Coeur Mining, Inc.

Good morning and welcome to the co-reminding second quarter 2020 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Paul Departu. Please go ahead.

Thank you, and good morning. Welcome to Core Mining's second quarter earnings conference call. Our results were released after yesterday's market close, and a copy of our press release and slides are available on our website. I would like to remind everyone that our press release, slides, and some of our comments today include forward-looking statements from which actual results may differ. Please review the cautionary statements included in our press release and presentation, as well as the risk factors described in our second quarter 10Q and 2019 10K. Now, I'll turn it over to Mitch.

Thanks, Paul, and good morning, everyone. Thanks for joining our call. I'd first like to introduce everyone to Mick Routledge, who joined us last month as our Chief Operating Officer. As we show on slide three in today's presentation, Mick is an accomplished leader and brings a lot of great experience to the company, which will help us improve our operational planning and execution. Later in the call, he'll give you his initial thoughts on the operations, touch on some of the highlights from the quarter, and summarize the key operational priorities looking ahead. Terry Smith is also on the line and has now transitioned to his new role as Chief Development Officer where he is overseeing our major projects and helping to advance our longer-term growth pipeline. And in addition to Mick and Terry, Tom Whalen and several other members of the management team are also on the line. Second quarter cash flow was stronger than the first quarter despite losing 45 days of production and cash flow from Palmareo, our largest operation, due to the Mexican government's mandated suspension of mining activities as a result of the COVID-19 pandemic. However, the rest of our operating portfolio, all located in the U.S., continued operating, and two of them, Kensington and Wharf, delivered strong quarters and allowed us to generate some solid overall results and achieve several meaningful accomplishments that I'll quickly highlight and are summarized on slide four. We successfully and safely restarted Palmareo and expect it to generate strong free cash flow during the remainder of the year. As I mentioned, our Wharf and Kensington gold operations both had very strong quarters. Kensington's free cash flow more than tripled, and Wharf's free cash flow increased nearly ninefold on the back of a higher gold price and a 60 percent increase in production. We expect both assets will continue delivering strong gold production, and free cash flow throughout the second half of 2020. Out in Nevada, we're set to break ground at Rochester next month on the POA 11 expansion. Construction is scheduled to be largely completed in late 2022, at which point Rochester should become the largest primary silver mine in the U.S. More importantly, we expect Rochester's free cash flow to exceed $100 million annually post-completion which is a major step change over the past three-year average free cash flow of about $2.5 million. We remain focused during the quarter on carrying out the largest exploration program in the company's history that is targeting new discoveries and resource growth to further extend our mine lives. Quarterly exploration investment increased 60% quarter over quarter and nearly doubled year over year, And we're excited to share the results of the program so far this year with you next month. Tom will cover our liquidity position and balance sheet in a few minutes. With cash up quarter over quarter, debt down, and adjusted EBITDA continuing to climb, we feel really good about our financial flexibility as we move into the second half of the year. Before handing the call over to Mick, I want to quickly call your attention to a set of slides that highlight our best in class corporate governance, proactive ESG programs and priorities, and our focus on fostering diversity and inclusion at our company and in our communities, starting on slide 15. Finally, I want to highlight a few upcoming disclosures we're planning for the rest of the year. The first one is the exploration update that I touched on earlier, which we plan to publish in mid-August. And then later this fall, we'll have the results of the updated technical report for the Rochester expansion. And finally, we plan to end the year with a virtual investor day to provide you with a more fulsome overview and outlook. We're all very excited about how we have positioned the company, and we look forward to updating all of you on our progress along the way. With that, I'll go ahead and turn it over to Mick. Mick, if you can hear me. There you are.

