Earnings Transcript for NCM.AX - Q2 Fiscal Year 2021

Operator: Thank you all for joining us this morning. Welcome to the Pretium Resources Second Quarter 2021 Conference Call. 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. The conference call today is being webcast live and available along with the presentation slides on Pretium’s website at pretivm.com. I would now turn the call over to Mr. Jacques Perron, Pretium’s President and CEO. Please go ahead.

Jacques Perron: Thank you. Good morning, everyone. Thank you for joining us for our second quarter 2021 operating and financial results conference call. The second quarter started under challenging circumstances, the impact of the COVID outbreak at Brucejack in the first quarter had some residual effects. And we also have to deal with some underperforming stopes at the onset of the second quarter. Thanks to the hard work of our team we made consistent improvements through the quarter. We also continue to make significant progress against our objectives and we accomplish another profitable quarter. On today’s call, I will highlight some of the key events of the second quarter. I will then turn the call over to Patrick Godin, our Chief Operating Officer, to provide an overview of our production results, the status of operations and the progress of our construction projects. Then, Matthew Quinlan, our Chief Financial Officer will go over some of the financial highlights of the quarter. Following Matt’s review, I will provide a summary of the underground expansion drilling results and the brief update on our exploration program before closing off with a look ahead to the remainder of the year. At the end of the presentations, we will open the line to your questions. Before we begin, note that our statements contain forward-looking information and future oriented financial information based on certain assumptions and subject to risk factors. I refer you to the cautionary language included in our news release yesterday, as well as the management discussion and analysis for the same periods. These are available on our website and have been filed on SEDAR. Please note, all dollar amounts mentioned on this call are in U.S. dollars, unless otherwise noted. Our top priority continues to be the health and safety of our employees, contractors and neighboring communities. Last year, in an effort to renew our safety culture, we launch an extensive company-wide health and safety program. Here on the fourth slide is a rolling 12-month lost time injury frequency rate, and our total recordable injury rate. Excellence in health and safety is a journey with ups and downs. And we are determined to maintain our efforts to emphasize the importance of safety and ensure it is at the forefront of everything we do. Despite the challenging start of the quarter, we were able to produce just over 83,000 ounces of gold. As a result, it was another profitable quarter and we generated just under $51 million in free cash flow. During the quarter, we made the voluntary debt payment and repaid the remaining $38 million on the revolving portion of the loan facility. We ended the quarter with a cash balance of approximately $202 million. And with that, we have reached a key turning point. Our cash exceeds our debt. Subsequent to the end of the quarter, we refinanced our remaining credit facility on favorable terms and increase our available liquidity. We have several major initiatives underway, such as accelerating underground development, infill drilling and increasing drilled up stope inventory with the intent to improve operations at Brucejack. We’re also making significant investments and future growth, which includes construction of upgraded Camp facilities, a modern assay lab and integrated core shack, extensive resource expansion and near-mine exploration drill programs are in full swing with drill results expected through the remainder of the year. As you are aware, a COVID outbreak was declared at Brucejack during the first quarter. Following the outbreak, additional procedures were established, including continued testing of all employees and contractors. The vaccination program has also been ongoing at Brucejack under the guidance of BC Northern Health. As of this week, 99% of our Brucejack workforce as received their first dose of the vaccine and 64% have received their second dose. We will continue to closely monitor the situation and provide updates as appropriate. It is a reminder that COVID remains a risk and could have a significant impact over a short period of time. I will now turn the call over to Patrick to provide an overview of our operations for the second quarter.

