Torex Gold Resources Inc.

Thank you for standing by. This is the conference operator. Welcome to Torex Gold's first quarter 2024 conference call and webcast. 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 one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Laura Turton, Investor Relations Analyst. Please go ahead.

Thank you, Operator, and good morning, everyone. On behalf of the Torex team, welcome to our Q1 2024 conference call. Before we begin, I wish to inform listeners that a presentation accompanying today's conference call can be found under the Investors 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 cautionary notes on page two of today's presentation, as well as those included in the Q1 2024 MD&A. On the call today, we have Jody Kozenko, President and CEO, Andrew Snowden, CFO, as well as Dave Stefanuto, Executive Vice President, Technical Services and Capital Projects. Following the presentation, Jody, Andrew, and Dave will be available for the question and answer period. This conference call is being webcast and will be available for replay on our website. Last night's press release and the accompanying financial statements and MD&A are posted on our website and have been filed on CDAR+. Also note that all amounts mentioned in this call are U.S. dollars unless otherwise stated. I will now turn the call over to Jody.

Thank you, Lauren. Good morning to all on the line. The first quarter of 2024 marked a great start to the year for Torex, just across the board. Production returned to more typical levels for us after our near-record Q4 last year. Costs are tracking to expectations, and ELG continues to fire on all cylinders. While it's still early in the year, obviously, we are well on pace to deliver annual production guidance for the sixth year in a row. Our liquidity position remains excellent, particularly impressive considering we've now crossed the two-year mark on MediLuna construction. With the record gold prices we're seeing and funding well in hand to execute on our strategic objectives, We're in a solid position financially and expect to exit the MediLuna build with a very modest level of net debt. We expect to pay back before the mine is even fully ramped up. In addition to the strong operational results, cash generation and balance sheet, MediLuna is progressing on schedule. With the project almost 70% complete at the end of March and first concentrate production expected in Q4 and commercial production coming early next year. I was at the mine a few weeks ago and saw for a can the progress being made. They will speak to the project in more detail, but what I saw was two-thirds of the concrete poured, steel being erected across multiple work fronts, the flotation cells now being set in place at the flotation circuit, and the underground mine is starting to look like an underground mine with more than 30 active headings. It's really incredible to see the project coming together and the finish line in sight. Starting as always with our strategic pillars on slide four, it's the anchor for our presentation. You'll remember that last quarter we updated our strategy to reflect the progress that has been made and how we're shifting our focus to ensure that we not only deliver Medialuna on schedule and on budget, but that we see a smooth integration of the project with existing operations. We're well underway to deliver Medialuna to full production. With a number of schedule critical milestones now behind us, our attention has turned to ensuring that our vendors meet key delivery timelines. It's turned to installing and commissioning the WAHES conveyor through the WAHES tunnel. On the mine side, we're working hard at ore control drilling, underground construction at the mine, and tighter and tighter iterations of the year one and two mine plan. On the processing side, we're preparing the final plans to complete the necessary tie-ins at the plant in Q4 of this year. Another important focus for us is integrating and optimizing the entirety of the Morelos asset, ensuring that our project is handed over to our operations team seamlessly and that both ELG and Medialuna work together at their peak operational performance. Work is very much in stride with what we call our operational readiness teams and our strategy is advancing as planned. On the pillar of capital allocation and discipline growth, our balance sheet remains strong and we're building a buffer with respect to available liquidity and remaining spend on MediLuna. On grow reserves and resources, we released our year end reserve and resource update in late March, and we did just that. At ELG Underground, we increased reserves to over 654,000 gold equivalent ounces, which now sees us with a reserve life through 2028. At EPO, indicated resources increased to $1.2 million, with another 720,000 gold equivalent