SSR Mining Inc

NASDAQ:SSRM

Earnings Call Transcript 2020-Q2

[Operator]

Good morning, everyone, and welcome to the SSR Mining’s Second Quarter 2020 Conference Call. This call is being recorded. At this time, for opening remarks and introduction, I would like to turn the conference over to Michael McDonald, Investor Relations for SSR Mining. Please go ahead.

[Michael McDonald, Director, Investor Relations]

Thank you, operator. Good morning, ladies and gentlemen. Welcome to SSR Mining’s second quarter 2020 conference call, during which we will provide an update on our business and a review of our financial performance.

Our Financial Statements and Management’s Discussion and Analysis have been filed on SEDAR and EDGAR, and are also available on our website. To accompany our call, there is an online webcast and you will find the information to access the webcast in our news release relating to this call.

Please note that all figures discussed during the call are in U.S. dollars unless otherwise indicated. All references to cash costs and all-in sustaining costs are per payable ounce of metals sold. We will be making forward-looking statements today, so please read the disclosures in the relevant documents.

Joining us on the call this morning are Paul Benson, President and CEO; Greg Martin, our CFO; Kevin O’Kane, COO; and Carl Edmunds, Vice President-Exploration. Also present is John DeCooman, Senior Vice President, Business Development and Strategy.

Now, I would like to turn the call over to Paul for opening remarks.

[Paul Benson, President and Chief Executive Officer]

Thank you, Michael. Good morning, ladies and gentlemen. I’m very pleased to welcome you to our call to discuss our second quarter 2020 operating and financial results.

Obviously, the second quarter was an eventful one for SSR Mining, from navigating the impact of the COVID pandemic through to announcing our zero-premium merger with Alacer. With respect to COVID, it’s worth remembering each of our sites has its own unique characteristics, with consequences for both the risks to the operation and how we manage them.

As Marigold is a highly mechanized operation with no camp or dining facilities, it’s been relatively unaffected by the virus. The Seabee, a fly-in/fly-out operation; and Puna, a bus-in/bus-out: both operations have camps associated dining and housing facilities, as well as nearby indigenous communities. So the risk was significantly higher.

Add to this, Puna is 4,200 meters above sea level in the Andes, with workers coming to site from across Northern Argentina. Because of these factors, we took a very conservative approach to shutting down both operations in March.

Kevin will go into more detail on how we are bringing both mines back to full production. But I’d like to thank and praise the management and workforce at all our operations on how they have risen to these challenges.

Our overarching philosophy has, as always, been the safety of our employees. It’s better to take the time to do the restart once and do it correctly. We also donated $350,000, which we’ve used to support the local communities near our mines in Saskatchewan, Nevada and Jujuy, and our offices in Vancouver, Peru and Mexico with their battles with COVID.

Despite the challenges, Marigold produced almost 50,000 ounces of gold; set a new record for material moved in a quarter in the 31 years of continuous operation, and remains on track for a strong second-half of the year.

At Puna, we began processing ore through the mill in late June and produced 400,000 ounces of silver. By the end of July, Puna was back to mining and milling at budgeted levels. At Seabee, where the mine has a limiting capacity, beginning in July, our focus has been on a staged ramp-up of the underground mining operations, allowing us to build an ore stockpile, which in turn will allow us to run the mill at a higher rate upon restart.

From an exploration perspective, as Carl will speak to shortly, following on from our impressive exploration success announced in May, we’ve increased the Marigold exploration spend for 2020. We’re also pleased with our financial performance during the quarter, all things considered.

Income from mine operations totaled $34 million and our cash balance stands at $462 million as of June 30, an increase of $63 million compared to the prior quarter. During the quarter, we also continued to advance our zero-premium merger with Alacer. Integration work is progressing nicely and we continue to be encouraged by the strong cultural fit between the 2 companies.

We are obviously very happy with the positive shareholder vote in early July and we’re working to finalize the remaining required activities in anticipation of closing the transaction in the near term.

With that, I’ll turn the call over to Kevin, who’ll discuss our operational performance in more detail.