Patrick Godin: Thanks, Jacques. Turning to operations on Slide 8, in the first quarter, we processed approximately 330,000 tons of ore through the mill equivalent to about 3,630 tons per day. This was below our objective of 3,800 tons per day as a result of the lasting effect of COVID outbreak along with schedule shutdown. Total production cost for the first quarter averaged $214 per ton milled an increase from the second quarter last year. The cost increased is currently due to the strong Canadian dollar. The change in the exchange rate increased production cost by about $22 per ton. Higher level of drilling and higher diesel price add an additional $6 per ton compared to the second quarter 2020. The cost increase was partially offset by a $9 per ton reduction in COVID-related costs. Turning to Slide 9 as you can see our quarterly rate of underground development has historically been on an upward trend quarter-over-quarter. The onset of the COVID stalled our progress in the first quarter of 2020 and then in the first quarter of this year our rate of development was impacted by the COVID outbreak outside. In the second quarter, we increased our efforts, portion underground development and achieved a rate of approximately 1,150 meters per month. We will continue to advance the development of this rate to get back in line with our 2021 plan. As Jacques noted earlier, the second quarter began with some challenges, including the COVID outbreak and performance issues with several stopes. We expect these factors will have a negative impact on both of our gold production and grade. However, even with the challenges at the beginning of the quarter, we produce 80,000 ounces of gold. This is less than 4% below the midpoint of our guidance range for the year. The mill feed grade averaged 8.6 grams per ton and the recovery rate was 97.4%. Stope performance improved towards the end of the quarter and as a result there was 7,700 ounces of gold remaining in-circuit, which is higher than usual for us. Based on our production forecast, we remain on track to be within our full-year production guidance range. To enhance our understanding of the deposit and improve the predictability of production we continue to prioritize increasing the drill data we collect. Diamond drilling advanced through the quarter with nine diamond drills in site more than 50,000 meters of diamond drilling was completed in the quarter for a total of 90,000 meter this year. Drilling will continue at an accelerated rate and as we push our target of 195,000 meters for the year. Turning to Slide 12. We have maintained an accelerated rate of underground development to increase access, optimize production, and improve blending in an effort to balance quarter-to-quarter fluctuations. The increase development rate, expand our access to new areas of the deposit and otherwise to build an inventory of drilled off-stope. At the end of the second quarter, we had more than 316,000 tons of drilled off-stope inventories. This is a 15% increase from the previous quarter. Our target is to have about 400,000 tons of drilled off-stope ready to be blasted by the end of the third quarter of 2021. This is roughly equal to a full quarter of production. We analyze that given delays related to the outbreak in the first, this is an ambitious goal, but we still believe that is achievable by the end of the quarter or early in the fourth quarter. Slide 13 shows a section view of the underground development looking North. Until this year, mining had been limited to only two mining only two mining horizon at Brucejack. Earlier this year, we began production from the lower horizon on the 1080 level. To the second quarter, we continued to advance development and began mining from the 1200 and the 1320 of the fault zone. It has been a major objective for our team to significantly expand our access underground and we are not actively operating from five distinct mining area. Our construction and capital expenditures projects began to significantly ramp up in the second quarter as the weather improved in Brucejack. Expansion capital expenditures include construction of a permanent camp and the project to support and improve – and to improve the efficiency of operation. Replacement of mine accommodation was required to insert consistent quality of facilities for all site employees and assist with employee’s retention. At the Wildfire Camp, which is situated at the entry of the mine site, along the Highway 37, a new 25% camp was construct and is now commission and occupied. The Knipple Camp located along the access growth of surface measurements, and serves as a transfer point for access into the Glacier Zone, a new 100% camp isn’t the final stage of construction and is expected to be commissioned and ready for capacity in the third quarter. A four swing is being added to the main Brucejack camp and the second camp to replace the whole [indiscernible] and expiration camp is also under construction for a combined 324 new rooms. The building modules are currently being laid with commissioning and expensive expected in the fourth quarter. This will bring the total number of rooms across the Brucejack mine properties to 775 beds. To support growth and improve the efficiency of operation a new assay lab core shack were also built within the mine, the new building. The core shack has been commissioned and is now in operation. The assay lab is in the final stage of commissioning. The new assay lab will have the capacity to test 1,200 samples per day. This will significantly improve the turnaround time and assay result, and is also expected to improve cost efficiency. I will turn the call to Matt for an overview of our financial performance.

