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spk02: Good day, and thank you for standing by. Welcome to the Dundee Precious Metals second quarter 2023 earnings results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jennifer Cameron. Please go ahead.
spk14: Thank you and good morning. I'm Jennifer Cameron, Director of Investor Relations, and I'd like to welcome you to our second quarter conference call. Joining us today are members of our senior management team, including David Ray, President and CEO, and Navin Dayal, Chief Financial Officer. Before we begin, I'd like to remind you all that all forward-looking information provided during this call is subject to the forward-looking qualification, which is detailed in our news release and incorporated in full for the purposes of today's call. Certain financial measures we will be referring to are not measures recognized under IFRS and are referred to as non-GAAP measures or ratios. These measures have no standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. The definitions established and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliations of these non-GAAP measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have generally been rounded. References to 2022 pertain to possible periods in 2022 and references to averages are based on midpoints of our outlook or guidance. I'll now turn the call over to David Ray.
spk17: Good morning and thank you all for joining us. I'm pleased to provide you with an overview of our second quarter of first half results and to provide some insights into our achievements during this period. This morning, I'll briefly review our results and discuss why we believe DPM continues to be well positioned to deliver value to all our stakeholders now and over the long term. The highlights from our second quarter, these include strong production of approximately 76,000 ounces of gold and 8 million pounds of copper, excellent all-in sustaining cost performance of $733 per ounce of gold sold, which continues to rank us among the lowest cost producers. record-free cash flow generation of over $70 million, and continued exploration success at Shoka Rikita in Serbia, with the most recent results we released in July extending the deposit to the south and confirming and further extending the high-grade zone. With strong production and cost performance in the first half of the year, both of our mining operations are on track to achieve the 2023 production and cost guidance. We exited the quarter in a very strong financial position reflecting our significant pre-cash flow generation in the first half of this year, as well as the proceeds of our divestment of B2 Gold shares following its acquisition of Savina. We continue to deploy our capital in a disciplined manner, and in addition to investing in our future growth and exploration prospects, we returned approximately 36% of our pre-cash flow to shareholders in the first half of the year, through our sustainable quarterly dividend and the enhanced share buyback program, which Navin will touch on shortly. Looking at our operations in more detail, Chalapach continued its track record of strong performance in the second quarter, producing approximately 44,000 ounces of gold and 8 million pounds of copper at an all-in sustaining cost of $776 per ounce of gold sold. We continue to advance the Chalapach brownfield exploration program with eight drill rigs currently active along the Breveni exploration license and the Charlotte Deary target within the mine concession. With increased in-mine and brownfield exploration drilling, we believe there is strong potential to continue our track record of extending mine life at Chalapetch, which currently extends to 2031. Turning to Adetepe, the mine continued to deliver impressive performance, producing approximately 32,000 ounces of gold. with an all-in sustaining cost of $530 per ounce of gold sold, which is at the low end of Adatepe's guidance range costs. Adatepe has consistently outperformed our expectations since commissioning in 2019, and we are confident that Adatepe will continue to deliver strong results, supported by the updated life of mine plan we announced in January. We're also continuing our exploration efforts around Adatepe, At the newly granted Krymovitsa exploration license, we have a permit for 29 drill sites in process, and drilling at three priority targets is planned to commence in early August. We are planning an aggressive drilling delineation and scout drilling program at Krymovitsa with 15,000 meters expected to be completed in the second half of 2023. At Sumeb, complex concentrates melted during the quarter was approximately 49,000 tons, which was below our expectations as a result of unplanned maintenance in the off-gas system. We are planning to undertake additional maintenance in the off-gas system concurrently with the Osmalt furnace maintenance, which is currently underway and is expected to resolve the issues in the off-gas system. As a result of these issues, TUMEP is trending at the low end of its production guidance and towards the higher end of its cost guidance. In Serbia, exploration activities focus on the accelerated with nine drill rigs currently in operation. In mid-July, we released additional assay results, which extended the deposit to the south and continues to confirm and further extend the high-grade zone. The 40,000-meter infill and extensional drill program is largely complete, including infill drilling at 60 by 60 meters spacing, and we've started an additional 30,000-meter infill drilling program to take the spacing to 30 by 30 meters. We expect to complete a maiden mineral resource estimate for Chocoriquita by the end of this year, and we're also progressing activities to accelerate the advancement of the project, including geotechnical drilling and metallurgical test work. We've also started scout drilling to test other camp-wide targets near Chocoriquita, as well as the 10,000-meter scout drilling program on the Unka license, which is some five kilometers south of Chocoriquita. Csoka Rikida has several positive attributes that we look for in projects, including a very high grade core, good initial metallurgical results, strong infrastructure, and it's a great fit with our skill sets, resulting in significant potential within our organic growth portfolio. As a result of this increased activity and the positive results we are seeing, we have increased our 2023 guidance for exploration spend in Serbia, which Navin will discuss shortly. Turning to Loma Lago in Ecuador, we continue to advance the updated feasibility study, including optimisation work, leveraging our significant expertise at Celefech in Bulgaria, and we expect to complete this work in the second half of 2020. During the quarter, the EIA for the 69kV power line, the primary power supply to the project, received technical approval, and the community consultation process for this aspect of the project is currently underway. At Loma Laga, drilling activities as well as the citizens' participation process for the environmental impact assessment remain paused pending the outcome of the appeals process related to the decision on the constitutional protective action following the hearing in mid-October last year. The decision on the appeal is expected to provide clarity on the consultation process and whether an indigenous consultation could be completed in parallel as we'd originally planned or would need to be completed The expected timing for the environmental license is subject to the outcome of this appeal process. As we advance the project, our approach will benefit from our firm commitment to the highest standards for engagement with local communities and environmental stewardship, in addition to our operating expertise to unlock the significant potential of the project. As a result of the ongoing optimization work for the feasibility study and increased stakeholder engagement activities, We're increasing our 2023 guidance for growth capital at Loma Laga, which Navin will discuss further. At the Tierras Coloradas concession, which is located 200 kilometers south of Loma Laga in Ecuador's Loja province, we expect to commence a 10,000-meter drilling program this month. This is designed to follow up on the positive results we reported at the end of February, which confirmed the presence of two high-grade vein systems that remain open in multiple directions. The primary focus will be to further assess the extension and geometry of the two vein systems and to test recently discovered high-grade vein and soil anomalies. In closing, our second quarter results continue to demonstrate BPM's strong performance and highlights within our industry. These highlights include strong consistent production from our operations and an all-in sustaining cost that ranks among the lowest in the gold industry, significant free cash flow generation financial strength and flexibility, a record of disciplined capital allocation and returning capital to shareholders, attractive development projects, proven exploration successes both in our existing mine life extensions and discovering new ground field opportunities, also demonstrates industry-leading ESG performance and an impressive track record in securing our social license to operate, and strong leadership and technical teams with a history of adding real value to innovation. I'll now turn the call over to Navin for a review of our financial results and outlook, following which we will open the call to questions.
