McEwen Inc. Q2 FY2021 Earnings Call

Hello, everyone. Welcome to McEwen Mining’s Q2 2021 Operating and Financial Results Conference Call. Today, we have Rob McEwen, Chairman and Chief Owner; Anna Ladd-Kruger, Chief Financial Officer; Peter Mah, Chief Operating Officer, and Steve McGibbon, Executive Vice President of Exploration presenting. After the presentation, we will have a question-and-answer session. I will now hand the call over to Mr. Rob McEwen, Chief Owner. Please proceed.

Thank you, operator. Good afternoon, shareholders and interested investors. I’m very pleased to welcome you to our Q2 2021 conference call. Over the past 15 months, we have rebuilt our senior management team at head office and other mines. It is these talented individuals who are responsible for the turnaround we are currently experiencing. Today, Peter, Anna, Steve, and I are going to share with you the significant improvements in the performance of our operations and financial strength, along with a review of the highlights of our exploration program and our plans for surfacing the value of our giant copper project, Los Azules. But first, I’m truly delighted to say that our mines are operating much more efficiently, such that we are back to delivering on our production guidance. We are building our treasuries, and our share price is gaining some of the ground we lost last year. These are very encouraging indications that we are getting back on track, and that the trend is definitely up. However, there is still a lot of ground to recapture, and I want to assure you that we are fully committed and driving hard to do so to regain that ground. Now, I will ask Anna to share with you the positive transformation of our financial condition as seen in our results of Q2 for the first half of this year. Anna, to you.

Thank you, Rob, and good afternoon, everyone. Q2 was the quarter demonstrating operational progress in our turnaround strategy, lower costs, and a strengthening treasury, all resulting in improved financial outcomes. Strong production from our operations translated into solid revenues from our gold and silver sales for the quarter. Our revenues from 100% owned operations during the quarter was 40.7 million, which is an increase of 123% compared to Q2 of last year. Average realized sales prices in the quarter were 1,830 per gold equivalent ounce, compared to prices of 1,733 realized in Q2 of last year. Our cash gross profit, which is a non-GAAP measure that excludes depreciation, was 9.6 million for the quarter, an increase of 13.6 million from Q2 of last year’s cash gross loss of negative 4.9 million. The change in Q2 is attributed to increased production in sales, higher average realizable gold prices, and decreased cash costs per ounce at both our Gold Bar and Fox Complex operations, which Peter Mah will detail shortly. We reported a net loss of six million or negative $0.01 per share for Q2. This does include a total of 7.7 million invested in our exploration and advanced projects. This compares to a net loss of 19.8 million or negative $0.05 per share in Q2 2020, again an improvement primarily driven by better operational efficiency. Our exploration activities wrapped up in 2021, and we have spent approximately 0.9 million to date on high-potential targets in both Ontario and Nevada. We are also incurring eligible Canadian exploration expenditures in the two locations of Ontario. Steve McGibbon will give further updates on our various exploration programs shortly. We also spent just under $1 million on advanced projects during the quarter. This includes continued spending on our Fox Complex PEA or Preliminary Economic Assessment and the Phoenix project in Mexico. Our total liquid assets as of June 30th was 48.9 million, compared to 20.8 million for the same period last year. This reflects higher cash and cash equivalents, restricted cash, investments, and our precious metals inventory. We also received 2.6 million in dividends in Q2 from my interest in San José mine, for a total of 7.6 million in H1. This compares to 0.3 million in the same period first half of last year. Net cash investing activities of 12.3 million in the first half of this year is largely attributed to the capital development costs at our Froome mine at our Fox Complex. We remain on track to reach commercial production in Q4. We ended Q2 with 74.9 million in current assets and a positive working capital of 30 million. Thank you. I will now turn the call to Peter Mah, our Chief Operating Officer.

