Lundin Gold Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 10, 2023

There are 8 speakers on the call.

Operator

Good morning. My name is Chris, and I will be your conference call operator today. At this time, I would like to welcome everyone to London Gold's Second Quarter 2023 Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Mr. Hochstein, you may begin your conference.

Speaker 1

Thank you, Chris, and good morning, everyone. Thank you all for joining us on this conference call today. We're Terry Smith, Chief Operating Officer and Chris Kowlian, Chief Financial Officer and I are going to take you through our results for the Q2 of 2023. Please note Lending Gold's disclaimer is on this slide. This discussion includes forward looking information.

Speaker 1

Actual future results may differ from expected results for a variety of reasons described in the caution regarding forward looking information section of our press release. London Gold is a U. S. Dollar reporting entity and all amounts in this presentation refer to U. S.

Speaker 1

Dollars unless otherwise indicated. London Gold achieved another quarter with excellent operating performance at FDM, With gold production of 129,731 ounces and gold sales of nearly 129,000 ounces at a cash operating cost of $6.44 per ounce sold and an all in sustaining cost of $8.02 per ounce sold. For the first half of twenty twenty three, London Gold has produced over 269,700 ounces and sold 263,649 ounces of gold at an industry leading ASIC of $7.65 per ounce sold. Performance in the 2nd quarter highlights London Gold's ability To generate significant free cash flow with $132,000,000 generated over the 3 month period, the highest achieved to date. As at June 30, the company maintained a strong cash balance of 275,000,000 compared to $363,000,000 as at December 31, 2022, especially taking into account the $208,000,000 repayment of the gold prepay in January.

Speaker 1

Based on very strong performance

Speaker 2

During the first half twenty

Speaker 1

twenty three and projections for the remainder of the year, the company has made the decision to increase its 2023 production guidance to 450,000 to 485,000 ounces. In addition, the company has reduced its 2023 cash Operating cost guidance to $6.50 to $700 per ounce sold and AISC to 8.20 to $8.70 per ounce sold. This is compared to previous production guidance of 425,000 to 475,000 ounces, cash operating cost guidance of $700 to $7.60 per ounce sold and AISC guidance of 8.70 to $9.40 per ounce sold. The expected strong outperformance on costs is the result of low inflationary pressures in Ecuador and continued operational excellence achievements and initiatives. During the quarter, LendingOLD also published its 2nd climate change and 7th annual sustainability reports.

Speaker 1

In our climate change report, the company reported a greenhouse gas emissions intensity for Scopes 12 of 0.06 tonne CO2 equivalent per ounce of gold produced in 2022. Based on publicly available data from 152 gold mines who reported their Scopes 12 GHG emissions in 2021, London Gold's 2022 emissions performance is among the lowest in the industry. By comparison, The average GHG emissions intensity of reporting underground mines was 0.42 tons CO2 equivalent Browns of gold produced in 2021, 7 times higher than Lending Gold's emissions. In the report, LendingOLD also set a target to be carbon neutral by 2,030 with respect to its scope 1 and 2 emissions based on its current life of mine plan. The establishment of this target is supported by a detailed analysis of the company's emissions and the identification, evaluation and prioritization of direct decarbonization opportunities.

Speaker 1

Through this exercise, Lending Gold has developed an initial roadmap To carbon neutrality, which is set out in the climate change report, we are firmly committed to achieving carbon neutrality by 2,030, and I'm excited to share our progress over the next few years. With that, I'd like to turn the call over to Terry for a more detailed look at the operating results.

Speaker 2

Thanks, Ron, and hello all. Another great quarter in the books for London Gold. I'd like to first congratulate the Thank you, and good morning everyone. Thank you, everyone. Thank you, everyone.

Speaker 2

Thank you, everyone. Thank you, everyone. Thank you, everyone. Thank you, everyone. Thank you, everyone.

Speaker 2

Thank you, everyone. Thank you, everyone. Thank you, everyone. Thank you, everyone. Thank you, Certainly worthy of some celebration, but we won't rest on our laurels.

