Pan American Silver Corp (PAAS) 2005 Q3 法說會逐字稿

Good afternoon ladies and gentlemen, my name is Carlina and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Pan American Silver Corporation third quarter 2005 earnings conference call. [OPERATOR INSTRUCTIONS]. It is my pleasure to turn it over to your host, to Mr. Ross Beaty. Sir, the floor is yours.

Good morning ladies and gentlemen. Welcome to Pan American third quarter conference call. With me are Geoff Burns, Pan American's President and CEO, Andy Pooler, Pan American's VP of Operations, Steve Busby VP of Projects, Rob Doyle our CFO, and Brenda Radies, our Vice President of Public Relations. As is usual, I will open it to some general comments, then Geoff Burns will provide specific fill-in regarding some of or projects and after that we'll open the call for questions.

Starting with financial and operating results. We recorded our highest silver production in our history at 3.2 million ounces in the third quarter. Our third quarter gross revenues also reached a new record at $30 million. Cash flow was $7 million and we recorded net income of $2.3 million. These are all much improved results over earlier quarters this year, as we predicted. And we believe the trend of improved results will continue in Q4 and through 2006 assuming steady metal prices.

Our gross revenue increased by 10% over Q3 in 2004. We realized higher silver production and enjoyed higher silver, zinc and copper prices, but we also saw lower base metal production due mainly to lower to lower zinc grades at our Huaron mines, and higher true royalty costs. Our concentrated shipments were also much reduced due to timing of shipments. We shipped 33,000 tons of concentrate in Q3, versus nearly 38,000 tons in Q3 of 2004.

Our cash costs per ounce of silver were 2% higher than Q3, 2004 but 7% lower than in Q2 and 8% lower than in Q1 this year. This is particularly pleasing, given that we had much higher energy and labor costs at all of our operations compared to last year. These were driven both by higher absolute oil and gas costs and by stronger Mexican and Peruvian currencies, against the U.S. dollar that had the effective increase in all of our local costs such as labor.

We also saw much lower zinc and copper production in Q3 due to temporarily lower grades at certain of our operations and this normally would cause higher cash costs for silver ounce, since we deduct base metal revenue before calculating cash costs. So we were particularly happy to see our cash cost decline in Q3 and this is simply due to higher productivity overall and better results, especially at our Morococha and La Colorado operations.

Looking at the bottom line, our earnings, we are seeing a solid improvement this year from $2.9 million loss we experienced in Q1, to more or less break-even result in Q2 and now our 2.3 million net earnings in Q3. That is a quarterly swing in earnings of over $5 million. Compared to last year, our Q3 results were especially good as they take into effect higher depreciation charges this year of $0.8 million, higher G & A costs of $0.6 million, due partly to Canadian dollar that influences the cost of our head office staff in Vancouver, higher reclamation expenses this year of 0.4 million and as I said earlier, much lower concentrated shipments this year.

In term of mine operating earnings, we recorded our tenth consecutive quarter of positive earnings with $4.9 million in Q3. These are good results and I expect we will see continuing improvements looking forward. Looking at our operations, we produced right on our overall budget of 3.2 million ounces and we expect this to continue in Q4 so we should end the year with silver production of about 12.5 million ounces, exactly our target that we provided target on in the second quarter.

Our star operation was our new Morococha mine in Peru, where we produced 706,000 ounces in Q3 at a cash cost of $1.99 per ounce Geoff Burns will elaborate on this in a few moments. Elsewhere in Peru, we had a good quarter our Quiruvilca mine, producing 580,000 ounces at $3.55 an ounce, our best quarterly performance so far this year. Results atour Huaron mine, though, continued to be lower than forecast with production of 940,000 ounces at a cash cost of $5.13 per ounce.

Huaron's cash costs are being affected by lower zinc production, due to lower zinc grades and lower zinc recovery as the veins we are now mining have worse metallurgy than those we have mined in recent years -- or more difficult metallurgy than those we have mined in recent years. We are working hard to return our zinc recoveries to historic levels and this will get our costs down to the future to the extent we are successful doing this. In Mexico, production at La Colorado reached record level in Q3 at 818,000 ounces.