Thank you, Anna, and good day to all. We are pleased to report on another good quarter for McEwen Mining, with production trending up on track with our 2021 guidance. Costs are trending down, with teams focused on continuous improvement, and the expansion project at the Fox Complex is progressing well. Consolidated gold production in Q2 2021 was 40,700 gold equivalent ounces, over two times higher than production during the same period last year. Total production for the first half of 2021 was 71,300 GEOs, in line with the lower end of our guidance range of 141,000 to 160,400 GEOs. Q2 production from our 100% owned lines was 22,400 GEOs, which increased by 12,300 compared to Q2 last year. Q2 consolidated costs per GEO for our 100% owned lines and operations were $12.86 for cash costs, about 41% lower than last year, and $14.47 for all-in sustaining costs, which was 47% lower than last year. Moving on to each region. At the Gold Bar Mine in Nevada, Q2 production was 14,100 gold equivalent ounces, reflecting a 132% increase over last year. The production increased in the first half of 2021 to 21,500 gold equivalent ounces from 15,300 for the same period last year. Cash costs per GEO for the quarter reduced 18% to $14.63, while all-in sustaining costs reduced 35% to $16.19, compared to the same period last year. Improved production and costs were driven by increased gold production, operational efficiencies, and no COVID interruptions to production. Moving on to Canada, Q2 production at the Fox Complex was 7,100 GEOs, reflecting more than a threefold increase from the 2,200 GEOs produced in Q2 of last year, increasing our expectations according to the mine plan as mining wound down at Black Fox and transitioned to the ramp-up at Fox Mine, which was modestly better than expected. Cash costs per ounce in Q2 decreased to $917, compared to $31.21 in 2020, while all-in sustaining costs per ounce in Q2 decreased to $10.88 compared to $33.32 in 2020. The decrease in cost reflects improved gold production, better mining efficiencies, more consistent throughput, and more reliable grade control programs. In addition, the Q2 2021 cost per ounce benefited from optimized mine design, reducing underground development costs and scheduling at the Froome deposit, with no production interruptions due to COVID. Froome remains on track to reach commercial production in Q4 of this year; grade reconciliation is on plan, and metallurgical recovery has slightly outperformed our expectations, with further optimizations of recovery versus grind size ongoing. Underground resource and reserve definition drilling is underway with the aim to extend the mine life at Froome and help bridge gold production, while the Grey Fox and Stock projects are being advanced. The Fox Complex expansion drill results and model updates are expected to be delivered in Q3, and the preliminary economic assessment subsequently in Q4 of this year. Plans are underway to select the mining contractor to start dewatering the stock mineshaft in Q4 of this year. This will provide access to the existing underground developments from which the Company plans to conduct underground drilling at Stock. At El Gallo in Mexico, Q2 production was 1,300 gold equivalent ounces from residual leaching of the existing heap leach pad. Residual leach activities are projected to wind down towards early 2022. We are currently evaluating multiple strategic alternatives, including the potential divestiture of our Mexican business units. Shifting to Argentina, at the San José Mine, Q2 production attributed to our 49% interest was 18,200 GEOs, nearly double the production for the same period last year, due to higher ore tons processed and reduced impacts from COVID. Increases were slightly offset by lower process grades due to the delayed timing of smelting and lower grade mill fills substituting development. Cash costs were $1,105 per GEO, slightly lower than Q2 2020 for the reasons mentioned, while all-in sustaining costs were on par for the same period last year at $1,500 per gold equivalent ounce. Thank you. I will now turn the call over to Steve McGibbon, our Executive Vice President of Exploration.

