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spk01: Thank you for standing by. This is the conference operator. Welcome to the Torex Gold Resources Inc. second quarter 2021 results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would like to turn the conference over to Dan Rawlins, Vice President, Corporate Development and Investor Relations. Please go ahead, Mr. Rawlins.
spk05: Thank you, operator, and good morning, everyone. On behalf of the TORX team, welcome to our second quarter 2021 conference call. Before we begin, I wish to inform listeners that a presentation accompanying today's conference call can be accessed through the investor section of our website at www.torexgold.com. I would also like to note that certain statements to be made today by the management team may contain forward-looking information. As such, please refer to the detailed contrary notes on page 2 of today's presentation, as well as those included in the Q2 2021 MD&A. On the call today, we have Jody Kazenko, President and CEO, as well as Andrew Snowden, CFO. Following the presentation, Jody and Andrew will be available for the question and answer period. This conference call is being webcast and will be available for replay on our website. This morning's press release and the accompanying financial statements in MD&A are posted on our website and have been filed to CDAR. Also, please note that all amounts mentioned in this call are U.S. dollars unless otherwise stated. I'll now turn the call over to Jody.
spk03: Thank you, Dan, and good morning to all on the line. Welcome to the Torex Gold Q2 results call. It's been an eventful first half. Highlights are as follows. Solid operational performance in spite of ongoing challenges related to COVID and metallurgy issues as we mine deeper in the pits. We're on track to deliver 2021 production and cost guidance. And after months of study, some key strategic decisions have come to ground, which we think bring enhanced clarity and certainty around the path forward for the company. In terms of the agenda for the call, I will provide a brief reminder of the strategic plan we are working to. Then I will step you through the key business and operational highlights specific to the second quarter. Then I'll turn the call over to Andrew Snowden for some detail on the financials. And after that, I'll provide a progress update on our critical projects, the key decisions that have been landed and close with some commentary relating to the completion of our board refresh. Dan has touched on the safe harbor language, so I'll move straight to the content slide four. This slide sets out the five pillars of our strategic plan. These remain largely unchanged. We've been very disciplined about executing this plan systematically and have made substantial progress in the first half of 2021. On that first pillar of optimize and extend ELG, optimization efforts are evident in the continued delivery of ounces to plan. In terms of extending ELG, we published the updated ELG MRMR in the first quarter, showing a 15% increase in underground reserves over 2019, and we are on pace with our 40,000 meter 2021 drill program at ELG Underground. Additionally and importantly, we've now received board approval to proceed with the pushback at Eliement Pit. I consider this to be just right sized or fit for purpose, spending just enough capital to add approximately 150,000 ounces to that transition period between ELG and Medialuna in late 23, mid 24. There's more detail on that at the end of the call. On the second pillar of de-risking and advancing Medialuna, We have made the risk-based decision to advance the Medialuna feasibility study on the basis of conventional mining and development methods. We're also continuing the Medialuna infill drill program through the second half of 2021, which is completely consistent with the shift in strategy to increase focus on exploration. We're adding another portal on the south side of the river to access the lower portions of the Medialuna deposit. And critically, we've now submitted to the regulators our permit application for the MIA integral. I will discuss all of this in more detail as we move through the slides. First on slide five, starting with the as-is business. This slide sets out some key operational and financial highlights for the second quarter. We delivered 118,000 ounces in Q2, placing us at 247,000 ounces mid-year. Clearly, we're well positioned to deliver on production guidance of 430 to 470. That says, I would caution not to expect that we will exceed 470, given that grade will trend closer to reserve levels for the second half of this year. Our total cash costs and ASIC at mid-year are tracking better than the best end of guidance on both parameters. There were and will continue to be some offsetting puts and takes in these numbers, increased reagent consumption, offset by PTU accruals under new legislation. Both Andrew and I will address this in further detail on the update. The cash generation capability of this asset continues to show itself with a year-to-date ASIC margin of $922 an ounce, over 50% per ounce. Given that, we were able to add to our bank balance and conclude the quarter with $196 million in cash and no debt, given that that was cleared off in Q1. So, with the large tax and PTU payments behind us in the first half, we expect the second half of the year to deliver healthy cash generation and to add to our total liquidity, which is completely consistent with our plan to cash up ahead of the Medialuna build. Now, on this next slide, I've already briefly touched on 2021 guidance. This slide sets out some of the specifics. Three key takeaways here. Production and total cash costs are tracking