Matthew Quinlan: Thanks Patrick. Our financial results were strong once again, in the quarter. Our results were higher in the first quarter of 2021, but lower than the comparable period of 2020, partly due to the very high level of gold sales during that quarter. For the second quarter of 2021, we realized an average gold price of $1,804 per ounce an increase of nearly 4% over the second quarter of 2020. Revenue decreased to $152 million or approximately 8.6%, primarily as a result of lower ounces of gold sold. And in the second quarter of 2021, we sold approximately 84,600 ounces of gold. EBITDA in the quarter was $72.6 million. Net earnings were $0.16 per share and adjusted earnings were $0.15 per share compared to $0.19 and $0.18 per share respectively in the comparative periods. The decrease in net earnings was primarily attributed to lower revenues, partially offset by a decrease in interest expense and a decrease in deferred income taxes due to lower pre-tax earnings. Turning to Slide 18, we once again generated significant cash flow from operations of $73 million for the quarter, and had strong conversion to pre-cash flow of $50.7 million. Free cash flow was directed to debt reduction as we have committed to do. Total capital expenditures in the quarter on a cash basis, including sustaining and expansion capital were $22.3 million liquid. Liquidity continued to grow in the quarter to over $400 million as of June 30, and we ended the quarter with approximately $200 million of cash. As Jacq mentioned, during the quarter, we voluntarily repay the entire remaining amount of $38 million under our revolver and subsequent to the quarter end we financed our credit facility. We ended the quarter with bank debt of $100 million and convertible notes also $100 million. Turning to Slide 19, all-in sustaining costs in the second quarter of $1,099 per ounce sold were higher than the comparative period in 2020, but remain within our guidance range for the year. For the first six months of the year, our AISC is $1,053 per ounce. The increase in AISC relative to Q2 2020 as a result of a higher sustaining capital investments for increased rates of drilling and development as referenced by Pat, higher production costs, primarily due to the strengths in Canadian dollar and lower sales in the period. The impact of the strengthening Canadian dollar during the second quarter of 2021 increased all-in sustaining costs by approximately $85 per ounce of gold sold compared to the comparable period in 2020. Turning to Slide 20. The strong financial performance of Brucejack continues to provide for meaningful debt reduction. And as you can see, we have consistently reduced debt over recent years, while also reinvesting in the mine. Earlier this week, we announced an amended credit facility with our lending syndicate on improved terms. The four-year committed facility increases the size of our revolver by $50 million and reduces the quarterly repayments under the term-loan to $5.9 million from $16.7 million. Lastly, we remain on track to achieve our 2021 guidance. You may recall that in the first quarter conference call, we commented where we were trending on our capital expenditure guidance ranges we released in January. We said we were at the low end of our sustaining capital and at the high end of our expansion capital guidance at that time. With seven months of the year now completed, we’re amending these guidance ranges. However, there’s no change in the aggregate total of capital expenditure guidance. We’ve lowered our guidance range for sustaining capital by $10 million due to reduced activity levels in the first quarter, as a result of the COVID-19 outbreak, as well as to reflect some updated timing of expenditures over the balance of the year. We’ve increased our guidance range for expansion capitals also by $10 million and due to increased cost of input materials, detailed engineering, being completed and construction activities being well-advanced and to a lesser extent, the strengthening of the Canadian dollar. I would like to reiterate once again, this quarter, the second and third quarters typically see higher levels of capital expenditures due to the summer construction season at Brucejack with expenditures peaking in the third quarter. Regional expiration activities, which also take place in the summer months are expensed under our accounting policy that we adopted in January and also peak in the third quarter. With that back to you Jacques.