Speaker 2

The team continues to drive towards the next milestone. Our strong operating results in Q1 continued during Q2, highlighted by quarterly gold production totaling 129 731 ounces comprised of 85,395,000 ounces of concentrate and 44,336 ounces of dore. Gold sales totaled 128,958 ounces. In the same period last year, gold production and sales totaled 111,890,096,291 ounces, respectively. Gold production during the Q2 was higher than planned due to high grade mined in Q1 that was stockpiled and milled through Q1 into Q2.

Speaker 2

We also benefited from higher mill throughput offset by lower recoveries compared to recent periods. Mine production totaled 404,408 tons of ore at an average grade of 9 grams per ton versus 369,430 tons in Q2 at an average throughput. The mill was running at 4,598 tonnes per day. Inclusive of the relining of the SAG and Ball Mills during the Q1, the mill averaged at a throughput of 4,479 tonnes per day during the first half of twenty twenty three. The average grade of ore milled during the Q2 was 11 grams per tonne with average recovery at 88%.

Speaker 2

Recoveries were affected by processing ore from sectors that contain higher levels of finely disseminated sulfide minerals. We're working on a few fronts to improve recovery and plan to report back next quarter with some more details on this. For the first half of the year, we produced and sold 269,702 ounces and 263,649 ounces respectively. The average grade of ore milled was 11.6 grams per ton with average recovery of 89.3%. This is great production performance, setting us up for a solid 2023.

Speaker 2

Sustaining capital expenditures accounted for $103 per ounce sold in the Q2, a significant increase compared to the last quarter. A large portion of this is attributable to the construction of the 4th tailings dam raise, which advanced on schedule through Q2 and is still anticipated to be completed in Q4. During the Q2, our conversion drilling program focused on the southern extension of FTN's inferred resource with approximately 3,211 meters drilled across 20 drill holes. Most of the drill holes confirm continuity of the mineralization, Our results have also identified higher grade veins within the larger resource envelope. 7,600 meters conversion drilling is planned in 2023 and since January a total of 4,612 meters across 30 drill holes have been completed.

Speaker 2

A complete table of results received to date can be found in London Gold's recently published press release dated August 3, 2023. I'm also happy to announce that the new warehouse was completed during Q2 and is now operational, and the new underground mine maintenance facility is expected to be completed during Q3, which will provide further efficiencies. Other sustaining capital projects will continue to ramp up during the remainder of the year. Operating costs were relatively consistent quarter over quarter. We achieved cash operating costs of 6.44 and all in sustaining costs or AISC of $802 per ounce sold in the second quarter.

Speaker 2

While for the first half of the year, we achieved cash operating costs of $6.44 and AISC of $7.65 per ounce sold. At these levels, Lundin Gold continues to be in the 1st quartile on the industry cost curve. I'll turn the call back to Ron now to discuss our exploration programs. Thanks, Terry.

Speaker 1

London Gold's near mine exploration program commenced in the Q3 of last year and is focused on expanding the FDM mineral resource envelope and testing several unexplored targets near the mine. As at the end of Q2, approximately 12,006 meters across 24 holes were from surface and underground have been completed, With assay results received to date set out in the last week's press news release, results are still pending for a number of the reported drill holes. The near mine drilling program continues to explore extensions of major controlling structures surrounding the Effian deposit. In the Q2, a total of 8,609 meters across 16 drill holes from surface and underground were completed on several targets near FDN. The surface drilling program continues along the southern extension of the East Fault With the FDNS South or FDNS and bonds for smart targets were identified in Q1.

Speaker 1

At FD and S, 6 surface drill holes were completed, confirming continuity and mineralization and defining a new geometry for the main system on this target. Drilling results indicate a series of subparallelepithermal veins At Bonso Sur, located 1 kilometer from FDM, 5 surface drill holes were completed and continue to confirm mineralization. Drilling results recorded multiple positive intersections and demonstrated the occurrence of 3 distinct mineralized zones, represented by veins and or valence of quartz and minor calcidone and manganoan carbonate. Mineralization currently extends 500 meters along strike from the north to the south and 300 meters along the down dip and remains open in all directions. Drilling to test new near mine sectors of interest was also initiated in Q2.