Our project to reopen the sulfide mine there is on target for an April start-up, and we expect the sulfide production addition of about 1 million ounces per year will drive our overall cash costs below $5 an ounce when it gets going. Finally, I'm really pleased to announce that our San Vicente mine in Bolivia has reopened, with total milling agreement at a local mill to treat San Vicente ore until we rebuild an on-site mill there in 2006. We also re-jigged our joint venture agreement with our local partner there and now hold 55% operating interest, and Geoff is also going to discuss this in more detail in a moment.

We have two major projects under development right now. In Mexico, we are in the middle of building our Alamo Dorado mine, so far so good. Geoff is also going to talk about this. Finally, we are in the last stages of feasibility at Manantial Espejo in Argentina. This week, we are submitting an environmental impact study to Argentine authorities after our public hearings last week. We hope the project can proceed in early 2006 with ultimate production of about 4 million ounces of silver and 60,000 ounces of gold annually.

Geoff, would you like to comment on those three projects, please?

Thanks, Ross. Yes, I would. The Morococha mine in Peru was our best performer this quarter. Silver production continues to climb, largely as a result of capital investments we had made at the mine in both underground infrastructure and equipment. As Ross mentioned, cash costs for the quarter were below $2 an ounce reflecting improved performance our milling facility particularly with respect to recovery of zinc which is a credit to our unit costs.

We will be increasing our processing rate to 50,000 tons per month at Morococha, about 10% above current level starting January 2006 when we completed some relatively minor modifications to the grinding and floatation circuits of the mill. The mine is already producing near this level, and we are stockpiling ore in front of the mill right now.

So far this year we spent $1.4 million in exploration at Morococha, and the results continue to be excellent. As you know, we added almost 23 million ounces of silver in the first half of this year to our reserves and resources. And with 7 drill rigs still turning, I guarantee you that more will be added by year end.

Finally, we have initiated the engineering work to determine the optimum configuration and production rate for Morococha. Particularly in view of our exploration success and our expectations relating to the expansion of ore reserves. This study is going to take a number of months to complete, but the initial work clearly suggests that there is an opportunity to double Morococha production over the next four to five years.

At Alamo Dorado in Mexico, the construction of our newest silver mine is right on track. We started pre-stripping the open pit and expect to be in our first ore bench next week, ore which we will stockpile until the processing facility is completed. The truck shop and warehouse facility are done. The lab is being erected. The civil work for the crushing plant and mill facility installations is well under way as is the construction of our 115-volt power line that will provide the power to run the operation.

Alamo Dorado is on schedule to begin production in the fourth quarter of 2006 and I'm equally happy to be able to report it's on budget, which is 76.6 million and which includes start-up working capital and contingencies. Alamo Dorado should produce, on average 5 million ounces silver per year over its 8-year mine life at a cash cost at under 3.25 per ounce.

In Bolivia, we have resumed mining and processing at San Vicente earlier than we planned. We began shipping ore to a nearby processing facility that has been made available to us by our joint venture partner. This will allow us to generate cash flow in country which we can immediately reinvest in our longer-term plan to rehabilitate the larger and on-site [Vatias] mill.

The concept of San Vicente is quite simple. We will continue to mine and mill at modest rates while preparing the mine and the Vatias mill for larger-scale production, thereby limiting our out of pocket investments. We currently expect it will take us until the middle of next year to prepare the operation to consistently run at a rate of 600 tons per day.

While the addition to production this year will be modest at just over 100,000 ounces, our share, we believe our developments plans at San Vicente will see the operation become a plus 3 million ounce a year producer with cash costs of less than $3 an ounce on a 100% basis. This is a high-grade mine with good ground conditions and at least 10 years of life ahead of it. While in an ideal world we would love to own 100% of this kind of project, we feel that a joint venture with local Bolivian company is prudent in this jurisdiction, so as Ross suggested, we have limited our investment to 55%.