Good morning, everyone. Before going through operational results, I'd like to start off by sharing my perspectives on the company after being here for just about 60 days. First, I want to highlight what a strong and balanced team I've joined. Everyone at Core works extremely hard and collaborates well to make the company's strategy clear to the workforce with strong alignment across the leadership team. Next, and in particular, I want to mention Core's health and safety standards. The company has great pride in taking care of its people. I look forward to building on this platform and working closely with leadership in the field. When we get health and safety right, strong production performance follows. From outside the company, before starting with core, I couldn't easily see the upside potential. What I see now as part of the team are exciting long-term opportunities we are developing into a robust, executable five-year strategic plan. Now, along with the team, we have a ton of excitement about the assets in our portfolio and the potential to generate meaningful value. We have work to do and we're confident in our ability to execute those plans with the goal of unlocking all of that value for our stockholders. Now turning to the operational results on slide six, beginning with Palmarejo. The team did an excellent job shutting down and then ramping up in a safe manner, starting with low-grade stockpile ore to balance the process plant. We are now maintaining solid performance and seeing good results over the past few weeks. Our workforce capacity is currently limited to 85% based on government guidelines that aim to protect our more vulnerable employees. Right now, we are running just over 4,600 tons per day through the mill, which is close to the 5,000 tons per day normal run rate. We intend to follow the main plan and partially offset the lower tonnage with higher grades and better recoveries. This is expected to drive production in line with full year guidance ranges and generate strong free cash flow. Turning to Rochester, dilution impacted our results. However, we recently designed and implemented a new stacking plan to help counterbalance this headwind. As highlighted on slide eight, The new plan utilizes an interlift liner, allowing us to place or close the plastic, shortening the recovery cycle and giving us good visibility of our improved performance from HPGR. We will also leverage separate collection systems to better monitor the solution grades coming off the pad and validate our expectations for this new plan. The team brought in some of the best heat leach experts in the world. and they are continuously helping us revise our models. We are already beginning to see encouraging results after having the new liner down for only a few weeks. We are confident in our ability to increase production in the second half and carry this momentum into 2021. Going back to slide six and looking at Kensington, production remains strong as we continue to see positive grade reconciliations from the Kensington main deposit. We also mined more joala material during the quarter. Most of that material was development ore, providing access to higher-grade stope ore during the second half of the year. We expect Kensington to finish the year strong and be the largest free cash flow mine in our portfolio. At Wharf, gold production increased significantly driven by improved weather conditions and higher grades. We also had much better crusher performance during the quarter as we enhanced our maintenance strategies. Impressively, the team was able to stack nearly 50% more tons quarter over quarter. With this strong performance, we are now caught up on placement rates and have demobilized the third party crusher contractor. Before passing the call over to Tom, I want to thank the team for continuing to operate safely during the pandemic. Let's stay disciplined Keep up the good work and finish the year with a very strong second half.

Thanks, Mick. Looking at slide five, our second quarter financial results reflect strong performances from Kensington and Wharf, which helped to partially offset the 45 days of production we lost at Palmarejo. Together with a higher goal price, this led to $154 million of revenues, and $42 million of adjusted EBITDA, both of which were down only 10% quarter over quarter. By sustaining higher margins, our LTM EBITDA has increased nearly 80% to over $200 million versus $116 million just 12 months ago. We incurred $6 million of incremental operating costs associated with COVID-19 during the quarter and expect these costs to total approximately $10 to $12 million for the year. Despite losing palm rail for 45 days, operating cash flow was $18 million higher and free cash flow improved by over $20 million quarter over quarter. We expect both operating and free cash flow to be considerably stronger during the second half of the year, consistent with our updated production and cost guidance. Before moving on, I want to hit on something that we discussed during our last call, our decision not to defer any of our capital projects including the expansion in Rochester or our significant investments in exploration in the wake of the uncertainty related to COVID-19. The combination of improved financial results and the anticipation of a strong second half makes us confident this was the correct decision. Turning over to slide 11, we continue to have a very sound balance sheet with no near-term maturities and over $240 million of liquidity. If you recall, we took a precautionary revolver draw of $100 million back in April as a result of our downside scenario planning for COVID-19. I'm happy to report that we repaid $90 million before the end of the second quarter. Expect to repay the revolver in full by year end and hopefully sooner at current gold and silver prices. Additionally, we have not utilized the ATM and it remains in place for now during this unprecedented time volatility and uncertainty. Total and net debt leverage ratios at quarter end were 1.7 times and 1.3 times, respectively. We expect our leverage ratios to continue trending downward over the remainder of the year. Over the last 18 months, we have increased liquidity, materially reduced debt, and significantly lowered leverage, leaving us very well positioned for our upcoming growth initiatives. Before handing the call back to Mitch, I wanted to quickly touch on our hedging program highlighted at the bottom of the slide. We continue to utilize zero-cost callers to achieve downside price protection, targeting up to 50% of expected gold production in 2021 and 2022 with a minimum price floor of at least $1,600 per ounce. We believe it is prudent to underpin cash flow generation during the construction of POA 11. I'll now pass the call back to Mitch.