within original guidance. Second, the range on capitalized waste has been increased by $15 million. This is on account of the additional stripping that will be done in the Eliement pit for the second half of 2021, given that we are proceeding with the pushback. Of note, we're not increasing the ASIC range, given that we're tracking beyond best end as at the middle of the year. We're keeping that range at 920 to 970, but I would expect it to come in towards the upper end of that range, given the addition on capitalized waste. Thirdly, that last line there in the chart, though we haven't changed the non-sustaining capital guidance, we are guiding toward the very upper end of that range as well. given two key additions to the plan. First, we've allocated $7 million to an expanded infill drill program at Medialuna and another $15 million for a lower portal on the south side at the Medialuna deposit. Given the broad range that we started with and progress year-to-date on the non-sustaining capital program, we expect to conclude the year at or just above the $150 million guided. Now, while I didn't mention ESG strategic pillar at the outset, we would be remiss not to call out the highlights for the quarter, which sees us on path of continued ESG excellence. Three points here, one in the top left quadrant. While COVID is settling in for yet another wave in Mexico and case counts are sadly on the rise, we're maintaining our existing approach of adherence to strict protocols. And we bolted on a specific vaccination program in concert with the local health authorities. At last week's count, we have more than 1100 people with at least one dose of vaccination. This is critical to safe operation moving forward. Second, despite a lost time injury in the quarter when a diamond drill contractor was struck by a hose that got tangled up in a drill bar. We closed the quarter with our LTI frequency at an impressive 0.26 per million hours worked, something I'm very proud of, a continued world-class safety performance. And you'll note on the right-hand side of that slide, we've been working hard to upgrade our disclosure to reflect the reality of the good ESG work we're doing on the ground in Mexico. And this has shown up in the improved ratings you see on this slide, notably On the ISS scoring, on social and governance, our rating has now gone to one. Lower is better on this scheme, and so it's the highest score possible. Turning now to some additional detail around operational performance. If you step back and look at these quadrants, you can clearly see the operational stability depicted by the bar charts over the last four consecutive quarters. I will draw your attention to a couple of highlights and a low light, starting with the low light first. Average plant throughput for the quarter was just under 12,000 tons per day, lower than the last three consecutive quarters and definitely not what we wanted. Ironically, it was our best ever performance on delivering the monthly maintenance plan. The team just did an outstanding job with planning, scheduling, and execution for each monthly maintenance shutdown in the quarter. The issue was that the metallurgy through the circuit with higher iron and copper and sulfides forced us to slow down or shut down the plant for a cumulative 60 hours in the quarter. We really did need additional residence time in leach to reach targeted metallurgical parameters with a view to maintaining recoveries and not wasting gold to tailings. On that note, recoveries was a highlight. Maintaining 88%, which is 1% above design, in the face of those metallurgical challenges is a testament to the strength of our MET program, our systems, and the metallurgical team. And the underground team did not disappoint once again, setting another quarterly record of over 1,400 tons per day at an average grade of 7 grams per ton. This performance certainly supported delivery of ounces in the quarter. Now, this next slide sets out how the unit cost took shape in the first half here. Two notes. One, you can see in that first line that our open pit mining costs are up slightly over 2020. As reported with our Q2 production results, our rope con has been down for repair since early June, when some wear was detected on the belt during a routine maintenance inspection. Given the specialty nature of the equipment, a splice kit had to be sourced from Europe and technicians flown in to install this, we expect it to be back in service by mid-August. While the team has done an excellent job to maintain production and blending by trucking ore from the pit down to the process plant, this event has driven up our maintenance and re-handling costs. Second, you can see that processing costs were up to $38 a ton in the quarter or $35 a ton on the half. This is driven by the cyanide consumption. With our historical cyanide costs coming in at an average $2.25 a kilogram, this impact to processing costs was not insignificant. We have several key initiatives underway to mitigate the higher reagent consumption, including operationally, further refinement of our geomet modeling, and what I now call precision blending strategies. And from an engineering perspective, we're looking at the possibility of bringing forward the installation of some aspects of the MediLuna flow sheet to deal with the soluble iron, namely the water treatment plant, and the iron flotation circuit. And you can see on that slide, if you look at the third line against the last line, the offsetting costs of the higher reagent consumption versus the new treatment of the PTU, given the new legislation that Andrew will detail. On that note, I'll now turn the call over to Andrew for a review of the financial performance.
