Dundee Precious Metals Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 2, 2023

There are 8 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Dundee Precious Metals Second Quarter 2023 Earnings Results Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jennifer Cameron.

Operator

Please go ahead.

Speaker 1

Thank you, and good morning. I'm Jennifer Cameron, Director, Investor Relations, and I'd like to welcome you to our Q2 conference call. Joining us today are members of our senior management team, including David Ray, President and CEO and Navin Dyle, Chief Before we begin, I'd like to remind you all that all forward looking information provided during this call is subject to the forward looking qualification, which is detailed in our news release and incorporated in full for the purposes of today's call. Certain financial measures we will be referring to are not measures recognized under IFRS and are referred to as non GAAP measures or ratios. These measures have no standardized meaning under IFRS and may not be possible for similar measures presented by other companies.

Speaker 1

The definitions established and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Please refer to the non GAAP financial measures section of our most recent MD and A for reconciliations of these non GAAP measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have generally been rounded. References to 2022 pertain to comparable periods in 2022 and references to averages are based on midpoints of our outlook or guidance.

Speaker 1

I'll now turn the call over to David Ray.

Speaker 2

Good morning, and thank you all for joining us. I'm pleased to provide you with an overview of our 2nd quarter and first half results and to provide some insights into our achievements during this period. This morning, I'll briefly review our results and discuss why we believe DPM continues to be well positioned to deliver value to all our stakeholders now and over the long term. The highlights from our Q2, these include strong production of approximately 76,000 ounces of gold and £8,000,000 of copper, Excellent all in sustaining cost performance of $7.33 per ounce of gold sold, which continues to rank us among the lowest cost producers. Record free cash flow generation of over $70,000,000 and continued exploration success at Choka Riquita in Serbia, With the most recent results we released in July, extending the deposit to the south and confirming and further extending the high grade zone.

Speaker 2

With strong production and cost performance in the first half of the year, both of our mining operations are on track to achieve the 2023 production and cost guidance. We exited the quarter in a very strong financial position with a cash balance of $542,000,000 reflecting our significant free cash Slow generation in the first half of this year as well as the proceeds of our divestment of B2 Gold Shears following its acquisition of Sabina. We continue to deploy our capital in a disciplined manner. And in addition to investing in our future growth and exploration prospects, We returned approximately 36% of our free cash flow to shareholders in the first half of the year through our sustainable quarterly dividend and the enhanced share buyback program, which Navin will touch on shortly. Looking at our operations in more detail, Chalapets continued its track record of strong performance in the 2nd quarter, producing approximately 44,000 ounces of gold and £8,000,000 of copper at an all in sustaining cost of dollars 7.76 per ounce of gold sold.

Speaker 2

We continue to advance the Chelopech Brownfield exploration program with 8 drill rigs currently active along the Brevania exploration license and the Charlotte Deere target within the mine concession. With increased in mine and brownfield exploration drilling, we believe there is strong potential to continue our track record of extending mine life at Chelopech, which currently extends to 2,031. Turning to Adatepe, the mine continued to deliver impressive performance, producing approximately 32,000 ounces of gold with an all in sustaining cost of $5.30 per ounce of gold sold, which is at the low end of ADATEPI's guidance range costs. ADATEPI has consistently outperformed our Since commissioning in 2019, and we are confident that ADATEPE will continue to deliver strong results, supported by the updated life of mine plan we announced in January. We're also continuing our exploration efforts around Adatepe.

Speaker 2

At the newly granted Krumovitza exploration license, We have a permit for 29 drill sites in process and drilling at 3 priority targets is planned to commence in early August. We are planning an aggressive drilling delineation and scound drilling program at Krumovitsa with 15,000 meters expected to be completed in the second half 2023. At Fumed, complex concentrate smelter during the quarter was approximately 49,000 tons, which was below our expectations as a result of unplanned maintenance in the off gas system. We are planning to undertake additional maintenance in the off gas system concurrently with the Ostmelt furnace maintenance, which is currently underway and is expected to resolve the issues in the off gas system. As a result of these issues, Tsumeb is trending at the low end of its production guidance and towards the higher end of its cost guidance.

