Welcome to the Pretium Resources Second Quarter 2021 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. The conference call today is being webcast live I will now turn the call over to Mr. Jacques Perron, Pretium's President and CEO.
Please go ahead.
Thank you and good morning everyone. Thank you for joining us for our Q2 2021 operating and financial results conference call. The Q2 started under challenging circumstances. The impact of the COVID outbreak at Brujak in the Q1 had some residual effects, and we also had to deal with some underperforming stopes at the onset of the second quarter. Thanks to the hard work of our team, we made On today's call, I will highlight some of the key events of the Q2.
I will then turn the call over to Patrick Godin, our Chief Operating Officer, to provide an overview of our production results, the status of operations and the progress of our construction projects. Then Matthew Quinlan, our Chief Financial Officer, will go over some of the financial highlights of the quarter. Following Matt's review, I will provide a summary of the underground expansion drill results and a brief update on our exploration program before closing off with a look ahead to the remainder of the year. At the end of the presentation, we will open the line to their questions. Before we begin, note that our statements contain forward looking information and future oriented financial information based on certain assumptions and subject to risk factors.
I refer you to the cautionary language included in our news release yesterday as well as the management discussion and analysis for the same period. These are available on our website and have been filed on SEDAR. Please note, all dollar amounts mentioned on this call are in U. S. Dollars, unless otherwise noted.
Our top priority continues to be the health and safety of our employees, contractors and neighboring communities. Last year, in an effort to renew our safety culture, we launched an extensive company wide health and safety program. Here on the 4th slide is a rolling 12 month lost time injury frequency rate and our total recordable injury rate. Excellence in health and safety is a journey with ups and downs, and we are determined to maintain our efforts to emphasize the importance of Safety and ensure it is at the forefront of everything we do. Despite the challenging start of the quarter, We were able to produce just over 83,000 ounces of gold.
As a result, it was another profitable quarter and we generated just under $51,000,000 in free cash flow. During the quarter, we made a voluntary debt payment and repaid the remaining $38,000,000 on the revolving portion of the loan facility. We ended the quarter with a cash balance of approximately $202,000,000 And with that, we have reached a key turning point. Our cash exceeds our debt. Subsequent to the end of the quarter, We refinance our remaining credit facility on favorable terms and increase our available liquidity.
We have several major initiatives underway, such as accelerating underground development and fill drilling and increasing drilled up slope inventory with the intent to improve operations at Brucejack. We are also making significant investments in future growth, which includes construction of Expansion and near mine exploration drill programs are in full swing with drill results expected through the remainder of the year. As you are aware, a COVID-nineteen outbreak was declared at Brucejack during the Q1. Following the outbreak, additional procedures were established, including continued testing of all employees and contractors. A vaccination program has also been ongoing at Brucejack under the guidance of BC Norton Health.
As of this week, 99% of our Brucejack workforce has received their first dose of the vaccine and And 64% have received their second dose. We will continue to closely monitor the situation and provide updates as appropriate. It is a reminder that COVID remains a risk and could have a significant impact over a short period of time. I will now turn the call over to Patrick to provide an overview of our operations for the Q2.
Thanks, Jacques. Turning to operation on Slide 8. In the Q1, we processed approximately This was below our objective of 3,800 tons per day as a result of the lasting effect of the COVID outbreak along with scheduled shutdown. Total production costs for the Q1 averaged $2.14 per tonne, dollars per tonne milled, an increase from the Q2 last year. The cost increase is primarily due to the strong Canadian dollar.
Change in the exchange rate increased production cost by about $22 per ton. Higher level of drilling and higher diesel price at an additional $6 per ton compared to the Q2 2020. The cost increase was partially offset by a $9 per ton reduction in COVID related costs. Turning to Slide 9, as you can see, our quarterly rate of underground development has historically been on an upward trend quarter over quarter. The onset of COVID stalled our progress in the Q1 of 2020.
And then in the Q1 of this year, our rate of development Was impacted by the COVID outbreak outside. In the Q2, we increased our efforts, pushed on underground development and Achieved a rate of approximately 11.50 meters per month. We will continue to advance development at this rate to get back in line with our 2021 plan. As Jacques noted earlier, the Q2 began with some challenges, including the COVID outbreak and performance issues with several stops. We expect these factors to have a negative impact on both of our gold production and grade.