[Kevin O’Kane, Chief Operating Officer]

Thank you, Paul. Good morning, all. I hope you and your families have been well during the challenging past few months. As Paul indicated, we suspended operations at Puna and Seabee near the end of Q1 2020. I’ll be providing additional information on the status of these operations as of today.

However, at the end of Q2, at Puna, ore haulage and the processing plant were ramped back up and operating normally and the mine on day shift only. Mine extraction had commenced at Seabee. We had started 4 development fronts underground, and major capital works such as the Triangle Lake Tailings Storage Facility project were once again in execution. The mine continues to ramp-up production.

Prior to site activities recommencing, we implemented a broad range of COVID protocols to ensure the safety and health of our employees. Obviously, the use of masks, physical distancing, disinfection of common areas and the like, but also multiple pre-screening steps before anyone is permitted on site.

Safety performance during the quarter was excellent. We had a third of the number of recordable events. The exposure hours were lower, but even with that, the accident rate was almost half of that experienced during Q1 2020.

SSR produced 53,200 gold equivalent ounces at a cash cost of $929 per gold equivalent ounce. Material movement at Marigold was over $22 million tonnes, a quarterly record for the site. And one day after restart, the Puna mill was operating at over 4,200 tonnes per day. I’m proud of the teams in all our sites, projects and offices for the way in which they’ve managed the COVID-19 crisis in a safe and responsible manner.

At Marigold, we produced 49,900 ounces of gold in Q2, 15% less than Q1. Cash costs for Q2 of 2020 were $864 per ounce, 5% higher than in Q1, mainly due to an increase in royalty costs from the higher gold prices.

Total direct costs were marginally lower than Q1, despite total mine movement being 9% higher. During Q2, 5.1 million tonnes of ore at a gold grade of 0.3 grams per tonne were delivered to the heap leach pads, consistent with expectations and in line with Q1 2022. 22.1 million tonnes of material removed, an increase of 9% from Q1 2020 mainly because of shorter haul distances associated with increased waste movement and good shovel and truck availabilities.

The consistency in gold grade and strip ratio with the previous quarter reflects the continued ore mining in Mackay Phase 4, and stripping in Mackay Phases 6 and 8. As previously flagged, gold grades will increase significantly through the year as well recoverable ounces stacked in H2 versus H1. The increase in ounces stacked will positively impact costs during H2. Construction of the new leach pad is progressing per plan, and the project is on track to be completed during the year.

Operating during the past 3 to 4 months has been challenging for the Marigold team. There have been days when they did not have the full complement of operating staff, because of COVID-related issues. And I’d like to recognize the great job they’re doing. They have managed the operations with care and discipline.

Moving on to Seabee. As I mentioned, we did not produce during the quarter. We did commence ore extraction from the mine at the end of June, moving approximately 1,800 tonnes to a stockpile at Santoy. The objective of the Seabee restart has been to move forward together with care in a planned, safe and disciplined manner. So we do this once and we maximize the opportunities for sustainable and predictable production. As of July 31, we had more than 20,000 tonnes of ore stockpiled at Santoy and the Seabee mill, and we’re now starting up the processing plant. We’ll make our first pour in more than 4 months during the next 7 to 10 days.

We expect to be operating in over 1,200 tonnes per day in the plant within 10 days, and at that level until at least the end of the year. The miners ramped up ore extraction and we expect to operate at budget levels for the rest of the year. During Q2, 2020, at site, we increase the number of people from 22 to 44 and then 100 during April to 200 during May, and currently have our full complement of operating personnel working.

The plant and discipline increases allowed us to safely manage the implementation of all the necessary control protocols for people transport, camp occupancy and kitchen services, while at the same time prioritizing and balancing the work activities such as care and maintenance, the commencement of underground development work, surface capital projects, like the tailings storage facilities expansion project, and the startup of the water treatment plant.