Speaker 2

In Serbia, exploration activities focused on the accelerated drilling program at Choka Rykita with 9 drill rigs currently in operation. In mid July, we released additional assay results, which extended the deposit to the south and continues to confirm and further extend the high grade zone. The 40,000 meter infill and extensional drill program is largely complete, including infill drilling at 60x60 meter spacing, and we've started an additional 30,000 meter infill drilling program to take the spacing to 30 by 30 meters. We expect to complete a maiden mineral resource estimate for Choke de la Quita by the end of this year, and we're also progressing activities to accelerate the advancements of the project, including geotechnical drilling and metallurgical test work. We've also started scout drilling to test other camp wide targets near Choka Riquita as well as the 10,000 meter scout drilling program on the UNKA license, which is some 5 kilometers south of Choka Riquita.

Speaker 2

Choka Riquita has several positive attributes that we look for in projects, including a very high grade core, good initial metallurgical results, strong infrastructure and it's a great fit with our skill sets, resulting in significant within our organic growth portfolio. As a result of this increased activity and the positive results we are seeing, we have increased our 2023 guidance for exploration event in Serbia, which Navin will discuss shortly. Turning to Loma Largo in Ecuador, we continue to advance the updated feasibility study, including optimization work, leveraging our significant expertise at Chelopech in Bulgaria, and we expect to complete this work in the second half of twenty twenty During the quarter, the EIA for the 69 kilobytes power line, the primary power supply to the project received technical approval and the community consultation process for this aspect of the project is currently underway. At Loma Lager, Drilling activities as well as the Citizens Participation Process for the Environmental Impact Assessment remain paused pending the outcome of the appeals process related to the decision on the constitutional protective action following the hearing in mid October last year. The decision on the appeal is expected to provide clarity on the consultation process and whether an indigenous consultation could be completed in parallel as we had originally planned or would need to be completed prior to resuming the Citizens' participation process.

Speaker 2

The expected timing for the environmental license is subject to the outcome of this appeal process. As we advance the project, our approach will benefit from our firm commitment to the highest standards for engagement with local communities and environmental stewardship, in addition to our operating expertise to unlock the significant potential of the project. As a result of the ongoing optimization work for the feasibility study and increased stakeholder engagement activities, We're increasing our 2023 guidance for growth capital at Lower Largate, which Navin will discuss further. At the Tierras Colorados concession, which is located 200 kilometers south of Loma Laga in Ecuador's Loja province, We expect to commence a 10,000 meter drilling program this month. This is designed to follow-up on the positive results we reported at the end in February, which confirmed the presence of 2 high grade vein systems that remain open in multiple directions.

Speaker 2

The primary focus will be to further assess the In closing, our 2nd quarter results continue to demonstrate BPM's strong performance and highlights within our industry. These highlights include strong consistent production from our operations and an all in sustaining cost that ranks among the lowest in the gold industry, Significant free cash flow generation, financial strength and flexibility, a record of disciplined capital allocation, extensions and discovering new brownfield opportunities, also demonstrates industry leading ESG performance and an impressive track record in securing our social license to operate and strong leadership and technical teams with a history of adding real value to innovation. I'll now turn the call over to Navin for A review of our financial results and outlook, following which we will open the call to questions.

Speaker 3

Thanks, Dave. This morning, I will discuss the highlights of our financial results, which contributed to our record quarterly free cash flow generation. I'll also provide an overview of our business on our balance sheet and capital allocation program. As Dave mentioned, the company's mines continue to deliver strong operating and cost performance. Looking at our key cost metrics, 2nd quarter all in sustaining cost of $7.33 per ounce of gold sold was 7% lower than the prior year, primarily due to lower treatment and freight charges at Chelopech as a result of increased deliveries to 3rd party smelters and higher volumes of gold sold.

Speaker 3

This was partially offset by higher labor costs and prices for direct materials as well as lower byproduct credits as a result of lower volumes and realized prices of copper sold. All in sustaining costs for the first half of twenty twenty three was $802 per ounce of gold sold, 8% higher than the prior year, primarily due to lower byproduct credits as a result of lower volumes and realized prices of copper sold, higher labor costs and prices for direct material and higher share based compensation expense reflecting DPM's strong first half share price performance. And this is all partially offset by lower treatment and freight charges at Chelopech and higher volumes of gold sold. All in sustaining cost per ounce of gold sold for the year is expected to be in line with our guidance. At Tsumeb, cash costs in the 2nd quarter and first half of twenty twenty three of $3.43 $3.60 per ton, respectively, were 65% 42% lower than the corresponding periods in 2022 due primarily to a stronger U.

