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spk01: Higher throughput and the recoveries helped offset lower process grades quarter over quarter, which is shown there on the bottom left. And you can see on the bottom right the steady mining rates from ELG Underground. The goal here for our team is consistent production quarter over quarter and year over year, and you can expect similar results over the coming quarters. Slide 10 outlines the year-to-date unit cost performance through Q3 2022 versus full year of 2021. You can see there the initiatives to hold the line on costs are helping to offset these persistent inflationary pressures that everyone is seeing in the market. Open pit mining costs are running slightly higher than last year, driven by additional re-handling to support optimal feed blending. That blending helps us manage both grade and reagent consumption. The underground mining costs are holding, with increasing mining rates providing some economies of scale. Processing costs are notable. They're driven lower by reduced cyanide consumption, which is averaged around 2.5 kilograms per ton through Q3, versus 4.7 kilograms per ton in 2021. Some major accomplishment here in our metallurgical control program, which really helps with those unit costs. I'll now pass the call over to Andrew to discuss the financial results in more detail.
spk07: Okay, thanks, Jody, and good morning, everyone. I'll start, as usual, with some comments on our Q3 financial performance. And looking first at slide 12, you can see that Q3 was another solid quarter financially. With the lower EBITDA and cash flow, you can see that over Q2, reflecting softer metal prices and higher costs quarter over quarter. This generated a TCC margin of 56% and an ASIC margin of 38%. Realized prices were $17.15 an ounce in Q3, and that's down $150 an ounce over last quarter. As noted in our production release last month, this Q3 realized price is slightly below the Q3 benchmark price due to September sales being back-end loaded and due to the timing of pause and therefore sold into a softer market. Despite the lower gold price, Torex generated $108 million in adjusted EBITDA and $102 million in operating cash flow during the quarter. And this included $19 million of tax payments related to monthly tax installments. After capital expenditures of just over $68 million, we generated free cash flow of $34 million in the quarter. I want to point out, and we've been signaling this for some time, that we expect quarterly free cash flow to decline in Q4 and then run negative through 2023 as spending on MediaLuna increases in line with development activities. On costs, we saw all-in sustaining costs increase in Q3, and this was primarily driven by lower grades and a higher strip ratio in the quarter as we caught up on stripping from Q2. You'll recall on the Q2 earnings call, I referenced the equipment availability constraints that we saw last quarter. Also, as I noted during the second quarter call, we are seeing and continue to see inflationary pressures in certain areas of our cost base, primarily in inputs into our processing plants with ongoing cost pressures being seen particularly in cyanide and other reagents. Work to offset these inflationary pressures continues across the company, with the team managing consumption rates through blending, pushing hard on pricing discussions with our suppliers, targeting efficiencies, and closely monitoring discretionary spending. As a result of these projects, we remain confident in delivering our 2022 cost guidance, and as Jody mentioned earlier, expect to be right at the top end of our total cash cost guidance. and at the midpoint of all in sustaining cost guidance. To give some initial commentary looking ahead now into 2023, while we expect production levels to be consistent next year with 2022, we do expect ongoing inflationary pressures on consumer vols to persist, and this will put pressure on TCC. Our 2023 budget process is currently well underway, and I'm currently anticipating that TCC to be up to 5% higher next year. On all in sustaining costs, in addition to these inflationary pressures, I'm also expecting a higher sustaining capital profile next year associated with increased stripping activity as we continue to extend the life of the pits. Construction of our previously announced solar plant and also infrastructure associated with the power upgrade from 25 megawatts to 45 megawatts, which will support both ELG and MediaLuna. Our current 2023 consensus estimates for ASIC look to be around 1060 an ounce for next year, and I expect we'll be modestly above that consensus number due to these factors. I also wanted to reconfirm that we're expecting to incur between $175 million and $200 million of accounting depreciation this year. The tax depreciation in 2022 is expected to approximate between 70 to 80 million, and that's a similar level to last year, and the primary reason behind the deferred tax recovery experienced the last several quarters. Turning now to slide 13, just to briefly review our cash movements in the quarter, As you can see, and as Jody mentioned, we ended Q3 with $339 million in cash and no debt. This is an increase of over $28 million in cash