SSR Mining Inc (SSRM) 2018 Q2 法說會逐字稿

Good morning, everyone, and welcome to SSR Mining's Second Quarter Financial Results Conference Call. This call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to David Wiens, Director of Corporate Finance.

Thank you, operator. Good morning, ladies and gentlemen. Welcome to SSR Mining's Second Quarter 2018 Conference Call, during which, we will provide an update on our business and a review of our financial performance.

Our financial statements and management's discussion and analysis have been filed on SEDAR and EDGAR and are also available on our website.

To accompany our call, there's an online webcast, and you'll find the information to access the webcast in our news release relating to this call.

Please note that all figures discussed during the call are in U.S. dollars, unless otherwise indicated. All references to cash costs and all-in sustaining costs are per payable ounce of metal sold. We will be making forward-looking statements today, so please read the disclosures in the relevant documents.

Joining us on the call this morning are Paul Benson, President and CEO; Greg Martin, our CFO; Kevin O'Kane, COO; and Carl Edmunds, Chief Geologist.

Now I would like to turn the call over to Paul for opening remarks.

Thank you, David. Good morning, ladies and gentlemen, and welcome to our second quarter call.

Positive momentum towards our 2018 goals continued in the second quarter. We grew quarterly gold equivalent production to over 85,000 ounces at lower cash cost. The Chinchillas project moved closer to completion, and we delivered solid financial results. We also released an updated mine life -- mine plan for the Marigold mine, outlining a 10-year mine life with robust economics and over 30% growth in the near-term gold production. An impressive base case with lots of upside as we look to continue our track record of reserve replacement and potentially assess an expansion of the operation.

In the second quarter at Marigold, we produced over 49,000 ounces of gold, a 15% increase compared to the first quarter. We look forward to further growth in the second half of the year and into 2019 with the new haul trucks coming into service and commissioning of the new leach pad.

We also stacked a record 7.9 million tonnes of ore in the second quarter, notably at a higher average grade, so a solid quarter at Marigold.

At Seabee, we produced over 23,000 ounces of gold, in line with production in the first quarter and putting us well on track for full year guidance.

All mining activities are now taking place at the high-grade Santoy mine and the team has been doing a good job of optimizing that transition, setting the stage for higher throughput in the second half of the year.

At Puna, we had another strong quarter, producing nearly 1 million ounces of silver, allowing us to produce well in excess of our first half production guidance of 1.6 million ounces of silver.

Importantly, the Chinchillas project remains on schedule and on budget. On today's webcast, we'll be showing a couple of videos that demonstrate the significant progress we've been making there.

Consistent with strong performance at our operations, we've increased earnings and operating cash flow, added cash to the balance sheet for the 11th consecutive quarter and are lowering our cost guidance.

With that, I'm pleased to turn the call over to -- for the first time to Kevin, who'll discuss our operational performance in more detail.

Thank you, Paul. As some of you know, I recently assumed the COO role here at SSR, and it's certainly a pleasure to be working with such a solid and experienced team here in Vancouver and at the sites.

As Paul alluded to in his opening remarks, Q2 was a solid quarter at all of our operations and we remain on track to deliver annual production and improved guidance.

In total, we produced over 85,000 gold equivalent ounces, an 8% increase over Q1 at lower consolidated cash costs of $758 per gold equivalent ounce.

Starting with Marigold, we produced 49,436 ounces of gold in the second quarter, a 15% increase over Q1. Cash cost decreased to $700 per ounce from $720 per ounce in Q1. As expected, both production and cash costs in Q2 were positively impacted by higher ore stacking rates achieved through the previous few quarters. We delivered a record 7.9 million tonnes of ore to the leach pad in the second quarter, importantly, at a 14% higher average gold rate as compared to Q1. An increase in ore mining led to longer haul distances, contributing to lower mining rates and higher unit mining costs of $1.92 per tonne that were also impacted by higher fuel prices. As noted in our production release a few weeks ago, we expect total material mined to increase during the second half of the year with shorter haul distances and the 4 additional haul trucks, 3 of which came into service in July. Third quarter production is expected to be between 40,000 to 50,000 ounces of gold. With the commissioning of the new leach pad and the higher stacking rates benefiting good recovery later in the year, we expect strong fourth quarter production of approximately 60,000 ounces of gold.

