Lundin Gold Inc

TSX:LUG

Earnings Call Analysis

Lundin Gold Q3 Report: Solid Performance

In the third quarter of 2023, Lundin Gold produced approximately 112,200 ounces of gold with sales of 112,711 ounces. The average cash operating cost was $704 per ounce, and the all-in sustaining cost (AISC) was $907 per ounce. Despite facing lower grades and recovery rates, the company is set to meet its revised AISC guidance of $820 to $870 and production target at the upper range of 450,000 to 485,000 ounces. They generated a free cash flow of $81 million, contributing to a cash balance of $302 million, allowing them to pay off $72 million in senior debt early. They also plan on enhancing recovery rates and milling capacity to 5,000 tonnes per day by Q4 next year. Ongoing conversion drill programs indicate promising resource expansion, with an updated mineral reserve estimate expected in Q1 2024.

Lundin Gold's Strong Production and Financial Performance

Lundin Gold has showcased a solid performance in gold production, achieving over 112,200 ounces, closely aligned with sales of around 112,711 ounces. The results for the third quarter highlight robust and disciplined operations, managing to hit the higher end of the revised production guidance at 450,000 to 485,000 ounces while keeping the all-in sustaining cost (AISC) within the projected range of $820 to $870 per ounce sold. This disciplined management has been profitable with free cash flow reaching approximately $81 million, contributing to a strong cash balance of $302 million. Lundin Gold's proactive approach in managing their finances has allowed them to fully repay their senior debt facility early, extinguishing $500 million in debt within only three years.

Operational Highlights and Future Growth

In Q3, the company reported stable mine production and excellent safety performance, with no incidents leading to lost time or medical treatment. A production highlight includes mining nearly 398,000 tonnes of ore with an average grade of 9.3 grams per tonne, achieved through a strategic stockpile reduction aimed at enhancing gold recovery rates. Dusting off the operational front, the company also finalized its conversion drill program, which will help update its resource and reserve estimates in the first quarter of next year, revealing the untapped potential beyond the current FDN resource. The positive results from the exploration program, particularly from the southern extension of the FDN deposit, have kept Lundin Gold on track with its commitment to progress and exploration.

Exploration Endeavors Paving the Way for Expansion

As exploration continues to gain momentum for Lundin Gold, an impressive 53,000 meters are now planned for drilling in 2023, an increase from earlier forecasts. The regional drilling program has also expanded, with the drilling at Bonza Sur targeting an exciting new mineralized system believed to stretch extensively both along strike and at depth. The advancements made in near-mine and regional exploration programs have positioned Lundin Gold to capitalize on the exploration potential closely surrounding their current deposit.

Robust Financial Growth and Commitment to Shareholders

Financially, Lundin Gold has had a stellar year with $211 million in revenue this quarter, driven by strong gold sales at an average realized price of $1,931 per ounce. Adjusted earnings of $45 million reflect a more than double increase from the prior year, translating into $0.19 per share. The company's commitment to returning value to shareholders is evident through its dividends, with $0.10 per share declared quarterly and a total of $71 million in dividends paid year-to-date. Lundin Gold anticipates continuing its strong free cash flow generation, which stands to benefit shareholders through additional cash flow previously committed to servicing debt.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning. My name is Lara, and I will be your conference operator today. At this time, I would like to welcome everyone to Lundin Gold's Third Quarter 2023 Results Conference Call. [Operator Instructions]Thank you. Mr. Ron Hochstein, President and CEO, you may begin your conference.

[Ronald Hochstein, executive]

