Alamos Gold Inc.

Good morning. I'll now turn the call over to Scott Parsons, Alamos Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator, and thanks to everybody for attending Alamos' second quarter 2023 conference call. In addition to myself, we have on the line today John McCluskey, President and Chief Executive Officer, Greg Fischer, Chief Financial Officer, Luc Guimond, Chief Operating Officer, and Scott R.G. Parsons, our Vice President of Exploration. We will be referring to a presentation during the conference call that is available through the webcast and on our website. I would also like to remind everybody that our presentation will be followed by a Q&A session. As we will be making forward-looking statements during the call, please refer to the cautionary notes included in the presentation, news release, and MD&A, as well as the risk factors set out in our annual information form. Technical information in this presentation has been reviewed and approved by Chris Blaswick, our Senior Vice President, Technical Services, and a qualified person. Also, please bear in mind that all the dollar amounts mentioned in this conference call are in U.S. dollars unless otherwise noted. Now John will provide you with an overview. Thank you, Scott.

Starting with slide three. We delivered an outstanding performance in the second quarter, achieving a number of operational and financial records. Production increased to a record of 136,000 ounces, exceeding our guidance for the quarter, while all-in sustaining costs decreased below our annual guidance. This was driven by another exceptional performance from La Yaqui Grande, which contributed to the strongest quarter from the Mulatto District in more than a decade. With production totaling 264,000 ounces through the first half of the year and costs well within guidance, we remain on track to achieve full-year production and cost guidance. Financially, we broke a number of records, including revenue and cash flow from operations, which increased for the fifth consecutive quarter to 138 million. We also generated a record 62 million of free cash flow, marking the fifth consecutive quarter of positive free cash flow as we continue to fully fund our growth projects and build our financial capacity. I'm turning to slide four. We're making excellent progress across our growth initiatives. We expect to release the results of an updated feasibility study on our Lynn Lake project in the next few weeks. Work on the phase three expansion continues to progress. and we continue to have exploration success at PDA in advance of a development plan that we expect to release in the latter part of the year. As we announced early in the year, we defined one million ounces of higher grade reserves and resources at PDA over the last two years. As demonstrated through our exploration update in May, we expect PDA to continue to grow and support a significantly longer life at the live mine at Milatos. At Island Gold, we're making significant progress on the phase three plus expansion. With the gullway recently lowered into the shaft, construction of the hoist house substantially completed and head frame erection well underway. We are on track to begin shaft sinking in the fourth quarter and deliver initial production from the shaft and expanded mill in the first quarter of 2026. We continue to have tremendous exploration success across the island gold deposit, as highlighted in our June news release, and are just scratching the surface of the regional potential across a much larger land package. This is highlighted by the photo at the bottom of the slide of a recently drilled core with significant visible gold from the prime breccia regional target, which is only four kilometers from the island gold mill. We also released our inaugural climate change report in the quarter, a significant milestone in our sustainability journey, which, among other things, outlines further details on our 30% reduction target in greenhouse gas emissions by 2030. Now turning to slide five, the key drivers of our strong outlook are all on track. As guided and seen through the first half of this year, low-cost production growth from Liaki Grande is taking our production higher and cost lower. Through the phase three plus expansion of island gold, we expect production will grow to 600,000 ounces per year, with all in sustaining costs decreasing below the $1,000 per ounce level. Longer term, through the development of Lynn Lake, we have the potential to increase production to 800,000 ounces of gold per year. All of this growth is in Canada. It's all lower cost. and we can fund it internally, providing one of the strongest outlooks in our sector. I'll now turn the call over to our CFO, Greg Fisher, to review our financial performance. Greg.