spk07: Thanks, Dave. This morning, I will discuss the highlights of our financial results, which contributed to our record quarterly free cash flow generation. I'll also provide an overview of our business cover balance sheet and capital allocation program. As Dave mentioned, the company's lines continue to deliver strong operating and cost performance. Looking at our key cost metrics, second quarter all-in sustaining cost of $733 per ounce of gold sold was 7% lower than the prior year, primarily due to lower treatment and freight charges at Shell Apache as a result of increased deliveries to third-party smelters and higher volumes of gold sold. This was partially offset by higher labor costs and prices for direct materials, as well as lower byproduct credit as a result of lower volumes and realized prices of copper sold. All in sustaining costs for the first half of 2023 was $802 per ounce of gold sold, 8% higher than the prior year, primarily due to lower byproduct credits as a result of lower volumes and realized prices of copper sold, higher labor costs and prices for direct materials, and higher share-based compensation expense reflecting DPM's strong first-half share price performance. And this is all partially offset by lower treatment and freight charges at Chalapetch and higher volumes of gold sold. All outstanding costs per ounce of gold sold for the year is expected to be in line with our guidance. At SUMED, cash costs in the second quarter and first half of 2023 of $343 and $368 per time, respectively, were 65% and 42% lower than the corresponding periods in 2022 due primarily to a stronger U.S. dollar, and higher volumes of complex concentrates smelted due to the timing of the Osmalt furnace maintenance shutdown, which was completed in the second quarter of last year. As Dave mentioned earlier, SUMEP is currently tracking towards the higher end of its 2023 guidance range for cash cost per ton, due to lower than planned complex concentrates smelted in the first half of the year from issues with the off-gas system. We are undertaking additional maintenance in the off-gas system to resolve this issue, along with the off-smelt furnace maintenance, which is currently underway. Looking at capital expenditures, sustaining capital expenditures in the second quarter and first half of 2023 of $9 million and $17 million respectively were 58% and 45% lower than the corresponding period in 2022, mainly due to the timing of the Osmalt Furnace Maintenance shutdown at Sumet. Sustaining capital expenditures are expected to be within the guidance range for 2023 with the completion of the Chalapach-Tayling Management Facility upgrade during the second quarter, and assumed maintenance scheduled for the third quarter. Growth capital expenditures in the second quarter and first half of 2023 primarily related to the Loma Larga Gold Project were $7 million and $13 million respectively, similar to the corresponding period in 2022. Turning to our financial highlights, revenue in the second quarter and first half of 2023 of $168 million and $323 million respectively, were 25% and 12% higher than corresponding periods in 2022, primarily due to lower treatment and freight charges at Chelapeche, higher volumes and realized prices of gold sold, and higher volumes of complex concentrates melted, reflecting the timing of the off-smelt furnace maintenance shutdown, partially offset by lower volumes and realized prices of copper sold at Chelapeche. Second quarter net earnings were $62 million, or $0.33 per share, compared to $34 million, or $0.18 per share, and the prior year due primarily to higher revenue and interest income, partially offset by higher planned exploration and evaluation expenses. Net earnings in the first half of 2023 were $108 million, or $0.57 per share, compared to $60 million, or $0.32 per share, and the prior year due primarily to higher revenue, lower cost of sales, and higher interest income, partially offset by higher planned exploration and evaluation expenses, and higher share-based compensation expenses, as a result of BPM's strong first half share price performance. In terms of our cash flow metrics, cash flow provided from operations in the second quarter and first half of 2023 of $59 million and $130 million respectively were 18% and 14% lower than the corresponding period in 2022 due primarily to the timing of deliveries and subsequent receipt of cash and the timing of payments to suppliers, partially offset by higher earnings generated. Free cash flow in the second quarter and first half of 2023 were company records at $71 million and $136 million respectively, $29 million and $46 million higher than the corresponding periods in 2022 due primarily to higher earnings generated and the timing of cash outlays for sustaining capital expenditures. The three-year outlook previously issued in our MD&A for the year end of December 31st, 2022 remains unchanged except for the following updates to the company's guidance for 2023. which Dave touched on earlier and which we have outlined on slide 17. Based on positive results from our drilling programs, exploration and evaluation expenses are now expected to be between $38 million and $46 million, up from the previous guidance range of $25 million to $30 million. This is due primarily to increased drilling activities and early-stage technical work at Soka Rikida in Serbia, as well as increased drilling activities at Tierras Coloradas in Ecuador. as the exploration programs were expanded following the initial guidance for both of these projects. Growth capital expenditures related to the Loma Larga gold project are now expected to be between $18 million and $22 million, up from the previous guidance range of $10 million to $14 million, due primarily to the initial scope of work for the optimization phase of the project that started earlier this year, which will carry through to the balance of the year, as well as increased activities related to stakeholder engagement. We continue to deploy our capital in a disciplined manner that balances our desire to reinvest in growing and optimizing our business with our commitment to returning capital to our shareholders. In addition to investing in our future growth and exploration prospects, we have continued to pay a quarterly dividend since 2020, offering an attractive 2.4% yield based on the current CPM share price. And we continued with our enhanced share buyback program to purchase up to 100 million of the company's shares over a period of 12 months, which began on March 1, 2023. Up to and including repurchases made in July, we have bought back approximately 6 million shares for a total value of approximately $42 million. In closing, we delivered another strong quarter of operating performance from our mine operations and generated a record quarterly free cash flow of $71 million, bringing the total free cash flow generated for the first half of 2023 to $136 million, also a company record. A robust cash balance of $542 million, which includes $56 million of cash proceeds from the Sabina B2 Gold investment, together with no debt, an undrawn $150 million revolving credit facility, continues strong free cash flow generation, positions us well to fund future growth opportunities that generate additional value for stakeholders while continuing to return capital to our shareholders. With that, I will turn the call back to the operator for Q&A.
