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spk03: Thank you all for joining us this morning. Before I turn the call over, I need to advise that certain statements made during this call today may contain forward-looking information and actual results could differ from the conclusions or projections in that forward-looking information, which include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the timing and amount of estimated future production, cost of production, capital expenditures, future metal prices, and the cost and timing of the development of new projects. For a complete discussion of the risks, uncertainties, and factors which may lead to actual financial results and performance being different from the estimates contained in the forward-looking statements, please refer to Yamana's press release issued yesterday announcing second quarter 2021 results, as well as the management's discussion and analysis for the same period and other regulatory filings in Canada and the United States. I would like to remind everyone that this conference call is being recorded and will be available for replay today at 12 p.m. Eastern Time. Replay information and the presentation slides accompanying this conference call and webcast are available on Yamana's website at Yamana.com. I will now turn the call over to Mr. Daniel Racine, President and CEO.
spk02: Daniel Racine Thank you, operator. Thank you all for joining us, and welcome to our second quarter 2021 conference call and webcast. Presenting with me today is Jason LeBlanc, our Chief Financial Officer, Yoann Bouchard, Chief Operating Officer, and Henry Marsden, Senior VP Exploration, will be available to answer questions. We'll start, as always, with health and safety. Our total recordable injury rate was 0.58 for the first six months of 2021. Earlier this year, we introduced our climate action strategy. Continue to advance the strategy during the quarter with work ongoing to determine baselines and gather data to develop abatement scenarios. The strategy is one pillar of our approach to ESG. Health and safety, environmental management, governance, and community engagement are all deeply rooted within our organization. We're proud to have been named one of Canada's Best 50 Canadian Corporate Citizens by Corporate Nights. Yamana ranked 31st overall and was the top-ranked Canadian mining company. The Best 50 rankings are based on a series of criteria, including eight environmental metrics, five social metrics, six government metrics, and three economic factors. To learn more about our ESG performance, I invite you to look at our latest material issue report and global reporting initiative report. Both are available on our website. Turning now to our Q2 operational highlights. We had a strong production with 217,402 ounces of gold led by standout performance at Jacobina, Canadian Malartic, El Pinon, and Minera Florida. Jacobina and Canadian Malartic, I'm pleased to note, both reach all-time quarterly heights. At Cerro Moro, production increased compared to the second quarter of last year. Both, but as we indicated previously, were expecting the mine to see much stronger results in the second half of this year. Produced 1.63 million ounces of silver during the quarter. Geo production was 241, 341 ounces. Quarterly cash costs were 720 per geo, and all in sustaining costs were 1,081 per geo, in line with plan. Our strong cash flow generation and increased cash balances continue to position us well to return cash to shareholders in the form of higher dividends. As reported yesterday, we are increasing our annual dividend to 12 cents per share, up nearly 15% from the previous dividend, and a 500% increase compared to Q2 2019. We also announced a normal course issuer bid that allows for the purchase of up to 5% of the company's issued and outstanding common shares over the next 12 months. First half production and costs were in line with our plan, set out at the beginning of the year. As with prior years, we expect Q4 to be the strongest quarter. I would like to remind everyone that we guided production to be a 57-53 split between the first half and the second half, and this is exactly what we have achieved in the first half. Taking a closer look at our operations, as mentioned, Jacobina posted record quarterly production of 47,503 ounces of gold. As you may have seen in our release yesterday updating progress on the phase expansion of Jacobina, average throughput for the quarter was 7,200 tons per day, up 5% over the prior quarter, with throughput averaging 7,500 tons per day for the entire month of May. I'll talk more about the phase expansion in a moment. At El Pinyon, GEO production for the quarter was 52,607 ounces, including 39,492 ounces of gold and 891,255 ounces of silver. We continue to expect planned production in Q3 and Q4, with the second half production to account for approximately 57% of the operation annual GEO production. The Canadian Monarchic had a record quarter. producing 92,106 ounces of gold, exceeding planned due to higher grades and recoveries from ore found deeper in the Malartic Pit. The operation remained on track to complete topographic drilling and blasting at the Barnet by the end of Q3 of 2021. Minera Florida was a standout