Thank you, Peter. Exploration activities ramped up significantly in Q2 across all projects in Canada, the United States, and Argentina, with a total investment of approximately $6.9 million. As you know, nearly 35,000 meters of core drilling were completed, equivalent to more than 114,000 feet. The focus on exploration remained on cost-effective discoveries and extending deposits adjacent to our existing operations in order to sustain near to medium-term gold production. Firstly, I will update on the work at our 49% San José property, which is operated by our joint venture partner Hochschild Mining. On a 100% basis, the 2021 exploration budget for San José is $9.3 million, with $2.9 million spent in Q2 2021. Lease and exploration expenditures for the first half of the year totaled $5.2 million. Proximal to current San José operations, resource drilling has been completed in Escondido, and the timing of gains from the 3,410 meters of drilling showed several encouraging drill intercepts of 1.5 meters to 2.5 meters, grading typically between 2.5 and 3.5 grams per tonne gold, and 200 to 300 grams per tonne silver were realized. One addition on these core monomers for SKD 2267 ran 18.4 grams per tonne gold and 1,879 grams per tonne silver, with a core length of 1.4 meters. I will remind the listeners that gold and silver deposits at San José are epithermal and will often produce highly variable drill results through the normal course of a drill program. At the Timmins site, 283 meters were completed, including a 3.1 meter intercept grading 5.5 grams per tonne gold and six grams per tonne silver involved SKD 2328. During the third quarter, 3,000 meters of drilling will be carried out to test a geophysical target to the south of San José. At Gold Bar Mine in Q2, exploration incurred $1.3 million in expenditures in the Gold Bar Mine area, which included 4,700 meters or 15,400 feet of core drilling, making it part of our planned program for 2021 tracking approximately $5 million in exploration spending. Drilling activities during the quarter were focused primarily on the ridge deposits located west of the active pit mine and at the nearby 30% Atlas Mine. Exploration efforts sought to reduce the risk of known mineralization and test potential deposit expansion in each area. The Ridge core drill program confirmed mineralization locally and returned intercepts reported in our May 10th exploration and definition update. Exploration activities of the atmosphere included 1,500 meters in 10 RC drill holes after mine mapping and modeling identified several drill targets for evaluation. Some assays remain pending, but our best results to date include a deeper intercept comprising about 27 meters or 90 feet of 3.10 grams per tonne gold OGB 010. This includes a higher grade interval of about 10.7 meters, or 35 feet of 6.33 grams per tonne gold. Further three-oriented core holes are planned for the third quarter and will round out the initial phase of drilling efforts. Activities at the Tonkin property include starting a property-wide revaluation of regional geology, mineralization controls and their context in relation to other large carbon-type systems in the industry. Revenue from this work suggests it often has greater similarities to other properties hosting large carbon-type systems to the north than previously thought, including the geological setting for the lower grade loss. A 1,900-meter RC and four-hole core drilling program, totaling some 1,500 meters, has been underway during the third quarter, primarily testing oxide mineralization at the one deposit. This work is being integrated into an updated geological model that will dovetail with our improved property rights understanding. Ongoing exploration activities at Tonkin, East Deck, Cabin, and Park Canyon are planned to continue throughout the second half of 2021. Exploration at Gold Bar South has successfully advanced the project and is expected to contribute to Gold Bar’s future production. At the Fox Complex in Canada, exploration will continue throughout 2021. As production area shifts to the frontline underground exploration zone, the East and West frame has been underway, with the objective of extending the Froome deposit and assisting the structure. The Froome deposit also remains open at depth with potential exists for nearby sub-parallel mineralization in the hanging wall and footwall that will also be drill tested. Underground drilling at the Black Fox mine continued to return encouraging metallic results at 160 West and 130 East targets. Underground diamond drilling is being completed to identify additional mineralization adjacent to the Black Fox ore body that could be inserted into a future mining plan. In the second quarter, we invested $3.5 million in exploration activities, including some 26,500 meters of core drilling focused around Stock West, Stock main targets, the Stock property, and the Whiskey Jack and Gibson targets at Grey Fox. The Stock exploration area sits adjacent to the stock home, which currently processes ore from our Black Fox and Froome mines. The mill processes ore from the historical underground Stock mine, which operated intermittently from the 1980s until 2004, producing 137,000 ounces of gold. The Stock was discovered in mid-2019, and in 2020, exploration activities were focused on follow-up drilling. Initial results suggested potential to define a significant resource in mineralization, a half-mile ore body located 100 meters from our Stock processing facility. In Q2 2021, core drillings secured as stock to infill and expand the main dimensions of gold mineralization. A total of 20,008 meters of surface exploration drilling was completed during the quarter at Stock West and Stock Main, with a primary focus on Stock West development. Two drill rigs also completed 1,861 meters to test the extension of shoots below the underground workings of the Stock mine. Activities of the Grey Fox project include drilling targets, focusing on the interpretation of local heating trends at the Whiskey Jack and Gibson targets. We expect the resource model to be updated in the second half of 2021. During the second quarter, we reported new stock assay results in our previously mentioned update. We have made good progress improving sample analysis charter funded assay labs in both Ontario and Nevada and on increasing drilling capacity with additional rigs input jurisdictions. As a result, we anticipate updating exploration and delineation results before the end of Q3. I will now turn the phone back to Rob.

