Coeur Mining, Inc. Q3 FY2021 Earnings Call

Good day, and welcome to the Coeur Mining Third Quarter 2021 Financial Results Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Paul DePartout, Director of Investor Relations. Please go ahead.

Thank you, and good morning. Welcome to Coeur Mining’s third quarter earnings conference call. Our results were released after yesterday’s market close and a copy of the press release and slides are available on our website. I’d like to remind everyone that our press release, slides and some of our comments today include forward-looking statements from which actual results may differ. Please review the cautionary statements included in our press release and presentation as well as the risk factors described in our recent 10-Qs and 2020 10-K. Now, I’ll turn it over to the team.

All right. Thanks, Paul, and good morning, everyone. Overall, the third quarter reflected a continuation of our strategy of investing in our North American assets to further reposition the Company with lower costs, sustainable free cash flow, and solid returns over longer mine lives. Starting off on slide 3 in today’s presentation, I’d like to highlight a few key points before turning the call over to the rest of the team. As you can see, it was a quarter with several significant developments and decisions. Results were in line with our internal forecast and were set up to deliver a strong finish to the year and achieve our original production guidance. Mick will go through the operations in more detail shortly, but I’ll quickly touch on a few main points. Wharf led the pack and achieved its second highest operating cash flow and free cash flow since we acquired the operation 6.5 years ago. Palmarejo and Kensington were largely on plan and are on track to deliver strong fourth quarters, and Rochester’s results reflect steady progress, despite devoting 38.5 days or about 45% of the quarter to crushing and hauling overliner material to the new Stage VI leach pad before winter. It’s worth pointing out that Rochester’s year-to-date results reflect 2.5 months of essentially no stacking on the legacy Stage IV pad as they prioritize activities to support the POA 11 expansion. On the exploration front, results continue to validate our ongoing commitment to these higher levels of investment. We invested $20 million in exploration during the quarter alone. This commitment to drilling has led to double-digit reserve and resource growth over the past few years, and we look forward to hopefully delivering further growth again at the end of this year. If you turn to slide 7, you can see that exploration continues to be a real differentiator for Coeur. We anticipate investing $70 million in exploration in 2021, which is nearly 40% higher than the record we set last year, and is one of the largest programs in our sector. We remain on track to achieve our full year drill footage targets, yet investing slightly less than originally anticipated, which reflects efficiencies we are realizing from these larger programs. We will plan to provide another exploration update before the end of the year that will focus on exciting new results at our assets in Nevada, both at Rochester and from the Crown district in Southern Nevada, where there continues to be a lot of activity. Switching over to our expansion projects, I want to walk through some updates starting with the Rochester POA 11 expansion. This project remains our top priority and is a transformative, well-funded source of production and cash flow growth for the Company. Things are moving right along. Overall progress stood at 42% complete at the end of the third quarter. In addition to completing the crushing of overliner for the new Stage VI leach pad, the team also kicked off foundation work for the Merrill-Crowe plant and the crusher corridor during the quarter. As we mentioned on our last conference call, we’re experiencing the impact of inflation on remaining unawarded work, like most companies are reporting. Overall, we’re fortunate to have had the vast majority of our contracts locked in prior to the current spike in costs and supply and labor disruptions. We’re trying to mitigate some of these impacts by re-scoping and rebidding unawarded contracts. But, we currently estimate that we’re likely to see a 10% to 15% overall increase to the POA 11 construction costs. Thanks to the ongoing test work and operating experience taking place at Rochester, our technical team has identified an opportunity to create additional operating flexibility by installing pre-screens into the new crushing circuit. We have kicked off detailed engineering and we’ll be evaluating the merits of implementing this process improvement over the coming months. Assuming we elect to pursue this opportunity, it could potentially extend the timetable for completion and commissioning of the crusher by three to six months. In the meantime, we plan to install pre-screens on the existing crusher during the first half of next year to give us some full scale runtime and experience that we can potentially incorporate into the new crusher configuration. Now, switching over to Silvertip, given the current inflationary environment, and pandemic driven supply and labor disruptions, it’s not an ideal time to be kicking off a new capital project on an accelerated timetable, despite multiyear high zinc and lead prices. Fortunately, Silvertip expansion and restart is still in the early innings, which gives us a lot of flexibility. Despite the uncertain macro environment, which contributed to higher than expected capital estimates for an accelerated expansion and restart, one thing we are certain of is the quality and prospectivity of the Silvertip deposit. The exploration results, along with the knowledge and new discoveries the team is generating, have led us in the direction of evaluating a larger Silvertip expansion and restart on a potentially slower timetable. To take advantage of such a high grade and significant resource, a 1,750 ton per day processing facility isn’t likely large enough to maximize Silvertip’s value. We’re going to take some additional time to evaluate what a larger design and footprint could represent in terms of economics and overall flexibility. This approach will give us time to continue drilling and hopefully keep growing the resource, allow for the dust to settle on many of these current macro economic factors, and allow us to focus on delivering POA 11, while not shrinking the balance sheet. Finishing out the highlights, we’re pleased to announce that we entered into an agreement with Avino Silver & Gold to sell them the La Preciosa project in Durango, Mexico. This transaction offers some real potential synergies to unlock value from that asset with their nearby Avino mine. Strategically, the transaction checks a lot of boxes for us with respect to further enhancing our geopolitical risk profile, our metals mix and the timing of our development pipeline. We can deploy some of the fixed cash consideration into the Rochester expansion and into our highly prospective exploration programs. The transaction provides a lot of upside to the asset through the equity ownership we will have along with contingent payments and two royalties we will retain. Shifting gears, I want to quickly bring your attention to a set of slides, starting on slide 17 that highlight the great culture and diversity efforts we have at Coeur. To be a high-performing organization, a company’s culture, strategy and capabilities need to be aligned, something that I believe we’ve achieved over the past few years. To that end, I want to recognize our Head of Human Resources, Emilie Schouten, for her efforts on diversity, equity and inclusion and for recently winning the industry’s Rising Star Award from S&P Global Platts. We continue to integrate our ESG efforts into our strategy and overall decision-making. Before having Mick provide an overview of our operations, I’d like Hans to follow up on my Silvertip comments by providing a brief overview of the Silvertip exploration results and why we are so positive about its potential. Hans?