through the quarter. And just a couple of items I'll point out here. Firstly, on changes in non-cash working capital, you can see the $11 million positive inflow in the quarter, and that reflects seasonal movements on accounts payable and prepayments, as well as the benefit from continued strong VAT collections. You'll note from our balance sheet that our VAT receivable balance has been declining each quarter through the year. On capital expenditure, we invested a total of $68 million in the quarter, and that included over $32 million relating to MediaLuna. Turning now to our balance sheet shown on slide 14, we exited the quarter with available liquidity of $589 million. And that includes $250 million of available credit under the credit facilities which we closed during the quarter. As a reminder, these credit facilities include a $150 million revolving facility and a $100 million term loan. And that term loan must be drawn before the end of 2023. And currently, this full $250 million credit facility remains fully undrawn. The increased credit facilities, robust balance sheet, and the strong forecast cash flow from ELG places on solid footing to not only fund the development of MediaLuna, but also continue to reinvest in value-creating exploration across the Morales property. Finally, turning to slide 15, just as a reminder, we've hedged approximately 25% of production starting in Q4 of this year through to the end of 2023. and that's at an weighted average price of 19.21 an ounce. With the decline in the gold price through Q3, these hedges did result in a further $20 million gain in the quarter, and you'll see that's been recognized in our income statement. As a reminder, though, these gains are backed out from our reported adjusted earnings metrics. The first of these forward contracts were delivered into in October, and that realized a gain of $2.7 million compared to the spot price on delivery. Depending on market conditions, we would consider hedging up to 25% of 2024 production at similar price levels. I would also potentially consider increasing 2023 hedges somewhat if we conclude it is to make sense. And as a reminder, this hedging program is being implemented with the aim of protecting the balance sheet and our cash flows during a period of elevated capital investment related to the development of MediaLuna. With that, that concludes my planned comments today, and I'll pass the call over to Dave Stefanuto.
spk02: Thanks, Andrew. We'll turn to slide 17 for some key highlights on MediaLuna. We've made steady progress at MediaLuna during the third quarter and expect development and spending levels to increase in Q4 and further in 2023. Some key highlights from the quarter include we've awarded a number of POs for critical long lead items, including our seven-kilometer-long Juarez Tunnel conveyor, flotation cells, thickeners, regrind mills, and our west edit vent fans. Over the next period, we will make significant commitments related to our paste and tailings equipment supply, as well as our high voltage transmission equipment. Overall, the costs of these POs and delivery times are well within the assumptions made in the 2022 technical report. We also expect to cut the first purchase orders for the battery electric mining fleet within days. And once again, I'm happy to say that the cost and anticipated lead times are in line with the technical report. With respect to construction, underground development advances, we crossed the thousand meter mark in both the south portal lower and south portal upper tunnels. Work has begun on internal ramp development in two directions in the upper tunnel. Despite heavy rains throughout the corridor, work progressed on schedule for the paste plant and construction generator area as the excavation nears completion. On the permitting side, we had two major milestones during the quarter. Jodi already mentioned the receipt of the MIA integral. The second key approval was the ability to increase the power draw from the current 115 kV line to 45 megawatts. Discussions are well underway to increase the power draw to 65 megawatts by tying into the nearby 230 kV high voltage line as well. As noted by Jody earlier, we now anticipate spending between $120 and $150 million on MediaLuna this year instead of $170 to $210. The underspend primarily relates to an adjusted distribution of project indirects such as contingency freight and import tax charges to later stages of the project. Procurement activities, which also reflect more time taken to widen the pool of vendors to ensure competitive pricing, and more time for vendors to provide bids and differing cost flow assumptions for these procurement packages. The cost flow assumptions experienced to date have resulted in lower upfront payments than originally assumed, i.e. we're spending less on deposits and down payments, putting more of the cost flow to later in the project timeline. While the cost flow patterns have deviated from the technical report estimates, the overall cost of POs executed to date are substantially in line with our initial forecast. Overall, at this early stage in the project development period, MediaLuna Critical Path is tracking to schedule and to budget. Turning to slide 