ounces in the inferred category. The pre-feasibility study at EPO is progressing nicely. We got a look at it as a management team a couple of weeks ago, and we expect to be in a position to provide high-level results later this year. I'll touch on reserves and resources again before the end of the call. In terms of the remaining two pillars, I've mentioned last quarter that retain and attract best industry talent was not a new strategic pillar for us, but certainly was a new strategic pillar, but certainly not new to Torex. There's an important point here I want to touch on. It's that a key piece of the MediLuna build has been our workforce transition plan to retain our local talent and offer our open pit employees the opportunity to transition to underground mining as the open pit mine comes off mid next year. And of course, to attract and supplement with new talent as required. We're making good headway here. We have now hired 110 people and transferred 61 people to the MediLuna project with another 165 transfers in process. In fact, our first class of minors from our underground training program graduated in quarter one. These crews are now working alongside our underground development team. And finally, we continue to build on ESG excellence. So this is shown through a number of improved ratings from various agencies that we got in the quarter. This is all in detail in our corporate deck on the website. I'd encourage you to look at it. It really does reflect the important work the team is doing on the ground on safety, social, and environmental issues. Moving to slide five, our unrelenting focus on safety didn't let up in the quarter. ELG complex has now surpassed 14 million hours worked lost-time injury-free. Our lost-time injury frequency for the Morelos complex in its entirety, this is ELG and the project and all contractors, now sits at 0.15, down from 0.31 at the end of Q4 and 0.47 at the end of Q3. What you hear in those numbers is a solid downward trajectory, and we're working hard to maintain this. Production at 115,000 ounces and costs with ASIC at $1,202 per ounce are tracking a plan. Revenue of $237 million was supported by our highest quarterly average realized gold price of $2,023 per ounce. With quarter one being another quarter of significant spending on Medialuna, enterprise-wide our free cash flow remained negative. That said, You'll see here that prior to Medialuna's spend, ELG generated positive free cash flow of $77 million. This is a good indication of what's to come when we return to positive free cash flow enterprise-wide in mid-25. On balance sheet, our liquidity position of over $400 million means we're comfortably funded for the remaining $257 million of capital expenditures on Medialuna. Turning more specifically to our operational performance on slide six, our solar production was driven by yet another new record at the processing plant. Gold recovery averaged 90.7% for the quarter, really the highest to date. The processing plant also achieved its fifth consecutive quarter above 13,000 tons per day. You can see on the bottom left, processed grade, although lower than Q4, was in line with our expectations. Recall, Q4 was a bit of a grade outlier after two quarters of heavy strip through the middle of last year. Our Q4 open pit mining rates were at record highs. So we fed the higher grade open pit material directly to the mill and directed lower grade feed to stockpiles in accordance with our feed strategy. Those swings are behind us now in the pits and we expect grade to be relatively flat for the balance of the year in line with what we saw in Q1. And lastly, our underground mining rates dipped below 2,000 tons per day in Q1, given the backfill priorities in the mine plan, particularly during the month of March. Mining rates are expected to improve in Q2 and return to what we now call the steady state range of over 2,000 tons per day for the remainder of the year. Slide seven shows our Q1 performance compared to our full year guidance. I've already talked about production of 115, places that's on track. Total cash costs of $918 per ounce and all in sustaining costs of 1202 per ounce. We're both slightly above our full year guidance ranges. This was expected. Costs are expected to decrease through 2024 as stripping requirements continue to decline with the wind down of the open pit. We very much expect to achieve full year guidance for both TCC and ASIC. During the quarter, $126 million was spent on Medialuna. We expect to remain above $100 million of spending per quarter through Q3 before CapEx comes off in Q4 as first concentrate production is achieved. There has been no change to full year guidance of between $350 and $400 million on Medialuna this year. And on that note, I'll hand the call over to Andrew to discuss our financials in more detail.