performer during the quarter, production of 23,818 ounces of gold was above plan and higher than the same period in the prior year. NIR development continues to advance well ahead of plan, and exploration results continue to demonstrate extension of identified areas of mineralization and new discoveries. Production at Cerro Moro was 25,313 geo compared to 15,451 geo in the prior year period. This includes 14,488 ounces of gold, and silver production was at 736,820 ounces in the latest quarter. Challenging water condition limited travel and impacted shift change. However, the company took the opportunity during this time to fast-track certain health, safety, and other site improvements originally planned for the second half of the year, which will benefit future quarters. The transition to more male feed coming from the underground ore at higher grade than the open pit ore will continue through the second half of 2021. We have a number of compelling growth opportunities in our portfolio, and that we're very excited about. One of these is the phase expansion at Jacobina. We've made significant progress on phase two expansion to increase throughput to 8,500 tons per day and raise production to 230,000 ounces per year. The Jacobina plans to continue to exceed expectations. As mentioned, our success underscores the simplified approach that we are now taking to complete phase two. This includes the processing plan and tailing system, as well as operational improvement that de-risk the project, greatly reduce capex, and eliminate the needs to install an additional ball mill. While capital costs are expected to be only a fraction of the original estimated amount, not exceeding 15 to 20 million, the key takeaway in yesterday's update is the greater certainty and reduced risk as we now require incremental optimization and operational improvements to achieve the phase two throughput. Subject to the successful completion of required permit modification, we expect Jacobina to begin producing at the new 8,500 tons per day in the second half of 2023. As we advance Phase II, engineering for Phase III expansion to 10,000 tons per day will advance in parallel, with the planned modification originally planned for Phase II now considered adequate for the Phase III. A feasibility study for the Phase III is scheduled to be completed in 2023, and project commissioning is still on track for 2027. In addition to the Phase II update, we also disclosed strong exploration results at Jacobina yesterday. The results included exceptional drilling from Canavera Centrals and Morro de Vento, as well as the discovery of a new zone at Joe Bellosul, with 536,000 ounces of mineral resources. The results support the phase expansion and demonstrate Jacobina's exceptional long-term growth potential and ability to further extend strategic mine life. Turning now to Wazamak, our only-owned gold project in Quebec's prolific Abitibi-Témiscamingue region. We are excited to be growing our presence in Quebec, which is also home to our Canadian Malarté Corporation. Wazamak is a great project, and since acquiring it early this year, we have made it even better We've carried out several studies that have expanded reserve and average annual production while increasing throughput and plant nameplate capacity. As a result, we've made a decision to advance the project to construction. We expect to receive all permits and authorization by the third quarter of 2024. We have identified opportunities to improve ramp-up and decrease the processing plant construction period. Development will be fully funded from available cash and cash flows. Once development is completed, production will ramp up quickly and will achieve full production of approximately 200,000 ounces per year in year two and sustain that level for at least the next four years with costs well below the company's average. Wasamac has a reserve of 1.91 million ounces, along with indicated resources of 326,000 ounces and inferred resources of 258,000 ounces, with excellent additional exploration potential. We believe Wazamak will be a very long mine life of 15 years or more. Assuming this strategic mine life, NPV will be in the range of 850 to 900 million at 1850 gold price. Just 100 kilometers down the road from Wazamak is our Canadian Malartic Operation where we're advancing the Odyssey underground project with our partners. This is another outstanding project that will extend Canadian Malartic's mine life through at least 2039. The second quarter, we've completed overburden excavation and grouting to prepare for the construction of the production shaft and head frame. We've also made progress on the underground ramp. Development is ahead of schedule with approximately 764 linear meters completed this year, and 1,587 linear meters completed since the start. The exploration ramp is expected to take about two years to complete, with the first drilling platform established in early July. We have also completed construction of the shaft collar, and engineering is progressing on the head frame, hoist room, pace plant, power line, substation, the workshop, and the warehouse. Construction of the headframe and oyster room is slated to begin in the third quarter of 2021. And with that, I will turn it over to Jason.
