SSR Mining Inc (SSRM) 2012 Q2 法說會逐字稿

Good day, everyone and welcome to Silver Standard's second quarter 2012 financial results and project update conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to John Smith, President and CEO.

Thank you, Ally. Good morning, ladies and gentlemen. So welcome to Silver Standard's second quarter 2012 conference call, during which we'll provide you with a review of our financial performance and give an update on our business. Joining me on the call this morning are Joe Philips, our Senior Vice President Operations and Development; Greg Martin, our CFO; John DeCooman, our Vice President Business Development and Strategy; and Ron Burk, our Vice President of Exploration. I also want to welcome Steve Hards as our new Director of Investor Relations.

Our interim financial statements, Management's discussion and analysis and business update have been filed on SEDAR and are also available on our website. To accompany our comments today, there is also an online webcast. You'll find this information in our news release relating to the call. Now we will be making forward-looking statements today and I'd refer you to the disclosure accompanying our slides, news release and also on SEDAR. So now we will review the Company's business and progress during the second quarter.

As we promised the market at the beginning of the year, we focused on delivering consistent results from our operations and projects and building value for our shareholders. We are not immune from this difficult market, but have worked hard in optimizing Pirquitas, completing the feasibility study for Pitarrilla, and trying to move forward at San Luis. Our achievements during the quarter include, again, delivering strong operating results at Pirquitas, managing the cost escalation and inflation in a difficult business environment in Argentina, and making significant progress at Pitarrilla. Our strong cash position and internal capability has us well placed to drive value. Our stock performance was impacted like the rest of market is beginning to show the evidence of how we are improving standing amongst our peers.

You will see from our operating results that Pirquitas production guidance is clearly in range. Import and export restrictions in Argentina require that we pay attention to matters that are not normal course business but with a capable team, we continue to deliver strongly. Exploration remains a focus at Pirquitas and as can be seen from our recent press release, we are very active in the pursuit of more reserves. Currently we have three rigs operating and more geophysical progress planned, that Ron will talk about later.

We are working hard in our development projects and George is moving these forward, with Pitarrilla progressing well through the feasibility stage. We are on course to complete the feasibility in the second half of this year and major progress has been made through the quarter, with a completion of in fill drilling, geotech work to assist with mine optimization, resource modeling, and considerable metallurgical testing and analysis. The feasibility study is based on a 16,000 tonnes per day open pit project, which would position Pitarrilla as one of the world's largest primary silver mines with a life in excess of 20 years.

At San Luis we are making progress on the agreement with the Ecash community, with ultimate project timing remaining dependent upon completing this agreement and the approval of our EIA. We monitor events closely in Peru and are encouraged to see President Humala's support for mining. In exploration, Ron's team have found encouraging resources adjacent to our open pit at Pirquitas and has developed more shallow resources through in fill drilling at Pitarrilla. We are also aiming to drive the BP Zone at San Luis in the second half of this year. Considerable work is scheduled for the second half of the year and we will cover this in more detail in the exploration part of the call.

Now I regularly get questions about our stake in Pretium and I again confirm that the exposure it gives us to gold and continuing prospectivity for the project sits well within our overall strategy. I will now hand over the call to the team to provide you with more insight on progress at Silver Standard. But let my say, I see this quarter as indicative of strong performance where in a number of areas great progress has been made, not withstanding the headwinds of today. This is not a time to be [shy], but to get real business done. With that, Joe will take you now through operations and development.

Thanks, John, and good morning, everyone. The second quarter of 2012 completed the third consecutive quarter of consistent performance at Pirquitas. Production of 2 million ounces was right in line with our budget and puts us squarely on track for meeting our annual guidance in silver production for the full year. Production was slightly off from our record pace 2.2 million ounces of silver in the first quarter, principally because of a scheduled change of the liners in our mill which was completed in its normal four-day plan program. The mill continues to operate at 4,200 to 4,500 tonnes per day, significantly above its 4,000 tonne per day design. Our exploration team also made significant progress in our drilling project focused on expanding the reserves at Pirquitas. Ron will talk about some of these encouraging results.

