Good morning, everyone, and welcome to Andean Precious Metals Conference Call to discuss the company's operating highlights and financial results for the three and six months ended June 30th, 2024. As a reminder, all participants are in a 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 and then one using a telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I'd now like to turn the floor over to Amanda Mallough, Director, Investor Relations. Please go ahead.
Thank you, operator, and good morning, everyone. Before we get started, I would like to point out that during today's call, we may make forward-looking statements as defined under Canadian securities law. I ask that you view our slide presentation precautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our press release, MD&A, and financial statements are available on both SEDAR+ and on our corporate website at andeanpm.com. With us on today's webcast is Alberto Morales, Andean's Executive Chairman and CEO, Juan Carlos Sandoval, our Chief Financial Officer, and Alex Pascual, our new Director of Financial Planning and Analysis. Following management's formal remarks, we will open the call to questions. Now I pass it on to Alberto.
Thank you, Amanda, and welcome everyone. I am pleased to share that Andean Precious Metals has delivered a robust quarter, highlighted by key operational milestones and a strong financial growth. Our strategic efforts are yielding results, and our ongoing focus on operational excellence is driving our continued success. We have record production and revenues by achieving on a consolidated basis, 2.5 million silver equivalent ounces produced, which is a 103% increase from Q2 2023. Our revenue soared to $69.8 million, marking a 357% YoY increase. We have successfully commissioned the FDF project. Our new fine mineral processing plant at San Bartolomé was commissioned on July 23, 2024. It is now operating at 1,300 tons per day.
We aim to ramp up to 1,500 tons per day by the end of Q3 2024, enhancing overall performance and sustainability. Q2 shows a strong financial performance, significant improvements in San Bartolomé's financial metrics, with a gross operating margin of $5.15 per silver equivalent ounce, up from $1.52 in Q2 2023, and a gross margin ratio of 24.45% compared to 22.95% in the previous year. On operational efficiency, despite the decrease in total plant throughput by 29% at San Bartolomé, our focus on processing purchased ore, an increase in production at Golden Queen contributed to a robust financial results. On health, safety, and environmental stewardship, we achieved zero lost time injuries and no reportable environmental incidents, demonstrating our commitment to safe and sustainable operation.
On exploration and expansion, we continued exploration activities with a focus on Paca, Alta Vista, and Golden Queen, and the development of the FDF expansion are a key part of our growth strategy. Our consolidated production reached a record 2.5 million silver equivalent ounces during the quarter. As we expressed, it's an increase of 103% from the same period of last year. This increase was largely due to the incremental production from Golden Queen, which added 16,986 gold equivalent ounces. We achieved a record quarterly revenue of $69.8 million, which, as expressed, represents a 357% increase compared to Q2 2023. This growth was driven primarily by an additional $40 million in revenue from Golden Queen and a $14.5 million increase from San Bartolomé.
We continue to invest in exploration and development, with a focus on identifying new sources of oxides, M&A, mill feed, and advancing potential projects. Our exploration efforts are aimed at enhancing our ore resource base and ensuring future growth at both of our assets. Market conditions for silver and gold remain volatile, driven by factors beyond our control, such as inflation, interest rates, and geopolitical factors. We are closely monitoring these trends to navigate the challenges and capitalize on opportunities. Summary, our second quarter was marked by strong operational performance and financial growth. We remain committed to our strategic goals and look forward to continuing this positive trajectory.... Now turning to slide 6. During the quarter, we made significant strides in advancing our FDF project. The completion of all concrete, structural, steel, and mechanical works shows our team's dedication.
As of June 30th, 2024, we have incurred in approximately $5.5 million against a budget of $6.7 million. The commissioning of the fines mineral processing plant on July 23rd, 2024, was a pivotal milestone for us. The plant is now operating, as we said, at 1,300 tons per day, and we are on track to ramp up to 1,500 tons per day by the end of Q3 2024. This advancement not only optimizes the processing of the FDF deposit, but also enhances our overall operational efficiency. The FDF deposit, with its 3.3 million tons of proven and probable reserves, grading 58 grams per ton of silver, represents a substantial resource base. The utilization of previously considered waste materials aligns with our sustainability goals, contributing to both improved silver recovery and reduced environmental impact.