spk06: Thank you, Daniel, and good morning, everyone. Turning now to our financial performance. Adjusted net earnings for the second quarter were $70.7 million, or $0.07 per share. Combined cash and cash equivalents at quarter end totaled $702 million, an increase of approximately 8% over December 31st year-end. This includes about $223 million that has been made available for the MARA project. Cash balances, along with further liquidity and cash flows, are more than sufficient to fully manage the company's business and capital allocation objectives, which includes further returns of capital to shareholders. We continue to generate robust cash flows with cash flows from operating activities increasing to $153.5 million in Q2 versus $129.4 million in the same period last year. Cash flows from operating activities before net change in working capital were $167.8 million, and free cash flow before dividends and debt repayments increased 34% year-over-year to $51.2 million. We expect cash flow to improve in the second half of the year, with Q4 expected to deliver the strongest performance in line with the production and costs. For Q3 and Q4, capital spending will be a little higher than the first half of the year as expected. For sustaining capital, we'll average about $50 million of spend per quarter. For expansionary CapEx, the average will be about $40 million per quarter, with about half that attributed to Odyssey. And for exploration, we'll spend between $25 and $30 million, with a 70-30 split between capital and OpEx. We continue to see a strong performance across our portfolio with production and cost tracking to plan. Our first half results are well aligned to our 2021 guidance released at the start of the year, which called for 53% of production to be weighted to the second half of the year. Our costs are also tracking in line for where they thought they would be at the end of Q2, and prospectively with minimal impact from inflationary pressures for the balance of the year. As noted, we expect stronger production and lower costs in the second half. Q4 is expected to be our strongest quarter, with the highest quarterly production and lowest quarterly costs, continuing a trend from previous years. And with that, I'll turn back over to Daniel.
spk02: Thank you, Jason. Before we begin the Q&A, I want to talk a little bit more about Wasamac and our growing presence in Quebec. I want to highlight the point raised by our Executive Chairman, Peter Moroney, in his most recent blog. If you haven't read it yet, the blog, I encourage you to do so. It's published roughly once a month as Peter shares his perspective on a wide range of topics related to the gold mining sector. His message in the blog can be summed up in five words, focus on big pictures. Our long-term production profile in Quebec, including Wazamak and Odyssey, is for 450,000 to 500,000 ounces per year between 2028 and 2035. While that's a strong profile in its own right, we believe it's just the starting point, that the mineral resources and exploration profile at Wazamak and Odyssey will generate significant production and mine life upside. That's where we're forecasting a 15-year strategic mine life for Wazamak. and why we believe Odyssey will be in production far from beyond 2039. We know that production like this calls for an element of trust on your part, and trust and benefit of the doubt are in short supply in our industry, perhaps for good reason, as a result of events in the last cycle. However, there have been many changes in our industry, and in our company in particular, along with many successes. We believe we merit the benefit of the doubt. that our long-term track record of converting resources to reserve at El Pinyon and Jacobina and our success at Canadian Maritime had good reason for your faith and confidence. Without diminishing the success at our other mines, Odyssey is a game-changer at a mine that has been a significant win for us on cash flows. But before Odyssey, Canadian Maritime was seen as limited only to its well-established open pit, Today is a top-tier generational open pit and underground mine. So we urge you to look at the bigger picture. Wazamak has the potential to become another generational mine in our portfolio, a mine that will be in production for at least 15 years carried in our strategic mine life. We look forward to advancing this mine and realizing its full potential, and we hope you join us and enjoy the full episode. Upside. In terms of our Canadian profile, in a few short years, we have established a platform that is among the biggest in Canada in terms of production. It's a production platform that will reach an initial roughly 500,000 ounces of gold, all concentrated in two mines in the same region of the country. With that, I will turn it back over to the operator for questions. Operator?
