Discovery Silver Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2026

Key Takeaways

  • Positive Sentiment: Record quarterly performance: Gold production reached 67,300 ounces, up 12% sequentially, while revenue rose 12% to $319 million and adjusted earnings increased to $92.3 million, nearly triple the year-ago level. Management said it remains on track to meet 2026 guidance.
  • Positive Sentiment: Kidd acquisition adds strategic capacity: The acquired Kidd operations contributed $30 million of revenue against $19 million of costs in June. Its processing infrastructure is expected to support Borden ore beginning in the first half of 2027 and potentially enable larger Pamour production in future years.
  • Positive Sentiment: Exploration results strengthened the growth outlook: Drilling at Pamour, Dome, TVZ, Owl Creek, and Borden continued to return high-grade intersections, with resource updates planned for later this year. Management believes Pamour could become significantly larger than the 150,000-ounce annual operation previously outlined and reiterated potential for gold production well above 500,000 ounces annually.
  • Neutral Sentiment: Heavy reinvestment weighed on free cash flow: Capital expenditures rose to $86 million in the quarter, contributing to $11 million of free cash outflow, while all-in sustaining costs were $2,154 per ounce. Management expects unit costs to improve in the second half as production and sales volumes increase.
  • Positive Sentiment: Liquidity remains strong: Discovery ended the quarter with $364 million in cash and more than $600 million of liquidity, subsequently increasing its revolving credit facility to $400 million and total current liquidity to over $750 million.
AI Generated. May Contain Errors.
Earnings Conference Call
Discovery Silver Q2 2026
00:00 / 00:00

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Operator

Good morning. My name is Alexandra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Discovery Mining second quarter 2026 conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one again. Thank you. I will now turn the call over to Mark Utting, Senior Vice President of Investor Relations for Discovery. Mr. Utting, you may now begin your conference.

Mark Utting
SVP of Investor Relations at Discovery Mining

Thank you, operator. Good morning, everybody. Thank you very much for joining us on Discovery second quarter 2026 conference call and webcast. As you just heard, I'm Mark Utting, Senior Vice President, Investor Relations. Joining me today are many members of Discovery senior executive team. Speaking today will be Tony Makuch, our President, CEO, and Chairman. Alison White, our Chief Financial Officer. Duncan King, our Senior Vice President, Canadian Operations. Gord Leavoy, our Senior Vice President, Mineral Processing. Harold Bird, our Vice President, Mineral Processing. Eric Kallio, our Senior Vice President of Exploration. José Jabalera, our Senior Vice President in Mexico. We'll then turn it back over to Tony for concluding remarks. Just before we get started, as always, I'll remind you that during today's call, we will be making forward-looking statements. These statements are based on current expectations and projections about future events.

Mark Utting
SVP of Investor Relations at Discovery Mining

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. For more information, please refer to slide two on our slide deck as well as other disclosures on our website. In addition, we will also be making reference to non-GAAP measures during the presentation. These measures do not have any standardized meaning prescribed under GAAP and therefore may not be comparable to other issuers. Slide three in the deck deals with cautionary language around non-GAAP measures. Lastly for me, all dollar amounts today will be expressed in U.S. dollars unless otherwise indicated. With that, I'll now turn the call over to Tony Makuch.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

Okay, thanks, Mark, and good morning, everyone. It's really good to be able to be here. Actually, I think maybe before we start, we had some pretty good results in the quarter. Things went well or progressed well. I know that there's a lot of stuff hiding in the background that maybe people don't see and don't talk about. A lot of people did a lot of good work. A lot of people that did a lot of good work, some of the results aren't really shown in this quarter. You'll be seeing them in future quarters.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

But what we talk about and all the benefits that we see and all the results you see, we get the chance to talk about it and tell you about it, but there's a lot of really good people working in the company throughout the operations, and they're the ones who did all the good work. So before we start, thank them for the good results. And we recognize really what everybody's doing. So stay tuned. We're going to talk about the good things that happened here, but stay tuned. There's still a lot coming to the end of the story. Anyway, I'll start with slide four. This is a slide that we've used a lot in the past to try to show things in terms of where we are in value creation.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