spk02: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone. Again, that is star one one on your telephone, and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Wayne Lamb of RBC. Your line is now open.
spk03: Thanks, guys. Good morning, everyone. Just wondering, at SUMEB, what's the length of the planned maintenance shutdown this quarter? And then I recalled you had mentioned earlier in the year that there were some changes being implemented that would help address some of the problems you've had with the off-gas improved continuity. I'm just curious if those changes are expected to take hold post the maintenance completed in Q3, or if there are additional items that have to be evaluated to provide better availability at the smelter.
spk17: Yeah. Hi, Wayne. So the plan shut down Lent. It started up on the weekend, and it should be in and around 42 days. in terms of changes to address the off-gas system reliability and continuity yes we are undertaking that work during the shutdown and um you know we would anticipate that what that's going to do is give greater continuity to the integrity of the water cooling system on the back end of the osmo which has been the achilles heel in the the last um two years or so at the snow so we're doing a more extensive replacement with the idea being that We're reliant less on doing repairs which take time down in the operation and are more prone to subsequent rework. So we anticipate that the current shutdown and the work that we are doing will mitigate that and get us back to a reliable smelter operation.
spk03: Okay, great. Thanks. And then maybe at Loma Larga, you guys have had to put a pause on drilling for well over a year now and still haven't had clarity on the consultation process, and yet the guided spend there is nearly doubling. So just wondering why you guys are committing more capital there. Is that just having a function of having excess cash on the balance sheet, or is it a matter of wanting to be in a position to get the optimized work done and ready to go if they ever give you the go-ahead?
spk17: It's definitely not excess cash on the balance sheet. We are continuing to be aware of needing to be disciplined in terms of the money that we have on the balance sheet. What we're targeting is making sure that we complete the feasibility work. It's very important that we do that to have a level of confidence in the information, to have clarity on capital costs and operating costs and further opportunities. The main piece of the addition is really targeted towards that. But we've also been having some success with work being done on our community and social activities. And we've put more time and energy into that. So it's those two items. It's completion of the engineering work, and it's also doing some additional activities in and around our communities.
spk03: Okay, great. Thanks. And then maybe just last one on the buyback program. It's been nice to see you guys being aggressive on buying back the shares. The stock's really outperformed your peers this year. I'm just wondering if the $49 million executed date was in part due to getting the proceeds from the B2 sale, or how are you thinking about the buyback levels kind of going forward?
spk05: Sure. Thanks, Wayne.
spk07: It's Navin. Yeah, so if you recall, at the start of the year, our board had approved the enhanced nciv program so we uh 10 of the public flows 16 and a half million shares uh one of the other things that the board did was prove uh up to 100 million of share buybacks over the 12 months starting in march so you know as we look and this is prior to the announcement of of sabina selling uh uh to uh to v2 so you know we'd already been considering this enhanced buyback even prior to that transaction being announced so so The approval of the $100 million for the next 12 months was independent of that thought or that activity. And so as we look through the balance of the year, that program continues to be in place. The board continues to authorize us to purchase up to $100 million for the next 12 months. And we see no reason at this point to stop that or pause that program, despite or notwithstanding the increase that we've seen in exploration spend or other demands of capital that we have in business.
spk03: Okay, great.
spk18: Thanks for the context, and it's nice to see. That's all for me. Thank you. Thank you. Please stand by for our next question.
spk02: Our next question comes from the line of Eric Windmill of Scotiabank. Your line is now open.
spk12: Great. Thanks for taking my question. And nice to see the Q2 results and the cash build. Obviously, I think it positions you well relative to the peers. Just a couple of quick questions for me. Maybe starting in Ecuador, obviously election cycles coming. Any comments there on how you see that impacting some of your work in the country?
spk17: The election is coming up on the 20th of August. That's going to be both for the assembly and also for the presidents. There's some possibility that the presidential election will be what we saw at the last election, whereby there's a secondary vote, which we anticipate would be in October. How does that impact what we're doing? It does not at the moment. That's not the reason why we're doing any of the work or the reason why we paused at Loma Lago. So we watch with interest. It will obviously be important in terms of the environment within which to deliver industrial projects and mining in the
spk12: Great, thanks for that. And maybe just moving over to Choka Rikita, so obviously great to see things are speeding up there, if you will, extra work being done. Do you see that potentially maybe moving the timeline to first production maybe a bit sooner? Any comments there?
spk08: Hi, Eric. It's Mike here. I think it's early to say the exact timeline. We're in the process of compiling that timeline and putting all the pieces together with respect to the technical work and permitting requirements that need to get done. I think we're going to have a better insight at the end of the year once we have our resource completed. But you are correct. We are accelerating drilling and a lot of the technical work to be able to advance that project as quickly as possible.
spk12: Okay, great. Thank you. And maybe also on sustaining CAPEX. Is it fair to think that there's going to be maybe a little bit higher sustaining capex in the back half of the year, or any particular projects or comments here on how that's shaping up compared to the forecast?
spk07: Sure. Eric, it's Navin. Yeah, so definitely sustaining capital is back in weighted for the rest of the year. So we've got the HEMA maintenance check that's happening now, which is a large component of that capital. Beyond that, you have additional capital at Channel Patch for mobile equipment and process and then it added Tepe for the integrated waste management facility. So definitely $17 million year-to-date for sustaining capital, and we're still guiding in the range of $46 to $57 million. We would expect to see higher capital in the second half of the year.
spk12: Okay, awesome. Thank you so much. And the last question for me, and then we'll hop back in the queue. So M&A, obviously Dundee is a name that comes up in terms of potential acquirers. Any comments there in terms of M&A? Obviously, I think you've said in the past you're opportunistic, but just curious if you can share anything there.
spk08: Eric, I would say the same thing we've said in the past. We do regularly evaluate opportunities. We're going to be disciplined as we go through that process. We recognize we're well-positioned, but of course, we regularly look at opportunities that are available. But, you know, we're very happy with our organic portfolio as well.
spk12: Okay, fantastic. Thanks. Yeah, congrats on the good quarter. Cheers.
spk02: Thank you. As a reminder, to ask questions, please press star 11 on your telephone.
spk18: Please stand by for our next question. Our next question comes from the line of Ingrid Rico of Seifel GMP. Your line is now open.