Speaker 1

This drilling aims to explore the extensions of major structures at FDM, with the 1st drill hole completed along the northern extension of FDM. Four surface rigs are currently drilling with 2 rigs at Ponsa Sur, 1 at FDNS and the 4th testing new near mine targets. The underground drill program continues to explore the continuity of the FTN deposit at depth and beyond the major faults. Four drill holes were completed in Q2 and intercepted structures and hydrothermal alteration beyond the current FDN resource limits at depth And to the east of the East Fault, the 2023 regional exploration program continues to advance In the southern region of the Suarez Basin, with a total of 2,796 meters completed to date, Targets of interest such as Corvada La Negra and Crispell located along the basin's western border have been the primary focus. The 2023 regional drilling program comprises 12,500 meters of drilling and a second rig was recently added to the program to advance exploration at additional targets.

Speaker 1

Funding Gold's exploration programs are continuing to demonstrate the significant untapped exploration potential near the current FDM deposit. 9 rigs are currently turning on our exploration programs a minimum of 43,000 meters of drilling across the conversion, near mine and regional programs are planned for are currently planned in 2023. This represents the largest drill program in the district since 2007. Also based on results to date, We are looking at adding additional rigs. I'd like to formally welcome Chris Kololian to London Gold as Chief Financial Officer.

Speaker 1

Chris or C. K. As many of you know him as, joined London Gold on July 1. I also want to take this opportunity to thank Chester See for stepping in as interim during the handover. Chester will continue with Lending Gold and the role of Senior Vice President, Finance.

Speaker 1

Now I'll turn the call over to CK for his inaugural call and to provide a more detailed look at the financial results.

Speaker 3

Thanks, Ron, and hello, everyone. I'm delighted to attend my first call at London Gold at such an exciting time in the business. Jumping into it on Slide 16. In the Q2 of 2023, London Gold recognized revenues of $244,000,000 from the sale of approximately 129,000 ounces of gold at an average realized gold price of $9.42 per ounce. Income from mining operations increased to $125,000,000 compared to $82,000,000 a year earlier, primarily as a result of the increase in ounces sold and higher gold prices.

Speaker 3

From this, London Gold generated adjusted earnings, which exclude the derivative gain and deferred income tax expense included net income of $59,000,000 or $0.25 per share this quarter compared to $13,000,000 or $0.06 per share a year earlier. For the first half of the year, LundinGold recognized revenues of $501,000,000 and income from mining operations of $258,000,000 The company generated adjusted earnings of $126,000,000 or $0.53 per share. Income taxes of $34,000,000 were accrued during the Q2 of $23,000,000 in line with the same quarter last year at $33,000,000 which is comprised of current and deferred income tax expenses of $28,000,000 $6,000,000 respectively. Adjusted EBITDA was $150,000,000 in the second quarter. For the first half of this year, LendingOLD achieved adjusted EBITDA of $309,000,000 Turning to Slide 17.

Speaker 3

Performance during the Q2 of 2023 highlights London Gold's ability to generate very significant free cash flow. The company generated very healthy net cash from operating activities in the Q2 of $162,000,000 and free cash flow totaled 130 $2,000,000 or $0.56 per share compared to $21,000,000 or $0.09 per share in the Q2 of 2022. For the first half of the year, the company has generated free cash flow of $120,000,000 which factors in the full repayment of the gold prepay facility in January. We expect to continue generating significant free cash flow in the future based on our production and all in sustaining cost guidance, especially given the increased exposure to strong gold prices with the benefit of the full repayment of the gold prepay. Turning to Slide 18, London Gold ended the 2nd quarter with very strong cash balance.

Speaker 3

As at June 30, 2023, the company had cash of $275,000,000 and a working capital balance of $268,000,000 compared to cash of $363,000,000 and a working capital balance of 195,000,000 as at December 31, 2022. The change in cash during the first half of the year was primarily due to the full repayment of the gold prepay facility of $208,000,000 principal repayments, interest and finance charges including associated taxes under the Stream credit facility totaling $39,000,000 Interest and principal repayments under the senior debt of $91,000,000 dividends of $47,000,000 and cash outflows of $20,000,000 relating to sustaining capital expenditures. This is offset by the substantial cash generated from operating activities of $307,000,000 and proceeds from the exercise of stock options and anti dilution rates of $10,000,000 Turning to Slide 19. Free cash flow is fundamental to London Gold's growth story and we have generated a lot of it in the 2nd quarter. The company's capital strategy ensures that we utilize our treasury as and when needed while maintaining optionality.