However, even with the challenges at the beginning of the quarter, we produced 83,000 ounces of gold. This is less than 4% below the midpoint of our guidance The mill feed grade averaged 8.6 gram per tonne and the recovery rate was 97.4%. Stock performance improved toward the end of the quarter and as a result there was 7,700 ounces of gold remaining in the circuit, which is a minor than usual for us. Based on our production forecast, we remain on track to be within our full year production guidance range. To enhance our understanding of the deposit and improve the predictability of production, we continue to prioritize increasing the drill data we collect.
Diamond Drilling advanced through the quarter with 9 diamond drills in sight. More than 50,000 meters of diamond drilling was completed in the quarter for a total of 90,000 meters this year. Drilling will continue at an excellent rate and as we pursue our target of 195,000 meters for the year. Turning to Slide 12, we have maintained an accelerated rate of underground development to increase access, Optimize production and improve blending in an effort to balance quarter to quarter fluctuations. The increased development rate expand our New areas of the deposit and allow us to build an inventory of drill off stopes.
At the end of the second quarter, we had more than 316,000 tons of drilled off stope inventory. This is a 15% increase from the previous quarter. Our target is to have about 400,000 tons of drill off stock ready to be blasted by the end of the Q3 of 2021. This is roughly equal to a full quarter of production. We acknowledge that given the delays related to the heartbreak in the Q1, this is an ambitious goal, but we still believe that is achievable by the end of the quarter or early in Q4.
Slide 13 shows a section view of the underground development looking north. Until this year, mining had been limited to only 2 mining horizon at Bulgean. Earlier this year, we began production from the lower horizon on the 10.80 level. Through the Q2, we continued to advance development and begin mining from the 1200 and the 1320 level of the fault zone. It has been a major objective for our team to significantly expand Our construction and capital expenditures projects began to significantly ramp up in the Q2 as the weather improved at Boosdak.
Expansion capital expenditures include construction of a permanent camp and project to support and improve and to improve the efficiency of operation. Replacement of mine accommodation was required to ensure consistent quality of facilities for all site employees and assist with employees' retention. At the Wildfire Camp, which is situated at the entry of the mine site along the I-eighty seven, a new 25% camp was The Nippel camp located along the access roadhouse is surface maintenance and serves as a transfer point for access into the Glacier Road. A new 100 person camp is in the final stage of construction and is expected to be commissioned and ready for occupancy in the Q3. A 4th wing is being added to the main Bujak camp and The second camp to replace the whole construction and exploration camp is also under construction for a combined 324 new rooms.
The building modules are currently being laid with commissioning and expenses expected in the Q4. This will bring the total number of room And improve the efficiency of operation, a new assay lab and core shack were also built within the mill building. The core shack has been commissioned and is now in operation. The assay lab is in the final stage of commissioning. The new assay lab will have the capacity to test 1200 samples per day.
This will significantly improve the turnaround time on assay result and is also expected to improve cost efficiency. Now, I will turn the call to Matt for an overview of our financial performance.
Thanks, Patrick. Our financial results were strong once again in the quarter. Our results were higher than the Q1 of 2021, but lower than the comparable period of 2020, partly due to the very high level of gold sales during that quarter. For the Q2 of 2021, we realized an average gold price of $1804 per ounce, an increase of nearly 4% over the Q2 of 2020. Revenue decreased to $152,000,000 or approximately 8.6 percent, primarily as a result of lower ounces of gold sold.
And in the Q2 of 2021, we sold approximately 84,600 ounces of gold. EBITDA in the quarter was $72,600,000 Net earnings were $0.16 per share and adjusted earnings were $0.15 per share compared to $0.19 and $0.18 per share respectively in the comparative periods. The decrease in net earnings was primarily attributed to lower revenues, partially offset by a decrease in interest expense and a decrease in deferred income taxes due to lower pretax earnings. Turning to Slide 18, we once again generated significant cash flow from operations of $73,000,000 for the quarter and had strong conversion to free cash flow of $50,700,000 Free cash flow was directed to debt reduction as we have committed to do. Total capital expenditures in the quarter on a cash basis, including sustaining and expansion capital were $22,300,000 Liquidity continued to grow in the quarter to over $400,000,000 as of June 30, and we ended the quarter with approximately $200,000,000 of cash.