It talks about our growth to over 500,000 oz of gold in production over the next three to five years. It looks at our potential for Cordero and what we think we can bring to Cordero of 14 million ounces silver production rate, but on an equivalent silver equivalent basis, depending on silver prices. There's significant zinc and lead production there. And definitely a world-class silver project in Mexico. We're just waiting for a permit. And then looking at a gold business and what we're doing, we now believe that growth has the potential to be significantly greater than what we show here. And that's a forward-looking statement as Mark talked about earlier and during this presentation, but we'll show you why we are confident that this can be achieved. Going to slide five.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

Second quarter was favorable, and we did have a lot of good works, and definitely we've done a lot of progress in advancing our growth plans. And maybe there were three key developments during the quarter that maybe we could highlight when we get. First, we completed the acquisition of the Kidd operations. Second, we continue to achieve outstanding exploration results. And on the exploration results, we originally were putting all in one press release. Now we put out three press releases in the last three weeks. And instead of lumping them into one, there's so much good information, we realized we probably have to start presenting them each individually. And you can see there's excellent drill results at all of our exploration targets, and we expect that to continue.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

We really think as much as this is a production and business story and a going concern operation that's financially viable, and as much as this is a growth story, this could be an exploration story as well on steroids. And so we had a lot of good exploration results, and we did ramp up our investments in the quarter. And then we've had definitely, we're focusing on trying to improve our operations. But going to slide six, this looks at the Kidd acquisition. I think in our last call, we did talk a lot about it. But in summing it up, the growth we talked about, this is really a big enabler besides the exploration, besides having the people and what we're doing in the Porcupine Camp.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

Besides all the geology, et cetera, that we see here and the infrastructure in place, the acquisition of the Kidd operations really helps us to achieve the growth that we're targeting over the timeframe that we plan to achieve it. A big part of it is the Kidd metallurgical site and what we can do there. We'll probably be talking more and more in future as the year progresses in terms of the benefits of that. We're not going to get into too much of the details of that, but that was a significant acquisition that really enables us to move forward.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

Maybe when we talk about it, there's a current processing capacity there, but for us to grow our operation, optimize ore quantities at the Pamour without this infrastructure and the geography, the land position, the power, the water that comes with Kidd operations, maybe I could talk too long on that, maybe I shouldn't. This is a very important acquisition for Discovery. Slide seven shows what we know from the last quarterly call and gives a concept that lays out our plan to construction a new conventional gold circuit incorporated into space that was the A Division. You can see that some of the conceptual diagrams of where the infrastructure will go. We are currently reviewing what this circuit will look like and are advancing engineering design work.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

I can tell you that we have moving parts, the exploration success and our productivity rates that we might design for them. There's still lots of being added to the story. So we've got a lot of blank pages. We might have a lot of headings on and chapters written in the book, but all the content is being rewritten as we speak in terms of what we're doing there. The B circuit, that's at Kidd. There is four circuits, as we've talked about before. The B circuit will continue to be used as a base metal circuit and right now processing the Kidd Creek material, at least for 2026 and all of 2027. For the C circuit, we are doing test work now, and we expect that this circuit will be used to process Borden ore starting sometime next year.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

We see this could add something up to 40,000 oz in annual production just in a current form. Where did we get that from? Well, it will add 2,000 tons a day of added availability at Dome. We can see improved metallurgical recoveries at the ore process at the Dome Mill currently. Plus, we think we're going to get improvement in recoveries from Borden. It also gives us the ability to process higher levels of Borden ore at Kidd. So maybe it gives us the ability to increase productivity from Borden, because we were limited on what Borden ore could be intermingled into the gold circuit at Dome. With the Kidd met site, we also investigated future plans for the D circuit. Our goal would be to have the TVZ and/or other materials processed here.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

We still have a lot of work there, but really an enabler in a lot of ways. Slide eight looks at the exploration, and I mentioned we had three press releases over the last three weeks, all with excellent results. Eric's going to talk about this later, so I will just focus on a couple of things and maybe highlights. We are excited about Pamour based on recent drilling and tied into past drilling, where we have established that the minimizing system over, we have identified over strike length of more than 4 km. The system remains open in all directions and at depth. We have talked previously about the depth potential in this region of the camp in terms of depth of Hoyle Pond, where it is down to 60, 2,000 meters, I should say. The depth that was at the Hollinger project, which is on strike on the same system.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