Thanks, Tom. Slide 12 outlines our key objectives for the second half of the year. First and foremost, it's essential that we maintain our rigorous health and safety protocols to continue protecting our workforce, their families, and members of our communities. Secondly, we need to develop the future of our business by sustaining our higher level of investment in exploration and by successfully executing on our internal growth projects. And finally, it's critical that we execute our plans to deliver consistent operating and financial results from each of our assets. We see a very compelling future for our company, and we'll get there by continuing to pursue a higher standard and by executing our strategy to protect, develop, and deliver from our North American-based precious metals assets. With that, let's go ahead and open it up for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Mark Mihaljevic with RBC. Please go ahead.

Hey, perfect. Thanks, and good morning, everyone. Hi, Mark. Hey, I guess I'll start with Mick, and obviously kind of new to the role here, just kind of give us a few highlights of what you think you might change or things you might, you know, opportunities for improvement that you see in your first few months on the job.

Good question. Mick, you want to go ahead and take that?

Yeah, for sure. You know, I'm really excited. I've been out to a couple of the sites already, and obviously with COVID restrictions, that travel is a challenge, but we're working out how to do that. But what I see is strong teams already there and good assets. What we're doing in this initial phase, we're joining up that strong exploration work that Hans and his team are doing, and we're lining that up with our strategic plan, and then we have to get on and execute that. I see that being the best opportunity for us, is to draw that picture of the long game and then execute well in the short game. And I think we'll have the team to do that, and we'll certainly have the assets to use to do that. And there's a little bit of upside in the process there, in the process assets and the equipment. And so I think it's a great opportunity going forward.

Okay. And then I guess digging in to some of the results here, obviously Rochester, you had some challenges in Q2 and are making some changes, but can you just give us a sense of really what was different to plan? I mean, I guess you guys were expecting to be stacking at these higher levels, lifts and higher areas of the pads. So what was different than what you were expecting in the actual performance?

Yeah, I'll start, Mark, and then Mick, maybe you can jump in on the heels of a couple of comments for me. You go back to rewind to the first of the year, priority number one was really dialing in that new crusher configuration and getting that running consistently, which we've been able to do. And then kind of transitioning into the second quarter, the real focus turned to that stage four leach pad kind of model calibration to align with the past six months and then starting to make some adjustments to this new stacking plan and putting this interstage liner into place to obviously get ounces out faster and further validate the HPGR. So it's kind of been a step-by-step learning process and then making adjustments as we go. And I feel like we've learned a lot over the last few months. I think now we've gained the knowledge that we can apply to set us up well for this expansion phase that we'll be going into now the next 24 months or so. Mick, do you want to go into a little more detail in terms of some of the learnings and tweaks that we've made here mid-year through the year?

Yes, for sure. So particularly Pad 4, when we look at how long that pad has been in operation, it's been quite a period. And so it's been irrigated for a long time and was particularly exhausted. So when we put the material on the top, We certainly expected some dilution but didn't quite expect as much as we saw in the end and the models we had didn't predict that as well as we'd like. But now the new models are predicting that well and that's encouraging us with our new plan to install even potentially additional interlift liners to support the one we have in play right now and that allows us to implement a short interval control and optimise or production process, all the way back from the mine and blasting through the crusher circuits and HPGR and onto the heap, and then to fine-tune that to get the best recovery that we can get from that heap. So, yes, it was not as predictable as we thought, but now much more predictable, and the view going forward is a strong one.

Okay, perfect. And I think you probably gave the answer already, but just to confirm, with the interlist liners, given where you're placing them, we shouldn't assume that you're losing any material pad inventory that you won't be able to irrigate anymore. You're only kind of stacking on a portion of it, and it had already largely been under leach for a long time, so not much inventory left. Is that the way to think about it? Yeah, go ahead, Mick.