Thank you, John. This is my first quarterly conference call as Chief Financial Officer, and I couldn't be happier to be reporting a number of new financial records. I've been with Alamos for over 13 years, most recently as Senior Vice President of Finance, and can say that the outlook for the company has never been better. I'm excited for the growth we have ahead and look forward to continued strong financial results in the years to come. Moving to slide six, we sold 132,000 ounces of gold in the second quarter at an average realized price of $1,978 per ounce, $2 per ounce above the London PM fix for record revenues of $261 million. Total cash costs of $847 per ounce. We're in line with annual guidance and all sustaining costs of $1,112 per ounce. We're below the low end of the range. Through the first half of the year, total cash costs are down 12% from a year ago and all sustaining costs are down 9% as we benefit from low cost production, low cost growth at Layaki Grande. We are one of the few companies to meet cost guidance in 2022 and are on track to do the same in 2023. Our reported net earnings of $75 million in the second quarter, or $0.19 per share, included unrealized foreign exchange gains of $13 million recorded within deferred taxes and foreign exchange and other gains of $2 million. Excluding these items, our adjusted net earnings were $59 million, or $0.15 per share. Driven by our strong operating results and expanding margins, operating cash flow before changes in non-cash working capital increased 9% from the first quarter to a record $138 million, or $0.35 per share. Free cash flow also increased significantly from the first quarter to a record $62 million. Strong operating results and margin expansion were the main drivers of the free cash flow increase, with the collection of $20 million in sales tax receivables in Canada that had been deferred from the first quarter also contributing. Capital spending totaled $80 million in the quarter and included $23 million of sustained capital, $50 million of growth capital, and $7 million of capitalized exploration. Through the first half of the year, capital spending totaled $164 million, consistent with our annual guidance. Our balance sheet continues to strengthen, with no debt and $189 million in cash at the end of the second quarter, up from $134 million in the previous quarter, reflecting the solid free cash flow generation. We expect this to continue as we internally fund our high return growth projects while generating significant free cash flow and providing strong ongoing returns to our shareholders. I will now turn the call over to our COO, Luc Guimond, to provide an overview of our operations.

Thank you, Greg. Moving to slide 7, Young-Davidson produced 45,200 ounces consistent with the first quarter reflecting similar grades and processing rates. Costs in the quarter and through the first half of the year were in line with the upper end of guidance. Grades mined and processed were at the low end of the annual guidance range and are expected to increase in the second half of this year as previously guided. Milling rates were below mining rates, reflecting a scheduled liner change and weather-related power outages in the region. Milling rates are expected to return to guided levels for the rest of the year. Combined with higher grades, this is expected to drive higher production and lower costs in the second half of the year, putting the operation on track to achieve full year guidance. Mine site free cash flow increased to a record $35 million in the quarter, bringing the first half total to $52 million. With a stronger second half expected, Young-Davidson is on pace to generate over $100 million in free cash flow for the third consecutive year. Over to slide 8. Island Gold produced 30,500 ounces in the quarter. Grades were in line with guidance. However, milling rates were impacted by lower mining rates as well as downtime for maintenance on the fine ore bin and weather-related power outages. Mining rates were also impacted by the power outages as well as some lost shifts due to smoke from wildfires in northern Ontario. Both mining and milling rates have returned to normal levels in July and are expected to average 1,200 tons per day through the remainder of the year. This is expected to drive higher production and lower costs in the second half of the year, putting Island Gold on track to meet full year guidance. Over to slide nine. We made considerable progress on the phase three plus expansion in the second quarter with mechanical installation of the production and service hoists completed and the hoist house substantially complete. The Galloway that will be used for shaft sinking was lowered into the shaft and is being outfitted with the required mechanical and electrical components. Over 90% of the buried surfaces required to start shaft sinking are now complete and the erection of the head frame is well underway as seen in the photos on the slide. Shaft sinking is unscheduled to commence in the fourth quarter. Over to slide 10. A total of $41 million of capital related to the Phase 3-plus expansion and capital development was spent in the quarter. The expansion remains on budget with 36% of the total initial capital of $756 million spent and committed to the end of June. Most of the capital spent and committed to date has been focused on the SHAP site area, with spending on the mill expansion and paste line expected to ramp up next year. The expansion is on track to be completed in 2026 and will create among the largest, lowest cost and most profitable mines in Canada. Moving to slide 11, Mulatto's district production totaled 60,300 ounces, an impressive 19% increase over the previous quarter and the highest production rate in the past 10 years. Costs were below full year guidance for the quarter and through the first half of the year, driven by strong results from Layaki Grande, with grades and stacking rates both above full-year guidance. Mine site free cash flow increased to $47 million, also the highest level for mulattoes in over 10 years. As previously guided, production rates are expected to decrease in the second half of the year and costs increase. This reflects the end of mining in the main mulattoes pit, as well as the decrease in stacking rates and grades Adela Yaki Grande to levels consistent with full-year guidance. With a very strong start to the year, the Mulattos District is well positioned to achieve full-year guidance. I will now turn the call over to our VP of Expiration, Scott R.G. Parsons.