spk00: Thank you, Jodie, and good morning, everyone. So Q2 was another strong financial quarter for us with $22 million of positive free cash flow generated despite the annual Mexican profit sharing payment of $30 million that was made during the quarter, and that payment relates to the profit sharing for the 2020 year. In addition, there was $60 million investment in capital expenditure during the quarter, primarily focused on MediaLuna. Slide 12 provides a summary on our financial results, and I wanted to to provide some comments on some key drivers in the quarter. Firstly, we generated revenue of $206 million and EBITDA of $127 million in the quarter. Although these outperformed consensus, they were both down $25 million on Q1. Change is primarily sales volume driven as we sold 18,000 ounces of gold less in Q2 compared to Q1, and that was partly offset by a $40 an ounce higher realized gold price in the second quarter. Given this lower Q2 sales volume, we closed the quarter with around 10,000 ounces of dore on hand, and this should support sales volume outpacing production in the second half of the year. On costs, we again reported strong TCC and ASIC cost performance with a 50% ASIC margin in the quarter. There are two key offsetting impacts within this performance I wanted to just briefly highlight on higher cyanide costs and lower accrued PT profit sharing costs. Firstly on cyanide, due to the higher soluble ion levels we were seeing in the ore, cyanide consumption rates are expected to be higher in 2021 than initially planned. As Jody noted earlier, we saw consumption levels in the first half of the year approximately two kilogram of tons higher than last year, and we expect higher cyanide consumption to continue through 2021. For full year 21, I expect this will impact costs by about 15 to $20 million compared to the initial plan. Next on the PTU profit sharing, as I noted on the Q1 earnings call, tax reform on the Mexican PTU profit sharing payment was enacted in April of this year. From a financial standpoint, the main impact of Torex is the introduction of a cap on the PTU payment at the higher of three-month salary or the trailing three-year average payment, and this is calculated on an individual employee basis. For most of our employees, the three-year average will be the most relevant cap, and so I expect the 2021 PTU amount, which is payable in Q2 of next year, to be approximately $20 million. This is $15 million than initially budgeted. Looking forward, our guided TCC range of 680 to 720 ounces of dollars an ounce is still a good number as we'll see some higher mining costs in the second half of the year as we mine some slightly lower grade material as Jody referred to earlier. Moving now to slide 13, you can see here in the cash waterfall that our cash balance increased by $24 million during the quarter, which was driven by the strong EBITDA performance. In general, the movements on this chart should be self-explanatory, but I will highlight a couple of items here. Firstly, the changes in working capital you see here primarily represent the $30 million PTU profit sharing payment made in the quarter relating to the 2020 year. This was offset by net collection of about $30 million in VAT. You'll recall from the Q1 earnings call, I did flag that we were experiencing some administrative delays in VAT collections, and I guided that these would be resolved in July. In fact, we were able to resolve these administrative matters earlier than expected and saw repayments resume in the month of June, collecting $35 million of outstanding VAT in that month. And we're now caught up to where we expect it to be mid-year 2021. Certainly on capital, you'll see on the chart here that we invested $43 million in non-sustaining capital during the quarter. And that was primarily related to MediaLuna as we continue to execute on the early works, MediaLuna infill drilling, and the feasibility study through the quarter. I expect overall non-sustaining capital to continue at the levels you're seeing here in Q2 through the balance of the year. Turning now to slide 14, the key takeaway here is that our balance sheet continues to strengthen ahead of the MediaLuna build. despite the significant capital investments I referenced on the last slide. As referenced earlier, we closed the quarter with cash of $196 million, and we also have available liquidity of $345 million in total when you include our available capacity on the revolving credit facility. And I expect this available liquidity amount will continue to increase as the year progresses. Finally on slide 15, this is just my typical quarterly reminder on the seasonality of our cash flow generation, which you can see here will be back half-weighted. The large annual tax, royalty and PTU payments are now behind us in 2021, which will support stronger operating cash flow in the second half of the year. Quarterly payments in the third and fourth quarter will now be focused on two items. Firstly, tax installments, and I've guided in previous quarters, tax installments are typically within a range of $7 to $8 million a month. We've seen that to be at the higher end of that range in the first half of the year, and I expect we'll trend towards the lower end of that range for the remainder of the year as taxable income will be impacted by the anticipated higher cyanide and mining costs I referenced earlier. Secondly, there's the quarterly 2.5% royalty payments, which will be made, and that's approximately $5 million a quarter. And with that, I'll turn the call back to Jody.