So yes, that's the correct assumption. There may be some slight impacts, but we're working on those plans as well to ensure that we can recover that material over time. And the material that we already had on the pad was under irrigation. We're already seeing some benefits from that coming in the flumes, but it's just going to take a little bit longer for that historic and that more recent material to give us the metal. But it is there, and it'll just take a little bit longer to come out. And we're optimistic that that'll support us as we go forward.

Okay, perfect. And then I guess not much commentary around Silvertip on the call today. kind of any updated thoughts and kind of how do the current silver prices, you know, adjust your thinking on the asset or kind of where do you sit on it right now?

Yeah, yeah, fair question. Second quarter, there was a lot of heavy lifting done at Rochester on that expansion. Third quarter will be a lot of heavy lifting, I think, on the silver tip, PFS, kind of pulling the different pieces together. We're starting to get different components of the work that's been going on since February. And so we'll be kind of fitting those different pieces together, whether it's, you know, on the metallurgy flow sheet, you know, a potential expansion of that milling facility. That work's starting to come to an end. Meanwhile, we're continuing to drill the exploration program there that's intended to give us confidence in a much larger, longer mine life to support any potential restart. You know, that we'll have more to say about during that exploration update here in a couple of weeks. And then, you know, the third piece that sits outside of our control, obviously, is the zinc and lead, you know, concentrate markets primarily. You know, you mentioned the silver price, that obviously – will be one factor that will go into the analysis. But I want to make sure that we, despite all of our strong desires to get Silvertip right, that we don't rush too fast, that we adhere to a disciplined process, we go through those steps, we assess the business case thoroughly, the underlying technical fundamentals, and then look at the returns, look at the timing, how does it fit in or not with our other priorities, and then make a sober, clear-eyed decision on Silvertip once we have more bits of information. So not a lot to say at this point, more to say in the coming months, and we'll obviously keep you posted.

Okay, perfect. And then I just lost one for me in Uh, obviously you guys are going to be putting out a bigger, uh, more comprehensive exploration update next month, but, uh, are there any highlights you'd like to share with us today and, and kind of, you know, what parts are really going to be the most exciting that we should be watching out for?

Oh man, I wish Hans was in my, in the room with me right now so I could pull the reins in on him. Cause I, he would love to talk a lot about, I think I'm expecting, uh, uh, silver tip, uh, will be a big theme, a big story. Rochester and the drilling that's going on to support this updated 43-101 that we'll have finalized later this year, along with updated capital, updated mine plan, and hopefully more tons as a result of this drilling. And then down in Southern Nevada, there's a lot going on there at the Crown. project you know it's a busy neighborhood down there there's a lot of excitement a lot of activity and and so we're looking forward to highlighting that as well those are the ones that stick out to me hans did i leave any any off without stealing under completely mark thanks for the question like like mitch said i i'm jumping up and down excited about our program this year

even though we did have a slowdown at Pomeroy Hill, we're still seeing excellent new results there too for growth. This is a year for resource growth and discovery with 80% of the budget focused on that and one of our largest budgets ever. So the news release will demonstrate that we have been successful at achieving that with a few new discoveries that will be discussed in the news release You've gotten a taste of one of them from Corvus' release on July 16th. One of our holes cut some mineralization on their property adjacent to ours, which gives you a taste of a part of our project called Seahorse at Crown, where we have 18 holes drilled, and that's one of them. For the news release, we'll only have six back from the lab, but... Yeah, super exciting year, and pretty much all sites are delivering on their programs. It's almost like we had a bunch of pent-up demand in geologic targets, and once we got approval from the board to drill this year, the drills were put in the right place.

Perfect. That's great to hear, and looking forward to the update in August. That's it for me, and thanks for that.

Yeah, thanks, Mark.

Our next question comes from Michael Dudas with Vertical Research Partners. Please go ahead.

Good morning, gentlemen, and welcome aboard, Mick.

Hey, Mike. Thanks.

Mitch, maybe you could further share. You talked about COVID. Share some comments on, you know, how successful the ramp-up had been at Palomar Rail. But, you know, looking internally and at all your operations, I'm sure the COVID protocols are still, as you mentioned, are still in place. How... How do you think productivity, how well it's worked out for the organization? And in Mexico, certainly there's been some concern about wave two that could come by. And how does labor, the community, the government officials are fitting in and thinking about it relative to that potential as you look through Pama Rail's ramp up and hopefully maintain its output during this second half of the year?

