Torex Gold Resources Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2024

There are 8 speakers on the call.

Operator

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.

Operator

I would now like to turn the conference over to Laura Totten, Investor Relations Analyst. Please go ahead.

Speaker 1

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.torixgold.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 2 of today's presentation as well as those included in the Q1 2024 MD and A.

Speaker 1

On the call today, we have Jody Kuzenko, 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 and A are posted on our website and have been filed on SEDAR Plus. Also note that all amounts mentioned in this call are U.

Speaker 1

S. Dollars unless otherwise stated. I will now turn the call over to Jody.

Speaker 2

Thank you, Lauren. Good morning to all on the line. The Q1 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.

Speaker 2

While it's still early in the year, obviously, we are well on pace to deliver annual production guidance for the 6th year in a row. Our liquidity position remains excellent, particularly impressive considering we've now crossed the 2 year mark on Medialuna 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 Medialuna 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, Medialuna 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.

Speaker 2

I was at the mine a few weeks ago and saw firsthand the progress being made. Dave will speak to the project in more detail, but what I saw was 2 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 4, 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 on a budget, but that we see a smooth integration of the project with existing operations.

Speaker 2

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 Juarez conveyor through the Juarez tunnel. On the mine side, we're working hard at ore control drilling, underground construction of the mine and tighter and tighter iterations of the year 12 minutee 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.

Speaker 2

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 disciplined growth, our balance sheet remains strong and we're building a buffer with respect to available liquidity and remaining spend on Medialuna. 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.

Speaker 2

At EPO, indicated resources increased to 1,200,000 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 a 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.

Speaker 2

There's an important point here I want to touch on. It's that a key piece of the Medi Luna 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 Medi Luna project with another 165 transfers in process.

Speaker 2

In fact, our first class of miners from our underground training program graduated in quarter 1. 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 on our corporate deck on the website.

Speaker 2

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 5, our unrelenting focus on safety didn't let up in the quarter. ELG complex has now surpassed 14,000,000 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.

Speaker 2

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 AISC at $12.02 per ounce are tracking the plan, revenue of $237,000,000 was supported by our highest quarterly average realized gold price of $20.23 per ounce. With quarter 1 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 spend, ELG generated positive free cash flow of $77,000,000 This is a good indication of what's to come when we return to positive free cash flow enterprise wide in mid-twenty 25. On balance sheet, our liquidity position of over $400,000,000 means we're comfortably funded for the remaining $257,000,000 of capital expenditures on Medialuna.

Speaker 2

Turning more specifically to our operational performance on Slide 6, our solid 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 5th consecutive quarter above 13,000 tonnes 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 great outlier after 2 quarters of heavy strip through the middle of last year.

Speaker 2

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 the 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 tonnes 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 tonnes per day for the remainder of the year.

Speaker 2

Slide 7 shows our Q1 performance compared to our full year guidance. I've already talked about production of 115 places us on track. Total cash costs of $9.18 per ounce and all in sustaining costs of $12.02 per ounce were 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.

Speaker 2

We very much expect to achieve full year guidance for both TCC and ASIC. During the quarter, dollars 126,000,000 was spent on Medialuna. We expect to remain above $100,000,000 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 $1,000,000 $400,000,000 on Medialuna this year. And on that note, I'll hand the call over to Andrew to discuss our financials in more detail.

Speaker 3

Okay. Thank you, Jovidy, and good morning, everyone. I'll start my commentary discussing our Q1 financial performance and you can see this summarized on Slide 9. You'll note here that despite another quarter of elevated spending on Media Luna and this has been the highest quarter of spend to date, we ended the Q1 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 generates $113,000,000 in adjusted EBITDA.

Speaker 3

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 $0.17 to $1 during the quarter and has remained around these levels since. As a reminder, we budgeted this year to an exchange rate of 18 to 1 and for every 1 peso move relative to the U. S. Dollar, all in sustaining costs annually will be impacted by about $10,000,000 On cash flow, with the ongoing investment in Media Luna, 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-twenty 25.

Speaker 3

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 Luna 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 contract 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 Jody mentioned earlier.

Speaker 3

These costs are expected to come down through the year as mining rates ramp back up to around and above 2,000 tons 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 for 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 1 month planned shutdown where we're building into our forecast for Q4 and also an increased employee focus on Media Luna.

Speaker 3

And those Media Luna employee costs, of course, get capitalized to the project. That said, the continuation of the current gold price environment could start to increase the PTU cost through the year. And so if the $2,103 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 $126,000,000 spent on the Media Luna project, while closing the quarter with a cash balance above $110,000,000 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 Q1.