It is not a mine that we have, but it was mined down to 5,000 ft. So there is a significant upside here. We are currently working on a mine redesign for the Pamour pit, and we expect Pamour to become a much larger producer. With that, as I talked about earlier in terms of the processing capacity and what we might build at Kidd A circuit to support a much larger open pit operation here. The other point that I will make is that Dome is the second large open pit operation we expect to be able to bring online. It has transformational growth potential. By what we do at Kidd with the Kidd A circuit and being able to move Pamour there, this enables the Dome Mill in its current form to be used to process and to start the Dome open pit. This is all future-looking stuff.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

We do also have longer term, the Hollinger-McIntyre as a potential third large-scale open pit. But again, maybe we just start with the Pamour and then see how Pamour goes to Dome. We truly believe that the day may come when Discovery operates three of Canada's largest open pit gold mines, all located in the Timmins Camp. Going to slide nine, it looks at our Q2 capital expenditures. As expected, our CapEx went up in Q2, totaling $86 million. That reflects our progress on a number of fronts, our tailings, we are advancing our tailings project at Dome to build up our tailings capacity. We continue to do pre-stripping at Pamour. Our goal is to be Pamour to commercial production, and we are investing in new fleets, equipment, and infrastructure at both Hoyle Pond and Borden.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

We expect to see further progress and further investments in CapEx over the year, et cetera. That has been our goal, to invest that back into these operations to not only build production but also to improve the operating performance. So not just growing production, but improving performance and reducing costs. Unit costs, maybe I should highlight that better. In terms of slide 10, it highlights our Q2 operating performance. Again, on this, I will leave the financial results for Alison to review, but I will say that virtually every financial metric improved substantially from last year's second quarter. We achieved record revenue in Q2 2026. Adjusted earnings increased significantly compared to both prior periods. Speaking of record results, we achieved record gold production in Q2. Production increased over 10% from the previous quarter.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

Duncan and Gord will get into the details, but the increase was largely due to higher throughput. A key highlight for the quarter was that both mining and milling rates showed strong growth at every operation. Finally, for me, in this part before I pass it on to Alison, slide 11 shows our 2026 guidance. Again, we'll tell you that we are tracking well to achieve all of our guides for the year. With that, I'll turn the call over to Alison White, our CFO.

Alison White
CFO at Discovery Mining

Thanks, Tony, and good morning, everyone. Overall, it was another solid quarter, reflecting the continued momentum that we built in Q1, and certainly that we've continued to build over the past year of operations. We had robust revenues during Q2 of $319 million, an increase of 12% quarter-over-quarter, primarily reflecting higher ounces sold and the impact of the Kidd operations from the closing on June 1st, which did contribute $30 million to revenues during Q2. Revenue has increased steadily since the same quarter of the prior year, our fourth consecutive quarter of growth, driven by the operational team effort to lift production and by higher gold prices over the same period of time.

Alison White
CFO at Discovery Mining

We've moved more tons during the quarter compared to the prior quarter at a lower cost per ton, coupled with higher number of ounces sold during the period and partially offset by a planned reduction in grade. As a result, cash costs per ounce were $1,387 per ounce sold. As we've said before, we expect unit costs to be the highest in the first half of the year and improve during the second half of 2026 as production and sales volumes build. All-in sustaining costs averaged $2,154 per ounce sold, reflecting expected higher sustaining capital expenditures, partially offset by the lower cash cost. The ramp-up of sustaining capital reflected capital development and infrastructure improvements at Hoyle Pond and Borden, additional deliveries of new mobile equipment, and construction work at the tailings TMA 6 project.

Alison White
CFO at Discovery Mining

EBITDA of $170 million was similar to the prior quarter as the contribution from the Kidd operations offset the decrease in the average realized gold price. That said, and similar to my comments on revenue, we've carried strong EBITDA momentum from last year. Free cash outflow of $11 million reflected the ramp-up of our capital expenditures program and the impact of $56 million in working capital changes, reflecting accelerated payments of accounts payable prior to a new system implementation that occurred at the end of the quarter. Funding of the Kidd operations that were offset by the first month's impact where no cash was received for Kidd revenues in June due to the timing of the receipts in the month following for sales according to the new offtake agreement.