Thank you, Lara. Good morning, everyone. Thank you all for joining us on this conference call today. With, Terry Smith, Chief Operating Officer, and Chris Kololian, Chief Financial Officer and I are going to take you through our results for the third quarter of 2023.Please note Lundin Gold's disclaimer is on this slide. This discussion includes forward-looking information. Actual future results may differ from expected results for a variety of reasons described in the caution regarding forward-looking information statement section of our press release. Lundin Gold is a U.S. dollar reporting entity and all amounts in this presentation refer to U.S. dollars, unless otherwise indicated.Lundin Gold reported gold production of just over 112,200 ounces and gold sales of 112,711 ounces this quarter at cash operating cost of $704 per ounce sold, an all-in sustaining cost of $907 per ounce sold.We maintained a high average throughput rate of just over 4,500 tonnes per day, which was offset by lower grades than previous quarters, which was expected based on our mine sequencing and lower recoveries. Terry will talk about our initiatives to improve recoveries in a bit more detail.Our cash operating cost and ASIC were higher than previous quarters, but they are in line with our expectations. Our operating results put us firmly on track to meet our revised ASIC guidance of $820 to $870 per ounce sold and near the upper end of our revised production guidance of 450,000 to 485,000 ounces.Lundin Gold's track record of generating strong cash flow continued during the third quarter with free cash flow of approximately $81 million or $0.34 per share achieved, resulting in a cash balance of $302 million at September 30. Given this robust cash balance and forecasted cash requirements, we have elected to fully repay out senior debt facility early.The remaining balance, plus accrued interest, totaling approximately $72 million, will be repaid next week on November 14, well in advance of its original maturity date of June 2026. Upon completion of this repayment, Lundin Gold will have extinguished 2 of its 3 project finance facilities, the gold prepay and senior debt, which had an original combined principal amount of $500 million, after only 3 years of operation.The stream credit facility now makes up the last component of the outstanding debt on our balance sheet, the first half of which we have the option to buy back in June of next year of $150 million. We have and will continue to progress our debt reduction strategy for the benefit of Lundin Gold shareholders.With that, I'd like to turn the call over to Terry now for a more detailed look at the operating results.

[Terrence F. Smith, executive]

Thanks, Ron, and hello all. Another quarter in the books for Lundin Gold. Operating results in Q3 were highlighted by quarterly gold production totaling approximately 112,000 ounces comprised of 72,000 ounces of concentrate and 40,000 ounces of dore.Gold sales totaled around 113,000 ounces. In the same period last year, gold production and sales totaled roughly 122,000 ounces and 135,000 ounces, respectively. I'm also pleased to report that we completed another quarter without any loss time or medical treatment incidents, further extending our exceptional safety performance.Mine production was close to 398,000 tonnes of ore at an average grade of 9.3 grams per tonne. Mine tonnes were less compared to previous periods as part of a stockpile reduction strategy to help reduce oxidation of ore on surface, which can impact recovery that I'll talk more about shortly.The mill processed about 416,000 tonnes of ore at an average throughput rate of 4,523 tonnes per day, which is consistent with the throughput rate achieved during the second quarter. The mill has averaged 4,494 tonnes per day during the first 9 months of 2023. Compared to previous periods, strong mill throughput was offset by a decrease in head grade and recoveries.Finally, disseminated sulfide minerals in the ore continued to impact the flotation circuit during the quarter, resulting in average recoveries of 86.5%. Recovery improvement initiatives remain a key focus for us. We continue to carry out various tests with different ore types, including grind size, flotation reagents, flotation operating conditions, with consideration for the impact of oxidation from stockpiling mentioned previously.We expect to implement changes to operating strategies to improve recoveries in the coming quarters. In addition, we have completed pilot testing of the Jameson cell technology, which yielded positive results. Basic engineering has been completed and detailed engineering is underway to incorporate this technology into our flow sheet.This recovery improvement project will be done in conjunction with the contemplated plant expansion to further increase mill throughput from the current 4,500 tonnes per day to 5,000 tonnes per day. Based on current schedules, the Jameson cells are to be in place at the same time as the ramp up to 5,000 tonnes per day anticipated Q4 next year.Sustaining capital expenditures accounted for $140 per ounce sold in the third quarter, another increase compared to recent periods. A large portion of this attributable -- is attributable to the construction of the fourth tailings dam raise, where significant progress was made in Q3, with the completion expected in mid Q4.During the third quarter. The conversion drill program also continued to advance and has now been completed. We plan to update our resource and reserve estimate in Q1, 2024, with these results in hand. Ron will go through this program in a little more detail later. In addition to the drilling, development advanced on our 2 exploration headings, 1170 and 1080 that will facilitate the 2024 conversion drilling program at the Southern extension of the current FDN resource. Development for these 2 headings is estimated at 765 meters.I'm also happy to announce that commissioning of the underground mine maintenance facility is now complete and we're moving into the facility. This new underground shop is expected to provide several efficiencies and cost savings by bringing our maintenance teams closer to the work underground.Other sustaining capital projects such as implementation of a mine dispatch system, upgrades to the sewage treatment plants, purchase of mobile equipment, and other efficiency improvement projects are expected to ramp up during the remainder of the year, with some projects carrying over to 2024.Cash operating costs and all-in sustaining costs in the third quarter were $704 and $907 per ounce of gold sold respectively, which are both higher than previous periods. Cash operating costs per ounce sold was impacted by lower gold production due to expected lower grade and recoveries, partially offset by increased mill throughput, while the higher all-in sustaining costs also reflects the increase in sustaining capital activities during the quarter.Over the first 9 months of 2023, Lundin Gold achieved an all-in sustaining cost of $807 per ounce. Fourth quarter production is anticipated to be lower than Q3 due to lower grades. In August, we increased production guidance and decreased cash costs and all-in sustaining guidance.Given our strong performance during the third quarter, we anticipate being at the upper end of our revised production guidance of 450,000 to 485,000 ounces sold and remain firmly on track to meet our revised all-in sustaining guidance of $820 to $870 per ounce sold.I'll turn the call back to Ron now to discuss our exploration program.

