Alamos Gold Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 27, 2023

There are 11 speakers on the call.

Operator

Good morning. I'll now turn the call over to Scott Parsons, Alamo's Senior Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and thanks to everybody for attending Alamos' 2nd quarter 2023 conference call. In addition to myself, we have on the line today John McCluskey, President and Chief Executive Officer Greg Fischer, Chief Financial Officer Luc Guillemin, Chief Operating Officer and Scott RG Parsons, our Vice President of Exploration.

Speaker 2

We will be referring to

Speaker 1

a presentation during the conference call that is available through the webcast and on our website. I would also like to remind everybody that our presentation will be followed by a and A session. As we will be making forward looking statements during the call, please refer to the cautionary notes included in the presentation, and MD and A as well as the risk factors set out in our annual information form. Technical information in this presentation has been Reviewed and approved by Chris Ploswick, our Senior Vice President, Technical Services and a qualified person. Also, please bear in mind that all the dollar amounts mentioned in this conference call are in U.

Speaker 1

S. Dollars unless otherwise noted. Now John will provide you with an overview.

Speaker 2

Thank you, Scott. Starting with Slide 3, We delivered an outstanding performance in the Q2, achieving a number of operational and financial records. Production increased to a record 136,000 ounces exceeding our guidance for the quarter, while all in sustaining costs decreased below our annual guidance. This was driven by another exceptional performance from La Yaqui Grande, which contributed to the strongest quarter from the Mulatos district in more than a decade. With production totaling 264,000 ounces through the first half of the year and costs well within guidance, We remain on track to achieve full year production and cost guidance.

Speaker 2

Financially, we broke a number of records, including revenue and cash flow from operations, which increased for the 5th consecutive quarter to 138,000,000 We also generated a record $62,000,000 of free cash flow, marking the 5th consecutive quarter of positive free cash flow as we continue to fully fund our growth projects and build our financial capacity. Now turning to Slide 4. We're making excellent progress across our growth initiatives. We expect to release the results of an updated feasibility study on our Lynn Lake project in the next few weeks. Work on the Phase 3 expansion continues to progress and we continue to have exploration success at PDA in advance of a development plan that we expect to release in the latter part of the year.

Speaker 2

As we announced early in the year, We've defined 1,000,000 ounces of higher grade reserves and resources at PDA over the last 2 years. As demonstrated Through our exploration update in May, we expect PDA to continue to grow and support a significantly longer life at life mine at Volaros. At Island Gold, we're making significant progress on the Phase 3 plus expansion. With the Gullaway recently lowered into the shaft, Construction of the hoist house substantially completed and headframe erection well underway. We are on track to begin shaft sinking in the Q4 and deliver initial production from the shaft and expanded mill in the Q1 of 2026.

Speaker 2

We continue to have tremendous exploration success across the Alamo Gold deposit, as highlighted in our June news release, And we're just scratching the surface of the regional potential across a much larger land package. This is highlighted by the photo At the bottom of the slide of a recently drilled core with significant visible gold from the prime Breccia regional target, Which is only 4 kilometers from the Alamo Gold Mill. We also released our inaugural climate change report in the quarter, A significant milestone in our sustainability journey, which among other things, outlines further details on our 30% reduction target in greenhouse gas and Company. Now turning to Slide 5. The key drivers of our strong outlook are all on track.

Speaker 2

As guided and seen through the first half of this year, low cost production growth from La Yaqui Grande is taking our production higher and cost lower. Through the Phase 3 plus expansion of Island Gold, we expect production will grow to 600,000 ounces per year with all in sustaining costs decreasing below the $1,000 per ounce level. Longer term, through the development of Lynn Lake, we have the potential to increase production to 800,000 ounces of gold per year. All of this with growth is in Canada. It's all lower cost And we can fund it internally, providing one of the strongest outlooks in our sector.

Speaker 2

I'll now turn the call over to our CFO, Greg Fischer, to review our financial performance. Greg?

Speaker 3

Thank you, John. This is my first quarterly conference call as Chief Financial Officer. I couldn't be happier to be reporting a number of new financial records. I've been with Alamo's for over 13 years, most recently as Senior Vice President of Finance, I can say that the outlook for the company has never been better. I'm excited for the growth we have ahead and look forward to continued strong financial results in the years to come.

