Pan American Silver Corp (PAAS) 2018 Q2 法說會逐字稿

Good day, and welcome to the Pan American Silver Second Quarter 2018 Results Conference Call and Webcast.

(Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Siren Fisekci, VP of Investor Relations.

Please go ahead, Ms. Fisekci .

Thank you, Operator, and welcome everyone to Pan American Silver's second quarter 2018 conference call.

We released our results after yesterday's market close, and a copy of the news release and presentation slides for today's call are available on our website.

In a few moments, I will turn the call over to Pan American's President and CEO, Michael Steinmann, who will provide a brief review of our second quarter results.

We will then open the call to questions and answers.

Joining us for the Q&A portion are Pan American's Chief Operating Officer, Steve Busby; Chief Financial Officer, Rob Doyle; Senior VP Project Development, George Greer; Senior VP, Technical Services and Process Optimization, Martin Wafforn; and VP of Business Development and Geology, Chris Emerson.

Before we get started, I'd like to remind everyone that our news release and certain statements and information in this call constitute forward-looking statements and information.

Please review the cautionary statements included in our news release and presentation as well as the risk factors described in our most recent Form 40-F and Annual Information Form.

I will now turn the call over to Michael.

Thank you, Siren.

Welcome everyone joining us today to discuss our results for the second quarter.

We generated revenue of $216.5 million, up 8% from Q2 2017, mainly due to higher byproduct prices and lower treatment and refining charges.

High revenues and lower production cost increased mine operating margins by about 22% compared to Q2 2017.

We recorded $55 million in mine operating earnings, which included the impact of higher royalties and higher depreciation and amortization expense.

Net earnings for the period about $36.7 million or $0.24 per share, similar to adjusted net earnings of $35.4 million or $0.23 per share.

Operating cash flow in Q2 was roughly $67 million, which factored in $7.8 million source of cash from working capital changes and $18 million in tax payments.

Tax payments are heavily weighted to the first half of the year, and we expect payments to be lower in Q3 and Q4.

Operating cash flow before working capital changes, interest and taxes was more than sufficient to fund sustaining and project capital expenditures, taxes and dividends, resulting in a $25 million increase of our treasury at the end of Q2 2018.

As of June 30, 2018, our cash and short-term investment balance was $250 million.

Total debt was less than $10 million, related entirely to finance lease liabilities.

Total available liquidity, including our undrawn $300 million credit facility, was $550 million.

Consolidated operating results were strong in Q2, with silver production as planned and costs lower than forecasted.

Silver production was 6.3 million ounces, reflecting higher production in San Vicente and La Colorada, offset by lower production at Huaron.

Production at Huaron was impacted by an approximate 3-week suspension of operations during the quarter.

As we previously reported, members of the Huayllay community erected temporary road blockage, demanding compensation for alleged impacts to land and additional service contracts for the mine.

With the help of the Social Affairs General Office of the Peruvian Ministry of Energy, we were able to negotiate mutually agreeable solution to allow the mine operations to restart on May 11.

Gold production was 53,400 ounces, up 42% from Q2 last year and reflects record quarterly production at Dolores due to higher throughput from the expansion, improved grades and faster recovery from the pulp agglomeration plant.

For base metals, zinc production was up 8%, lead production slightly lower and copper production down 44% compared with Q2 2017.

The decrease in copper production was primarily because of anticipated lower rates at Morococha and the lower production at Huaron.

Consolidated cash cost for Q2 2018 were $0.92, down 84% from Q2 2017.

As a result of higher by-product credits due to increased gold and zinc production and higher metal prices for all by-products, as well direct selling costs decreased, primarily because of improved contract terms for concentrate treatment and refining, all-in sustaining costs were $6.45.

Turning now to performance of each of our mines.

At La Colorada, production and cost continued to benefit from the mine expansion completed in 2017.

In Q2, we produced 1.9 million ounces of silver at cash costs of $1.93 and all-in sustaining costs of $3.46.