Our care and maintenance activities were focused on asset integrity and preventative maintenance work in the plant and other surface infrastructure. We executed preventative maintenance work on our mobile equipment fleet and reduced accumulated backlog. In the mine, we’ve been advancing 2 capital development fronts for future ore supply and are now accessing the Gap Hanging Wall mineralization to facilitate conversion of these resources during Q1 2021. We initiated the construction of one ventilation raise and associated infrastructure to increase underground air volumes by 25% during 2020 and with a second raise 60% total during Q1, 2021. This work will allow us to operate at increased production levels.

As previously reported, we’re expanding the capacity of our tailings storage facilities to accommodate the expected increase in mine life. Activities recommenced during the quarter in June, and we’re still projecting to complete the project at the end of 2021 and demobilized the contractor over the 2022 ice road.

Operating a remote fly-in, fly-out mine is a complex undertaking, the care, discipline, dedication and commitment of all of our Seabee employees is a reflection of the quality of people that work there. And I know they’re proud of what they’ve achieved. Puna operations produced 0.4 million ounces of silver during the second quarter of 2020, 79% lower than quarter 1, due to the suspension of operations on March 20.

Ore haulage began – ore haulage between Chinchillas and Pirquitas commenced May 22. The plant started June 12, and the mine was running one shift at the end of the quarter. During April and May, we executed a number of significant maintenance projects in the plant and other Pirquitas infrastructure. We did a relied of the ball mill and changed out the drive motor for that mill. To limit the number of people on site, all this work was conducted by our people and executed safely without incidents or injuries.

Total plant throughput was 76% lower than the first quarter entirely due to the suspension of operations. Silver recoveries reached expected levels almost immediately. Feed grade to the plant was 159 grams per tonne, a 6% decrease compared to Q1 and silver recovery was 91.6%. Total mine extraction during the second quarter was 48,000 tonnes. There’s sufficient ore stockpile for 2 months of continuous milling operations.

Throughout the shutdown period in the mine, our people perform preventative maintenance on mobile equipment and component change outs for major equipment, setting us up for success in the second half of the year. More recently, in July, we implemented an extensive COVID testing program for all people going to site. This has been in development for some time and with the upward trend in cases in Argentina and Juyjuy province, we initiated the program.

As a result during the last week of July, we identified a meaningful number of asymptomatic positive cases prior to those people traveling to site and that’s were able to reduce the risk of virus spread to the camping operations. There have been sporadic but manageable disruptions to mine production.

The ore stockpiles will mitigate impacts on milling operations. Silver sales in the second quarter totaled 600,000 ounces, and lead and zinc 1.7 and 0.4 million pounds, respectively. All the silver, lead and zinc concentrate stocks were sold during the quarter. Cash costs were $13.51 per ounce of silver, impacted by limited by product credits.

I’d like to recognize the excellent job by the Puna team especially given the remote operation, camp environment and the complexities of transfer and transport of people from a diverse number of locations.

In summary, the operations again delivered solid safety performance. We maintain production of Marigold, while managing the impacts of COVID-19. And we safely and efficiently completed the restart of production at Puna. At Seabee, we’ve commenced what should be a very successful second half of the year.

I will now hand over to Carl, who will take you through our exploration activities.

[Carl Edmunds, Vice President, Exploration]

Thank you, Kevin. At the outset of 2020, we had exploration plans for a record amount of work and related expenditures to be completed on claims surrounding our 2 North American operations targeting Mineral Reserve and Resource growth. Like many industries reacting to the pandemic, we have responded to the conditions on the ground by temporarily suspending operations and exploration activities where we could not confirm to the jurisdictions occupational health and safety guidelines and keep our employees safe.

Against this background, we were able to maintain exploration activities at Marigold throughout the period, but suspended exploration work for the entire quarter in Saskatchewan. Currently, we have just begun to turn the underground drills again at Seabee on Gap Hanging Wall and look forward to reporting results as the remainder of the year unfolds.

At Marigold, we continued our exploration and confirmation drilling program at Trenton Canyon and Marigold, we announced a $2 million increase to our 2020 budget to further explore Trenton Canyon sulphide gold discovery intercepts published in May. Work completed in the second quarter totaled 19,400 meters in 61 holes completed at Trenton Canyon and Marigold, Valmy.