Speaker 3

The taxes paid in the quarter of approximately $44,000,000 included the annual 7.5% Mexican Mining royalty payment, and that was for $25,000,000 And in addition, it was also $12,000,000 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 and EBITDA. And as a reminder, our profit sharing or PTU will be paid this month and in fact that's getting paid today and will have an impact on our Q2 cash flow. This year, we expect the payment in relation to 2023 to be approximately $23,000,000 And 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 1 month shutdown of processing plants and the media lunatics, where we'll only have the 2 months of revenue during that quarter. Looking now at our liquidity position, which you can see on Slide 12.

Speaker 3

This slide really shows that we closed the quarter with over $400,000,000 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 $100,000,000 in cash on the balance sheet through the build. And based on the current forecasts, I expect we'll draw about $150,000,000 on the credit facility to achieve this. And so with $100,000,000 in cash, really a net debt of $50,000,000 coming out of the build. On this note, we did draw the first $30,000,000 of the credit facility this April.

Speaker 3

And so that you'll note that in our disclosure here, but that was a post quarter end activity. Just briefly touching on leases, our lease related obligations also did increase this quarter to $44,000,000 and that was driven by $11,000,000 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 Media Luna build with only modest levels of net debt, and we expect we'll be able to repay that debt back very quickly as Media Luna 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 $257,000,000 of remaining spend on Media Luna and our strategic objective of maintaining at least $100,000,000 on the balance sheet.

Speaker 3

Executing on these priorities compares to the $130,000,000 of cash and $292,000,000 of available credit facilities we had at quarter end, resulting in a funding surplus of about $50,000,000 at the end of the quarter. Our surplus we expect will further improve over the remainder of the year, given the strong cash flow generation from ELG, which have to take into account corporate G and A and exploration, have generated $246,000,000 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 an ounce range, we're well positioned to further strengthen our funding position through the remainder of the year. With Media Luna tracking to 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.

Speaker 3

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 Media Luna. We do not have any plans to add any hedges in 2025 or beyond, which will provide full exposure to the 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:one assumption we had in our operating budget this year and also the 20:one assumption we made in our media Luna feasibility study.

Speaker 3

As reported previously, to help manage the foreign exchange risk related to the build, we did enter into a series of 0 cost collars to hedge against foreign exchange movements and the details of that are summarized on this slide. Just as a reminder, approximately 45% of the remaining expenditures are expected to be denominated in pesos and the level hedged represents just under 40% of the peso denominated expenditures. And so with that, I'll turn the call over to Dave for an update on Media Luna.

Speaker 4

Thanks, Andrew, and good morning to everyone on the call. Slide 16 shows the progress at Media Luna during Q1, which was announced in the 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 wires conveyor system with 78% of the conveyor tables installed at the end of March.

Speaker 4

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 base for our Sandvik production equipment and Rokeon MacLean support equipment were excavated and the installation of the charging equipment was completed in April. On surface, 2 thirds of our planned concrete for the project has been poured, including all concrete for the paste plant thickener area. The balance of the plant concrete is to be completed during the Q2 to facilitate the start of steel erection in May.

Speaker 4

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 Oren 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.

Speaker 4

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 Wyatts 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 Wyze conveyor head station where the conveyor will terminate outside the Wyze tunnel portal. From here, ore and waste will be rehandled to its final destination.

Speaker 4

During the quarter, the e house for the WAIS 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 steel work. 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.

Speaker 4

With that, I'll turn the call back over to Jody.

Speaker 2

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.

Speaker 2

You can see that 67% of the reserves processed last year were replaced. Importantly, the focus area here is the mine life of the LG underground. It was extended by 2 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 2 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 fill the mill post-twenty 20 7.

Speaker 2

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 $1500 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.

Speaker 2

The year before, we added over 1,000,000 ounces of gold equivalent to the M and I category. So almost 2,000,000 ounces in 2 years, which I think is pretty impressive for company our size and there is more to come. The 2 main drivers of resource growth this year were not surprisingly our focus areas. ELG underground now sitting at 1,400,000 ounces in M and I and EPO now sitting at 1,200,000 ounces in indicated. Similar to reserves, we increased our resource prices as well now sitting at $16.50 per ounce gold, dollars 22 per ounce silver and $3.75 a pound copper.

Speaker 2

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 2 strong growth years behind us and 30,000,000 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.

Speaker 2

With 3,000,000 ounces produced, we crossed that milestone last year, another 10,000,000 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.