spk13: Great, thank you. Good morning, David and team. I have a couple of questions for you guys. You know, it continues to be, I guess, quite apparent that Chalopech concentrate is less relying on SUMEV, looking at the first half of this year, less concentrate process there than the first half of last year. So perhaps can you remind us how should we think about the balance of the year and into 2024 in terms of that delivering to third-party smelters? And maybe if you can share, you know, securing a full-time place for that smelter going forward.
spk17: Yeah. Hi, Ingrid. So what we've been saying during the course of the year, it remains the case, is that one quarter of production from Chalapetch will go to Sunev. This quarter in which that concentrate is going to be produced, I might add just there's a little bit of a complication. These things are not so discreet when it comes to unit costs that are charged against Chalopeche. There are slight offsets, and there are also some corrections that are made where we're 90% concentrate payments at time of movement and a 10% correction at the end of things. So you might look to see some influences outside of the period that we normally talk. So just a caution, just have to keep that in mind. So this quarter's production from Chalapeche will be Sumed and the elevated TCs, which would include elevated transportation costs to simulate the destination. In terms of Sumed itself, we're obviously doing what we can to bring down this operating cost to make it competitive to be able to attract concentrate at the right TCs. There's no shortage of concentrate. The question is the treatment terms that you can achieve. So it's not a question of filling the facility. It's a question of what is going to be the average TC in that last element that you bring in. So at this point, we're not seeing any need for any decisions about whether we operate the smelter or not. So there is sufficient concentrate. But it is something that we are observant of. Just a last comment there is that the SUMEB has to be able to successfully compete for the concentrate from Chalopeche in order for us to divert Chalopeche concentrate to SUMEB. So, you know, we're very clear about our intent to divert that concentrate elsewhere.
spk13: All right, great. Thank you for that. Just a follow-up, just for 2024, so we can sort of assume that the third-party deliveries are going to sort of stay steady from 2023, or is there a chance for more of that going to third parties?
spk07: Yeah, sure, I'll just take that. So yeah, so the expected, we don't expect to be delivering any additional concentrate to SUMEP in 2024, so all of it will be third party going forward.
spk13: Okay, great. Thank you for that, Navin. And because I have you on the line here, question for you on cost. So looking at Chalopesh and Adatepe, they're tracking much better than the cost per ton guidance for the year. Perhaps you can comment on where you're seeing that inflation easing in your cost structure.
spk07: Sure, absolutely. So definitely, one of the biggest areas is in power. If you recall, for the past couple of years, we had been, or Bulgaria had been benefiting from a power subsidy that was, even despite power costs being historically higher than And then what they were, they were actually mitigated. That increase was mitigated in part by a power subsidy that we were receiving for most of 2021 and through 2022. Starting this year, with global electricity costs, fuel prices coming down, we've seen our power costs come down significantly, such that in Bulgaria over the past quarter, we haven't had to receive a subsidy. And in fact, the power costs... per megawatt hour is actually much below than what we were experiencing in the last year with the subsidy. So that's one area. Another area is definitely diesel costs, for obvious reasons there. Cement is another one. Steel. So we're seeing a lot of, relative to our budget that we had at the beginning of the year, we're seeing a lot of easing in some of these consumable areas. Now quarter over quarter, this year versus last year, we're still seeing bit of an increase, but definitely we're seeing an easing in that, such that we're coming in, as you said, a bit towards the lower end of our cost per time guidance for those respective lines. It's only going to be a percentage range of what we're seeing. Yeah, sure. A percentage range, we're seeing anywhere between 15% to 20% in some of these areas, but on average, it's closer to between 8% to 12%.
spk13: Excellent. And in terms of labor, I know it depends on the jurisdiction, but We keep hearing that labor costs still challenge and finding labor is a challenge. Perhaps you can tell us a little bit more on the labor side.
spk07: Yeah, I'll talk about perhaps the cost area. So definitely labor has been a bit more sticky in terms of that's certainly not coming down year over year. And so definitely that's a factor in perhaps why our costs for this year are higher than last year. In terms of availability, and I'll start, and maybe Dave can jump in as well, but definitely the competition for labor in Bulgaria is increasing, in Europe in general. And yes, we are seeing a lot of competition there.
spk17: Yeah, we're seen as a very good employer in Bulgaria, and as a consequence of that, we're not seeing a particular issue in attracting people to our production and maintenance roles. It's a little bit more of a challenge when you're talking about technical roles, where there's very significant competition that we're seeing inflationary pressures on what we would need to attract somebody. But at this point, what we're seeing is the cost increases year over year, as Navin was saying, they're coming down and that's reflecting to not just to availability, but also in terms of things like collective bargaining and the increases that we're anticipating between 2023 and 2024. So overall, we've peaked and we're definitely seeing ourselves on a lowering trajectory in terms of that inflationary pressure that's been there. within Europe, particularly after the onset of the war last year.
spk13: Excellent. That's great to hear. I'll probably just leave it there, and thank you for taking my question.
spk05: Thank you, Chris.
spk18: The next question comes from the line of Eric Windmill of Scotiabank. Your line is now open.
spk12: Great. Thank you. Just a quick point of clarity. You mentioned that 15% to 20% figure, probably tracking close to 8% to 12%. Is that obviously on a year-over-year basis you're seeing decreases in the costs? Or just one of you clarify that, please.
spk07: Sure. It's actually relative to budget. And the 15% to 20% was really around the items that I mentioned, which was know diesel uh power power is actually close you know above 20 percent relative to our budget um but we had budgeted um and cement so and then the other numbers in general between eight and twelve percent that's just across the board if you kind of factor in anything that there's some pluses some minuses there but uh but on average we're seeing about an eight to twelve percent uh decline relative to budget so maybe just an additional comment we just assumed
spk17: steel balls, biters, reagents. So basically, you're seeing these things translate not just into a downward pressure, but they're actually translating into 12-month contracts, which is substantially lower than the previous year's contracts.
spk12: Okay, great. No, certainly nice to hear. So great to hear that. Thank you.
spk18: Thank you for your questions. That concludes the question and answer session.
spk02: At this time, I would now like to turn it back to Jennifer Cameron for closing remarks.
spk14: Great. Thank you all for joining us today. Please feel free to reach out if you have any additional questions, and we look forward to keeping you updated as we move towards the end of the year. Thanks and take care.