By-product zinc production for the quarter was off by 45% versus the previous quarter, in line with a similar reduction in zinc grade in the ore for the quarter. As we have mentioned before, zinc production for the mine will vary widely depending upon the quantities of red sheeted ore, which we blend in the plant feed. Plant recoveries for silver for the quarter were down 3.6% at 74.5%. Normal recoveries for our operation at these processing rates should be in the 76% to 78% range for the grade of ore we're processing. Challenges from shortages in the availability of our preferred floatation reagent and some water shortages from severe winter freezing weather impacted our recoveries. Our increased plant capacity and high operating rates enabled us to offset the production impact of these lower recoveries.

Mining operations were solid during the quarter, exceeding our ore production forecast by 8%. Silver feed to the plant was 219 grams per tonne, in line with our expected grades for this area of the mine. Direct mining costs for the quarter were up 2.6%. Our operation has been impacted as has the remainder of the Argentine mining industry by the effects of high Argentine inflation and restrictions on the imports of critical spares and supplies. Specifically in the second quarter, we saw impacts from the removal of subsidies on some of our key raw materials, as well as adjustments in long term service contracts due to high inflation. Fortunately, our team in Argentina has been an industry leader in mitigating these impacts by seeking efficiencies and enabling us to minimize delays caused by import restrictions.

We continue to work on cost savings initiatives in addition to optimization of the operation to confront these pressures. Another element of our cost control strategy has been to increase the silver grade of our concentrates. Our efforts this year have increased the average silver grade by 8%. This higher grade will provide cost savings in product transport and will reduce the treatment charge per ounce of silver. Now that we've contracted for the sales of our entire concentrate inventory and production for the year, we're ramping up our shipping schedule.

In the second quarter, Argentina's government imposed new restrictions, shortening the time period allowed for exporters to repatriate cash proceeds from their export sales. Initial versions of this resolution imposed an unrealistic period of 15 days, which led us to postpone some shipments. During the quarter the government adjusted the terms more in line with the actual times needed to ship, assay and close sales of our products.

Now on to Pitarrilla. As John mentioned, we're proceeding on schedule to complete the final feasibility study and our environmental impact assessment for Pitarrilla in the second half of 2012. Feasibility engineering, mine and process design are essentially complete. As a part of this process, our project group identified a number of potential upsides, which were compelling, and led us to extend the completion date so that they could be included. Principal areas of work include in fill drilling of the upper zones of the oxide deposit to increase resource and reserves and reduce mining ratios in the early years of the pit, close space drilling and geostatistical studies to update our resource and reserve model.

Our improved understanding of the deposit indicates an improvement of 8% to 10% in the resource grade in the oxides and upper sulfides. Optimization studies on milling and leaching circuits, which increased the capacity of the plant in its current design configuration, and confirmation of floatation recovery projections for sulfide resources in the upper zones of the project and validation of the economics for leaching the sulfide tails. Pitarrilla is a significant project in a long lived mine with a production of over 20 years. With a completion of the feasibility and approval of the EIA, we will have the project positioned for development. This will be one of the largest silver mines in Mexico.

Next I'd like to talk a bit about our San Agustin project near Pitarrilla in the state of Durango in Mexico. San Agustin is a property which Ron and the exploration team have developed into a very interesting surface mineable gold deposit with shallow oxide and sulfite resources. We're working with our exploration and project groups in preparation for an in fill drilling and baseline environmental program to further move San Agustin along the project pipeline.

Finally at San Luis in Peru, we're preparing the exploration program for the BP Zone on our Cochabamba properties. In the meantime, the review and approval of our EIA for the San Luis mine appears to be nearing completion. Formal negotiations are underway with the Ecash community for the remaining surface rights to mine the project. Now over to John DeCooman for an update on silver concentrate sales contracts.