At Seabee, we produced 23,582 ounces of gold in Q2, in line with production in the first quarter, as we saw the benefit of the release of in-circuit inventory that had accumulated in Q1, offsetting the impact of lower mill throughput and feed grade. The mill performed well in the quarter with lower quarterly throughput of 923 tonnes per day, reflecting seasonal planned maintenance, a temporary interruption in operation due to a forest fire and a ramp-up in mining activities at the Santoy mine, where we now source all of our production. We expect mill throughput to increase through the second half of the year and continue to target 1,000 tonne per day average for the year consistent with the preliminary economic assessment published last year. The mill feed grade was 7.95 grams per tonne in Q2 reflecting planned sequencing at the mine. Cash costs for the second quarter were $616 per ounce as compared to $481 per ounce in the first quarter.

At Puna operations, we continued processing stockpiled material at the Pirquitas plant, while advancing work on the Chinchillas project, which I'll come to shortly.

The Pirquitas plant continued to perform well, operating at an average throughput rate of 4,353 tonnes per day for the second quarter, 5% above Q1, which was affected by weather events. The planned shutdown for major plant maintenance and other plant modifications previously scheduled for June was successfully completed during the month of July.

In anticipation of increased zinc in material to be delivered from Chinchillas for processing later this year, we recommissioned the zinc circuit during the second quarter, which had been out of service since February 2016. In May, we began processing stockpiles from Pirquitas that contain higher levels of zinc and are once again a zinc concentrate producer. Recommissioning and other costs associated with zinc production as well as declining grade of stockpiled material are reflected on our second quarter cash costs of $14.73 per ounce of silver sold. We produced 954,000 ounces of silver in the second quarter, marginally higher than the previous quarter, as higher plant throughput offset lower grades and quality of stockpiles processed. As a result, we produced 1.9 million ounces of silver in the first half of 2018, exceeding our guidance of 1.6 million ounces of silver, an excellent result.

At the Chinchillas project, significant progress was made with construction and mine development during the second quarter. We'll now play a couple of short videos that demonstrate what this looks like.

(presentation)

Starting with the Chinchillas site, as can be seen, prestripping activities have materially advanced with a total of 1.8 million tonnes moved through the end of June. In July, we also began transporting limited quantities of ore and building stockpiles at the Pirquitas site, which will be fed to the mill and lead up to commercial production. Infrastructure earthworks were completed, foundations for the truck shop were laid with structural steel deliveries initiated and a number of modular buildings were installed during the quarter.

Moving on to the Pirquitas site. This drone footage shows the construction progress we've been making on the stockpile dome. About 90% of the structural frame for the dome was completed by the end of the quarter with the remaining portion completed in July. As can be seen, we are now in process of planning the structure and we expect to complete that by the end of the third quarter. In addition to the work on the dome, all the required plant upgrades to treat Chinchillas ore were completed in the quarter.

Our success with recommissioning the zinc circuit and producing zinc concentrate in the second quarter gives us added confidence in a smooth transition to Chinchillas ore later this year.

So the project is now well advanced and looking ahead, we expect the remaining construction and development activities to wrap up for sustainable ore delivery to commence in the fourth quarter of this year.

To sum up, we had a solid quarter operationally, and we continue to expect to deliver to guidance.

I will now hand over to Carl, who will take you through our exploration activities.

Thank you, Kevin. Exploration activities maintained pace at both North American operations in order to make meaningful additions to reserves and resources by year-end and give us exposure to an early-stage opportunity in the top-tier North American gold exploration district.

At Marigold, where our main objective is to ultimately convert the Red Dot resource to reserve, we completed 27,900 meters of drilling and 75 holes between the Red Dot area and 2 phases of the Mackay pit. Recall that we took a phased approach to the Red Dot drilling. Having confirmed our expectations with an assessment of the first-half drill results on the current mineral resources, we made the decision to advance to Phase 2 that when completed, is expected to convert inferred resources to the indicated category. If Phase 2 is successful and mine planning completed, the ultimate goal is to convert the Red Dot resources to reserves in 2019. The remaining drilling for the quarter was completed on 2 phases of the Mackay pit, where we suspect the presence of continuous higher grade North, Northeast trending structures. This drilling has yielded encouraging results with higher-than-average grade intercepts occurring within and just outside the current mineral reserve pit outline. We expect these intercepts to make positive contributions to the mineral resource and reserve at year-end.

At Seabee gold operation, close to the Santoy mine, we completed 12,160 meters of underground drilling in 40 holes with another 6,840 meters being completed from 12 surface holes. These programs continued our efforts to convert inferred resources to indicated at Santoy 8A and the lower and eastern portions of Santoy Gap. In addition, drilling continued on the Santoy Gap hanging wall target, where we expect to report additional inferred resources at year-end. Results through the quarter on Santoy 8A have been positive on plunge in the core area, confirming the high-grade nature of the resource and its continuity.