As Jacques mentioned, during the quarter, we voluntarily repaid the entire remaining amount of $38,000,000 under our revolver and subsequent to the quarter end, we financed our credit facility. We ended the quarter with bank debt of $100,000,000 and convertible notes also of $100,000,000 Turning to Slide 19, all in sustaining costs in the Q2 of $10.99 per ounce sold were higher than the comparative period in 2020, but remain within our guidance range for the year. For the 1st 6 months of the year, our AISC is $10.53 per ounce. The increase in ASIC relative to Q2 2020 is a result of higher sustaining capital investments for increased rates of drilling and development as referenced by Pat, Higher production costs, primarily due to the strength in Canadian dollar and lower sales in the period. The impact of the strengthening Canadian dollar during the Q2 of 2021 increased all in sustaining costs by approximately $85 per ounce of gold sold compared to the comparable period in 2020.
Turning to Slide 20. The strong financial performance of Brucejack continues to provide for meaningful debt And as you can see, we have consistently reduced debt over recent years, while also reinvesting in the mine. Earlier this week, we announced an amended credit facility with our lending syndicate on improved terms. The 4 year committed facility increases Size of our revolver by $50,000,000 and reduces the quarterly repayments under the term loan to $5,900,000 from $16,700,000 Lastly, we remain on track to achieve our 2021 guidance. You may recall that in the Q1 conference call, we commented where we were trending on our capital expenditure guidance ranges, which we released in January.
We said we were at the low end of our sustaining capital and at the high end of our expansion capital guidance at that time. With 7 months of the year now completed, we're amending these guidance ranges. However, there's no change in the aggregate total of capital expenditure guidance. We've lowered our guidance range for sustaining capital by $10,000,000 due to reduced activity levels in the Q1 as a result of the COVID-nineteen outbreak as well as to reflect some updated timing of expenditures over the balance of the year. We've increased our guidance range for expansion capitals also by $10,000,000 due to increased cost of input materials, detailed engineering being completed and construction activities being well advanced, and to a lesser extent, the strengthening of the Canadian dollar.
I would like to reiterate once again this quarter, the second and 3rd quarters typically see higher levels of capital expenditures due to the summer construction season at Bostiak with expenditures peaking in the 3rd quarter. Regional exploration activities, which also take place in the summer months, are expensed under our accounting policy that we adopted in January and also peak in the Q3. With that, back to you, Jacques.
Thanks, Mac. Let me now turn to our exploration activities for 2021. The summer near mine exploration program was initiated in mid June with 2 drills positioned on surface. Program is focusing on the trend of highly altered outcrop that extends 4 kilometers from the Hanging Glacier zone to the Northwest to the bridge zone to the southeast. To follow-up on the successful discovery of epithermal style gold mineralization at Hanging Glacier in 2020, A drill program was initiated in early July to delineate the high grade gold corridors and test for high grade epithermal style veins.
Hanging Glacier is located approximately 4 kilometers from the Brujak mine and is easily accessible in the summer using existing exploration trails. In addition to drilling, the NEAR mine exploration program includes a high resolution magnetic survey, MT and IP geophysical surveys, Soil sampling and prospecting. The 2021 Brucejack definition and expansion drill programs Are anticipated to total approximately 195,000 meters of drilling comprised of reserve definition and resource expansion drilling. Our resource expansion drill programs continue to successfully intercept high grade mineralization immediately adjacent to existing underground infrastructure and continue to highlight the potential to extend beyond the Valley of the Kings deposit. For these programs, at the end of the quarter, 7 drills were operating with 3 drills working on the definition programs and 4 drills testing the expansion potential.
This is in addition to the 2 drills that were active on surface for near mine exploration. Resource expansion drilling continued through the Q2 with 24,000 meters completed within the Nord Block and 10 80 level zones. In early July, 2 drills from underground were repositioned on surface to complete a 13,000 meter resource expansion drill program at Goshen Hill. At the bridge zone, 11,000 meters of underground resource expansion drilling is expected to start in late August. Slide 25 shows a planned view of the Valley of the Kings deposit with the drill results from the Nord Block Phase 1 and 2, as well as the results from the 10 80 Level Phase 1 drill program.