On Golden Queen, this was our second full quarter operating Golden Queen after the acquisition in late November of last year. As a reminder, it offers a fully permitted open pit heap leach operation in a Tier One jurisdiction, advancing our goal of being a mid-tier producer in the Americas. Golden Queen produced 16,986 gold equivalent ounces this quarter, reflecting a strong recovery from the December 2023 fire and improved operations post-acquisition. We've strengthened our management team at Golden Queen with the addition of Sylvain Lessard as president and general manager. His exceptional leadership skill, deep technical knowledge, and proven capabilities in driving operational excellenc e and costs control align perfectly with our company's goals. We continue to focus on the opportunities ahead, namely optimizing the mine plan, improving ore recovery and production, and increasing cash flow and optimizing operating costs per ounce.
We are also defining and prioritizing exploration targets to help realize the potential upside at Golden Queen, and extend the operations life of mine with a plan to present a fulsome exploration program to the market towards the end of the year. Following the Golden Queen acquisition, Andean is now a very different company than it was just 12 months ago. This acquisition represents a significant transformation, effectively doubling our company's size across mission-critical metrics such as revenue, production, reserves, and workforce. As we continue to integrate Golden Queen into our operations, our team has been focused on streamlining processes to enhance efficiency and performance in alignment with our annual plan for 2024. We anticipate the second half of this year will be better reflecting this integration, with improved production and enhanced operational efficiencies.
We have also developed a strong platform to support our ambitions of becoming a mid-tier producer in the Americas. We have several years of available reserves, as well as diversified asset base of gold and silver production, that is expected to drive growth in cash flow and profitability going forward. Further, our operational expertise and strong financial position enable us to continue to act on future opportunities for growth through acquisitions. With that, I will hand over the reins to Juan Carlos, who will review our financials in more detail.
Thank you, Alberto. First, I will start with San Bartolomé, our operations in Bolivia. During the second quarter, we purchased 228,000 tons, a 36% increase compared to Q2 2023. This rise was driven by our strategic plan to increase third-party oxide purchased materials for processing. Silver equivalent ounces produced were down 12% when compared to Q2 2023, impacted mainly by the discontinuance of our Pallacos deposit, and the late start-up of the FDF project. However, head grade improved to 155 grams per ton, up from 119 grams per ton in Q2 2023. Revenue surged 95% to $29.8 million, driven by higher sales volumes for the quarter and improved realized silver and gold prices.
We sold 1.1 million silver equivalent ounces at an average price of $27.81 per ounce, compared to Q2 2023, cash gross operating margin for silver equivalent ounce sold was $5.15, up from $1.52, reflecting higher realized prices, and the gross margin ratio improved to 24.45%, up from 22.95%. Capital expenditures in the second quarter were $1.7 million, with $1.2 million directed towards the FDF. Moving on to Golden Queen's operating and financial performance. Golden Queen produced 16,986 gold equivalent ounces in Q2 2024, demonstrating solid operational performance and strong recovery from the fire incident in late December.
Revenues reached $40 million for the quarter, with 17,348 gold equivalent ounces sold at an average realized price of $2,305 per ounce. The total operating cash cost per ounce sold, net of by-products, was $1,350 per ounce, which is a direct result of the improved operations at Golden Queen since its acquisition in November 2023. And finally, the All-in Sustaining Cost and all-in cost per ounce sold, net of by-product, were $1,752 and $1,782 per ounce, respectively, underscoring our focus on maintaining cost efficiency while delivering on production targets. Moving on to our overall financial performance. For the second quarter, we saw a substantial improvement in our financial metrics.
Consolidated revenue reached $69.8 million, a significant rise from the $15.3 million in Q2 2023. This revenue growth was driven by a 103% increase in silver equivalent production and higher average realized prices for silver and gold. Total cost of sales increased to $47.8 million in the second quarter, attributable to incremental costs from Golden Queen and higher costs from the San Bartolomé operations due to increased sales volumes. Finance costs were $1.6 million, mainly due to the interest on the Golden Queen's Main Street Priority Loan. We realized a foreign exchange gain of $3.4 million, driven by premiums on U.S. dollar sales in Bolivia. Capital expenditures for the quarter totaled $5.2 million, of which $1.7 million was San Bartolomé and $3.5 million for Golden Queen.
We remain vigilant regarding market volatility and its impact on our financial performance. Our focus continues to be on operational efficiency and strategic growth. In conclusion, Q2 2024 was marked by a robust financial performance and significant operational milestones. We are well-positioned for continued success and are committed to delivering value to our shareholders. Moving on to our capital structure on slide 11. As of June 30th, 2024, we had liquid assets of $87 million of cash and cash equivalents, a negative net debt, and $121 million of working capital. Our mandate is, and will continue to be, on maintaining our balance sheet to support future growth. Now, I'll turn it back to over to Alberto for any closing remarks.
