Equinox Gold - Earnings Call - Q2 2025

Transcript

Speaker 8

Thank you for standing by. This is the conference operator. Welcome to the Equinox Gold Second Quarter 2025 Results and Corporate Update. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Ryan King, Executive Vice President, Capital Markets for Equinox Gold. Please go ahead.

Speaker 0

Thank you, Operator. Good morning, everyone, and thank you for taking the time to join the call this morning. Before we commence, I'd like to direct everyone to the forward-looking statement on slide two. Our remarks and answers to your questions today may contain forward-looking information about the company's future performance. Although management believes that our forward-looking statements are based on fair and reasonable assumptions, actual results may turn out to be different from these forward-looking statements. For a complete discussion of the risks, uncertainties, and factors which may lead to actual operating and financial results being different from the estimates contained in our forward-looking statements, please refer to our second quarter and year-to-date MD&A and Consolidated Financial Statements available on our website, as well as on CDAR Plus. Finally, all figures are in US dollars unless otherwise stated.

Present today with me on the call are Darren Hall, Chief Executive Officer; Peter Hardie, Chief Financial Officer; and David Schummer, Chief Operating Officer. We will be providing comments on our second quarter 2025 production and cost results and an update on the Greenstone and the Valentine Gold mines, after which we'll take questions. The slide deck we will be referencing is available on our website at equinoxgold.com under the Shareholder Events section. You can also click on the webcast to join the live presentation. With that, I will turn the call over to Darren.

Speaker 1

Turning to slide three, and thanks, Ryan. Good morning, everyone, and I appreciate you taking the time to join us on the call today. Firstly, I would like to acknowledge the efforts of our employees and business partners for their continued focus during the quarter to responsibly deliver over 219,000 ounces during what can be a distracting time as you integrate two businesses together. Well done, and thanks to everyone. With the completion of the merger, we have created a significant Americas-focused gold producer anchored by two cornerstone Canadian mines, Greenstone and Valentine. It is definitely exciting times as we build one Equinox Gold with the leadership team and the entire organization focused on delivering on its commitments, operational excellence, advancing high-quality organic growth, rationalizing the portfolio, and importantly, disciplined capital allocation.

The benefits of bringing the teams together are already paying dividends, one example of which is reflected in improvements at Greenstone, which we'll talk to later. The company has entered into a pivotal phase with production, cash flow, and earnings expected to grow meaningfully in the coming quarters. Turning to slide four, Q2 financial results predominantly reflect Equinox Gold's pre-merger assets. On an attributable basis, the company sold just over 148,000 ounces at an average realized price of $3,200 an ounce. Interestingly, had the Calibre Mining transaction been effective January 1, the pro forma consolidated revenue for H1 would have been approximately $1.33 billion from 401,000 ounces, which clearly underscores the enhanced scale and earnings power of the new company.

Looking forward, Q3 and Q4 will see increasing production as we benefit from a full quarter of contribution from the Calibre Mining assets, continued improved performance at Greenstone, and first gold from Valentine. Turning to slide five, Greenstone is a key focus. The ramp-up is progressing, and we are seeing tangible improvements. Q2 delivered solid results where mining rates increased 23% and processing rates improved 20% over Q1. Building on that momentum, Q3 is off to a strong start, with quarter-to-date mining rates 10% higher than Q2, with months-to-date August mining rates averaging 200,000 tons per day. Over the 30 days ending August 10th, we processed an average of 24,500 tons per day, with more than one-third of the days above the nameplate capacity of 27,000 tons per day.

There is still work to do as we focus on minimizing dilution and mining losses around historical workings, concurrently with targeted programs to improve fleet productivity and operating discipline. I'm pleased to introduce David Schummer as Equinox Gold's Chief Operating Officer, who brings over 35 years of mining experience to the business. David and I worked together at Newmont and most recently Calibre Mining, and he has been working closely with the Greenstone team since mid-May to accelerate the ramp-up, improve efficiencies to safely deliver reliable performance. With that, I will ask David to discuss a little more color on some of the team's recent progress at Greenstone.