Speaker 3

By fully repaying the gold prepay in the Q1, Further, as per the terms of the agreement, the company continues to evaluate the option of buying back half of the Stream credit facility in June 2024 $150,000,000 Unless gold prices fall materially between now and then, doing this makes both financial and strategic sense. The remaining component of our outstanding debt is the senior debt facility, which had a remaining principal outstanding of $98,000,000 at the end of the second quarter and is repayable in quarterly variable installments and through a cash sweep mechanism. We are looking at the options around the senior debt, but based on our current Free cash flow generation unless repaid early. This debt facility is expected to be repaid in the first half of next year, approximately 2 years ahead of its scheduled maturity in 2026. Now again, talking about cash flow without mentioning London Gold's dividend policy of $0.10 per share declared on a quarterly basis, which positions us as one of the highest yielding gold equities globally.

Speaker 3

The 2nd quarter dividend 2023 was paid at the end of the second quarter, while the 3rd quarterly the 3rd is payable on September 26 for shares trading on the TSX and OTCQX and September 29 for shares trading on Nasdaq Stockholm based on a record date of September 11, 2023. Even after the payments of dividends, we still retain a healthy treasury and continue to generate significant operating cash flow for other value generating initiatives such as our near mine and regional exploration programs, future throughput expansions, further debt reduction and other strategic opportunities. A great first half of the year for London Gold and an exciting 1st 2 weeks from my end. The company is in a very strong financial position and I'm looking forward to helping build the business going forward. For a more detailed discussion of our financial results, I encourage you to turn to our MD and A.

Speaker 3

We are also happy to answer questions during the Q and A along with my partner, C. Who is on the line. Now I'd like to turn the call back over to Ron for his concluding remarks.

Speaker 1

Thank you, C. K. Another strong operating and financial quarter for London Gold. Achievements during the first half of the year provide the company with a positive outlook for the remainder of the year. And as a result, production guidance has increased to 450,000 to 485,000 ounces, While cost guidance decreased for both cash operating costs and AISC to $6.50 to $700 per ounce sold $8.20 to $8.70 per ounce sold respectively.

Speaker 1

Production for the second half of twenty twenty three It is expected to decrease relative to the first half of the year, primarily driven by lower grades, while AISC is expected to increase slightly driven by completion The 4th raise of the tailings dam as well as several other capital projects. In addition, the conversion drilling program aiming to convert inferred indicate that mineral resources is planned to continue, plus 400 meters of development to better drill the southern extension of our resources is underway or the 2024 conversion program. The near mine drilling program will continue with 3 rigs dedicated to the expansion of mineralized zones at depth and a long strike. Another surface rig and underground rig will continue to explore for major discoveries in the near mine district, Targeting the extension of major controlling structures at FDM and new targets and sectors. The Near My program is currently expected to comprise a total of 23,000 meters of drilling for 2023.

Speaker 1

The regional drilling program continues to focus on the Southern Suarez Basin, advancing along the eastern and western borders of the basin. A second rate has been added to advance numerous target areas identified during the previous quarters. The regional drilling program Currently is expected to comprise a total of 12,500 meters for the year. The combined near mine and regional exploration budget for 20 $23,000,000 currently remains at $24,600,000 Thank you all once again for your continued support. And with that, I will now open the call to questions.

Speaker 1

Back to you, Chris.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Kerry Smith, Haywood Securities. Kerry, please go ahead.

Speaker 4

Thanks, operator. Terry, just on the quarter on the mill throughput and the grades, do you expect to maintain Is Shire 4,500 tonnes a day through the back half of the year? Or are there any big planned maintenance shutdowns that are required that might lower that number?

Speaker 2

Thanks for the question. We have a SAG mill liner change happening here in the Q3, which will affect our throughput. But I don't see why we wouldn't be able to maintain the averages that we've been seeing through the first half of the year.

Speaker 4

Okay. So even with the reline, with the diesel, you expect to kind of be in that 4,400 tonne 4,500 tonne a day rate. Okay. And then just on the grade, Kerry, how was the grade reconciliation in Q2 model grade versus what you actually mined?