Thank you, Peter. I understood; I was silenced, the phone is silent during the meeting. I’m sorry. Now I would like to talk about how we are going to develop one of our assets in a way that I believe has the potential to create significant value for McEwen Mining. As you know, we have a large copper project, Los Azules. It is a giant within our portfolio and a giant on a global scale. I do not believe the potential value of Los Azules is reflected in our share price, and that is something that we are determined to change. Furthermore, I believe there are several reasons why it has remained undervalued. First, Los Azules has a number of risks associated with it. It is remote with limited access, with road access only five months of the year. It is only at a preliminary economic assessment stage, so uncertainty remains about its resources, its economic projections, CapEx, and permitting. A large investment is required to reduce these risks, and unfortunately, the funding requirements are significantly greater than McEwen Mining’s treasury can handle without resorting to a financing that will lead to considerable share dilution. Second, McEwen Mining management lacks the perceived expertise in debt and copper experience to develop this project, and we have done quite a bit to correct that situation by putting together a large team of very experienced copper professionals. The third point is that the market appears to prefer to invest in a pure copper play, a pure copper development company over small gold producers such as ourselves with significant cash flow but focused on copper development. To surface the values of Los Azules, we considered a number of alternatives. The first one was to self-fund, but due to the large potential dilution involved with that funding, this option is unattractive. The second was to seek out a joint venture or an outright sale, and we had discussions with several major mining companies that have the treasury and the experience to build it. However, they all wanted to buy the project outright, which would leave us with no continuing interest in the property. We could suggest to all of them that we would like to retain a royalty, as this property has a 36-year life with very robust economics at this point. It would be a shame to give it away at an early stage when the copper price seems to be going higher, driven by the electrification of the world’s transportation system and renewable energies, all significant users of copper, along with a projected supply deficit. The third option was distributing this asset to our shareholders, an idea that has been discussed since the days of past management, yet it never gained traction for a couple of reasons. First, there is a complex tax structure that needs to be dismembered, and upon distribution, there would be a tax for both McEwen Mining and for the shareholders receiving the development. Additionally, the company would have to go out and do some fundraising, which is not feasible at this stage to gain large value for the assets because of the issues I mentioned earlier. The fourth option we looked at, and have decided to move forward with, is to privately fund a subsidiary that holds Los Azules and advance the project, moving it towards a pre-feasibility study and subsequently a feasibility stage. We aim to secure year-round access to the site, which is presently underway and should be completed within 12 to 14 months. I believe this is the best alternative for maximizing value for shareholders. If you look at large copper projects purchased between 2010 and 2018, you can see that the stage of development of the project is clearly reflected in the value paid per pound. So at the earliest stage of development, where you have some drill results and a resource, the value is at the lowest point. As you progress from a preliminary economic assessment to a pre-feasibility study and on to a feasibility study, the value incrementally increases. We can see a significant increase in the value of the property by resolving the access problems, completing more drilling, and fulfilling the environmental, metallurgical, and other studies necessary to produce a pre-feasibility study. To get the project rolling, since we do not have the money, I decided to commit $40 million of the up to $80 million we are looking to raise, and that will allow us to move the project aggressively. In fact, the new road into the property is already underway, now in its 15th day of construction. It will take about a year to complete, but will make a huge difference in this project. This investment is a related party transaction. We asked the disinterested directors on board, which everyone is set myself, to engage and independently assess the value. They looked at what McEwen Mining was getting relative to the market. They agree with our valuation of approximately $175 million on the property plus a royalty of 1.25%. We estimate that the projects are currently valued at just under 29.5 billion pounds of copper in the indicated and inferred category, valued at about $0.06 per pound. Progressing to a pre-feasibility and feasibility study could see that value increase to $0.03 to $0.06 and even higher, especially in a strong market. Thus, the math shows that we believe this will create substantial value in McEwen Mining, rather than selling too early in what appears to be a developing copper bull market. At this point, I would like to thank you for your attendance and invite you to our question-and-answer period. Operator, could you open up the phones for questions?

And your first question comes from Jake Sekelsky of Alliance Global Partners.

Thanks for taking my question. So it is good to see that costs at Gold Bar are trending down. I’m just curious if we should expect to see some further improvements here over the next few quarters. If so, can you touch on some of the operational improvements that are driving this?

Certainly. I will pass that question over to Peter.