In general, holes completed on the marginal inferred areas of 8A and westernmost upper gap have returned results that confirm the cored structure at subresource grades.

With half the year complete, we remain optimistic that we will meet our resource conversion objectives at Santoy.

To date, the majority of our Seabee surface exploration drilling has been on the 34,000 hectare Fisher property. Of the 23 diamond drill holes comprising 12,050 meters completed during the second quarter, 18 holes were completed at Fisher to begin testing a portion of the Santoy shear zone extension. Initial results continue to demonstrate the Fisher property's prospectivity and underpin our belief that over time, Fisher could demonstrate similar shareholder value like recent discoveries at Santoy.

Elsewhere on the Seabee property, we completed selective drill testing for satellite mineralization at the CRJ and Santoy targets as potential Seabee mill feed. Additional drilling is planned to investigate new areas for discovery on the Seabee property this year.

At the SIB project located in British Columbia, we began mobilization of a 30-man camp ahead of drilling that started early July. Our target here is precious metal and rich massive sulphide that may occur in the same geology that hosted the past-producing Eskay Creek mine. During the quarter, we received the results of an EM survey that identified a discrete conductor located 2 kilometers south of our 2017 drilling and this will receive some ground follow-up and drilling in the coming quarter.

Looking ahead to the third quarter, at Marigold, we will continue to push the completion of the Red Dot drilling, together with some targeted follow-up on higher-grade intercepts that are present in the Mackay Phase 5 area. Activities at Seabee will be focused on the conversion of inferred at Santoy Gap and Santoy 8A with opportunities for inferred addition at Gap hanging wall and 8 East.

With that, I'll turn the call over to Greg for a discussion of our financial results.

Thanks, Carl. At the halfway point of the year, I'm quite pleased with how our financial performance is tracking. Despite metal prices coming off marginally from the first quarter, our continued positive operating performance continues to provide solid results as we move into a stronger second half.

With a cash balance approaching $0.5 billion, we are capable of funding the remaining Chinchillas capital and new trucks at Marigold without denting our strong balance sheet.

For the quarter, we generated: revenues of $104 million, a 6% increase from the first quarter; and income from mine operations of $21 million, a 23% increase from Q1. So both figures are tracking in the right direction, despite the lower metal prices.

Our G&A expense is significantly higher than the comparative quarter at $8.2 million, but the difference is largely due to valuation changes on stock-based compensation. Paul has still been tough on hiring, so our cash G&A is materially the same as it has been over the last few years.

Reported net income was $2.6 million or $0.04 per share. As I noted in my remarks last quarter, we booked a onetime $5.8 million tax expense related to our reorganization in Argentina, which results in the Pirquitas and Chinchillas assets being held in the same entity. This reorganization simplifies our operations in Argentina significantly and gives us a stronger consolidated company to drive our future strategy in the country.

The expense was lower than the $7 million estimate I had previously provided. Adjusted net income, which considers that expense along with other items was $12.1 million or $0.10 per share. So earnings performance remains solid, even as we transition to the near-term growth we expect in the fourth quarter and beyond.

Cash generated by operating activities was $17.1 million, an approximate 50% increase over the first quarter of this year. You probably noted sales of gold were below production as we built bullion inventory, which deferred about $8 million of cash flow in the quarter. At quarter-end, we held approximately 13,000 ounces of gold bullion in inventory.

$35 million in proceeds from the final sales of Pretium shares financed our investments in our assets of $19.3 million and investment in Chinchillas of $16.1 million. As a result, our cash position grew by $21 million to $494 million, the 11th consecutive quarter our cash position has increased.

I highlight our working capital position, which totaled $670 million as a strong net current asset balance adds to our cash. It remains supported by our undrawn $75 million credit facility.

I'm sure those of you that follow Argentina are aware of the significant devaluation of the Argentine peso. While we don't expect to see any material reduction in costs in the long term due to ongoing higher inflation, I draw your attention to the impact it has had on the tax moratorium liability we hold in Argentina.

If you recall, one of the benefits we noted was the conversion of a U.S. dollar liability to a peso liability. So while due over 5 years, in 18 months, the liability in U.S. dollar terms is now approximately half of what it was when we entered into the moratorium. We have made some improvements to the higher end of cash cost guidance at Marigold and Seabee. These improvements reflect the solid first half of the year each mine has posted.