Thank you, Luke. Over to slide 12. As John noted, we continue to have exploration success across several areas, most notably at Mulattos and Island Gold. In May, we announced an exploration update at the higher-grade underground PDA deposit within the Mulattos District, where we continue to extend high-grade gold mineralization outside of currently defined reserves and resources. At one million ounces of combined reserves and resources, PDA has already grown larger than Lucky Grande. Given the number of high-grade step-out holes intersected already this year, we expect that growth will continue. Based on the success to date, we have doubled the size of our exploration drilling program at PDA and will be completing an expanded 35,000-meter program in the third quarter. The results will be incorporated into the development plan for PDA, expected to be completed in the fourth quarter. We expect that this development plan will outline a significant mine life extension at Mulattos. We also announced a wide interval of gold mineralization at 2 grams per ton over 82 meters in a breccia along the Kaplan Fault. The Kaplan target is located four kilometers east of the Mulatto's pit in an area that has seen limited historical exploration. We've completed several follow-up drill holes, stepping out in this area with assays pending. Thus far, I'm pleased to report that we're seeing similar lithologies, alteration, and styles of mineralization as the first hole, highlighting the significant potential of the Kaplan target and within the Mulatto's district. Over to slide 13. At Island Gold, as highlighted in our June update, underground drilling continues to extend high-grade mineralization across island gold deposits. While this has been a consistent theme since we acquired the island gold mine in 2017, a more recent focus over the past year is an expanded underground exploration drilling program in the hanging wall and footwall of island gold deposits. Exploration to date has defined and expanded on several higher-grade zones in the hanging wall and footwall structures. These zones are in proximity to existing underground infrastructure, highlighting a significant potential to add near-mine, high-grade reserves and resources that would be low-cost to develop. An excellent example of this is a newly defined perpendicular structure, the NS1 zone. We defined this zone earlier this year and we're currently developing it and will be mining it over the coming quarters. A highlight from the steel development material we've already processed is 3,100 tons, grading 15.2 grams per ton. This zone was not factored into our reserves and resources, nor our 2023 mine plan, but is already contributing to our production. With over 7,000 gold composites historically and recently intersected in the hanging wall and footwall structures, there are numerous opportunities for the definition of additional high-grade zones in the hanging wall and footwall across island gold deposit, which has the potential to greatly increase our ounces per vertical meter. At 5.3 million ounces of combined reserves and resources, Island Gold has already tripled in size since we acquired it. We see excellent potential for that growth to continue. That's not even factoring in the significant regional potential that we're only just starting to test. With that, I'll turn the call back to John.

Thank you, Scott. That concludes our formal presentation. I'll now turn the call back to the operator to open the call for your questions. Operator?

Thank you. We will now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making your selection. If you have a question, please press star 1 on your device's keypad. To cancel the question, please press star 2. Please press star 1 at this time. If you have a question, there will be a brief pause while participants register for questions. Thank you for your patience. And the first question is from Cosmos 2 from CIBC. Please go ahead.

Thank you, John, Greg, Luke, Scott, and Scott. Congrats on a very strong Q2. And on that, you know, as we talked about, you had a very strong first half. You've maintained your guidance for the year. But if I have done my math correctly, you've done about 53% of the full year targeted guidance at the midpoint. I guess my question is... you know, with young Davidson and Island Gold expected to be even better in the second half, is there a potential for you to exceed, you know, your current guidance for the year?