The 10 80 Level program conducted from 1 of the lowest mining levels at Brujak mine Intercepted high grade gold mineralization up to 200 meters below and 200 meters east of the current mineral resource shell, with intercepts as high as 1600 grams per ton gold over 1 meter. Phase 2 of the 10 80 level resource expansion drill program is in progress and was initiated to infill between the initial drill fans and target the visible gold mineralization to the east. We also announced Phase 2 drill results from the Nord Block that Conducted to test the extension of the North Block zone to the Northwest. The Phase 2 program continued to encounter high grade gold mineralization up to 450 meters from the current resource shell. Phase 3 of the Nord Block program was recently to infill between the existing drill fans with active results pending.
Phase 4 of the program has now been initiated to test the area immediately to the northwest of the current drilling. With the objective of operational improvements and following a thorough testing process, we have committed to purchase 7 battery electric haul trucks to replace our fleet of 12 diesel powered underground haul trucks. 1 battery electric truck is currently in operation with the remainder to be progressively dispatched by 2023. Mobile combustion of gasoline and diesel contributed to roughly 68% of the greenhouse gas Emitted from operating the Brujesak mine in 2020. After the rollout of this multi year plan, we forecast a reduction of 20 4 percent or 6,900 tons of carbon dioxide equivalent annually from the implementation of this initiative.
Looking ahead to the rest of 2021, we remain committed to safety. This includes continuing our COVID safety protocols to minimize the potential for another outbreak at site. We are determined to continue to deliver consistent results and remain on track to achieve our 'twenty one objectives. Based on our production forecast, We anticipate meeting our annual production guidance. We expect to generate a significant amount of cash this year, which we have already in part deployed to reduce the debt.
We have now reached a key turning point. Our cash exceeds our debt. Our underground development now provides us with access to 5 distinct mining areas. We nearly have a quarter of drilled up stopes in inventory. Our capital expenditures projects are progressing well and our resource expansion drill programs continue to successfully intercept high grade mineralization.
Driller results are expected to be released continuously throughout the rest of the year and we will continue to and will contribute to program with the intention to expand on resources in close proximity to the Brucejack Mine. We are really pleased with the hard work of our team and we look forward to reporting back on our progress. Thank you. That concludes the formal presentation. I will now turn the call over to the operator, We'll open the line for your questions.
Ariel?
Thank you. We will now begin the question and answer We will pause for a moment as callers join the queue. Our first question comes from Heiko Ihle of H. C. Wainwright.
Please go ahead.
Hey there. Thanks for taking my questions. Hope you guys are all staying safe.
Good morning, Heiko. Hi.
I got a question about the chart you have on Page 9 of your presentation. The cumulative Underground development appears to be going up in a fairly straight line, which I guess is the whole premise of this chart. But I mean conceptually, how much Longer can you keep up more or less linear growth in underground development before you hit some sort of barrier where you have to venture out further from infrastructure Underground for favorable ore. I assume there is no scientific and direct answer to this, but I mean, is this a matter of quarters, years, decades, never?
Thank you for your question, Eiko. As we mentioned in the past, Our objective is to accelerate development performance in order to open up the mine, Open up new mining areas for flexibility and blending, but also open up the mine for to establish drilling platforms. At the current rate of development, it would be difficult to increase even more. So at the 1100 meters per month, we're at a good rate right now. And Again, based on current reserves, we would continue to develop at this rate for maybe a year, year and a half, and then it's going to come down very quickly.
But As we said in the past, we're very confident we're going to find additional resources and we're going to have to open up these areas. So, We'll see what we get from the exploration program this year, but no, no, we're because of the results we are getting so far from the drilling, I expect Development rate to continue to be at a higher level for a few more years.
Got it. At the risk of getting another answer along the lines of, as we mentioned in the past, all options are on the table. Just thinking out loud, I mean, your balance sheet is healthy and it's getting more so by the day. You've recently refinanced the loan facility at the firm. Meanwhile, shares are below $10 and this includes 10 plus percent Poppier today.