Jacques Perron: Thanks Matt. Let me now turn to our exploration activities for 2021. The summer near-mine exploration program was initiated in mid June with two drills positioned on surface. Program is focusing on the trend of highly altered outcrop that extends four kilometers from the Hanging Glacier Zone to the Northwest, to the Bridge Zone, to the Southeast. To follow up on the successful discovery of epithermal style gold mineralization that Hanging Glacier in 2020 a drill program was initiated in early July to delineate the high-grade gold corridors and test for higher grade epithermal style wings. Hanging Glacier is located approximately four kilometers from the Brucejack mine and is easily accessible than the summer using existing exploration trails. In addition to drilling the near-mine expiration programming includes the high resolution magnetic survey, MT and IP geophysical surveys, soil sampling and prospecting. The 2021, Brucejack definition and expansion drill programs are anticipated to total, approximately 195,000 meters of drilling comprise of reserve definition and resource extensions drilling. Our resource expansion drill programs continue to successfully intercept high grade mineralization immediately adjacent to existing underground infrastructure and continue to highlight the potential to extend beyond the Valley of the Kings Deposit. For these programs at the end of the quarter, seven drills were operating with three drills working on the definition programs, and four drills testing, the expansion potential. This is an addition to the two drills that were active on surface for near-mine exploration. Resource expansion drilling continued through the second quarter with 24,000 meters completed within the North Block and 1080 levels zones. In early July, two drills from underground were repositioned on surface to complete a 13,000 meter resource expansion drill program at Gossan Hill. At the Bridge Zone 11,000 meters of underground resource expansion drilling is expected to start in late August. Slide 25 shows a plan view of the Valley of the Kings Deposit with the drill results from the North Block Phase 1 and Phase 2, as well as the results from the 1080 level Phase 1 drill program. That at 1080 level of program conducted from one of the lowest mining levels at Brucejack mine, intercepted high grade gold mineralization up to 200 meters below and 200 meters east of the current mineral resource shell. With intercepts as high as 1,600 grams per ton, gold over one meter. Phase 2 of the 1080 level of resource expansion drill program is in progress and was initiated to infill between the initial drill fans and targets the visible gold mineralization to the east. We also announced Phase 2 drill results from the North Block that was conducted to test the extension that of the North Block Zone to the Northwest. The Phase 2 program continued to encounter high-grade gold mineralization up to 450 meters from the current resource shell. Phase 3 of the North Block program was recently completed to infill between the existing drill fans with assay results spending. Phase 4 of the program as now being initiated to test the area immediately to the Northwest of the current drilling. With the objective of operational improvements and the following thorough testing process, we have committed to purchase seven battery electric haul trucks to replace them feet of 12 diesel power underground haul trucks. One battery electric truck is currently in operation would the remainder to be progressively dispatched by 2023. Mobile combustion of gasoline and diesel contributed to roughly 68% of the greenhouse gas emitted from operating the Brucejack mine in 2020. After the roll out of this multi-year plan, we forecast the reduction of approximately 24% or 6,900 tons of carbon dioxide equivalent annually from the implementation of this initiative. Looking ahead to the rest of 2021, we remain committed to safety. This includes continuing our COVID safety protocols to minimize the potential for another outbreak at site. We are determined to continue to deliver consistent results and remain on track to achieve our 21 objectives. Based on our production forecast, we anticipate meeting our annual production guidance. We expect to generate a significant amount of cash this year, which we have already in part deployed to reduce the debt. We have now reached a key turning point. Our cash exceeds our depth. Our underground development now provides us with access to five distinct mining areas. We nearly have a quarter of drilled-up stopes in inventory. Our capital expenditures projects are progressing well and our resource expansion drill programs continue to successfully intercept high-grade mineralization. Drill results are expected to be released continuously throughout the rest of the year. And we will continue to – and we will contribute to an updated mineral resource and reserve. We plan to release in the first half of next year. We have also launched our near-mine exploration program with the intention to expand on resources in close proximity to the Brucejack mine. We are really pleased with the hard work of our team, and we look forward to reporting back on our progress. Thank you. That concludes the formal presentation. I will now turn the call over to the operator. We’ll open the line for your questions. Ariel?

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Heiko Ihle from H.C. Wainwright. Please go ahead.

Heiko Ihle: Hey dude, thanks for taking my question. Hope you guys are all staying safe.

Jacques Perron: Good morning, Heiko.

Patrick Godin: Hi.

Heiko Ihle: I had a question about the chart you have on Page 9 of your presentation the cumulative underground development appears to be going up in a fairly straight line, which I guess is the whole premise of this chart. But I mean, conceptually, how much longer can you keep up more or less linear growth in underground development before you hit some sort of barrier where you have to then show it further from infrastructure underground for favorable or I assume there is no scientific and direct answer to this, but I mean it’s just a matter of quarters, years, decades, never.

Jacques Perron: Thank you for your question, Heiko. As we mentioned in the past, our objective is to accelerate development performance in order to open up the mine, open up new mining areas for flexibility and blending, but also open up the mine for to establish drilling platforms. At the current rate of development then it would be difficult to increase even more. So at the 1,100 meters per month, we’re at a good rate right now. And again based on current reserves, we would continue to develop at this rate for maybe a year, year and a half, and then it’s going to come down very quickly. But as we said in the past, we’re very confident we’re going to find additional resources and we’re going to have to open up these areas. So we’ll see what we get from the exploration program this year. But no, no, we’re – because of the results, we are getting so far from the drilling, I expect development rate to continue to be at a higher level for a few more years.

Heiko Ihle: Got it. The risk of getting another answer along the lines of, as we mentioned to the past, all options are on the table. I’m just thinking out loud, I mean, your balance sheet is healthy and it’s getting more so by today. You’ve recently refinanced the loan facility at a firm. Meanwhile, shares are below $10 and this includes a 10%-plus pop here today. Earlier on the call, you mentioned debt reduction is what we’ve committed to do, but I got to ask at what point in time and I assume the Board and you are discussing this in pretty much every meeting, at one point in time, would everyone be willing to start some sort of small share repurchase program? And I guess if you can’t really answer that question directly, I’ll just ask for future plans of capital.

Jacques Perron: Yes. Heiko, they – as we mentioned in the past and our priority is to reduce the debt, and we continue that. And as I – as we said in the past as well, until the convert is behind us, we will not be spending a lot of time and energy thinking about dividends or share buyback. So our convert matures in March 2022. So I think when we come back from first quarter and the first quarter 2022 results, that’s when we’re going to and starting to think about this some more.