[Ronald Hochstein, executive]

Thanks Terry. During the third quarter, conversion drill program continued to advance in distinct sectors of the FDN deposit, focusing on the northern-central and southern portions of the resource envelope, with approximately 6,200 meters drilled across 46 holes.A total of approximately 11,000 meters of underground drilling from 79 drill holes was completed as part of the now completed 2023 conversion program. Conversion drilling in the southern sector of FDN has returned several high grade intercepts associated mainly with vein and/or veinlet zones hosted in volcanic porphyritic intrusive rocks. In the north-central sector, results show gold mineralization in breccias and stockwork zones, very similar to the mineralization found in the mineral reserves of this sector.Results are currently being incorporated into the geological model and will form the basis of an updated mineral reserve resources estimate to be completed during the first quarter of next year. The largest exploration program of our 3 programs, the near mine program, continues to explore distinct sectors located in the long trend of the FDN deposit and within extensions of its major controlling structures.The near mine program includes drilling from both surface and underground. The surface drilling program continues along the south extension of the East fault, where the FDN South, also known as FDNS, and Bonza Sur targets were identified.During the third quarter, 10 surface drill holes were completed, mostly at Bonza Sur, where the drilling program continues to confirm the continuity of the mineralization. Exploratory holes were also completed along the north and south extensions of the FDN deposit. Five surface rigs are currently drilling; two of them are at Bonza Sur, two along the south and north extensions of FDN, and one to the east of FDN.The underground drilling program continues to explore the continuity of the FDN deposit at depth and beyond the major faults. Four drill holes were completed in the third quarter and all of them intercepted structures, zones of hydrothermal alteration and gold mineralization beyond the current limits of the FDN resource boundary.In the north part of FDN, one underground drill hole confirmed hydrothermal alteration zones related to the breccias and veins at depth below the current resource mineral envelope of FDN. In the central part, another underground drill hole intercepted hydrothermal alteration zones along the downdip extension, again below the current resource envelope.Furthermore, 2 underground drill holes completed at the FDN East target intercepted a new mineralized zone represented by breccias, veins and veinlets with sulfides hosted on porphyritic intrusive rocks or in volcanic rocks.I'd like to spend a little time on Bonza Sur, though, where exploration continues to advance into finding this new epithermal system. Seven drill holes have been completed here and confirm the extension of this new mineralized zone. Recent results indicate that the gold mineralization is hosted by the same volcanic sequence found at the FDN deposit, with occurrences of disseminated to semi massive levels of sulfide.Since the discovery of Bonza Sur, numerous drilling intercepts suggest the occurrence of 3 sub-parallel vein or veinlet zones, which we have called Colorada Central, West, and East. This epithermal system is believed to extend to surface and stretches for 850 meters along the north-south strike and for at least 500 meters at depth in the central area. Gold mineralization remains open in all directions.Over the coming months, the drilling program at Bonzo Sur will focus on better understanding the mineralized zones through reducing drill spacing and focusing on further exploration at depth and along the strike. Two rigs are currently turning at Bonzo Sur, and I'm excited to see the progress we continue making at this high priority target.The regional drilling program continues to advance in distinct sectors along the southeastern and southwestern borders of the Suarez Basin and total of 2,544 meters across 4 drill holes were completed in the third quarter. Regional drilling focused on the Crisbel target, where 3 drill holes were completed, testing in unexplored geochemical soil anomaly along the southwest contact between the Suarez border and the volcanic sequence.All drill holes intercepted hydrothermal alteration zones with important quantities of sulfides hosted on brecciated volcanic rocks. One drill hole returned low grade values of gold.Lundin Gold's exploration programs are continuing to demonstrate the significant untapped exploration potential near the current FDN deposit. Nine rigs are currently turning on our exploration programs and we now expect to drill 53,000 meters in 2023.11,000 meters is already drilled on the conversion program, 9,000 meters anticipated on the regional program, and now 33,000 meters on the near mine program. That is more than the 50,000 meters we had communicated previously, while we maintain our cost guidance. Very exciting times for us at Lundin Gold.I'll now turn the call over to CK to provide a more detailed look at the financial results.