Thanks, Joe. Before we turn the discussion over to exploration, I wanted to take a minute to comment on our silver concentrate sales strategy. Many of you may recall we laid out a strategy one year ago to diversify our customer base and achieve market-based terms. We delivered on this commitment to our shareholders with our announcement in July of two additional sales agreements. This is in large part thanks to hard work by our operations and corporate teams and a solid group of customers.

Based on our silver production guidance selling more than 2,000 excess tonnes to reduce inventory and our suite of four sales agreements, we anticipate TCRC costs to average about $6.50 per ounce produced for the full year 2012. This is a $2.50 per ounce, or 28% decrease relative to July 2011 terms if you project a $30 per ounce silver price for the remainder of 2012. This is an excellent outcome for our shareholders and is a good start toward our 2013 negotiations. Ron, I'll turn the call over to you.

Thank you, Johnny. Principal achievements made by exploration during the second quarter include successful drilling campaigns at Pirquitas and at Pitarrilla. At our Pirquitas mine, we are expanding and better defining resources at the Cortaderas target, the ultimate goal being to increase the mines reserves. At Pitarrilla, the objective of our drilling is to convert waste rock into oxidized resource block within the limits of the proposed open pit. In addition, we advanced the definition of high potential drilling targets on a number of our mineral properties, which are located within the central Mexican silver belt, the world's premier mineral province for silver.

At Pirquitas, we have increased the planned total meterage for the 2012 drilling campaign from about 22,500 meters to more than 28,000 meters, based on encouraging drill hole results obtained to date. The majority of this year's planned drill holes are designed to substantially expand and better define the Cortaderas Breccia and Valley inferred resources. Together the two zones have inferred mineral resources, which are located only about 250 meters north of the operating open pit, were estimated last year to contain approximately 22.5 million ounces of silver and 239 million pounds of zinc.

Since the start of the drilling at the end of Q1, 56 diamond boreholes have been completed for a total combined length of approximately 23,500 meters. Last month we publicly reported import mineralized intersections obtained by the first eight holes, including a 78-meter long interval averaging 756 grams per tonne silver and 9.8% zinc. These eight drill holes, and others that were subsequently drilled, confirm the lateral continuity of the Cortaderas Breccia resource body and we are confident that the zone will be extended at least 50 meters to the east, to the west and to depth. Moreover, the mineralization is open in these directions.

In addition to the drilling that will be done in the Cortaderas target area, several holes will be drilled to test the number of gravity anomalies that were outlined by geophysical surveying being done in the first quarter over areas adjacent to the San Miguel open pit. The gravimetric high is interpreted to be reflecting zones of relatively dense rock that in some cases are hosting important amounts of silver bearing sulfite mineralization. In fact, the effectiveness of the gravity survey method at Pirquitas has encouraged us to survey an additional 39 line kilometers east of the open pit where old underground workings exist and surface geochemical anomalies have been detected. We are optimistic that additional drilling targets will be identified by the second program of geophysical survey.

In our in fill drilling program at Pitarrilla, which was completed this past quarter with approximately 7,800 meters drilled in 33 holes, these drill holes have provided us with assay data that is intended to convert currently defined waste rock in the upper parts of the planned open pit into indicated resource blocks, which would improve the mining strip ratio and ultimately the economics of the project.

In addition to contributing to the optimization of Pitarrilla, our Mexican exploration team has been conducting comprehensive exploration programs on our Valenciana and El Mogote in Zacatecas and Durango states respectively, as well as on four of our properties situated in the historically important Parral silver mining district in Chihuahua state. During Q2 we completed a variety of geophysical surveys on these properties, including helicopter borne magnetic surveys. Gravity and induced polarization surveys that were completed on the Valenciana and El Mogote properties have outlined geophysical anomalies that represent attractive targets for the drilling programs that we are presently being prepared.