Speaker 3

Moving to Slide 6. We sold 132,000 ounces of gold in the 2nd quarter at an average realized price of $19.78 per ounce, $2 per ounce above the London PM Fix for record revenues of $261,000,000 Total cash costs of $8.47 per ounce We're in line with annual guidance and all in sustaining costs of $11.12 per ounce were below the low end of the range. Through the first half of the year, total cash costs are down 12% from a year ago and all in sustaining costs are down 9% as we benefit from low cost production of Low Cost Growth at La Yaqui Grande. We are one of the few companies to meet cost guidance in 2022 and are on track to do the same in 2023. Our reported net earnings of $75,000,000 in the 2nd quarter were $0.19 per share included unrealized foreign exchange gains of $13,000,000 Recorded within deferred taxes and foreign exchange and other gains of $2,000,000 Excluding these items, our adjusted net earnings were 59,000,000

Speaker 2

for $0.15 per

Speaker 3

share. Driven by our strong operating results and expanding margins, operating cash flow before changes in non cash working capital Increased 9% from the Q1 to a record $138,000,000 or $0.35 per share. Free cash flow also increased Significantly from the Q1 to a record $62,000,000 Strong operating results and margin expansion were the main drivers of the free cash flow increase With the collection of $20,000,000 in sales tax receivables in Canada that has been deferred from the Q1 also contributing. Capital spending totaled $80,000,000 in the quarter and includes $23,000,000 of sustaining capital, dollars 50,000,000 of growth capital and $7,000,000 of capitalized exploration. Through the first half of the year, capital spending totaled $164,000,000 consistent with our annual guidance.

Speaker 3

Our balance sheet continues to strengthen with no debt and $189,000,000 in cash at the end of the second quarter, up from $134,000,000 in the previous quarter, reflecting the solid free cash flow generation. We expect this to continue as we internally fund our high return growth projects, while generating significant free cash flow for providing strong ongoing returns to our shareholders. I will now turn the call over to our COO, Luc Guillemin to provide an overview of our operations.

Speaker 4

Thank you, Greg. Moving to Slide 7. Young Davidson produced 45,200 ounces, Consistent with the Q1 reflecting similar grades and processing rates. Costs in the quarter and through the first half of the year were in line with the upper end of guidance. Grades mined and processed were at the low end of the annual guidance range and are expected to increase in the second half of this year as previously guided.

Speaker 4

Milling rates were below mining rates, reflecting a scheduled liner change and weather related power outages in the region. Milling rates are expected to return to guided levels for the rest of the year. Combined with higher grades, this is expected to drive higher production and lower costs in the second half of the year, putting the operation on track to achieve full year guidance. Mine site free cash flow increased to a record $35,000,000 in the quarter, bringing the first half total to $52,000,000 With a stronger second half expected, Young Davidson is on pace to generate over $100,000,000 in free cash flow for the 3rd consecutive year. Over to Slide 8.

Speaker 4

Island Gold produced 30,500 ounces in the quarter. Greeds were in line with guidance. However, milling rates were impacted by lower mining rates as well as downtime for maintenance on the Fine Ore Bend and weather related power outages. Mining rates were also impacted by the power hedges as well as some lost shifts due to smoke from wildfires in Northern Ontario. Both mining and milling rates have returned to normal levels in July and are expected to average 1200 tonnes per day through the remainder of the year.

Speaker 4

This is expected to drive higher production and lower costs in the second half of the year, putting Island Gold on track to meet full year guidance. Over to Slide 9. We made considerable progress on the Phase 3 plus expansion in the Q2 with mechanical installation of the production And service hoist completed and the

Speaker 2

hoist house substantially complete. The Galloway that will

Speaker 4

be used for shaft sinking was lowered into the shaft And is being outfitted with the required mechanical and electrical components. Over 90% of the buried services required to start shaft sinking are now complete And the erection of the headframe is well underway as seen in the photos on the slide. Shaft sinking is unscheduled to commence in the Q4. Over to Slide 10. A total of $41,000,000 of capital related to the Phase 3 plus expansion and capital development was spent in the quarter.