We have received positive assay results from 2 drill holes that follow up on intercepts reported from the sulphide discovery announced previously. Drill hole MR7233 returned 4.8 grams per tonne gold over 35.1 meters from 218 meters depth, including 24.9 grams per tonne gold over 6.1 meters, located approximately 40 meters west of the MRA7178 intercept of 5.2 grams per tonne gold over 84.5 meters. Diamond drill hole 7202 returned 4.9 grams per tonne gold over 18.5 meters from 178.3 meters depth.

We are pleased by the results to date and continue to drill in this area as we investigate the mineralized zones continuity, structural orientation and metallurgical characteristics. In the coming quarter, we anticipate initiating a seismic geophysical survey over select lines across Trenton Canyon and Marigold, which will tie into existing drill information. Once process later this year, it is likely that the results will allow us to resolve the spatial distribution of the favorable rock packages and the mineralized structures to identify new drill targets.

At Seabee, we previously reported exploration and infill results to April 30. Since that date, we have received another 3 infill holes, with one meeting resource intercept criteria from the Santoy 8A zone. This hole returned in intersected interval of 10.96 grams per tonne gold over 5.5 meters from infill drilling.

As mentioned, underground diamond drilling has resumed at Santoy. And importantly, we are advancing underground access towards the Gap Hanging Wall zone on the 46 level. We have already intersected projections of the mineral resource here. We plan to cross cut the mineralization and then drive the drift on the level in both directions for 100 meters to confirm grade and continuity.

Now, over to Greg for a discussion of our financial results.

[Gregory Martin, Chief Financial Officer]

Thanks, Carl, and good morning to everyone. I hope you’re all making the best of your summer. I’ll keep my review brief since the quarterly financial results are not particularly meaningful in light of the temporary mine suspensions that occurred. For the quarter, we generated revenues of $92.5 million and income from mine operations of $34.2 million. As Marigold’s performance was in line, and we generated some sales at Puna from inventories, significantly higher gold prices were certainly the theme of the quarter.

Within our income statement a number of meaningful impacts, G&A was elevated entirely due to valuation changes on stock-based compensation, totaling $9.9 million. We expensed $2.8 million of transaction costs related to our upcoming merger with Alacer. And finally, care and maintenance cost expense for both Seabee and Puna totaled $19.7 million.

Care and maintenance costs were marginally below the guidance we provided in our first quarter release. Reported net loss was $6.3 million or $0.05 per share, and adjusted net loss was $2.1 million or $0.02 per share. In accordance with recently published guidance on COVID-related costs, we did not add back care and maintenance costs in our determination of adjusted income.

Cash generated by operating activities was $21.8 million, with investments in capital declining to $27.2 million. All operations incurred certain annual capital items as on-site crews completed capital maintenance and other projects as capabilities allowed.

So certain capital items incurred in Q2 set us up well as the mines restart. The divestment of our position in SilverCrest in the quarter added a net $64 million to our cash position. While we registered a total pre-tax gain of $38 million on the purchases and subsequent divestments, this gain is presented within our other comprehensive income and not within reported income.

Overall, for the quarter, we added $63 million to our cash to close the quarter at a total cash position of $462 million.

Looking forward to the third quarter, clearly, we have a lot going on. Most important is the safe and sustainable restart of mine operations to take advantage of the higher metal prices prevailing in the market. For the period of the quarter where components of the mines aren’t at full production, certain standby costs will continue, however, at a much-reduced amount.

In addition, some, but generally modest incremental costs to adhere to COVID-related protocols continue to be incurred at each site, largely related to transport and camp costs. We expect the merger with Alacer to close in the quarter. So we will be focused on close and integration activities to set us up for consolidated third quarter reporting,

Acquisition accounting related to the transaction will have a number of impacts on our financial statements presented next quarter, as we pick up Alacer’s assets and liabilities at fair value. While it doesn’t affect transaction economics and reinforces the deal rationale, the increase in share prices since announcement makes the acquisition costs, we will recognize for accounting purposes meaningfully higher.