Alison White
CFO at Discovery Mining

Discovery deployed $86 million in capital expenditures to further advance the asset base at Porcupine, consistent with our capital allocation plan and toward our vision of reinvesting in the business to build value over the long term. Operating and free cash flow reflect the reinvestment in the business through the company's capital expenditure programs and the impact of working capital described earlier. Let's move on to the next slide to review net income and adjusted net income. On an adjusted basis, earnings were $92.3 million, or $0.11 per share, compared to $82.7 million or $0.10 per share in the prior quarter, and $28.4 million or $0.04 per share during Q2 2025.

Alison White
CFO at Discovery Mining

The primary differences between net income and adjusted net income during Q2 2026 included the exclusion of a one-time deferred tax expense resulting from a change in the discount rate methodology from the acquisition date fair value for the Kidd acquisition subsequent to remeasurement, which had a $0.02 impact. TSA and other one-time costs had a $0.01 impact. The purchase price allocation adjustments related to the Kidd acquisition for the fair value also had a $0.01 impact, and finally, another cent for payments to First Nations in relation to the closing of the Kidd acquisition and reclamation expenses for non-operating sites. To summarize, adjusted earnings were up quarter-over-quarter and nearly three times from only one year ago when the company initiated operations through the acquisition of Porcupine. Let's turn to the next slide to review our capital priorities. First, we are actively investing to drive future growth.

Alison White
CFO at Discovery Mining

Our capital spend program is robust during the current year, with $195 million-$235 million planned for growth capital at Porcupine, including an additional $25 million-$35 million for capitalized exploration and $120 million-$165 million planned for sustaining capital. The capital spend program includes replacing equipment, expanding mill capacity, and working to enhance future production levels through exploration and conversion drilling across the business that continues at a rapid pace. Second, we are strengthening our balance sheet. Despite the period of reinvestment that I just spoke about, we had over $600 million in liquidity at the end of the quarter, with $364 million in cash, and since the close of the quarter during July, have upsized the company's revolving credit facility to $400 million, bringing total current liquidity to over $750 million.

Alison White
CFO at Discovery Mining

As we look to continue to expand and grow, our financial strength will be fundamental to our success. We've continued to build on the momentum that began last year across all of our key financial metrics. Revenue and EBITDA have remained robust each of the last four quarters and equally proved strong earnings generation. Let's take a look at our liquidity position on the next slide. Discovery's cash balance totaled $364 million at the end of the quarter. The gold price environment translated into $130 million of operating cash flow, partially offset by the working capital adjustments and continued capital investments that were covered earlier. This leaves us with a strong balance sheet and the financial flexibility to fund our capital programs and advance our strategic priorities that underpin our vision with confidence.

Alison White
CFO at Discovery Mining

I am now going to pass it over to Duncan King, our Senior Vice President of Canadian Operations.

Duncan King
SVP of Canadian Operations at Discovery Mining

Well, thank you. I will discuss our production numbers and then ask Gord Leavoy to review our processing performance. During Q2, we achieved record production of 67,300 oz, 12% higher than in Q1. Gold ore and gold sold were both 66,000 oz. The increase in production was due primarily to higher tons processed, which more than offset the impact of an anticipated reduction in the average grade. The lower grade was largely a result of mix of mill feed. We had a higher proportion of feed from the open pit sources and stockpiles. As Tony mentioned, a highlight of the quarter was our mining rate, which increased at every operation. We mined 1.1 million tons during the quarter and ended the quarter with 14 million tons in stockpile. Site-level operating cash costs averaged $1,878 per ounce, a 2% improvement from Q1.

Duncan King
SVP of Canadian Operations at Discovery Mining

Site-level AISC has increased to $2,028 per ounce, with the increase entirely due to the pickup in the sustaining capital. You may recall we were below plan for sustaining CapEx in Q1, mainly due to the timing for the delivery of our mobile equipment. We made up for a lot of that in Q2. I will now call on Gord Leavoy to talk about the milling.

