Argonaut Gold Inc.
Q3 2021 Earnings Call Transcript

Published: 15 Nov 2021

[Operator:]

Good morning. My name is Pam, and I will be your conference operator today. At this time, I’d like to welcome everyone to the Argonaut’s Q3 2021 Financial Results Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker’ remarks, there will be a question-and-answer session. Thank you. Mr. Dougherty, you may begin your conference.

[Pete Dougherty:]

Thank you, Pam, and welcome everybody to Argonaut Gold’s Q3 financial and operating results conference call and webcast. I want to thank everyone for taking the time to join the call today. We had another strong quarter, both operationally and financially. Today, we’re going to walk through the Q3 results, which yielded very strong cash flow and earnings. And we are also going to spend some time providing you with an update on our Magino construction project and our recent increases in mineral tenure at San Agustin district and our exploration initiatives, which are providing terrific results. Just before leaving this introductory slide, I want to draw your attention to the picture of Magino process plant area. The project is tracking on schedule and we are in the process of finishing a review of the capital. I know everyone is anxious to receive this update and we fully intend to provide you with an update as soon as we can, which will be before the end of this year. However, we are still working on this. And as you can imagine, there are thousands of line items to go into a true bottoms up estimate. We will discuss this further a bit later in today’s call, but first, let’s move forward and go through the Q3 results. Slide 2. During this presentation, we will be making forward-looking statements based upon our best knowledge as of today, please note that we cannot predict the future with 100% accuracy, but we will do our best based upon the information we have today. Slide 3. Q3 2021 and recent highlights. It was another strong quarter, both financially and operationally for Argonaut. We produce nearly 59,000 gold equivalent ounces at an all-in sustaining cost just a little over $1,200 per ounce. We generated cash flow from the projects of nearly $40 million, despite the unusual productivity challenges that we typically experienced during the rainy season in Mexico. We saw increases in the net income of 12% and adjusted net income of 43% when compared to Q3 of 2020. This was a tremendous achievement when you consider that the realized gold price dropped 7% this quarter versus a year ago. Thinking about short-term growth initiatives, we made great strides with respect to the Magino construction project, which remains on schedule. If you’re not already signed up for a monthly news letter to track this progress, I encourage you to do so and we’ll walk through some of the progress at this particular project in a few moments. This quarter, we also quadrupled our mineral tenure at our San Augustin project creating one of the biggest areas in that district. Something that the market could be sleeping on today, but given that Magino is at the top of mine for most of our investors today, we think this puts us as great potential. I’ll discuss what this means to Argonaut shortly hereafter. Thinking about our longer term growth initiatives, we had a fantastic quarter in terms of exploration results, both at Magino and the La Colorado project. I’ll spend a bit of time on each of these programs today as well. Now, I’ll turn the call over to Dave Ponczoch, our CFO to walk through the Q3 financial highlights. Dave?

[Dave Ponczoch:]

Thanks, Pete. If you’ll join me on Slide 4 of financial performance. We’ve sale the nearly 61,000 gold equivalent ounces for Q3, which led to revenue of approximately $109 million. As Pete mentioned, this drove very strong cash flow of nearly $40 million for the quarter. Net income increased 12% and adjusted net income increased 43%. One of the items, which we are really proud of is we set out a goal to generate a $100 million cash flow this year, which is obviously very important as we are reinvesting into the Magino construction project to grow and diversify our business. Through the first nine months, we’ve now generated $107 million and have already achieved this goal. And we still have three months to go to add to that total for the year. If you’ll turn to the next slide, Q3 2021 capital spending and cash flow. Looking at our Q3 cash flow reconciliation, we have ended Q2 – we had ended Q2 with $216 million in cash. We generated $40 million in cash flow and invested $73 million in capital programs. So that leaves us with $168 million in cash at the end of Q3. More than 80% of the capital spend during the quarter went towards the Magino construction project as you might expect. During the three and nine months ended September 30, 2021, we incurred $68 million and $171 million respectively towards the Magino construction project. I’ll now turn over the call to Lowe Billingsley, our Senior Vice President of Operations to walk through the operational highlights for the quarter. Lowe?