And finally, as discussed in our outlook, upon close of the transaction, we expect to issue updated guidance for the new SSR, reflecting our increased scale and quality.

With those comments, I’ll turn the call back to Paul.

[Paul Benson, President and Chief Executive Officer]

Thanks, Greg. So despite the challenges thrown at us by COVID, I’m happy with the way we entered Q3. Barring any new impact, Marigold is set up for a strong H2 and on track to meet guidance we presented at the beginning of the year.

Puna has already started up and is running at the same above-budget throughput rates for achieving before the March shutdown. At Seabee, the mine is back at full production. And with an existing stockpile we expect to run the plant at a higher rate than before the March shutdown.

Looking forward, we expect the merger with Alacer to close soon, and the focus will be on safely integrating the world-class Çöpler operation into our portfolio. With our enviable financial position that will only get stronger when the merger completes, we’ll be able to continue doing what we do well, creating value for stakeholders by maximizing the value of our own assets and focusing on disciplined growth.

Finally, with a run up in silver prices, it’s worth reminding people that in addition to silver production at Puna, we own 100% at Pitarrilla, one of the largest undeveloped silver projects in the world.

Earlier this year, we announced we will extend the existing exploration decline to enable closed space drilling at the higher-grade zone. COVID delayed the commencement of that project, which we now expect to start in Q4.

As this concludes the formal remarks at what should be my final SSR earnings call, I’d like to thank the SSR management team and Board of Directors for their leadership and support as well as all SSR employees. I’d also like to thank our shareholders and the others on this call, analysts and bankers, who supported SSR over the years.

As I said, when we announced the merger, although I will be leaving the company, I will remain a shareholder, cheering from the sidelines. With that, I’ll now pass the line to the operator and to take any questions you may have.

[Operator]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Mark Mihaljevic with RBC Capital Markets. Please go ahead.

[Mark Mihaljevic, RBC Capital Markets]

Perfect. Thanks and good morning. And congrats again on the deal and best of luck in your next adventures to Paul, Johnny and the rest of the team that will no longer be with the merged company.

I guess, first question for me, can you just kind of outline expectations for news flow out of the Trenton Canyon discovery and kind of milestones we should be looking out for beyond the ongoing drilling?

[Paul Benson, President and Chief Executive Officer]

[Technical Difficulty] is because they’re really spectacular intersections of Marigold. We tend to accumulate results and put exploration release out every quarter or every 2 quarters. And I’d imagine, we’d continue to do that. We drive everything around our resource and reserve updates, which come out in February of each year. And so, that will be the first time when we actually release some sort of resource update for that area.

But what I’ve said the whole way along. This is going to be a long program. It’s a huge area. We’ve increased the expenditure, because we’ve had results initially much better than we’re sort of counting on. So it’s a great position to be in, but what we said all along we’ll be spending $2 million, $3 million, $4 million within next 4 or 5 years. This is a big area. Carl, you?

[Carl Edmunds, Vice President, Exploration]

Yeah, that pretty much covers it. But the beginning of what you started with Paul was somehow cut out there. And I don’t know whether Mark heard that. But just to reiterate, we typically do these up to 2 times a year unless there’s something very special in terms of the results that we get.

This follow-up hole that we’ve got, that we’ve reported here is interesting and lines up well with the other ones. But we’re beginning to think that we have an east/west structure, steeply dipping. And if we start to develop some more continuity with this particular intercept, that’s the 7178 intercept. We’ll be releasing some of those results as we accumulate them.

[Mark Mihaljevic, RBC Capital Markets]

Perfect. Thanks. Thanks for that. I guess, in terms of the incremental COVID cost you expect going forward, can you just kind of give us a breakdown on, obviously, the transportation and some of the camp stuff that you mentioned? Can you just quantify the expected cost there?