Speaker 4

The expansion remains on budget with 36% of the total initial capital of $756,000,000 spent and committed to the end of June. Most of the capital spent and committed to date has been focused on the Shaft site area, with spending on the mill expansion and pace plan expected to ramp up next year. The expansion is on track to be completed in 2026 and will create among the largest, lowest cost and Most Profitable Mines in Canada. Moving to Slide 11, Mulatos District production totaled 60,300 ounces, An impressive 19% increase over the previous quarter and the highest production rate in the past 10 years. Costs were below full year guidance for the quarter and through the first half of the year, driven by strong results from La Yaqui Grande with grades and stacking rates both above for full year guidance.

Speaker 4

Mine site free cash flow increased to $47,000,000 also the highest level for Mulatos in over 10 years. As previously guided, production rates are expected to decrease in the second half of the year and costs increase. This reflects the end of mining in the main Mulatos pit as well as the decrease in stacking rates and grades at La Yaqui Grande to levels consistent with full year guidance.

Speaker 2

With a very strong start to

Speaker 4

the year, the Milados District is well positioned to achieve full year guidance. I will now turn the call over to our VP of Exploration, Scott, RG Parsons.

Speaker 5

Thank you, Luke. Over to Slide 12. As John noted, we continue to have exploration success across several areas, most notably at Mulatos and Island Gold. In May, we announced an exploration update at the higher grade underground PDA deposit within the Mulatos District, Where we continue to extend high grade gold mineralization outside of currently defined reserves and resources. At 1,000,000 ounces of combined reserves and resources, PDA has already grown larger than Lucky Grande.

Speaker 5

Given the number of high grade step out holes intersected already this year, we expect that growth will continue. Based on the success to date, we have doubled the size of our exploration drilling program at PDA and will be completing an expanded 35,000 meter program in the 3rd quarter. The results will be incorporated into the development plan for PDA expected to be completed in the Q4. We expect that this development plan will align a significant

Speaker 2

of Mine Life Extension at Mulatos.

Speaker 5

We also announced a wide interval of gold mineralization at 2 grams per tonne over 82 meters And a breccia along the Kapalin fault. The Kapalin target is located 4 kilometers east of the Mulatos pit in an area that has seen limited historical exploration. We've completed several follow-up drill holes stepping out in this area with assays pending. Thus far, I'm pleased to report that we're seeing similar lithologies, alteration and The milestones of mineralization as the first hole, highlighting the significant potential of the Kapalin target and within the Mulatos District. Over to Slide 13.

Speaker 5

At Island Gold, as highlighted in our June update, underground drilling continues to extend high grade mineralization across Island Gold deposit. Well, this has been a consistent theme since we acquired the Island Gold Mine in 2017. A more recent focus over the past year is an expanded underground exploration drilling program in the hanging wall and footwall of Island Gold Deposit. Exploration to date has defined and expanded on several higher grade zones in the hanging wall and footwall structures. These zones are in proximity to existing underground infrastructure, highlighting the significant potential to add near mine, high grade reserves and resources There'll be low cost to develop.

Speaker 5

An excellent example of this is a newly defined perpendicular structure, the NS1 zone. We defined the zone earlier this year and we're currently developing it and we'll be mining it over the coming quarters. A highlight from the field development material we've already processed 3,100 tons grading 15.2 grams per ton. This zone was not factored into our reserves and resources nor our 2023 minutee plan, But he's already contributing to our production. With over 7,000 gold composites historically and recently intersected in the hanging wall and football structures, There are numerous opportunities for the definition of additional high grade zones in the Hanging Wolfs for Vault across Island Gold deposit, which has the potential to greatly increase our ounces per vertical meter.

Speaker 5

At 5,300,000 ounces of combined reserves and resources, Alamo Gold has already tripled in size since we acquired it. We see excellent potential for that growth to continue. That's not even factoring in the significant regional potential We're only just starting to test. With that, I'll turn the call back to John.

Speaker 2

Thank you, Scott. That concludes our formal presentation. I'll now turn the call back to the operator to open the call for your questions. Operator?

Operator

Thank you. We will now take questions from the telephone lines. Thank you for your patience. And the first question is from Cosmos Chiu from CIBC. Please go ahead.

Speaker 6

Thank you, John, Greg, Luke, Scott and Scott. Congrats on a very strong Q2. And on that, as we talked about, you had a very strong first half. You've maintained your guidance for the year. But if I have done my math correctly, you've done about 53% of the full year targeted guidance at the midpoint.