Hi Jake, thanks for your question. We released the feasibility as you are aware, and we are driving towards that guidance. We are not providing updated trough guidance at this time, but we can certainly see from our production profile that costs are trending quite well relative to the feasibility. That is the best information we can share at this time. Regarding areas to improve, we spoke on last quarter about the mine, the process plant and general administration as areas of focus. We continue to look for improvements in our mining with our contractors. Regarding processing, we have been completing that program. We talked about last call targeting run of mine leaching. Those tests are coming through fairly positively, but we are in the analysis stage of determining the split of how much we could place on the pad of ROM versus crushing. Lots of business improvements are ongoing through amendments and working through synergies, particularly with our Mexican operation, utilizing some of the team there to support our Nevada team. We are doing quite well.

Okay. That is helpful. And then speaking of Mexico, it looks like residual leaching at El Gallo is probably going to conclude in the first half of next year. I think you guys touched on this earlier, but can you provide any more color on the plans for the mix going forward, whether it be on the M&A front or looking at the development of the Phoenix project? Just any color you have on Mexico would be helpful.

We are looking at Phoenix. We are just pushing a few levers there to try to improve the economics of the project and also looking at first funding.

Got it. Okay, that is all in mind. Thanks again, Rob, and congrats on a good quarter.

Okay. Thank you.

Thank you. Your next question is from Heiko Ihle, H.C. Wainright & Co.

At the Fox Complex, would you be able to give a little more color on when you expect to see it? More importantly, what do you think a good to amazing outcome scenario for the site would look like?

Peter, would you care to answer, Heiko?

Sure. Good to amazing! I will touch on that second point. We are conducting some additional work on the drilling that Steve shared with you. We are targeting Q4 for releasing the PA, likely on the earlier side according to our current schedule and should see that before year-end. Regarding a good to amazing outcome, how big do we want to dream here? In the PA for the first step of our expansion, we are targeting a 10-year mine life of something more than 100,000 ounces a year with this project charter, which we are still analyzing resources and optimizing our mine plan layers, so it is trending well. We don’t have everything consolidated yet to give you a view on that, and that will be articulated before the year ends.

Moving on to McEwen copper and the interest in Los Azules. It has been a month since the initial announcement. How is the deal coming along, and are there any future timelines you can disclose? You set 12-months in the original press release that came out in July, but are there any other hard or soft timelines you can discuss?

We will probably close this in two stages. One, during this month, around the middle of the month. It has been a legacy of a lot of subsidiaries that came with Los Azules from the previous owners. There is a labyrinth of subsidiaries that came in Canada and Argentina. Those all had to be cleaned up, and that has taken longer than we thought it would. We are looking to close this and simplify that structure by mid-August, and then again by the end of September. In terms of going public, we would be targeting up to 12 months after September.

Got it. Very helpful. Thank you very much.

You are welcome.

Thank you. Your next question is from John Tumazos, Very Independent Research.

Thank you very much, and congratulations both on the new progress and the energy of all the members of the McEwen team. I’m thinking of the February 1 announcement from another company, i.e., a gold company, that they were creating a new and stronger management team, and they hired a former CEO of Nevada Copper for their one jurisdiction. I’m just considering how the Fox Complex has at least three deposits, and the Stock Complex has at least three deposits, whereas the Timmins downtown Lexam VG projects have at least three projects. Gold Bar has over three deposits, and then there is El Gallo and an $80 million program up in Argentina. Is there a whole new management structure to be rolled out for Argentina, or are Peter and Steve and team working 72 hours a day, or should we just assume that El Gallo and what I call the downtown Timmins properties are on the back burner because there is only so much you can do at Fox and Stock and Gold Bar? This is quite a remarkable treasure of opportunities.

Yes, they are working 76 hours a day! Pete, did you want to talk about the team that has been assembled for Los Azules? It is extensive and has a lot of copper experience.

Absolutely. And thanks, John, for the questions and the gathering. There are a few more than 76 hours in a day. We have assembled a strong supporting team around the project that includes some internal consultants and additional people on the ground in San José, as well as external consultants. Internally, we have beefed up our team, bringing in a construction manager with a very decorated career in mine building, as well as other experienced professionals who have joined us to support these projects. In addition to that, we have incorporated an extensive group of experts who have experience in projects similar to ours. There is a solid team in place, and we are actively engaged in advancing our plans.

So you and Steve and Stephen aren’t managing the Argentina theater of operations, where Nevada and Ontario are funny, with a touch?