We have also been -- excuse me. We also have drilling campaigns planned for a number of our properties in South America and in the southwestern USA. At San Luis in Peru, we will be drilling a pore free copper target that is located less than 5 kilometers east of our island gold silver resource. To summarize then, the second quarter of 2012 ended with our drilling campaign at Pirquitas being significantly expanded as a result of encouraging assay results being obtained from several of the drill holes that test at the Cortaderas Breccia resource.

At Pitarrilla, approximately 7,800 meters were drilled to increase near surface resources and thereby reduce the volume of waste rock in the upper parts of the planned open pit. In addition, we completed geophysical and geochemical exploration programs on several of our properties in preparation for drilling campaigns to be carried out by the end of the year. And with that, I will turn the call over to Greg for a discussion on finance.

Thanks, Ron, and good morning, everyone. The second quarter of the year has proved to be a successful quarter, with results generally consistent with our expectations. Sales of 1.9 million ounces of silver and 1.8 million pounds of zinc resulted in revenues in the quarter of $42.4 million, about 10% higher than Q1 due to higher ounces sold, offset by 7% lower realized silver prices and a $3 million negative mark-to-market adjustment on outstanding sales.

As discussed earlier, while sales increased, they remain lower than production due to the changes in Argentina repatriation rules we had discussed on our first quarter call. Those requirements have now extended to 140 days and sales through the second half of the year are anticipated to be strong as we sell down our $60 million in finished goods inventory. July shipments of 2,300 tonnes of silver concentrate, containing about 1.1 million ounces, shows the focus on moving the inventory and gives us a strong start to sales in the third quarter.

Income from mine operations for the quarter was $6.8 million with net income for the quarter totaling $34.5 million. Income from mine operations was equivalent to the level in the first quarter of the year. Net income was significantly, positively impacted by the $45.9 million gain recognized on exercise Pretium warrants, which I'll discuss in more detail in a few moments. With silver production of Pirquitas on track at 4.2 million ounces for the first six months of the year, our full year guidance is maintained at between 8.2 million and 8.5 million ounces. While zinc production in the quarter was low at 1.8 million pounds due to planned mining of low zinc grade ore, we expect to move into higher zinc grade ore in the second half and with year-to-date total zinc production of 5.1 million pounds, we are on track for annual guidance.

Direct mining costs in the quarter totaled $13.07 per ounce, marginally above our annual guidance level though Q2 was expected to be a higher cost quarter in our budget. Costs were negatively impacted by high local inflation combined with an Argentine paso that appreciated at a slow rate, increased diesel consumption and higher mine maintenance due to ongoing import restrictions on parts. We are adjusting direct mining cost guidance marginally.

Based on year-to-date direct mining costs of $12.44 per ounce, we are now expecting full year direct mining costs to be in the range from our initial guidance of $11.85 to $12.85 per ounce. Cost management remains a priority and the Pirquitas team continues to do a solid job in managing through a challenging cost environment in Argentina. Cash costs during the quarter totaled $21.81 per ounce, marginally higher than Q1 due to the higher direct mining costs and higher ratio of sales to production.

I'll reiterate my comments from our last quarterly call that when sales exceed production, as we expect will occur in Q3 and Q4, cash costs will be temporarily elevated as significant treatment and refining costs, transportation and royalty charges will be incurred based on sold ounces but attributed over the produced ounces. We do not expect to have fully sold down our concentrate inventory by year-end. So while benefiting from the better sales terms under the long term sales agreements, due to ongoing volatility and sales relative to production, we will not report closer to steady state cash costs until into 2013. Strong cash flows will be generated as the inventory is sold down through the second half of the year.

We saw very good progress during the quarter on recovery of VAT taxes in Argentina. In total, we've now received approval of approximately $55 million of VAT and recovered over $60 million of cash. The team in Argentina continues to actively pursue these recoveries. We're now into a more regular cycle and discussion with the tax authorities and the recovery processes are working effectively.

