Pan American Silver - Earnings Call - Q2 2019

Transcript

Operator (participant)

Thank you for standing by. This is the conference operator. Welcome to the Pan American Silver Second Quarter 2019 Results Conference Call. 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 the operator by pressing star and zero. I would now like to turn the conference over to Siren Fisekci, VP, Investor Relations. Please go ahead.

Siren Fisekci (VP of Investor Relations)

Thank you, Operator, and welcome everyone to Pan American Silver's Second Quarter 2019 Conference Call. We released our results after yesterday's market close, and a copy of the news release and presentation slides for today's call are available on our website. In a few moments, I will turn the call over to Pan American's President and CEO, Michael Steinmann, who will provide a brief review of our results. We will then open the call to questions and answers. Joining us for the Q&A portion are Pan American's Chief Operating Officer, Steve Busby, Chief Financial Officer, Rob Doyle, Senior VP Project Development, George Greer, Senior VP Technical Services and Process Optimization, Martin Wafforn, and VP of Business Development and Geology, Chris Emerson. I'd like to remind everyone that our news release and certain statements and information in this call constitute forward-looking statements and information.

Please review the cautionary statements included in our news release and presentation, as well as the risk factors described in our most recent Form 40-F, an annual information form. Media and other participants on the call are invited to participate in listen-only mode. I will now turn the call over to Michael.

Michael Steinmann (CEO)

Thank you, Siren. Welcome everyone joining us today to discuss our results for the second quarter of 2019. Revenue in Q2 2019 was roughly $283 million, up 31% from Q2 2018, driven by higher quantities of metal sold, except for copper. This number excludes revenue of $57.5 million from our Timmins mines, which are classified as assets held for sale. Gold volumes more than doubled quarter over quarter, reflecting the strong contribution from our new La Arena and Shahuindo mines in Peru, as well as the Bell Creek and Timmins West mines in Canada. Partially offsetting the higher quantities sold were lower metal prices for silver and base metals compared to Q2 2018, and increased higher direct selling costs due to increased treatment and refining costs for concentrates, and the temporary export tax in Argentina. Net earnings for the quarter were $18.5 million or $0.09 per share.

Adjusted earnings were $9 million or $0.04 per share. The primary adjustments made to earnings were the removal of earnings from the Timmins Mines and removal of NRV adjustments at Dolores. Net cash generated from operations in Q2 was $83.5 million. Strong operational cash flow was more than sufficient to cover our sustaining capital, taxes, interests, dividends, and project capital, while adding $17 million to our cash and short-term investment balance, which was about $139 million at June 30th. Working capital at the end of Q2 was $793 million, which includes $376 million relating to the Timmins Mines. Total debt was $378.8 million, comprised of $43.8 million of lease liabilities and $335 million drawn on our credit facility. We continue to have $165 million available under the credit facility and total liquidity of $304 million. We produced 6.5 million oz of silver and 154,600 oz of gold in Q2.

Consolidated cash costs were -$4.19 per oz, and all-in sustaining costs were $6.12 per oz. Consolidated cost metrics are calculated on silver sold basis with all byproduct metal sales, including the gold revenues, as a credit to costs. Costs for silver segment operations and our gold segment operations are detailed in our Q2 report. For the first half of the year, costs were tracking below guidance. Together with expectations for the remainder of the year, we have revised our annual 2019 cost guidance. Consolidated silver cash costs are now expected to be between -$3.30 and -$1.80 per oz. All-in sustaining cost guidance has been reduced to between $7 and $9 per oz. Again, the detail on segmented basis is available in our Q2 report.

We are reducing our guidance for annual 2019 silver and gold production slightly because of the postponement of commercial production from the COSE and Joaquin projects in Argentina by about three months. Silver production in 2019 is now expected to be between 25.3 million oz and 26.3 million oz, and gold production between 550,000 oz and 600,000 oz. After the tragic groundfall accident in June, we are now conducting an extensive evaluation of alternative mining methods best suited for the ground conditions we are now experiencing at COSE. The slight delay in the development of COSE and Joaquin increases our guidance for project capital expenditure by about $5 million to a total of $45 million. Guidance for sustaining capital expenditures remains at $203 million-$213 million for 2019.