spk03: Thanks, Andrew. Turning now in these last few slides to some updates on our key projects. As we work through our strategy and we set the foundation for the future at Morelos, this slide sets out some detail around the pushback at the Alimant pit. It's been approved by the board, This will add approximately 150,000 ounces through the transition period from ELG to Medialuna in that critical late 23, early 24 period. The work is already well underway, and I've already touched on adding the $15 million to non-sustaining capital for Strip in the back half of 2021. Now, just a couple of comments about Strip. You can expect it to peak in 2022 and then fall away significantly after that. Over the four-year pushback, strip ratio for the pushback only comes in at about 15 to 1, which results in the remaining open pit life of mine strip at 7 to 1. Without the pushback, it was 6 to 1, and now it's 7 to 1. Given that over time, costs will ultimately fold into the mining costs for the open pits, we won't detail those publicly. We don't give zone-by-zone updates of that nature. I will say, however, that the pushback generates positive cash flow down to $1,300 gold, so it was a sensible business decision, and I think of this as a profit-making insurance policy. These pushback ounces will be incorporated into a multi-year production outlook that we plan to release to market in the coming weeks. Additionally, on this slide, you'll see some information about the second focus area of the strategy to ensure a smooth transition from ELG to Medialuna. And that is continued exploration, development, and mining of our ELG underground. So there are two items of note here. First, we're progressing on our Portal 3. And second, we're advancing our exploration program as planned. We've now transitioned to a focus on step-out drilling through the back half of 2021, a reminder that that program was 40,000 meters at ELG underground for this year. Now this next slide, there's lots of text on it, but it sets out really three key additional developments on our projects. First, after what amounts to a few years of study, we've made the decision to advance the Medialuna feasibility study on the basis of conventional mining methods and not Makahai. There were many and varied considerations around this decision making. These included, first, the absence of any meaningful upside associated with deploying the technology, either on an economic analysis through the lens of IRR, NPV, CAPEX, or OPEX, or on schedule considerations. We also consider the stakes involved for Torex. While not our only operating mine in Guerrero, Medelluna will be a primary source of feed starting in 2024, and it's a big mine. We also consider the results of the test program at El Imodip, which just concluded, specifically the rates achieved on development, both laterally and on the steep ramp, and the rates achieved with stoping and backfill. This test program showed us that there is process improvement and engineering to be done on this technology. We also considered risk mitigation in the event that the technology didn't perform quite to expectations, given its level of maturity. Specifically for Medialuna, once two steep ramps are driven around that deposit, there is really no plan B without significant cost or schedule disruption. So, rather than bet the farm on the new tech, we'll consider including in the upcoming technical report a Makahai case at EPO. EPO is a smaller adjacent deposit outside of Medialuna. If we do consider this in the technical report, it will be at the PEA level. For the second half of 2021, no further funding will be allocated to the Makahai testing. We guided to spend $8 million on the program in this year, and that has been spent. Instead, we'll spend additional non-sustaining capital through the second half of 2021 on other items that will de-risk and advance Medialuna, and those are noted on the right-hand side of the slide. $7 million to continue to infill drill. We're really just keeping the eight drill rigs turning for the rest of the year and expanding the 2021 program from 44,000 meters to 83,000 meters. And we'll add $15 million for an additional portal on the south side of the river into the lower part tunneling of the Medelluna deposit. This is important because it will enable us to open up the entire lower portion of that deposit so we have enough development to support a successful ramp up. And this tunnel at the lower part of the deposit has the additional upside of positioning us to continue