Gord Leavoy
SVP of Mineral Processing at Discovery Mining

Good morning. We milled 904,000 tons in Q2 2026. That was up almost 30% from the previous quarter. Some of the issues we had in Q1 in the crushing circuit did impact, to some extent, in early Q2, but overall, the mill performed much better for the quarter. We exceeded 11,000 tons per day on 49 days in Q2, and we exceeded 12,000 tons a day on 11 days. Supported by the higher throughput, our milling costs for the quarter were $2,150 per ton, 14% better than in Q1, and just slightly higher than our best quarterly average to date of $2,120 per ton in last year's third quarter. I will now turn over the call to Harold Bird, Vice President of Mineral Processing, to discuss the Kidd operations.

Harold Bird
VP of Mineral Processing at Discovery Mining

Thanks, Gord. Good morning. Overall, Kidd Operations had good performance in the first month since its acquisition, excuse me, contributing a positive revenue of $30 million versus production cost of $19 million. Kidd's growth capital primarily related to tailings, buttressing, and mill modifications to support the processing of Borden ore, which is targeting to begin in the first half of 2027. Further study work has commenced to expand to the Kidd mill process to process Pamour in future years. Kidd Operations continues to be a safe, reliable operating mine that currently has a total reportable injury frequency rate of zero. Now I'd like to turn the call over to Eric Kallio, our Senior Vice President of Exploration.

Eric Kallio
SVP of Exploration at Discovery Mining

Okay, thank you, Harold, and good morning, everyone. I'm slightly keen and happy to say this has been another good quarter for exploration, with excellent success at operating mines and new growth projects. With this in mind, we must look at, but I'll start here with Pamour, where we drilled another 47 holes. We continue to obtain some very exciting new results. Showing the image, the main focus here has remained on three main targets, including the main pit, Pamour West, and the North Contact Zone. Additionally, we added a new target into the mix. It's called the Keora Trend, which is located west of the main pit. Results for each of the areas are shown in the current image, indicated extremely positive, with some of the best results seeming to come from the main pit, including highlights of 305 over 30 meters and 2.08 over 24 meters.

Eric Kallio
SVP of Exploration at Discovery Mining

This one continued to see strong results from the Pamour West and North Contact areas, including several holes with multiple zones at excellent grades and widths. Finally, we have the Keora Trend, where we're very happy to report a high-grade result of 17.36 g per ton over 5.9 meters in the very first hole drilled, 200 meters west of the current resource. We now turn to my next slide, number 19. You see the first of two images providing different angles for the areas drilled, with this first one looking to the north and focused on the south side of what's called Pamour Trend.

Eric Kallio
SVP of Exploration at Discovery Mining

Key things to note here are the main pit and Pamour West areas, which are on the central and left sides of the slide, as well as the overall size of the target area, which we're looking at here, which at this point measures a little over 4 km long and at least 400 meters deep.

Eric Kallio
SVP of Exploration at Discovery Mining

Also notable is the very shallow depth of drilling to date to both areas, and the large areas still remaining to be tested below and between. Turning to the next slide, which is number 20, you see a view looking to the southwest, providing a better view for the north side of the trend. Key things to note here would be the current resource pit, which sits in the background, as well as all the new intersections in the north contact and Keora areas, which sit directly to the north. Also provided here is another good angle of the Pamour West area. Given all the above, we are very pleased with progress to date at Pamour. Drilling is continuing here with four drills. Additionally, work has now begun on a new resource update and on track for this year for what we believe will be a very positive result.

Eric Kallio
SVP of Exploration at Discovery Mining

Going on next to slide number 21, we see the Dome, which is another project which we believe has a lot of potential. As previously described, Dome is a historic mining property, which already has over 17 million ounces mined and where we have a resource of over 11 million ounces. Also now working to upgrade and expand for an updated estimate this year. Indicated on the image, all the new drilling is in the area surrounding the current resource, with focus on areas to the southwest, north, and northeast portions of the property, with results continuing to look very encouraging. Drilling in the southwest portion of the property includes 9 holes to evaluate mineralization near the south limits and continue to indicate excellent grades and widths at very shallow depths.