[Lowe Billingsley:]

Great, thanks Dave. The operational overview for the quarter, we saw a 20% increase in production and a 14% reduction in all-in sustaining cost compared to quarter three last year. The increase in gold equivalent ounce production was primarily due to the lower production in Q3 of 2020, as we were ramping back up from the temporary suspension of mining in Mexico during the onset of the pandemic, higher grade at La Colorada, as we mine deeper in the El Créston pit, and a combination of higher grade and productivity and operational improvements at Florida Canyon since acquiring the mine July 1, 2020. On the cost side, El Créston and San Augustin saw increases in cost compared to quarter three last year, primarily related increased mobile equipment maintenance cost, and also we tend to use higher levels of reagents during the rainy season. In Durango this year, it was a well above average rainy season. Costs were significantly lower than Q3 2020 at both La Colorado and Florida Canyon. At La Colorado, this is primarily driven by higher gold grades on a lower strip ratio, as we go deeper in the El Créston pit. And for the Canyon higher grade was also the driver of lower costs, but we have had productivity and operational improvements that led to more tons to the leach pads in prior months. Overall, it was a strong quarter operationally considering the seasonal impacts associated with quarter three in Mexico. Regarding 2021 guidance on Slide 7, now we’re tracking very well compared to our 2021 production and cost guidance. well positioned to reach the upper half of production guidance and the lower half cost guidance, which bodes well for a cash flow, particularly at current gold prices. I’ll now turn the call back over to Pete.

[Pete Dougherty:]