Hey, Cosmos, it's Greg here. I mean, there is a potential. We're sticking with our guidance because at Mulatto's, I mean, we've highlighted that at El Salto, we've completed mining in September, so we'll be relying on some stockpiles for the second half of the year, but you can certainly... know that production is going to go down at Mulatto's portion of the pit. And then at Layaki Grande, we were producing from a pretty high grade in the first half of the year. That's also going to come back down to guided levels in the second half of the year. So the offset to the better production at both islands and YD would be lower production at Mulatto's.

Of course. And maybe a little bit deeper at the Yaqui Grande, as you mentioned, Q1 or Q2, sorry, was really good. I read that there was positive grave reconciliation. Could you maybe give us a bit more color on that? Was it confined to a certain area? What was your understanding behind the positive grave reconciliation? And on that, could it happen again?

Hi, Cosmo Yachts. Luke here. It's really... It's really a function of the drill density with regards to the early stages of the pit. And as we get deeper into the pit, the drill density is more defined. So part of it is just the wider spacing of the drill density at the top of the pit. The other aspect of it as well is that we were actually getting some ore outside of the block model with pretty strong grades as well, which was not identified in the original block model. So that also helped in the overperformance. I mean, for the quarter, I think we were about 7% above our expected block model grade. But as we get lower into the pit, what I can say, you know, with the current benches that we're mining relative to the tons and grade modeled from our block model, we're very tight as far as the actual results relative to the block model as we continue to move deeper into the pit.

Of course. Maybe switching gears a little bit, as you mentioned, the PDA development plan is coming out, you know, before the end of 2023. in Q4 2023. As you mentioned, May 15th, mid-May, the exploration results I came out, they were very good. You know, if I look at it correctly, there were some holes that returned 21 grams per ton, 8.33 grams per ton, 14.8 grams per ton. Uncut, but even cut, it was still very good. And, you know, certainly higher than the current reserve grade, which is 4.84 grams per ton. I guess my question is, Number one, can you remind us, you know, what is being included in that development plan in terms of the timing, in terms of cutoff? And number two, what's the, you know, potential for even higher grades being incorporated into this deposit?

If I can take that, it's Scott, RG. We're in the midst of that expanded drill program, so I guess the first point is... We look to be defining an internal mid-year resource update. towards the end of the program, probably mid-Q3, which we would use for the updated development plan. I will say that that doesn't mean that the drilling will stop at that point in time. I mean, we're continuing to expand the deposit in multiple directions. We've focused around PDA 1 and 2 zones so far. Gap, Victor, and Estrella are part of that reserve and resource and represent significant upside in terms of exploration. when we start expanding on those as they are open as well. In terms of higher grades, the more drilling we're doing, the more predictive we're getting with targeting higher-grade structures within the PDA deposit. So there is a strong northeast control to high-grade mineralization, and there's a periodicity to those structures. So as we expand out from the existing mineralization, we're strategically targeting those structures that we know are controlled on some of the higher grades there.

Great. Maybe one last question and switching gears again a little bit. Lynn Lake, you know, certainly your updated feasibility study is coming out next month in August. You know, and, you know, John, I think you've done a very good job in terms of progressing the asset there. You have the EIS now. You've signed with the First Nations Group. I guess, you know, what's next? You know, I guess you can't tell me too much more, but if I looked at the 2018, the last sort of feasibility study, kind of outdated now, the IRR was 12.5%, but that was, again, based on a much lower gold price. So, again, I'm sure you can't tell me what the IRR is going to be that's coming out, but can you remind us, like, in terms of your hurdle rate, how you look at these projects, and what should we expect next? Again, to the extent that you can share with us.