Speaker 6

I guess my question is, with Young Davidson and Island Gold expected to be even better in the second half, Is there a potential for you to exceed your current guidance for the year?

Speaker 3

Hey, Cosmos, it's Greg here. I mean, there is

Speaker 2

a potential.

Speaker 3

We're sticking with our guidance because at Mulatos, I mean, we've highlighted that At El Solta, we've completed mining in September, so we'll be relying on some stockpiles for the second half of the year. But you can certainly No, that production is going to go down at Mulatos portion of the pit. And then at La Yaqui Grande, we were producing Pretty high grade in the first half of the year. That's also going to come back down to guided levels in the second half of the year. So the offset to the better production At both Islands and YD would be lower production at Mulatos.

Speaker 6

Of course. And maybe a little bit deeper at The Yaqui Grande, as you mentioned, Q1 or Q2, sorry, was really good. I read that there was positive grade reconciliation. Could you maybe Give us a bit more color on that. Was it confined to a certain area?

Speaker 6

Was it what was your understanding behind the positive grade reconciliation? And on that, could it happen again?

Speaker 4

Hi, Cosmo. Yes, Luke here. It's really a function of the drill density with regards to the early stages of the pit. And as we get deeper into the pit, the drill density is more defined. So part of it is just the wider spacing of the drill density at the top of the pit.

Speaker 4

The other aspect of it as well is that we were actually getting some ore outside of the block model with Pretty strong grades as well, which was not identified in the original block model. So that also helped in the over performance. I mean, for the quarter, I think we were about 7% Above our expected block model grade. But as we get lower into the pit, what I can say with the current benches that we're mining Relative to the tons and grade model from our block model, we're very tight as far as the actual results relative to Block model as we continue to move deeper into the pit.

Speaker 6

Of course. Maybe switching gears a little bit. As you mentioned, the PDA development plan is coming out before the end of 2023 in Q4, 2023. As you mentioned, May 15, mid May, the exploration results at Kimbo, we were very good. If I look at it correctly, there were some holes that returned 21 gram per tonne, 3.33 gram per tonne, 14.8 grams per ton.

Speaker 6

Uncut, but even cut, it was still very good and certainly higher than the current reserve grade, which is 4.84 grams per ton. I guess my question is, number 1, can you remind us what is being included in that development plan in terms of The timing in terms of cut off? And number 2, what's the potential for even higher grades We incorporated into this deposit.

Speaker 5

Cosmos, I can take that. It's Scott, RG. Yes. We're in the midst of that expanded drill program. So I guess the first point is we look to be Defining an internal midyear resource update towards the end of the program, probably mid Q3, Which we would use for the updated development plan.

Speaker 5

I will say that, that doesn't mean that the drilling will stop at that point in time. I mean, we We're continuing to expand the deposit in multiple directions. We're focused around PDA 1, 2 zones so far. GAAP, Victor and Astrea are part of that reserve and resource and represent significant upside in In terms of exploration, when we start expanding on those, they are open as well. In terms of higher grades, the more drilling we're doing, The more predictive we're getting with targeting higher grade structures within the PDA deposit.

Speaker 5

So there is a strong Northeast control to high grade mineralization, and there's a period of seasonal structures. So as we expand out from the existing mineralization, We're strategically targeting those structures that we know are controlling some of the higher grades there.

Speaker 6

Great. Maybe one last question and switching gears again a little bit. Lynn Lake, certainly your updated feasibility study is coming out next month in August. And John, I think you've done a very good job in terms of progressing the asset there, the EIS now, you I guess, what's next? I guess you can't tell me too much More, but if I looked at the 2018, the last sort of feasibility study, kind of outdated now, the IRR was 12.5%, but that was again based on a much lower gold price.

Speaker 6

So again, I'm sorry you can't tell me what the IRR is going to be But can you remind us like in terms of your hurdle rates, how you look at these projects and what should we expect Again, to the extent that you can share with us.

Speaker 3

Cosmos, maybe I'll start on what we can expect. I mean, yes, we are putting out our Updated feasibility in a couple of weeks. So we can't speak to any specifics, but I mean you can expect that capital is going to go up. We released that in 2017, The end of 2017. So there's been 6 years of inflation in some of the highest inflationary period that we've seen over the last 30 years in that period.