Thanks, Mitch, and good morning, everyone. We bought Silvertip in late 2017 with the recognition that the asset has excellent growth potential. We now have almost 3.5 kilometers of potential growth defined, based on step-out drill holes or more than triple what we knew in 2017, as highlighted on slide 8. This year, we are completing the largest exploration program in the history of the project. Impressively, Silvertip accounts for roughly 25% of our $70 million overall budget at Coeur. The site team, led by Ross Easterbrook, has done an outstanding job managing the 100,000 meter drill program. Drilling from underground has given us the ability to conduct exploration year round, and test different parts of the orebody from different angles, which has been a crucial part of the Silvertip growth story. Underground drilling in early 2021 has led to the discovery of the Southern Silver zone vertical feeder structures and fixed manto zones, and more recently, vertical feeder structures under the Discovery South Zone. These structures represent significant resource tonnage potential and present excellent upside. We now have two rigs active underground with plans to add a third rig early next year. We also expect to continue with three surface rigs testing resource growth to the south, and the 1.5 kilometer gap between Southern Silver and the other zones. With the larger drill budget this year, we expect to continue significant growth at Silvertip, which will give our development team confidence to right size the future operation to fit the potentially increased scale of the orebody. One final note, the team reported last week they had cut the best hole ever with 11 mineralized manto horizons. The hole is located under Silvertip Mountain about 500 meters or 1,500 feet south of the Southern Silver and Camp Creek zones in an area with no resource shapes at this time. This new step-out hole is a significant indicator of the growth potential we expect for 2022 and beyond. I’ll pass the call over to Mick. Mick?