Those are my comments, Ross.

Okay. Thanks very much, Geoff.

I forgot to mention a comment about the exploration front, which is a subject near and dear to my heart as a geologist. We are extremely busy company-wide. We have 17 drill rigs active at our different projects and mines, all designed to increase our silver reserves and resources. As Geoff said, we are generating tremendous results in Morococha, but we have also had some very interesting results at Manantial Espejo, Huaron, Quiruvilca and La Colorado.

All in all we had an excellent quarter but just look at how we're positioned now for internal growth over the next few years. Our 2005 production should be about 12.5 million ounces, with the modest expansions in progress at La Colorado and Morococha, as well as new production at San Vicente, we are targeting to produce well over 14 million ounces in 2006.

As Alamo Dorado enters production in late 2006, we will jump to annual production of nearly 20 million ounces. Beyond that, we should see incremental growth at Morococha and San Vicente and then new production at Manantial Espejo to take our total production to well over 25 million ounces or double this year's level. And assumes no new silver discoveries and no new acquisitions. This is all internal growth.

Pan American has grown to be the pre-eminent global silver mining company and we are really excited to continue our great growth story since we began as a silver company in 1994. Our aim is to driver the best leverage to silver prices to our investors and we do this by increasing our silver reserves and resources and by increasing our silver production.

Looking at silver markets, we are pleased to see the relative strength in silver this year. It is easy to paint a bullish picture going forward. Continued probable weakness in the U.S. dollar should be good for both silver and gold.

Strong industrial demand continues. Particularly in China right now, with numerous new applications for silver in the electronics and biomedical industries. Silver supply is growing slowly from mines, but it is dropping in terms of scrap supply, due to Less silver being used in photography.

Finally, we are excited about the prospects for new silver ETF approved by the SEC to give investors of physical silver an new and easy way to buy silver for investment. In this environment where silver prices are well underpinned by growing demand and static supply, and with continually declining inventories, Pan American Silver is well positioned to deliver great value to our share holds. Our reserves and resources are growing, and production is increasing. New production, such as at Morococha is lower cost too, resulting in the trend we see this year to steadily improving financial results. On that note, I think I'll open the call to questions.

Thank you. [OPERATOR INSTRUCTIONS]. Your first question is coming from David Mallalieu from BMO Nesbitt Burns.

That's close. Hi, Ross, and all.

Hi, David.

Question with regards to--excuse me -- Huaron with regards to the actual production versus the reserve grades.

What is the projection for going forward, because your grades are a little bit lower than expected, and let's say for the next couple of quarters, and how does this compare against the reserve rates which are somewhat higher on the base metals?

Andy, do you want to grab this one?

Let me look up the -- if you give me just a minute, I'll be glad to answer that question. Go on to another question in the meantime.

We'll get back to that in a second, Dave.

Thanks. We'll let someone else take another question, then.

Okay.

Thank you. Your next question is coming from Ivan Sacks from IE Corporation.

Good afternoon, congratulations and good results. I've two very simple questions if you could please assist on. One is being in the silver demand, I know it sounds like a basic economic question, but where is the demand coming for silver? And has that been--the photography demand actually been replaced by any other demand? Secondly, if you could just paint a general picture for the demand for silver, I would say in the next three years. The supply side you have taken good care of.

Thanks. I'm only going to do--I can take an hour and a half--is have abridged fashion here. Silver demand clearly is a function of three main areas: Four main areas: Number one, industrial demand which is the dominant demand category now. Number two, jewelry and silverware demand and well down the list is photographic demand and then finally investment demand.

In the last year the trend has been to steadily increase the industrial demand globally, all sorts of new applications strong growth in China but strong growth really everywhere. The trend in the last year in jewelry and silverware has been to static or slightly declining demand, largely what's going on in India. Last year it wend down because Indian demand for silver was muted as silver went up in price, and it's quite a price-sensitive market. This year looks like silver demand in India is relatively stable and relatively strong compared to last year so we expect to see a pickup in those numbers in 2005 and going forward.