Operations resumed at Manantial Espejo on June 23rd after a thorough safety assessment and additional safety training, and we expect development of the Joaquin project to resume over the next couple of weeks. The Manantial Espejo, COSE Joaquin assets are not material within Pan America's large diversified portfolio, and we don't expect a significant impact from the slight delay to our 2019 financial performance. Turning to Guatemala, our activities are limited to the care and maintenance of the Escobal mine as the Guatemalan government continues with the ILO 169 consultation process. We will fully support and participate in this government-led consultation process, and we will continue to put forth our best efforts towards establishing peaceful dialogue with the communities near the Escobal property.

Before we move into the Q&A portion, I would like to touch on the recent drill results from our La Colorada Skarn Discovery, which we provided in a news release on August 1st. Those results included the best Skarn drill intercepts so far. Drill hole 51 returned 140 m at 109 gm per ton silver, 1.66% lead and 3.8% zinc, and hole 46 intersected 126 m at 55 gm per ton silver, 3.8% lead and 6.55% zinc, just to mention two of the outstanding results. We are continuing to drill this exciting discovery with seven drill rigs, with the plan to release a first resource estimation at the end of the year. The potential of the La Colorada Discovery is one significant catalyst within a solid, well-capitalized company that is delivering strong operational and financial performance.

The integration of the former Tahoe operations is going very well, and the associated transaction costs should now be substantially behind us. Precious metal prices have strengthened considerably since the end of Q2, which points to strong financial performance in the second half of the year. That wraps up my formal comments, and I'd like now to open the line for questions.

Operator (participant)

We will now begin the question-and-answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. Using a speakerphone, please pick up your handset before pressing any keys. To draw your question, please press star, then two. We will pause for a moment as callers join the queue. The first question comes from Chris Terry with Deutsche Bank. Please go ahead.

Christopher Terry (Analyst)

Hi, Michael and Tim. Yeah, a few questions for me. Just the first one on divestments. I think previously you'd said that you were pretty close on the Timmins sale, and you were doing the DD with some potential buyers. Just wondering if you could give a timeline on your latest thinking on the assets you may divest and when that might occur. Thank you.

Michael Steinmann (CEO)

Yeah. Look, I don't have, obviously, for things like that, there's no fixed timeline, as you understand. As I indicated from the beginning on, the idea is to divest non-core assets. I think they're pretty well defined now with, obviously, Timmins, La Arena, too, that are defined as a big copper portion that is not a good fit for us. I also indicated our ownership in the large Shalipayco zinc deposit in Peru that we had in our portfolio, and then there are a few smaller assets from the Pan American side. So a lot of fronts we work on, as you can imagine, with a lot of changes in metal prices over the last, what is it now, a couple months, month and a half. A lot changed, and I think people have to regroup. We have to regroup and see how to move forward.

I was very clear that we are not in a hurry at all to sell these assets. You have seen the results on Timmins, for example, which have been very positive, even at considerably lower prices, actually, in Q2 than what we see actually right now, so we will be very patient here and, obviously, only sell these assets if we get the right value for our shareholders, so stay tuned, and as I said, we'll see how it advances over the next few months.

Christopher Terry (Analyst)

Thanks, Michael. All makes sense. And then just in terms of the great success you've had at La Colorada, I think you said you're expecting an updated resource at the end of the year. Can you talk a little bit more about the ways that you're looking at to best monetize that success? Just whatever framework you can provide. Thank you.

Michael Steinmann (CEO)

Sure. It's a great discovery. It's probably quite a bit early to talk about how we monetize it right away. I mean, you've seen the results that come with drilling with seven rigs on it. So it's obviously a very important project for us. I think it's a very fascinating discovery, very wide intersects and high grades, and you can hear the geologist out of me being very excited about this large discovery. Just a few notes on this. Keep in mind that this is separate from the silver side of La Colorada. So La Colorada, very important and very strong silver producer and cash flow generator for the company. That will happen over a long, long time. We have very long reserves and very long resource life at that asset. The Skarn is a little bit on the side and will be separate treatment, obviously.

Everybody saw that the silver grades are a bit lower, although there are some very fascinating intercepts, and there's obviously some high-grade silver veins as well cutting the skarn, cross-cutting it. If you look at the press release that we put out last week, you see there are some more narrow, very high-grade silver veins. The narrow intercepts are obviously the veins that cross-cut in the skarn. But very wide intercepts are very interesting. It will need, obviously, separate different mining methods. It's completely a different wide ore body, not what we mine at La Colorada right now. It will require different treatment. We did not think yet about size of plant or location, etc., etc. All we do right now is be fascinated about the results. Keep drilling. They keep coming, and they're very, very wide.