Earlier on the call, you mentioned that reduction That's what we've committed to do. But I got to ask, at what point in time, and I assume the Board and you are discussing this in pretty much every meeting, At one point in time, would everyone be willing to start some sort of small share repurchase program? And I guess if you Can't really answer that question directly. I'll just ask for future plans of capital.
Yes. Heiko, as we mentioned in the past, and our priority was to reduce the debt and we continue that. And As we said in the past as well, until the convert is behind us, we will not be spending a lot of Time and energy thinking about dividend or share buyback. So our Convert matures in March 2022. So, I think when we come back from 1st quarter end of Q1 2022 results, that's when we're going to be in Starting to think about this some more.
I have a feeling it would be a decent path for the shares if that happens. And then just one quick clarification, how much is left to be spent on the Knippel and Brewster cams as of today, please?
The total expense for that is turning around CAD62 million, so So probably around 50% of that.
Perfect. Thank you guys very much. I'll get back in queue.
Thank you, Iko.
Our next question comes from Ovais Habib of Scotiabank. Please go ahead.
Thanks, operator. Hi, Jack and the Protune team and thanks for taking my questions. Jack, Quick question from my end, just on regarding the Q2 performance. I believe you started talking about it and my All dropped, so I apologize if you have to repeat this. But you had said Q2 was impacted by performance issues with some of the stocks.
Can you give us some color as to what changed to the positive in rate Q2 to achieve the grade guidance?
It's when we talk about the grid variability of BlueJean is that I can say to you that The 1st 2 months of the quarter, we were right in line with our planning. And in the Q3, we had a stope, mainly 1 stope. We had 2, but mainly 1, We made a huge difference in grades because it's part of the nugget effect of the ore body. And we had the high grade feed for the last 2 weeks of the month And it was mainly impact positively the production. It's mainly the difference here.
We are in when we have Stokes like that, as we explained to you previously, we apply a line call factor to our reserves. And in the planning, sometimes we are capping stope in term of grade Because we are reported variability and in this case, we have a huge and really positive over grade Improvement on the grade on one stope and it's what made the difference. And at the end of the month of June, We have so when we are having facing high grades like this, we are slowing down the milling process to make sure that we to improve the recovery. And we had a load of gold in the gold room and Swadae on a day basis, we increased the inventory at the end of the month because we're not able to pour it.
And that's the 8,000 ounces of gold in the circuit as well. That's correct?
Yes. That's what it is.
Got it, got it. Okay. And so then going into Q3, moving into Q3, In terms of the drilling that you have in front of production, I believe now you're So, how do you See Q3 kind of fairing out, is it going to be fairly similar to what you saw in Q2?
We're expecting in Q3 and Q4 more or less What we plan in terms of the guidance, slightly better.
Got it. And just moving a little bit to the sustaining cost Based on your guidance range, sustaining costs were lower in the first half, despite lowering the guidance for spend by Sustained capital by $10,000,000 Do you still see a catch up of these costs in the remaining quarters of the year?
It's Matthew here. Thanks, Ovais, for your question. Yes, we do see A catch up, I think in Q3, as I mentioned, we have it's our peak spending period, both for Expansion capital, but also to a certain extent sustaining capital. So you can see that rise a little bit in Q3 and we're very comfortable with that $40,000,000 to $45,000,000 range for the
year. Okay, perfect. And I still have one more question, but I'll jump back in the
Our next question comes from Wayne Lam of RBC. Please go ahead.
Hey, good morning guys. Just curious in terms of the costs related to safety measures and COVID underground, just wondering how things have been progressing post the And will those increased safety costs kind of be factored into the mine plan coming up?
It's Matthew here. Yes, the COVID costs are trending down. We did have COVID costs of around about $22 per ounce in the quarter this per ounce of ASIC in this quarter. And in Q2 of 2020, when we were in the eye of the storm, it was very it was $50 an ounce. So that is trending down.
Our guidance calls for I think in our guidance we've disclosed for the year, ASIC costs for COVID would be approximately $5 per ounce. We're still comfortable with that. We may be a little bit higher than that, but it's a very, very small number. And I think as Jaakos mentioned previously, we're now in the state where Most of the industry is baking those costs into their future plans at some level. So that will be part of our budgeting process for next year.