[Christopher Kololian, executive]

Thanks, Ron, and good morning, everyone. In the third quarter of 2023, Lundin Gold recognized revenues of $211 million from sales of approximately 113,000 ounces of gold at an average realized gold price of $1,931 per ounce.Income from mining operations increased to $100 million compared to $84 million a year earlier, primarily a result of the higher gold price. From this, Lundin Gold generated adjusted earnings, which exclude the derivative gain and related deferred income tax expense included in net income, of $45 million or $0.19 per share this quarter compared to $20 million or $0.09 per share a year earlier.For the first 9 months of the year, Lundin Gold recognized revenues of $712 million and income from mining operations of $357 million. The company generated adjusted earnings of $171 million or $0.72 per share. Adjusted EBITDA was $121 million in the third quarter. For the first 9 months of this year, Lundin Gold achieved EBITDA of $430 million.Performance during the third quarter of 2023 continues Lundin Gold's track record of generating strong free cash flow. The company generated net cash from operating activities of $120 million and free cash flow totaled $81 million or $0.34 per share compared to $65 million or $0.28 per share a year earlier.For the first 9 months of 2023, the company has generated free cash flow of over $200 million, which impressively also includes interest and finance charges of $129 million from the full repayment of the gold prepay facility in January. We expect to continue generating significant free cash flow in the future based on our production and ASIC guidance, especially given increased exposure to strong gold prices with the benefit of the full repayment of the gold prepay.Lundin Gold ended the third quarter with a very strong cash balance. As at September 30, the company had cash of $302 million and a working capital balance of $314 million compared to cash of $363 million and a working capital balance of $195 million as at December 31, 2022.The change in cash during the first 9 months of the year was primarily due to the full repayment of the gold prepay facility of $208 million, principal repayments, interest and finance charges including associated taxes under the stream credit facility totaling $61 million, interest and principal repayments under the senior debt of $121 million, dividends of $71 million and cash outflows of $40 million relating to sustaining capital expenditures.This is offset by substantial cash generated from operating activities of $427 million and proceeds from the exercise of stock options and anti-dilution rights of $13 million.As Ron mentioned, given our robust cash balance and forecast cash requirements, we are going to fully repay the remaining principal and accrued interest under the senior debt facility of approximately $72 million, which will take place next week. With this, we will have extinguished all bank debt with only the stream credit facility remaining.I would like to express our appreciation to our lenders for their participation and trust in Lundin Gold, the country of Ecuador, and Fruta del Norte over the past 5 years. Their financial support allowed Lundin Gold to introduce responsible mining in Ecuador and create opportunities for the people of Zamora-Chinchipe that may have not otherwise existed.In addition to the senior bank debt, we have the option to buy back half of the stream in June next year for $150 million and the second half in June 2026 for $225 million. The company continues to evaluate these options, and in the absence of other more attractive capital allocation opportunities, we expect exercising the first option will make sense for our shareholders.Free cash flow is fundamental to Lundin Gold's growth story and we have generated a lot of it in 2023 so far. We've made some serious headway in our debt reduction strategy. Lundin Gold shareholders already benefit from the additional cash flow generated from the 11,500 ounces quarterly that no longer service the gold prepay, which was repaid in early Q1. Now, going forward, shareholders will also benefit from the additional cash flow that would otherwise have serviced our senior debt.I can't talk about cash flow without mentioning Lundin Gold's dividend policy of $0.10 per share declared on a quarterly basis. The third dividend of 2023 was paid at the end of Q3, bringing year-to-date dividends paid to a total of $71 million.The fourth dividend is payable on December 22 for shares trading on the TSX and OTCQX and December 29 for shares trading on Nasdaq Stockholm based on a record date of December 7, 2023. Even after the payment of dividends, we still retain a healthy treasury and continue to generate significant operating cash flow for other value generating initiatives, such as our near mine and regional exploration programs, future throughput expansions, and other strategic opportunities.We continue to progress on strengthening our balance sheet. We expect to reevaluate our dividend policy in the latter half of next year. A great first 9 months for Lundin Gold. The company is in a robust financial position to benefit from prevailing gold prices and remains in a strong position to meet our improved guidance for the full year.For a more detailed discussion of our financial results, I encourage you to turn to our MD&A.Now, I'd like to turn the call back over to Ron for his concluding remarks.