Heiko Ihle: A feeling it’d be a decent pop for the shares, if that happens. And then just one quick clarification, how much is left to be spent on the [indiscernible] Brucejack cams as of today, please.

Patrick Godin: The total difference for that is turning around CAD52, so what would be around the 50% of that?

Heiko Ihle: Perfect. Thank you, guys very much. I’ll get back in queue.

Jacques Perron: Thank you, Heiko.

Operator: Our next question comes from Ovais Habib from Scotiabank. Please go ahead.

Ovais Habib: Thanks, operator. Hi Jacques and Pretium team, and thanks for taking my questions. Jacques, quick question from my end, just on regarding the Q2 performance I believe you started talking about it and I – my call dropped, so I apologize if you have to repeat this, but you had said Q2 was impacted by performance issues with some of the stopes. Can you give us some color as to what changed to the positive in late Q2 to achieve the grade guidance?

Patrick Godin: I know it’s one, we talked about the grid variability of Brucejack is that I can say to you that the first two months of the quarter, we were right in line with our planning. And in the third quarter, we had a stope nearly one stope, we had two, nearly one. We made a huge difference in grades, because it’s part of the nugget effect of the ore body. And we have the high grade feed for the last two weeks of the month. And it was it mainly impact positively the progression. It’s mainly the difference here. We are in – when we have a stope like that as we explained to you previously, we apply a mine to our reserves. And in the planning, sometimes we are capping stope in term of grade because we are afforded variability. And in this case, we have a huge and really positive over grade improvement on the grade on one stope. And it’s what made the difference. And at the end of the month of June, we have – so we when we are having, I think I agree like this, we all slowing down the milling process to make sure that we to improve the recovery. And we had a load of gold in the gold room on a day basis. We increased the inventory at the end of the month, because we’re not able to pour it.

Ovais Habib: And that’s the 8,000 ounces of gold in the circuit as well. That’s correct?

Patrick Godin: Yes, that’s what it is. Yes.

Ovais Habib: Got it. Got it. Okay. And so then going into Q3, moving into Q3, in terms the drilling that you have in front of production, I believe now you’re setting at around three months of drilled stope inventory. So that’s actually congratulations, that’s pretty good to see. So how do you see Q3 kind of spreading out? Is it going to be fairly similar to what you saw in Q2?

Patrick Godin: We’re expecting in Q3 and Q4 more or less what we’ve learned in terms of the guidance, slightly better.

Ovais Habib: Got it. And just moving a little bit to the sustaining cost quickly, based on your guidance range sustaining costs were lower in the first half, despite lowering the guidance for spend by sustaining capital by $10 million, do you still see a catch up of these costs in the remaining quarters of the year?

Matthew Quinlan: It’s Matthew here. Thanks, Ovais for your question. Yes, we do see a catch-up I think in Q3, as I mentioned, we have that’s our peak spending period both for expansion capital, but also to a certain extent, the sustaining capital. So you can see that a rise a little bit in Q3, and we’re very comfortable with that $40 million to $45 million range for the year.

Ovais Habib: Yes, perfect. And I still have one more question, but I’ll jump back in the queue and I’ll take my questions later on. Thanks for now.

Jacques Perron: Thank you, Ovais.

Operator: Our next question comes from Wayne Lam of RBC. Please go ahead.

Wayne Lam: Hey, good morning, guys. Just curious in terms of the costs related to safety measures and COVID on the ground. I’m just wondering how things have been progressing post the outbreak and will those increased safety costs kind of be factored into the mine plan coming up.

Matthew Quinlan: It’s just Matthew here. Yes. The COVID costs are trending down. We did have COVID costs of around about $22 per ounce in the quarter this per ounce of ASIC in this quarter. And in Q2 2020, when we were in the eye of the storm, it was very – it was $50 an ounce. So that is trending down. Our guidance calls for I think in our guidance, we’ve disclosed for the year ASIC costs for COVID would be approximately $5 per ounce. We’re still comfortable with that. We may be a little bit higher than that, but it’s a very, very small number. And I think as Jacques has mentioned previously we’re now in the state where most of the industry is baking those costs in – into their future plans at some level. So that’ll be part of our budgeting process for next year.