spk03: 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. You may cancel your question at any time by pressing 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 Anita Soni from CIBC World Markets. Please go ahead. Your line is now open. Good morning, guys.
spk04: Thanks for taking my call. My question is with regards to the indications that you've given for inflation going forward. Can you give us a little bit more color on some of the offsets that you're seeing? I think you mentioned that you are seeing some inflationary pressures that you've got – operational synergies that can offset that. And areas where you might not have operational synergies, then we might see some cost escalation. Thanks.
spk02: Thanks, Anita. I'll start and I'll let Jason to give more detail. But talking about inflation, you know, a big part of our cost is manpower. And then we have negotiated two contracts this year successfully within our budget. So we have not seen really inflation in that part. There's been some inflation pressure in the first half, but like we mentioned, we were able, with some synergy, some good operational excellence, again, to limit the impact, and then we were right in line. So maybe, Jason, you can give some detail of what we see coming and how we plan to mitigate these costs of pressure.
spk06: Yeah, sure, Daniel. Good morning, Anita. You know, Daniel mentioned we're seeing inflation, those headline items like everybody else out there, they're trickling down to, you know, consumption level of, you know, grinding media and the like, explosives, et cetera. And, you know, those are all up year over year, up a little bit more than our plan. But, you know, we indicated it is, you know, not significant, you know. With the guidance range that we provided previously, it's accommodated in there, you know, with a little bit stronger foreign exchange, I'd probably peg that at, you know, $15, $20 of negative impact compared to where we were at the start of the year. And obviously, we're working to try to offset that with, you know, all of our procurement efforts. I think we feel pretty good about that. And then also operational excellence, I think, has been a you know, a big part of our success over the last number of years. And that program's just that much more mature and advanced. So we feel like we're in a pretty good position to offset some of these impacts. And, you know, we do think they are typical in nature. They are, you know, all these, you know, direct inputs are up quite a bit from recent cycle lows. So they've come off from highs earlier this year. So they do seem to be moderating, but there is definitely an element of uncertainty here, and we have to do our best to manage it.
spk04: Okay, and then the second question is just on Jacobina. I think you guys mentioned that you'd be pulling lower grades for the second half of the year as the mill is now outpacing the mine. As you go forward, and that was temporary and it's going to be set up into 2022, but how do we think about grades in Jacobina in 2022 and 2023? I think previously we were kind of targeting towards 2.3 gram per ton material to achieve those production targets. Is that still your target?
spk02: Anita, coming from the underground mine itself, that's the grade you can expect, but you can understand that our phase one was 6,500 tons per day. We budgeted a bit higher than that at 68, but you saw our number. We're achieving 72 and 75, so The mine is not ready to produce that amount of ton, but we have stockpiles at a bit lower grade. So this is why the grade will be a bit lower. So we're going to process more ton, a bit lower grade, and then in total that will be a higher production at the end of the day. I think we have to take the advantage that we can put that supplemental and incremental ore into the mill. And that's what we do. We're making a lot of money even with 2.1 grams per ton at Jacobino. And then eventually, when we're going to catch up to the production, the underground production, to what the mill is able to do, then the grade will come back to that 2.3 to 2.4. Okay.
spk04: So, yeah, I guess I was just asking, when do you think you'd get back to that 2.3 or 2.4? And then secondly, as you mentioned, you're making a lot of money at 2.1. So then what kind of – You know, is there any kind of, I guess, processing cost reduction with the higher throughputs that I should be thinking about in the model while you're still processing 2.1?
spk02: Why don't you answer that question?