[Paul Benson, President and Chief Executive Officer]

Yeah, sure. I’ll hand over to Greg, then Kevin. Just I think, Greg, it’s worth reiterating the fact that although some of our peers have stripped out the care and maintenance costs from the adjusted cost, we didn’t. So people should definitely be aware of that.

[Gregory Martin, Chief Financial Officer]

Yeah, thanks, Paul. And, Mark, as indicated by Kevin, obviously, protocols are changing. So the main impacts, as we said, really is bus transportation at Puna and Marigold, and then some flight and camp costs at both Puna and Seabee. So, we’re talking in the hundreds of thousands and up to $1 million.

We’re not talking about costs that are material at this point. Again, it’s dynamic. But with Seabee ramping back up and getting back to kind of a full contingent, we’ve seen those densities improve. And with the masking and other protocols, we’ve been able to improve the density on some of those transport routes and maintain the kind of safety protocols that we’ve targeted. So I don’t see it being a material impact if we stay in the current trend that we’re on right now. Kevin?

[Kevin O’Kane, Chief Operating Officer]

No, I think you’ve covered it very well, Greg. At Seabee, we’re almost back to normal flights. We had more than double before. So, yeah, that’s good.

[Mark Mihaljevic, RBC Capital Markets]

Okay, perfect. And then, just at Seabee, kind of what type of mining rates do you think you’ll be able to get out with – while maintaining all the social distancing and other COVID protocols? Do you think you’ll be able to ramp-up to your prior levels without really a change in those protocols or is it – should we assume something like 90% of prior run rate?

[Paul Benson, President and Chief Executive Officer]

Kevin, you get this?

[Kevin O’Kane, Chief Operating Officer]

Yeah, I assume you meant Seabee. Mark, I didn’t quite catch that.

[Mark Mihaljevic, RBC Capital Markets]

Yeah, yeah, Seabee.

[Kevin O’Kane, Chief Operating Officer]

Yeah. Yeah. So assuming – we expect to reach, in fact, we’re reaching them now. All of the people working underground at Seabee were already wearing respirators for other reasons. And any of the line-outs or crew starts or what have you, have the correct physical distancing. And there is a use of masks for any transport if there’s people going underground, et cetera. So, yes, we will reach and we already are reaching where we were before.

[Paul Benson, President and Chief Executive Officer]

So the good thing is because we – and that was the strategy. We started the mine for – by building up a stockpile, we can run the mine at the levels we were before the shut, but that will allow us to run the plant at a faster rate than before the shut.

[Mark Mihaljevic, RBC Capital Markets]

Okay, perfect. Yeah, should give you a chance to really show what that plant can do and what it would be able to do if the mine could support it, because I guess that’s always been the bottleneck there.

[Paul Benson, President and Chief Executive Officer]

Yeah, and the other part of the news that we’re talking about is getting that access into the Gap Hanging Wall and going in better directions. That gives you new development ends in ore, which hopefully, that improves productivity. So if we couldn’t get more out of the mine going forward then, yeah, continue to run the mill faster.

[Mark Mihaljevic, RBC Capital Markets]

Perfect. That’s it for me. Thanks, guys.

[Operator]

Our next question is from Chris Thompson with PI Financial. Please go ahead.

[Chris Thompson, PI Financial Corp]

Hey, good morning, guys. Thanks for taking my questions. Paul, all the best for the future to you. I think a lot of my questions have actually been answered by the previous caller there. But I guess, this is for you, Carl, I wondered if you could just expand just a little bit about what excites you when you look at sort of potential analogies looking at Trenton Canyon with other sort of deep-level sort of Carlin-type systems?

[Paul Benson, President and Chief Executive Officer]

Yeah, thanks, Chris. It’s always dangerous to ask a geologist what excites them. You’ve opened that bottle. So, Carl, you go.

[Carl Edmunds, Vice President, Exploration]

Hi, Chris. Good morning. My comments here are sort of more of a personal nature in the sense of when I first visited the property and we were looking at it back during the due diligence for the acquisition. There’s a broad footprint there and not a lot of holes down beyond about 200 meters. And the 30 or 40 years it’s been mining of these types of deposits in Nevada. They’ve in certain areas been able to go deeper and into higher grade sulphide-type ores.