[Ronald Hochstein, executive]

Thanks, CK. Before I conclude, I want to quickly provide a few important corporate updates. Near the end of the quarter, Nathan Monash, Vice President of Sustainability, departed Lundin Gold. I want to thank Nathan for the incredible important work he has done since joining the company in 2015.Nathan has been instrumental in building the industry leading ESG practices that Lundin Gold today incorporates in our activities and helping to develop a responsible mining industry in Ecuador. We wish him well at Lundin Mining, where I'm certain he will do a fantastic job.In his place, Sheila Colman has taken on the role and is now Vice President, Legal and Sustainability and Corporate Secretary. A number of changes have also occurred on Lundin Gold Board of Directors upon the acquisition of Newcrest by Newmont on November 6. Craig Jones and Jill Terry, former Newcrest nominees, resigned from the Board. In their place, Lundin Gold has appointed two new directors, Melissa Harmon and Scott Langley as Newmont nominees.Melissa has a mine engineering degree and an MBA. She has been employed with Newmont for over 20 years in increasingly senior roles in operations and is currently Group Head Non-managed Operating Joint Ventures. Scott is currently Vice President of Corporate Development at Newmont and worked in Investment Banking for more than 15 years prior to joining Newmont. We are pleased to welcome both Melissa and Scott to the Lundin Gold Board of Directors.In closing, another strong quarter of free cash flow generation, and as a result, we are advancing our debt reduction strategy with repayment in full of the remaining balance of our senior debt facility. Operationally, while results were strong, we continue to focus on improving recoveries and have made progress in identifying and implementing solutions.Thank you all once again for your continued support. And with that, I will now open the call to questions. Over to you, Lara.

[Operator]

[Operator Instructions] We have our first question coming from the line of Wayne Lam from RBC. Again, Mr. Wayne Lam from RBC.

[Wayne Lam, analyst]

Just wondering what needs to be done to kind of expand the mill beyond the current capacity. What's the cap on the throughput there? Is there a cap around 4750. And I guess what's required in terms of permitting and would you have to throttle back output to remain within the capacity limits?

[Ronald Hochstein, executive]

What's needed to go to that is -- we're not talking about a lot of capital. We're presenting that to the Board here in a few weeks with our 2022 budget. But it's a neighborhood Terry 30 to 40. 30 to 40, months probably yes. It's close 30 million to 35 million. And from permitting standpoint, we've done the work. We're still within our environmental envelope that was the original EMP or Environmental Management Plan for the operation.No further disturbed areas. We're still with all our discharges are within the environmental envelope. So it's essentially a notification to the Ministry of Environment that we're increasing throughput and that we're within. So there's really not much on the permitting side. The way that Terry and the team are laying out the project --and they way the mill was built and everything.It's actually pretty neat in that we're going to be able to carry on this project, through the year with minimal downtime. And really what we're doing right now is scheduling our downtime to bring that project in, when we're doing mill lock relines not sort of thing to really minimize the impacts, for 2024 production and be able to almost do this seamlessly and be able to ramp up in Q4.