Speaker 3

S. Dollar and higher volumes of complex concentrate smelted due to the timing of the Ausmelt furnace maintenance shutdown, which was completed in the Q2 of last year. As Dave mentioned earlier, Tsumeb is currently tracking towards the higher end of its 2023 guidance range for cash cost per tonne due to lower than planned complex concentrate smelted in the first half of the year from issues with the off gas system. We are undertaking additional maintenance in the off gas system to resolve this issue along with the off gas furnace maintenance, which is currently underway. Looking at capital expenditures, Sustaining capital expenditures in the second quarter and first half of twenty twenty three of $9,000,000 $17,000,000 respectively, were 58% 45% lower than corresponding periods in 2022, mainly due to the timing of the Ostmelt furnace maintenance shutdown at Tsumeb.

Speaker 3

Sustaining capital expenditures are expected to be within the guidance range for 2023 with the completion of the Chelopech tailings management facility upgrade during the 2nd quarter and the Sumit maintenance scheduled for the Q3. Growth capital expenditures in the second quarter and first half twenty twenty three, primarily related to the Loma Largo gold project, were $7,000,000 $13,000,000 respectively, similar to the corresponding periods in 2022. Turning to our financial highlights. Revenue in the second quarter and first half of twenty twenty three up $168,000,000 and 323,000,000 respectively, were 25% and 12% higher than the corresponding periods in 2022, primarily due to lower treatment of freight charges at Chelopech, Higher volumes and realized prices of gold sold and higher volumes of complex concentrates melted reflecting the timing of the Ostfeld furnace maintenance shutdown, partially offset by lower volumes and realized prices of copper sold at Chelokuch. 2nd quarter net earnings were $62,000,000 or $0.33 per share compared to $34,000,000 or $0.18 per share in the prior year due primarily to higher revenue and interest income, partially offset by higher planned exploration and evaluation expense.

Speaker 3

Net earnings in the first half of twenty twenty three were $108,000,000 or $0.57 per share, compared to $60,000,000 or $0.32 per share in the prior year due primarily to higher revenue, lower cost of sales and higher interest income, partially offset by higher planned exploration and evaluation expenses and higher share based compensation expenses as a result of DTM's strong first half share price performance. In terms of our cash flow metrics, cash flow provided from operations in the second quarter and first half of twenty twenty three of 59,000,000 and $130,000,000 respectively were 18% 14% lower than the corresponding periods in 2022 due primarily to the timing of deliveries and subsequent receipt of cash and the timing of payments to suppliers, partially offset by higher earnings generated. Free cash flow in the Q2 and first half of twenty twenty three were Company records at $71,000,000 $136,000,000 respectively, dollars 29,000,000 $46,000,000 higher than the corresponding periods in 2022, due primarily to higher earnings generated and the timing of cash outlays for sustaining capital expenditures. The 3 year outlook previously issued in our MD and A for the year ended December 31, 2022 remains unchanged except for the following updates to the company's guidance for 2023, which Dave touched on earlier and which we have outlined on Slide 17.

Speaker 3

Based on positive results from our drilling programs, exploration and evaluation expenses are now expected to be between $38,000,000 $46,000,000 up from the previous guidance range of $25,000,000 to $30,000,000 This is due primarily to increased drilling activities and early stage technical work at Choca Raquita in Serbia, as well as increased drilling activities at Tierras Coloradas in Ecuador, as the exploration programs were expanded following the initial guidance for both of these projects. Growth capital expenditures related to the Loma Largo gold project are now expected to be between $18,000,000 $22,000,000 up from the previous guidance range of $10,000,000 to $14,000,000 due primarily to the initial scope of work for the optimization phase of the project that started earlier this year, which will carry through to the balance of the year, as well as increased activities related to stakeholder engagement. We continue to deploy our capital in a disciplined manner that balances our desire to reinvest in growing and optimizing our business with our commitment to returning capital to our shareholders. In addition to investing in our future growth and exploration prospects, we have continued to pay a quarterly dividend to 2020, offering attractive 2.4 percent yield based on the current DPM share price.

Speaker 3

As we continued with our enhanced share and we continued with our enhanced share buyback program to purchase up to 100,000,000 of the company's shares over a period of 12 months, which began on March 1, 2023. Up to and including repurchases made in July, we have bought back approximately 6,000,000 shares for a total value of approximately $42,000,000 In closing, we delivered another strong quarter of operating performance from our mine operations and generated a record quarterly free cash flow of 71,000,000 bringing the total free cash flow generated for the first half of twenty twenty three to $136,000,000 also a company record. A robust cash balance of $542,000,000 which includes $56,000,000 of cash proceeds from the Sabina B2Gold investment together with no debt, An undrawn $150,000,000 revolving credit facility and continued strong free cash flow generation positions us well to fund future growth opportunities that generate additional value for stakeholders, while continuing to return capital to our shareholders. With that, I will turn the call back to the operator for Q and A.