More acceptance of this sort of base price now of around 7/50 an ounce, and that's leading to more sales in the biggest jewelry market in the world, in India, on photographic demand, photography, don't forget, just; 10 or 15 years ago amounted to over 40% of silver demand. Today that's down to about 24%, and it continues to drop as a percentage of total demand and also it is a secular decline because of digital imaging. It is not falling off a cliff, it's not disappearing completely, but it is in decline because there is less silver being used in film and that's somewhat offset by more silver being used in photographic paper.

Nevertheless, there is a decline, but when you actually look at the decline in silver and photography demand, and you look at how much silver is not being returned to the supply side through recycling of silver, because most silver in photography is recycled. You actually see a very offsetting decline in supply to match that decline in demand and the net effect in the silver equation is really very modest, it's a very modest but slightly negative effect.

Finally, investment demand, which I think is the most important demand today for all precious metals, and that is clearly it has gone from a 10-year period, from 1993 to 2003, where you saw investment, negative investment demand. In other words, there was investment supply to the market as people dis-horded silver, in other words there was investment supply to the market as people dis-horded silver they had acquired in the 1980s to, and it started in 2003, particularly picking up last year, and I think you'll see more very strong numbers this year.

More people are buying physical silver as an investment as an alternative to stocks and bonds and it is more in sync with a general trend with more physical commodity acquiring in all metals by interested investors who want to have alternatives to conventional stocks and bonds. There's all sorts of reasons for this but it is giving silver and gold very good underpinnings right now and this should--this should accentuate, if in fact there is economic weakness in major global markets going forward.

We see particularly good promise in the silver sector for strong investment demand if this silver ETF is approved by the SEC over the next four or five months, because that will provide a very low-cost, very easily available to any investor, opportunity to buy physical silver, whereas it is rather more difficult to do that right now. So we're very--I hope that's sort of a short answer to what could have been a very, very long one. Abridged down to what we think are strong demands on the metals and silver.

Andy, are you ready for the question?

Yes, I am. First off this year's production, or this year's grade has averaged about 213 grams per ton silver and--

He's talking about zinc.

It was a zinc question. I apologize, give me a minute. I'll come back.

Take another question.

Thank you. Your next conversation is coming from Steve Butler from Canaccord Capital.

Yes, good afternoon, guys, from Toronto, at least. Silver--can you clarify the tons milled at Morococha, as stated. Is that 87% basis, gentlemen?

Yes, it is.

That is correct.

Okay. And also I guess, Geoff, we saw that you spent 10.5 million in the quarter on Alamo, 13 million in Q4, what remains there for in '06" I can't remember if you spent before this second quarter--or third quarter, excuse me, if you spent anything on Capex for Alamo Dorado?

Prior to the announcement of our construction decision we had spent a couple of million dollars on completing all the feasibility work, et cetera. So in our numbers, accounting numbers, we show about $22 million having been spent. Against our project budget, which is the $76.6 million which we have been discussing we have spent $19 million of that. We already have commitments for an additional 30, as in we've got contracts and equipment purchases set up, and the balance, which would take us about another $26.5 will come next year. Does that make sense?

Let me clarify the 19 million spent through what point?

Through right now, through the end of September.

Through the end of Q3.

Q3, that's correct.

19 million.

It leaves a balance of 56.6 million of which we already committed to 30 of that.

Okay. And, last question, in terms of the Morococha reserves that you announced in July, I think it was, so has this affected your depreciation base already in the third quarter, Geoff?

I'm going to put that over to Rob who is with us here, Steve.

That's right. Based on those results we did--there were actually 2 effects, we did reallocate some of our Morococha carrying costs from non-producing properties on the balance sheet until all property, plants, and equipment.