As we indicated, towards the end of the year, we come out with a maiden resource on it. I think to drill it fully out, that will take time. It's a very large discovery.

Christopher Terry (Analyst)

Great. Thanks, Michael. All the best.

Michael Steinmann (CEO)

Thank you.

Operator (participant)

The next question comes from Cosmos Chiu with CIBC. Please go ahead.

Cosmos Chiu (Executive Director)

Hi. Thanks, Michael and Tim. Maybe my first question is on COSE and Joaquin, and maybe if you can elaborate a little bit more on the ground condition issues here at COSE. I recall two years ago at the analyst day, I asked the question on Q-value and also RQD of COSE, or either COSE or Joaquin, and that number turned out to be pretty low. So I would imagine you had some thoughts in terms of you had to be careful in terms of how you mined the two assets here. But what is it? Is it just more fractured than you had expected? Is there a certain type of mineral that's causing you issues? And in terms of fixing it, is it as simple as more ground support or maybe even a faster cycle time? If you can give us a bit more color, that'd be great.

Steve Busby (COO)

Yeah. Thank you, Cosmo. This is Steve.

Cosmos Chiu (Executive Director)

Hi, Steve.

Steve Busby (COO)

Hi. Yeah. Obviously, we did encounter ground conditions that were a little bit more trickier than we had anticipated. We did anticipate bad ground. The RQDs were quite high. I mean, they were broken up material. We knew that. We didn't recognize some of the structure or some of the fault features in there, and we ended up opening up an area a little bit bigger than we were hoping to open up, and unfortunately, that's the area that came down. In terms of our mitigation plan to get back in there, we're looking at ways of mining that structure to where we don't open up as much. If we do have to open up as much, obviously, we're going to much more elaborate support systems, possibly rebar, bolting, cable bolting, getting a lot more length into the wall. So that's kind of what we're focused on.

The delay that we have in doing this is going to be probably a few months as we look at the engineering of that, which means we'll start stockpile production towards the end of the year. We have been producing a bit of development muck as we got into that structure, which looked pretty good. I mean, we already have 1,500 tons on the ground that's grading 2.6 kilos of silver and 33 grams of gold. So the structure is there. It's broken up. There are ways we know we can mine it. It's just a matter of getting all the design properly done and then training our miners on how to properly use that new ground support systems.

Cosmos Chiu (Executive Director)

And in terms of 2019 guidance, the updated 2019 guidance, I guess you mentioned that it includes only development ore coming from COSE in 2019. Can you remind us anything coming in from Joaquin in terms of that guidance?

Steve Busby (COO)

Yeah. I don't have that number right in front of me, Cosmo, but yeah, we've also reduced that back a little bit because we have decided to do a little bit more work on ground control methods in that mine as well. It won't be as big a delay as we're seeing at COSE, but there will be about a month delay there compared to what we originally planned. So we did trim that guidance down a little bit too. I don't have it broken out by those two different assets, no.

Cosmos Chiu (Executive Director)

But as you mentioned, Steve, that's been factored into your updated 2019 guidance.

Steve Busby (COO)

That's correct. It is in there.

Cosmos Chiu (Executive Director)

And then in terms of the issues that we just talked about, is it confined to COSE? Or as you mentioned, you're looking at some of the ground support systems at Joaquin as well, but it's not as sensitive? I don't even know what the word is. Does that translate? Are you seeing the same thing at Joaquin?

Steve Busby (COO)

No. The issue at Joaquin, we saw in the development ramp in the waste rock. It wasn't in the ore zone at all. And we saw some interesting clay zones and gouge zones in the waste that we didn't expect. We did elaborate on the ground support systems as we got into that area. It looks pretty solid. But given what happened at COSE, we decided we're bringing in a lot of geotechnical experts to look at COSE. We thought we'd take advantage of that and look at Joaquin at the same time. So we're just being extra cautious given the nature of the accident that occurred. But that's not in the ore zone, and we're not anticipating any change in our understanding of the ore at Joaquin as we get into it.

Cosmos Chiu (Executive Director)

Great. And as Michael mentioned, at least for 2019, COSE and Joaquin's production isn't exactly material to the company. And from that perspective, as you kind of find out more about COSE and Joaquin and learning about the potential additional costs, is there any possibility that COSE and Joaquin might just never come in in terms of production?