Thanks, Hans. Before diving into operational results, I want to recognize the team for continuing to prioritize health and safety, and driving continuous improvement in this area. Moving to slide 24, I’m proud to report that we recently received the NIOSH Mine Safety and Health Technology Innovation award for our cross-functional COVID-19 response efforts. I’m truly honored to be part of such a great team that is relentless in its efforts to work together and look after the wellbeing of our people. Now, turning to slide 5 to cover the operations and starting off with Palmarejo. The team did an excellent job maintaining highest throughput levels and maximizing recoveries to offset some of the lower grades that we’ve been experiencing with our resequenced mine plan. We’ve also continued advancing development, while focusing on increasing rehabilitation rates across the mine, which helps ensure that we’ve appropriately prioritized the health and safety of our workforce. Quarterly operating costs remained within guidance, helping to counterbalance lower realized prices and generate $15 million of free cash flow. We expect a strong finish to the year at Palmarejo, and we’re excited to see how much production growth we can achieve here in this fourth quarter. Switching over to Rochester. We crushed just under 1.3 million tons of overliner for the new Stage VI leach pad during the quarter, completing the necessary requirements for POA 11. It’s important to note when we were generating overliner, we were not crushing material stacked on the legacy Stage IV leach pad, which had a knock-on effect for production during the third quarter. Despite the near-term production impact, all the time, energy and resources used to finish crushing overliner was an important step towards completing this highly anticipated expansion project. Now, turning to Kensington. Production was slightly higher during the quarter as better grades helped to offset lower mill throughput caused by stope sequencing and drill parts availability. The good news is that we anticipate more high grade drilling materials over the coming months and have already received the necessary spare parts for our stope drills, leaving us very well positioned for strong production growth in the fourth quarter. The Kensington team did an excellent job balancing multiple priorities and maintaining solid cost controls throughout the quarter, which helped generate nearly $15 million of free cash flow. Finishing with Wharf, I want to start by acknowledging the tremendous achievement. On October 3rd, the team at Wharf celebrated one year without a recordable safety incident, truly an amazing accomplishment. From a result standpoint, Wharf put together yet another great quarter, which marks back to back periods of strong performance. Gold production was up 17% and cash flow figures were the second highest since Coeur’s acquisition back in 2015. With that, I’ll pass the call over to Tom.

Thanks, Mick. First, I wanted to add a bit of color on the noncash adjustments that impacted our third quarter earnings. We wrote off $26 million of Mexican VAT refunds to which we strongly believe we are entitled, but like many other multinational companies doing business in Mexico, we have experienced significant challenges from SAT and the Mexican courts in obtaining these payments. We also had a mark-to-market adjustment on our equity investments, primarily related to Victoria Gold. However, the carrying value of the investment remains above our original cost. Turning over to slide 4, I’ll quickly run through our quarterly consolidated financial results. Revenue of $208 million was driven by relatively stable metal sales and a lower average realized silver price versus the second quarter. Operating cash flow totaled $22 million. This was lower than last quarter, but also negatively impacted by changes in working capital. Removing working capital, operating cash flow improved by more than 10% quarter-over-quarter. Like most companies, we’ve seen cost pressures related to consumables and labor across all of our operations, but thanks to our strong cost control focus, we have maintained our CAS guidance at all sites, except for Rochester where we guided a modest increase. The stronger expected Q4 production, we anticipate operating cash flow levels to continue climbing as we finish out the year. Turning over to slide 12 and looking at the balance sheet. We ended the quarter with approximately $330 million of liquidity, including $85 million of cash and $245 million of availability under our revolving credit facility. Also, it’s worth highlighting that these numbers do not include the $140 million of equity investments on our balance sheet. While we did draw down modestly on the revolver, we ended the period with a net debt to EBITDA leverage ratio of 1.4 times. We will continue adhering to our disciplined capital allocation framework and remain focused on our goal of keeping net leverage below 2 times and maintaining liquidity of at least $100 million throughout the entire Rochester construction period. The incremental capital costs at Rochester will put pressure on this goal. However, we expect the revised timeline for Silvertip along with the current robust metals price environment will leave us well positioned to maintain a strong and flexible balance sheet. I’ll now pass the call back to Mitch.