Operator

Thank you. At this time, we will conduct a question and answer session. Our first question comes from the line of Wayne Lam of RBC. Your line is now open.

Speaker 4

Thanks guys. Good morning everyone. Just wondering At Tsumeb, what's the length of the planned maintenance shutdown this quarter? And then I recall you had mentioned earlier in the year that there were Some changes being implemented that would help address some of the problems you've had with the off gas system to provide improved continuity. Just curious if those changes are expected to take hold post the maintenance completed in Q3 or if there are additional items that have to be evaluated to provide better availability at the smelter.

Speaker 2

Yes. Hi, Wayne. So the plant shutdown length, it started up on the weekend and it should be in and around 42 days. In terms of changes to address the Off gas system reliability and continuity, yes, we are undertaking that work during the shutdown. And We would anticipate that what that's going to do is give greater continuity to the integrity of the water cooling system on the back end of the OSMO, which has been The Achilles heel in the last 2 years or so at the smelter.

Speaker 2

So we're doing a more extensive replacement with the idea being that We rely on blast on doing repairs which take time down in the operation and are more prone to subsequent rework. So we anticipate that the current shutdown and the work that we are doing will mitigate that and get us back to a reliable smelter operation.

Speaker 4

Okay, great. Thanks. And then maybe at Loma Larga, you guys have had to put a pause on drilling for Well over a year now and still haven't had clarity on the consultation process, and yet the guided spend there is nearly doubling. So Just wondering why you guys are committing more capital there. Is that just having a function of having excess cash in the balance sheet?

Speaker 4

Or is it A matter of wanting to be in a position to get the optimized work done and ready to go, if they ever give people go ahead.

Speaker 2

Yes. Wayne's definitely not excess cash on the balance sheet. We are continuing to Be aware of needing to be disciplined in terms of the money that we have on the balance sheet. What we're targeting is making sure that we complete The feasibility work is very important that we do that to have a level of confidence in the information to have clarity on capital costs and operating costs and further opportunities. So The main piece of the addition is really targeted towards that.

Speaker 2

But we've also been having some success with work being done on our community and social activities. And we've put more time and energy into that. So it's those 2 items. This is completion of the engineering work and it's also doing some additional activities in and around our communities.

Speaker 4

Okay, great. Thanks. And then maybe just last one on the buyback program. It's been nice to see you guys being aggressive on buying back the shares. The stocks really outperformed your peers this year.

Speaker 4

I'm just wondering if the $49,000,000 executed date was in part due to getting the proceeds from the B2 Sale or how are you thinking about the buyback levels kind of going forward?

Speaker 3

Sure. Thanks, Wayne. It's Navin. Yes. So if you recall at the start of the year, our Board had approved the enhanced NCIB program.

Speaker 3

So we 10% of the Closed 16,500,000 shares. One of the other things that the Board did was prove up to 100,000,000 of share buybacks over the 12 months starting in March. So as we look and this is prior to the announcement of Sabina selling to E2. So we had already been considering this enhanced buyback even prior to that transaction being announced. So The approval of the $100,000,000 for the next 12 months was independent of that thought or that activity.

Speaker 3

And so as we look through the balance of the year, that program continues to be in place. The Board It continues to authorize us to purchase up to $100,000,000 for the next 12 months. And we see no reason at this point to stop that or pause that program despite or notwithstanding the increases that we've seen in exploration spend or other demands of capital that we have in business.

Speaker 4

Okay, great. Thanks for the context and it's nice to see. That's all for me. Thank you.

Operator

Our next question comes from the line of Eric Windmill of Scotiabank. Your line is now open.

Speaker 5

Great. Thanks for taking my question and nice to see the Q2 results and the cash Bill, obviously, I think it positions you well relative to the peers. Just a couple of quick questions for me. Maybe starting in Ecuador, obviously, election cycles coming. Any comments there on how you see that impacting some of

Speaker 3

your work in the country?

Speaker 2

The election is coming up on the 20th August. That's going to be both for the assembly and also for the President. There's some possibility that presidential election will be what we saw at the last election, whereby there's a secondary vote, which we anticipate would be in October. How does that impact what we're doing? It does not at the moment.