spk02: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Music Thank you. Thank you. Good day, and thank you for standing by. Welcome to the Dundee Precious Metals second quarter 2023 earnings results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jennifer Cameron. Please go ahead.
spk14: Thank you and good morning. I'm Jennifer Cameron, Director of Investor Relations, and I'd like to welcome you to our second quarter conference call. Joining us today are members of our senior management team, including David Ray, President and CEO, and Navin Dayal, Chief Financial Officer. Before we begin, I'd like to remind you all that all forward-looking information provided during this call is subject to the forward-looking qualification, which is detailed in our news release and incorporated in full for the purposes of today's call. Certain financial measures we will be referring to are not measures recognized under IFRS and are referred to as non-GAAP measures or ratios. These measures have no standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. The definitions established and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliations of these non-GAAP measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have generally been rounded. References to 2022 pertain to comparable periods in 2022 And references to averages are based on midpoints of our outlook or guidance. I'll now turn the call over to David Ray.
spk17: Good morning, and thank you all for joining us. I'm pleased to provide you with an overview of our second quarter and first half results and to provide some insights into our achievements during this period. This morning, I'll briefly review our results and discuss why we believe DPM continues to be well-positioned to deliver value to all our stakeholders now and over the long term. Highlights from our second quarter, these include strong production of approximately 76,000 ounces of gold and 8 million pounds of copper, excellent all-in-sustaining cost performance of $733 per ounce of gold sold, which continues to rank us among the lowest cost producers, record-free cash flow generation of over $70 million, and continued exploration success at Shoka Rikita in Serbia. With the most recent results we released in July, extending the deposit to the south and confirming and further extending the high-grade zone. With strong production and cost performance in the first half of the year, both of our mining operations are on track to achieve the 2023 production and cost guidance. We exited the quarter in a very strong financial position with a cash balance of $542 million, reflecting our significant pre-cash flow generation in the first half of this year. as well as the proceeds of our divestment of B2 Gold shares following its acquisition of Sabina. We continue to deploy our capital in a disciplined manner, and in addition to investing in our future growth and exploration prospects, we returned approximately 36% of our free cash flow to shareholders in the first half of the year through our sustainable quarterly dividend and the enhanced share buyback program, which Navin will touch on shortly. Looking at our operations in more detail, Chalapetch continued its track record of strong performance in the second quarter, producing approximately 44,000 ounces of gold and 8 million pounds of copper at an all-in sustaining cost of $776 per ounce of gold sold. We continue to advance the Chalapetch brownfield exploration program with eight drill rigs currently active along the Breveni exploration license and the Charlotte Dairy target within the mine concession. With increased in-mine and brownfield exploration drilling, we believe there is strong potential to continue our track record of extending mine life at Chalapetch, which currently extends to 2031. Turning to Adatepe, the mine continued to deliver impressive performance, producing approximately 32,000 ounces of gold, with an all-in sustaining cost of $530 per ounce of gold sold, which is at the low end of Adatepe's guidance range costs. Atatepe has consistently outperformed our expectations since commissioning in 2019, and we are confident that Atatepe will continue to deliver strong results, supported by the updated life of mine plan we announced in January. We're also continuing our exploration efforts around Atatepe. At the newly granted Krimovica exploration license, we have a permit for 29 drill sites in process, and drilling at three priority targets is planned to commence in early August. We are planning an aggressive drilling delineation and scout drilling program at Kramovica with 15,000 metres expected to be completed in the second half of 2023. At Sumed, complex concentrates smelted during the quarter was approximately 49,000 tonnes, which was below our expectations as a result of unplanned maintenance in the off-gas system. We are planning to undertake additional maintenance in the off-gas system concurrently with the off-smelt furnace maintenance which is currently underway and is expected to resolve the issues in the off-gap system. As a result of these issues, TUMEP is trending at the low end of its production guidance and towards the higher end of its cost guidance. In Serbia, exploration activities focus on the accelerated drilling program at Čoka Rikita, with nine drill rigs currently in operation. In mid-July, we released additional assay results, which extended the deposit to the south and continues to confirm and further extend the high-grade zone. The 40,000-meter infill and extensional drill program is largely complete, including infill drilling at 60 by 60 meters spacing. And we've started an additional 30,000-meter infill drilling program to take the spacing to 30 by 30 meters. We expect to complete a maiden mineral resource estimate for Chocoriquita by the end of this year, and we're also progressing activities to accelerate the advancement of the project, including geotechnical drilling and metallurgical test work. We've also started scout drilling to test other camp-wide targets near Chocoriquita, as well as the 10,000-meter scout drilling program on the UNCA license, which is some five kilometers south of Chocoriquita. Chokerikida has several positive attributes that we look for in projects, including a very high grade core, good initial metallurgical results, strong infrastructure, and it's a great fit with our skill sets, resulting in significant potential within our organic growth portfolio. As a result of this increased activity and the positive results we are seeing, we have increased our 2023 guidance for exploration spend in Serbia, which Navin will discuss shortly. Turning to Loma Lago in Ecuador, we continue to advance the updated feasibility study, including optimisation work, leveraging our significant expertise at Celefech in Bulgaria. And we expect to complete this work in the second half of 2023. During the quarter, the EIA for the 69kV power line, the primary power supply to the project, received technical approval, and the community consultation process for this aspect of the project is currently underway. At Loma Laga, drilling activities as well as the citizens' participation process for the environmental impact assessment remain paused pending the outcome of the appeals process related to the decision on the constitutional protective action following the hearing in mid-October last year. The decision on the appeal is expected to provide clarity on the consultation process and whether an indigenous consultation could be completed in parallel as we'd originally planned or would need to be completed The expected timing for the environmental license is subject to the outcome of this appeal process. As we advance the project, our approach will benefit from our firm commitment to the highest standards for engagement with local communities and environmental stewardship, in addition to our operating expertise to unlock the significant potential of the project. As a result of the ongoing optimization work for the feasibility study and increased stakeholder engagement activities, We're increasing our 2023 guidance for growth capital at Loma Laga, which Navin will discuss further. At the Tierras Coloradas concession, which is located 200 kilometers south of Loma Laga in Ecuador's Loja province, we expect to commence a 10,000-meter drilling program this month. This is designed to follow up on the positive results we reported at the end of February, which confirmed the presence of two high-grade vein systems that remain open in multiple directions. The primary focus will be to further assess the extension and geometry of the two-vein systems and to test recently discovered high-grade vein and soil anomalies. In closing, our second quarter results continue to demonstrate BPM's strong performance and highlights within our industry. These highlights include strong consistent production from our operations and an all-in sustaining cost that ranks among the lowest in the gold industry, significant free cash flow generation financial strength and flexibility, a record of disciplined capital allocation and returning capital to shareholders, attractive development projects, proven exploration successes both in our existing mine life extensions and discovering new ground field opportunities, also demonstrates industry-leading ESG performance and an impressive track record in securing our social license to operate, and strong leadership and technical teams with a history of adding real value to innovation. I'll now turn the call over to Navin for a review of our financial results and outlook, following which we will open the call to questions.