That has the effect of increasing the number we need to depreciate on a tens mill basis--correct, on a tens mill basis. However, as you point out, the increase in reserves also increases the denominator in that calculation, so on a unit basis it did go down, but not by a great amount because of those two offsetting factors.

Okay. Thanks very much.

Andy.

This is Andy Pooler answering the gentleman's question relative to zinc, I'm sorry, I thought it was relative to silver to start with.

Our reserve grade we carry on our books is at 4% zinc. This year we've been mining at 2.82. One of the reasons for that is that we have been deferring a very high-grade zinc portion of the mine until we have enhanced the recovery in the mill. It's the Alianza vein, which is very zinc-rich. That is a portion of the reserves, and it is what carries that higher-grade value.

As far as reconciliation to the model on the predicted grade, we have had no problems whatsoever. The model is performing well. It is all basis of mine plan and timing of when we put it through the mill.

That's good, Andy, that's a good answer. Is that okay, Dave?

He is no longer in queue.

We'll roll the next question.

[OPERATOR INSTRUCTIONS] Thank you. David has come back into queue from BMO Nesbitt Burns.

Thanks a lot. The question--and thanks a lot for that number. So, with regards to the Alianza vein, when is that scheduled to be brought on? I would suspect if that is your weighted average grade of 4%, you will have a bump-up when it does come in, then?

Yes, right now that is in. We're working on our next year's plans for 2006. The Alianza vein is a component of that plan. We're fixing some of the recovery characteristics, as Geoff mentioned we're adding to regrind on the zinc and we're also adding to some of the flotation equipment to enhance the lead-copper separation, if you will, which will in turn enhancing our zinc recovery. With all that said it should come into play 2006, my plan.

Change the question around a little bit. The Alianza vein on its own, what does that run?

I don't have that information before me but I sure can gather it in short order from Michael Steinmann our new VP of Exploration.

All right. Another question, then. With regards to Manantial Espejo, what is the status--you've been working--it's been work in progress for quite a while. What have been some of the challenges you're having with regards to optimizing the feasibility?

Oh, brother.

There have been a few, I'm sure.

The usual ones, really, Dave. It is in a fairly remote area of southern Patagonia, Although it is right beside the very large Cerro Vanguardia mine, operated by AngloGold, it is still in a remote area, there is significant power infrastructure issues and we're trying to deal with the best way to source power diesel or bring in a pipeline or generate our wind power if we find enough wind in that area.

There are a bunch of trade-offs in that exercise that you have to do and that is what we're very much involved with doing. We're talking about infrastructure issues as well with the local government, housing and so forth, the workforce, where the workforce is going to be located in the local town and beside the mine and those kinds of things.

There are all sorts of the usual technical reviews of looking at a combined open pit and underground mine, which involves lots and lots of detailed scheduling and planning, so a tremendous amount of detail work in that. And the usual grind of trying to get good numbers today in a environment where numbers are changing quickly and source and procuring supplies is a great challenge, particularly in the country which is not really a dominant mining company like Argentina.

So it's normal stuff we've been doing various iterations of the feasibility study already. We have some numbers out and trying to finish them by the end of the year.

I may be completely wrong on this, and if I'm wrong, correct me right off the bat. With regards to scheduling of the silver component of the deposit and the gold component of the deposit, is that an issue or have I just invented that?

This is Steve Busby. There is no issue between silver and gold. We do have certain minor veins that contain more gold than silver, but they're really mined as we mine our principal veins, which are carrying most of the silver. The schedules, although the grades vary year-to-year in our schedule, we're not seeing where we're going in targets in silver over the gold.

Okay. Thank you.

Thanks, Dave.

Your next question is coming from Terence Ortslan from TSO and Associates.

Thanks, it is good to see the progress at Morococha and La Colorado, guys. Coming back to Espejo. It will not be in a position to finance anything in 2006, it will go into year after that. You won't be in a position to finance it in 2006, then?

We will be in a position to finance it in 2006, yes, that's our plan.

You want to do it internally?