Eric Kallio
SVP of Exploration at Discovery Mining

This leads to have eight more holes in the north part of the property and under north wall of the pit, which were also very successful, with multiple excellent intercepts, including a highlight of 9.09 over 17.3 meters. Finally, we had one new hole to the northeast intersecting a quartz vein near the east limit and containing a very high-grade assay of 278.48 g over 21 meters. Turning to my next slide, 22, we see another image related to Dome, which provides two different viewing angles across the target area and a little more detail on the new results, with the one on the top covering the south part of the pit looking northwards and the other covering areas to the north and looking west.

Eric Kallio
SVP of Exploration at Discovery Mining

Key things to note here would be the red and green outlines, which represent current pit shell and underground workings, as well as the shallow depth and excellent grades and widths in both areas, which remain open for future testing and expansion. With this, I will conclude by saying that similar to Pamour drilling, here is looking very good, continuing with two to three drills. Work has also now begun on a new resource update and on track for year-end. Turning on to my next slide, 23, we see the TVZ, where we also have very good progress. As described in the past, TVZ is a significant zone of mineralization in the southeast part of the Hoyle Pond that was partially drilled and defined by past operators, which remain in zone drilling to support a maiden estimate for later this year.

Eric Kallio
SVP of Exploration at Discovery Mining

Shown on the screen are two different angles on the deposit, with both being long sections and providing different levels of detail. Turning to the one on the left, we see more of an overall view of the size and shape of the zone, as indicated, looking at a large northeast trending structure just south of the mine between the 850 and 1700 levels, and where mineralization is contained mostly in a series of lenses that are highlighted here in a variety of colors. Also important to note here on this slide is the close proximity of the zone to the current mine workings and location of various drill platforms, including 1210 and 1680 levels, which we have been using for most of the drilling to date.

Eric Kallio
SVP of Exploration at Discovery Mining

Referring now more to the right-hand side, we see details for the new drilling, which as indicated, has been focused mainly on the 1210 and 1680 levels and looking very positive. Just to give you a few examples, what we're seeing, basically we're looking at values of 5.13 over 18.2, 7 over 16.9, 5.7, 5.17 over 21. Important to note that all of these intersections are similar to or better than previously drilled holes in these areas. Aside from the above, I'd also like to point out that as part of the latest program, work is also initiated to collect samples from metallurgical testing from holes near the 1210, with a total of four samples now collected and shipped out, with results expected later this year. Given the above, we're very happy with the progress so far. The program is continuing with three drills on 1210 and 1680 levels.

Eric Kallio
SVP of Exploration at Discovery Mining

Turning now to the next slide, which is 24, we see Owl Creek, where we completed another 10 holes and continue to confirm and expand mineralization near the Owl Creek pit. Just for context, the Owl Creek pit is located 1.5 km west of Hoyle Pond Mine on the south side of the Falcon belt, which is the same contact that hosts the mine. The pit, as well as two underground ramps, which you see here on the image, were both developed by Falconbridge Gold in the 1980s. Shown on screen are two images, with the one on the left being a plan of the drill area and the one on the right being a long section providing more details.

Eric Kallio
SVP of Exploration at Discovery Mining

Referring to the left, we see the new drilling targeted two main areas on the east and west sides of the pit and continued to obtain very positive results, with some of the key values on the east side being 7 g, 7.09 over 17, and 6.35 over 9.4. Highlights to the west, 4.72 over 24 and 19.35 over 5.4. Turning now to the right side, we see a view looking northwards across the zone and yet again, another angle on the new results and showing the overall pattern of holes going to depth from west to east. Important to note here is the holes on the left are the ones drilled directly below the pit, and the ones on the right are what we call into the wide high-grade zone.

Eric Kallio
SVP of Exploration at Discovery Mining

Also important to know here is what we think is very good continuity between the areas and limited drilling, which exists below the 650-m level and in areas going to the east. In terms of current activities, drilling is continuing here with two drills on site focused on further confirmation expansion. Additionally, in light of the good success, work has now been initiated on a new exploration ramp from Hoyle Pond Mine, which will allow more detailed drilling both here and in the areas between. Although not shown in the image, the ramp will enter the zone from the east side near the 300-m level and allow quick access to the zone. The expected completion date is in Q3 2027. Turning to slide 25, we see an overall view of the Borden mine, where we have also been very busy.