Wayne Lam: Okay, great. Thanks. And then maybe just wondering back on the grade for the quarter if you might be able to provide some detail on kind of the monthly grade profile or how it was trending prior to that, I guess one stope and just given the prior commentary was there a significant positive reconciliation versus the block model on that one section and just wondering if you might be able to provide some more detail on that.

Jacques Perron: Wayne, as Patrick mentioned, as you will remember at the end of the first quarter, when we had the first quarter results, we guided that – we guided, we indicated that we would be at the low end of the range of the guidance so closer to 80,000 ounces per quarter. And we were tracking right on that forecast for the first and second month. And then in the turn month, we had this one stope that gave us a big bump. So, we had a significant increase in the month of June and mainly that, as Patrick mentioned, that increase came, not during the whole month, it was the last week –the last two weeks of the month. So, that was that the impact. We don’t do a reconciliation on a monthly basis, because of the variability of the deposit, if we look at it on a stope-by-stope basis, it doesn’t make any sense. So, we look at it on a more global basis and we’ll be able to do our reconciliation, like we do every year at year end. And we’ll provide the information when we when we give our year-end results in early 2022.

Wayne Lam: Okay. Got it. Thanks. And then maybe just lastly, just on the fleet replacement as you guys replace the fleet over the next couple of years, like, is there any incremental costs in terms of capital in moving to an electric fleet?

Patrick Godin: Yes, but it’s included in our program is, we – the cost is including the truck. We are not buying the batteries. We will rent the batteries because we don’t have the expertise to break that. And also we have some charging facilities, but it’s minor investment, and we’ll use more or less we’ll use to render excavation to fulfill this demand. But it’s mainly the trucks and we are – we’re expecting a lot from that in term of also the quality of the air, the ground, the efficiency, the truck or faster in the ramp. We already are – we already operating the vehicles since in partnership with Sandvik since the beginning of December of this year. And the trial is really successful and in term of all the aspect of health and safety, and also of the efficiency. So it will all reduce, it will improve our cost mainly, because we’ll reduce the manpower outside. So, actually their vehicles – the diesel for vehicles are home by the mining contractors. And but the electrical vehicle will be owned by us and we will operate the vehicle going forward.

Wayne Lam: Okay, perfect. Congrats on the quarter. That’s all for me.

Jacques Perron: Thank you, Wayne.

Operator: Our next question comes from Joseph Reagor of Roth Capital Partners. Please go ahead.

Joseph Reagor: Good morning Jacques and team. Thanks for taking my questions. Just maybe one more point – maybe one more point of clarity on the single stope that kind of changed the quarter for you guys. Was that stope already drilled off ahead of time when you guys reported, what was that May 4th, May 5th, like, did you guys have some concept that there was a chance of this, or was this something where as you guys did – your drilling ahead of time, it became more obvious as you got into the third month of the quarter.

Patrick Godin: Usually the definition is two or three months ahead, so it was more or less the drilling. I don’t know when we signed off on the grade pedestal, probably it was at the beginning of April, but however, and not get the fact is that if you can – we have a drilling pattern when we’re doing the definition drilling and the another – we can, it’s possible for us. And it’s happened to us really awfully that when we are drilling, we’re missing the nugget between and bit will be between the holes and between rings. So we have a tight drilling pattern because when we are doing the definition of a stope, we have multiple components to do this. First, we have the diamond drilling, we are doing also definition diamond drilling. We are having after that, the development of the stope, because the main advantage that we are doing when Jacques explained that we push to development is to push the access to drill the stope in advance to minimize the cost and be more efficient. So, where do we have all the development that we recovering the chip sampling, and we have the geology. And after that to do the definitions, we are using RC drills and we are drilling the stope and we have a composite per hole. So, it’s pretty tight, but no is, but basically the grid showed up in a structure that probably intersects the stope between rings and it’s what happened. So it’s the nature of the ore body.

Joseph Reagor: Okay. Thanks for the clarity on that. And then second question…

Patrick Godin: Don’t worry. Because if the grade, if we were able to know that I will never say that we will know the objective for Q2, it’s the nature of ore body was like this.

Joseph Reagor: Okay. And then second question. Some other companies have reported that they started to see inflationary pressures related to, you know shipping of reagents and on the labor front, et cetera. And as inflation’s a big topic right now, have you guys started to see inflationary pressure? And can you give any color as to what magnitude and how you’re planning for it?