Speaker 2

That's not the reason why we're doing any of the work or the reason why we're paused at So we watch with interest. It will obviously be important in terms of the environment within which to deliver industrial projects and mining in future.

Speaker 5

Great. Thanks for that. And maybe just moving over to Chokereducita. So Obviously, great to see things are speeding up there, if you will, extra work being done. Do you see that potentially maybe moving the timeline to first Production maybe a bit sooner or any comments there?

Speaker 6

Hi, Eric. It's Mike here. I think it's early to say the exact timeline. We're in the process of compiling that timeline and putting all the pieces together with respect to the technical work and permitting requirements that need to get done. I think we're going to have a better insight at the end of the year once we have our resource completed.

Speaker 6

But we are you are correct, we are accelerating drilling and a lot of the deductible work to be able to advance that project as

Speaker 5

Okay, great. Thank you. And maybe also on sustaining CapEx, Is it fair to think that there's going to be maybe a little bit higher sustaining CapEx in the back half of the year or any particular projects or comments here on how that's shaping up

Speaker 3

Sure. Eric, it's Navin. Yes, so definitely sustaining capital is back end weighted for the rest of the year. So we've got The cement maintenance shut that's happening now, which is a large component of that capital, beyond that you have additional capital at Chelopech for mobile equipment and Pro head process plant and then it added TAPPE for the integrated waste management facility. So definitely $17,000,000 year to date for participating capital and we're still guiding in the range of $46,000,000 to $67,000,000 we would expect to be higher capital in the second half of the year.

Speaker 5

Okay, awesome. Thank you so much. And the last Question for me and then we'll hop back in the queue. But so M and A, obviously, Dundee is a name that comes up in terms of potential acquirers. Any comments there in terms of M and A?

Speaker 5

Obviously, I think you've said in the past you're opportunistic, but just curious if you can share anything there.

Speaker 6

Eric, say the same thing we've said in the past. We do regularly evaluate opportunities. We're going to be disciplined as we go through that process. We Guys, we're well positioned. But yes, of course, we regularly look at opportunities that are available.

Speaker 6

But we're very happy with our organic portfolio as well.

Speaker 5

Okay, fantastic. Thanks. Yes, congrats on the good quarter.

Operator

Our next question comes from the line of Ingrid Rico of Stifel GMP. Your line is now open.

Speaker 7

Great. Thank you. Good morning, David and team. I have a couple of questions for you guys. It continues to be, I guess, quite apparent that Chelopech concentrate is less relying on Tsumeb looking at the first half of this year, less concentrate processed there than the first half of last year.

Speaker 7

So perhaps can you remind us how should we think about the balance of the year and into 2024 In terms of that delivering to 3rd party smelters. And maybe if you can share securing a full time place for that smelter going forward?

Speaker 2

Yes. Hi, Ingrid. So What we've been saying during the course of the year, it remains the case, is that 1 quarter of production from Jalapetsch will go to Tsunib. It's this quarter in which that concentrate is going to be produced. I might add just there's a little bit of a complication.

Speaker 2

These things are not so When it comes to unit costs that are charged against the Chelopech, there are slight offsets and there are also some corrections that are made where we have a 90 Concentrate payments at time of movement in the 10% correction at the end of things. So you might look just to see some influences Outside of the period that we normally talk, so just to caution you, just have to keep that in mind. So this quarter's production in Fronchalo patch will be cement and And the elevated TCs, which would include elevated transportation costs to similar to destination. In terms of Tsumeb itself, we're obviously doing what we can to bring down its operating cost to make it competitive to be able to attract concentrate at the right TCs. There's no shortage of concentrate.

Speaker 2

The question is the treatment terms that you can achieve. So it's not a question of filling the facility, it's a question of what is going to be the average TMC in that last element that you bring in. So at this point, we're not seeing any need for any decisions about whether we operate the smelter or not. So there is sufficient concentrate, But it is something that we are observant of. Just a last comment there is that Tsumeb has to be able to successfully compete for the concentrate from Chelopech in order for us to divert Chelopech concentrate too soon.

Speaker 2

So we're very clear about our intent to divert our concentrate elsewhere.

Speaker 7

All right, great. Thank you for that. Just a follow-up just for 2024, so we can sort of assume that The 3rd party deliveries are going to sort of stay steady from 2023 or Is there a chance for more of that going to 3rd parties?