Speaker 3

So Capital is going to go up from that perspective, but also we have a bigger resource. And as a result of the bigger resource, we have the ability to potentially Increase the mill throughput that we're putting through, so just increasing the size of the plant. And both of those would contribute To a larger operation and as a result, higher capital.

Speaker 2

Hi, Cosmos. It's John here. I would add that If you keep in context, it's our usual To pull in M and A transactions when the gold price is very low, where we can buy things At lower cost, and at the time we closed this transaction to acquire Carlisle Gold Fields, The gold price was under $1100 an ounce. It was virtually the bottom of the market. That would have been January 2016.

Speaker 2

So the whole point of acquiring it at that time was to pick up those ounces cheaply. And I think We paid something like $22,000,000 for what was roughly a 1,600,000 ounce resource. We did a quick preliminary study just to get a gauge On what economics might look like and using a $12.50 gold price assumption, It still showed something like 11% or 12% IRR. And that was not using any creative financing in order to Pull that IRR up higher. So here we are at $1900 gold.

Speaker 2

We can certainly use a substantially Higher gold price assumption when we are going in to run the economics this time around. So that's going to be one of the big offsetting factors. And the change in scale, we've added a significant number of ounces since we acquired the deposit. And there's more to come. That's the other thing.

Speaker 2

We always had in view that we had a district scale play here with something like 80 kilometers of Strike in a virtually untested Greenstone Belt that the market by and large does not really understand, but the potential is real. And based on preliminary work that we've been doing on a regional basis, we are more encouraged than ever At the long term potential for this district. So for us, the development of the 2 pits is just a start. It's a gateway into what we think is a very long term potential for the company. So Like most things we do, the acquisition of Island Gold was a very strategic move.

Speaker 2

It had more than enough flesh on the bones to justify the exploration work we've put in and of Of course, we can point to quite a substantial success. But you're going to see us do much the same as we did at Mulatos. We're going to We continue to explore and over time we're going to add more deposits and we think there's a really bright future for that part of the world. And we intend to be quite aggressive pursuing that potential over time. In terms of the development Timeline, we will come out with this study, but based on previous guidance, we're not intending to immediately jump into the development of Fine.

Speaker 2

We don't need to

Speaker 6

do that.

Speaker 2

And it would be far better timed for us in terms of allocation of capital and allocation of Allocation of management time, the skilled personnel that we'll ultimately Put on that project right now, they're quite heavily involved in the Phase 3 expansion of Island Gold. So we want to be in a position Substantially derisk the Phase 3 expansion, get most of the capital spend. And by that time, There'll be a natural progression where we'd be able to move people from Island Gold and on to the Lynn Lake project. So we're still sticking with that objective, even though you can see we're generating Tremendous amounts of free cash and we have we certainly have the capacity to do the work. What we can do and what we will continue to do is advance the detailed engineering.

Speaker 2

So when you see us make an estimate, As you will see in this upcoming study, it's not a rough guess. These numbers are going to be very, very well nailed down. And so I would say our estimates are going to be highly reliable. And therefore, the IRR It's something that we'd be very happy if you modeled and the valuation that we're going to Put on this project is going to be real added value to the asset base of the company.

Speaker 6

Great. Thanks again, John and team for answering all my questions. That's all I have. Thank you.

Operator

Thank you. The next question is from Ovais Habib from Scotiabank. Please go ahead.

Speaker 7

Thanks, operator. Hi, John and Alamo's team and yes, congrats on the Q2 beat. Just a couple of questions from me. My first question is in regards to the NS1 zone. I did miss some of the comments made by Scott, RG.

Speaker 7

So I apologize if I have to repeat some of your comments here. At the recent Island Gold site visit Dennis The zone was discussed pretty well in-depth and there was a potential to commence production from the zone in the second half. Again, even though this zone is not even in reserves or resources, is this still the case? Is that still the plan? And what potential do you see across the Island Gold Deposit

Speaker 5

Yes. It's Scott R. G. I can take the question. Yes, the NS-one zone is it was discovered earlier this year.

Speaker 5

We've been able to pivot and advance it quickly in conjunction with the mine plan for this year. Basically, drilling it off, Going along and I highlighted in my commentary 3,100 tons from an exploration still at 15 grams per ton that we've already Put into production. We'll be developing stopes on the NS-one zone in the second half of this year. As discussed, The zone remains open up and down dip. We're drilling that as we speak.