Thank you, Lowe. I’m on Slide 8. Of course, none of our operating or financial success would be possible without our cultural commitment to sustainability. We are making investments into human resources to be in a position to deliver on our ESG strategy. We just recently appointed Alfredo Phillips as Vice President of Corporate Affairs and Country Manager for Mexico, and welcome his wealth of experience from Torex Gold core financial or metal. As we see and feel, he is the right person to continue to lead our team in Mexico with respects to government and community relations, as well as executing on our ESG strategy. Slide 9. This quarter we had several initiatives underway at our various mines and projects. This slide shows just the tip of the iceberg, but gives you a glimpse of some of the corporate social responsibility initiatives that we are very proud of here at Argonaut. Slide 10. Magino construction capital estimate. Now, I’d like to spend a few moments providing an update on the Magino construction project. We typically speak in Canadian dollars when we are discussing Magino’s construction capital as about 85% of the capital is in Canadian dollars. When we approved the project, we made our construction decision on an estimate between C$480 million and C$510 million. So using round numbers roughly around C$500 million. When we took a look at this construction estimate in the first quarter of this year, we had a few months of site preparation under our belts and in May guided to the potential increase of up to 15% from the original estimate back in October or roughly C$575 million using that original starting point of C$500 million approximately. Then during Q2 reporting periods in August, we saw other companies in our industry with very large capital projects, providing updates that we’re well above the 15% increase. At that time, we hadn’t done a new capital estimate. However, we felt we could not say that we’d be you within the 15% increase signaled in May. Additionally, we were seeing cost increases just like others, and we announced spending would be trending above – potentially above that 15%. As you can imagine, a true bottoms up estimate takes months to do properly with all the moving pieces. We are working to provide a new bottoms up estimate before the end of the year, and we’ll provide more information as soon as we have it, but we have been experiencing cost pressures like everyone else in the current environment. We do believe that we will be above that 15% previously outlined in May. Since we are close to providing this new estimate, we see felt it appropriate to withdraw our 2021 capital guidance until we have this update completed. We have incurred C$171 million or about C$213 million through September 30 of this year out of the original guidance, which was C$235 million to C$250 million. So, you can see we’re well within line of where we expected. Again, we are working diligently to complete this CapEx review and provide an update and should be able to do so in the coming weeks. Please turn to Slide 11. And the good news is that we are tracking on schedule. We are pouring concrete and have completed so in many areas, and have begun construction on the Tailings facility. We are still currently on track for first gold, by the end of Q1 of 2023. I again, encourage all of you to sign up on our website for our monthly newsletter construction project that’s going on. Slide 12. You can see from these pictures that the project is progressing well, the open pit is starting to be opened up. The plant site is coming along and the tails empowerment area work is undergone today. Steel is arriving at site and building construction is up next. Please turn to the next Slide 13. We get a lot of questions about supply chain due to COVID-19, and whether this is an issue for us. As many of you know, we have partnered with the Ausenco Group and they are staying on target for that Q1 2023 report. I’m very happy to report, that we are one of the first projects out of the gate. And because of this, it has allowed us to get our orders in the front of the line. We are hearing that lead times on several key pieces of equipment, such as mills are really starting to stretch out, but as you can see, we are in good position with our major process plant components and expect delivery of these items during the first quarter of 2022. Please turn to Slide number 14. Now, switching gears from Magino construction, I wanted to spend a moment discussing our latest acquisition. I felt like it has flown a bit under the radar since the focus for most of us is on the Magino construction project. We did a deal this quarter, where we quadrupled our mineral tenure at our San Augustin district for about C$6 million. You can see our previous mineral claims in the blue color and our pit outline in the red dash oval, right in the center of the page. What excites us about this deal is twofold. We feel like this deal more than paid for itself. As it allows us to push back the pit walls into those four small yellow areas, expanding the pit. This allows us to capture what we call wedge ounces or ounces that are on our side of the property boundary, but could not be mined because of the angle of the pit wall, now we can. The second benefit of this deal that is also very exciting is the acquisition of the massive yellow block that surround all of San Agustin. This increases our potential for exploration by over 400% in mineral tenure. I really think the market is focused on other things happening in the company right now from Magino’s construction to our exploration successes at both Magino and La Colorada. And we understand it that’s normal, but we are very pleased to get this deal done. And what it could mean for the company in the future. These near mine acquisitions are usually the type of deals with the highest rate of return, since you already have the infrastructure and equipment and team in place to mine and process ounces. It is now about pulling more into the mine plan. And the best place to find new gold is where you found it before. I will now turn things over to Brian Arkell, our Vice President of Exploration. And he’ll walk you through some of the recent exploration results. Brian?

[Brian Arkell:]

Yes. Thanks Pete and good morning everyone. If you’ll turn to Slide 15, I’ll take a moment to update you on our high grade discovery at La Colorado. During Q2 we announced some of the best drill results we’re seeing from the entire precious metals industry this in recent memory. And during Q3, we followed up with some impressive results from our Phase 2 program below the El Créston pit. The deposit was mined underground in the 1800s and 1900s, early 1900s. And we’re now finding the down dip extension of what the old timers were mining back in the day. There were no records of the grade at that time, but we knew that we would find high grade continuing at depth below the pit. We now believe we’ve discovered the down dip extension of these high grade veins and the early results you can see speak for themselves. We’ve hit several 20 meter width – wide widths of high grade gold. And some fantastic width 5 meters to 10 meters of 40 to 100 grams per ton gold. If you’ll turn to Slide 16, that is a cross-section of the deposit. You can see that we’re targeting three very distinct veins and following the down dip extension leave us today we’re very excited what this could mean for the future of La Colorado and it’s something certainly to keep your eyes on. Right now, we’re doing some modeling on these veins and we’re looking to do some underground scoping work here in the very near future. So if you’ll turn the Slide 17 please, here talk the exploration without mentioning Magino’s high-grade potential depth below the pit. There’s some very early results of the high – not numerous high grade results that were found on the property, but I want to take a moment to go over the elbow and central zones, as you can see in the red box on this slide. When we began drill testing for high grade mineralization at depth over the last couple of years, initially it was wide space drilling across six distinct targets, and we hit high grade in each single of them. Recently though, we’ve turned our focus back to the first high grade discoveries, the elbow and central zone to focus on an early stage resource definition drilling. If you’ll turn the Slide 18, you can – in this – this is a long-section of the elbow zone. You can clearly see the potential. The red area shows areas where we are hitting greater than 30 grams per ton goal in our drilling. We’re testing the zone now down to a 1,000 meters vertical depth. And while I say results are taking longer to get back these days, these holes take some time to drill, keep your eyes open we’ll be continuing to put out results. We have four drills turning there and we’ll begin to see results in the new project . And from that, I’ll turn it back over to Pete.