18, we have some pictures of the progress to date. As you can see, we're making solid progress on our underground development and surface construction. The electrical substation at the Juarez Tunnel entrance is completed, and we are in the process of constructing weather protection over it. There has been a strong discipline on the installation of all services and quality of work completed in the underground development, including maintenance of the ramps, despite the push for continuous development improvements. This will serve to facilitate improved efficiencies and safe operations as we get deeper into the mine. We have considerably progressed the excavation associated with the paste plant and adjacent generator pad, all this while stabilizing slopes on our access roads during a challenging rainy season. Slide 19 illustrates the progress we're making on the long lead development. The Guarez Tunnel has now advanced more than 2.8 kilometers at the end of October with rates relatively stable the last several months. We remain focused on improving cycle times and expect to see daily advance rates move higher in the coming months with the receipt of new suitably sized drill equipment for this large heading. At South Portal Lower, we are now advanced almost 1.2 kilometers with rates continuing to improve now that we're in the host granodiorite. which is very competent rock. We have also established stable power supply for continued development and additional equipment has been mobilized to ensure effective availability and an opportunity to advance multiple headings. Given progress in both tunnels, breakthrough of the Guades tunnel is still anticipated in Q1 2024. Once breakthrough occurs, we'll complete the installation of the Guades conveyor, as well as the balance of the main services and supply lines for both water and tailings. This will be well in advance of commissioning our new flotation plant in Q4 of 2024. At South Portal Upper, we completed the main tunnel decline and are now advancing the internal ramp towards the west vent at it and down to our production levels. We are also mobilizing our raised board contractor as we'll be able to begin the required vertical development to increase ventilation supporting additional advance towards the upper and middle portions of the deposit. Slide 20. outlines the prospective nature of the Morelos property and our planned exploration and drilling program for 2022. Overall spending and progress is tracking to budget with over 70% of the planned drilling and exploration expenditures incurred as of the end of September. Given the number of assays received or expected to be received in the coming weeks, we expect to provide a number of drilling updates over the next three to four months, including results from the infill drilling program at Media Luna and EPO, step-out drilling within the broader Media Luna cluster, drilling below the El Lamoncer open pit, as well as additional results from drilling within the ELG underground. In September, we released initial results from the ongoing drill program within the ELG underground, which reinforced our confidence to extend the life of the underground mine, but also increase output towards 2,000 tons per day. In addition to positive results from the infill drilling below reserves at ELD, StepOut and Infill Drilling identified a potential new mining front at Sub-Cil South, which is about 100 meters from existing infrastructure at Sub-Cil. With Portal No. 3 completed, StepOut Drilling targeting vertical extensions of Sub-Cil have commenced. We are excited about the potential of this program given mineralization in both Sub-Cil and ELD remains open at depth. With the level of step-out drilling under the 2022 program, we expect to replace reserves in 2022 and grow the overall resource envelope. The 2023 program will be looking to convert these new resources into reserves. I'll now turn the call back over to Jody.
spk01: Thanks, Dave. I'm excited too about the potential there at ELG Underground. In sum, it's certainly been an eventful quarter with the team just continuing to execute as planned. Consistent delivery in the operations at ELG, maintaining cost control, and the project not only ramping up, but hitting some major, major milestones. With the steady progress made across all of our strategic objectives, we expect a successful close to 2022 right around the corner here, and a setup for another excellent year in 2023. I'll now turn the call back over to Sachi, who will open the call for questions.
spk00: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one 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 two. We will pause for a moment as callers join the queue. The first question is from Trevor Turnbull from Scotiabank. Please go ahead.
spk06: Hi, thank you. I plan to ask about using the tech report kind of as a stand-in for guidance, given the inflation you've experienced since it was written, but Andrew really addressed that very well. Instead, could you just remind me what the underground mining rate assumption was in the tech report, and then maybe make a comment on how critical that future growth in the underground is to keeping those costs to the levels that Andrew indicated.
