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Timmins Gold's (TGD) CEO Bruce Bragagnolo on Q2 2015 Results - Earnings Call Transcript

Timmins Gold Corp (NYSEMKT:TGD)

Q2 2015 Results Earnings Conference Call

July 30, 2015, 11:00 AM ET


Bruce Bragagnolo - CEO

Darren Prins - CFO


Derek Macpherson - M Partners

Steven Green - TD Securities

Sam Crittenden - RBC

Jim Belin - Aldebaran Asset Management


Good morning, ladies and gentlemen. Welcome to the Timmins Gold Second Quarter 2015 Operating Results and Financial Statements Conference Call.

I would now like to turn the meeting over to Mr. Bruce Bragagnolo, Chief Executive Officer. Please go ahead sir.

Bruce Bragagnolo

Yes, thanks. Thanks everyone for attending the conference call. I am Bruce Bragagnolo, the CEO of the company and also on the call is Darren Prins, our CFO and I am pleased to be here today to report our second quarter 2015 financial results.

In the course of this conference call, we may be making statements that are characterized as forward-looking statements that we claim Safe Harbor for any such statements. So Q2 was a big quarter for the company. The highlight was the arrangement with Newstrike Capital Inc. that closed on May 26, 2015.

We're extremely excited about the opportunity to develop the high grade, high margin Ana Paula project that came with the Newstrike transaction and this is designed to help position Timmins as an emerging Mexican mid-tier producer as Ana Paula will significantly increase our production level and dramatically lower our consolidated cost profile.

The one thing that I've been listening to shareholders about is I think a lot of people don't realize how good an asset Ana Paula is. According to the PA it will average about 116,000 ounces of gold production per year for over eight years at a current cash cost estimate of $486 per ounce and those are the type of ounces that everybody wants to see including operators in this current price environment.

We also had a relative low pre-production capital of $164 million and life of mine sustaining enclosure CapEx of $56 million. This represents a 32% IRR and a 2.4 year after-tax payback at $1,300 gold.

We've run our own mine plans in Ana Paula and it still has an attractive return at $800 gold and that's mainly because of the high grade core, which is around six grams.

So we're making good progress that the team is actually progressing very quickly to Ana Paula and they've received full cooperation from all levels of government, state, municipal, local, a dedicated local technical team has been set up at the project and in July we began a metallurgical drill program consisting of approximately 2,000 meters of drilling and we're proceeding full speed with the feasibility study.

We've also begun environmental baseline work for permitting and we're working towards that feasibility study as soon as possible, hopefully within 12 months.

At Caballo Blanco the company continues to engage with local stakeholders and carry out baseline work mainly focusing on environmental and social issues. So for Caballo Blanco and Veracruz, we've met with the State and Municipal officials and received positive responses and we're continuing to work on the baseline studies and the environmental impact assessment.

So on to San Francisco, San Francisco has presented some challenges the last couple of quarters and I think the biggest challenge there really is to provision of great dilution at the pit pace. We've identified some dilution that is un-reconciled. So what we have to do is we're working on better supervision to make sure that we minimize dilution.

Also at San Francisco we just finished stacking on the top of the pads, which results in a slower flow of solutions. Right now, we're stacking our new pads, which should definitely help as it has in the past with speedier flow solutions and a better Q3.

One thing we're very excited about at San Francisco is that the pilot phase is doing very well. It's ahead of schedule and we're doing the drifting into the underground veins parallel to the south wall of the San Francisco pit.

As we drift this part of the pilot phase designed to test the mining and processing of the underground ore to determine whether full scale underground mining is feasible, the advance rate has been very good. We've completed about half of the pilot phase drifting, which is ahead of time and our limited time to date has shown positive grade reconciliation over the drill holes.

The ground conditions are also very good, which they should be given the nature of the rock at San Francisco. We hope to be able to provide a more detailed update by the end of August.

Previous drilling has delineated three of these veins and we've also drilled underneath the pit and we hit high grade drill holes 800 meters below the North wall of the pit. So we feel and our geological theory here is that in-field drilling between the veins is going to help and also it's open to the east and along or down-dip to the north. So we're quite optimistic about the potential of this area as an underground mine in the future.

So a general update on San Francisco. We reached a record stacking rate for the quarter of 24,754 tons per day. The increase in throughput has helped to offset the decrease in grade from the prior year and as I said, gold recoveries are projected to be faster in Q3 as we move from the top of the current pads to the new pads.

Construction of the new pads is complete and we just started stacking one of the new pads. This will result in faster recoveries since the solutions don't have this far to go. The company is adjusting its 2015 production guidance to 100,000 to 110,000 ounces of gold and our cash cost guidance is revised to between $875 and $925 per ounce.

With that said, here are the financial highlights of our second quarter. Our earnings and total comprehensive income was $0.6 million or $0.00 per share compared to $3.2 million or $0.02 per share during Q2 2014. Cash flows provided by operating activities were $4.6 million compared to $18.7 million during Q2 2014.

Cash and cash equivalents at June 30, 2015 were...