First Q2, we have started commissioning the backfill plant that will provide the ability to increase production rates from our high-grade stopes.

At Dolores, we produced 1.1 million ounces of silver at a cash costs of negative $9.80 and all-in sustaining costs of $1.18, driving those low costs was record-breaking quarterly gold production of 39,800 ounces, thanks to the benefits from the new pulp agglomeration plant.

We are planning to install expansion kits to our pressure filters in the pulp agglomeration plant later this year, which will assist in the continued ramp up of throughput in the plant.

As previously announced, we suspended transport of personnel and materials to Dolores in late May due to security incident on the access roads to the mine.

Production of silver and gold continued at normal rates throughout this period due to the availability of large ore stockpiles.

However, we did curtail work on the heap leach expansion project as well as open pit and underground mine activities.

The Chihuahua state and federal law enforcement agencies rapidly addressed the security situation, allowing us to resume use of the access roads in early June.

Open-pit mining returned to normal levels by late June.

As customary, leach pad expansion work will resume after the rainy season.

We also took advantage of the disruption to accelerate the demobilization of one of the primary underground mine contractors in favor of hiring and training our own workforce, which had originally been planned to occur later in the production ramp-up phase of the operation.

Consequently, we anticipate reinitiating underground mine production early next month.

The planned underground production of 1,500 tonnes per day should be achieved in early 2019.

The timing is not critical to our long-term production forecast, but we have sufficient high-grade feed from the open pit for the agglomeration plant.

Moving now to Huaron.

As mentioned, production was impacted by an approximate 18 days suspension of the operations, which has since been resolved.

In Q2, we produced 742,000 ounces of silver at cash costs of $1.95 per ounce, all-in sustaining costs were $8.11.

More good news from Huaron.

We have initiated development of a new deeper production level that will access the continuation of the range structures 80 meters below the deepest current mine level.

We are now installing the infrastructure necessary to support mining on that level for many years ahead.

At Morococha, we produced [652,000] ounces of silver at cash costs of negative $6.41 per ounce in Q2, all-in sustaining costs were negative $0.19.

We continue to see mine sequencing into [less vein rich] Zones with less copper production for the remainder of the year.

Our San Vicente mine posted strong production growth in silver, copper, lead and zinc in Q2 as a result of higher grade from improved ore-control performance and mine sequencing to access higher grade stopes as compared with the recent past quarters.

We produced 976,000 ounces of silver, 27% more than Q2 2017 at cash costs of $9.36 per ounce, and all-in sustaining costs of $13.15.

This performance demonstrates that we are now beginning to see the benefit of the move to more mechanized mining methods at San Vicente, similar to what we have achieved in Peru.

At Manantial Espejo, we produced 962,000 ounces of silver at cash costs of $6.62 per ounce and all-in sustaining costs of $7.08.

The devaluation of the Argentine peso and better than expected gold production, largely from higher-than-expected grades in our underground ores, drove cost to these low levels.

We are anticipating some offsetting increases during the second half of the year.

However, we do anticipate overall cost to be lower than originally planned at Manantial Espejo for 2018.

The COSE and Joaquin projects in Argentina are progressing on budget.

Completion of Joaquin project has potentially been delayed by a few weeks, due to a short stretch of difficult ground conditions encountered during the decline development.

The COSE project remains on schedule.

We have revised the annual forecast for 2018 cash costs, all-in sustaining costs and copper production based on results achieved for the first half of the year, including current lower base metal prices for the second half.

Annual 2018 cash costs have been lowered to the range of $2.80 to $3.80 per ounce and annual 2018 is cost has been lowered to the range of $8.50 to $10 per ounce.

Due to lower copper grades at Morococha, we reduced our copper guidance for 2018 to a range of 9,000 to 10,400 tonnes.

We are maintaining all our other estimates for production and capital expenditures.

In summary, our Q2 results demonstrate strong cash flow generation, record low cash costs and silver and gold production on track for 2018.