Speaker 2

Yes. Thanks, Carey. The reconciliation is tight. The reason that we had such a high mill grade Compared to the mine grade in the quarter was because of stockpiled material, from mining in Q1 that was spread through Q2. And so we've really absorbed all of that high grade through the mill now, and we have More of a match between the mill and the mine from a grade perspective.

Speaker 2

So from a reconciliation perspective, that didn't really play into that Disconnect between the mine and the mill from a grade perspective.

Speaker 4

Okay. And then for the back half and you are guiding lower grades, Is it going to be below 10 grams or kind of similar to the grade you mined in Q2? Or how should we think about that?

Speaker 2

Yes. I think the grades that we mined in Q2 are representative of what we'll continue to see through the rest of the year and And the mill grades will follow.

Speaker 4

Okay. Okay, perfect. And just maybe a broader A comment from Ron, if you don't mind, with the assassination last night of the presidential candidate and then Lasso has now announced A 60 day state of emergency. Will that state of emergency have any impact on The operation, maybe if you could just make some comments on the election, which is coming up later this month. Yes.

Speaker 1

Carrie, first of all, the whole London Gold team thoughts and prayers are with the Lavencia family. It's horrible what happened. With regards to the I'll start with it, the broader topic with regards to the election. Yes, this could have an impact The election and that it's going to really push, I think, the whole focus around security, which has been The key platform for a number of the candidates. There is talk right now, Kerry, it hasn't been confirmed, but there is Some discussion in the state of emergency may lead to this of postponing the election, which was originally scheduled for August 20.

Speaker 1

That may happen. This could have an impact on the election again in terms of just the way people are looking at Security and could change people's views on candidates. With regards to us at site down in Southeast Ecuador, we're not seeing The criminal element or that aspect there at all, It's kind of the quiet part of the country. That said, we're not letting our guard down. We continue to have strong security.

Speaker 1

There's a strong because we're on the border, there's already a strong military presence in Sumarach and Chape because we're right on the border with Peru. But as you've been there, Terry, it's pretty remote and it is pretty quiet relative to what's going This was Iquito, but most of the issues and a lot of the issues that we've been seeing over the last little while and continue are along the coast. So we're quite a ways from the coast and it's yes, security at site, we're not too worried.

Speaker 4

And Ron, I mean, I know you have to ship concentrate out through Goyaqil and you bring a lot of your consumables and fuel in that way. Like, Would there be any impact on that side from the state of emergency then because that is on the coast?

Speaker 1

No. No. Our movements will continue as planned, Terry.

Speaker 4

Okay.

Speaker 1

Okay. A lot of the state of emergency deals with not Having movements at night and everything like that, but that's been our policies from the very start is that we don't have transportation Traps or anything moving at night for a health and safety standpoint. So, yes, it doesn't really affect us.

Speaker 4

Okay. Okay. Thanks very much and congratulations on a good strong quarter.

Speaker 1

Thanks, Carey.

Operator

Thank you. Your next question comes from Martin Prender, Veritas. Martin, please go ahead.

Speaker 5

Thank you for taking my question. I have two questions. Can you comment on the 2024 expected grades? Will it be a continuation of 2023 or what are we looking at?

Speaker 1

We haven't. We're in the process of preparing our 2024 budget life of mine plans and everything like that. So Can't really comment on 2024. We have published our guidance prior with regards to gold production of that and We will be reevaluating that as we go through the 2024 budget cycle, but I can't really comment on that at this point in time.

Speaker 5

Okay. And in terms of the mill in 2024, Are you going to be closer to the 5,000 ton per day or you're already sort of maxing out at 4,500 1,600.

Speaker 1

We're doing the engineering and everything. We've actually just completed the basic engineering and moving into detailed engineering On the 5,000 ton per day expansion. So again, that will be part of our 2024 budgeting exercise and everything, and we'll have more information on that later this year. But yes, We are progressing on the expansion to the 5,000 ton per day.

Speaker 5

But when will you be there? I mean, Do you expect to be there by the end of 2024 or is the beginning or you know?

Speaker 1

Yes. We're still again, it's a bit too early to say on that because part of large part of it's going to be dependent upon we're not talking about A large amount of capital, but there's still equipment delivery issues and things like that. I'm bringing the detailed engineering up and working with suppliers. That's going to really Kind of dictate as to how quickly we'll get to 5,000 ton a day will be equipment delivery issues, scheduling of downtime, that sort of thing. So Again, we'll have a lot more information on this in a few months.