Thanks, Tom. Before moving to the Q&A, I want to quickly highlight slide 13 that outlines our near-term priorities as we approach the end of the year. With production guidance reaffirmed and a strong expected fourth quarter underway, we’re feeling confident about our 2021 results and in our ability to carry this momentum into next year. We’ll continue pursuing a higher standard and execute at a high level to deliver consistent results and industry-leading organic growth from our balanced portfolio of North American based precious metals assets. With that, let’s go ahead and open it up for questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Mark Reichman with Noble Capital Markets. Please go ahead.

I’ve been getting more questions about sustainability reports. And so, I was just kind of hoping you might be able to elaborate on Coeur’s framework for limiting GHG emissions. I mean, a lot of companies are saying they’re looking to improve on their current path, others are aligning with the Paris Agreement, others are putting out plans for a path to net zero emissions by 2050. So, just your general thoughts on your efforts and trade-offs would be helpful.

Yes, sure, very relevant question. Thanks for asking it. I have Casey Nault here in the room with us, who’s our General Counsel and leading our ESG efforts. On the website, our Responsibility Report is available, which we’ve done now for the last two years. That’s a great place I suggest you refer any inbounds that you get, as well as every quarter we do a really good job in these quarterly slide decks that accompany these calls of highlighting different elements of our ESG priorities and efforts. I’d consider us—and I think third parties consider us—a real leader among our peers. We punch above our weight when it comes to our ESG priorities. We’re now into the first year of having a GHG emissions intensity target that we’ve announced, which we’re proud of, and I think is a good indication of just how serious we are about doing our part. It’s consistent with our overall strategy and priority that we place on our ESG initiative here. We’d be happy, Mark, to set up any detailed call with you one-on-one, with any of your interested people to go deeper into ESG, if there’s any interest.

That would be helpful. I think that the focus is really the climate change portion of it and the pathway. And then, just a second question is, do you think will the Support Agreement associated with Victoria Gold get extended or what are your thoughts on that?

Yes. Good question. The expiration date is the 31st. You may see in our disclosures that there’s an embedded derivative tied to that Support Agreement that we assigned a value of zero in our disclosures, which is an indirect way of answering your question about the likelihood that we assign to there being any value associated with that agreement.

Our next question comes from Michael Dudas with Vertical Research Partners. Please go ahead.

Good morning, Mitch and gentlemen.

Good morning. Hi.

So, Mitch, can you maybe elaborate a little bit more on Rochester and the pre-screening capital that may or may not go in? What are some of the trade-offs, IRRs, timing relative to enhanced or lengthening life or cash flow through the project?

Good question. I’ll ask Mick to cover that. It’s something that we’ve zeroed in on here over the last few months as we’ve done a whole lot of test work out there, and as we have continued to operate the existing operation, especially as it relates to some of that softer ore that we’ve talked about on prior earnings calls. This pre-screen concept is something we think that could provide a lot of flexibility for handling that softer ore type in the coming years. Mick, do you want to go a layer deeper on pre-screens?

Yes, for sure. So, very typical in a mine as the orebody develops and we see a few signs, you pop up a pre-screen, pull those fines off. That does a few things. It manages the fines at the back end that we put to the heap leach, which is positive, and helps us manage the PSD. It also can help with throughput at times. We haven’t finished the design on that yet though. We’re busy working through that and will certainly update as we go forward. For the moment, we’re taking a deep look at that. We’re going to look to put some kind of pilot into the X-pit to make sure that the technology we put in matches the orebody we’ll have and that we’ll get good learning ahead of any possible implementation into the new crushing circuit. We’ll have that work wrapped up here in the fourth quarter.