Speaker 2

Thanks, Darren. We've moved quickly to put more horsepower behind Greenstone's ramp-up. This includes bringing in seasoned advisors with decades of load and haul experience, improving shovel loading cycle times through operator training, the addition of auxiliary equipment to maintain pit floors and shovel dig faces, and the introduction of double-side loading to essentially eliminate haul truck spotting time. We've also recently taken steps to bring in technical specialists to optimize and monitor our blast designs and performance, targeting improved fragmentation, reduced dilution, and improved ore presentation to the mill. On the haulage side of things, improved road designs and construction, tighter dump exchanges, and recently added support equipment are all helping us move material much more efficiently through increased average speed across the haulage fleet.

These enhancements, along with a concerted effort to reduce operating delays, specifically through the implementation of an efficient hot change between shifts, are already contributing significantly to stronger daily performance. As Darren mentioned, month-to-date August mining rates have been around 200,000 tons per day, with best-demonstrated performance to date of 227,000 tons per day, and the focus remains on driving dilution down and fine-tuning the process plan to steadily improve operating time, throughput, and recovery. Turning to slide six and back to you, Darren.

Speaker 1

Thanks, Dave. Valentine is a conventional crush grind CIL plant and will be our second Canadian cornerstone mine and a significant contributor to cash flow. Before providing the Valentine update, it is important to note there are currently active wildfires in Newfoundland and Labrador, with a number of communities on evacuation alert. Our thoughts and best wishes go out to those impacted, and our operations have not been impacted, but we remain vigilant and supporting those that have been. In Q2 2024, we assembled an operating team with significant commissioning experience, led by Jason Sear, who's been working symbiotically with Kyle Kunz and Pierre Lagarde, who are leading the construction front over the last year.

This investment in talent is paying off, as evidenced by our current state of operational readiness, which includes the process plant is fully energized, key circuits have been tested, and commissioning crews are working through performance verification. Maintenance systems are live, operating procedures have been developed, and crews have trained. We have invested over $25 million in critical spares to support a smooth ramp-up. First ore to the plant is scheduled to commence before the end of August, with first gold anticipated approximately a month later, followed by a steady ramp-up to nameplate capacity in Q1 2026. Turning to slide seven. With Greenstone ramping towards nameplate capacity and Valentine on track to deliver first gold, we are entering a period where production and cash flow will materially increase.

These two cornerstone Canadian assets, combined with our diversified portfolio, give us the scale, stability, and leverage to gold price required to drive a step change in margins, earnings, and therein shareholder value. Our strategy is clear: quality over quantity. Focus on production that moves the needle in terms of free cash flow and valuation. Advance high-return organic growth. Invest where we create the most value per dollar spent. Rationalize and streamline. Continuously assess the portfolio to focus our human and financial capital on our best opportunities, a recent example of which is the sale of our Nevada assets for $115 million. Deliver tangible returns. Share price appreciation through margin expansion, disciplined cost control, and production growth, while positioning the company to return capital directly to shareholders through dividends and/or share buybacks once our delivery objectives are achieved.

We are focused on executing with discipline, and I'm confident in our ability to realize our vision to be a top quartile valued gold producer. With that, we're happy to take questions, and back to you, Operator.

Speaker 8

Once again, to join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. Our first question comes from Ovais Habib with Scotiabank. Please go ahead.

Thanks, Operator. Hi, Darren and Equinox team. Congrats on our Q2 beat and really great to see Greenstone Mill hitting the over nameplate capacity. Darren, a couple of questions from me, just starting off with Greenstone. The grade at Greenstone came in at around 0.92, down from around 1.06 in Q1. When should we start seeing grades improve going into the second half? What measures are you taking to manage and improve grade dilution? Essentially, what I'm asking is, are you expecting grade to improve quarter over quarter, kind of going into Q3, or is this more of a Q4 situation?

Speaker 1

Yeah, no, thanks, Avas. Appreciate your support and questions. Grade, we are seeing improvements in grade. Month-to-date August grades are right around a gram a ton, so improving over what was Q2. We will continue to see improved grades because of face position and face position driven by kind of where we sit in the pit. Obviously, the more material we move, it means the more face positions we make, which means the deeper we get, the more material we have. The more material we move, it allows us to be able to operate more effectively along that grade tonnage curve. Importantly, in everything we're doing right now, it's about ensuring we get the quality as well as the quantity.