Speaker 5

If you were to discover some new deposit And you say, well, I would like to have, I don't know, 7,000 ton per day or something like that. Will that Mean that you have to do a new mill? Or is there a possibility that through modest Investment, you can continue increasing the throughput of that mill.

Speaker 1

That's things that we're starting to do, I would say, Those blue sky type studies that we're looking at things, but again, a large part would depend on the If we discovered Anew, is it an FDM look like or is it different metallurgy, that sort of thing. There's a number of factors that would Enter into that analysis. Again, it's too early to say, but it's something we're looking at.

Speaker 5

Okay. Thank you.

Speaker 1

Thank you.

Operator

Thank you. Your next question comes from Don DeMarco, National Bank. Don, please go ahead.

Speaker 6

Thank you, operator. Hi, Ron. Good morning. Just to follow-up on the tragic events last night. Well, first, I heard your response and it's encouraging to hear that the mine is in a peaceful area, Very secure.

Speaker 6

But you mentioned security is a topic in the election. Can you comment a little bit on why it's a topic in the election and how maybe security in the country has trended under LASSO over the last few years?

Speaker 1

Yes. Don, it's become a real topic because actually, it's very unfortunate having Lived there for over 6 years. I'm spending a little less time there now. But having lived there for 6 years and seen the changes, It is sad. The crime is higher.

Speaker 1

The murder rate has climbed recently. Again, most of that's focused on the coast And a large part of it's being driven by trying to control the transportation hubs. Ecuador has multiple ports And we are also border on 2 large Colombia and Peru, which are large Drug Manufacturing Centers, if you want to say it that way. So that's what the real issue has and it's just it's kind of become a little bit uncontrolled over the last little while. And as a result, A lot of the presidential candidates are trying to put in policies or talking about what they would do to try to bring Ecuador back To where it was a few years ago, which was one of the lower crime rates, lower lowest murder rates in Latin America.

Speaker 1

They want to get back to there. So it has been a topic and it has been a platform for many of the candidates.

Speaker 6

Okay. Well, certainly appropriate that it is a priority then. On to my next question, Congratulations on a strong free cash record free cash from the quarter. And I saw net debt took a step change lower. Are you expecting to be net cash surplus by year end there, both?

Speaker 1

Okay.

Speaker 3

I think that's certainly the trend or Certainly trending. Yes. Thanks for the question, Don. No, I think we're certainly Trending in that direction, I suppose in terms of how you factor in the stream. But if you think about cash less senior debt, we'll certainly be in a positive position that will continue to grow into next year when as mentioned, we'll be looking based on current gold prices, our forecast, we would expect that senior debt to be cleared In the first half of next year.

Speaker 6

Okay, good. And a question then moving away from the financial reporting last night, but to The exploration update that you provided on August 4th, in particular, I'm looking at the resource to reserve conversion drilling. Some of the intercepts here are impressive, 11 grams per ton over 35 meters, 23 grams over 16 meters. What are the implications of this in terms of when these we expect they might be converted to reserves, when would they be added to the mine life? And what does it bode for potential mine life extensions?

Speaker 1

Is this something you can

Speaker 6

mine in the next couple of years or is this longer dated?

Speaker 1

Right now, our current mine plan, which we're as I mentioned just a little while ago, we're updating, which will include The Southern the new mine plan will include the Southern extension resources, which were part of the new resource model, which was issued in March of this year. Would we bring these in sooner? There's we've got so much in front of us right now, Don, in terms of FDM itself, our current mine plan shows some of that southern stuff coming in, Probably closer to 2,030 and beyond. This new drilling that we're doing We'll be brought into a new resource estimate, which we will be expected to be completing in issuing that in Q1, so we'll look at resources, but our new mine our mine plants are kind of a little bit delayed offset. So that Whatever we bring into resources at the end of this year would be then factored into a new mine plant for 20 25 minutee plan.

Speaker 1

There's a little bit of offset there. We are already bringing in the new life of mine plan some of that Southern extension and Yes. Some of these commercial results are very exciting. And definitely, we're and that's partly, Don, we've accelerated the development. This 400 meter development that I mentioned wasn't in our original sustaining capital budget.