Puna operations continues to show positive performance from the Pirquitas stockpiles through Q2, but we need construction completed and actual performance results of the Chinchillas ore through the plant to have confidence before adjusting Puna guidance. Our production remains weighted to the fourth quarter as both Chinchillas ore processing and the new Marigold leach pad are expected to come online during that period.

With regards to the third quarter, a few items to note that will draw cash. At Marigold, the new haul trucks will be entering service in that period, so the $22 million in capital will be invested and we will incur the bulk of the new pad build in that quarter. Chinchillas' capital spending will continue through the quarter as we advance that project, with the outstanding amount of its 100% project budget being approximately $40 million. As we supported our partner Golden Arrow through a loan agreement, I expect to see some advances on that $10 million loan in this quarter to fund their 25% share of capital.

So with those comments, I'll turn the call back to Paul.

Thanks, Greg. To conclude, we delivered another solid quarter for our shareholders. We look forward to delivering further production growth in the fourth quarter and carrying through to at least 2021, as Marigold, Seabee and Puna all see increased production and retain significant exploration upside.

As strong first half operating and financial performance positions us well to meet our production and cost guidance for a seventh consecutive year, our track record of delivery, our diversified Americas-based operating platform and our exceptional balance sheet are what continues to differentiate SSR Mining from the majority of our peers.

This concludes the formal remarks of our earnings call. I'll now pass the line over to the operator to take any questions you may have.

(Operator Instructions) The first question is from Rahul Paul with Canaccord Genuity.

At Seabee, it looks like you've been able to successfully push the mill to over 1,200 tonnes a day on multiple times this year. Have you begun to evaluate an expansion beyond the current plan, which, I believe, is 1,050 tonnes a day? Or is it too early to say?

Yes, I think a bit early to say. We're focused on the transition. We have been focused on the transition, moving all the mining across to Santoy. We closed the Seabee mine earlier this year. I think, let us get some runs on the board, at consistently moving the bottleneck away from the mine and we'll see how we go. But I would say, we'd review that early calendar next year.

Okay, perfect. And then just a related question, I guess. At what level does the mine become the bottleneck? I understand now that with the Seabee mine shutdown, I mean, all of the feed is coming from Santoy. So at what point would you expect mining to become a bottleneck here?

Well, the mine definitely is a bottleneck now. You can see that because, as we've said, we've run the mill over -- I think, the peak days, we've had over 1,300 tonnes per day. And so by definition, we're not running consistently at $1,300. The bottleneck is there. There's -- part of it is we continue to open up new phases. Also equipment deliveries are limited to the winter ice road. So we'll be getting, I think, 2 additional trucks and loaders next calendar year. And so you'll probably see a step-wise movement in production. So yes, definitely bottleneck, sitting at the mine at the moment.

The next question is from Michael Sroba with Macquarie Capital Markets.

A couple of questions on Marigold on my end. The capitalized stripping was quite low in 2Q. Do you still expect a $15 million overall spend for 2018?

Yes. Thanks, Mike. Yes, it was low in the quarter. We tend to get variations in deferred stripping depending on the actual phase sequencing. And you noted that, obviously, we moved a lot of ore tonnes in the quarter relative to the waste tonnes. So yes, we have an adjusted guidance. We still are expecting in that range of deferred stripping as we move through the year.

Okay. And are we still right to assume a higher strip for the second half of the year, closer to 2:1?

We certainly see the strip ratio trending up through the second half of the year. We don't provide specific, but obviously, we've just announced and put out the technical report. So directionally, that would give you some guidance as to how that would trend in the second half.

Okay. And just on the pad build, what's the approximate capital cost of building that pad each year?

So we build pads periodically sort of on every 2-year cycle is what we've been on. This particular pad build is a little bit more complicated, just because we had to move some roads and some collection ditches and other things. So typically, the pad builds range in the $5 million to $6 million. This one is the $8 million to $9 million, because there was more infrastructure associated with it.

Okay, great. And just quickly on Santoy. How many stopes do you currently have online and/or development phases?

To be honest, off the top of my head at the moment, not sure if we can get that detail for you at the moment. Yes, obviously, it varies through the year because you're ranging from stopes, which can be up to 20 meters wide to stopes, which are 5 meters wide. But again, yes, I can get that detail for you later.

The next question is from Mike Parkin with National Bank.