Yeah, sure. Obviously, it's tough. a top area of focus, uh, for us. And there's, as everyone on the, on the call can, can attest to a lot of, a lot of layers, a lot of complexities, a lot of, a lot of moving parts. Um, and, and Tom, maybe after I give some comments, Tom, if you want, you can talk more about the financial impacts as we see it. Um, Starting with just the footprint of our assets has served us well for the most part with three of our four operating mines being in the U.S. Under the Department of Homeland Security, a designation of mining as being an essential or critical business has really given us kind of that license to continue operating, obviously with a lot of new protocols and procedures in place here in the U.S., Some more adjustments at Kensington than maybe the other sites, just given the location up there in southeast Alaska, a requirement to quarantine coming in from the lower 48 before going out to the mine. So we've had to adjust some rotations and work schedules and things like that. Mexico has been probably not only because of the 45 days that we lost at Palmareo, but just the logistics there of our workforce, a camp set up, people coming from all over Mexico, some of whom live in higher-risk areas and not able to travel back. Mexico, as Mick mentioned, has designated this vulnerable area section of their population, whether it's age or pre-existing conditions. And that's kept us about 120 people short of a full roster there. So, you know, we've been managing through that and doing the best that we can with what we have. I'm particularly proud at the fact that we have, I think, been very proactive in the testing infrastructure that we've put in place, the technology that we've put in place. We've We've now tested 100% of our population PCR tests, other than a couple of rotations who have yet to come to site. I think one at Kensington, maybe one at Palmoreo. So we've been very, I'm very proud of what our team has been able to put together in a short period of time to get that testing done for thousands of people. We have had some positive tests. Almost all of them, I think it's with the exception of one, have been asymptomatic. But the important thing is we're catching these cases through our proactive testing, through those procedures and protocols that we have in place before anybody enters a site. And we've got robust contact tracing and all the other things that everyone talks about around the screening and the sanitizing and the distancing. Here in Chicago, we're still mostly remote. People can come back to the office under a certain set of criteria and health procedures. But for the most part, we're maintaining our productivity at the headquarters despite everybody, mostly everybody, being remote. I think it goes without saying, probably, but just not letting our guard down. And with COVID fatigue maybe setting in, You know, we need to resist that urge to take our foot off the gas and continue to maintain the discipline that we've had around, you know, these procedures and protocols that seem to have served us well so far. So I don't know, Mike, if that helps.

Yeah, it does. How do you think from the Mexican government standpoint and how they're thinking about, you know, if things were to get worse, you know, is there more sensibility of a more central aspect to the mining versus what we had early in the case? Is there any sense or any observational method?

You know, I feel like it took the Mexican government a little while there in late March, April, as they were, you know, kind of quickly putting in place some mandates, some decrees. But then in May, when they came out and designated mining to be an essential industry or an essential business, since then, things have been pretty straightforward. Obviously, we're putting a lot of effort into implementing the kinds of requirements that they have. that they issued in conjunction with that designation of our industry being essential. And so, you know, we want to obviously maintain a safe and healthy workforce. We've got, you know, very strong screening and testing procedures down there, complying with everything that the government has rolled out. But since that designation was put in place in May, you know, we have had a much more straightforward experience down there. And it's allowed us to get back up and going with those obvious restrictions still in place.

I appreciate those observations. Thank you, Mitch. One follow-up, welcoming to see these higher gold and silver prices for sure. Certainly, this is going to improve cash flow and balance sheet metrics dramatically here, assuming they maintain near these levels. Is that how you guys are thinking about just kind of, you know, setting up and may have a better position to implement the spending program at the Rochester? Or are you thinking or beginning to think about other things that might, you know, be mitigated or enhanced, you know, if things start to, you know, continue to be at a reasonable rate going forward? And that includes even on the hedging policy and how that maybe changes now versus what it was maybe a month or six weeks ago.