Speaker 1

We've Added that because we just see some real opportunities and we need to be able to drill this more From underground. So that's why we're doing the development currently. Us, the operating team mine operating team have done a great job and we're Actually, ahead of development as to what we need underground. So we've got the resources to dedicate to this. So that's underway right now.

Speaker 6

Okay. Okay. Well, that's great to hear. And when we look at near mine and the regional programs, obviously, near mine could probably be trucked To the mill if it was proven successful. But with the regional program, like conceptually, was this Would it be too far to truck?

Speaker 6

Is this regional program looking at potentially a whole new mine and mill, a separate standalone project if successful?

Speaker 1

Actually, I think you could truck to as you could truck from the regional program. We're not talking about being that far away.

Speaker 6

Okay. Okay.

Speaker 1

Don, even near mine, FDNS, that could be accessed to our existing underground Mark? Yes. We're not even talking about that's what's really exciting about FDMS and Bonzosaurus only a kilometer away, but We were brainstorming last week for how will we access Ponce Seward.

Speaker 6

Yes.

Speaker 1

It's the near mine program is In just such a short period of time and the success rate that Andre and his team are having The number of holes we've put into bonds of sewer and I think we're pretty close to 100%, if not at 100% of the holes have hit Gold mineralization or grade mineralization, which is in a new target, that's the team has done a great job.

Speaker 6

Okay. Good to hear. That's all for me. Good luck with Q3. Thank you.

Speaker 1

Thanks, Don.

Operator

Thank you. Your next question comes from Jeremy Hoye, Canaccord Genuity. Jeremy, please go ahead.

Speaker 7

Hi. Thanks for taking my questions. Most of my questions have been answered. So Maybe just a quick clarification on some of the exploration results. The results were really exciting.

Speaker 7

And one thing that stood out to me was a comment about FTNS that the zone was showing similar hydrothermal alteration to that at FBN and that the geological understanding had evolved. Could you elaborate a bit on how this understanding has changed and what this means for the target?

Speaker 1

What we're starting to see as we move to the South and this is both FDNS and Bonso Sur Yes. The mineralization tends to be more like a traditional epithermal type mineralization like what you'd see in many other Several type operations around there around the world. FDM is unique and we're not saying there isn't another FDM there, But what we're starting to see is that as we move to the south, it's a very strong, but more Epithermal vein type systems, which means that it's going to take more drilling in order to really lay it out. And that's hence why I made the comment that we're currently considering maybe adding some more rigs even this year. And I think we're looking at next year's program of being Significantly larger.

Speaker 1

So that's what we talked about it changing, Jeremy, is just going from a FDN Type to more traditional epithermal type model.

Speaker 7

Okay, great. Thanks. Looking forward to seeing more results come in there. And I guess just one last one then. It's not something that you guys have definitely talked about this quite a bit in the past, but could you just refresh us on What your priorities are for potential M and A targets given the free cash flow generation and improvements to the balance sheet that we're seeing?

Speaker 3

Thanks, Jeremy. I think you're certainly days at the moment, I think what's clear to us is The sheer scale, the cash flow generation from FTN is throwing up all sorts of optionality in terms of how we consider the next chapter of the business. And so what struck me certainly in my 1st month on the job is just the best in class expertise we have across so many different Disciplines within the company, whether it's project execution, operations, you're seeing the operational excellence program coming through then certainly on the exploration side. So I think that gives us a pretty desirable whiteboard to think about when we think about where we could take this business with the expertise we have in house. So I think it's something we're thinking about.

Speaker 3

There's nothing imminent. We're spending time thinking about it, but really the focus remains on Driving value through the exploration programs and certainly the operational excellence for the time being.

Speaker 7

And there's certainly a lot of potential nearby. Okay. Well, that's it for me. Thank you and congrats on a good quarter.

Speaker 1

Thanks, Jeremy.

Operator

Thank you. There are no further questions at this time. Please proceed.

Speaker 1

Thanks, Chris, and thank you everyone for taking the time to hear about Lending Gold and Look forward to updating everyone as the quarter progresses and for Q3 results. Thanks everybody and have a great day.

Operator

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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Earnings Conference Call
Lundin Gold Q2 2023
00:00 / 00:00