[Pete Dougherty:]

Thank you, Brian. If you could all join me on Slide number 19. Thank you for your patience as we continue to work to get that Magino CapEx estimate nailed down as disclosed earlier before the end of the year. With each passing month, Magino becomes more and more de-risked and as we move it closer and closer to our first goal pour in 2023. Also keep a look, an eye out looking for exploration updates both at La Colorado and Magino, as we continue to develop these high grade targets. With that, I’ll turn the call back over to our operator, Pam for a brief question-and-answer session. Pam?

[Operator:]

Thank you. Your first question comes from , a Private Investor. Please go ahead.

[Unidentified Analyst:]

Hello. Can you hear me?

[Pete Dougherty:]

Hello. Yes, we can.

[Unidentified Analyst:]

Hey Peter, how are you?

[Pete Dougherty:]

I’m good.

[Unidentified Analyst:]

Been investor since Alio Gold days with you guys, so very pleased with what’s going on. Just have a few questions. The first one is regarding Ana Paula, what’s happening with it, because I don’t see any mention about it in the presentation or the website. So just wondering what’s going on with Ana Paula right now?

[Pete Dougherty:]

Okay. I’ll take that question. Ana Paula is an interesting project. It’s a project that is permitted today, a project that in the Alio Gold days was going to be their flagship as they move forward. As we saw this project, we thought it was an exciting project, but one that we would not be able to move towards until a later point in time. As we see in our portfolio today, Magino is our number one construction project, first. Secondly, we think that our Cerro del Gallo would be our number two project. Both of these projects host nearly 5 million ounces on a global equivalent basis or more. And so there’re much larger than Ana Paula project. And therefore that means Ana Paula doesn’t get moved into our timeframe sitting in the third slot until a much later point in time for development. We always have felt that Ana Paula is an exciting project, one that can generate significant cash flow for somebody, but it’s a bit on the small side being about 1.2 million ounces as we understand it today. So we were looking for a deal where we thought we could receive some compensation today and then a longer-term investment on that project over time via a deferred payment scheme or a royalty scheme. And so we’re still holding that asset as available for sale. If somebody might be interested, but from our perspective, it really is the third project in the line, not the, the number one, number two so it would be coming later in the line of projects that we’d be looking to develop.

[Unidentified Analyst:]

Thank you, Peter. Okay. One more question. So in Mexico, right, there’s a permitting issue going on. Have you guys felt it, because I see Fortuna had a issue with getting the permits and it’s been a while for Argonaut not to get the permits for Cerro del Gallo, so I’m just wondering what’s going on? How do you feel about it? I mean, for Fortuna, I understand it’s the community were against them, but for Argonaut, not sure what’s going on because we’re supposed to get the permit by now, but still we haven’t received it. So just wondering what’s going on over there?