Okay, great. Thanks. And then maybe just wondering back on the grade for the quarter, If you might be able to provide some detail on kind of the monthly grade profile or how it was trending prior to that, I guess, one stope. And Just given the prior commentary, was there significant positive reconciliation versus the block model on that one section? And just wondering if you might be able to provide some more detail on that.
Wayne, as Patrick mentioned, As you will remember at the end of the Q1, when we had the Q1 results, we guided that We guided we indicated that we would be at the low end of the range of the guidance, so Closer to 80,000 ounces per quarter and we were tracking right on that forecast for the 1st and second month. And then in the 3rd month, we had this one stope that gave us a big bump. So we had a significant increase in the month of June. And mainly, as Patrick mentioned, that increase came not during the whole month. It was the last week the last 2 weeks of the month.
So that was the impact. We don't do reconciliation on a monthly basis Because of the variability of the deposit, if we look at it on a stope by stope basis, it doesn't make any sense. So we look at it on a on a more global basis and we'll be able to do our reconciliation like we do every year at year end and we'll Provide the information when we give our year end results in early 2022.
Okay, got it. Thanks. And then maybe just lastly, just on the fleet replacement. As you guys replace the Over the next couple of years, like is there any incremental cost in terms of capital in moving to an electric fleet?
Yes, but it's included in our program as we will the cost is including the truck. We are not buying the batteries. We will rent the batteries because we don't have the expertise to break that. And also, we have some charging So this is what is minor investment and we'll use more or less we'll use current excavation to fulfill this demand. But it's mainly the trucks and we're expecting a lot from that in terms of also the quality of the air, the ground, the efficiency, the Truck or faster in the ramp.
We already are we already operating the vehicles since in partnership with Sandvik since the beginning of December this year and the trial is really successful and in terms of all the aspects of health and safety and also of the efficiency. So, and it will reduce, it will improve our cost mainly So actually, the vehicles are the diesel powered vehicles are owned by the mining contractors And but the electrical vehicle will be owned by us and we will operate the vehicle going forward.
Okay, perfect. Congrats on the quarter. That's all for me. Thank you, Wayne.
Our next question comes from Joseph Reagor of ROTH Capital Partners. Please go ahead.
Good morning, Jacques and team. Thanks for taking my questions. Just kind of maybe one more point. Hey, maybe one more point of clarity on this single stope that kind of changed the quarter for you guys. Was that stope already drilled off, ahead of time when you guys reported, Was that May 4th, May 5th?
Like did you guys have some concept that there was a chance of this? Or was this something where as you guys did, you're drilling ahead of time, It became more obvious as you got into the 3rd month of the quarter.
Yes. Usually, the definition is 2 or 3 months ahead. So it was more or less the drilling. I don't know when we signed us on the grade for the stope. Probably it was at the beginning of April.
But however, You know, another good effect is that if you can we have a drilling pattern when we're doing the definition drilling. And another question that we can it's possible for us and it's happened to us really oftenly that when we are drilling, we're missing the nugget between holes and between rings. So we have a tight drilling pattern because when we are doing the definition The stope, we have multiple components to do this. First, we have the dam and drilling. We are doing also definition dam and drilling.
We are adding after that the development of the stope because the main advantage that we are doing when Jacques explained that we paused the development is to pause the access Drill the stop in advance to minimize the cost and be more efficient. So we have all the development that we're recovering, the chip sampling and we have the geology. And after that, To do the definitions, we are using RC drills and we are drilling the stope and we have a composite per hole. So It's pretty tight, but basically, the grade showed up in a structure that probably intersect the stone between rings And it's what happened. So it's the nature of the store body.
Okay. Thanks for the
clarity on that. And then
And don't worry, because the grade if we were able to know that, we'll never say that we will know about the objective for Q2. It's the nature of your body was like this.
Okay. And then Second question, some other companies have reported that they started to see inflationary pressures related Shipping of reagents and on the labor front, etcetera, and as you know, inflation is a big topic right now. Have you guys started to see inflationary pressure? And can you give any color as to what magnitude and how you're planning for it?