Understood. And then, looking out at the rebid and reconstituted requirements for the remaining capital allocation on Rochester. Can you talk a little bit about timing? And some of the dynamics—obviously you’ve talked about some of the dynamics, but is it just contractor, material, timing? It’s just that everything’s so tight, and is COVID been an issue relative to working in North Central Nevada, getting the folks on board?

Yes. I’ll start, and then Tom, you can pick up where I leave off. COVID is definitely exacerbating the labor challenges for contractors, just in terms of available people. That’s not helping for sure. That has found its way into some of the preliminary proposals that we received on some of this remaining unawarded work. Tom, maybe you can talk a little bit about the 10% to 15% range that we mentioned, timing and dynamics.

Both of the two SMPEI contracts were bid out with fixed prices in mind to mitigate our risk. What happened was as part of that mitigation, given the labor supply shortages as well as some other inflationary pressures, we saw some bids that were much too high. So, we’ve decided to go back, rebid each of the two contracts, widen the scope of who we’re talking to, and most importantly modify the commercial approach, so instead of a fixed price we’ll go with a reimbursable cost with a sharing of the commercial risks. That work is actively underway and we hope to get those awards in the near future. I would suspect we’ll have a lot more to say during the February year-end call.

And then, Mike, just shape of remaining capital, if that’s part of your question. I think as we go into 2022 and 2023, you could expect 70% of the remaining capital next year, and the remainder in 2023 as we wrap things up.

We have some great partnerships that worked well on prior projects, and we’re talking to those kinds of organizations now around that rebid and the new strategy around execution on those packages. Those negotiations are going well and we’ll update everybody after that. So far, we’re seeing some opportunity to rethink those packages.

That’s great. Very helpful, Mitch, Tom, Mick. Thank you very much.

Our next question comes from Joseph Reagor with ROTH Capital Partners. Please go ahead.

Hey Mitch and team. Thanks for taking the question. So, two things. First one, on the cost side, there’s a lot of debate over whether or not the current inflationary environment will hold, whether it’ll accelerate, etc. What are you guys doing to plan for existing operations to keep cost inflation at a minimal over the next year or two?

The word transitory depends on your definition. We don’t necessarily see a near-term inflection where things start to ratchet back down. We are making plans and pursuing opportunities to try and offset some of those impacts that could be around for a long time. Tom, do you want to share a little more on the inflationary aspects and then Mick can touch on operational mitigation?

The two big areas for us have been labor and consumables. Some consumables, like diesel, we’ve seen increases—roughly 35% in our U.S. operations and 20% in Mexico. Other consumables are up in that 7% to 8% range. Labor pressure is notable, particularly at Kensington. All of that has us in the 5% range for increases in costs. In our budget cycle right now, we are not anticipating that pressure to come off in 2022. We’re doing lots of things to maintain costs, and we’re pleased to be able to maintain our cost guidance. I think a lot of the efforts that Mick will touch on are contributing to being able to hold costs flat in this inflationary environment.

We have a strong business improvement and continuous improvement program. Various projects are ongoing to hold and improve costs, particularly where we have areas of high fixed costs to drive productivity. We’ve seen good progress this year in that space, particularly at Palmarejo and Rochester.

And then, Mitch, following on the sustainability question earlier, given you tend to be active on M&A, have you given thought to diversifying into battery minerals? One, that would help your ESG focus, and two, that sector seems to have plenty of technical people but perhaps not mining experience. Any thoughts?

It’s a provocative question. With attention on rare earths and battery metals, you can’t help but think about it. In the near term, we have an awfully full plate delivering on our priorities, and that’s our focus. We do note the ESG story for silver—end uses in solar, electrification, and storage—so we’re pleased to have that as a contributor. As far as expanding into other battery minerals or rare earths, that’s not a priority in the near term. Never say never, but no plans at present.

Our next question comes from Michael Siperco with RBC Capital Markets. Please go ahead.

Could you—just going back to the Rochester expansion and the timing of capital spend. If I do the math on the revised guidance for Rochester CapEx in 2021, I get to a number of about $60 million, $70 million in Q4, and then about $300 million through completion, based on that 10% to 15% cost inflation. So, am I right in my math and thinking about it around $200 million in 2022 and $100 million in 2023, is that the ballpark?