Okay. Thank you, Jody, and good morning, everyone. I'll start my commentary discussing our Q1 financial performance, and you can see this summarized on slide nine. You'll note here that despite another quarter of elevated spending on MediaLuna, and this has been the highest quarter spent to date, we ended the first quarter in a strong financial position. Our Q1 operational performance, supported by a record realized gold price of over $2,000 an ounce, helped us achieve an all-in sustaining cost margin of 39% and generate $113 million in adjusted EBITDA. Although our financial performance was supported by these higher gold prices, the strong Mexican peso did erode some of this margin and impacted our cost performance, averaging $17 to $1 during the quarter and has remained around these levels since. As a reminder, we budgeted this year at an exchange rate of 18 to 1, and for every one peso move relative to the U.S. dollar, all in sustaining costs annually will be impacted by about $10 million. On cash flow, with the ongoing investment in MediaLuna, we did again see free cash flow remain negative this quarter, as it has been over the past year. We are, however, still very much on track, though, to return to positive free cash flow in mid-2025. And in addition, the current gold price environment combined with the consistently strong operational performance we're seeing from ELG bodes well for further margin expansion and robust cash flow generation. This should further strengthen our funding position and allow us to exit the media lunar build with only a modest level of debt. Turning now to slide 10, you can see a summary of our unit cost performance here and just a few comments I want to make on this slide. Firstly, looking at the open pit unit costs, in addition to the peso strength I mentioned, the mining costs there were also impacted and also higher due to some higher contractor and fuel costs in the quarter. At the underground, the higher costs you see there are directly related to the stronger peso and also the lower underground mining rates that Jodi mentioned earlier. These costs are expected to come down through the year as mining rates ramp back up to around and above 2,000 funds per day. At the plant, processing costs were higher due to the stronger peso. And then finally, I just want to talk briefly about the Mexican profit sharing, or the PTU. And just to point out that this amount is accrued quarterly, and that's based on the expected full-year taxable income, which is then allocated between OPEX and CAPEX. The lower expense you see here in Q1 is just due to the lower taxable income currently forecast for 2024, and that's due to the one-month plan shutdown we're building into our forecast for Q4, and also an increased employee focus on MediaLuna. And those MediaLuna employee costs, of course, get capitalized to the projects. That said, the continuation of the current gold price environment could serve to increase the PTU cost through the year. And so if the $2,300 an ounce price does remain, you should expect that will kind of increase back up to closer to 2023 levels. Turning now to slide 11, the strong EBITDA generated in the quarter helped to offset the $126 million spent on the MediaLuna project. while closing the quarter with a cash balance above $110 million. And that's without yet having to draw on our credit facility at the end of the quarter. In addition to the significant capital expenditure, and as a reminder, tax and royalty payments are always higher in the first quarter. The taxes paid in the quarter of approximately $44 million included the annual 7.5% Mexican mining royalty payment, and that was for $25 million. And in addition, it was also $12 million in revenue-based royalty payments made in the quarter. And these royalty payments are not considered taxes and are therefore accrued quarterly within our reported costs in EBITDA. And as a reminder, our profit sharing or PTU will be paid this month. And in fact, that's getting paid today. And we'll have an impact on our Q2 cash flow. This year, we expect the payment in relation to 2023 to be approximately $23 million. Finally, on this slide, I also want to just remind everyone that in addition to the tax royalty and PTU seasonality this year, we are expecting cash flow in Q4 to be impacted by the one-month shutdown of processing plants and the media luna tie-ins, where we'll only have the two months of revenue during that quarter. Looking now at our liquidity position, which you can see on slide 12, this slide really shows that we closed the quarter with over $400 million in available liquidity and no amounts yet drawn on our credit facility. You will recall, though, that one of our strategic objectives is to retain approximately $100 million in cash on the balance sheet through the build. And based on the current forecasts, I expect we'll draw about $150 million on the credit facility to achieve this. And so with $100 million in cash, really a net debt of $50 million coming out of the build. On this note, we did draw the first $30 million of the credit facility this April, and you'll note that in our disclosure here that that was a post-quarter end activity. Just briefly touching on leases, our lease-related obligations also did increase this quarter to $44 million, and that was driven by $11 million of additional lease-related obligations. In summary, our balance sheet continues to remain strong, leaving us well-positioned to deliver on our strategic priorities. The continued strength in the gold price also bodes well for further balance sheet strength, which, if continued, should allow us to exit the MediaLuna build with only modest levels of net debt, and we expect we'll be able to repay that debt back very quickly as MediaLuna ramps up. And you can see this liquidity position much more clearly on slide 13, and you can see how our liquidity position compares to both the $257 million of remaining spend on MediaLuna and our strategic objective of maintaining at least $100 million on the balance sheet. Executing on these priorities compares to the $130 million of cash and 292 of available credit facilities we had at quarter end, resulting in a funding surplus of about $50 million at the end of the quarter. A surplus we expect will further improve over the remainder of the year, given the strong cash flow generation from ELG, which, after taking into account corporate G&A and exploration, has generated $246 million of free cash flow prior to immediately the spend over the last 12 months, and that's an average price of just under $2,000 an ounce. With the gold price now hovering around the 2,300-ounce range, we're well-positioned to further strengthen our funding position through the remainder of the year, And with MediaLuna tracking the plan, I expect, as I mentioned earlier, we'll return to positive free cash flow during 2025. Finally, just a quick reminder to the listeners on our hedging position. You can see these summarized on slide 14. At the end of the quarter, we had just over 114,000 ounces remained hedged on gold at an average price of $19.75 an ounce. Recall, these hedges were purpose-built. to protect the balance sheet during the build-out of MediaLuna. We do not have any plans to add any hedges in 2025 or beyond, which will provide full exposure to a strong gold price, copper, and silver prices going forward. Also, in terms of the Mexican peso, as I mentioned, we're currently seeing it trade around 17 to 1, and that compares to the 18 to 1 assumption we had in our operating budget this year, and also the 20 to 1 assumption we made in our MediaLuna feasibility study. As reported previously, to help manage the foreign exchange risk related to the build, we did enter into a series of zero-cost collars to hedge against foreign exchange movements, and the details of that are summarized on this slide. Just as a reminder, approximately 45 percent of the remaining expenditures are expected to be denominated in pesos, and the level hedged represents just under 40 percent of the peso denominated expenditures. And so with that, I'll turn the call over today for an update on MediaLuna.