Well, definitely, Joe, we've seen steel, lumber Increases as we started our construction program for the year. We're monitoring the situation and our Supply chain department is looking at now that we're going to start to work on 2022 budget, we're starting to look at what are the assumptions we're going to take and We're going to deal with that. I think for us right now, Joe, what is I would say the more challenging aspect of all this is the lead time or delivery time for supplies. That is what we're we have some impact on in terms of costs, but they haven't been It's very significant to date in the big picture, but it's the delivery times that is we can see that now things are getting a little more Challenging. But we continue like it's not unusual in the current gold price and copper price Context to see escalation, we've seen this in this business before and we're just going to be making sure that we're careful and when when we're planning our budget for next year.
But other than the exchange rate that is impacting significantly in terms of ASIC costs, we don't see any No major impact between now and the end of the year.
Okay. And then just you mentioned timing on getting stuff. Are there any materials that you guys need to get on a regular basis that you're concerned about or that there's any risk To the supply chain 4 that you can see right now?
No, we don't. At the onset of COVID, the team took the proper measures and Our inventories of grinding media, reagents, other supplies. So we're in good position right now. We don't see any risk of getting supplies. We're more starting to think about The construction plans and projects for 2022, ordering steel and all that good stuff and But overall, we don't see any risk for 'twenty one.
Okay. Thanks. I'll turn it over.
Our next question comes from Anita Soni of CIBC World Markets. Please go ahead.
Good morning, guys. So a lot of the questions, I guess, have been asked. I just wanted to pick up on one thing that was said was, You said at the end of the quarter, you couldn't pour the gold. Why is that? Was there a specific reason or was it just timing?
Well, it's the goal when the goal gets into the circuit, Anita, it gets out at the end and it's difficult to there's a Pouring capacity we have every day, but there's also a situation here in British Columbia right now that is impacting us. We normally well, we transport the dore bars by helicopters. And we have helicopters normally helicopters that can Carry a certain weight, which I'm not going to disclose, but a certain weight of gold and All those helicopters now are requisitioned by the government to fight forest fires. So we have to operate with much smaller helicopters, which limits the quantity of gold we can get out. So that's the one other thing that is impacting our Ability to ship gold out of sight.
So if this the forward flyer situation continues, we might see more inventory build up before you can draw it down.
No, I don't think so. I think our objective is to try to bring it down over the quarter. So to be at the end of the quarter at a more normal level, but again, I don't know if you follow the situation here in BC, but BC is burning right now. So it's challenging.
Same thing in Ontario. So then just my next question, I guess, I saw the credit facility was increased from $300,000,000 to $350,000,000 And within that, There was, I guess, a commentary about being able to capitalize on strategic opportunities as they arise. So I'm just curious, given that you've got $120,000,000 to $170,000,000 you're doing well on that in free cash flow this year. You're paying down your debt. Are you looking at diversifying your revenue streams, looking at doing an acquisition at this stage?
I think in the past, we had You'd mentioned that maybe in the latter half of the year, you would start to take a look at maybe broadening your revenue stream.
Yes, that comment we made earlier Anita continues to be true. We wanted to get the operations in good shape. We always said that until the Q3 this year, which we're in right now and we would our focus would be much more internally. But Definitely, as we get closer to the end of the year, we're going to start to look at what are the next steps for the business. So and Having increased our liquidity in terms of the refinancing and the cash we generate, We're going to be thinking about what we need to do and we're going to be in a better position with the current Financial capabilities that we have.
Sure. And then the last thing on the capital, I guess, going we're still referencing, I guess, or taking a look at the old technical report, which obviously this year, the capital was much higher In Quantum, I think it was supposed to be 53,000,000 came in at 120,000,000, right? And then this 2022 number is kind of like 30 1,000,000 or so. So as we think about 2022, should we expect that the cap that your capital programs fall off this year? What kind of like go forward number and then what should we be thinking about in terms of inflation on the CapEx side of the equation and then also that $10,000,000 that you didn't spend in sustaining capital this year, is that going to be pushed into next year?
So Very long question with many parts, but I'll let you answer that. Thank you.
I'll start with the end of your question. The $10,000,000 yes, definitely it's Move to next year. That's going to happen. In terms of CapEx, We're going to be higher than the 40 three-1 101 next year. We haven't finalized our budgets for 2022.