It depends upon the final number, the final results of the feasibility study and what we see in Argentina.

Ballpark that number for this project? Beg your pardon? Is it a ballpark number on this project?

I don't think so. I don't think we've stated it, no.

Between 1500 would be a number to you? Or more?

We haven't provided a number.

Okay. Just come maybe on the markets, what's your impression, your take on the ETF, how it's going to impact the market for us.

I'm sure it will impact it positively from our standpoint. It will increase silver demand and that usually has a salubrious effect on price. That's certainly I think the gold ETF has been positive and well-received, it's a good source of investor interest, and I think it's a service to the industry. It is a service to the general investing public to have these kind of things out there for people to use or not use.

There has been a lot of discussion. There was an interesting letter from the Silver Users Association to the SEC that says that they should not have a silver ETF because there is not enough silver around, and liquidity issues and problems. We disagree. We don't think there is liquidity problems at all. There's a very very liquid market for silver on the London Bullion Exchange particularly, on the COMAX and there is lots of silver around.

There is 5 or 600 million ounces of silver in bullion inventories. That is a heck of lot more silver inventory than for example copper inventories right now, or nickel inventories or lead inventories or maybe even gold inventories if you exclude central banks. So there is lots of silver out there for investors to use as a pool of silver for an ETF. So we think that argument is just plain wrong.

And we don't see particularly, reasons why the SEC should not approve this. However, we're not involved in the process. We are certainly rooting for it because we're giving a service to investors and a lot of those investors are our own shareholders, but we are really outside the process, it is between Barclays and the SEC, and we hope everything is going well

The earliest for this to be launched is when?

I have no idea. It will depend on SEC approval. The gold ETF took about a year, and we hope the SEC will take less time for the silver ETF, which was actually filed I think in July. That's all I can say.

Okay. Great, thanks.

Thank you. Your next question is coming from Adrian Day from Adrian Day Asset Management.

Good afternoon, I'm returning to Manantial Espejo, if I may. some of the questions were kind of answered, but Two questions, really. Significant amount of gold would you be using the gold as a by-product of credit, do you think? And secondly, given the challenges, the capital cost and the location, is this a little small to be jointly owned? Would you rather have all of it?

The second question first, the answer is yes. But that takes two to tango, Adrian and we'll have to deal with that, but obviously yes, it is a nice project. It is silver and it is good. On the question regarding gold, do you want to answer that, Rob?

Sure, typically you would use--we would use metals other than silver as a by-product credit for our cut of silver production. In our financial statements, any gold revenues would be incorporated in our revenue line, but when we come to calculating our cash and title cost of silver, the gold revenue would be utilized as a by-product credit in the same way that our zinc, for instance, and our base metal production is used.

The only difference at Manantial really, is it is about 50-50 gold, silver. We may account for a true co-product accounting but all things being equal, we do what we do with everything else.

Okay. So it could be very cost, indeed.

Indeed.

Okay. Thank you.

Very good.

Thank you. Your next question is coming from David Mallalieu from BMO Nesbitt Burns.

I could swear that there's no one else on this call. Anyway, question with regards to Sam Vicente, you stated that should be starting mid-2006 at 600 tons a day, I think you mentioned in the press release. So any--you got ideas, what can we use in our modelling for costs for everything?

David, are you referring to the capital costs or are you--

Operating costs.

Operating costs. Yes, I think you can use safely use $3 to $3.25 an ounce, very safely. There is a by-product zinc credit coming through there as well, but that is a real sum number I'm very comfortable with.

That if I make it more basic, would you be bold enough what a cost per ton mining would be, and milling?

You're getting down into the detail.

Yes.

I think--I mean, their all-in costs on a per-ton basis is going to be in the low $30 number per ton. I mean, we're in around 42, 43, as you know, improve Bolivia's is in the nicest sense that much cheaper for us to operate in, and this is a pretty good mine in terms of ground conditions, so in the low $30 is where we think we'll end up there.