Jacques Perron: Well, definitely, Joe, we’ve seen steel, lumber increases as we started our construction program for the year. We’re monitoring the situation and our supply chain department is looking at, what, now that we’re going to start to work on 2022 budget, and we’re starting to look at what are the assumptions we’re going to take, and how we’re going to deal with that. I think for us right now Joe, what does the – I would say the more challenging aspect of all this is the lead time or delivery time for supplies, that is what was – we have some impact on in terms of costs, but they haven’t been very significant to date and the big picture, but it’s the delivery times that is we can see that now things are getting a little more challenging. But we continue to like – like it’s not unusual in the current gold price and copper price contacts that to see escalation we’ve seen this in this business before. And we’re just going to be making sure that we were careful and when we’re planning our budget for next year, but other than the exchange rate that is impacted significantly and in terms of basic costs, we don’t see any major impact between now and the end of the year.

Joseph Reagor: Okay. And just you mentioned timing on getting stuff. Are there any materials that you guys need to get on a regular basis that you’re concerned about, or that there’s any risk to the supply chain for that you can see right now?

Jacques Perron: No, we don’t. At the onset of COVID the team took the proper measures and increased our inventories of grinding media reagents no other supplies. So, we’re in good position right now. We don’t – we don’t like – we don’t see risk of getting supplies. We’re more starting to think about the construction plans and projects for 2022, ordering steel and all that good stuff. And but overall we don’t see any risks for 2021.

Joseph Reagor: Okay. Thanks. I’ll turn it over.

Operator: Our next question comes from Anita Soni of CIBC World Markets. Please go ahead.

Anita Soni: Good morning guys. So a lot of the questions, I guess, have been asked, I just wanted to pick up on one thing that – that was said was, you said at the end of the quarter, you couldn’t pour the gold. Why is that, was there a specific reason or was it just timing?

Jacques Perron: Well, it’s, – when the gold gets into the circuit Anita, it gets out at the end – and it’s difficult to –there’s a kept pouring capacity we have every day, but there’s also a situation here in British Columbia right now that is impacting us. We normally, well – we transport the dore bars by helicopters and we have helicopters normally, helicopters that can carry a certain weight, which I’m not going to disclose, but a certain weight, a certain weight of gold and all those helicopters now are requisitioned by the government to fight forest fires. So, we have to operate with much smaller helicopters, which limits the quantity of gold we can get out. So that’s the one other thing that is impacting our ability to ship gold out of sight.

Anita Soni: So this the forest fire situation continues. We might see more inventory build up before you can draw it down?

Jacques Perron: No, I don’t think so. I don’t think – I think our objective is to try to bring it down over the, quarters to be at the end of the quarter at a more normal level. But again I don’t know if you follow the situation here in BC, but BC is burning right now. So it’s challenging,

Anita Soni: Same thing on Ontario. And so then just my next question, I guess I saw the credit facility was increased from 300 million to 350. And within that there was a I guess, a commentary about being able to capitalize on strategic opportunities as they arise. So I’m just curious, given that you’ve got, 120 million to 170 million, you’re doing well on that in free cash flow this year. You’re paying down your debt, like, are you looking at diversifying your revenue streams, looking at doing an acquisition at this stage? I think in the past we had, you had mentioned that maybe in the latter half of the year you would start to take a look at maybe broadening your revenue streams.

Jacques Perron: Yes. That comment we made earlier, Anita it continues to be true. We wanted to get the operations in good shape. We always said that no, until the third quarter this year, which we’re in right now and that we would, our focus would be much more internally, but definitely as we get closer to the end of the year we’re going to start to look at what are the next steps for the business. So and adding increased our liquidity in terms of the, refinancing and the cash we generate. If, we’re going to be thinking about what we need to do, and we’re going to be in a better position with the current financial capabilities that we have.

Anita Soni: Sure. And then the last thing on the capital I guess, the going, we’re still referencing, I guess, or, taking a look at the old technical report, which obviously this year, the capital was much higher. In quantum, I think it was supposed to be 53. I came in at 120, right and then this 2022 numbers kind of like 30 million or so. So when, as we think about 2022, should be expected the cap that your capital programs fall off this year, what kind of like go forward number, and then what should we be thinking about in terms of inflation on the CapEx side of the equation, and then also that $10 million that you didn’t spend in sustaining capital this year, is that going to be pushed into next year? So very long question with many parts, but I’ll let you answer that. Thank you.

Matthew Quinlan: I’ll start with the end of your question, that $10 million, that yes, definitely. It’s going to move to next year. That’s going to happen. In terms of CapEx, we’re going to be higher than the 43 101 next year. We haven’t finalized our budgets for 2022, where – but we’re starting to work on it, but it’s not finalized, but it won’t be at the same level as this year. It’s BLB somewhat lower. We’re not exactly sure how we’re going to end up, but it’ll be lower, lower than this year.