spk07: Thanks, Dave. This morning, I will discuss the highlights of our financial results, which contributed to our record quarterly free cash flow generation. I'll also provide an overview of our business program balance sheet and capital allocation program. As Dave mentioned, the company's lines continue to deliver strong operating and cost performance. Looking at our key cost metrics, second quarter all-in sustaining cost of $733 per ounce of gold sold, was 7% lower than the prior year, primarily due to lower treatment and freight charges at Shell Apache as a result of increased deliveries to third-party smelters and higher volumes of gold sold. This was partially offset by higher labor costs and prices for direct materials, as well as lower by-product credit as a result of lower volumes and realized prices of copper sold. All in sustaining costs for the first half of 2023 was $802 per ounce of gold sold, 8% higher than the prior year, primarily due to lower byproduct credits as a result of lower volumes and realized prices of copper sold, higher labor costs and prices for direct materials, and higher share-based compensation expense reflecting DPM's strong first-half share price performance. And this is all partially offset by lower treatment and freight charges at Chalapetch and higher volumes of gold sold. All outstanding costs per ounce of gold sold for the year is expected to be in line with our guidance. At SUMET, cash costs in the second quarter and first half of 2023 of $343 and $360 per time, respectively, were 65% and 42% lower than the corresponding periods in 2022 due primarily to a stronger U.S. dollar, and higher volumes of complex concentrates smelted due to the timing of the Osmalt furnace maintenance shutdown. which was completed in the second quarter of last year. As Dave mentioned earlier, SUMED is currently tracking towards the higher end of its 2023 guidance range for cash cost per ton, due to lower than planned complex concentrates smelted in the first half of the year from issues with the off-gas system. We are undertaking additional maintenance in the off-gas system to resolve this issue, along with the off-smelt furnace maintenance, which is currently underway. Looking at capital expenditures, sustaining capital expenditures in the second quarter and first half of 2023 of $9 million and $17 million respectively were 58% and 45% lower than the corresponding period in 2022, mainly due to the timing of the Osmalt Furnace Maintenance shutdown at Sumet. Sustaining capital expenditures are expected to be within the guidance range for 2023 with the completion of the Chalapach-Tayling Management Facility upgrade during the second quarter, and assumed maintenance scheduled for the third quarter. Growth capital expenditures in the second quarter and first half of 2023, primarily related to the Loma Larga Gold Project, were $7 million and $13 million respectively, similar to the corresponding period in 2022. Turning to our financial highlights, revenue in the second quarter and first half of 2023 of $168 million and $323 million, respectively were 25% and 12% higher than corresponding periods in 2022, primarily due to lower treatment and freight charges at Chelapeche, higher volumes and realized prices in gold sold, and higher volumes of complex concentrates melted reflecting the timing of the off-smelt furnace maintenance shutdown, partially offset by lower volumes and realized prices of copper sold at Chelapeche. Second quarter net earnings were $62 million or $0.33 per share compared to $34 million or $0.18 per share and the prior year due primarily to higher revenue and interest income, partially offset by higher planned exploration and evaluation expenses. Net earnings in the first half of 2023 were $108 million, or $0.57 per share, compared to $60 million, or $0.32 per share, and the prior year due primarily to higher revenue, lower cost of sales, and higher interest income, partially offset by higher planned exploration and evaluation expenses, and higher share-based compensation expenses, as a result of BPM's strong first half share price performance. In terms of our cash flow metrics, cash flow provided from operations in the second quarter and first half of 2023 of $59 million and $130 million respectively were 18% and 14% lower than the corresponding period in 2022 due primarily to the timing of deliveries and subsequent receipt of cash and the timing of payments to suppliers, partially offset by higher earnings generated. Free cash flow in the second quarter and first half of 2023 were company records at $71 million and $136 million respectively, $29 million and $46 million higher than the corresponding periods in 2022 due primarily to higher earnings generated and the timing of cash outlays for sustaining capital expenditures. The three-year outlook previously issued in our MD&A for the year end of December 31st, 2022 remains unchanged except for the following updates to the company's guidance for 2023. which Dave touched on earlier and which we have outlined on slide 17. Based on positive results from our drilling programs, exploration and evaluation expenses are now expected to be between $38 million and $46 million, up from the previous guidance range of $25 million to $30 million. This is due primarily to increased drilling activities and early-stage technical work at Choco Raquita in Serbia, as well as increased drilling activities at Tierras Coloradas in Ecuador. as the exploration programs were expanded following the initial guidance for both of these projects. Growth capital expenditures related to the Loma Larga gold project are now expected to be between $18 million and $22 million, up from the previous guidance range of $10 million to $14 million, due primarily to the initial scope of work for the optimization phase of the project that started earlier this year, which will carry through to the balance of the year, as well as increased activities related to stakeholder engagement. We continue to deploy our capital in a disciplined manner that balances our desire to reinvest in growing and optimizing our business with our commitment to returning capital to our shareholders. In addition to investing in our future growth and exploration prospects, we have continued to pay a quarterly dividend since 2020, offering an attractive 2.4% yield based on the current CPM share price. And we continued with our enhanced share buyback program to purchase up to 100 million of the company's shares over a period of 12 months, which began on March 1, 2023. Up to and including repurchases made in July, we have bought back approximately 6 million shares for a total value of approximately $42 million. In closing, we delivered another strong quarter of operating performance from our mine operations and generated a record quarterly free cash flow of $71 million, bringing the total free cash flow generated for the first half of 2023 to $136 million, also a company record. A robust cash balance of $542 million, which includes $56 million of cash proceeds from the Sabina B2 Gold investment, together with no debt, an undrawn $150 million revolving credit facility, continues strong free cash flow generation, positions us well to fund future growth opportunities that generate additional value for stakeholders while continuing to return capital to our shareholders. With that, I will turn the call back to the operator for Q&A.