[Pete Dougherty:]

Right. When we look at Mexico, I can give you a little color around permitting. Permitting is moving very slowly in Mexico and it’s not just us, it’s everybody. And it’s not just mining. I mean, in Mexico, it doesn’t matter whether we’re talking about infrastructure projects like roadways or airports or even electricity type facilities, trying to be permitted and put in place. Everything is moving slowly. From everything we have heard and a lot of things are being canceled. We think there have been two distinct issues with this one. There has been a change in government and then secondly, and the more poignant part is COVID. As you know, many of the federal agencies in Mexico are all centralized in Mexico city and that is a very densely populated area. And things are very strict in Mexico city right now, as far as getting around and people coming to work or not. And have not at this time really opened up from a government perspective. Now that slows things down in a very tight fashion. And what happens is that all permitting, as I said before, has been coming to a very slow movement process in Mexico. With that being said, we think we have great support for our projects, especially this Cerro del Gallo project in Guanajuato. And as we look at that, even if we had permits today, we would not be moving that project forward as our efforts today are all focused at the Magino project, but it would be our next project that we’d be moving forward on. So I think we need to just remain calm on this and, and watch as hopefully COVID starts to take a turn the other way here and hopefully that Mexico opens up a bit more and we can start to see some advances in the government areas and start to move forward projects such as Cerro del Gallo.

[Unidentified Analyst:]

Thank you for that. One more question. Yeah. One more question then I’ll get back in line if there is any. So regarding Magino construction rate, previously you’ve been saying at 1,600 goal like you won’t have any more dilution, like you going to do the construction with the cash flow generated from the mine. Is that still valid or you think you’re going to need a higher gold price than $1,600.

[Pete Dougherty:]

Well, when we looked at the Magino construction, originally we outlined a capital program that would get us there. We needed roughly around $135 million coming out of the business over a two – the two consecutive years, 2021 and 2022 in order to support that at $1,600 environment, with the things that we had in place at the time. Now, if capital construction goes above this, and if we are unable to generate that $135 million from the existing operations, well then there might be a need to draw either on our revolver or to find funds elsewhere. Right now it’s too early to be able to say what Magino’s true capital might be at the end of the day, we’re working on that bottoms up approach and we hope by the end of the year to be able to come out and share that with you and what our program might be is how we would attack funding that.

[Operator:]

Your next question comes from Terence Ortslan with TSO & Associates. Please go ahead.

[Terence Ortslan:]

Good morning, Terry Ortslan from TSO & Associates. Couple of questions guys, thanks again for the presentation, lot of details here. That’s good. I understand that you need some time to get this capital budgeting appropriately done. What’s off the table in terms of it’s been accomplished in terms of engineering equipment procurement. What’s like I see the slide number, was it 13? How much of the equipment has been procured and dealt with? How much engineering has been completed so far things like, the typical breakdown of the project? Where are we on that before the year-end final number we hear from you guys? Thank you.

[Pete Dougherty:]

Right? Okay. So Terry, this is Pete Dougherty. When we look at the project today, I think it’s important to understand whenever you start a project like we did, when we put out our first announcement of a bottom up approach that was early in the year. We really didn’t know a lot about the site, because we are just getting into tree clearing, and trying to figure things out at the site. What I tell a lot of people today is, we know now what we didn’t know when we first started. You just saw a lot of trees and stuff out in areas today, if you look over the sites, you’ll see that many of the – most of the sites has already been cleared. A lot of the foundational work has been done, and we have completed the original 11 copper dams that would need to be put in place before we could start on the main tails empowerment facility. So, what we know today is, what we didn’t know before. Right? All the clearings been done. All the foundational work has been done. I liken it a lot to a house. When you’re building a house today, and you look at your contractor and you go month after month a month, and you really don’t see a lot of advancement, because he’s putting in the sewer lines or putting in the power or the water lines coming into the house. He’s building that foundational before you can start to erect, the actual building itself. That’s really all the work that has been completed to date as far as the engineering and design work. Well, obviously you cannot go forward and start ordering mills and building cyclones and building thicker tanks, and leach tanks and all these other pieces to it – if you haven’t done the engineering. So clearly the facility itself, the engineering has been done. And you can see the pictures of the equipment that has been completed and is getting ready for shipment. We’re already starting to receive part of that. The steels are already arrived on site part of the steel, and they’re going to start erection of that facility as we speak. So things are advancing along terms quite well on the project. But there are still more things to be done. We still have to finalize the tails empowerment. We’re about – I just a rough guess, somewhere around 15% of the way through, on the build of the dam right now that we need to build. So a lot of preparation work has been done. Now it’s about the execution and erection and building it up from this point in time.