During the quarter we generated cash at $58.5 million to bring our total cash and cash equivalent balance to over $350 million, a significant strategic asset in the current challenging market conditions. Cash generated by operating activities was $11.6 million as Pirquitas generated cash and overall working capital declined despite a further $10 million increase in finished goods inventory. Book value of finished goods inventory now totals $60 million, an asset whose value will be recognized in the coming quarters. Investments in our portfolio during the quarter included $5.7 million in property, plant and equipment and $ 11.3 million in exploration and development expenditures principally related to Pitarrilla and Pirquitas.

Our working capital position remains exceptionally strong in an industry that is currently constrained for financing. Working capital at June 30 was approximately $378 million, including the recognition of our $138 million of convertible notes as a current liability. Over 90% of our cash remains held in Canada and other AAA rated jurisdictions. During the quarter we received an additional CAD67 million on the exercise of Pretium warrants we had sold in the secondary offering last year. When added to the $4 million received in first quarter, the warrants have added $71 million of cash proceeds to further bolster our already strong balance sheet. Our interest in Pretium, excluding the flow-through financing announced yesterday, is currently approximately 20.3% with a market value of approximately $290 million.

In summary, we continue to keep the focus on the areas that are important to deliver financial performance and value to shareholders. We expect sales in the second half being strong on the back of the clarity Johnny and the team have brought to the sales agreements, the operating team at Pirquitas delivering to plan and budget, and managing our project development and exploration investments to generate returns commensurate with risk. With those comments, I'll now turn the call back to John for concluding remarks.

Thanks, Greg. So ladies and gentlemen, I trust we have given you a sense of progress at Silver Standard. Revisiting goals that we set in the market at the beginning of the year, we are delivering consistent quarterly operating performance at Pirquitas. Our long term sales strategy is in place and we are managing the export, import supply chain well, thanks mainly to our in-country team. Our focus remains on adding reserves at Pirquitas. Adding resources is the first step in that process and Ron took you through this activity.

Having now an excellent, experienced team in place, we are well positioned to move forward on growth. Through the Pretium IPO and other transactions, we have the cash. We are now focused on building real value for our investors underpinned by expedience and good process. Our concentrate strategy allowed to us better understand the market. Our balance sheet and investments provide us with an enviable position and options unlike all of our competitors. This, along with our project alternatives, allows us to build real value no matter what market conditions prevail. With that, let me hand it back to the operator and open up for any questions that you may have.

Thank you, Mr. Smith.

(Operator Instructions)

Jorge Beristain, Deutsche Bank.

Hi, good morning, John and team. My first question is on Pitarrilla, if you could discuss, given that you let out the time a little bit for the feasibility study to, you said uncover more project upsides, does that change the expected start date for this project by about one year? We had it previously starting production first metal in about 2015, but by the latest timeline for the build calendar it looks like it would be closer to 2016.

Thanks, Jorge. I think the issue at Pitarrilla as we -- through the second half of this year we'll get the feasibility study done and at that point we'll then start to make the right decision about when to go to construction and we'll take it to our Board to do. So it's part of that process is finishing off the feasibility and the work that Joe and the team have done and added to get better definition and better understanding and more resource adds to that. So still plan to finish the feasibility study second half of this year. Then we'll take it for decision to our Board and make our choices. And, Joe, you may want to talk about when the decision is made, time to production.

Right. Jorge, good morning.

Morning.

Typically in a project of this size and complexity you look at approximately a 24 month construction cycle. There is a couple of things, dynamics that have been going on in the world in the mining industry here recently in the last month, critical lead times on major process equipment have been shortening, which has altered some of the schedules for needing to order these types of equipment in preparation.

So I think the best answer I can give you is that it was somewhat offset. The extended time for our feasibility and the shorter lead times probably combined to keep that possible start date in the same range.