Thanks, Andrew, and good morning to everyone on the call. Slide 16 shows the progress at MediaLuna during Q1, which was announced in a press release earlier last week. At the end of March, overall progress sits at 69% complete, up from 60% at the start of the quarter. Underground development and construction was 64% complete. significant progress has been made here on installing the wise conveyor system with 78 of the conveyor tables installed at the end of march the conveyor belt segments have been received and are being spliced to length at site with their installation expected to commence mid q2 well ahead of commissioning in august in mine development also continued to advance steadily The first charging bays for our Sandvik production equipment and Rokeon-McLean support equipment were excavated and the installation of the charging equipment was completed in April. On surface, two-thirds of our planned concrete for the project has been poured, including all concrete for the Pace plant thickness area. The balance of the plant concrete is to be completed during the second quarter to facilitate the start of steel erection in May. On the north side of the river, significant progress was also made, including the setting of the first flotation cells at the processing plant, the start of installation of the wires tailing thickener, piping installation in the water treatment area, and at the processing plant between grinding and flotation circuits. Procurement reached 78% with deliveries of important infrastructure, such as the ore and waste transfer conveyors taking place during the quarter. Finally, engineering was at 91% complete at the end of Q1 and continues to focus on finalizing electrical deliverables, such as electrical schematics. We are working closely with vendors to expedite purchase orders and compress delivery times where possible. Moving to slide 17, you'll see some pictures of the project development. The conveyor table installation I just mentioned can be seen on the left side of the slide. The picture really gives you a good idea of the scale of the size of the WISE tunnel when you look at the workers in comparison. As a reminder, the tunnel sits at 6 meters wide by 6.5 meters tall. The top middle photo is the WISE conveyor head station where the conveyor will terminate outside the WISE tunnel portal. From here, ore and waste will be re-handled to its final destination. During the quarter, the e-house for the WISE conveyor was placed onto concrete supports to prepare for electrical installation next quarter. The top right shows the copper and iron sulfide flotation cells being set in place and piping being installed. And finally, the bottom photo shows progress made at the paste plant where concrete foundations have been poured. Erection of the binder silo and thickener will commence shortly, in parallel with erection of the filter building steelwork. In summary, a lot of progress has been made in Media Luna during the quarter. With first production still on track for Q4 this year, we're looking forward to delivering Media Luna to plan. With that, I'll turn the call back over to Jody.