Yeah, sure. I'll take a shot. Tom, feel free to chime in on anything I missed. We have that capital allocation framework. I think that slide is in the deck today. And we keep kind of preaching that here, that we've got to follow the framework, fund things according to returns, and stick to the plan, organic growth, exploration, to the extent there's excess free cash flow and there's debt, further debt reduction opportunities, you know, capital can, excess capital can flow there. And if there's still excess capital beyond that, which is probably going to be more likely on the back of the expansion at Rochester, then, you know, returning any excess back to stockholders becomes a very relevant discussion and topic. And so, We're not deviating from that framework. You know, maybe we spend a little bit more on exploration, for example, as long as there are good business cases made to justify it. But that's how we're continuing to think about, you know, how do these higher prices impact our decision-making. And I just say around the hedging question, look, our rationale there is that, This Rochester expansion, for us, it's a large project. It's an important project in 2021 and 2022 is the capital spend. We think it's going to generate a really great return and fundamentally change the company. And in that process, we think it's going to unlock a bunch of value for stockholders. And we don't want to fund that thing With external issuing shares or dilution or anything like that, it's important to us that we self-fund that project. And that means relying on free cash flow. And by relying on free cash flow, we think it's important to have a floor or have that underpinned with a minimum price. As we think about it, the risk-reward, the downside versus upside, it's almost asymmetric. What Rochester should deliver... in terms of fundamental cash flow and value should far outweigh, you know, should we give up a few dollars an ounce on the gold price on the upside? Ensuring that we've got funding sufficient from internal sources is our, you know, kind of our first and highest priority. And then just the last little thing I'd say is, you know, we talk about up to 50 percent of 21 and 22 gold production Remember, gold is 70%, 75% of our total revenue, so that's up to 50% of that portion. Not doing anything with silver, that's still awfully volatile, awfully expensive, and letting silver do what it's going to do is still our frame of mind as it relates to silver and any kind of hedging, but that's That's how we are thinking about that. Tom, did I miss anything or anything you want to add?

No, I just say 90 days ago we confidently stated we plan to fund POA 11 with our existing operating cash flow and the existing debt capacity that we've got. And here we are 90 days later feeling that much more positive around it. and we've got that downside protection underpinned and ready to roll. So I think we're feeling really comfortable with the balance sheet, and the entire team knows this capital allocation framework is in our DNA. We've actually changed our long-term incentive to have return on invested capital. So this is more than just something you see on a slide. We're living it every day at CORE.

That's well said, gentlemen. Thanks for your thoughts. Appreciate it.

Thanks, Mike.

Our next question comes from Joseph Regor with Roth Capital Partners. Please go ahead.

Morning, guys. Thanks for taking the questions. I guess kind of following on the questions about the free cash flow, you know, given current gold and silver markets, Do you guys have a rough estimate where, you know, what you think you can generate for free cash flow for the rest of the year?

Ah, good question. A tricky one to answer without any kind of, you know, with the guidance that we have out there, the revised guidance, I should say undoubtedly, but positive, I can point to that. Tom, do you want to? give any more general direction?

Again, we try and be pretty transparent with the guidance to give you what the CAS is, and we kind of leave it to everyone for themselves to figure out what gold price they want to plunk in there. But certainly, as we did our second quarter forecast, we used actually $1,650 and $1,650 keep it simple, 1650 gold and 1650 silver to plan out our updated forecast. We had an upside which shows that we intend to repay our revolver throughout the rest of the year. We leave it to the analysts to figure out what price they want to use to figure out free cash flow, but we feel confident that we'll have the revolver paid. That gives at least some indication of of how much free cash flow we expect to generate.

Okay. And can you remind us what's remaining on that?

$60 million.

Okay. And then switching gears. So at Palmoreo, the cash costs for the first half of the year have been low. I realize it's really a quarter and a half, not two full quarters. But it kind of suggests either higher costs in the second half of the year or that the cost guidance is a, you know, a little bit higher than maybe it could be. Can you give me any additional color there?

Yeah. Mick, do you want to take a crack at that one?

Yep. Yep. So overall, the team have worked very hard to maintain costs, and of course, with us, Being at 85% for the workforce, we'll have to watch that really closely. I'm confident that we'll maintain our current trajectory. Certainly we'll expect, if we move more tons throughout the second half of the year, to spend a little bit more. But the guidance that we've issued is based on a solid forecast for the year, and I think we'll deliver on that.