tunneling from south to north to meet up with the O'ahuasca tunnel coming in from the other side. This provides mitigation for a key schedule risk in the development of Medelluna. Now this last slide, no text, lots of pictures. It includes some photographs of various aspects of development of Medelluna. In the upper left, you can see a picture of the monorail-based equipment dumping waste outside the O'ahuasca tunnel. And in the bottom right, you can see the portal prep work for the south portal upper is well advanced and we expect to call her the portal this quarter. Finally, a word about governance. Our board refresh is concluded and was endorsed with overwhelming support of our shareholders at the AGM. Tony Giardini, Jennifer Hooper, Jay Kellerman and Rosie Moore have officially assumed their positions. Rick Howes has also stepped into the role of independent chairman of the board. I'm completely confident that we have the right mix of skills around the table to deliver Torex's second act. With a new board and some key strategic decisions behind us, our long-term plan is coming together nicely and we're just going to get on doing what we do best, which is executing on the plan. With that said, subject to any questions, I will turn the call back over to Michelle.
spk10: We will now begin the question and answer session.
spk01: To join the question queue you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone please pick up your handset before pressing any keys. To withdraw your question please press star then 2. We will pause for a moment as callers join the queue. The first question comes from Blythe Adams of CIBC. Please go ahead.
spk07: I don't know if I missed it, but the 150,000 ounces in the pit layback, can you comment on the grade of those ounces? Is that in line with the reserve grade?
spk03: Yeah, that's right, Bryce. It's in line with the reserve grade of the pit.
spk07: Okay, thanks. No big change there. The next question was just on the Waharas tunnel. With the changes to the conventional mining at Media Luna or conventional mining and the feasibility, does that impact your advance rate in that tunnel at all or are you still targeting the 10 metres per day in the back half of the year?
spk03: Yeah, we're still targeting the 10 meters a day, Bryce. The decision not to advance the MediLuna feasibility study on the basis of the Makahai technology doesn't change the process plan for advancing the Wahez Tunnel using the monorail-based technology. The risk profile on those two things are materially different. We're driving laterally, not on a steep ramp. We're not drilling at the face with the monorail-based drilling. We're using a three-boom jumbo that's wheel-based, and we're not using the slushing. We are instead using a hag loader and loading onto a trapping conveyor and then jumping into the boxes to move it out. We think that system, taken all together, once we get it up and running, will deliver an advance rate that exceeds conventional advance rates, and we're still targeting the 10 meters a day. Whether we get there is another question.
spk07: Got that. So still a hybrid approach there. But maybe with the change to conventional mining at MediaLuna, is there any design change to that tunnel, the profile size of the tunnel? Could you make it smaller, and would that help your advance rates?
spk03: No, we're not changing the size of the tunnel. It's six by six and a half, and we're keeping it that way. The decision to advance Medialuna on the basis of conventional technology doesn't change the size of that.
spk07: Okay. Just on the cost profile, you got it to all in sustaining costs in the high end, upper end of the range. Is that, when you say that, do you mean that all in sustaining costs for the full year will be in the high end or for the second half? Because if you're tracking at 874 for the first half, For the full year numbers to be at the high end, they're going to need to be much higher than the high end of the range for the second half. How should we be looking at that?
spk00: So, Bryce, I mean, your initial, Andrew here, your initial comments were correct in that it's, you know, we're guiding that we'll hit the range for the full year or the upper end of the range for the full year. And you're right, that means the second half of the year now will have a higher range cost profile or high ASIC profile. And one key driver for that is the additional stripping costs and sustaining costs related to that that Jody referred to earlier and related to the pushback.