spk02: To ask a question, you will need to press star 11 on your telephone. Again, that is star 11 on your telephone. And wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Wayne Lamb of RBC. Your line is now open.
spk03: Thanks, guys. Good morning, everyone. Just wondering, at SUMEB, what's the length of the planned maintenance shutdown this quarter? And then I recalled you had mentioned earlier in the year that there were some changes being implemented that would help address some of the problems you've had with the off-gas system to provide improved continuity. I'm just curious if those changes are expected to take hold post the maintenance completed in Q3, or if there are additional items that have to be evaluated to provide better availability at the smelter.
spk17: Yeah, hi, Wayne. So the plan shut down length, it started up on the weekend, and it should be in and around 42 days. terms of changes to address the off-gas system reliability and continuity yes we are undertaking that work during the shutdown and you know we would anticipate that what that's going to do is give greater continuity to the integrity of the water cooling system on the back end of the Osmo which has been the Achilles heel in the last two years or so at these numbers so we're doing a more extensive replacement with the idea being that we're reliant less on doing repairs which take time down in the operation and are more prone to subsequent rework so we anticipate that the current shutdown and the work that we are doing will mitigate that and get us back to a reliable smelter operation okay great thanks and then maybe at loma larga
spk03: You guys have had to put a pause on drilling for well over a year now and still haven't had clarity on the consultation process, and yet the guided spend there is nearly doubling. So just wondering why you guys are committing more capital there. Is that just having a function of having excess cash on the balance sheet, or is it a matter of wanting to be in a position to get the optimized work done and ready to go if they ever give you the go-ahead?
spk17: Yeah, it's definitely not excess cash on the balance sheet. We are continuing to be aware of needing to be disciplined in terms of the money that we have on the balance sheet. What we're targeting is making sure that we complete the feasibility work. It's very important that we do that to have a level of confidence in the information, to have clarity on capital costs and operating costs and further opportunities. The main piece of the addition is really targeted towards that. But we've also been having some success with work being done on our community and social activities. And we've put more time and energy into that. So it's both two items. It's completion of the engineering work, and it's also doing some additional activities in and around our communities.
spk03: Okay, great. Thanks. And then maybe just last one on the buyback program. It's been nice to see you guys being aggressive on buying back the shares. The stock's really outperformed your peers this year. I'm just wondering if the $49 million executed date was in part due to getting the proceeds from the B2 sale, or how are you thinking about the buyback levels kind of going forward?
spk05: Sure. Thanks, Wayne. It's Navin.
spk07: Yeah, so if you recall, at the start of the year, our board had approved the enhanced nciv program so we uh 10 of the public flows 16 and a half million shares uh one of the other things that the board did was prove uh up to 100 million of share buybacks over the 12 months starting in march so you know as we look and this is prior to the announcement of of sabina selling uh uh to uh to v2 so you know we'd already been considering this enhanced buyback even prior to that transaction being announced so so The approval of the $100 million for the next 12 months was independent of that thought or that activity. And so as we look through the balance of the year, that program continues to be in place. The board continues to authorize us to purchase up to $100 million for the next 12 months. And we see no reason at this point to stop that or pause that program, despite or notwithstanding the increase that we've seen in exploration spend or other demands of capital that we have in business.
spk18: Okay, great. Thanks for the context, and it's nice to see. That's all for me. Thank you. Thank you. Please stand by for our next question.
spk02: Our next question comes from the line of Eric Windmill of Scotiabank. Your line is now open.
spk12: Great. Thanks for taking my question. And nice to see the Q2 results and the cash build. Obviously, I think it positions you well relative to the peers. Just a couple of quick questions for me. Maybe starting in Ecuador, obviously, election cycles coming. Any comments there on how you see that impacting some of your work in the country?
spk17: The election is coming up on the 20th of August. That's going to be both for the assembly and also for the presidents. There's some possibility that the presidential election will be what we saw at the last election, whereby there's a secondary vote, which we anticipate would be in October. How does that impact what we're doing? It does not at the moment. That's not the reason why we're doing any of the work or the reason why we paused at Loma Lago. So we watch with interest. It will obviously be important in terms of the environment within which to deliver industrial projects and mining and
spk12: Great. Thanks for that. And maybe just moving over to Choka Rikita. So, obviously, great to see things are speeding up there, if you will, extra work being done. Do you see that potentially maybe moving the timeline to first production maybe a bit sooner? Any comments there?
spk08: Hi, Eric. It's Mike here. I think it's early to say you know, in the exact timeline. We're in the process of compiling that timeline and putting all the pieces together with respect to the technical work and permitting requirements that need to get done. I think we're going to have a better insight at the end of the year once we have our resource completed. But, you know, you are correct. We are accelerating drilling and a lot of the technical work to be able to advance that project as quickly as possible.
spk12: Okay, great. Thank you. And maybe also on sustaining CapEx, is it fair to think that there's going to be maybe a little bit higher sustaining CapEx in the back half of the year, or any particular projects or comments here on how that's shaping up compared to the forecast?
spk07: Sure. Eric, it's Navin. Yeah, so definitely sustaining capital is back in weighted for the rest of the year. So we've got the HEMA maintenance check that's happening now, which is a large component of that capital. Beyond that, you have additional capital at Canela Patch for mobile equipment and process plant, and then at Atepe for the integrated waste management facility. So definitely $17 million year-to-date for sustaining capital, and we're still guiding the range of $46 to $57 million. We would expect to see higher capital in the second half of the year.
spk12: Okay, awesome. Thank you so much. And the last question for me, and then we'll hop back in the queue. so m a obviously you know dundee is a name that comes up in terms of you know potential acquirers um any comments there um in terms of m a obviously i think you've said in the past you're opportunistic but just curious if you can share anything there eric you know say the same thing we've said in the past we do regularly evaluate opportunities you know we're going to be disciplined
spk08: that are available. But we're very happy with our organic portfolio as well.
spk12: Okay, fantastic. Thanks. Yeah, congrats on the good quarter. Cheers.
spk02: Thank you. As a reminder, to ask questions, please press star 11 on your telephone.
spk18: Please stand by for our next question. Our next question comes from the line of Ingrid Rico of Seifel GMP. Your line is now open.