Okay. So is it, I guess what I'm trying to get at though is for the analyst modeling purposes, we should just model what we have to kind of get within that guidance range for the costs or is it possible to come in below it for the year?

I'd say it's possible. We were very careful in setting those ranges to set us up for, you know, a high likelihood of meeting or beating. So that's the job that we have ahead of us here for the second half.

Okay. Fair enough, Mitch. One final thing. With the exploration update you're providing in August, what, you know, what areas – you know, are we going to get, you know, drill results from? I mean, besides, I guess you guys already touched on, you know, six holes from Southern Nevada. But, you know, any other greenfield stuff?

Oh, Hans, do you want to take that?

No other greenfields specifically, but all the programs are reporting on expensed exploration, so resource growth. Silver Tip, we're doing some big step outs so that now we've got holes with mineralization visual a kilometer north of our prior resources and a kilometer and a half south of our prior resources now. So these are almost greenfield step outs at Silver Tip. We wanted to start testing edges and we still haven't found the edge. So that's good news. That's about it for the closer to greenfields type portion of the release. Everything else will be resource growth, expensed exploration discussions. Very little infill this year, just at Palmarejo. That was it.

The only other thing I'd hop into to say, not directly related to your question, Joe, but on the greenfields or earlier stage side, not that we'll have any drilling to talk about in August, but I look now at that Alio gold transaction that we did and other similar things like that in the past few years when markets and sentiment were very different. And we have a ton of drilling and growth ahead of us on that earlier stage side of exploration. And I know Hans and his team are out there on the ground developing those targets. But you go west of Rochester, and there's a series of projects and deposits there that we control. When we did that deal with Alio, I think we more than doubled our land package there at Rochester off to the west. And so there's a lot to do out there. And then Hans already talked about Crown and in Seahorst, and then we have Sterling down there, all of that down in southern Nevada. There's a lot of drilling ahead and hopefully a lot of new discovery and a lot of resource growth. So no shortage of exploration opportunity.

Okay. And if I could, just on your point of prior transactions, remind me, La Preciosa, you don't get a lot of value, obviously, in the market for it. But with silver now, you know, approaching the mid-20s, Is there any opportunity to either re-look at that or maybe even vend it out to somebody who could do some work on it and capture some value there?

Yes and yes, really. We have had a process of re-examining, optimizing La Preciosa data kind of late last year, early this year. There's some ongoing work right now. And then, you know, you plop in, you know, current silver price, and that project, as it sits today, starts to look pretty interesting. Now, does it fit in to our, you know, capital spend profile? How does it compete in terms of relative returns? You know, that lies ahead. But your other point there about, you know, What else could we do with LaPreciosa? It doesn't have to be 100% us. That's another angle that we're considering, and anything we can do to daylight some value there, because I agree that we're not, probably for good reason, at least up until recently, haven't been getting a lot of attention or value out of that big silver resource sitting down there in Durango.

Okay, thanks for the color. I'll turn it over. Yeah, thanks, Joe.

Our next question comes from Adam Graff with B. Reilly FBR. Please go ahead.

Hey, guys. Thanks for taking my question. Welcome, Mick. Congrats on the strong quarter. I think most of my questions have been asked before. an answered a quick question for Hans. I know you, I know, uh, um, Mitch is, is, is got your hands tied, but, um, the, uh, the step outs, uh, that you're, you guys are doing at silver tip, you know, what's, uh, you know, what's your feeling or what's your bet that, uh, that, that, you know, that, uh, that that's contiguous with the, uh, with the main or body there.

The, uh, well, Mind if I jump in, Mitch? Sorry. You got me excited, Adam. Visually, the mineralization looks exactly the same on these big step-out holes. And stratigraphically, it's in the exact same horizon as the mineralization in the ore body. So all indications are it should be a continuation, but we don't have really... We have zero holes in between in both cases of those step-outs I mentioned. So as a result of these successes, we'll fund a winter program that will include three rigs full-time through the winter on that northern piece that is a kilometer north of our discovery ore body. And that will essentially, the reason we're doing the winter is we want to do as much step-out now as we can in the higher terrain, higher elevations. And then once the snow hits, we'll be down closer to camp. The higher elevation hits down south on Silver Chip Mountain are approaching a magnetic feature that we have always thought is the source of mineralization. So between now and when we shut this program down in mid-September, probably because of snow, we anticipate three or four more holes in that area, including into that magnetic anomaly. And we should have a pretty good idea that that is the source and that we've got X potential to grow based on that being the source in the future. That's been the enigma on the project ever since Silver Corp days even, what is the source of mineralization. So to answer your question, I believe it will be continuous, but we have no evidence yet because we have no info holes.