Speaker 5

I think the real opportunity beyond just that zone, I think that's a good example, is the number of zones That exists an island that we need to we're now in a position to drill from underground. And these perpendicular structures, They occur on periodicity across the mine. It's a matter of drilling them off well ahead of when we get there with the mine development, which we're doing now and then also looking at these subparallel zones.

Speaker 7

So this 3,100 tons, was that already produced in Q2? Or would that be kind of coming in Q3?

Speaker 5

So that's been mine. So it was an exploration still that we put in on the NS-one zone.

Speaker 7

Got it. Got it. Okay. Thanks for that. And just switching to Mexico in regards to PVA, just Some thoughts on permits.

Speaker 7

So what kind of permits would be required? Will it just be an addendum to the existing Villages permit or would you have to apply for a full permit over there?

Speaker 4

Yes. Hi, it's Luke here. So with regards to the PDA permitting, I mean, with obviously with Some of the Mexican mining reform changes there, we don't see any issues with regards to being able to obtain permits in relation to mining for PDA from both the mining and In a milling point of view, it's within our existing concessions. And the legacy of actually having Operator underground mines here previously would fall just as an amendment to our existing permits to be able to continue that from a mining perspective. And very similar for the milling aspect with regards to what we're looking to do.

Speaker 4

We did have a small mill complex there from the previous underground mining operations. We'll have to upscale that once we do complete our mine design and then support the mill design for that. But also it would be Again, within our existing concessions, and we would just be looking to seek amendments to our existing permits.

Speaker 7

Excellent. Okay. That's it for me and thanks for taking my questions.

Operator

Thank you. The next question is from Fahad Tariq from Credit Suisse. Please go ahead.

Speaker 8

Hi, good morning. Thanks for taking my question. Just something maybe we haven't talked about in a while. The Turkish assets, has there been any update on that front whether the arbitration process or potentially finding a local partner and or Selling those assets altogether. Any color on that would be really helpful.

Speaker 8

Thanks.

Speaker 2

Yes, we haven't provided an update on it because there really is Nothing to update. When there is, you'll hear from us.

Speaker 8

Okay. And then just switching gears, just a modeling Thinking about grades in Q3 and Q4, I know they're declining sequentially. Is there any additional color we should be thinking about like Are grades going to fall like to the low end of the annual like the guidance range in Q3 and Q4? Just Anything that could help us modeling those grades would be helpful.

Speaker 4

Yes. Well, as per our mine plan for this year, we were expecting grades to drop in the second half of the year as per our guidance. So in the second half of the year, we'll be more aligned with our reserve rate of about 1.25.

Speaker 8

And there's no is that Is there a difference between Q3 and Q4?

Speaker 2

Is it kind of safe to assume?

Speaker 4

Pretty consistent in the second half of the year. And as I touched on with regards to Our over performance certainly from the first half of the year based on what we're seeing with the benches that we're currently mining, they're aligning with the block model From our actual results, so we're not expecting any over performance in the second half of the year. We should be more aligned with our reserve grade of 1.25.

Speaker 8

Okay, great. That's super clear. Thank you.

Operator

Thank you. The next question is from Mike Parkin from National Bank. Please go

Speaker 9

ahead. Thanks guys and Greg congrats on your first call and a nice quarter too. Just most of my questions have been answered, but with Lynn Lake, I think you've set a good tone on what to expect in terms of scale and CapEx. Can you remind me again power costs? I remember we chatted about it in the past, but from what I recall, I think the power costs for the asset With grid power extremely low, I just don't remember what

Speaker 5

the number is off the top of my head.

Speaker 3

Yes, Mike, it's Greg here. It's about $0.045 Kilowatt hour.

Speaker 9

And then you've kind of addressed it, but it seems like challenges Working around smoke in the area that seems to be largely kind of behind you. Can you just give some additional color there? Is it you've noticed Current days are on average better than what maybe June was.

Speaker 4

Yes. Hi, Mike. It's Luke here. I mean, obviously, as you'd appreciate, I mean, forest fires are kind of an annual thing that we have to deal with In regards to our operations in Northern Ontario, certainly in the summer months. In this case, I mean, with regards to the fires that we had in the region, no effect as far as The fire itself to compromise the assets, it was more really related to smoke and it's always a function of the wind direction.