Okay. So the 36 months that you're quoting is basically conservatism?

No. I think it's realistic rather than conservative. The place has been changing quite a bit. You've seen a lot of companies blowing out on capital and dates and we just want to be very attentive and clear about what we're going to do.

Okay. And my other follow-up question related to that was given the mining industry CapEx blowouts, has any thought been given to perhaps risk sharing the development of Pitarrilla with a partner?

That's exactly how -- we do look exactly at how we should finance and how we should build it and taking out the risk for the organization and capturing value. So as part of the process we're working through just now is complete feasibility, concurrent and parallel with that, we're looking at how is best to finance and shape the project and in that process, we look at the involvement of our joint venture partner and what kind of partner. That's very much part of our process as we go through this second half of this year.

And then just last question on the financing, given your strong cash position and your investment in Pretium, would you view Pretium as being the natural bank that would fund Pitarrilla or are you happy to keep that strategic stake at this level?

I think keeping the stake just now from a point of view of exposure to gold and the future perspective of the project makes sense for us, but I think I've always said, Jorge, it's not a strategic investment for us per se and there will come a time that it -- Silver Standard does different things, but where we are just now we're very happy with that investment. We've got a strong cash within the balance sheet. So immediacy is not there.

Great, thank you.

Thanks, Jorge.

Andrew Kaip, BMO.

Hi, John. I've got a couple of questions on Pirquitas. First of all, you indicated on the quarter that zinc rates were lower because of mining cycle and that they're expected to improve through the second half of this year and largely meet your guidance. One of the things that I've noticed, however, is that essentially the zinc produced and the sales, there's a fairly large discrepancy there and I'm wondering if you can provide us some indication of what's going on. Were concentrates not delivered?

Yes, Andrew. I think just to make a general comment. Our zinc tends to get produced and sold fairly quickly, so through this process we've not had a problem with zinc shipments, unlike our silver where we've had a long term silver strategy that put us out of sync production to sales. We haven't had that same situation with zinc, so zinc should be fairly well matching produced getting sold quickly thereafter.

Can you just remind us what the terms on the zinc concentrate are? What pay ability are you looking at?

We haven't disclosed that, Andrew, because of commercial confidentiality.

Okay.

But we're happy with our zinc contracts. From our point of view, we're happy with those contracts. Those contracts were never an issue for us in the same way that we were with the silver, which caused us to change strategy.

All right, all right. And then with respect to -- can you give us some indication with respect to the recovery of -- you are accruing, essentially, sales of concentrate charges on your balance sheet. Can you give us a sense of how the legal issues surrounding those sales and whether the appeal that the Argentinian government has is going to be successful or when that appeal might be resolved?

Are you talking about the export taxes?

Yes, the export tax.

We put forward our legal defense in that quite strongly and it's held in place and it's similarly held by other producers, so we feel quite strongly about that. We are taking a conservative position of booking it to the balance sheet, but we have not had to pay out cash. So, it's a balance sheet item recognizing conservatism, but we haven't had to pay cash. Frankly, as time goes on, I think our argument as to why we shouldn't because of having a fiscal stability agreement stands.

Yes. Now the Argentinian government has appealed that. Can you give us a sense of how that process is moving forward and whether you're going to see final resolution this year or when you expect that?

Yes. Specifically for our sales, Andrew, we've not had any notification or change relating to that.

Okay.

So our situation still stands and we feel that -- our legal team feels quite strongly that we're well position around that.

All right. Those are my questions. Thank you.

Thanks, Andrew.

(Operator Instructions)

Joseph [Reger], Global Hunter Securities.

Hi. Couple quick questions for you. You guys at one time talked about adding a tin circuit. I was wondering if there was any update there. Are you guys still planning on trying to do that or has that been put aside for the time being?

Okay. Joseph, let me hand that one over to Joe.