Thanks, Dave. We're looking forward to that, too. Before we wrap up here, I wanted to touch on the excellent year-end reserves and resources update we put out at the end of March. Our teams are doing a lot of work to grow our resource base, and the results we released highlighted just that. You can see here on slide 19, a summary of the changes to our reserve base. You can see that 67% of the reserves processed last year were replaced. Importantly, the focus area here is the mine life of ELG underground. It was extended by two years through 2028. This underscores our belief in the resource potential of this deposit that we'll be able to mine a year, add a year, mine a year, add two years, year after year for the foreseeable future. And this ELG underground is an important part of the life of mine plan to complement Medialuna production and fill the mill post-2027. I'll also note here that we increased our reserve prices across gold, silver, and copper. We saw this as a prudent thing to do given where commodity prices sit today. The reserve price used for gold was $1,500 an ounce, and it's in line with the average of North American listed precious metals producers. Resources are shown here in the next slide, slide 20. In 2023, we increased our measured and indicated resource base by over 900,000 gold equivalent ounces. The year before, we added over a million ounces of gold equivalent to the M&I category. So almost 2 million ounces in two years, which I think is pretty impressive for a company our size, and there is more to come. The two main drivers of resource growth this year were not surprisingly our focus areas. ELG Underground, now sitting at 1.4 million ounces in M&I, and EPO, now sitting at 1.2 million ounces in indicated. Similar to reserves, we increased our resource prices as well, now sitting at $16.50 per ounce gold, $22 per ounce silver, and $3.75 a pound copper. Again, we're still relatively conservative here. The gold price used for resources is modestly below the average of the North American listed precious metal peers. And finally, slide 21 highlights our overall exploration and drilling plan for 2024. With two strong growth years behind us and $30 million budgeted for this year on the drill bit, we're confident we'll continue to see success in growing reserves and resources on both the north and south sides of the property. And we're also this year advancing early stage exploration on some of the more regional targets across the property. We expect to release initial results from the 2024 program at ELG Underground in June and have a steady cadence of exploration releases throughout the year and into early 2025. With 3 million ounces produced, we crossed that milestone last year, another 10 million ounces in our resource base and the property remaining 75% unexplored. We all know there is much more value to unlock here at Morelos, and we're working away at doing just that. So that's the sum up of an excellent quarter that was, and the finish line at Medialuna. And with that said, I'll now hand the call back to the operator to open the line for questions.

Thank you. To join the question queue, you may press star, then run on your telephone keypad. You will hear a tone, not using 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. The first question comes from Don DeMarco with National Bank Financial. Please go ahead.

Thank you, operator. Good morning, Jody and team. Great work proceeding with Media Luna development. It's great to see another quarter of execution. So first question, what's on the critical path of Media Luna development over the next three quarters?

Hi Don, thanks for the question. Dave Stefanuto here. Yeah, in terms of critical path for us, it's really just delivery of the final components of electrical gear to support the commissioning of the flotation plant and the paste plant later on in the year. So it's making sure those vendors meet those commitments and ensuring we have that gear installed to facilitate that commissioning.

OK, and are there any parts or equipment that's not on site yet that could be potentially delayed?

Again, primarily electrical gear. We do have some switch gear. It wasn't long lead item, but there's a lot of high demand in the industry for this. So vendors are struggling to meet deliveries. But we do have workarounds for many of these in Plan B. So we do have ways to mitigate that risk moving forward. Other than that, the majority of all of our major equipment, major processing equipment and major underground equipment is already arrived at site.