[Wayne Lam, analyst]

And then just wondering on the additional tailings raise, how much capacity does that give you at the current run rate? And is there sufficient capacity in doing additional lifts going forward to support the expansion capacity or at some point are you going to have to contemplate a new TSF?

[Ronald Hochstein, executive]

Well, if Andre keeps having success he's having on the exploration programs, you know, we put 14 holes into Bonza Sur and 13 have hit our grade mineralization. So with that continued success rate, I hope you're right, and that we will have to be looking at another TSF because we're going to be way beyond our current mine life, but going back to what we have right now and they speak the throughput vein.We're fine, with our existing, at the current - the increased throughput rate, our next raise will be tail end of later 2025 when we have to do the next raise. And then it's kind of every other year after that, and we have sufficient capacity with our existing tailings facility to handle our current reserves, and a good chunks of our resources actually. We're in good shape with current facility.

[Wayne Lam, analyst]

Sounds good. Sounds like Andre's putting a bit of pressure on Terry over there. Maybe just last one from me. What's, I guess, required in terms of the equipment for the additional, improvement in recoveries and do you have a kind of quantum of CapEx spend related as well?

[Terrence F. Smith, executive]

Wayne, it's Terry here. Yes and the 30 to 35 that we were talking about, that included, the Jameson Cells that we mentioned, in the in the earnings script. So there's three cells that we're looking at purchasing and, you know, we were obviously encouraged from the pilot testing and, excited to get them in. So we've already started procurements to get them fabricated and into the operation next year.

[Operator]

Our next question comes from the line of Arun Lamba from TD Securities.

[Arun Lamba, analyst]

Just high level on the new President, Daniel Noboa. Just kind of your thoughts on that? Kind of my view is generally been pro-mining and you never really had any kind of political issues at your mind in Southeastern Ecuador, but maybe just high level on the new president, any interaction that you may have had or going to have would be helpful?

[Ronald Hochstein, executive]

Arun, that's a good question. No, we're -- so the new National Assembly is taking their seats on November 15, and the new president, President Noboa, will be taking his seat on December 1. I personally haven't spent as much time as I have in Ecuador. I'm really -- I'm personally excited about, what I see from this new government and also, I think the new National Assembly, not just the president of the new National Assembly.I think a lot of people have learned the mistakes or the errors or their ways over the past few years and lack of things have happened with the government and so it's exciting times. The challenge we're going to have Arun is, as you all know, Noboa coming in and the National Assembly, they only have an 18-month term. So they're only finishing out, which was Palacio's original term. So, they're essentially almost the day they start, they're going to be campaigning again to get reelected. So it's encouraging.There's probably going to be some really good things happening within the country, but they're going to be focused on things that are going to get them votes, which is the security, healthcare jobs, he's really focusing on jobs for young people. Those are the things he's going to - so in terms of what the impacts of the mining industry, I don't see much happening within the next, during this term, but I'm encouraged overall. I think - I think he's going to be great for the country, and I think the National Assemblies, they're going to find ways to work together.

[Arun Lamba, analyst]

That's helpful. And then just one more, with the Newmont and Newcrest acquisition closing, I know you guys had a great relationship with Newcrest and they kind of gave you a sign off to - if you found something that made sense for you guys. You kind of, I mean, they were generally supported of anything you guys did. Have you been in discussions with Newmont during this past 6 months in the deal process, or now that it's closed dialogue will kind of pick up. And then what you're thinking just kind of terms in M&A, I think before you mentioned looking at potential developers, if it makes sense? Yes, any color on that would be great?