Our management team, so myself, Steve, and Reuben Wallin on permitting, environmental health and safety, oversee this extensive team executing day-to-day operations. We monitor and drive our projects through that team. There is an extensive team under each area that is executing successfully. We are proud of what we have achieved in the past year, especially with our results speaking for themselves. At Froome, we are on-track for commercial production. We have a robust team, and we are expanding our operational team to ensure we have every base covered.

Is it too much to assume for a second that the management team is delegating and supervising Argentina, but you still have Froome's restart and all these different good zones like Gold Bar? Are you managing operations in North America?

Absolutely. Our results this year have been solid, indicating effective management in every area. There has been strategic recruitment to enhance operational capabilities. El Gallo does not demand much of our time, and we are exploring strategic options. We are positioned well this year without any dire need for major alterations. We continuously look for the right people to advance all our regions of operations. Once the ongoing tasks are completed, we will assess our next steps for the Fox expansion.

John, it is a very good question. We need people to run things effectively. As for administrative tasks, we are seriously investing in systems to help streamline and automate operations. We are implementing an ERP system, a budgeting and forecasting system, and various operational systems this year that will be in place by the end of the year, which should improve efficiency significantly. We are recruiting additional people at the director and VP levels and considering succession planning. Our intention is certainly to position ourselves effectively as McEwen Copper aims to go public within a year or less. At that time, we will need a dedicated management team focused on compliance and reporting for public companies.

It is amazing that you only lost a penny with all this activity and new hiring going on. Can you talk about what the CapEx was in the June quarter? How many of these new people are capitalized versus expensed?

The different capital expenditures for the quarter were primarily related to the Froome mine project. None of the individuals we are discussing right now are considered capitalized; they are ongoing management costs. A lot of our recruitment efforts have been replacements that combine previous roles, particularly at the executive level. We did not add many new positions at that level.

Thank you, Rob and team. David Dennison, individual investor and author of this company since 2004. I think they mentioned regarding what to expect as a current McEwen Mining investor in the next 12, 18, or 20 months as McEwen Copper progresses and things develop as you hope or expect. Secondly, regarding the 100% owned properties down next to the San José Mine that you are drilling. What happens if you find something? Does it become subsumed under the current structure where you get 49%, or you don’t know that yet?

Regarding San José, the properties that Minera Andy's house were two sets of properties around the mine—Minera Andy one off-field had another. A number of years ago, we merged these two interests together. So they are all contained within the San José mine property, under the Minera Santa Cruz, which is the mine we have a 49% interest in. We do not have any 100% ownership of properties in the vicinity of San José any longer.

Got it. Thank you for that clarification.

On the copper project, because it is in Argentina and has limited access, we will gain access to the property in November. We have a plan to drill 53,000 meters. There are ongoing studies for environmental permitting, metallurgical, economic, and community relations. We hope to advance the project significantly next year through drilling to increase confidence in the resources. The first step will be updating the preliminary economic assessment done in 2017, reassessing costs, and exploring ways to reduce costs and lower capital. Moving forward, we aim to have a pre-feasibility study completed by the end of next year, but we want to go public before that. The drill season will run from November to early April, and we are setting up camps to operate effectively during that time. Road construction has started on what we call the Northern route, which will give us year-round access to the property.

So, as a current McEwen Mining shareholder, do I get anything from that or do I have to buy into that as it develops?

Under the current plan, we looked at distributions to shareholders regarding this interest, which has tax consequences for both McEwen Mining and the shareholders receiving it. This creates a taxable event, and many shareholders may choose to sell to cover the taxes. Thus, we determined the best way to maximize value is to advance the project systematically. We expect to raise $40 million to $80 million; at this current price, if we only raise $40 million, McEwen Mining would maintain an 82% interest in the company before going public, along with a 1.25% stake in the property. If our drilling confirms the substantial resource we've identified, we could see considerable returns once we go public and the project continues developing.

Thank you, Rob. I apologize if these questions seemed remedial. I’m not a mining expert by any stretch, just an individual investor. So thanks.

Not at all. You are welcome anytime.

There are no further questions at this time. I will turn the call back over to you, Mr. McEwen.

Thank you, operator. I would like to thank everyone for joining us today. Stay tuned, as the best is yet to come. Thank you.

Thank you. This does conclude today’s conference call. You may now disconnect.