Steve Busby (COO)

I don't believe so, Cosmo. I think we see some real benefits in keeping that asset moving down there at Manantial Espejo, keeping people gainfully employed, and it is providing some limited value, but it keeps our Argentine business kind of established, well-established, well-respected within the community down there. So we feel some importance to that. Although those mines by themselves are not material, I think that overall operation, we see some strategic value in that as we look forward.

Cosmos Chiu (Executive Director)

Of course. Maybe switching gears a little bit in terms of Dolores. Q2 costs were still fairly high and tracking to higher than your 2019 All-in Sustaining Costs guidance. Could you give us a sense in terms of what we should be expecting in terms of improvements in the second half? And in terms of the Pulp Agglomeration Plant, how is that working out? And I guess last year, there were some setbacks in terms of mining in Mexico. Has that been fully resolved?

Steve Busby (COO)

Let me start with the second part there first. The mining is running quite smoothly. The operation's running well. We still have the support of local law enforcement escorts on the access road. All that's working incredibly well for us. So the mine is operating very smoothly. We're very happy with that. We don't anticipate any changes to that going forward. Relative to the cost at COSE during the first half, great question. Actually, during the first half of the year, we moved just under 3 million tons of spent ore that was sitting on pad one. Pad one was the old pad that Minefinders had originally built that had failed, and we are now approaching the point of the leach pad development at Dolores where we want to expand into that pad one area and repair and upgrade what was there originally.

So in order to do that, we have to remove that spent ore. There's actually some value in that spent ore, so we're removing it. Like I say, it took about three million tons out during the first half. And the team at the site actually, cleverly, they were able to. We anticipated some production out of that ore based on the grades and the recovery projections we had on that. They went through some pretty extensive testing and proved that by better cyanide management, better pH management, we could actually enhance the recoveries of that material. So a lot of those costs that you see in H1 is additional reagents that we used during that pad one relocation. As we move into H2 of 2019, that's going to drop way off. We slowed that way down.

We just needed enough room to start our geotechnical work and repairing that pad area of pad one during the first half of the year. We're now there. We're building on that pad as we speak. So we've slowed that rate of movement of that spent ore way down. There's about 2 million tons left, and it may take us as much as a year to move that next 2 million tons. So you won't see that cost impact moving into the second half that we had in the first half. Relative to the Pulp Agglomeration Plant, we have now got the third set of filter expansion kits on. The plant's running really well. We're consistently achieving about 5,000 tons a day through it, just under 5,000 tons a day. Recoveries are at what we expected.

The site really likes it because we get that recovery immediately versus out on the pad, as you know, we got quite long leach cycles out there. So as we start to move into high-grade ores later in the year, we're really excited about that Pulp Agglomeration Plant delivering returns right away for us.

Cosmos Chiu (Executive Director)

For sure. Maybe a question for Michael here. Michael, earlier this month, at Escobal or in Guatemala or in the BC courts, the case against or with Garcia was settled. Should we read into it? Any kind of positive read-through? And I'll ask this question anyways in terms of timing for Escobal. Likely, you can't answer me at this point in time, but I'll ask.

Michael Steinmann (CEO)

Sure. Look, I mean, you shouldn't read more or less into it than what we had in the press release on Garcia. You had there my statement as well. I said that it was important to us to resolve that. We really hope that this is a step forward on repairing some of the relationships with the broader communities in Guatemala. I don't think so that you should read more or less into that. On timing, look, I stay my course, obviously, on the timing side. As I said, this will take time. I don't have the timing for it. So stay tuned on this. As I've since November last year indicated, this will take a while, and we will take the time to get this done right. So you have to be patient.

I think meanwhile, you see what the other assets that we purchased aside of Guatemala are capable to do, even at quite lower metal prices than what we see right now, so that starts to look very interesting here looking forward, but look, I mean, we know that the government has to lead this through the ILO 169 Indigenous Consultation process, and as I said, we'll continue to put forth our best efforts towards establishing a peaceful dialogue with the communities, and that's probably all I have right now.

Cosmos Chiu (Executive Director)

Yep. Thanks, Michael. And now one more question following up on the divestitures of some of the non-core assets here. Maybe I'll ask the question a little bit differently. With the commodity prices being more robust in Q3, does that help in terms of interest in those assets? Have you seen an increased interest in those assets based on what's happening to the gold price?