And with that, I would like to open the call for questions.

(Operator Instructions) The first question comes from Chris Terry with Deutsche Bank.

Just a couple of questions for me.

The first one just on the cost guidance.

How do we think about the medium term on the cost?

What are the cost guidance that you've just guided down to, it seems to be a trend in the last few years where you've continually been able to beat those, obviously, a portion of it's the by-products.

But can you step through the other components within the costs at the moment?

Maybe talk about cost inflation and cost any deflation you're seeing so we can think about how -- what a 2019 cost might look like?

Chris, Michael.

Sure.

As we mentioned, we have seen cost reductions here over the last few years.

Why that happened?

Large part of it is productivity increase that we have seen, obviously, with the larger production and our Mexican expansion, Dolores and La Colorada, and the mechanization in Peru that helped us there.

But as you also mentioned, the by-products that are an important part of our costs as well.

So right now, we see in the market quite a bit a weaker market for base metals and coal prices.

So we can factor that in for the second half of this year obviously, looking at kind of actual lower prices.

And we'll tell where prices will go and that will have some impact on our cost.

But I think if you look at the mechanization and improved productivity, this cost reductions, the lion share of that we already included in our lower cost over the last few years.

I may pass it on to Steve to give you some ideas on cost inflation or possible inflation for next year.

Although, just keep in mind, we are not giving guidance out yet for 2019 in detail on the costs.

We did not change those costs, and we remain with our 3-year forecast that we did at the main -- at the beginning of the year.

Yes, Chris, this is Steve.

Relative to our base cost inflation and things, I would say overall, with the exception of Argentina and Manantial Espejo, our costs have been -- the escalation of cost has been pretty modest, down in the 2% to 3% to 4% range.

We are seeing that relatively across the board.

Q2, we did have a couple of unusual events with the shutdown that we are on actually without that production.

So when you factor in that cost and the restart, there's probably some costs impacts there on a unit basis that we won't see going forward.

At Dolores, kind of a little bit of the opposite effect because we basically shut down the open-pit mine for a while and the underground mines, so our cost actually came down as we ran some of that start pile out.

Argentina, of course, had the big devaluation on the peso.

We do anticipate there's still high inflation -- local inflation down there.

So there will be some clawback as we go back towards the end of this year.

But that gives you a fairly good feel of our base cost.

Okay.

The other one for me.

So just thinking about 3Q versus Q4, obviously expecting slightly stronger production in the second half.

What -- can you maybe just talk to a couple of the operations?

And where there's moving parts on what we should expect on the production or anything significant on 3Q versus 4Q?

Yes.

Chris, this is Steve again.

The big things that we'll see different moving into the second half is really -- we won't -- we don't anticipate that slowdown we had -- we're on during the second quarter in the second half.

We also feel second quarter is more characteristic of what we'll see at San Vincente, moving through the rest of the year.

So when you factor those annual, you'll see some improvement.

There will be a bit of an offset at Manantial Espejo, but it's not really material relative to everything else.

Manantial will go to more normal rate that we had protected for the year in the second half.

And just to weigh in here, Chris, I'm sorry you noticed that there was quite some improvement at San Vicente, as we start working our way through with the mechanization there.

And as Steve mentioned, that will obviously, we hope, continue for the rest of the year and have a bigger impact.

If you go back to Q1, San Vicente was a bit weaker there and really strengthened substantially in Q2.

Okay.

Just a last one from me.

The dividend, what are you thinking there in terms of just giving the cash balance versus M&A versus paying a dividend?

How are you trying to get the balance right between the capital allocation?

Really nothing changed to what I said in the quarters before.

I think as the board, we have a look every quarter at the dividend.

We normally make -- try to make the changes beginning of the year, if you look back historically, unless something really would change dramatically in the market, up or down.

Nice to have a strong cash balance at this point in the market.

There is weaker silver price, weaker metal prices.

I think there's more opportunity out there in the M&A space, and I like to keep some powder dry for that for sure.