Simon and Dave and the team are absolutely focused on moving as many tons as cheaply as we can, but importantly, minimizing dilution to be able to segregate out the waste from the ore. Secondly, that is also to minimize the ore losses in and around historical workings. It is a work in progress, and as we go forth, I anticipate that we'll see quarter-on-quarter improvements in grade. I would anticipate that Q3 grades probably won't be too dissimilar to Q2, right? Maybe marginally better, but we are also ensuring that we make face positions so that additional capacity that we've got is ensuring that we end up with nice areas to work in that provide really, really effective mining areas that will positively impact unit mining costs as well, which will then flow through to margin in escalation as well.

Got it, thanks for the color on that. In terms of the fleet that you have in place, in terms of improving the mining rates as well, do you have all the equipment and mining fleet in place, or do you think you need to beef that up?

No, I think for what we've, you know, what we've socialized vis-à-vis either the feasibility study or more recently is that all the equipment that we require is in place. It's really about maximizing the value of our committed capital and what we've delivered into. That's working with our business partners and our vendors as well to ensure that they have skin in the game and are focused on our performance as well. We have seen over the last quarter a significantly higher level of engagement from both Komatsu, Caterpillar, and SMS as well, which is great to see. No, short answer is that we have the equipment. The board afforded us some additional support equipment, which is positively impacting things as Dave indicated, by increased haul speeds for the truck fleet.

No, we have what we need, and it's really about ensuring that we maximize the value out of that invested capital.

Got it. Thanks for that, Darren. Just moving on to Los Filos, obviously you've had the agreements in place now with the two communities. Are you, I mean, now I'm forgetting the name of the third community. I apologize, but in terms of, are you in discussion with that third community as well right now, or are you dealing with just the two communities that basically have signed on to move forward with Los Filos?

In every jurisdiction that we operate in, we maintain regular and engaged communication and coordination with all of our stakeholders, and that's in, you know, whether it be in Mexico, Nicaragua, or Ontario. We maintain open dialogue with everyone. The third community that we're having discussions with is Carouseleo. What we have done is that we do have fully executed agreements in place with two of the three communities, and we're currently working with those communities to recommence exploration activities and look at a two-community plan to be able to exploit Los Filos as well. We are hopeful that we will work towards a solution, but you know, as we do everywhere, for those that want to work with us, we will work constructively and responsibly with every stakeholder.

Got it. Just my last question over here, Darren. Great to see you've started selling off non-core assets, and we saw that with Pan. Are we going to see more of that going into the second half or early 2026? Any color there would be appreciated?

Yeah, no, Avas, you know, we love all of our children, but if we find that some of our assets can create you and our other shareholders and us more value in the hands of someone else, we will actively explore those opportunities. Are we running processes? No, but have we seen a level of engagement and inbounds as a consequence over the last quarter or two? Yeah, absolutely. As we demonstrated with the Nevada assets, we will move agilely to be able to surface those values as they present. That will all be focused on ensuring that they positively impact share price, and that's where our focus will be.

Perfect. Thanks for taking my question, Darren, and again, congrats on our Q2 beat.

Thank you, Avas.

Speaker 8

The next question is from Anita Soni with CIBC World Markets. Please go ahead.

Hi, good morning, Darren, and firstly, congratulations, David, on your appointment. I think we crossed paths when you were at New Gold in 2014-2016. My first question, just to follow up on the grades at Greenstone, you did indicate that the grades increased quarter over quarter of what was mined. Can you give us an idea of what those actual numbers were in terms of what the grades that you mined out of the pit this quarter and last quarter? Secondly, what would the block model have predicted just so that we can get a benchmark of the kinds of ore losses that you're experiencing right now?

Speaker 1

Yeah, Anita, thanks for the questions. I don't have the mined information in front of me right now. I guess there are two parts I think we want to focus in on here. We will see an improving grade, quarter on quarter, as we get deeper in the pit and as we improve our practices in and around mining dilution or minimizing mining dilution and ore losses. Secondly, the volumes of material will also impact the grade that we see presented to the process plant. If we step back and look at the veracity of the feasibility study over the longer term, from memory, I think it was around 300,000 ounces a year or thereabouts. What we see is that from a high level, we see the reconciliation of total metal being pretty consistent with that.