Eric Kallio
SVP of Exploration at Discovery Mining

As described in the past, Borden is located west of Timmins and centered on a major east-west trending shear zone called the Main Zone, which has now been traced and part-mined for a distance of over 2 km. In terms of recent exploration, pretty much all work is focused on the far east side and on extending the main and east lower zones from platforms underground near the 585 level, as well as from surface northeast of the main zone. In terms of results, they have all been very positive, with excellent grades and widths both within and outside the current reserve shapes in both zones targeted, with some of the key highlights from underground reaching levels such as 9.16 over 29.0 m. The highlight of the program, I think, a new intersection on surface of 6.34 over 8.7, 500 m down plunge from the inferred resource.

Eric Kallio
SVP of Exploration at Discovery Mining

Moving on to slide 26. I have one more image related to this area, which is a TV looking northwest across the area drilled. It is showing more detail about all the new holes. A few things to know here might be that all the new holes were drilled from the 585 level, which is the green line at the top of the drawing, and targeting at and beyond the current limit of the inferred resource, which is shown here in light blue. I would also point out locations of the new surface hole, the BL26-001119, which is in the far left side and located 500 m from the current resource. With this being my last slide, I would just like to say in summary, things still continue to go well and a lot more to come.

Eric Kallio
SVP of Exploration at Discovery Mining

With that, I will pass over to José Jabalera, our VP Corporate Affairs and Sustainability at Mexico.

José Jabalera
VP of Corporate Affairs and Sustainability at Discovery Mining

Thanks, Eric. In Cordero, on July 24, we received an official visit from senior level SEMARNAT officials with very good outcome from the project and from the visit. We right now are in the final stage of the environmental permitting process. At the same time, we are continuing with the studies to update capital and cost estimates, as well as more detailed studies regarding water, embark, and power for the project. I will pass to our CEO, Tony Makuch.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

Thanks, everybody, and this is hopefully the, well, not hopefully last slide. It will be the last slide 28. I think you get a sense there is a lot of things going on, whether it is operating the farms, exploration, development, a lot of exciting projects here. This slide, and really just a slide that maybe we put together when we first started with the acquisition of Porcupine with Discovery. We tried to show how gold could grow to well over 500,000 oz a year. By the way, this doesn't include Cordero in here, which is even over and above that. You can see from our quarter two results that we achieved in exploration, the acquisition of Kidd, our continued investment in operations.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

We are demonstrating what is going on here, that we are taking the vision from concept to reality in terms of what we can build in Porcupine and build in Discovery as a whole. Looking at the slide, Pamour now, as we talked about, now expected to become a much larger mine than the 150,000 oz a year producer outlined in last year's technical report that would show 150,000 oz a year up to 2047, I think, in the report. As I mentioned, we are working on a mine redesign for Pamour and a new large-scale processing plant at Kidd to support this. This then unlocks the Dome Mill for Dome Mine, which at current levels of grade could produce over 200,000 oz a year. We will give you a better sense of what that looks like later this year when we update the resource.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

We also have growth potential at Borden, as outlined by Eric in terms of what he sees, plus the processing as we build processing capacity for both Borden and then looking at the investments we are planning. Then there is TVZ and Owl Creek at Hoyle Pond. We have a planning and initial before Q1 on resource for TVZ later this year, and we will continue working towards a resource at Owl Creek. There is still a lot of work to be done. There is probably some exploration targets I know there is that we haven't even talked about here. There is much more to our story lying ahead of us and a lot of exciting things to do.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

I think one of the things, though, that's also important and that maybe we should acknowledge. Harold talked about the safety performance at Kidd and that TMIFR of zero. I know there's been a significant improvement in our TMIFR at all of Porcupine operations down to one. Effectively, we're running mines here, underground mines and open-pit mines and our processing plants in the Timmins camp that's safer to work there than to be working at Walmart or working at Canadian Tire. We're really proud of that, and we want to maintain that as we go forward. Anyway, with that, I want to thank everyone for being on the call, and I'd be happy to take any questions.

Operator

We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Larry Lu with CIBC. Your line is now open. Please go ahead.

Larry Lu
Larry Lu
Analyst at CIBC

Hi, Tony, Alison, Mark, and team. Thanks for taking my question. I guess I'll kick off the first question with free cash flow. Free cash flow turned negative this quarter, but for very good reasons, right, for timing of cash flow from Kidd and other items. I guess my first question is, can you remind us, what are some of the upside for the new enterprise resource planning system that was implemented and how that would help with further operation optimization from here?