spk13: Great, thank you. Good morning, David and team. I have a couple of questions for you guys. You know, it continues to be, I guess, quite apparent that Chalopeche concentrate is less relying on SUMEV, looking at the first half of this year, less concentrate process there than the first half of last year. So perhaps can you remind us how should we think about the balance of the year and into 2024 in terms of that delivering to third-party smelters? And maybe if you can share, you know, securing a full-time place for that smelter going forward.
spk17: Yeah. Hi, Ingrid. So what we've been saying during the course of the year, it remains the case, is that one quarter of production from Jalapetch will go to Sunev. This quarter in which that concentrate is going to be produced, I might add just there's a little bit of a complication. These things are not so discreet when it comes to unit costs that are charged against Chalopeche. There are slight offsets, and there are also some corrections that are made where we're 90% concentrate payments at time of movement and a 10% correction at the end of things. So you might look to see some influences outside of the period that we normally talk. So just a caution, just have to keep that in mind. So this quarter's production from Chalapeche will be Sumed and the elevated TCs, which would include elevated transportation costs to simulate the destination. In terms of Sumed itself, we're obviously doing what we can to bring down this operating cost to make it competitive to be able to attract concentrate at the right TCs. There's no shortage of concentrate. The question is the treatment terms that you can achieve. So it's not a question of filling the facility. It's a question of what is going to be the average TC in that last element that you bring in. So at this point, we're not seeing any need for any decisions about whether we operate the smelter or not. So there is sufficient concentrate. But it is something that we are observant of. Just a last comment there is that the SUMEB has to be able to successfully compete for the concentrate from Chalopeche in order for us to divert Chalopeche concentrate to SUMEB. So, you know, we're very clear about our intent to divert that concentrate elsewhere.
spk13: All right, great. Thank you for that. Just a follow-up, just for 2024, so we can sort of assume that the third-party deliveries are going to sort of stay steady from 2023, or is there a chance for more of that going to third parties?
spk07: Yeah, sure, I'll just take that. So yeah, so the expected, we don't expect to be delivering any additional concentrate to CMF in 2024. So all of it will be third party going forward.
spk13: Great, thank you for that, Navin. And because I have you on the line here, question for you on cost. So looking at Chalopesh and Adatepe, they're tracking much better than the cost per ton guidance for the year. Perhaps you can comment on where you're seeing that inflation easing in your cost structure.
spk07: Sure, absolutely. So definitely, one of the biggest areas is in power. If you recall, for the past couple of years, we had been, or Bulgaria had been benefiting from a power subsidy that was, even despite power costs being historically higher than And then what they were, they were actually mitigated. That increase was mitigated in part by a power subsidy that we were receiving for most of 2021 and through 2022. Starting this year, with global electricity costs, fuel prices coming down, we've seen our power costs come down significantly, such that in Bulgaria over the past quarter, we haven't had to receive a subsidy. And in fact, the power costs... per megawatt hour is actually much below than what we were experiencing in the last year with the subsidy. So that's one area. Another area is definitely diesel costs, for obvious reasons there. Cement is another one. Steel. So we're seeing a lot of, relative to our budget that we had at the beginning of the year, we're seeing a lot of easing in some of these consumable areas. Now quarter over quarter, this year versus last year, we're still seeing bit of an increase, but definitely we're seeing an easing in that, such that we're coming in, as you said, a bit towards the lower end of our cost per time guidance for those respective mines. It's only going to be the percentage range of what we're seeing. Yeah, sure. The percentage range, we're seeing anywhere between 15% to 20% in some of these areas, but on average, it's closer to between 8% to 12%. Excellent.
spk13: And in terms of labor, I know it depends on the jurisdiction, but We keep hearing that labor costs still challenging and finding labor is a challenge. Perhaps you can tell us a little bit more on the labor side.
spk07: Yeah, I'll talk about perhaps the cost area. So definitely labor has been a bit more sticky in terms of that's certainly not coming down year over year. And so definitely that's a factor in perhaps why our costs for this year are higher than last year. In terms of availability, and I'll start, and maybe Dave can jump in as well, but definitely the competition for labor in Bulgaria is increasing, in Europe in general. And yes, we are seeing a lot of competition there.
spk17: We're seen as a very good employer in Bulgaria, and as a consequence of that, we're not seeing a particular issue in attracting people to our production and maintenance roles. It's a little bit more of a challenge when you're talking about technical roles, where there's very significant competition that we're seeing inflationary pressures on what we would need to attract somebody. But at this point, what we're seeing is the cost increases year over year, as Navin was saying, they're coming down and that's reflecting through not just to availability, but also in terms of things like collective bargaining and the increases that we're anticipating between 2023 and 2024. So overall, we've peaked and we're definitely seeing ourselves on a lowering trajectory in terms of that inflationary pressure that's been there. within Europe, particularly after the onset of the war last year.
spk13: Excellent. That's great to hear. I'll probably just leave it there, and thank you for taking my question.
spk05: Thank you, Chris.
spk18: The next question comes from the line of Eric Windmill of Scotiabank. Your line is now open.
spk12: Great. Thank you. Just a quick point of clarity. You mentioned that 15% to 20% figure, probably tracking close to 8% to 12%. Is that obviously on a year-over-year basis you're seeing decreases in the costs? Or just one of you clarify that, please.
spk07: Sure. It's actually relative to budget. And the 15% to 20% was really around the items that I mentioned, which was you know, diesel, power, power is actually close, you know, above 20% relative to our budget, but we had budgeted, and cement. So, and then the other numbers in general, between 8% and 12%, that's just across the board, if you kind of factor in anything, that there's some pluses, some minuses there, but on average, we're seeing about an 8% to 12% decline relative to budget.
spk17: So, maybe just an additional comment. We just put steel balls, biters, reagents. So basically, you're seeing these things translate not just into a downward pressure, but they're actually translating into 12-month contracts, which is substantially lower than the previous year's contracts.
spk12: Okay, great. No, certainly nice to hear. So great to hear that. Thank you.
spk18: Thank you for your questions.
spk02: That concludes the question and answer session. At this time, I would now like to turn it back to Jennifer Cameron for closing remarks.
spk14: Great. Thank you all for joining us today. Please feel free to reach out if you have any additional questions, and we look forward to keeping you updated as we move towards the end of the year. Thanks and take care.
spk02: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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