We are seeing more tons at a lower grade, and that's where our focus is on dilution and ore loss. As we work through the balance of the year, I think we'll be in a better position to be able to talk about what those shorter-term grades look like. I'm comfortable with the ability for the asset in the long term to deliver into the feasibility, which is not specifically answering your question. I just wanted to provide a little bit more color around what the long term looks like because I don't have the actual mined or mine grades. As of end of month July, we had about right around 6 million tons on stockpile. There's a large stockpile of material as well and how that figures into the as mined versus the as milled. I'm happy to.

Yeah, I can appreciate that, but I think that grades were supposed to be in the order of about 1.3 this year. That's where we're, you know, the 0.92 is where I'm trying to understand. Secondly, you mined 50% more than you milled. Did you just direct ore feed what you mined or was there, like, I'm trying to understand, like, the movement between what's happening at the mine, is there any stockpiling happening? You guys also talked about the grades being, you know, the lower availability, like lower grade availability within the stockpile that you pulled going to the mill. I'm trying to get an understanding of the material movement and what's happening there.

Yeah, it's probably worthwhile us sitting down and walking through what that looks like. Absolutely, right, there's a stockpile and there's a surge capacity in front of the plant. I don't have the number at hand, maybe Dave does, but I would anticipate that probably less than one-fifth of the material is direct dumped into the primary crusher. I think the majority of the material is actually re-handled from the stockpile to be able to ensure that we get a consistent feed from not only grade, but also arsenic and sulfur. We get a nice blended product to get a nice stable feed into the plant that will have a positive impact on recovery. The stockpile is a critical part of the process here, because we don't go direct mine to mill.

Speaker 3

It is Peter here, Anita. We did see an increase of the stockpile from the end of Q1 to the end of Q2, but we can address some of those items perhaps in more detail offline.

Okay, second question in the series of questions, and I'll leave it at three. The second question, just in terms of the disclosure that you've provided on both the tax and the legal front in the MD&A, one on taxation in Nicaragua and a dispute on the tax rebate, and secondly, the Arizona legal matter. Can you give me some color on, you know, firstly on the tax, do you like the on the tax issue there? I mean, do you expect a resolution in the near term, or is that something that we should be concerned about? Secondly, on Arizona, a similar question. Would that impact your ability to execute on asset sales if you were thinking about asset sales in Brazil?

Yeah, it's Peter here. On Nicaragua, without getting into too much of the detail, because it is an ongoing discussion with the tax authority, tax law changed. We are quite confident that the Nicaragua operations are grandfathered under the pre-existing regime, and we're actually reasonably confident we'll come to a beneficial resolution there. As to a timeline on when that might be settled, I don't know, but we did not record a provision with regards to it, which indicates our expectation of likelihood of a successful resolution. With respect to Brazil, the legal wheels in Brazil turn very slowly, so we don't expect that to be resolved in the near term. We do not expect that to, there is no process on Brazil. I just want to reiterate that, or on any of the Brazil assets or any of the other assets for that matter.

We wouldn't expect that kind of thing to interfere. If there was one, we wouldn't expect it to interfere with the process.

Speaker 1

Yeah, as it didn't, given this recent merger between Calibre Mining and Equinox Gold.

Speaker 3

Exactly. Yeah.

Okay. Last question, I guess I'll move to Los Filos. Los Filos, you know, in the last two years, Peter, as you guys had indicated previously, has been a bit undercapitalized. You were preserving capital to get the ramp-up at Greenstone up and running. If Los Filos comes back outside of the CIL, what kind of CapEx should we be expecting in terms of a recapitalization of that mine?

Speaker 1

Yeah, Anita, we're working through what a potential restart may look like at Los Filos. As we have visibility into that, we'll be absolutely transparent with what those requirements are. Our focus right now is working with the two communities on developing a two-community plan, which would involve the construction of a CIL. That's starting with recommencing exploration activities here in the next, we'll call it weeks, and then continuing the studies in the background to be able to look at refreshing some of those longer-term economics. It's really about the longer-term capital requirements and what that asset looks like as a world-class gold asset. If we're faced with a first-world problem of being able to restart, we'll start to provide that information because those numbers change on a pretty regular basis.