But as I always mentioned, we're always happy to return some money to our shareholders.

And I'm happy that the board decided again this year -- this quarter to pay the dividend.

Our next question comes from Cosmos Chiu with CIBC.

Michael, Steve, and team, maybe a few questions from me here.

Maybe first off on Dolores.

As you mentioned, you've worked through some of those stockpiles, those high-grade stockpiles, how much more of those high-grade stockpiles do you still have?

And have you started -- I think you mentioned that you've started open-pit mining once again.

Like, where are you in terms of -- I don't -- are you at 100% yet?

Or are you trying to get 100% sometime in Q3?

Cosmo, this is Steve.

Relative to -- I'll start with the mining.

Relative to mining, yes, we are at full speed in the open-pit mine 100%.

We got back up and running at 100% pretty quickly, once we sent everybody back to work.

So really there was about a 3-week period.

We had planned on mining, roughly, 45 million total tonnes of waste and ore this year from the open-pit at Dolores.

We plan to accelerate a little bit through the second half, and we think we will make that tonnage this year.

So everything's back to normal there.

We don't anticipate -- relative to the high-grade stockpile, there's probably about 200,000 tonnes of, rough numbers, ahead at the pulp agglomeration plant right now.

With that said, we do have quite a bit of high grade exposed in the bottom of the pit that we lose access to that during the wet season -- during the rainy season that we're currently experiencing.

But as we come out of that we'll get back into that.

So there is ample high grade at the bottom of the pit, it's just scheduling to Dan and scheduling around the weather that we deal with.

Okay.

And I guess the grade was actually fairly good in Q2 at Dolores, 1.03 gram per tonne, and your recovery was -- has improved as well.

Looking at gold, you're averaging 72.3%.

I guess my question is, once you get back to the underground, once you start mining underground again, could we see a further improvement in the grade?

And on that, in terms of recovery, was an improvement in recovery due to pulp agglomeration?

Or was it due to the improvement in grade?

Yes, good questions, Cosmos.

Relative to the underground production, because we're going to south mining, we kind of accelerated that schedule as Michael mentioned, to south mining.

We don't anticipate a material supplement of production from the underground during the remainder of the year.

That will really start coming on more importantly into 2019.

Again, as Michael mentioned too, we have plenty of that high grade, I mentioned, in the pit that we can access.

So we don't anticipate that being any kind of impact to our production.

The higher recoveries that we saw, there is a benefit with the pulp agglomeration plant because we get that quick return, particularly with gold because it leeches so quickly, we can get 45%, 50% of the gold in just 8 hours ahead of the filters in the pulp agglomeration plant.

So that's really given us that boost.

We anticipate that to continue.

We don't really think the grades have been much -- we see more of an impact whether it's Sulfide ores versus oxide ores.

That's really what impacts the gold recovery just by a few percentage points, so we're not talking anything major.

But that's really what we look at for recovery.

And then looking at your cost guidance here.

Certainly one of the assets that has had a very good cost profile in the first half is Dolores, much lower than what you anticipated when we first kicked off 2018.

How much of that lower cost could you -- would you say is due to higher by-product gold?

How much of that lower cost would you say is due to the fact that you weren't mining much in Q2?

And how much of that would you say is actual decrease in the unit cost per tonne?

Yes, I think the vast majority -- the biggest impact for sure is the gold price -- we did get a little bit more gold out than we had forecasted.

So the combination of higher quantity and higher price is really what drove those costs down.

Our cost per tonne are tracking reasonably closely to what we were forecasting.

As I mentioned, we did have 3 weeks without open-pit mining where we're mining off stockpiles.

So there was basically 3 weeks of costs -- no open-pit mining or underground mining costs.

So that -- it's fairly substantial impact during Q2.

Okay.

Maybe switching gears a little bit.

Manantial Espejo, that was the other one where the all-in sustaining costs guidance for 2018 has decreased quite substantially.