You're not seeing any gradation in the alteration or the mineral assemblage that would let you believe you're moving in one direction or another, you know, you're moving closer or farther from the source?

To the north, we're seeing more pyrite, but we've also seen more pyrite on the fringes of the Discovery East zone. So that's our only clue that we may be hitting closer to the northern edge. up to the north, which is still three and a half kilometers from that southernmost hole now. So quite large, quite a lot of infill to do on that. That's about it. The hole to the south that we've just hit looks very strong. Alteration around the massive sulfide looks very strong. So, yeah, still, and we're still waiting for assays to compare actual metal grades.

Yeah. Yeah, well, great. Thanks for that. And you and I should follow up offline because I've got experience with similar systems. Anyway, great. Congratulations again, guys, on the strong quarter.

Thanks, Adam.

Our next question comes from Brian MacArthur with Raymond James. Please go ahead.

Good morning. I have two questions. Just first, on Rochester, you made a comment you could make more than $100 million in free cash flow. Is that at the 1650 gold price and 1650 silver price? Is that sort of what you're assuming? And I realize it's a general number.

Yeah, generally speaking, yeah. And then, you know, obviously you can play with the model and see how much torque there is at current prices.

Yeah, exactly. Okay. Okay, that's going to be my second question, but just before I do that, and is that assuming, I assume that's using tax pools going forward and things like that, or is that just purely on a fundamental study basis?

Well, that would be using our NOLs, so it's an after-tax number, but taking into consideration the fact that we've got, I don't know, close to a half a billion dollars of U.S.

in a wealth perfect that's what i thought now the second part was i think where you're going with this i mean philosophically in the past you have made a number of things to balance the portfolio but as you look forward and then you know when rochester's up and running it i could make the case that it's a very significant asset and kind of dominates everything else how do you and i realize this out in the future how do you philosophically think about that if five minds are right um saying out then does it make more sense to take advantage of high prices that you know move something out right now realize some value to fund this because it's so important or how are you just sort of thinking about that uh going forward because obviously rochester kind of i would argue dominates to a large degree going forward or maybe that's philosophically wrong uh just like your comments on that yeah no you're thinking about it um the right way between

the POA 11 expansion and then all that potential to the west, you know, Rochester is likely to be the dominant, call it whatever you want, cornerstone or whatever, foundation for a long time. And sitting there in northern Nevada is a great place, a place we've been for 30 years. So we've got, you know, very deep and meaningful relationships there with the, you know, the state, with community. And then, you know, you look down south and on an earlier stage basis, what we've got going down there with Crown and Sterling and this seahorse thing that Hans mentioned. You know, the western U.S. kind of long life, heap bleach, gold dominant type of assets work well for us. We know how to do that well. I think, you know, if we can have five to seven assets, each of them generating in excess of $50 million of free cash flow a year. You know, that sets us up nicely to be kind of an attractive, call it senior intermediate or somewhere in there between the intermediate and senior space where there, I think, is kind of a lack of good quality, especially U.S.-centric, U.S.-domiciled. And that's a pretty, you know, attractive-looking company, I think. And that's kind of how we're, thinking about it and where we're trying to take the company from a high-level perspective.

Great. Thanks very much, Mitch. Yeah. Thanks, Brian.

This concludes our question and answer session. I would like to turn the conference back over to Mitchell Krebs for any closing remarks.

Okay. Well, hey, thanks. We appreciate everybody's time and look forward to that exploration release here in a few weeks. So hopefully we can talk to you again then. And in the meantime, or if we don't talk then, I hope you all have a great rest of the summer and stay healthy and safe. And thanks again for your time and interest. Bye-bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.