Speaker 4

These

Speaker 1

fires can

Speaker 4

be up to 100 kilometers away from our infrastructure, but the wind direction will bring the smoke into that our region of our operations. And it's always a function of our fresh air fans to provide the proper ventilation for the underground workings where the smoke The fans pick up that smoke and then bring it into the work environment. And then it just it becomes difficult for our workforce to rather determine whether it's an actual fire or if

Speaker 3

it's just related So as a result of

Speaker 4

that, we had to cancel shifts. It's intermittent. So I mean, we could have potentially 1 shift or 2 consecutive shifts canceled. Smoke The wind directions change brings the smokes takes the smoke away from our infrastructure, our ventilation fans, and then we're able to operate again for a number of days. And then obviously with the wind direction change, it could bring that smoke back into the region.

Speaker 4

So in this case, we just had more frequency of Smoke being in the region with regards to our assets, which is what resulted in canceled shifts as a result. But it's something that we deal with on an annual basis.

Speaker 9

Okay. And then for Scott RG Parsons, the Capulin drill results, you noted that you've got a number of additional assays pending. Do you have a sense of when you might be able to release those?

Speaker 5

Yes. Obviously, we want the story continues to develop what we're seeing visually anyway. We want to have Meaningful number of holes to release so we can as we continue stepping out on that first hole that we spoke to. So we're continuing to drill there now. We've just added a 3rd drill, so there will be more coming out of that area over the coming months.

Speaker 5

Likely, I'd expect that we'd have a story Talked to him in September. Okay. So kind of ahead of

Speaker 9

Denver Gold Show, we could probably see something?

Speaker 5

It could be around that time. Yes, again, results dependent as we get them in. Yes, obviously, yes.

Speaker 9

Okay. Thanks, guys. Congrats again.

Operator

Thank you. And the next question is from Kerry Smith from Haywood Securities. Please go ahead.

Speaker 10

Thanks, operator. Luke, just on the guidance for La Acha Grande where you To talk about lower stacking rates in the second half, are you tailing back the stacking rates because of the rains that usually come in Q3? Or is there another reason why the stocking rates will be lower than what you've done in Q2?

Speaker 4

Hi, Kerry. No, it's really related to The seasonal effect with regards to the rains that we get in Mexico, productivity wise, it just it slows down our overall of Operations. So as a result of that, the stacking rates end up being lower through the rainy season.

Speaker 10

Okay. So we see that through Q3 and now maybe The back end of Q4 would be a lot less a lot higher pace possibly because it drives out.

Speaker 4

Yes, it's primarily related Q3, but again, it's always a function of depending on how long the rains last, but usually by Q4 things start to return to more normal levels.

Speaker 10

Right. Okay. And for the recoveries at Lillahi Grande, how have the leach curves been tracking With the ore that you've been leaching, when you run your leach curves in the Ancio lab, how have they been looking relative to your overall Recovery curve that you've got for the project. Are they tracking in line or are they tracking better or?

Speaker 4

Yes. They're tracking in line. They've been very solid, Kerry. I mean recoveries are plus 80% certainly on the Layaki ore.

Speaker 10

Okay. And Scott, RG, just on Catalent, how many holes do you think you might have drilled in with 3 rigs running now by the time we get to September.

Speaker 5

Probably an additional somewhere in the ballpark of 4000 to 5000 meters. Obviously, we're We're in a large area there. We're moving drills between holes as we continue to step out from what we know. So yes, likely an additional 4000 or 5000 meters by then.

Speaker 10

And how many holes do you have that you have assets pending on right now?

Speaker 5

We have from the second quarter 9 additional At the end of the second quarter.

Speaker 10

Okay. Okay. And then the 4000 to 5000 meters is including the 9 holes, is it?

Speaker 5

No, not including. Yes, I think you had spoken to what to expect between now and the next news release. So he's not including those 9 holes. We're expecting to drill An additional 4000 to 5000 meters between now and end of or say September.

Speaker 10

Okay, got it. Okay. Okay, great. Thank you.

Operator

Thank you. There are no further questions registered at this time. This concludes this morning's call. If you have any further questions that have not been answered, please feel free to contact Mr. Scott Parsons at 416 368,9,932extension5,439.

Operator

Thank you for your participation and you may now disconnect your lines.

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Earnings Conference Call
Alamos Gold Q2 2023
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