[Ronald Hochstein, executive]

Yes, Arun, we've been having discussions with Newmont for quite a -- for several months. That's developed more as they as they became clear and clear that transaction was going to occur. Like, I'm really looking forward to or we are looking forward to the relationship. We've got a lot of discussion right at the very senior and through the organization. CK has good contacts there. Really, we've had, Melissa, Scott took part in their first board meetings yesterday and really excited to have them on the Board.I think right now what we can say, Arun, is Newmont everything we're hearing from Tom and senior people and the four nominees is they're aligned with Lundin Gold to create shareholder value and there are supportive of the Lundin family and I think there's some long - also relations - longer relationships with Newmont and the Lundin family than they were even with Newcrest. So, I think we overall are excited about, the new -- the horizon here with our new shareholders, Newmont.

[Operator]

Our next question comes from the line of Don DeMarco from National Bank Financial.

[Don DeMarco, analyst]

My first question, just Ron, taking a look back at the technical report, I mean, of course, we're seeing grade over 10 grams per tonne next couple of years production topping 500,000 ounces a year. Is this trend still intact after you've worked your way through 2023 and I guess we're just trying to get a little bit of flavor ahead of the guidance release next year?

[Ronald Hochstein, executive]

We're just -- we've seen preliminary life of mine plans we're putting that forward to the Board in a couple of weeks with our 2024 budget. But we're based on the current life of mine plan, Don, we anticipate a good couple of years in front of us -- getting up to 5,000 tonnes per day by the end of Q4 and the grades that we see over the next couple of years.

[Don DeMarco, analyst]

Okay. Also another question on the mine plan. We see after the next couple of years, grades moderate a little bit still fairly robust, but come down, with your exploration - your near-mine exploration success and so on? Is there potential opportunity to lift those grades ever - even ever so slightly beyond say 2025?

[Terrence F. Smith, executive]

Don, it's Terry here. What Ron was describing in the call from some of the exploration work going on around the peripheries of Fruta, certainly we're seeing very similar, tenure of grades and widths as the main ore body. So obviously as we incorporate that into our resource model and redo our reserves and update our life of mine plans, that's of course going to extend the really good high grade hearts of our life of mine plan. So, we're hopeful to see that. But that process is under underway at the moment. So we'll report back on that resource reserve update next year.

[Don DeMarco, analyst]

Excellent. Okay. And as a final question, just shifting to recovery in Q3, of course, you saw recoveries slightly and I know you have a work in place to -- to bring them back up to recent run rate. Was it really just a largely a function of grade then, lower grade, we would might expect lower recoveries, or the things you can do, and do you have the expectation to kind of bring those recoveries back up? Even if it was comparable?

[Ronald Hochstein, executive]

Yes. It was a little bit - it was a little bit great, but now it was just a type of type of ore. Remember, Don, we've been covering for a while with the SBR and now we're getting into different parts of the ore body. So, yes, I would say it was more with more -- mineralogy issue than a grade issue, because the following month we saw similar grades and recoveries 3% to 4% higher than what we had in the tail end of the -- tail end of the quarter. So it was really -- it's really a mineralogy issue.

[Don DeMarco, analyst]

Okay. And are you able to adopt the plant? Like now you have some familiarity with the different types of mineralogy? Are there adjustments to make when you enter zones that you mined in Q3?

[Ronald Hochstein, executive]

Yes, there's definitely adjustments we're making with the blending strategy. We're looking at, as Terry mentioned, some different reagents, to not help, but where were our losses -- what we've determined where our losses are is in the finely disseminated sulfides and that's really - that's in the wheelhouse of the Jameson Cells. That's what they really focus on is the fine grained flotation and so as Terry mentioned, we had a pilot to cell on-site.We got really interesting results. We've done a bunch of simulations for us, which has led to the installation of three cells at different stages within the flotation circuit and I guess what I want to say, Don, is that we're, we're not just sitting on our laurels and waiting until those Jameson Cells are installed. We continue to do work and we are learning to improve but, we're pretty excited about what we anticipate to see with the Jameson Cells.

[Operator]

Our next question comes from the line of Kerry Smith from Haywood Securities.

[Kerry Smith, analyst]

Just on the test -- the test work that you've done with the Jameson Cells, what sort of indicated recovery are you -- recovery improvement are you seeing? And I know you probably won't get that in the commercial plant, but what is the kind of the order of magnitude that you're targeting?