Operator

Thank you. The first question comes from Don DeMarco with National Bank Financial. Please go ahead.

Speaker 5

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

Speaker 4

Hi, Don. Thanks for the question. Dave, Stefanuto here. Yes, in terms of critical path for us, it's really just delivery of the final components of electrical gear, to support commissioning of the flotation plant and the pace 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.

Speaker 5

Okay. And are there any parts or equipment that's not on-site yet that could be potentially delayed?

Speaker 4

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.

Speaker 4

So we do have ways to mitigate that risk moving forward. Other than that, the majority of all of our major equipments, major processing equipment and major underground equipment has already arrived at site.

Speaker 2

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 Coprakhan 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.

Speaker 5

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 a little 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.

Speaker 2

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 8, it goes to 4 to 5 and then 2 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. 1800 ton a day is low for us in this new environment.

Speaker 2

We had to backfill the 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 flat flat through to Q4.

Speaker 5

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 as you mentioned or other factors? I mean, I see the tech report also is based on $1600 gold and that's now $700 higher. But with respect to costs, should we apply some kind of a factor to those in our models?

Speaker 2

Yes, I mean, the cost profile for Medi Luna early days is going to be higher than what you see in the technical report. And then 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 pond. 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.

Speaker 2

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 coppercon 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 $1100 an ounce out of Medialuna will 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.

Speaker 5

Yes. 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.

Speaker 2

Thanks for that, Don. We appreciate it.

Operator

The next question comes from Spencer Lehman, Individual Investor. Please go ahead.

Speaker 6

Jody, how 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 LNG and in the future opening with Media Luna?

Speaker 2

Yes, thanks for the question. We like copper. When we're in full production there, we're going to be producing about £45,000,000 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 in terms of not only in terms of what we're doing at Morelos, but as we conclude Medialuna and as we're thinking about M and A, I think we have a really nice and natural segue to look at acquiring some assets that are rich in copper as well.

Speaker 2

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.

Operator

The next question comes from Kevin O'Halloran with BMO Capital Markets. Please go ahead.

Speaker 7

Hey, Jody and team. Thanks for taking my question. A few of mine have already been asked, but maybe just building on the M and 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?

Speaker 2

Yes. Thanks for the question, Kevin. On M and A, as Medialuna finish line is in sight, M and A starts to be in sharper and sharper focus because what Medialuna is on will have an asset that delivers $200,000,000 cash flow year over year over year for in my view what will be decades to come. Our mine life is out to 2,030 3, 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.

Speaker 2

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 We

Speaker 1

believe we're good at what we do in Mexico.

Speaker 2

We've demonstrated that to ourselves and to

Operator

the rest of the world. I believe

Speaker 2

Mexico is 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 3 pronged strategy in terms of the type of asset we're looking at. One is an MOE type transaction.

Speaker 2

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 3rd stream is smaller, very early stage exploration plays.

Speaker 2

We've really worked hard to bolster our exploration team. This last year, we now have a VP of Exploration and 2 lieutenants, one of whom is going to be specifically focused on assessing and evaluating early stage exploration plays. In terms of timing,

Speaker 1

sooner the better as far as

Speaker 2

I'm concerned, we'd like to really get on this growth trajectory, because we think we're ready to do it.

Speaker 7

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

Speaker 2

Thank you, Kevin.

Operator

The next question comes from Eric Windmill with Scotiabank. Please go ahead.

Speaker 6

Great. Hi, Jody and team. Thanks for taking my question. Congrats on the quarter. Just a question on EPO.

Speaker 6

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.

Speaker 2

Thanks for the question, Eric. We're very excited about EPO and I'll tell you why. It will be the first example So remember So remember this $875,000,000 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.

Speaker 2

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 Juarez tunnel, it's about a 400 meter drift and really continue to drill that off from underground, pull the ounces back in through

Speaker 4

the existing infrastructure at

Speaker 2

Medialuna, all of the ore and waste handling systems, 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 tonnes a day with the Medialuna build. We expect about 7,500 tonnes a day from Medialuna. We expect about 2,000 tonnes a day from ELG underground and we expect another 15,021,000 tonnes a day from EPO.

Speaker 2

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.

Speaker 6

Fantastic. Thank you. Really appreciate the added detail. So congrats again. I'll hop back in the queue.

Speaker 6

Cheers.

Speaker 2

Thank you.

Operator

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.

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Earnings Conference Call
Torex Gold Resources Q1 2024
00:00 / 00:00