Depending on the commitments we make and the agreements we have in place with the communities, that will also impact what that capital start looks like. We're comfortable that the provisions that we've made and the progress that we've made is preserving our ability to recommence when we do have those agreements in place.

All right, thank you. That's it for my questions. Sorry, go ahead.

Speaker 3

No, I was just going to say, Anita, it's Peter again. Given the longer history perhaps with Los Filos than others in the room, no one will actually be happier than me to have to come forward with that information. Looking forward to the day when we do.

All right, thank you. That's it for my questions.

Speaker 8

The next question is from Mohamed Sudaib with National Bank Financial. Please go ahead.

Hi, Darren and team. Thanks for taking my questions. Maybe on the cost front in the quarter, I just wanted to dive in a little bit deeper into the Brazilian operations cost. They seem to have been doing better than guidance and better than what I was expecting there. Should we expect those similar unit costs to continue into the back half of the year, or how should we be thinking about cost out of the Brazilian operations? Thank you.

Speaker 1

I’ll start with a kind of a 30,000-foot view and then see if Peter’s got anything to add to it. On June 13, I think, or thereabouts, we reestablished guidance for the full year, and we're very comfortable with our consolidated and piece guidance for all of our assets going into it. I think with that, we'll see variation on a quarter-by-quarter and a month-by-month basis as we see different levels of spend and different reaction too. Again, holistically for the year, we're very comfortable with the guidance. Peter, anything you'd layer on on that?

Speaker 3

Just that, you know, Brazil, as those who are familiar with the company would know, is very seasonality-driven, and we tend to generate most of the production cash flow in the second half of the year, which has obviously an impact on the unit costs overall. As Darren said, very solidly in range for delivering on our updated guidance.

Speaker 1

Yeah, I think that just to layer in is that, you know, someone, I think, well, Anita maybe had raised it, but in terms of the, you know, the capital constraints that we had seen over the last few years in terms of where we deploy capital, you know, as our organization changes and as we generate that capital, it's allowing us to look at, you know, that capital deployment throughout the assets. I think that, you know, we'll see assets like Brazil be able to better perform as we can deploy more capital that will positively impact their ability to be able to see what's in front of them and then be able to more reliably produce as well.

Whether that be exploration through, you know, results of exploration through the drill bit, or whether it be investing in capital for equipment to be able to lower unit costs, all those things will positively impact our portfolio. I think that, you know, with this pivotal change we're seeing with, you know, Greenstone coming on board, or sorry, you know, ramping up, and then, you know, we're imminent with respect to Valentine, you know, that very much changes the paradigm, which is Equinox Gold, and will allow us to then be able to reinvest back into some of these assets that arguably probably haven't seen the light over the last couple of years. You know, again, very exciting times for our entire portfolio of assets.

Great, thanks for that caller. If I could shift maybe to Greenstone, maybe just a follow-up on a great question there, as you relate to the stockpile. You noted an increase in the stockpile that you have at the asset there for a quarter. Would it be possible to know with the 6 million tons, what grade the 6 million tons are at for the stockpile? Thank you.

Speaker 3

Sorry, you broke up there right at the end. Do you mind just repeating that question? Apologies.

Would you be able to tell us what are the grades for the stockpile, the 6 million tons of stockpile that you have at Greenstone?

Speaker 1

In terms of splits, there's different grade splits. From memory, Mohamed, I think we're looking at about 6 million tons at just over half a gram as a total. I believe there's about 1.5 million tons at about 0.7x, right, in terms of the higher grade portion. We'll call it the bin two. We can get it offline and provide more color that you would like. You know, we've got a significant stockpile that's very similar to what we have processed year to date, and then a larger stockpile of lower grade material. We talk about 1.5 million ton, basically the average grade processed year to date.

Great. Just final question on Valentine. In the MD&A, you noted that you have about $54 million Canadian left on your total CapEx there. How should we think about the capital spend at the asset as you ramp up, specifically as it relates to development CapEx or initial CapEx or non-sustaining CapEx for that asset in the second half of the year? Thank you.