[Terence Ortslan:]

Got it. I mean, I mean – undermining by any means that’s all like projects like this doesn’t matter if it’s midsize or big, always take a lot of details and lot of execution risks. Just be seasonally before the winter settles in are you on your – in your mind, you’re on schedule before the winter months kind of come in and slow, slow you down?

[Pete Dougherty:]

I would expect that that when we looked at this and I met with the Ausenco management last weekend, actually. And when I talk to them about how they’re going to execute over the winter? The game plan from them is to continue moving forward over the winter. So get the – continue with the buildings, continue with the, getting all the foundational pieces, the pouring a concrete, all that through the December timeframe, take a couple months off in January, February, and hit us back again in March really hard, but in the meantime, equipment is going start to arrive. One of the things that we have at our disposal right now is that there is an old abandoned mill site there in the town of Dubreuilville that we’ve acquired the right to be able to place the equipment in those buildings, et cetera. So, we’ll have it as the equipment arrives in undercover and safe for when it needs to start to go in to be placed here early first quarter – late first quarter next year.

[Terence Ortslan:]

Okay. Got it. Thank you for that. On the mineral tenures, shall I come back to Slide 14? Okay, you got about close to 40 square kilometers, 50 square kilometers of land position here. Am I right? Approximately?

[Pete Dougherty:]

It’s a large land package.

[Terence Ortslan:]

Have you done any on – I’m, just saving time for me, mapping any geophysics on this properties that you acquired?

[Pete Dougherty:]

Yes. I’ll turn this over to Brian Arkell, Vice President of Exploration, because we know a little bit about this property. So Brian, would you take this?

[Brian Arkell:]

Yes, no, we haven’t Terry, we haven’t done it internally. It was belong to Fresnillo before, as you know, and what we do have is, we have their database that we obtained a while back. So, we have that knowledge by ourselves. We haven’t been on the ground. We do have quite a bit of drilling on the edges of it. And so we’re quite familiar with this. But no, we haven’t done the work internally.

[Terence Ortslan:]

And who’s the light green spot, third party claims. Who are they? Sorry.

[Brian Arkell:]

Yes, it’s a small junior. Yes. Rather not talk the name there, but yes, it’s not a…

[Terence Ortslan:]

Okay. Okay. Brian, thanks again. Thanks guys. And look forward to maybe sharing about Analyst Day or something like that. When you got the project numbers kind of more fixed in terms of possibility of sharing with us, if you don’t mind sometime late in the year, early next year, it’s up to you, but I’ll leave it on the table. Thank you.

[Pete Dougherty:]

Okay. All right. Thank you, Terry.

[Operator:]

Your next question comes from Wayne Lam with RBC. Please. Go ahead.

[Wayne Lam:]

Hey morning guys.

[Pete Dougherty:]

Hi Wayne.

[Wayne Lam:]

How’s it going? Just a question on the optimizations at Florida Canyon. Just wondering if you had any commentary on how the ramp up has gone with the new conveying and stacking system. And should we be anticipating for the cost savings into Q4?

[Pete Dougherty:]

Wayne, this is Pete. I’ll – since we have Lowe here with us today, I’ll transfer this over to him, as you probably notice that production moved up slightly quarter-over-quarter, again obviously a big pickup from first quarter, second quarter little bit of improvement here in third quarter, but as we told you, we thought this was fourth quarter into next year. So go ahead, Lowe.