Cosmo, maybe I'll start on what we can expect. I mean, yeah, we are putting out our updated feasibility in a couple weeks, so we can't speak to any specifics. But, I mean, you can expect that capital is going to go up. We released that in 2017, the end of 2017. six years of inflation in some of the highest inflationary period that we've seen over the last 30 years in that period. So capital is going to go up from that perspective. But also we have a bigger resource. And as a result of the bigger resource, we have the ability to potentially increase the mill throughput that we're putting through. So just increasing the size of the plant. And both of those would contribute to a larger operation and as a result, higher capital.

Hi, Cosmos. It's John here. I would add that if you keep in context, it's our usual habit to pull in M&A transactions when the gold price is very low, where we can buy things at lower cost. And at the time we closed this transaction to acquire Carlyle Goldfields, the gold price was under $1,100 an ounce. It was virtually the bottom of the market. That would have been January 2016. So the whole point of acquiring it at that time was to pick up those ounces cheaply, and I think we paid something like $22 million for what was roughly a 1.6 million ounce resource. We did a quick preliminary study just to get a gauge on... what economics might look like, and using a $1,250 gold price assumption, it still showed something like 11% or 12% IRR. And that was not using any creative financing in order to pull that IRR up higher. So here we are at $1,900 gold. We can certainly use a substantially higher gold price assumption when we are going in to run the economics this time around. So that's going to be one of the big offsetting factors. And the change in scale, we've added a significant number of ounces since we acquired the deposit. And there's more to come. That's the other thing. We always had in view that we had a district scale play here with something like 80 kilometers of strike in a virtually untested greenstone belt. that the market by and large does not really understand, but the potential is real. And based on preliminary work that we've been doing on a regional basis, we are more encouraged than ever at the long-term potential for this district. So for us, the development of the two pits is just a start. It's a gateway into what we think is a very long-term potential for the company. Like most things we do, the acquisition of Island Gold was a very strategic move. It had more than enough flesh on the bones to justify the exploration work we've put in, and of course we can point to quite a substantial success. But you're going to see us do much the same as we did at Mulatto's. We're going to continue to explore, and over time we're going to add more deposits. And we think there's a really bright future for that part of the world. And we intend to be quite aggressive pursuing that potential over time. In terms of the development timeline, we will come up with a study, but based on previous guidance, we're not intending to immediately jump into the development of this mine. We don't need to do that. and it would be far better timed for us in terms of allocation of capital and allocation of management time. The skilled personnel that we'll ultimately put on that project right now, they're quite heavily involved in the Phase 3 expansion at Island Gold. So we want to be in a position to substantially de-risk the Phase 3 expansion, get most of the capital spent, and by that time there'll be a natural progression where we'd be able to move people from Island Gold and on to the Lynn Lake project. So we're still sticking with that objective, even though you can see we're generating tremendous amounts of free cash and we certainly have the capacity to do the work. What we can do and what we will continue to do is advance the detailed engineering. So when you see us make an estimate, as you will see in this upcoming study, it's not a rough guess. These numbers are going to be very, very well nailed down and so I would say our estimates are going to be highly reliable and therefore the IRR is something that We'd be very happy if you modeled and the valuation that we're going to put on this project is going to be real added value to the asset base of the company.

Great. Thanks again, John and team, for answering all my questions. That's all I have. Thank you.

Thank you. The next question is from Always Habib from Scotiabank. Please go ahead.

Thanks, operator. Hi, John and Alamo's team, and yeah, congrats on the Kisu beach. Just a couple of questions from me. My first question is in regards to the NS1 zone. I did miss some of the comments made by Scott RG, so I apologize if I have to repeat some of your comments here. At the recent Island Gold site visit, the NS zone was discussed pretty well in depth, and there was a potential to commence production from the zone in the second half, again, even though this zone is not even in reserves or resources. Is this still the case? Is that still the plan? And what potential do you see across the Island Gold deposit to discover similar zones?