Yes. I think your numbers sync up with that 70%, 30% split.

Okay, great. Just wanted to make sure on that. And then on Silvertip, are you able to separate the delta in costs versus your expectations in terms of how much was related to the accelerated timeline, and how much was general cost pressure? Or in other words, how confident are you in a more reasonable number while pushing out the project, if inflationary pressures remain?

Good question. The accelerated timetable was a large contributor because it squeezes construction activities into a short window and requires accommodating large numbers of contractors beyond current capacity, which increases indirect costs. There was also a factor related to the design and placement of key infrastructure into an existing footprint, which drove costs higher. With time we can continue drilling and growing the resource, see if macro factors calm down, and take a more patient approach to footprint and site layout that could alleviate some of those constraints. That helped lead us to the direction we’re taking now.

With the timeframe in our hands, we can look at technology selection, make sure health, safety, environment and hygiene factors are best practice, and then optimize as we learn more about the resource. The early work is going well; we’re de-risking the project and site cleanup and decontamination have gone very well. Overall, I think we’re well positioned.

Again, the importance of a strong and flexible balance sheet during the entire Rochester construction cannot be overstated. This is another reason to support that we’ll maintain a strong and flexible balance sheet through the Rochester expansion.

That makes sense. When should we expect an updated technical report or more color on how the project will be progressing? And second, can you give a sense of the quantum of spending at Silvertip in 2022 and 2023 before you embark on actual construction?

On the technical report schedule, it’s likely around the middle of next year. We need to reset and look at the new schedule and opportunity, and we’ll talk about that as we go forward. For the project, it depends on technology selection and strategy: a staged approach versus a step-change approach. Permit requirements for each option will influence timing. We’ll lay that out in the future technical report.

Depending on whether we go staged or step-change, that will impact the level of care and maintenance required. We’ll be out with our budget early in February. Also, we’re excited about exploration potential and expect continued levels of exploration to support growth in the resource. I can’t be more specific at this stage.

You mentioned last quarter you were looking at offtake options for funding. Is that still ongoing? Is that still a consideration?

Yes. It will continue to be an element. The testing of metallurgical processes is positive and the level of interest is high. Timing has been pushed out, but there’s no change in that being a significant part of the strategy to help fund Silvertip.

Can you comment on how, if at all, the new contractor laws in Mexico have affected operations or costs or if they will in the future?

For us, that process was completed in July when we transferred employees out of a service company. There were no big challenges. The way we historically compensated employees in the service company was consistent with how we compensate everyone, regardless of entity. There was no meaningful impact to our costs or labor compensation. It was largely an administrative exercise that wrapped up in July, with no fallout since then.

Our next question comes from Brian MacArthur with Raymond James. Please go ahead.

I think Mike has asked a lot about timing at Silvertip and ongoing tasks or expenditures for care and maintenance. Conceptually, are we thinking to slot in with Rochester that we’ll drill in 2022 and 2023 and try to hit the construction season for some plant in 2024 with production in 2025? Or are we talking about drilling for two or three more years and aiming for 2026? What’s the carrying cost as you wait?

My preference is a staged approach—start a little sooner and smaller and allow the operation to self-fund expansion over time as permitting and continued drilling lay out the runway. But we’ll let the work dictate the schedule. We’ll balance that with our desire to preserve balance sheet flexibility. The work is underway to see if a staged approach is viable.

It’s dependent on that strategy. We have permits in hand already and amendments that we can make to allow building a smaller plant. If we want a big plant, we have to re-evaluate permits and footprint and get the amendments in place. A modular approach is a preference, but we’ll look at the best value proposition and make a decision when ready.

And you’ll continue to drill aggressively to figure out what you actually have to decide where to build a bigger plant?

Exactly.

Our next question is a follow-up from Mark Reichman with Noble Capital Markets. Please go ahead.