Speaker 3

The spend on the project itself that's in the MD&A takes us through to first gold pour. When you're thinking of, and that's a fairly, you know, it's a tail end of the project. That spend becomes less lumpy than earlier in the project. I suppose if you're trying to understand it, the easiest way to look at it is just a smooth spend through first gold. Subsequently, it's your very typical working capital buildup and ramp-up and the costs that are typically associated with that. We haven't guided on Valentine costs as of yet, and we won't do that in all likelihood until commercial production. You know, you can make, I suppose, typical assumptions on a 2.5 million ton per year plant and mining operation.

Speaker 1

Yeah, I think that, you know, again, if I was sitting in your shoes, Mohamed, I mean, you know, I'd be taking average mining costs and average processing costs and using them as the basis for. There is no surprise in terms of we deferred $100 million worth of spend, and now it's going to come out in Q4 as opposed, you know, for extra capital. There's none of those shenanigans that have been played out. I mean, you know, we've played a pretty straight bat at this at providing updates as we've gone through. The EAC estimates that we've foreshadowed, we're tight on, we're comfortable with. As Pete mentioned, it's really going to be the operating ramp-up, which are tied into basically, you know, capital demands from an operating cost perspective as opposed to capital injection per se from a lumpy piece.

Speaker 3

I'd just add to that, fully funded.

Speaker 1

Oh yeah, no, absolutely, absolutely funded out of cash and cash flow from. Part of the reason that we didn't provide, you know, all-in sustaining and cash cost guidance for the tail end of the year when we provided guidance just recently is that, you know, the production I think we're pretty comfortable with an estimate of, but you get some really wide swings there in terms of unit costs, and then it becomes distractive to the discussion. We see nothing that's, you know, that's concerning there from a delivery in the back half of the year or being able to fund it. Our focus is on getting to, you know, close to nameplate, you know, by hopefully the end of Q1, but definitely in Q2.

We've afforded, the Board has afforded us, you know, significant investment there in terms of capital spares, as we've talked about, the redundancy, the additional time that we've had through the build has allowed the operating team to come in, do that redundancy checks, and we've got $25 million worth of additional spend or a spend associated with pumps and redundancies to ensure that when things do go bump in the middle of the night as we ramp up, we can just switch between and minimize those impacts.

Great. Thanks so much for answering my questions.

Was you all factored into the initial project capital?

Amazing. Yeah, thanks for answering my questions and congrats on the quarter.

Appreciate it. Thank you very much for your support.

Speaker 8

The next question is from Jeremy Hoy with Canaccord Genuity. Please go ahead.

Thanks for taking my question. Remaining on the topic of Valentine, could you let us know what the key metrics we should be watching are during the ramp-up process?

Speaker 1

Yeah, it'll be tons mill, Jeremy. As soon as we commence production there, we'll provide regular updates on throughput. I think that that's going to be the measure. This is a long-life asset. There'll be dips and weaves along the road with respect to grade. I mean, we're comfortable with respect to grade as we've demonstrated through the releases we've provided and through recent kind of production results. No, I'm comfortable with it's really going to be about showing that steady state or that ramp-up in throughput. That's going to be the key measure. Everything else is kind of a, how do you say, a consequential related to that. Mining rates are going to be fine. We've had good mining performance. We've got all the material, all the assets ready to turn on.

We've actually had some delays in providing that as we've seen the project being delayed in terms of the build. We are very comfortable from a mining perspective. It's really going to be about mill throughput.

Thanks, Darren. Appreciate it. One last one, just thinking about the future, there's a lot of exploration potential at some of these assets. I appreciate that there's focus on ramp-ups and operations at the moment. Are you able to sort of give some sort of loose priority or ranking in terms of where you see the greatest exploration potential?

Yeah, no, thanks Jeremy. Even though there's a few things happening in the business, we haven't lost sight of the fact that our roots are very heavy in exploration. We continue to explore in Nicaragua. We've provided a bit of a summary there. We spent about $70 to $90 million this year. We provided, sorry, consolidated. We did provide a release here on July 25th in terms of some very encouraging results out of Nicaragua, which are arguably some of the best results ever returned from the property. We have had good success in and around Valentine as well. We would anticipate maybe later this quarter providing an update on some recent exploration results out of Valentine.