[Terrence F. Smith, executive]

Kerry, it's Terry here. Yes, the pilot work that we did really simulated, the three positions that we're looking at, putting these, Jameson cells, ones at the head end of the flotation circuit, one sort of in the middle of the flotation circuit, and then one is at the end and we tried to introduce as much variability into the feed as we could to really understand the performance. And so the modeling work that we've done and of course Glencore Technology has taken the results and we're estimating that we'll see about a 3% recovery bump once these, Jameson Cells are installed.

[Kerry Smith, analyst]

Okay. Great. And that's 3% expected in the commercial plan, not 3% from the pilot work and expected to slightly lower than that?

[Terrence F. Smith, executive]

That's correct, 3% sort of over our historical averages.

[Kerry Smith, analyst]

Okay. Okay. That's great. Awesome. And, you'll have those cells installed and running by the end of the year -- sorry by the end of next year as part of the expansion to 5,000 tonnes and that's the intention, correct?

[Terrence F. Smith, executive]

You got it.

[Kerry Smith, analyst]

Okay. And when just to maybe you can answer this question too, Terry. When will we see the new life of mine plan that's been generated and is going to be presented to the Board? Is that something that we'd see with your guidance, or will that be a new technical report, or how would we how would we see that?

[Terrence F. Smith, executive]

We're not planning on updating our technical report, Kerry. So, we'll just be issuing a 3-year guidance following that approval of the budget.

[Kerry Smith, analyst]

Okay. So in the 3-year guidance we would only see the 3-year guidance, we would not see necessarily the total life of mine plan then?

[Terrence F. Smith, executive]

No. We'll wait till we get sort of material changed and update our technical report. We don't anticipate doing that next year.

[Kerry Smith, analyst]

I got you. Okay. And then just the last question I had and maybe Terry can comment just on the current run rate for unit costs at the operation, like cost per tonne mine, cost per tonne mill and site G&A. Could you give me some flavor for what you're kind of seeing these days and your costs?

[Terrence F. Smith, executive]

Yes. I think our third quarter costs per tonne we're in that $170 to $180 a tonne range. So nothing really significantly different than what we've talked about in the past, Kerry.

[Kerry Smith, analyst]

Okay. And the and just remind me the milling cost again?

[Terrence F. Smith, executive]

Low 30s per tonne of mill.

[Operator]

[Operator Instructions] We have next question coming from the line of Jonathan Egilo from Desjardins.

[Jonathan Egilo, analyst]

Most of my questions have already been answered. I guess the one remaining one is how well understood and modeled are these finely disseminated sulfide zones. And I guess did their appearance in Q3 or surprise you or were you expecting to have to deal with them this quarter?

[Ronald Hochstein, executive]

It was a little bit of a surprise, but we are getting -- we're getting ahead with all our infill drilling now, Jonathan, we're collecting samples and again, doing metallurgical cast on them. Our geo-metallurgical model that we've been working on now for about a year as we get into different parts of the ore body and it's really coming together. So, I think we're going to be a lot -- we have a lot better and we'll be able to blend better as we go forward. So it's been work in progress, but we're making some serious headway.

[Jonathan Egilo, analyst]

Okay. And I guess is it too early to know then if there's expectations of some signs in the upcoming quarters then or is something you're doing right now and it'll come out with guidance?

[Ronald Hochstein, executive]

We'll take that into it -- we've we're taking in our all our efforts improve recovery that'll be incorporated into our 2024 budget as some things we're implementing -- some newer agents, Terry, we're implementing this quarter, aren't we, in Q4, so we'll take that, we'll take that into account and are right off the start of the year.

[Operator]

There are no further questions at this time. I'd now like turn the call back over to Mr. Hochstein for final closing comments.

[Ronald Hochstein, executive]

Thanks, Laura. Thank you everybody for taking the time this morning to hear a little bit more color on, the Q3 results and as I mentioned in the call it is really exciting times. Our exploration programs are really -- really showing a lot of, opportunities for us.We're starting to work on even now as a result of those 5-year, 10-year plans for milling throughput rates, tailings, capacity mining alternatives. And so, yes, look forward to talking to you a little bit more about the, upcoming announcement of our new 3-year guidance and thank you again taking the time this morning.

[Operator]

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