spk10: Yeah, Daniel, thank you. We're going to see for sure. I mean, we're doing step-by-step implementation to the processing plant, so for sure with... What we have in mind by increasing to 8,500 tons per day without having to install a curveball mill, you can understand that's going to be much more efficient. So, yes, for sure, at 8,500, with that new, I would say, approach, I would say I would expect to see some cost decrease with processing.
spk02: Okay. Regarding grade, Anita, that's when Phase 2 was planned, so around that time. second half of 2023, you should see grade going back. Even maybe next year, you should see grade coming back to that 2.3 to 2.4.
spk04: Okay, fair enough. Thank you. And then lastly, on Cerro Moro, as we look at the, you know, just taking a look at the production year to date overall, is it fair to say that it might undershoot the original sort of guidance range for that specific asset where other assets that are outperforming like Monero, Florida, and El Pino on versus your budgets might make up the difference?
spk02: Sure, the other four mines will do better, but we're still targeting to achieve our guidance for Cerro Morro. So second half at Cerro Morro is planned to be a very good half. We're going to see there's always a risk, but we're still aiming to achieve our guidance at Cerro Morro.
spk04: All right, so that was on throughput statistics. reverting back to normal throughputs after that sort of health and safety shutdown that you guys had, and then secondly on, I guess, really good grades, right?
spk02: Yes, exactly.
spk04: Okay, thank you very much. That's it for my question.
spk03: Thank you. The next question is from Fahad Tariq from Credit Suisse. Please go ahead. Your line is now open.
spk07: Hi, good morning. Thanks for taking my question. Just on the dividend, I noticed there was some commentary around... maybe a different methodology or a slightly different perspective based on minimal cash that's needed. Can you just touch on kind of if the thinking around how the dividend is increased, if that has changed given, you know, there's obviously some capital commitments that are coming up over the next few years with Wassamak and Malartic, you add that up, it could be, you know, almost a billion dollars of CapEx over the next few years. Just maybe just any changes to the way you're thinking about the dividend. Thanks.
spk02: Good morning, Farhad. Yeah, we mentioned in the past that we might look on a formula for dividends, but we've decided not to do that. We look at our, like you mentioned, we look at our future capital, our future cash flow generation, and then what we can afford as a dividend. And then when we look at what's coming at Malartic, at Wazamak, you saw that Jacobino is a lot less now that we can afford to increase our dividend to 12 cents per share. And then we're going to continue to look at it in the future. And then we want that, like we mentioned many times, that dividend to be sustainable. So if we were able to increase it from 10.5 to 12 cents per share, it's because we believe our profile in the next many years, we can afford to pay it at that level.
spk07: Okay, that's clear. So if gold prices stay above $13.50 an ounce, it's fair to assume that this dividend would be consistent?
spk02: It will be consistent at $13.50, absolutely. Okay, great.
spk07: All right, that's it for me. Thanks so much.
spk02: Thank you.
spk03: Thank you. The next question is from Josh Wolfson from RBC Capital Markets. Please go ahead. Your line is now open.
spk08: Thanks for taking my questions. Focusing on Sarah Morrill, you know, is there anything that you, is there any details you can provide in order for us to sort of connect the dots as to what's required to see improvements in the second half of the year? You know, historically, and last year, obviously, COVID being a bigger impact, you know, getting the development rate seems to be a challenge. What's maybe giving you more comfort on the outlook now in terms of expected improvements?
spk02: Good morning, Josh. Thank you. I'll let you answer, but I'll say development as rates are improving. They're going a lot better now, so maybe, Johan, you can give color of why we're very confident that the second half will be quite a good half at Cerro Morro.
spk10: Yeah, for sure. Good morning, Josh. So, as Daniel said, I mean, we did progress really well to catch back on our development, so that opened a lot of possibilities with mining. Just to give you an example, when we start July, we had only to do 70 meters of allotment to meet all the requirements for the next six weeks. So we're getting in better position. We have higher reconciliation, I would say better reconciliation between what we mine versus what we see to the mill. We did some progress as well with controlling dilution. It's already in our vein. So all that together. I think that the operation now reached a point where we see, I would say, a Q3 and Q4 reach the target that we wanted. So, again, it's going to be a progressing approach, quarter over quarter at CETL model. So, for sure, I mean, I will not find it going to be challenging to meet all budget and guidance on that one. But the plan that we have in front of us is showing a good trend if we succeed to maintain that high level of development.