spk07: Is there anything else other than the stripping costs? Because even adding in that extra $15 million a strip, I'm not sure I can quite get there.
spk00: Well, the second driver, which I referred to, was around some higher mining costs in the second half of the year. So we are expecting that to trend upwards in the second half because of the lower grades that we'll be mining through the back half of this year.
spk07: Okay, thanks. I'll take another look at that. My last question is just on the underground performance. It's been good. Can you remind me, is that still with the contractor or is it owner-mined? And if it is with the contractors, is it I think there was at some point some thoughts to changing to owner-operator.
spk03: It's still a contract mind, Bryce, and there are still those thoughts.
spk07: Okay. All right. Thanks a lot for answering the questions. Talk to you all again. Cheers.
spk03: Thanks, Bryce. Be well.
spk01: Our next question comes from Wayne Lamb of RBC. Please go ahead.
spk09: Hey, good morning. Just curious on the cyanide usage. The usage this quarter is kind of a run rate that we should be thinking about as we move along and into the later years as well. It seems to be relatively high relative to what you guys were doing last year. So just curious if we should kind of model that kind of cost impact going forward.
spk03: Hi, Wayne. Yeah, the usage of this quarter was just over six kilograms a ton. Last year, you'll recall that once we implemented that oxidation program through Alige, we rounded out the year at about three kilograms a ton, which is where we wanted to be. Moving forward, given the efforts on blending, et cetera, I think it's probably safe to model in the five kilogram a ton range, and that comes with a caveat. If we're able to land the aspects of the Medialuna flow sheet to deal with that soluble iron, then that number will tank significantly. And so the question is, can we do it? What will it cost? How fast can we pull it forward? And does it make any sense to do so? And as I said in my commentary, that's under investigation at the moment.
spk09: Okay, perfect. Thanks. And then just curious on the cyanide and reagents themselves, have you guys been seeing any cost inflation on that front?
spk03: No, actually we're holding pretty well at $2.25 per kilogram. One interesting development that I didn't mention in the commentary is that we're looking at using an aggregator, an aggregator in the country on cyanide supply. If we can get together with a couple of other mining companies to support us in driving down unit costs, we'll certainly explore all options associated with that.
spk09: Okay, great. Maybe just moving to Muckahai, as you guys did the testing over the past couple of years, just curious, you know, if you had more specific detail on, you know, where there were areas of further optimization relative to, you know, what was outlined in the PEA.
spk03: Yeah, I think the areas of focus for further optimization will be steep ramp development, loading the muck boxes on the steep ramp, and testing the loading to MuckBox integrated aspects of the system. So the commentary on Muckahy, I want to be clear, isn't any kind of commentary about the potential of the technology. It's commentary about where the technology is and the massive stakes associated with deploying that technology at MediaLuna for Torex.
spk09: Okay, perfect. Understood. And then maybe just lastly on the lower portal, I was just curious when that decision was made to implement that and I guess given that you guys hadn't increased the non-sustaining capital guidance, was there some kind of offset to that or were you guys just trending towards the lower end of range for the year?
spk03: That decision on the South Portal lower was under investigation for the first half of this year. We had been carrying it as an option, depending on how the decision laid down with conventional mining versus Makahai mining. And we've been trending lower on the non-sustaining spend for the first half of the year, hence the guidance towards that $150 million range with the addition of South Portal lower and the continuation of the infill drill program.
spk10: Okay, perfect. That's all for me. Thank you very much. Thanks very much for the questions.
spk01: Our next question comes from Trevor Turnbull, Scotiabank. Go ahead, please.
spk04: Yeah, hi. I just had a couple of follow-ups, I guess, further on the Makahai I understand you have kind of used up the budget for test work on it this year, and obviously there's further work that does need to be done in terms of optimizing it and kind of testing its capabilities. So I'm kind of wondering, how does it move forward from here? Will there still be work done with Makahai, and kind of what's the schedule for continuing to kind of optimize that?