Scott, I can take the question. Yeah, the NS1 zone, it was discovered earlier this year. We've been able to pivot and advance it quickly in conjunction with the mine plan for this year. Basically, drilling it off, sealing along it. I highlighted it in my commentary, 3,100 tons from an exploration, still at 15 grams per ton that we've already put into production. We'll be developing stopes on the NS1 zone in the second half this year. As discussed, the zone remains open up and down dip. We're drilling that as we speak. I think the real opportunity beyond just that zone, I think that's a good example, is the number of zones that exist at Island that we need to, we're now in a position to drill from underground. And these perpendicular structures, you know, they occur on periodicity across the mine. It's a matter of drilling them off well ahead of when we get there with the mine development, which we're doing now, and then also looking at these subparallel zones.

So this 3,100 tons, was that already produced in Q2, or would that be kind of coming in Q3?

That's been mined. That was sort of an expiration seal that we put in on the NS1 zone.

Got it. Got it. Okay. Thanks for that. And just switching to Mexico, in regards to PDA, just some thoughts on permits. What kind of permits would be required? Would it just be an addendum to the existing Villages permit or would you have to apply for a full permit over there?

With regards to the PDA permitting, obviously with some of the Mexican mining reform changes, we don't see any issues with regards to being able to obtain permits in relation to mining for PDA from both the mining and the milling point of view. It's within our existing concessions. And, you know, the legacy of actually having operated underground mines here previously would fall just as an amendment to our existing permits to be able to continue that from a mining perspective. And very similar for the milling aspect with regards to what we're looking to do. We did have a small mill complex here from the previous underground mining operations. We'll have to upscale that once we do complete our mine design and then support the mill design for that. But also it would be Again, within our existing concessions, and we would just be looking to seek amendments to our existing permits.

Excellent. Okay. That's it for me, and thanks for taking my questions.

Thank you. The next question is from Fahad Tariq from Credit Suisse. Please go ahead.

Hi, good morning. Thanks for taking my question. Just something maybe we haven't talked about in a while, the Turkish assets. Has there been any update on that front, whether the arbitration process or potentially finding a local partner and or selling those assets altogether? Any color on that would be really helpful. Thanks.

Yeah, we haven't provided an update on it because there really is nothing to update. When there is, you'll hear from us.

Okay, and then just switching gears, just a modeling question on Layaki. Thinking about grades in Q3 and Q4, I know they're declining sequentially. Is there any additional color we should be thinking about? Are grades going to fall to the low end of the annual, like the guidance range in Q3 and Q4? Anything that could help us modeling those grades would be helpful.

Yeah, well, as per our mine plan for this year, we were expecting grades to drop in the second half of the year, as per our guidance. So in the second half of the year, we'll be more aligned with our reserve grade of about 1.25.

And is there a difference between Q3 and Q4, or is it kind of safe to assume?

Pretty consistent in the second half of the year. And as I touched on, with regards to our overperformance, certainly from the first half of the year, based on what we're seeing with the benches that we're currently mining, they're aligning with the block model from our actual results. So we're not expecting any overperformance in the second half of the year. We should be more aligned with our reserve grade of 1.25.

Okay, great. That's super clear. Thank you.

Thank you. The next question is from Mike Parkin from National Bank. Please go ahead.

Thanks, guys. And Greg, congrats on your first call and a nice quarter too. Just most of my questions have been answered, but with Lynn Lake, I think you've set a good tone on what to expect in terms of scale and CapEx. Can you remind me again, power costs? I remember we've chatted about it in the past, but from what I recall, I think the power costs for the asset with grid power are extremely low. I just don't remember what the number is off the top of my head.

Yeah, Mike, it's great here. It's about 4 1⁄2 cents a kilowatt hour.

And then you've kind of addressed it, but it seems like, you know, challenges working around smoke in the area. That seems to be largely kind of behind you. Can you just give some additional color there that you've noticed, you know, current days are on average, you know, better than what maybe June was?