Lastly, I wanted to ask about the impetus behind the sale of La Preciosa. I’ve heard some criticism, but you’ve known Dave Wolfin a long time and it seems Avino will try to make the most of the asset and you’ve retained some interest. So, just your thoughts about that transaction and why now?

La Preciosa has been evaluated for the best path to unlock value for a while. It was acquired when the silver price was in the mid-30s and looked attractive then, but the environment has changed. After-tax, risk-adjusted returns at La Preciosa have a hard time competing with other opportunities we have, mostly in the U.S. and to a lesser extent in Canada. Mexico has become more challenging in our experience—permitting, security, rule of law, and obtaining VAT refunds has been disappointing. The VAT write-off wasn’t the sole driver for the La Preciosa decision, but it was an ongoing headwind. Tax rates in Mexico relative to other jurisdictions and our U.S. tax loss carryforwards factor in as well. There were many aspects, including that La Preciosa is a primary silver asset and we’re comfortable with our current metals mix. Leveraging nearby Avino infrastructure makes sense and is a pathway to realizing value sooner than on a standalone basis.

That’s very helpful. Thank you very much, Mitch.

Our next question comes from Ryan Thompson with BMO. Please go ahead.

Hi, Ryan.

Hey, Mitch. Thanks for the updates. Just a question on Rochester: at recent run rates you’re producing between 700,000–900,000 ounces of silver and 7,000–8,000 ounces of gold over the past few quarters. You mentioned using crushers for the overliner material for expansion. Is it reasonable to assume Rochester production over the next few quarters will pick up a little now that that crusher is available? How should we think about medium-term production before the expansion is done?

In the very near term, here in the fourth quarter, despite recent heavy rains in Northern Nevada and California, we’re excited about the fourth quarter at Rochester because there’s no overliner being generated and diverted to Stage VI and there’s no swap out of a crusher, so it should be a fairly clean quarter relative to recent ones. Going into early next year, the only item to watch is putting pre-screens into the legacy X-pit crusher, which will have a little downtime associated with it—likely in early Q2. Otherwise, we should be able to sustain higher throughput, crushing and stacking rates, and continue to realize improvements from inner-lift liners we installed earlier this year and the screens planned in Q2.

We’ll continue to use the X-pit as a large-scale pilot for the new crushing circuit and learn a lot. We’ll work through 2022 to optimize particle size distribution and balance throughput and recoveries. We expect some variability through 2022 but overall more stability now that infrastructure is in place, other than the pre-screen installation in Q2.

That’s very good to hear, thanks. Maybe one more: Mitch, can you give an update on your latest thinking on the Victoria Gold investment?

Since May when we made that investment—about $117 million in share consideration to Orion—it’s been a good investment. It’s up to roughly $160 million current value and has generated a nice gain for us. Their stock price has increased significantly since our purchase. They’ve said publicly they are running a soft process; we’re not part of that process despite our 18% ownership and genuine interest. We view Victoria as an attractive opportunity that’s on strategy. They recently put out solid third quarter production results and ramp-up appears to be progressing well.

That’s great color. One more quick one: update on the Southern Nevada property? There’s been activity in that region—what’s the latest thinking and activities out there?

Hans is still on the call, but I’ll speak to this. We’ll keep drilling. We love our land package and think it’s great that a neighboring company’s acquisition has validated enthusiasm in the region. It’s part of a larger system that we’re drilling on. We’ll continue to prioritize drilling while exploring ways to work with neighbors to make the pie bigger—sharing infrastructure where possible. We plan to put out an exploration update before year-end with new results from that area. It remains a very active and exciting exploration district in Nevada and an important future pipeline for us.

This concludes our question-and-answer session. I would like to turn the conference back over to Mitchell Krebs for any closing remarks.

Okay. Well, thank you for all the good questions and for your time this morning. We will have another call like this early next year. Happy holiday season to everybody. Have a safe, happy and healthy holiday season. Thanks for your time today, and have a good rest of the day.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.