How much of that is due to the deflation of the Argentinian peso?

Yes, another good question.

The big surprise for us at Manantial Espejo was really on the grades.

The head grades feeding the plant were substantially higher than we anticipated.

That was a positive reserve reconciliation in the areas we're mining, particularly in the Maria East underground.

We definitely had some surprises there for better grades.

And that's what really drove those costs, drove the productions up and drove our unit costs down with that gold production.

With that said, the depreciation was very substantial and the majority of our costs are peso related there.

So it did have a fairly substantial effect as well.

So the 2 together, obviously, is what really drove those costs quite favorably.

We don't forecast in that reconciliation moving into the second half, we're moving more into the Concepcion ore body.

We're not -- we haven't really been mining there underground yet.

So we don't know how that reserve model's going to behave.

So we haven't factored in any kind of positive reconciliations moving forward.

And we are anticipating a bit of a clawback on that depreciation in the second half.

Our next question comes from Mark Mihaljevic with RBC Capital Markets.

Little bit easier with the nice clean beat from you guys.

So just a couple of quick ones from me.

First off, obviously, you did tweak the copper guns for 2018, now just wondering how much of that was a management decision to scale back and mine some of the lower copper grade areas, given the pullback in prices we've seen?

And whether that will impact the 2019-'20 outlooks?

Or how we should be thinking about that?

Yes, Mark, Steve here.

So I wish I could say we could dial it in on price that well.

But that's not the reality.

The reality is it's really mine sequencing according to accessibility.

And as we develop our headings in -- these are old mines, so we're deep underground.

We are deep and developing infrastructure in faraway places.

So it's really just sequencing into ore that's in front of us and available to us according to our developments.

Okay.

And then, I guess, with the Dolores security issues, are -- there'd been some talk about putting in a more permanent security presence with the state or federal police.

And I was just wondering if there had been a decision on that?

And if there was a sense of potential cost if this was being implemented?

Sure, Mark.

So as you know this, and we put it in our press release as well, that the state of Chihuahua federal government reacted very quickly to that issue, and mobilized escorts for our vehicles along the access road, after what I think there was only about a week after the shutdown.

So that's why we could restart the transportation that quickly.

And we are already pleased with the support that we received really from law enforcement at this time.

On the cost side, for sure, there is more activity, much more activity there.

That's a -- we're talking about public roads here, obviously, we'd like to clarify that there was never a security issue in our employee camp or on our side, and so the government is taking care of that.

We are dealing with the authorities right now.

And for sure there will be some costs for like food and lodging related for the additional security up there, but I would not anticipate a major big impact to our cost from that at this time.

And then just one final one.

With the pullback in silver prices, a lot of times, we ask companies about stress testing their balance sheets, but given your cash position and free cash flow generation, just wondering if you're starting to see any more opportunities on the M&A front?

And whether some management teams are a little more willing to discuss with you guys now?

As you know, and as I mentioned many times, that's -- we're pretty picky on the M&A side.

I think we're really looking for high-quality asset.

As you can imagine, we are looking for assets that fit in our kind of current cost structure.

They have to be accretive and low cost.

There's no point of just growing our production if it's not accretive and keep making money or being even better what we have right now.

But having said that, there's definitely I think at this market depressed -- kind of depressed metal price market.

There's more opportunity out there.

We really don't just slow down or speed up looking around based on metal prices, because as you know that takes normally quite some time to identify the high-quality projects and kind of weed the bad ones out there and so that's an ongoing process.

And then of course, when the prices are a bit lower of the management teams are about more willing to enter discussions with us.

But for sure, we're in a great situation here with our strong balance sheet to react if opportunities come up.

The next question comes from Chris Thompson with PI Financial.

Just listening to [P&L] there and getting some good comments on that channel.

Just couple of quick questions, we'll start off with La Colorada.

Obviously, the grade is tracking higher, tonnes of tracking higher, can give us a sense, a bit of visibility on what to expect in the second half of this year there?

Yes.