Michael Steinmann (CEO)

I think there was always quite a good interest in it. It's just, as I said, I want to be patient to get the right value for our shareholders out of it. I don't think so, that everybody just because of, what is it, as I said, a month, a month and a half of higher prices, and that happened probably in most people's summer vacation, so I think people will get back from vacation in September, look at the second half or last part of the year, and probably update some of their price assumptions, and we'll see what happens by then.

Cosmos Chiu (Executive Director)

Great. Thanks, Michael and Steve. Those are all the questions I have.

Michael Steinmann (CEO)

Thank you, Cosmos.

Operator (participant)

The next question comes from Chris Thompson with PI Financial. Please go ahead.

Chris Thompson (Analyst)

Hi, good morning, guys. Thanks for hosting the call. A couple of quick questions, more specifically, I guess. Let's just look at Dolores. I wonder if you could just maybe just unpack the components that make up the operation. I know that Cosmo asked the question relating to the agglomeration there, but what's the production rate on the underground right now?

Steve Busby (COO)

Yeah. The last probably three or four months, Chris, we've been running about 1,000 tons a day out of the underground. We're still ramping that up. Our goal is to get to 1,500 tons a day towards the end of the year. It's ramping up well. Costs are looking good. We're down below $50 a ton all in cost, and that includes all our development that's going underway right now. So we're very pleased with the ramp-up. We're finally there to where it's ramping up quite nicely. Grades are coming in reasonably well. We're seeing above a 2-gram gold equivalent type grades coming through. So overall, it's performing well, and we expect it to deliver according to our plans.

Chris Thompson (Analyst)

Great. Thanks for that, Steve. So just remind me, the goal, I guess, was a 20,000-ton-a-day stacking rate on the pads. You're a little short, obviously, this quarter. Would that be the makeup you're looking for by the year-end from the underground?

Steve Busby (COO)

Yeah. I mean, a big part of that shortfall in stacking rates during the first half of the year is really the ore coming out of the pit. We're in that big stripping phase of that open pit, phase eight. And we're just not seeing, and we didn't expect it, we're not seeing the ore flow and the smooth high-grade ore flow. It's just that period of time of the stripping sequence. So as we move towards the later part of the year, I do expect we'll see us getting up to that 20,000-ton-a-day stacking rate again. And that'll include the 1,500 tons a day coming out of the underground.

Chris Thompson (Analyst)

Great. Thanks for that, Steve. Just, I guess, moving over to the other heap leach operation, Shahuindo here. Again, can you just give us a little, I guess, info on the agglomeration there, the compaction? What are you putting through the agglomeration plant right now? What's run-of-mine? How that's working out for you?

Steve Busby (COO)

Yeah. Right now, we are not operating the crushing and agglomeration circuit at Shahuindo. We're processing all ores run-of-mine. We just simply are not seeing yet the high-clay ore that requires the crushing and agglomeration. We expect that in the future. We're still revising our geologic models to try to better understand that distribution. But as I mentioned, I think last quarter, all of this year, and probably most of next year, we're not really anticipating much to start that plant up. So the plant's idle. We haven't really staffed it. We're not really putting any cost to it. We're running all run-of-mine. We're very pleased with that operation. We're building leach pads. The waste dumps are coming together well, and I think I still feel there's some decent upsides at Shahuindo.

Chris Thompson (Analyst)

Yep. No, definitely. And then just quickly moving on to La Arena. Again, a little light, I guess, on the tons place there. I think historically, you're looking at about, was it, 30,000-ton-a-day operation here? Are we going to see that sort of improve? Or what's your sense there?

Steve Busby (COO)

Yeah. Absolutely, Chris. Another one, we happen to hit Dolores and La Reina at the same time in the stripping sequence. So this is the effect of that phase seven stripping. And it's simply because it's run-of-mine leaching, all ore that's mined goes directly to leach pads. So that's just the ore flow that's coming out as we strip that phase seven. So towards the end of the year, we've actually, I don't know if you recall, but actually, Talho Leighton, the life there had increased the permit levels to 45,000 tons a day. So I think as we move through the rest of the year, you're going to see that ore flow once we get back into that ore in the next couple of months jump up to the 45,000 tons a day rate.