spk03: That's under assessment for us right now, Trevor. What we did know for sure is that given that we've used the $8 million for this year and we had higher non-sustaining capital priorities for the back half of 2021, given the strategic priority to de-risk and advance Medialuna, we're just going to take a pause on it. If we pick it back up in 2022, we'll certainly let folks know.
spk04: Okay. And, you know, I heard you talking to Wayne about it and that you're not drawing any conclusions about the potential going forward. But one of the comments I was curious if you could elaborate on a bit, and that is that aside from the risks associated with trying to implement it and keeping Medialuna on schedule, you mentioned that it didn't, there wasn't a strong case on the financial side And I was just wondering, are the costs associated with Makahai not really coming through the way that you had anticipated potentially in terms of, because I thought that Makahai, part of its appeal was the ability to actually be a means of cost savings in terms of development. I just wondered if you could comment a bit on the financial aspect.
spk03: Yeah, I mean, I think that appeal is still there. As I said, there's lots of potential in the technology. And as you know, Trevor, I mean, costs are rolled up on the basis of assumptions, how fast you go, what the advance rates are, how fast you can clear the muck from the face. And so we had to use the data from the test program to formulate the assumptions, to build up the mine plan, to roll up IRR, from which comparisons were made. from the Makahai case to the conventional case. I won't give out details on that, but I will say, when we ultimately did the IRR comparison between the conventional case and the Makahai case, that big differential that you saw in the PEA closed substantially. And so, I do think there remains upside on Makahai, depending on what it's able to achieve in either test or small mine deployment in the future, but the assumptions that we used sort of negated what the upside could be on either cost or schedule, both of which are important to us.
spk04: No, I understand, and obviously until it's running as well as you would like, obviously the costs aren't going to reflect its potential. My last question, sort of Makahai related, but not really, is just on the EPO deposit that you did mention as a place where you might still potentially find use for Makahai. I was just wondering, can you tell us a bit more about that? You said it was separate from Medialuna, but similar. And I just don't remember hearing a lot about that before. And I was curious if you could give us a bit more detail.
spk03: Sure. EPO was in the PEA. It's about an 8 million ton resource, a little lower gold equivalent grade than Medialuna, right around 3.5 grams per ton gold equivalent. It's literally a right turn off of the Wauhess Tunnel, south of the Balsas River. And so that, to my mind, Trevor, is still a potential for the Makahai technology, depending on its evolution over the next couple of years. That's deprioritized for us as relates to the development of Medialuna, but we're certainly keeping the possibilities open to tuck that in later, smaller ore body, potential testing ground, and something that we have ready access to in the mine plan after Medialuna.
spk04: Okay, I understand. Well, you've made a lot of big decisions this quarter and a lot of good things to see. Thank you very much.
spk03: Thanks for the question, Trevor.
spk01: Our next question comes from Ryan Thompson of BMO. Please go ahead.
spk08: Hey, Jody and Andrew. Thanks for the update. I think most of my questions got asked, but maybe just one on the rope con. Sounds like maybe a couple of weeks of slippage on getting it repaired. Can you just remind us Is that ropecon going to be used throughout the life of the ELG pits and how that ties into the pit layback?
spk03: Yes. I mean, we'll continue to use the ropecon throughout the life of the ELG pits, Ryan. That's the short answer to the question. And yes, some slippage in the schedule. I mean, it's a highly, highly individualized piece of equipment. throw COVID over top of that and sourcing splice kits from Germany and getting the right personnel on the ground after they've been COVID cleared and COVID tested, it was a bit of a trick. And so we're looking at mid-August now to get that back up and running. I will say this, we've ordered three splice kits, not one. So in the event that there's any sort of wear detected in the future, we have that on hand.
spk08: Got it. Perfect. No, totally understandable on that. with everything that's going on in the world with COVID and whatnot. Maybe just sort of shifting gears here to the balance sheet. Can you just talk a little bit about the balance sheet? Are you comfortable as you sort of progress the feasibility study work on MediaLuna? Are you seeing any sort of inflationary pressures coming through in the feasibility study? And is there any need to sort of lock in prices or anything like that as you continue on your work there.