Yeah. Hi, Mike. It's Luke here. I mean, obviously, as you'd appreciate, I mean, forest fires are kind of an annual thing that we have to deal with with regards to our operations in northern Ontario, certainly in the summer months. In this case, I mean, with regards to the fires that we had in the region, you know, no effect as far as the fire itself to, you know, compromise the assets. It was more really related to smoke, and it's always a function of the wind direction. You know, these fires can be up to 100 kilometers away from our infrastructure, but the wind direction will bring the smoke into that our region of our operations and it's always a function of our fresh air fans to you know provide the proper ventilation for the underground workings where the smoke you know the fans pick up that smoke and then bring it into the work environment and then it just it becomes difficult for our workforce to rather determine whether it's an actual fire or it's just related to the forest fires so as a result of that we had to cancel shifts it's intermittent so I mean we could have potentially one shift or two consecutive shifts cancel, the wind directions change, takes the smoke away from our infrastructure, our ventilation fans, and then we're able to operate again for a number of days. And then obviously with the wind direction change, it could bring that smoke back into the region. So in this case, we just had more frequency of smoke being in the region with regards to our assets, which is what resulted in canceled shifts as a result. But it's something that we deal with on an annual basis. Okay.

And then for Scott RG Parsons, the Kaplan drill results, you noted that you've got a number of additional assays pending. Do you have a sense of when you might be able to release those?

Yeah, obviously we want, you know, the story continues to develop what we're seeing visually anyway. We want to have, you know, a meaningful number of holes to release as we continue stepping out on that first hole that we spoke to. So, you know, we're continuing to drill there now. We've just added a third drill, so there will be more coming out of that area over the coming months. Likely, you know, I'd expect that we'd have a story to talk to in September.

Okay, so kind of ahead of Denver Gold Show. we could probably see something.

Could be around that time. Yeah, again, results are dependent as we get them in. Yeah, obviously, yeah.

Okay, thanks, guys. Thanks, guys, again.

Thank you. Once again, please press star 1 if you have a question. And the next question is from Kerry Smith from Hayworth Securities. Please go ahead.

Hey, operator. Luke, just on the guidance for Layaki Grindy where you talk about lower stacking rates in the second half, are you tailing back the stacking rates because of the rains that usually come in Q3, or is there another reason why the stacking rates will be lower than what you've done in Q2?

Hi, Gary. No, it's really related to the seasonal effect with regards to the rains that we get in Mexico. Productivity-wise, it slows down our overall operation. So as a result of that, the stacking rates end up being lower through the rainy season.

Okay. So we would see that through Q3 anyhow, and maybe the back end of Q4 would be a lot higher rates, possibly, because it dries out.

Yeah, it's primarily related to Q3, but again, it's always a function of depending on how long the rains last, but usually by Q4, things start to return to more normal levels.

Right, okay. And for the recoveries at Liaki Grande, how have the leach curves been tracking with the ore that you've been leaching when you run your leach curves in the OxyLab. How have they been looking relative to your overall recovery curve that you've got for the project? Are they tracking in line or are they tracking better?

Yeah, they're tracking in line. They've been very solid, Kerry. You know, I mean, recoveries are plus 80% certainly on the Layaki ore.

Okay. Okay. And Scott, RG, just on Capulet, how many holes do you think you might have drilled in with three rigs running now by the time we get to September?

Probably an additional somewhere in the ballpark of 4,000 to 5,000 meters. Obviously, we're exploring a large area there. We're moving drills between holes as we continue to step out from what we know. So, yeah, likely an additional 4,000 or 5,000 meters by then.

And how many holes do you have assets pending on right now?

We have, from the second quarter, nine additional holes at the end of the second quarter.

Okay. Okay. And the 4,000 to 5,000 meters is including the nine holes, is it?

No, not including it. Yeah, I think you'd spoken to what to expect between now and the next news release. So it's not including those nine holes. We're expecting to drill an additional 4,000 to 5,000 meters between now and the end of, say, September.

Okay. Got it. Okay. Okay, great. Thank you.

Thank you. There are no further questions registered at this time. This concludes this morning's call. If you have any further questions that have not been answered, please feel free to contact Mr. Scott Parsons at 416-368-9932 extension 5439. Thank you for your participation and you may now disconnect your lines.