spk08: Okay. Okay. And for the heap leach study, what was the grade of the material that was used for the column tests? It's about 1 gram per ton. And when you're thinking about, you know, this 5 million ton target, I guess, initial resource, is that the comparable grade we should think about for this opportunity?
spk10: Yeah, I think it would, yeah. Yeah, you're correct. Okay. Okay. For sure, I mean, we're going to see opportunities as well. I mean, we won't dilute if we don't have to, but that can be our regret as well. But I would say one gram per ton is our minimum each grade. Sure.
spk08: Okay. Thank you very much. Okay.
spk03: Thank you. The next question is from Mike Parkin from National Bank. Please go ahead. Your line is now open.
spk05: Hi, guys. Thanks for taking my questions. With Odyssey, has there been a good plan developed in terms of what will ultimately be involved with the Canadian Malartic Mill in terms of what it'll be scaled down to? Right now you've got the big sag feeding into the three ball mill lines, if I remember correctly. I know there's been some preliminary talk about potentially removing the sag. Is the idea to kind of run a couple of the ball mill lines and kind of keep a third one as a spare, or...? What's the thoughts there?
spk02: Good morning, Mike. Johan, maybe you can put some color on it, but we know exactly what needs to be done to achieve. But again, Mike, we're, what, six, seven years away to be in full production underground at Odyssey, so things might change. Our partner announced and then we said the same thing, a new discovery at Malartic during the second quarter. So if we find more opportunities, or more areas to be mined, then throughput might increase in the future at Malartic. But for now, we know exactly what's needed to achieve 20,000 tons per day. So maybe, Johan, on the mail, what needs to be done?
spk10: Yeah, you know, I will not go into detail on my question, but what we need to understand here is we cannot batch the ore, the processing plant, because we need to keep all... It's still a plan running all the time to accommodate the mining sequence. So, as you said, we need to, I would say, right-size the processing plants about 20,000 tons per day. And the idea here is going to be to do it efficiently. So, we're going to park some of the grinding units, some of many equipment going to be parked, but that will not be removed in case of something of this coming. So, we're going to remain with that flexibility. So from the current, I would say from the current cost, processing cost, by processing less tons, we believe that the processing cost will increase by about, I would say, top of my head, $1.50 US per ton more for processing going at 20,000 tons per day. Okay, that's perfect.
spk05: Another question, with the Jacobina, Kind of revisit on the phase two, simply just kind of looking at it in terms of where the bottlenecks are and unlocking the potential by addressing those rather than going ahead with the bigger capital spend. Can you just give us a couple of ideas where the bigger bottlenecks are within the mill and how you're working to address those?
spk10: Yeah, for sure. I mean, Jacobi and I, we had a really good surprise. The team are working, like, they did a really good job, I mean, to do the bottlenecking little project, and it just creates a surprise, and it brings us to just reconsider what we have for Phase 2 extension. So I would say on the short term, Mike, they're going to work on the, like, water pumping system and slurry pumping system, and we're also going to do some modifications to our tailing line. So even if we did some, we still have to do some modification there to release the system. So in parallel, I mean, what we see there is we're using a power draw of about 92%. And I mean, the sweet spot for mining is about 95% to 97%. So we're going to take advantage of re-registering the power draw at our grinding units. I would say we also underutilize the crushing circuit. Primary circuit is about 38%. And the secondary crusher circuit is used up about 50%. So we see some opportunities there by optimizing usage and, I would say, maybe decreased IT granularity of the crushing. So that will help. And I would say the second one is, I would say the third point is going to be to optimize grinding size and also screening and cycloning performance to for sure unload the grinding units and be able to push more tons through the mill.
