Thank you for standing by. This is the conference operator. Welcome to the First Majestic Silver second quarter production results and 2022 guidance 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 an operator by pressing star and zero. I would now like to turn the conference over to Mr. Keith Neumeyer, President and Chief Executive Officer. Please go ahead.
Thank you, operator. Welcome everyone to our H2 guidance call and production announcement. Both, I think everyone online has seen the two news releases that went out yesterday. Before I get into it, I just want to introduce the people in the room with me today. I have Steve Holmes, the company's Chief Operating Officer. I've also got Connie Lillico, our Corporate Secretary. I've got Todd Anthony, VP Corporate Development, Mani Alkhafaji, he's VP of Procurement, Andrew Poon, VP Finance, and also Mark Carruthers, Manager of Investor Relations. Also, we are calling in remotely, we have our CFO, David Soares as well. Before I speak any further, just gonna pass the call over to Connie.
Prior to us beginning today, I'll read our disclaimer and forward-looking statement. Certain statements contained in this conference call regarding the company and its operations constitute forward-looking statements in accordance with applicable Canadian and U.S. securities laws. All statements that are not historical facts, including without limitations, statements regarding future estimates, plans, objectives, assumptions or expectations of future performance constitute forward-looking statements. We caution you that such forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and future events to differ materially from those anticipated in such statements.
Such risks and uncertainties include the duration and effects of the coronavirus and any other pandemics on our operations and workforce and its effects on global economics and society, fluctuations in precious metal prices, unpredictable results of exploration activities, uncertainties inherent in the estimation of mineral reserves and resources, fluctuations in the cost of goods and services, problems associated with exploration and mining operations, changes in legal, social, or political conditions in the jurisdictions where the company operates, lack of appropriate funding and other risk factors as discussed in the company's filings with the Canadian and U.S. securities regulatory agencies. Resources and production goals and forecasts may be based on data insufficient to support them. The company expressly disclaims any obligation to update any forward-looking statement. Back to you, Keith.
Thanks. Thanks, Connie. Just getting into the news releases briefly, I'm not gonna go through it in detail, but obviously the second quarter was an improvement over Q1, where we were expecting to see that. You know, there's no cost associated with the production numbers yet, but I can suggest that the numbers are improving on a cost basis, and we expect that to continue to improve as throughput increases at Jerritt Canyon. You know, good increase in production. Santa Elena is just booming away. It's with the Ermitaño ore coming in, it's just actually producing above budget. We've actually, if you noticed in our guidance, for H2, we've actually increased the production there, which is pretty exciting and the costs are quite nice as well.
Throughout the year as we bring in West Generator and Saval II mines at Jerritt Canyon, you're gonna start seeing the increase in throughput there, and we're expecting to see that positively impact not only the gold production numbers but also costs on an all-in sustaining basis. There'll be other events occurring in 2023 as well. You know, we're expecting 2023 for both Santa Elena and Jerritt Canyon to be pretty exciting times for both of those two mines. We have had some questions coming in on a couple of topics, so I'm gonna address the ATM right now just in case there are questions around that.
We did announce an ATM after this announcement that came out on H2 guidance and Q2 production. Just, you know, to preempt any type of questions, it is our view or my view that every public company should always have a share buyback program in place, and they should also always have an ATM in place. That allows management to take advantage of, you know, certain events that occur in the marketplace, you know, whether they're, you know, very positive high metal price environments or, you know, very negative kind of low metal price environments that we're currently experiencing with mining stocks out of favor and, you know, First Majestic shares, you know, underperforming over the last couple of quarters.
We have bought stock back, just so that you know, we will be putting the exact numbers out in our production or pardon me, our financial numbers which come out in the next few weeks. We've been in the market buying stock and, you know, we don't even plan on using the ATM at these crazy share prices. None of us are happy where the shares are trading, but you know, we need to, as far as we're concerned, have both the share buybacks and ATMs in place at all times. The last ATM expired or was actually used up, I think, late last year or early this year, and it always takes time to put these prospectuses together.