spk00: Yes, so thanks for the question there, Ryan. I mean, overall, from a capital cost perspective on MediaLuna, you know, we are seeing some inflationary pressures there, obviously, compared to what was previously disclosed within the PEA. So we are seeing some overall upside I mean, nothing that I think at this point would drive us to do anything fancy in terms of locking in certain FX rates or certain commodities. We are continually looking at hedging as being an appropriate tactic to help manage capital costs looking forward. But I think as you highlighted and was highlighted in my material, we are sitting now on a very strong balance sheet, $350 million of available liquidity, and still feel that we can comfortably self-fund MediaLuna going forward if that's what we choose to do. So I think we're in a good position, even notwithstanding inflationary pressures that we're seeing across the globe at the on that capital project over the next few years.
spk03: And in terms of locking in pricing, Ryan, I'll just bolt on one additional comment. As we're entering into contracts on the south side and really putting meat on the bone on our contracting strategy for Medelluna, we're being very careful, A, given that we don't have a construction decision, and B, I'm very, very hesitant to lock in pricing at the peak of pricing, for example, for steel. And so we're maintaining some optionality around receiving the benefit of price reduction as 2022, 23, 24 move on on commodity-specific contributors like steel.
spk08: Got it. Yeah, no, I mean, my question was more related to sort of the gold price and locking in the gold price from ELG, but I think Andrew covered that.
spk10: Thanks.
spk01: Our next question comes from Spencer Lehman, private investor. Go ahead, please.
spk06: Well, good morning, Jody. Yeah, I'm just a private – I'm a long-term shareholder. I'm not an analyst. And a great report. A lot of it is pretty technical. I just wondered if you can maybe simplify it a little bit for me in sort of Lehman language. And in regard to this big decision on Media Luna, I think I understand it, except just summarize it for me simply as far as what are the downsides in not going through with the monorail at this point? I mean, obviously, that's probably wonderful technology and exciting, but doing the conventional way I can see it as less risk for the company and the shareholders. But what are you giving up with that decision? What's the downside of it?
spk03: So, first of all, Spencer, thank you for dialing in, and thank you for your holdings. We always appreciate our long-term shareholders because TARTS is the kind of company that has a long-term view, driving business value over the long term. So thanks for that. Quite frankly, I don't see any real downside in not deploying the Makahai technology at Medialuna. Like any decision in business or in life, it's a risk versus reward decision. And given the maturity of the technology, the rewards that maybe would have been available if the technology had been a couple of years advanced weren't readily available to us. And so we were looking at a lot more risk than potential upside. So on that basis, that decision was taken. It's really a size of the stakes consideration for Torex.
spk06: Once you do the conventional, could you do the monorail in the future?
spk03: Yeah, I mean, interesting that you raise that. And so we haven't done a lot of down deep drilling below the Medialuna deposit. And so if, for example, we ramp in conventionally around that deposit, mine conventionally around that deposit, do some further exploration work down deep, get some interesting drill holes down there, we could definitely do a steep ramp down under that deposit and deploy the Makahai technology there on a smaller scale.
spk06: Gotcha. Okay, a great balance sheet. What's with the increased cash now? What is the... What's the current book value, equity per share, as of June 30th?
spk00: I don't have that to hand, Spencer, but we can circle back with you on that.
spk06: Well, I think it was $11.70 or something in March. Would you say it's up a little bit more?
spk00: In terms of our book asset value, I think it's relatively consistent with where it was at Q1. Cash balance has increased, but that's been offset from an asset value basis by some depreciation during the quarter.
spk06: Okay. It'll be out when we get all the final. It's an old-fashioned index, but it's always interesting to know what the book value is. I'm 85 years old, so some of these things are old-fashioned.
spk03: The old-fashioned stuff is old-fashioned because it works, Spencer. So we can get back to you with that for sure.
spk06: All right. Okay, thank you.
spk10: Thank you.
spk01: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
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