spk05: Do you expect any loss in recovery or have you already kind of done some studies on that where you're not seeing material?
spk10: Yes, a good question. I mean, maybe you saw that in our release, that we run two tests in Q2, and we went up, we put the meal up to 8,600 tons per day on the day, and we averaged a really high tonnage over a short period of time. So for sure, we saw a decrease of recovery during that time, but that was within 1%, I would say, and I'm generous in saying that. So, I mean, by doing all that, and for sure, now we're looking at, like, a P80. We actually have designed a 160 micron. I mean, between 160 and 180 micron doesn't make a big difference. We believe that we can push that a little bit further, and we don't see yet the inflection point. So, that means by being, cutting a little bit by processing, I would say, coarser material, for sure, we're going to cut on power requirement as well. So, As I said, this is something that's come up like in Q3, and we're very excited, and we still try to understand what's going to be, I would say, the positive impact on cost going forward and ready to find where it's going to be our sweet spot for processing rates. Okay, that's good.
spk05: And then last question, with respect to the NCIB, how should we kind of think about the execution of that? Are you going to be strategic? or looking to kind of just be a regular participant in the market with it and buying kind of a fairly steady pace of shares through the next 12 months?
spk02: We're going to be strategic, Mike. We don't intend to buy a small amount of shares. When we're going to decide to do it, if we do it, it's going to be on a strategy point of view. Okay.
spk05: That's it from me, guys.
spk07: Thanks so much. Thank you, Mike.
spk03: Thank you. Once again, please press star 1 on your device's keypad if you have a question or comment. The next question is from Ralph Profitti from 8 Capital. Please go ahead. Your line is now open.
spk09: Good morning. Thank you, Daniel, for the question. There's quite a comprehensive tailing strategy being built around Jacobina, and I'm just wondering... Is substitution of the surface tailings to the highest degree possible the goal here, where you're taking more sort of an ESG perspective? Or are you coming away with more of a strategic mine life at the increased processing rate of 10,000 tons per day when you're managing the surface tailings capacity?
spk02: Good morning, Ross. Good question. There's a lot of strategy behind the 10,000 tons per day at ESG. At Jacobina, we have to think about tailing. We mentioned already that we're going to go with an hydraulic backfill system to start. We're probably going to switch eventually or have both. Also, a pace fill system to put more of the tailing underground. Even now, we're studying dry stack tailing on surface to have to use less space on surface. All of that, it's included in our strategy. We would like to use as much as possible and the maximum the actual tailing. That's what we've been successful to. At 6,500 tons per day, we had 16 years of tailing in mine life. We will increase to 85 and we will have the same because we're going to implement a backfill system. The next step going to a higher tonnage is to use the same strategy. What we can do to maintain our tailing mine life still increasing the underground mine life, but putting more tailings. You're absolutely right. That's part of a strategy to put as much or more tailings underground or reduce our footprints on surface with tailings. We're doing already quite good, but we see opportunities in the future. That's going to be one of the big part of the phase three expansion.
spk09: Thank you. You know, my second question is coming back to some of these wage inflation pressures. You talked about the two contracts secured. Would it be safe to say that those are in that sort of plus 2% to 5% range that we're seeing in the industry benchmark? And specifically, when does the Cerro Moro wage negotiation come due?
spk02: We did El Peñon and Chacobina this year. Cerro Moro, I don't remember. Maybe, Yoman, you know.
spk10: Daniel, I don't recall, sorry.
spk02: We'll get back to you, but I don't think it's this year.
spk06: 2023, yes.
spk02: 2023, okay. So we're two years away.
spk09: Okay, thank you. That's great. Thank you, Ralph.
spk03: Thank you. The next question is from Tanya Jafuconic from Scotiabank. Please go ahead. Your line is now open.