Just a couple of follow-up questions. On that Marigold pad, is that $8 million to $9 million all going to be spend in the third quarter? Or would we assume that's going to be spread out into the fourth quarter as well?

Mike, thanks. We actually started this pad build late in '17 and then put it on hold through the winter season. So we did incur a couple million of that last year. The remainder of the bulk will certainly be incurred through the third quarter. We may see some carryover into the fourth quarter, but certainly the bulk of that remaining spend will be in this coming quarter.

Okay, that's good. And then can you just go into a bit more detail on what you were talking earlier with the peso denominated liability in Argentina?

Sure, Mike. We entered into an agreement, it's what was called a tax moratorium, in Argentina related to export duties that was a U.S. dollar liability. Through that, we converted it to a peso liability. We're paying that over a 5-year period. As I noted in my remarks, because it's denominated in pesos with roughly 40% decline we saw in the Argentine peso through late Q1 and through Q2, that's had a significant decline in the principal value of what we would have to pay over the remaining term of that moratorium.

If you want detail on it, go back on our website, have a look. I think, the press release would have been March or April of last year and that was just resolving that export tax issue.

(Operator Instructions) The next question is from Chris Thompson with PI Financial.

I've just got 2 questions. I'll start off with Marigold. You did mention, I guess, the higher fuel prices during the quarter and their effect on the, I guess, the mining costs there. I mean, can you just walk us through sort of expectations in the second half of this year? Or whether we're going to see, I guess, the benefit of the tonnage or sort of, I should say, shorter haul distances sort of compensating for higher fuel prices?

Greg?

Yes. Chris, say, it's Greg. Thanks for the question. Obviously, one of the factors is going to be where oil trends over the quarter and we've seen it stabilize in a range fairly similar to Q2. So we wouldn't, hopefully, see much to do with pricing. As Kevin noted in his remarks, we're going to see tonnage levels up. So overall, we will be using more truck hours in the second part of the year, which will consume more in absolute dollar terms, but we expect to move more tonnes. So on a per tonne basis, we'll expect diesel cost or fuel cost to decline in the second half of the year relative to the first half of the year. Diesel is about 15% of the cost structure at Marigold, so that gives you a sense of the sensitivity. And we have about 40% of the diesel hedged at Marigold for the remainder of this year and that protects us at oil prices above -- in the range of $60 to $65. So we're getting some relief on that at the current oil price levels and it will protect a portion of that exposure if oil prices did accelerate from here.

We also had the issue that with oil you have a longer haul distance getting back to the pad. So as you're mining through the phases, you define more ore than waste that actually just increases your haul distance. But it's obviously a positive because you're getting more ore than you originally planned as you go through that process.

Can you just walk us through just quickly on the sort of step-up in capacity maybe Q3 to Q4? I mean, where do you see this going on a half quarter basis?

No, we don't give that much guidance. I mean, we normally don't even give quarterly guidance, but we have this year because we saw that much variation. So we've said, Q3 at Marigold, 40,000 to 50,000 ounces and then around 60,000 ounces in the fourth quarter. But, I mean, we definitely don't give any more precise guidance than that.

All right, all right. That's good. And just a final question, I guess, Seabee, just want to understand what grade reconciliation and the level of dilution is looking back at Santoy at the moment?

Grade reconciliation has always been good there. We continue to adjust that as we do each year's reserve calculation, but it has been positive over recent years and continues to track well. And dilution, for those who went to the site visit last year saw, we have -- we don't have a big issue there. We tend to get very good breakage on the hanging wall, so it's not a major issue. If you look, we did the PEA last year. I mean, if you read through that, there's quite a bit of detail in terms of the different assumptions that are used.

The next question is from John Tumazos with John Tumazos Very Independent Research.

I have just a couple mechanical questions. The marketable securities were over $100 million at year-end and $8 million remains. What is the $8 million remaining, first? And second, were there something else that were sold or matured besides the Pretium shares? For example, did you have some treasury notes that turned into cash? And second question, when does the long-term debt mature, which, I guess, naturally reduced a little bit of the cash?

Greg?

Yes. Hey, John, thanks. Obviously, the reduction in marketable securities on the balance sheet is a combination of the sales plus the decline in value of the Pretium stock over that period. So it's a combination of those 2 factors. The marketable securities that remain are all fairly immaterial amounts that have arisen generally as we've divested properties over the last 2 or 3 years. You've seen through most of those announcements, we tended to take a small position in stock back in some of those transactions. So there's really nothing material there. It's 5 or 6 different companies. Probably our position in Golden Arrow is probably the largest one and that was announced previously. With regards to -- sorry, the second half of the question, pardon me, John.