And one of the--you won't be the only people dealing with this, but I mean this is--is this going to be set up as U.S. dollars or, I mean--how is this going to be--can you control your costs given that it's Bolivian currency?

We actually at this stage haven't looked at in detail. First of all, the capital investment is going to be very limited. This is not a big number going in. Secondly, the Bolivian tracked the U.S. dollar as any U.S. currency globally. It is a very, very close tie to the U.S. dollar for all those reasons.

Okay. So just keep it as a U.S. dollar mine.

Keep it as a U.S. dollar mine. To some degree Mexico and Peru have traditionally tracked the U.S. dollar closely and they have strong economic ties to the U.S. It seems last year there was somewhat appreciation, about a 15% appreciation in both currencies against the dollar. Unusual but that is the way it's been.

Okay, leave you be. Thanks.

Our pleasure.

Your next question comes from Steve Butler from Canaccord Capital.

You confused my accent with Terry Orstlan.

Sorry about that, Steve.

That is okay, too, Terry. Anyway, I just wanted to ask you guys a question about average metal prices. You know, of course you don't quote your absolutes unless you have silver, you may have quoted your silver realized price.

Given the gyration on the upper basis, we had zinc pull back a bit, flattish -- The question is if you could tell us your average realized prices in zinc, lead and copper, and if you don't, if there are any favorable or unfavorable adjustments to revenues for concentrate settlements.

Steve, Rob Doyle here, I'm afraid I don't have that to hand. We do calculate realized prices in zinc. It is lower than the average price that you see that we quoted here because of the impact of our hedge book in zinc where we've locked in prices.

But for the other metals we--in fact in silver, in the third quarter we actually realized slightly better than the average prices, and in lead it was very much in line with the average prices. Typically it is in metals where we have a hedge program which in this case is zinc where we vary greatly from the average.

So concentrate delivery timing and settlements is not a big factor then, Rob?

It certainly can be. It can be positive or negative. More times than not it is slightly negative, of course, but typically it's--it all comes out in the wash.

Yes, and Geoff, can you say anything about trends in cost? Any joy you've had as you progressed through out the year, Q1, Q2, to Q3, at any particular operation. Have you had any benefits for productivity, which you've alluded to, if you could quantity those for us.

Yeah, Steve, we haven't had a lot of joy on the absolute dollars that we've been spending, as Ross referred to, we've been fighting a little bit exchange rates. We certainly have been fighting higher energy costs, and higher consumable costs across the board for steels and other products that we're putting in. In absolute dollar basis we haven't seen much improvement.

Certainly at Morococha, as we ramp up our production levels, we're going to see some benefit in our unit cost there. I think we started the year at sort avenue 42, 43,000 tons per month, at Morococha, and we've been getting to the 45, 46 mining-wise. We're stockpiling some of that as we refurbish the mill.

We'll see the benefits there. In Quiruvilca and Huaron, we're not seeing a lot of joy on the units. We're 42, $43, and that's, with all the fight we have in us, I think that's where we're going to be.

Thank you.

Thank you. [OPERATOR INSTRUCTIONS]. Your next question is coming from David Mallalieu from BMO Nesbitt Burns.

Sorry. La Colorado, what would be the size of the stockpile in tonnage by the time you start the processing from that?

At La Colorado, you talking the sulfide project there, David?

Yes.

Somewhere in the neighborhood of 10 to 15,000 tons.

That's it?

You're talking about the sulfide plant that we're bringing in 250 tons per day?

Yes.

Yes.

That's trivial, then.

It's not material. The stockpile is not significant. We're not stockpiling ore in advance of starting up 250 ton a day mill.

I thought this was going to be a more substantial thing, looking for impact on cash flows, et cetera. Okay. That's it. Truly it.

Thanks, Dave.

Thank you. There are no other questions.

Okay. That's great. Thank you very much for your joining us today. Don't hesitate to call if you have any specific questions that we haven't answered today and I close the call now. Thank you.

Thank you, ladies and gentlemen. This does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day.