spk01: Yeah, thanks, Trevor. I'll take that one. Dan's just pulling up. We've got to go back in the memory bank here to get the underground mining rate and the technical report. But that increase in rate is important to us for a couple of reasons. One, it is a key piece of the puzzle as we are in that transition period between the open pits coming offline and Medialuna coming online. with early production in early 2024 and then commercial production in Q1 of 2025. And the other thing about that ELG underground, it's important for us recall the mill cuts out from 13,000 tons a day to 10.6 in Q4 of 2024. And we are looking for other sources of feed to fill the mill post that 2027 period. So the base case in the technical report is 7,500 tons a day from Medelluna, together with contribution from ELG Underground that we're now eyeballing in the range of 2,000 tons per day, and then contribution from EPO as well. The assumption, I'm getting a note here from Dan, the assumption in the technical report for ELG Underground was 1,400 tons per day. So you can see that we're hitting beyond those rates already.
spk06: Yeah, that was kind of what my memory was telling me. That sounds great. The only other question I had is just about agreements with local communities as the operations start to shift more towards Medialuna. I couldn't remember if there was any kind of work outstanding with respect to that or if everything's already been completed.
spk01: There is work outstanding with respect to that, Trevor, and I can tell you that it's progressing very well. Recall on the north side of the river, we have 11 agreements called CODA COPS with the 11 communities around us there. There are three new communities that we're going to be dealing with on the south side of the river. And we've already, as one would expect, opened up conversations and dialogue with them about our processes for employment and participation in the contracting environment. One specific agreement that has been entered into already was with respect to the road improvements that we had to get done to move heavy construction equipment through the zone. And we're moving ahead on CODA COPS with the other three communities. one of which has just recently been signed. So we've got two to go here. Things are going well.
spk06: Okay. Sounds good. Thank you very much.
spk00: Next question is from Michael Fairbairn from Canaccord Genuity. Please go ahead.
spk04: Hi, everyone. Congrats on a very strong quarter, and thank you very much for taking my question. Just one for me on Sub-Cell South. I'm just wondering if we might expect to see that included in this year's reserve and resource update. And if things are looking positive as the exploration program progresses, how quickly do you think you might be able to get into it to potentially start mining it?
spk03: Yeah, I'll take that one, Mike. So I would expect to see Sub-Sahel South into resources. We had a small resource there last year. We'll see that expanded this year. We'll do follow-up drilling on that in 2023, and I expect you'll see that brought into reserves with the year-end 2023 update. It's about 100 kilometres, sorry, 100 metres away, not kilometres. It's 100 metres away from the existing infrastructure at sub-sill. So as we do a little bit more work on the exploration program, That will play out into our future development plans as we look to access that. Right now, it's probably two to three years away before we start to pull ore there based on what we see today, but that will help go with the extension of the mine life. We'll also have some additional drilling out later this year on some of the work we've been doing below the Elieman Sur open pit. And you recall, we did provide a little bit of detail on that drilling in the December 2021 ELG underground resource press release, drilling press release we put out. So still lots of work to do under the ELG underground to figure out what we've got there. But so far we're really, really confident in what we're seeing.
spk04: Sounds great. Looking forward to the results as they come out, and congrats again on a strong quarter.
spk01: Thanks, Mike.
spk00: Once again, it is Star 1 to ask a question. The next question is from Don DeMarco from National Bank Financial. Please go ahead.
spk05: Thank you, operator, and good morning, Jody and team. Just one question, and it's regarding the CapEx guidance increase. I apologize if it's been asked previously, but the... So I see some of the costs are being reallocated forward. Is there any potential risk that they could, in 2023, be reallocated further forward and then maybe even put some pressure on the schedule of the project? So if you just sort of provide some color on the reasons why that CAPEX was pushed forward and if, indeed, they will be spent in the years that are now scheduled. Thank you.
spk02: Yeah, I'll take that one, Don. Dave Stefanuto here. So over 64, 65% of the reallocation has to do with indirects associated with contingency, freight and IMEX, as well as renegotiated payment terms for POs that we've committed to and locked in. So it's really just adjusting the cost flow to future years. We have pushed back some of that contingency to the latter parts of the project where we really see kind of the risk on some of the bigger contracts is when we would experience those So we don't expect to see a significant change moving forward. A small portion of that redistribution is related to the progress that we've seen to date. And again, we're generally trending on track for the project, so not expecting any further significant adjustments through 23 and 24. Okay.
spk05: Thank you. That's all from me. Good luck.
spk01: Thanks, Don.
spk00: As there appear to be no more questions, this concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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