Speaker 3

Yes, sure. I'll just take that. So yes, so the expected we don't to be delivering any additional concentrate to Tsumeb in 2024. So all of it will be 3rd party going forward.

Speaker 7

Great. Thank you for that, Navin. And because I have you on the line here, Question for you on cost. So looking at Chelopech and Atatepe, they're tracking much better than the cost per ton guidance for the year. Perhaps you can comment on where you're seeing that inflation easing in your cost structure?

Speaker 3

Sure, absolutely. So definitely, one of the biggest areas is in power. We if you recall, for the past couple of years, We have been or Bulgaria had been benefiting from a power subsidy that was even despite power costs They have been historically higher than what they were. They were actually mitigated. That increase was mitigated in part by a power subsidy that we were receiving for most of 2021 through 2022.

Speaker 3

Starting this year, with global electricity cost fuel prices coming down, We've seen our power costs come down significantly such that in Bulgaria over the past quarter, we haven't had to receive a subsidy. And in fact, Power costs per megawatt hour is actually much below than what we were experiencing in the last year with the subsidy. So that's one area. Another area is definitely diesel costs for obvious reasons there. Cement is another one, steel.

Speaker 3

So we're seeing a lot of relative to our budget that we had at the beginning of the year. We're seeing a lot of easing in some of these consumable areas. Now Quarter over quarter or this year versus last year, we're still seeing a bit of an increase, but definitely we're seeing an easing in that such that We're coming in, as you said, a bit towards the lower end of our cost per ton guidance for those respective lines.

Speaker 2

So maybe the percentage range of what Yes, sure.

Speaker 3

In percentage range, we're seeing anywhere between 15% to 20% in some of these areas, but on average, it's closer to between 8% to 12%.

Speaker 7

Excellent. And in terms of labor, I know it depends on the jurisdiction, but We keep hearing that labor costs still challenging and finding labor is a challenge. Perhaps you can tell us a little bit more on the labor side?

Speaker 3

Yes, I'll talk about perhaps the cost area. So definitely labor has been a bit more sticky in terms of that's certainly not coming down year over year. And then so definitely that's a factor in perhaps why our costs that we've for this year higher than last year. In terms of availability and I'll start and maybe Dave can jump in as well, but definitely the competition for labor in In Bulgaria, it is increasing, in Europe in general. And yes, we are seeing a lot of Yes.

Speaker 2

We've seen as a very good employer in Bulgaria and as a consequence of that, we're not seeing a particular issue in attracting people to our Production and maintenance roles, it's a little bit more of a challenge when you're talking about technical roles, where there's very significant competition that we're seeing Inflationary pressures on what we would need to attract somebody. But at this point, what we're seeing is the cost increases year over year, As Navin was saying, they're coming down and that's reflecting through not just to availability, but also in terms of things like selective bargaining and the increases that we're anticipating between 2023 2024. So overall, we peaked and we're definitely seeing ourselves on a lowering trajectory in terms of that inflationary pressure that's been within Europe, particularly after the onset of the war last year.

Speaker 7

Excellent. That's great to hear. I'll

Operator

The next question comes from the line of Eric Windmill of Scotiabank. Your line is now open.

Speaker 5

Great. Thank you. Just a quick point of clarity, you mentioned that 15% to 20% figure probably tracking closer to 8% to 12%. Is that obviously on a year over year basis you're seeing decreases in the costs or just one of you clarify that please?

Speaker 3

Sure. It's actually relative to budget and the 15% to 20% was really around the items that I mentioned, which was Diesel, power is actually above 20% relative to our budget, what we had budgeted and cement. So and then the other numbers in general between 8% and 12%, that's just across the board if you kind of factor in anything that There's some pluses, some minuses there, but on average, we're seeing about an 8% to 12% decline relative to budget.

Speaker 2

So maybe just an additional comment. We just put in place contracts for the next year and those see significant decrease in things like steel balls, binders, reagents. So basically, you're seeing these things translate not just into It's a downward pressure, but they're actually translating into 12 months contracts, which is substantially lower than the previous year's contracts.

Speaker 5

Okay, great. No, certainly nice to hear. So great to hear that. Thank you.

Operator

Thank you for your questions. That concludes the question and answer session. At this time, I would now like to turn it back to Jennifer Cameron for closing remarks.

Speaker 1

Great. Thank you all for joining us today. Please feel free to reach out if you have any additional questions, and we look forward to keeping you updated as we move towards the end of the year. Thanks and take care.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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