Chris Thompson (Analyst)

That would be great. Okay. And then just, yeah. Excellent. And then just, I guess, finally here, Morococha, a little light on the grade front. I'm expecting about 150. Are we going to see it move higher, silver grades there?

Steve Busby (COO)

Yeah. Good question, Chris. As I've mentioned before, both Huarón and Morococha, we're doing nearly 25 kilometers of underground development every year. These mines require a massive amount of development, and some of those development, we've got many, many phases going at one time. Some are exceeding plan, some are not meeting plan, and unfortunately, into some of the higher silver grade ores of Alapampa, we're short on that development. We didn't get into the higher grade silver ores we had planned for this year. So to offset that, we've moved to ores where we've had better results in underground development. Those ores are higher zinc grade with lower silver. Unfortunately, I think that's going to remain that way for the rest of the year, and that also was factored into our new guidance when we put in the new guidance. Yeah.

Chris Thompson (Analyst)

Steve, thank you very much for your comprehensive answers to my questions. Thanks, guys.

Steve Busby (COO)

Thanks, Chris.

Michael Steinmann (CEO)

Thank you.

Operator (participant)

Once again, if you have a question, please press star, then one. The next question comes from Lawson Winder with Bank of America, Merrill Lynch. Please go ahead.

Lawson Winder (Analyst)

Hi, everybody. Thanks so much for taking my questions. Just two for me. One, first on La Colorada, the cash cost guidance of $250-$350. I'm just kind of working through those numbers. I mean, the implication is that in H2, the cost per ton is going to go up quite materially. But I mean, that just doesn't make a lot of sense to me. Is there a reason why that might be happening? Or is it something else where perhaps it's just that the byproduct production is anticipated to go down a lot? Thanks.

Steve Busby (COO)

Yeah. Yeah. Lawson, this is Steve. And I think you're getting close to where we're at there. But the real issue is the base metal prices. We're projecting lower base metal prices moving into the second half. So it's that byproduct credit due to pricing, not due to production. Our unit cost per ton, we're not anticipating any change really from H1.

Lawson Winder (Analyst)

Okay. That's very helpful. Thanks, Steve. And then just my other question was on the depreciation. There was a lot of movement in the depreciation per ounce at several of the mines in Q2 versus Q1. I'm just curious, are you guys expecting to see any substantial moves at any of the assets into the second half versus Q2? And that's it for me. Thanks.

Robert Doyle (CFO)

Hi, Lawson. Rob Doyle here. No, we don't anticipate any changes from Q2. Obviously, we're going through the purchase price allocation process for the Tahoe assets that we've just brought onto the balance sheet. So as we finalize that process, there may be some change in carrying values, which would impact depreciation, but nothing material anticipated there. So I think what's important to bear in mind is sales volumes. That's a key driver for the depreciation that we recognize. Obviously, it's all triggered by revenue recognition. So just make sure that you're looking at sales volumes as opposed to production volumes when you're doing that calculation.

Lawson Winder (Analyst)

Yeah. No, no. Definitely am. Okay. So I mean, Q2 can be taken then as a fairly sensible run rate?

Michael Steinmann (CEO)

It should be a good proxy going forward. Yeah.

Lawson Winder (Analyst)

Okay. That's very helpful. Now, I know I said I'd ask only two questions. If you guys wouldn't mind asking one more, just with Cosmos Chiu, how are the grades reconciling versus your models?

Steve Busby (COO)

Yeah. Thanks, Lawson. Yeah. Very solidly. I mean, we're still outperforming our model. We've got our teams, our geologic teams, Chris and his group, looking very hard with it, along with Martin, as we go to build our new reserve. Like I said, I think this reserve is going to capture some of the upsides we've been seeing. As we open up the phase two of that pit, we're just opening it up here in the last couple of months. It's too early to really call if it's going to carry through to phase two yet. But I would say year to date, we're still running about 15% ahead of the reserve model. So we're optimistic looking forward.

Lawson Winder (Analyst)

Thanks so much.

Operator (participant)

This concludes the question and answer session. I would like to turn the conference back over to Michael Steinmann, President and CEO, for any closing remarks.

Michael Steinmann (CEO)

Thank you, Operator, and thank you very much for calling in today. I'm looking forward to give you an update on Q3 in November. That's already. Enjoy the rest of the summer, everybody, and talk to you soon. Thank you very much. Bye.

Operator (participant)

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