They're big prospectus projects too. We'll get these things filed, and they do have a shelf life of a couple of years, generally speaking. You know, you won't be seeing another one for quite some time. That's really it for me. Why don't we just go to questions?
Thank you. 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. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Craig Hutchison with TD Securities. Please go ahead.
Hi. Good morning, guys.
Morning.
My question is on Jerritt Canyon. Can you provide some kind of reference point with respect to grades or throughputs that we can kind of expect in the second half here in order to sort of deliver on guidance?
Yeah, thanks, Craig. I'll pass that question on to Steve Holmes, our Chief Operating Officer.
Yeah. Craig, yeah, our expectation is to see throughputs at Jerritt Canyon begin to escalate in the third quarter and further increase in the fourth quarter as we bring on West Generator and the Saval II mines. We're getting good performance, expected performance in many ways out of SSX and Smith. What we're focused on is increasing the ore flow because the plant can accept double what we're putting through the plant today, and that's all part of our plan as we move into 2023. We'll also see a grade increase, and we're anticipating that, which will come from both West Generator and Saval II. West Generator and Saval II will probably contribute another 1,500 tons a day by the fourth quarter in the 6.0 gram-6.5 gram per ton range.
Hopefully that answers your question.
additional 1,500 tons per day on top of the 2,600 tons a day.
Yeah.
Just in substitution of it?
Yeah, it'll be a little bit of a trade-off because the 2,600 tons per day, there is some incremental material that's in there that's fairly low grade and that's gonna get displaced. Our target is to really push up to right at 3,000-3,500 tons per day.
Okay, great. Just with respect to Saval II, West Generator, can you give us a sense of how long those operations will or how long those deposits will feed ore into the mine plan? Is it a couple quarters, or is it more sustainable than that?
It's more sustainable than that. There's tremendous exploration potential between the Murray mine and West Generator. Longer term, we're gonna connect those two mines. Right now we're in process with the new mine contractor, which is Redpath, that's rehabbing down into West Generator. As soon as we clear one of the escape way passes, which is blocked, you know, this mine has been idled for about 16, 17 years. We'll get that done in the next few weeks and start shipping ore. We need that escape way unblocked so that we can ship ore, and that's just according to MSHA regulations. It's coming in the third quarter.
It's a little more work when we got in there than we thought for ground conditions, dewatering and then that escape way, but it's in front of us, and we're gonna get it brought in.
Okay, great. Maybe one last question from me. The dual-circuit at Santa Elena, I believe it's supposed to be operational by Q4 and will improve recoveries. Any sense in terms of what that performance increase will look like on a recovery basis?
It's the design, you know. There's three pieces to dual-circuit. There's an additional Leach Tank # 6 that's already commissioned, and it's in operation, so we'll see that impact in the third quarter. There's another CCD # 4. That was tied in last weekend, and we'll have it operational in August, so that's part of it. Then the big piece is that big Metso Outotec tailings filter press. That'll be later in the fourth quarter. What that press filter allows us to do is to change the grind to a finer grind on Ermitaño ores and liberate more gold and silver. We're looking anywhere from 5%-7% at the high end, based on the geomet testing.
We'll have to see as we get into it 'cause we're still doing quite a bit of geomet testing.
Okay, great. Thanks for taking my questions, guys.
Thanks, Craig.
Once again, if you have a question, please press star then one. The next question comes from Don DeMarco with National Bank Financial. Please go ahead.
Well, thank you, operator. Good morning, Keith and rest of the team there. Congratulations on, you know, good trend at La Encantada and positive outlook at Santa Elena. My first question is on Santa Elena. What's a good balance of contributions from Santa Elena and Ermitaño ore? We saw that the contribution from Ermitaño increasing quarter-over-quarter. I'm just wondering if you expect that to continue or what's a good balance.
Well, thanks for the question, Don. I'm gonna pass that also to Steve Holmes, the Chief Operating Officer.