We're going to start to work well, we start to work on it, but it's not finalized. But it won't be at the same level as this year. It will be
somewhat lower.
We're not exactly sure how we're going to end up, but it will be lower than this year.
Okay. And then lastly, that commitment to purchase Electrified vehicles like what's the timeframe on which you're going to be doing that purchase?
It will be we already have one truck at site. The second truck will show up in November. And after that, all the others are scheduled 1 after month up To us in right at the end of August 2022.
Okay. So that should be within our 2022 Numbers when we're looking at capital, right?
Yes.
Okay. And can you give us an idea of how much that was?
In terms of cost of truck? Yes. It will the truck is $2,200,000
Okay. Thank you. That was
all my
Question comes from Don DeMarco of National Bank Financial. Please go ahead.
Well, thank you, operator. Hello, Jack and team. My first question, the point of drilling off the inventory is to tame the production volatility. And there was a key scope that factored into Q2 that we're hearing about. But with the strong Q2 and the previous quarters, we're seeing that this production volatility is decreasing.
So is it fair to say that your strategy to drill off the inventory gets working and that you have higher confidence in achieving production and grade targets going forward?
Definitely, Don, you're bang on. If you look at our performance, there's a slide in the presentation that shows compared to the midpoint of the guidance With the high end of the guidance and the low end of the guidance on a quarterly basis, we've been tracking Within 5% for a number of quarters now. And in an ore body like ours, to be able to do that, It's quite remarkable and the team has done an excellent job, excellent job, drilling and advancing the knowledge. And Yes. So now on a stope by stope basis, we're going to see some up and down and it's going to happen.
But overall, I think We can say that our production is fairly consistent. We're as Patrick mentioned, we're expecting the next quarters to be More or less in line with the guidance, the mid range and we think maybe even a Slightly higher than the mid range, but we're going to be within that band as far as we can see. So yes, very we're getting With the 5 areas that we have opened up, with the drilling inventory, we're a lot more consistent and we have a lot more confidence and what is coming in front of us.
Okay. Yes, great. Because Yes, I think the point of it is that the market likes to see that hitting the midpoint of guidance in a way. And if there's any given quarter that you have low throughput, That can be you have the ability to pull levers and offset that with slightly higher grades. So I'll take that as encouraging and we'll look forward to the next couple of quarters.
Just a couple of other quick questions, though. Can you remind us, are you planning an updated technical report and life of mine plan for next year? If so, can you just remind us of the timing?
Yes. As we said earlier, Don, we're planning to issue an updated 40three-1 101 in the first half of next year, Most probably more in the Q2 than the Q1. We're still debating when we're going to do the cutoff on all the drilling and all that But for sure, it will be out in the first half of twenty twenty two.
Okay, great. And finally, the convertible debts due in March, Is it your intention to pay this off with cash? And can you also remind us what the level of debt that you're comfortable with?
Sure. It's Matthew Quinlan here. We are planning to pay that off with cash. As Jacques and I have mentioned in the past, We want to exit that maturity with at least $100,000,000 of cash on the balance sheet. So we do have the ability to draw on the revolver to redeem that, but given our cash position, we would anticipate funding that redemption with cash on hand.
With respect to debt in the past on the balance sheet, we don't have a specific number, but Jacques, myself and Pat all believe that lower leverage in a commodity business is generally a good thing. And certainly, under one turn of funded debt is something that we would be entirely We're comfortable with, maybe even a little bit less than that. We're also cognizant we're a single asset producer. So as Jacques has mentioned in the past, We want to have a lot of liquidity and also cash on hand as well.
Okay. Thank you, gentlemen. That's all for me.
Thank you, Don.
This concludes the question and answer session. I would like to turn the call back over to Mr. Perron for any closing remarks.
Thank you, everyone, and Thank you for joining us this morning. I would like to thank you and thank the team For the interest in what we're doing here and thank our entire Pretium team and all our partners and contractors and People that work with us for their dedication as we look forward to a very exciting second half of twenty twenty one. As we continue to execute on our plan and achieve our objectives. So, we wish everyone a very nice weekend and be safe out there. Thank you very much.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.