Joseph, good morning. We continue to do testing of the floatation alternatives for the tin circuit. So we continue to have plans to try and get something there that will work, the challenge being not so much recovering the tin but making it into a marketable concentrate, which has to be in certain quality limits. Another interesting thing we're doing now in parallel with that is actually, from an economic standpoint, a bit more interesting is a study to improve the processing of our zinc concentrates and move more of the silver that now reports to the zinc concentrate into the silver concentrate where we get better payment terms.

Okay. And on the zinc concentrate sales, are you guys still projecting I believe it's like 7.5 to 8.5 for the year or have you guys revised that down? I'm sorry, 11.5 to 12.5 was the original, right?

Joseph, we have not made any adjustments to our zinc production guidance.

Okay. And if you guys do go forward with Pitarrilla, do you guys have a preliminary estimate, before the feasibility study, for what the CapEx is going to be about including these changes you guys have made or is it still as of the last study?

It's going to be quite a bit different, Joseph, because the whole concept is different than the last study. The last study was (technical difficulty). Now we're looking at a large open pit design. We're still running through that process of keeping the feasibility on track. We've done a lot of work around -- particularly around the front end and getting more definition, taking out risk, adding some more resource and understanding better our design and where we put the plant. That's the work that we're doing just now.

Ultimately those things all accumulate through and work through into our economic model. Realistically, I don't think we'll release anything until we get to our feasibility, such so close that I think we'll release it all with our feasibility because CapEx is a big question -- not a big question, but it's a big part of our process is identifying exactly what we spend and how we spend it and the team has done a real good job on that. So feasibility out on track, we are on this year.

Okay. And that feasibility study after it comes out, it's -- to clarify from before -- it's a two to three year construction time from that point, right?

Yes. Once we come out with the feasibility study we make the decision as to how we proceed and as we talked about on the call, there's a lot of other decisions that we have to make around that process. We then take it to the Board and once we get approval to go, we go.

Okay. Thanks, guys.

Chris Lichtenheldt, UBS.

Hi. Good morning, everyone. First question, do you have any contracts set up for 2013 or with all the new sales contracts, do you anticipate some of those have a good chance of being renewed at similar terms?

Chris, it's Johnny, good morning. We do have a contract that extends into 2013 and I would expect that some of the existing contracts would be renewed for 2013.

Okay, great, thanks. And with the new disclosure on treatment refining for this year around $6.50, that's helpful. Can you help us put it all together for a cash cost number for this year with royalties and the site costs and everything? Is it low 20s and particularly because of what you mentioned about higher sales and production that will skew things? Can you help give us a number for the back half of the year?

Chris, hello. It's Greg. As you're aware, we provide guidance on direct mining cost. We don't provide guidance on total cash costs because a number of the factors that build into total cash costs are driven by sales and so there's some timing differences which make it challenging to forecast. What I'd direct you to is, our note 13 in the MD&A gives you the adjustments and the adjustments from our reported numbers through to the cash cost numbers with some significant detail around transportation costs, royalties and production taxes, bi-product credits. It's fairly straightforward to adjust those to a per ounce basis and then come up with an estimate of where cash costs should be through the year.

Okay. We'll rely on that. And then lastly, you mentioned labor inflation in Argentina. Do you mind, can you just quantify that? I'm curious what labor inflation you're seeing recently.

Morning, Chris. This is Joe. The official report of inflation versus what our actual experience has been in the mining industry has been a bit of a wide range, generally been in the order of 25% to 30% per year.

Okay. So that's still the case based on recent wage negotiations?

Yes. The labor is the highest inflation element within the inflation environment in Argentina. So that's the hard one that we have to manage, Chris.

Okay. All right. That's helpful. Thanks a lot.

There are no further questions at this time. I'll turn the call back to Mr. Smith for any final remarks.

Thank you, Ally and thank you everybody for participating this morning. We look forward to keeping you updated, so have a good day today. Thanks now.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect and have a wonderful day.