Okay, Don. Right now, we actually campaign both mines. We don't run them and mix them together. Ermitaño's a little bit harder ore, but it's quite a bit higher grade, particularly on the gold content side. Generally, we're running about a 50/50 mix, campaigning one mine and then the other, usually in two-week to 2.5-week intervals. You know, we're dialing in the Ermitaño ores with our HIG mill, which is our high intensity grinding mill, and trying to pull that up to full power. We're running Ermitaño ore at about 2,400-2,500 tons per day. When we flip to Santa Elena, because it's softer ore, we'll get up over 3,000 tons a day.
Contribution is about 50/50 in tonnage, but in terms of ounces, we're getting quite a bit more ounces out of Ermitaño because the grade is so strong. And we expect that contribution to continue for the next several years. It's been a really good project for us, and it's surprisingly positive even on the grade side.
Oh, okay. Thanks, Steve. Would the mining rates at Ermitaño support like maybe a 60/40 campaign, rather than just the 50/50 tonnage right now? Is that something that you guys are thinking about?
Yeah. We're actually you know, we developed Ermitaño this year to be over 1,000 tons per day average. If it's running half the time, that's about a 2,000 tons per day contribution when it's running the campaign. We're actually accelerating development in Ermitaño, so I'd expect that 50/50 mix to continue into 2023. We're working on the 2023 update plans because of our budget cycle. I'd expect that pretty much a 50/50 mix between the two. It's just that because the grade's so strong from Ermitaño, it's probably two-thirds of the ounces coming from Ermitaño and about a third coming out of Santa Elena.
Okay. Good. That's helpful. Just my other question is on Jerritt Canyon. We see the guidance cost have ticked higher. Relative to the original guidance, how would you explain the higher cost? Is there a portion that's attributed to inflation, or was it maybe operational considerations? How would you explain that, the delta there on cost, higher costs at Jerritt Canyon?
Yeah. Go ahead, Steve.
Okay. It's a very good question. There's two big factors that are impacting Jerritt Canyon. The inflation is obviously one of them. Inflation is probably most pronounced at our Jerritt Canyon Mine simply because in Mexico, we had a lot of protective measures in place, like with our LNG plants, long-term contracts, long-term agreements on consumption reagents and things like that. When we bought Ermitaño, they didn't have any of that in Jerritt Canyon. We didn't have any of that in place. We are establishing that in place now and obviously rebidding all those things. Jerritt Canyon was more exposed to inflation pressures and, you know, for example, they get their power from Nevada Power. We saw in the last year a 53% increase in unit power costs that came in from Nevada Power.
It's all spot power. There's no long-term fixed or firm contracts or anything. That's part of the issue. The other part of the issue is just the ore quantity and grade. Our focus has been to get the ore flow up to feed the capacity of the plant, and that continues to be the plan going into 2023. We have, as Keith mentioned, the West Generator and the Saval II mines that'll be coming online in the next three months to support Smith and SSX with two different mining contractors delivering that ore. Then next year, we're gonna look at the Murray mine. We'll actually have the five underground operations feeding, pushing that rate up.
You'll see the ounces come up pretty strongly, and consequently, cash and all-in sustaining costs and those types of things will be cut significantly. That's because the fixed cost structure of Jerritt is quite high.
Okay. Thanks so much for that, Steve. That's helpful. That's all for me.
Okay. Thanks, Don.
Once again, if you have a question, please press star then one now.
We're definitely in a bull market.
As there are no more questions from the phone lines, this concludes the question and answer session. I would like to turn the conference back over to Mr. Keith Neumeyer for any closing remarks.
Thanks, everyone, for joining today's call. Feel free to contact either Todd or Mark if you have any additional questions. You know, look forward to ending or, you know, for First Majestic ending 2022 on a very strong note and a very strong 2023 with the work that's going on at Jerritt and at Santa Elena. Thanks again for your time and look forward to the next one.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.