And that is it’s tied up with certain structural stratigraphic combinations that are different between Carlin and, say, that’s at the mines that are north of us at Turquoise Ridge. So as we’ve explored here, the thing that’s become quite interesting is that we’ve got the same lithologic package that’s at depth at Marigold.

We’ve got the same – that same package at depth at Marigold, the Comus Formation which sits underneath the Roberts Mountain thrust. That’s present very close to surface on Trenton Canyon and, in fact, it’s exposed.

These are features that we’ve discovered just as we’ve taken over the project and been completing surface mapping. We have some confirmation type work to do in terms of the fossil assemblages that are in those rocks, but lithologies are analogous to deeper slope sedimentation or sedimentary rocks. We’re seeing things like slump features and rip-ups of these sedimentary rocks and that’s all analogous to the Comus compared to the Valmy, which is what the assumption had been in terms of the formation. So we’ve got the right rocks there and just the idea of being able to or have a large footprint in this district of large footprint of property in this district.

With these rocks being relatively unexplored at depth to be able to tie one of these drill holes into a high grade sulphide intercept that would be analogous to Turquoise Ridge, which would be just stellar for us. And that’s what’s really exciting and driving the exploration in this part, this arena, at depth area. It’s also something a concept that the chief geologists there, Jim Carver had for a long time. He’s, I would say quite a bit more optimistic than I am a lot of things, but he’s very excited by being able to explore for this type of target. The material that we’ve intersected is close, it’s not 100%, but we’re on the trail is how we feel. So we’re pretty excited. That’s short enough.

[Chris Thompson, PI Financial Corp]

Yeah, that’s perfect. Thanks a lot. And Congratulations, guys, and all the best.

[Paul Benson, President and Chief Executive Officer]

Thanks very much. And I did warn you.

[Chris Thompson, PI Financial Corp]

Yeah, [go bad] [ph].

[Operator]

[Operator Instructions] Our next question is from Mike Parkin with National Bank Financial. Please go ahead.

[Mike Parkin, National Bank Financial]

Hi guys. Just a little bit of follow-up on that. In terms of the diamond drill holes that you mentioned that program at Trenton Canyon. When do you expect to start the first hole?

[Paul Benson, President and Chief Executive Officer]

We already have – yeah, I think we – part of those results in May, one of them came – or we talked about it. But Carl, do you want to talk to the timing of the 2 programs?

[Carl Edmunds, Vice President, Exploration]

Yeah. The – we started diamond work back in January on Trenton Canyon. First hole was more of a stratigraphic hole. The – in this press release here, we’ve got results from the – I believe it’s the third one. No, it’s the second one rather. And that’s what’s referenced there. So we now are on our fifth. And we’re going to be doing up to 6,300 meters of core work there.

[Mike Parkin, National Bank Financial]

Do they have a different designation on the drill hole number, so people can follow them? Carl?

[Carl Edmunds, Vice President, Exploration]

Yeah. That’s – they’re easily identified. They’re DDH as opposed to the MR or MRA listings on the whole IDs.

[Mike Parkin, National Bank Financial]

Right. Diamond drill hole. That’s easy enough.

[Paul Benson, President and Chief Executive Officer]

Yeah. Just to make a comment, Mike. Remember our strategy when we bought this project, or picked up the land? Yeah, we justified it purely on the oxide. So a lot of our drilling at the moment is looking at bringing some oxide resource in at the next update early next year.

And then we said we’d use thing also searching for these deeper targets. That first hole we put down that Carl mentioned stratigraphic hole, it was a deep on over kilometer. And really what I think exciting from us from an exploration point of view, we’re running the seismic surveys, we’ve never done that before. That will enable you to use the initial diamond drill holes, you already understand the lithology, map that out over the property. And then look for structures in that to see where you could have plumbing systems bringing up gold bearing fluids, which will enable you over time to focus drilling across that what is a very large property.