Chris, No.

I think with the increased throughputs that we're seeing above our targets, we are kind of distributing our mine plan a little bit differently and starting to bring in not -- we don't want to run that higher tonnage than we planned, just strictly on high-grade.

So we are kind of going to dilute the grade a little bit.

I generally believe Q2 is probably a good reflection of kind of the steady state run rate at La Colorada right now, in terms of tonnes, grades, costs.

Okay.

That's good, all right.

Just moving onto Dolores.

I know Cosmos was talking about the recoveries in the grades there, especially the nice gold grades.

I'm going to sort of ask a pointed question.

1 gram on the gold side, is that sustainable in the second half of this year?

That is a pretty pointed question.

I would say, we would be -- we're probably going to come in somewhat less than that.

I don't think it's going to -- I think plus or minus, 10% to 15% of that.

Okay, great.

You guys are doing a great job on that asset.

Just Manantial very, very quickly, a nice grade bump.

I know you did comment about that earlier versus Q1 there, sustainable at these levels?

No, as I mentioned, Chris, that came as a surprise to us with a very positive reserve reconciliation in one area of the mine.

We are mining out of that area.

We're moving into a new area, the deeper part of Concepcion, which we really haven't been mining yet.

So we don't how that one's going to behave.

So we haven't forecasted that going forward.

All right.

And then finally, just San Vicente here.

Any chance of seeing 400 grams per tonne of silver grade out of this asset?

The straightforward answer is that, that would be a stretch.

I think the grades we're seeing during Q2 are kind of what we expect going forward.

And what's driving that a lot is at the big [literalle].

We see nice grades throughout San Vicente, but we don't have that big 15-meter wide literalle vein that we mine anymore.

They're more 3 -- there's still very nice veins, but when you're comparing back to what we used to have, it is quite a different picture there.

So it'd be stretch to see us go to 400.

Our next question comes from Lucas Pipes with B. Riley FBR.

I wanted to follow up a little bit more on the cost side as well on the site.

If I recall correctly, 3 months ago or so when you reported Q1 results, there were a number of questions about cost inflation in Argentina, given the currency situation and such.

And I think at the time you said it just takes a little longer for those sort of inflationary pressures to roll through and I wondered here, at this point, 3 months later, what are you seeing, not just in Argentina but across your operations in terms of higher labor rates and such?

Yes.

I'll just start and pass it on to Steve.

Obviously, we have seen further deflation of the peso since we talked there last time in Argentina.

So that helped us on the cost side to a certain level.

As you mentioned, we talked about some of that lower cost will be called back.

We still anticipate that, that will happen later on in the year.

At the moment, it's kind of steady state and we see the positive impact to Manantial Espejo.

I'll pass on to Steve, and he made already comment on the other operations as well.

Yes, Lucas, this is Steve.

I don't have much more to say.

I mean, apart from Argentina, I would say our escalations are pretty modest there in the 2% to 4% range.

No real surprises there.

Got it.

And then switching topics.

Navidad, I don't think it's come up much on the call, or at all.

What's the most recent status, any development there?

Or can you update us in terms of what you're seeing on the ground?

I would appreciate your thoughts.

Sure, Lucas.

I can give you quick update here.

And I'm sure if you follow the press and if you go to I'm sure have noticed that the rate we got into mining and provinces has gained really much more momentum there.

We have seen a lot of recent press reports indicating that the governor of Chubut and, of course, the national government, are supporting really the debate in the legislature regarding mining activity in the province.

So I think we'll see continuing that, and we also understand that there's a proposed bill there that will deal with mining in the province in certain areas.

I think there's some coronation with some land use sensitivity in the province, and we also understand that Navidad will be located in the mining zone with low sensitivities.

So as I said before, we're really looking forward to this open and transparent debate here on mining in Chubut.

And obviously, are hopeful that responsible mining will happen in Chubut here, I think, with the appropriate government controls, that could be and will be a very good thing for all the stakeholders involved.