And Don, I just want to make another point here on this question around delay, because it's an important question. While we're very much planning to produce Copricon in Q4 of this year, if and as this electrical gear doesn't come in, all we're going to do is continue to produce out of ELG in the way that we have. And so, unlike a true greenfield project where delay means massive overrun costs and no cash flow, We're sitting in a very different situation in terms of the business reality of schedule risk on this project. So I just want to amplify that.

Okay. Okay. So looking at operations over the next few quarters, could you walk us through those next few quarters? Like obviously Q4 is going to be the low watermark for the year with the shutdown and the tie-in. But would you expect Q2 and Q3 then to be the higher production quarters relative to Q1? I see the strip is easing and so on.

You can think about production, John, as relatively flat, Q1, Q2, Q3, and then coming off slightly, not slightly, a month's worth in Q4. I think the real sort of puts and takes in production is one that you mentioned already, strip coming off in the pits. It halves roughly every quarter, so we were at eight, it goes to four to five, and then two, and then comes right off at the end of the year. And the other one is, as mentioned on the call, the underground mining rates are going to pull back up to where they need to be. 1,800 ton a day is low for us in this new environment. We had to backfill a crown pillar in Q1, and so that took up some time and attention for the underground mine, but we'll pull those back up. But in terms of finished ounces, you can think about it as relatively thought flat through to Q4.

Okay, sure. And then taking a look back at the technical report from 2022, How should we look at ASIC over the mine life in light of peso strength that's been mentioned or other factors? I mean, I see the tech report also is based on $1,600 gold, and that's now $700 higher. But with respect to cost, you know, should we apply some kind of a factor to those in our models?

Yeah, I mean, the cost profile for MediLuna early days is going to be higher than what you see in the technical report. I mean, my instructions to the team are first, figure out how to do it. and then figure out how to do it safer, faster, cheaper. And I'm going to give you one good example of that. We're going to be producing copper con. There are a number of ports of choice that we can send it to as Andrew and his team are making arrangements with traders and smelters. We have landed on a port in Manzanillo that is far away from the operations only because the security around that is well established, the port infrastructure is well established, and that will cost substantially more than the transportation costs we had outlined in the technical report as we move forward and get good at our logistics and systems on copper con delivery we will move to a much closer port and work with a partner to build infrastructure that sees that that's secure so there will be a period of time where costs are under pressure early in the mine life And after that, I very much expect them to settle out at about $1,100 an ounce out of MediLuna. We'll continue to be among the best cost profile producers for a very long time. And the peso strength will be more than offset by the gold and copper prices we're seeing.

Yeah. Okay, great. Thanks for that. And well, good luck with the rest of Q2 and the rest of the build. That's all for me.

Thanks for that, John. We appreciate it.

The next question comes from Spencer Lehman, individual investor. Please go ahead.

Jody, copper is having a nice run lately, and of course the future demand, this looks huge. How important is copper becoming to Torex, both in the ELNG and in the future? Opening with Media Luna.

Yeah, thanks for the question. We like copper. When we're in full production there, we're going to be producing about 45 million pounds of copper per year. The value of copper in that deposit is about 30%. And so it becomes an important piece of the story for Torex, not only in terms of what we're doing at Morelos, But as we conclude Medialuna and as we're thinking about M&A, I think we have a really nice and natural segue to look at acquiring some assets that are rich in copper as well. So to bolster our gold production profile with copper production, which will give our investors a nice diversified metal supply mix in addition to diversifying jurisdiction. We like copper going forward. I'm quite bullish on it. I see no scenario where the supply... side meets the demand in the next 10, 15 years.

Oh, good. Thank you. That sounds good.

Thanks for your question. The next question comes from Kevin O'Halloran at BMO Capital Markets. Please go ahead.