spk01: Yes, great. Good morning, everybody. Just wanted to come back on the share buyback. I know you commented on it being strategic. I'm just trying to understand how you view your dividend versus your share buyback. Dividend is about $115 million. Your share buyback, should you do all of it, that's over $200 million. It's probably double your dividend. I'm just wondering how you're balancing that. Do you have a target in mind that, you know, share buyback would be similar to your dividend? Just try and understand the strategy.
spk06: Go ahead, Jason. Yeah, I think first, Tanya, it's got to start with the overall capital allocation so we still have that balance across all those priorities. That's the first kind of point of reference. And as Daniel said, with the $0.12, that's effectively fixed in our mind. It's sustainable. We've made sure it's sustainable through the cycle. That's going to be the first priority, and then once we look at those other capital allocation opportunities, then we can look at the NCIB, so straight divvy first, and then there'll be a component going to the NCIB.
spk01: Okay, so there isn't a target within the component. It's whatever you... So there isn't a target, basically.
spk06: Well, we can't look at just the dividend in and of itself. We've got to look at all the capital allocation. I think we've got the transparency on capital now. It's very well laid out with the two projects in Odyssey and Wazamak now. It's spread out, manageable in every year, and we will still continue to chip away at the balance sheet, too. So we're going to be balanced across everything like we have been for the last several years.
spk02: We mentioned many times, Tania, that we have three buckets, so our capital allocation, the dividend, and reducing the debt. And then the debt is reaching a level now that we are very comfortable. It will continue to improve. So then at one point when there's enough cash, then we might decide to do the NCIB. So it's all included in our strategy. We We look at all time, these three buckets, and then if there's money available at one point, we might do the share buyback, but it will all depend what happened with so many other factors like gold price that we don't control.
spk01: Okay, no, that's fair enough. Thank you. And maybe just coming back to the inflation, I know Anita asked this, and I just wanted to come back, and you talked about efficiencies you know, offsetting this inflation. And Jason, thank you for the currencies. The 15, 20 bucks was due to, you know, stretching of the currency. Just for ourselves, are you seeing the inflation when you look at all of these numbers going forward in that 3% to 5% range that you're looking to offset? I'm just trying to see if that you're, you know, similar with your peers in that sense.
spk06: Yeah, so maybe just start to clarify the $15 to $20 would be, you know, both FX and inflationary pressures baked together. I kind of gave you one stop there. So that's the two of them. And, you know, it's coming through on a component of items. We highlighted a few in our disclosure. But, you know, we're seeing the results of our procurement efforts still in lower costs on other stuff. So I think that's part of it as well to the extent we are seeing you know, higher costs on, you know, like the straightforward stuff like grinding media where, you know, we're actually seeing lower costs on cyanide, by example, because of consolidation work that we're doing. So it's a bit of both, but the net is a little bit more in inflation for sure. So we've got to focus on more of those bundling and consolidation opportunities to try to take the edge off it and then, you know, back to our pure operational excellence. So that's more of a, you know, of a productivity – avoidance type approach there. So we're coming at it from all angles.
spk01: Okay. So it seems as though you're probably then on the lower end of that sort of range in terms of what you are seeing inflationary-wise?
spk06: Yeah, for sure. That's fine with 3% to 5%. I think that fits squarely within the labour component that Daniel mentioned, very much within our planning. And then on a line item basis, we may see higher than 3% to 5%. But when you When you look at the aggregate of all of our work, it's going to come out more to that 3% to 5% range.
spk01: That's good. Great. Thank you so much for the insights.
spk02: Thank you, Tanya.
spk03: Thank you. There are no further questions registered at this time. I'll turn the meeting back over to Mr. Racine.
spk02: Thank you, Operator. Thank you, everyone, for joining us. We look forward to updating you on our third quarter call in October. Please take care, stay safe, and enjoy the rest of the summer. Thank you. Bye-bye.
spk03: Thank you. The conference is now ended. Please disconnect your lines at this time, and we thank you for your participation.
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