The next question comes from Ryan Thompson with BMO.

I just had a quick question on Morococha.

I know back at the Analyst Day, that there was some talk about potentially having to relocate the mill at some point?

Just wondering if you could provide any sort of update on that?

Yes, we talked about that.

And I mean if you look in our public filing, there is some information about that too.

This is kind of a fluid situation, obviously, depending on how the mining advances with our neighbor there [Torremocha].

We don't have really a fixed date right now.

We obviously discussing with our neighbor.

There's enough time for us to do the engineering and make a decision when it happens.

But right now, I don't know, Steve do you want to add something?

No, I think that we are looking at some engineering, but the big thing is we are in discussions and trying to work with their schedules and determine when we may have to move.

We don't know when that is right now.

Next question comes from John Bridges with JPMorgan.

Modeling/accounting question.

Steve, you mentioned with respect to Dolores that you pulled from the stockpile 3 weeks and went mining either in the pit or underground.

I would have thought on that brought your cost down?

But I would have thought that you had already attributed cost to that stockpile?

And so it shouldn't have had a significant effect on your reported costs for the year, for the quarter?

How does that work out?

John, Rob Doyle here.

Yes, you are correct that we do inventory cost and then as the inventory stockpile is processed.

Then that those costs then flow through to our production.

So that is correct, there is sometimes a timing difference, of course, and typically, the cost basis on our entry may be lower than our carrying costs.

So there is typically a bit of a benefit to processing inventory versus incurring the carry cost of operations.

So what -- is that a last in first out situation where the stockpile ounces you pulled out, were old ounces at low cost, is that why it happened?

It's actually a weighted methodology that we use on the stockpile at Dolores.

Yes, it's first in averaged out.

So the other thing that happens there John, is because of the large heap and the large inventory on the heap, there is a huge dilution effect that takes place there.

So it gets pretty complicated when you get into the details.

But generally, what Rob said is correct.

Just as long as you don't lose the ounces on the heap like some miners do.

Yes, that's something.

(Operator Instructions) And our next question comes from Lawson Winder with BofA Merrill Lynch.

Just -- I didn't hear you mention on the stockpiles.

How much -- how large is the low grades stockpile?

And then I also did not hear you mention the grades of the existing stockpile both, either the low grade or the high grade?

Yes, Steve here.

Yes, we don't really show the grades on the stockpiles in many of our reporting.

We have massive amounts of low-grade millions of tonnes scattered on that site, that we stockpile during the open-pit mining.

The high grade, we did have obviously, quite a large stockpile ahead of the pulp agglomeration plant as we're commissioning that plant.

The grade of that high grade, I would say, is close to the grades that we have seen going through the plant during Q2.

They are very good grades.

And they were intentionally put there to give us some buffer capacity for that pulp agglomeration plant.

Okay, great.

And then just finally, I might have missed it, but I don't think I saw any mention of 2019 and 2020 production.

So just with what happened at Dolores, could there be any change, whether it'd be higher or lower in terms of that production guidance?

I mean, I know it's -- I don't think -- you've obviously not changed that guidance, but I mean, where would -- like if we were to sort of risk weight this would it be potentially higher or potentially lower?

Yes, Lawson, it's really -- we're just starting our budget process for next year.

We'll be starting that next month and working through the mine plan.

So we didn't provide any change to the forecast for the 2 year outlooks.

We will bring a new guidance out in January.

Right now, I can't say that this would have much of a material impact to what we're going to see in '19.

But we need to work through the mine plans and there's lots of factors that go through all that.

So we're not willing to change anything at this stage.

This concludes our question-and-answer session.

I would like to turn the conference back over to Michael Steinmann for any closing remarks.

Thank you, Operator.

And thank you, everyone, for joining us for the call today.

Looking forward to talk to everybody in November, it will be already, for our Q3.

Until then, enjoy the rest of the summer.

Thank you very much.

The conference has now concluded.

Thank you for attending today's presentation.

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