When does the debt mature?

Yes, so the convertible is early 2020, so Feb 1, 2020, is kind of the effective maturity of the convertible. Its notional maturity is 2033, but there is an investor put option on February 1, 2020. Unless the share price increased significantly, we would expect those notes to get put to us at that period.

What is the conversion price?

It is USD 20 per share.

Just as sort of some added color on the first part of the question. The reason we have those securities is, we've made a conscious effort over the last couple of years to sell those projects that we had in the portfolio that we didn't think we would add value to. And so we've sold a number of those and quite often what we do is retain some sort of upside exposure, both through NSR royalties if it goes into production exploration bonus payments and often take some equity in that process. And really so when we sold the project, if that company is able to move that project forward, our shareholders still have some trialing benefit.

The next question is from Humphrey Carey with [KRI-RS] Fund.

I just wanted to ask about the Marigold project. Looking at 2019 and 2020 and looking at the recent changes to the life of mine plan. It seems -- am I right in thinking that the all-in sustaining costs are going to increase quite significantly over the next 2 years, in which case, obviously, the mine will be producing a lot less cash flow? Or am I missing something, please?

If you have a look on our website, you'll be able to see the 43-101 document we've released. We put a press release out a couple of months ago and then the full document went on very recently and it'll give you year-by-year, both cash costs and all-in sustaining costs. And it varies between the all-in sustaining costs -- from the 900s, it gets high in '20, '24, '25, primarily due to phasing of stripping and then it drops back down again. So as late as 2028, the all-in sustaining costs are about $790 an ounce. So it varies year-by-year, but all that detail is on the website.

Yes, I was referring -- it's on Page 5. I was referring to that, but if you look at 2018, you're forecasting $936 AISC; in 2019, you're forecasting $1,062; in 2020, you're forecasting $1,125. Yet in the next -- in the medium term, for the next 2 to 3 years, actually your AISC costs are going up quite a lot.

Yes, they're going up and then they come down.

Then they come down, but what I don't understand is, I mean, I was just surprised because, obviously, I know you're spending a lot of money this year in terms of CapEx, sustaining CapEx and other CapEx plus, obviously, you're buying the trucks in the third quarter. But I was a bit -- I assumed that CapEx might reduce in the following year, but it seems to be getting higher. Is that right?

A lot of that is just the prestrip. Obviously, when you do the pit optimizations, it sequences on maximizing NPV and a lot of that is coming into the capitalized stripping.

Okay. But if say -- but obviously, I know you've done well in terms of your drilling et cetera at Red Dot. But if that becomes -- if you can establish a reserve at Red Dot, say, in the middle of next year, would you be able to bring that into the production profile? And would that help things or is that...?

No, no. So consider that the 43-101 is the base case, and so that's everything that's ore at the moment, and proved and probable. So Red Dot is currently outside of reserves. Red Dot tends to be higher grade, but deeper. It's got a higher strip ratio. So you would tend to see -- you either need to find more material, which is why we're doing -- more ore, which is why we're doing the drilling and realization, to be more precise, at the moment and/or lower your mining costs. So it's a iterative process. We're doing the drilling this year. Early next year, we'll do the mine planning. If it comes in, it'll have a higher strip because we know it's deeper, but then you get the benefit of higher grade. Until we do the mine planning, we don't know what the answer is, but that's something that we'll be focusing on next year once we get all those drilling results. And I think the thing to remember there, Marigold is an amazing operation, opened in '89 with an 8-year mine life, 10-year mine life today and still this project we're focused on is -- has the potential to increase the reserve by 30%.

No, no. I just wanted to check on that though. Can I ask your question about Argentina? You've been very nice to your partner and lent them $10 million, is that right?

Yes, yes. Look, we have a facility.

You could have been less nice. Can you explain why you chose that strategy, if you see what I mean?

Yes. What we do is get sort of better lien on the remainder of the property, in terms of security around that loan. They could have financed it elsewhere. It's got a reasonable coupon on it, so it's certainly in excess of our cost of capital. So we thought that was the best outcome for our shareholders, doing it that way.

And you know how good the operation is, so that helps as well. Doesn't it? I mean it's not...yes. Yes. No, I think -- looks good.

Yes.

This concludes the question-and-answer session. I will turn the call back to Mr. Benson.

Okay. Thanks very much, everyone. Look forward to doing this again for the Q3 results. Have a good day. Cheers.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.