Alison White
CFO at Discovery Mining

Yeah, Larry. I'll be happy to take that question and talk about the benefits for us in implementing the new system. You may recall that when the company acquired the Porcupine operations, there was an agreement to utilize some of the ERP system with Newmont. The company then simultaneously set up its own instance of SAP, and that SAP instance will allow us to have a lot more flexibility as well as a lot more visibility into the cost structure for all of our operations on a go-forward basis. It's also going to obviously be in our full control since it's a Discovery implemented instance that has been set up with the full complement of everything that we typically look at and that we typically like to track. We are anticipating that we will see some additional value going forward.

Alison White
CFO at Discovery Mining

We also will be able to have a little bit more granularity into the business that the whole management team is used to seeing, and we will be able to provide some additional clarity on all the growth that is coming in the future.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

Yeah, and really in summary there, effectively we have been operating under the code of accounts and accounting practices that were limited to how our SAP was set up under Newmont. We can now implement it more in our way, as Alison mentioned, and we have a different view on our management accounting and how we account for things. We see that as a big value driver in terms of, as I say, we can turn the finance team and accounting team from looking to profit centers for the company.

Larry Lu
Larry Lu
Analyst at CIBC

Yeah, no, for sure. Good to hear that things are doing the Discovery way, doing the best way possible. I guess, kind of on that note as well, Tony and Alison, can you remind us what is your view for Kidd Creek, both near term and longer term? I know this quarter, because of timing of cash flow, the operation kind of had a little bit negative free cash flow. But for the rest of the year, should we still expect a positive free cash flow, and how does it help with the operation or hitting that 500,000 oz in the near to medium term?

Alison White
CFO at Discovery Mining

Larry, this is sort of the first and only month that we will see this cash flow differential that we did see because of the timing of the offtake agreements and the way that the sales agreements were structured. The cash is remitted back to the organization in the following month after the sale. Because the transaction occurred as of June 1st, this quarter, because it ended on June 30th, we do see that gap in terms of sale versus cash remittance. But on a go-forward basis, there will always be a one-month lag, but it will be a constant one-month lag, and we will have that catch up in terms of cash and sales on a go-forward basis. So we will still be a month behind in cash collection, but that will be something that you will see roll into the overall financials on a go-forward basis.

Tony Makuch
President, CEO, and Chairman at Discovery Mining

Yeah, effectively, as Harold mentioned, we had almost $30 million in revenue with $19 million in costs. The cash is going to come in a month later based on the offtake agreements and how concentrates get moved. But it really was a positive month.

Larry Lu
Larry Lu
Analyst at CIBC

Amazing. Sounds good. Thanks again, Tony and Alison, for taking my question, and congrats on a strong quarter.

Operator

A reminder, if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. There are no further questions at this time. I will now turn the call back to Mr. Utting for closing remarks.

Mark Utting
SVP of Investor Relations at Discovery Mining

Well, listen, thanks, everyone, for participating in today's call. You've heard we've got two key parts when we talk to the market that we address, and one is the significant improvement you're seeing in performance as we go quarter to quarter, and in this case, particularly compared to last year's second quarter. We also have a lot to talk about in terms of our growth story, which we think is clearly one of the best in the gold industry today. On that, second quarter was a tremendous quarter for us, and we expect to continue to have a lot of progress and look forward to our next call when we can tell you about how much further we've come. Thanks very much.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.

Analysts
    • Mark Utting
      SVP of Investor Relations at Discovery Mining
    • Tony Makuch
      President, CEO, and Chairman at Discovery Mining
    • Alison White
      CFO at Discovery Mining
    • Duncan King
      SVP of Canadian Operations at Discovery Mining
    • Gord Leavoy
      SVP of Mineral Processing at Discovery Mining
    • Harold Bird
      VP of Mineral Processing at Discovery Mining
    • Eric Kallio
      SVP of Exploration at Discovery Mining
    • José Jabalera
      VP of Corporate Affairs and Sustainability at Discovery Mining
    • Larry Lu
      Analyst at CIBC
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