[Lowe Billingsley:]

Yes, sure. Good morning. Thanks for the question. Just the status of the overland conveying project. We are in the process of, we have that commission that in the process of ramping that up at the operation. The team is fully engaged in terms of making that operational and getting it to be as efficient and effective as it can be. Probably, the largest component of not seeing that the big tons coming up maybe that we had talked about on that is we did have a lot of benefit of tons of backfills sent through the crushing facility early in the year. And those historic backfill tons are becoming less and less and the pit as we continue mining. And so that is impacting our throughput rates, but we’ll continue to push those productivities up and we should expect to see those coming up over the course of the next couple of quarters.

[Wayne Lam:]

Okay, perfect. Thanks. And then maybe just at Magino on the CapEx review, does that impact the timing of the spend at all? Or just the quantum of spend on the individual items and will any of the operating costs be reviewed as well?

[Pete Dougherty:]

Wayne, so obviously if we change the capital costs, it could impact on that that timing. I don’t have that right now today. As far as the looking at the overall operation, yes, we have we’ve been doing a fair bit of drilling on the project. Some infield drilling, et cetera, all of that, that we will be including into a new revised 43-101 to come out to sometime during Q1 of next year on that project, and all that will be taken into account. So a new model, new drilling, new mine plans, the whole entire package.

[Wayne Lam:]

Okay, got it. Thanks. And then maybe just last one kind of related on the permitting side in Mexico just wondering on the new concessions, adjacent to San Augustin, what kind of needs to be done there on the permitting side? And how are you guys thinking about that in terms of timeline?

[Pete Dougherty:]

Okay. In terms of permitting, if we wanted to conduct new drill programs, as you know, Fresnillo had done some work here before, but if we wanted to conduct any new drill programs ourselves we’d need to go through and get the permitting in place there. That’s usually done under what we call an IP and usually takes anywhere from 30 days to 60 days to accomplish that to get any drilling. Now, if we wanted to move to an expansion, we’re actually mining or producing out of there that would require, an adjustment to MIA, which could take six, nine months in timing in today’s world, the way things are working. In the old terms, it could have been four months, but today I think we’re looking more closer to six months to nine months on MIA. Is that correct, Brian?

[Brian Arkell:]

Yes, except for that one block to the north, that right on the edge of our pit, that’s already in the permitted side.

[Pete Dougherty:]

Right. Those are already permitted on – yellow areas.

[Brian Arkell:]

That’s right. It’s fully permitted and we’re drilling on it right now.

[Pete Dougherty:]

So that larger, he we’re talking about that larger area where we’d have to go get new permits and MIAs in those things. But the little fourth quadrants right close into next to the pit are already within our existing permits and he’s drilling today.

[Wayne Lam:]

Okay. Thanks. And so, sorry, just to clarify on Cerro del Gallo with the resubmission, is that also kind of a six month to nine month timeline that you guys are looking at now?

[Pete Dougherty:]

Yes, we’re in the process of preparing a new permit application that would go in sometime next year. And then I would think you’re looking at a six to nine month timeframe after its submittal of it Wayne.

[Wayne Lam:]

Okay, perfect. Thank you. That’s all for me.

[Operator:]

There are no further questions at this time. Please proceed.

[Pete Dougherty:]

Pam, thank you very much. And thank you all for joining us this morning with the Q3 results and conference call. Again, we couldn’t accomplish what we have without our people on the site, and they have done a tremendous job in delivering. Very pleased that the operations have already put a $100 million back onto the balance sheet through cash generation, which is well ahead of our target for the year. And we look forward to talking with you all again at the end of the year, or later on as we discuss results from exploration drilling to the new capital estimate at Magino. Again, thank you for your time this morning and have a great day. Bye now.

[Operator:]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating. And ask that you please disconnect your lines. Have a great day.