I think as we chatted a little bit earlier, as we generate cash and we're coming out of the back of two significant builds and capital draws, it'll allow us to be able to refund or reinitiate some work in some of the areas that have been maybe a little bit underloved from an exploration perspective. Los Filos is a good example with a two-community plan going forward. Obviously, maintaining focus in Nicaragua will be key. Valentine, because the potential in both of those assets is significant. Mesquite as well. Mesquite has been an enduring asset with a long life. It's been pretty low on the food chain from a capital deployment perspective over the last few years. We'd like to see, and we will see, exploration programs recommence there within the next few months.

I like to think of us as an exploration company backed by $3 to $4 billion of revenue. As you know us as Pedigree, I would anticipate that if I was modeling, sitting on your side and modeling this, I would anticipate roughly $100 an ounce of exploration spend as kind of an operating cost going forward as well. We see great talk across all of our assets to exploration success.

Great, thanks, Darren. Appreciate the color and looking forward to developments there. I'll step back in the queue.

Appreciate it. Thanks, Jeremy. Thanks for your support and Canaccord's.

Speaker 8

The next question is from John Tomases with John Tomases Independent Research. Please go ahead.

Thank you for the good job that's going on. Looking to next year, assuming Los Filos idle as it is at the moment, what is a reasonable target for cash cost? Company-wide, $1,400, $1,300, $1,200, $1,100. How much better do you think things will get?

Speaker 1

I know I'm sitting back here a little bit. I'll maybe pass it to Peter to start with, and then I'll pick up the other, then I'll close out as I kind of collect my thoughts. Thanks for the question though, John. He's sitting there thinking.

Speaker 3

It is starting to be unblessed with an embarrassment of riches. John, we haven't, I mean, obviously for everyone on the call, anything we say today is not guidance for next year. If you're just thinking about ballparking, an example is for Q2. If we're looking at things on a combined basis, we're at about $1,400, a little under $1,400 per ounce cash cost. That's with Greenstone not fully ramped up and Valentine not contributing. If you're trying to model it through, John, you could probably knock $100 an ounce off of that, $150 an ounce. I do want to emphasize, we'll have that guidance in the new year as we normally do. We're just starting to see the benefit of our larger lower cost producers coming online. I know that's where your question is getting to.

We're looking forward to being able to provide that information more confidently next year. If you're trying to look at it now, that's how I'd approach it.

Speaker 1

Yeah, I think that, you know, I kind of put Pete on the spot there. Sorry, Pete. As you sit back and you look at the guidance we've provided this year, we've provided $1,400 to $1,500 an ounce. If you look at the profile as we move into 2026, as Pete foreshadowed, we're going to have Valentine and Greenstone being larger contributors, which will lower our production cost per ounce. In the current gold tape that we see, the ability for cash flow generation is going to be significant.

When we're talking about $1,000 to $1,500 an ounce margin, we're going to be blessed in a very great situation to be able to, one, deliver the balance sheet primarily first, and then look at, by this time next year, we'll be having, I'm sure, lots of animated discussions in and around how additionally to be able to return value to shareholders through dividend or share buybacks as well. I think that we need to work through the balance of the year so we can create expectations that we can deliver into in 2026. Taking the guidance that existed for this year and even rolling that forward, that puts us in a very, very favorable position, John.

Thank you. If I could ask you to stick your necks out a little further, looking to 2027, is it a reasonable goal to be in a net, assuming the Castle Mountain capital doesn't start, Los Filos mill doesn't start, is it a reasonable target to be in a net cash position at current gold prices by the end of 2027?

Speaker 3

Yeah, I think that's reasonable.

Super. Thank you very much.

Speaker 1

Thanks, John. Appreciate your support and continued support over the journey. It is much valued. Thank you.

Speaker 3

Thanks, John.

Speaker 8

This concludes the question and answer session. I would like to turn the conference back over to Darren Hall for any closing remarks.

Speaker 1

Yeah, no, I'd just like to thank everyone for joining the call today and taking the time. It is appreciated. Continued support is acknowledged, valued, and respected. Again, as always, myself and the entire team are available to field any questions after the call and anytime during the quarter. I look forward to continued engagement. If anyone has any questions, reach out. Other than that, have a wonderful day and back to you, operator.

Speaker 8

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.