So for me, it’s tip of the iceberg stuff, absolutely, we’ll be there for a number of years following this up, but as everyone knows, if you do get one of these high-grade sulphides, the company changing discovery, so that’s what’s really exciting about it.

[Mike Parkin, National Bank Financial]

Okay, I think that’s where I was confused. It’s that program that you were talking about earlier being more late summer fall, getting that done to better fine tune and hone in on where you want to put additional holes.

[Paul Benson, President and Chief Executive Officer]

Yeah. And unfortunately, seismic, yeah, it doesn’t run at the speed that you do it, if it’s all internal, you do the work it gets interpreted or processed. And then you’ve got to get the expert, the geophysicist to do the interpretations. And – yeah, so in terms of getting drill holes coming off from that, Carl, what are you looking at end of year at best?

[Carl Edmunds, Vice President, Exploration]

Yeah. Yeah, absolutely. It’s – you can spend quite a lot of time processing the – any of the seismic data.

[Mike Parkin, National Bank Financial]

Okay. Yeah. Okay. That’s what I was thinking of. So that was kind of like Q4 kind of thing. Okay. So we could potentially see results early in the new year from that programs starting out.

[Paul Benson, President and Chief Executive Officer]

Now the results you’re talking about these would be the geophysical results. Is that right?

[Mike Parkin, National Bank Financial]

No. Like once you’ve got that and interpreted it. And then have your plan of attack of where you want to put the next set of holes based off that study. That could be potentially returning results kind of late Q1, best case?

[Paul Benson, President and Chief Executive Officer]

I would, yeah. Best case probably more like Q2 and Q3 just because if it involves anything that’s elevation, we don’t really get that underway much in Q1. Although we were able to start this year from disturbed sites, you know, where we really had good road access, but it’s a serious winter up there.

[Mike Parkin, National Bank Financial]

Would you need any additional exploration permits to do anything there? Are you pretty much got a good blanket, in terms of…

[Paul Benson, President and Chief Executive Officer]

We’re in good shape for exploration permits.

[Carl Edmunds, Vice President, Exploration]

So that was we made a point in Q1, the initial hole we put in was located where there was already disturbed ground, because we didn’t yet have that permit to go and draw where we wanted to, we received that. So now, yes, it’s some open territory for us.

[Mike Parkin, National Bank Financial]

Okay. And then just I know, it’s obviously early days with the oxides there, but what would be the general kind of thoughts in terms of first production? Would you be putting a pad locally around or hauling all the way back to Marigold?

[Paul Benson, President and Chief Executive Officer]

We don’t know that yet. And we put together a project team with – because that’s multidisciplinary. So that’s obviously, geologists working on that part of it, but it’s engineering. it’s permitting, it’s metallurgical. But there are different scenarios you could have a satellite pad. And then bring some products back to Marigold proper. And it’s very, very early days. But Kevin, any comments from you?

[Kevin O’Kane, Chief Operating Officer]

That characterizes it correctly. I mean, any increase in overall production at Marigold would require additional pads, and so if we did that the logic might say to do at Trenton Canyon. But we’re looking at sort of all possible combinations.

[Mike Parkin, National Bank Financial]

Okay. I guess it makes kind of depends how big it is, if it’s sort of like the Seabee thing if you find enough of it, it might warrant put in there rather than hauling back just long-term economics payoff better happening at local?

[Paul Benson, President and Chief Executive Officer]

Yeah.

[Mike Parkin, National Bank Financial]

Right. Okay. That’s it for me. Paul and team, it’s been a pleasure working with you over the years. All the best to you in the future, and congrats on welcome deal by your shareholders.

[Paul Benson, President and Chief Executive Officer]

Yeah, great. Okay. I think operator, that’s the end of the question.

[Operator]

Yes, sir, there are no more questions at this time.

[Paul Benson, President and Chief Executive Officer]

Okay. Thank you very much everyone for joining. As I said, what should be my last call. Have a good day and keep safe, cheers.

[Operator]

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