Anita Soni: Okay. And then lastly, that commitment to purchase electrified vehicles, like what’s the timeframe on which you’re going to be doing that purchase?

Patrick Godin: It will be a, we already have one truck. We’ll have the second truck will show up in November and after that all the others are scheduled in month after month of two and rated the end of August 2022.

Anita Soni: Okay. So that should be within our 2022 numbers when we’re looking at capital. Right?

Patrick Godin: Yes.

Anita Soni: Okay. And could you give us an idea of how much that was?

Patrick Godin: In term of costs of truck? A truck is to $2.3 million.

Anita Soni: Okay. Thank you. That’s it for my questions.

Operator: Our next question comes from Don DeMarco of National Bank Financial. Please go ahead.

Don DeMarco: Well, thank you, operator. Hello, Jacques and team. My first question, the point of drilling off the inventory is detained the production volatility, and there was a key stope that factored into Q2 that we’re hearing about, but with the strong Q2 and the previous quarters we’re seeing that this production volatility is decreasing. So is it fair to say that your strategy to drill off the inventory is working and that you have higher confidence in achieving production and grade targets going forward?

Jacques Perron: Definitely Don you’re bang on, if you look at our performance, there’s a slide in the presentation that shows compared to the point of the guidance with the high end of the guidance and the low end of the guidance on a quarterly basis. I know we’ve been tracking within 5% and all for a number of quarters now, and in ore body like ours to be able to do that, it’s quite remarkable and the team has done an excellent job, excellent job. Drilling and advancing to knowledge. And yes, on a stope by stope basis, we’re going to see some up and down and then it’s going to happen. But overall I think, we’re – we can say that the, our production is fairly consistent. We’re – as Patrick mentioned, we are expecting the next quarters to be no more or less in line with the guidance, the mid range. And we think maybe even a slightly higher than the mid range, but we’re going to be within that ban, as far as we can see. So yes, very we’re getting at with the five areas that we have opened up with the drilling inventory, where we’re a lot more consistent and we have a lot more confidence in what is coming in front of us.

Don DeMarco: Okay. Yes. Great. Because yes, I think the point of it is that with the market likes to see that hitting the midpoint of guidance in a way. And if there’s any given quarter that you have low throughput, that can be, you have the ability to pull leavers and offset that was slightly higher grades. So, I’ll take that as encouraging, and we’ll look forward to the next couple of quarters, just a couple of quick questions. So, can you remind us, are you planning an updated technical report in life of mine plan for next year? If so, can you just remind us of the timing?

Jacques Perron: Yes. As we said earlier, Don we’re planning to issue an updated 43 101 and the first half of next year. Most, probably more in the second quarter than the first quarter. We’re still in an old debating when we’re going to do the cutoff on all the drilling and all that good stuff, but for sure it’ll be out in the first half of 2022.

Don DeMarco: Okay, great. And finally, the convertible debts due in March, is it your intention to pay this off with cash? And can you also remind us what the level of debt that you’re comfortable with?

Matthew Quinlan: Sure. It’s Matthew Quinlan here. We are planning to pay that off with, with cash as Jacques and I have mentioned in the past, we want to exit that maturity with a – at least a $100 million dollars of cash on the balance sheet. So we do have the ability to draw on the revolver to redeem that, but given our cash position, we would anticipate funding that redemption with, with cash on hand, with respect to debt in the past, it is on the balance sheet. We don’t have a specific number, but Jacques and myself and Pat all believe that, lower leverage in, in a commodity business is generally a good thing. And certainly under one turn of funded debt is something that we would be entirely comfortable with. Maybe even a little bit less than that. We’re also cognizant we’re a single asset producer. So as Jacq has mentioned in the past, we want to have a lot of liquidity and also cash on hand as well.

Don DeMarco: Okay. Thank you, gentlemen. That’s all for me.

Jacques Perron: Thank you, Don.

Operator: This concludes the question and answer session. I would like to turn the call back over to Mr. Perron for any closing remarks.

Jacques Perron: Thank you everyone. And thank you for joining us this morning. I would like to thank you and thank the team for the interest in what we’re doing here and thank our entire Pretium team and all our partners and contractors and people that work with us for their dedication. As we look forward to a very exciting second half of 2021. As we continue to execute on our plan and achieve our objectives. So we wish everyone a very nice weekend and be safe out there. Thank you very much.

Operator: This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.