Hey, Jody and team. Thanks for taking my question. A few of mine have already been asked, but maybe just building on the M&A theme here. With Medialuna progressing well, the balance sheet looking really strong, can you refresh us on your thoughts? If you're actively looking, what sort of assets and maybe more importantly, what type of timing you might be considering if you were to transact?

Thanks for the question, Kevin. As Medialuna finish line is inside, M&A starts to be in sharper and sharper focus because Once Medialuna is on, we'll have an asset that delivers $200 million in cash flow year over year over year for, in my view, what will be decades to come. Our mine life's out to 2033, but the MAG anomaly at Medialuna is only about a third drilled off, and the asset, the property itself, is 75% unexplored. So that really opens up the opportunity with good, solid cash generation to look at growth beyond Guerrero And in terms of jurisdiction, we're looking at the Americas, Canada, the United States, Mexico. We believe we're good at what we do in Mexico. We've demonstrated that to ourselves and to the rest of the world. I believe Mexico's in for a bit of tailwinds here as the election occurs and we get some increased political stability. And so that's what we're looking at geographically. In terms of metal mix, I've already touched on that in my commentary on copper. And we're open to, we have a three-pronged strategy in terms of the type of asset we're looking at. One is an MOE type transaction. I'd like to get our share price up a little bit before we do something like that. The other is a project. that we can add value to and create really real value for our investors by deploying what is now a very experienced project team who will have successfully built Medialuna into the next one. We think we have the skills to do that. We can accrue a lot of value in doing that. And then the third stream is smaller, very early stage exploration plays. We've really worked hard to bolster our exploration team This last year, we now have a VP of Exploration and two lieutenants, one of whom is going to be specifically focused on assessing and evaluating early stage exploration plays. In terms of timing, sooner the better as far as I'm concerned. We'd like to really get on this growth trajectory because we think we're ready to do it.

Great. Thanks, Jodi. Appreciate that. And I'll pass it on to the next caller.

Thank you, Kevin. The next question comes from Eric Windmill with Scotiabank. Please go ahead.

Great. Hi, Jody and team. Thanks for taking my question. Congrats on the quarter. Just a question on EPO. I know you said you're getting the study results now and put something out to the market later this year. What are you thinking we might see there and how are you sort of thinking that might integrate? Any details would be appreciated. Thanks.

Thanks for the question, Eric. We're very excited about EPO, and I'll tell you why. It will be the first example of adding ounces to the mine plan on the south side that floats off of the back of all of this heavy lift on the capital investment we've made at Medialuna. So remember, this $875 million investment got us the tunnel, the conveyor system through the tunnel, the increase in power supply, the increase in water supply. It got us everything we need to really exploit that south side in a very capital efficient way. And EPO is going to be the first example of that. And so what you're going to see is a mine plan that's not fully defined in terms of the ounces. It's expensive to drill EPO from surface. It's at the very top of the mountain where we have to go in. So we're going to go in there, start to drift over from the Wajas Tunnel. It's about a 400-meter drift and really continue to drill that off from underground. pull the ounces back in through the existing infrastructure at Medialuna, all of the ore and waste handling systems. And so this will be an example of a very capital-efficient, bolt-on, additive ounce situation to the existing mine plan. And one of the things we really like about it is when we show that added in, we will be able to showcase a scenario that we're growing increasingly confident in that we will fill the mill post-2027. And so the way the production profile looks is the mill is being taken down to 10,600 tons a day with the Medialuna build. We expect about 7,500 tons a day from Medialuna. We expect about 2,000 tons a day from ELG Underground. And we expect another 1,500, 2,000 tons a day from EPO. When we showcase that we have that mill full, it will become clear to everyone that we will be a 500,000 ounce producer for many, many years to come with great cash costs. And that will punctuate this idea that Morelos is our flagship asset from which we grow this company.

Oh, fantastic. Thank you. Really appreciate the added detail. So congrats again. I'll hop back in the queue. Cheers.

Thank you. As there appears to be no more questions, this concludes the question and answer session and today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.