Thank you, Juan Carlos. To summarize, Andean Precious Metals has demonstrated strong operational and financial performance in the second quarter. Our advancements in the FDF project, record production, and revenue growth underscores our commitment to creating value and achieving our strategic objectives. At San Bartolomé, we will be working towards signing additional agreements to process high-margin third-party work and stabilizing production from the FDF project. At Golden Queen, we will continue to leverage our expertise and experience to stay focused on the implementation of the identified strategies to optimize operations, productions, and efficiencies. We appreciate your continued support and look forward to updating you on our progress in the coming quarters. With that, I will now open the call for questions. Operator, please go ahead.
Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, we do ask that you please pick up your handset before pressing the keys. To withdraw your questions, you may press star and two. We'll pause a moment as callers join the question queue. Our first question today comes from Justin Chan from SCP Resource Finance. Please go ahead with your question.
... Thanks, guys. Congratulations on the, the positive cash flow. I think that's a, that's a huge catalyst. And, just to compliment, the new disclosure, I really like it. There's a lot of useful info, so it made it a lot easier this morning. My first question is just on San Bartolomé, and I guess as you look at the, the current quarter and the next quarter, you know, your, your ore purchase volumes ticked up in Q2. Do you think they can increase a little bit further? And, and likewise, just on the FDF, I guess, what are you expecting for Q3 and Q4 volumes, you know, maybe averaging through the quarter?
Hello, Justin, this is Alberto. Well, thank you for your question. So let me first address the purchase, the purchases. The answer to that is yes, we're actively pursuing to increase our third-party ore purchases, and we have certain projects on the pipeline that we're hoping to materialize that will increase our tonnage, available tonnage for processing. So we're heavily involved, I would say, and aggressively pursuing that avenue. Now, in connection with the FDF, yes, indeed, it took us about 4-6 weeks longer to get it commissioned, but we're finally fully commissioned, working on it. And during these initial stages, where we're starting to produce roughly about 1,300 tons per day, we are starting with the upper part of the FDF.
That upper part of the FDF, it's really the ending part of the Pallacos deposit, the low-grade Pallacos deposit. So the grade is going to start to increase as we go deep into the FDF. So we're looking, if you wanted to use the analogy on a micro-mine of the FD F, by starting to achieve, as soon as possible, deeper, zones, where we can get higher grade, and get to the fifties grams per ton, average, grade per ton. That'll be, there'll be a ramp-up for that, but to be summarizing your question, we're hoping to average roughly approximately, I would say, 30,000 ounces produced from the FDF on a monthly basis on total beginning August. So that's roughly what we're estimating.
And certainly, by the time we exhaust the upper part and continue to go into the deeper portion, we are expecting that that could be increased, but perhaps at the beginning, starting beginning of next year.
Okay, thanks. That's quite helpful. So maybe to read between the lines, you'll probably, just in terms of full year guidance, it's back-half-weighted, so that'll probably more come from ore purchasing than the FDF, at least for the next two quarters?
Yes.
Okay, thanks. That's, that's really helpful on that side of things. Also, I guess back-half-weighted is your, your CapEx guidance. I saw you reiterated it today, but, you know, you're, I guess, halfway through the year, your, your CapEx is below that run rate, let's say. I guess, how much, how much potential is there for you to come in below your full year guidance in CapEx, do you think, in the second half? Are you pretty confident that, that you'll hit that kind of $24 million number?
Yeah, thank you, Justin. It's JC. I would say we are, we're in line with what was presented. As you know, we have a budget of around $20 million. Half of it has been spent for the first half. So I would, yeah, I would say we are well in line. I think we will be spending or we will be reaching that amount at the end of the year.
Okay. Okay, that's, those two are, those two are quite helpful. I think, I mean, overall, maybe, maybe just one last one on, I guess, working capital. Are you expecting any kind of, any kind of movement in the second half? I noticed your, for example, your receivables are a little bit lower than, let's say, they, they are traditionally. Is that just, you know, is that- is there anything specifically behind that, or would you expect kind of that, those numbers to, to normalize? And/or just any other movements in working capital that I should, I should be aware of modeling in the second half?
Yeah, not really, Justin. Our accounts receivable and our accounts payable, they have those differences as a closing months, at closing months. But I would say, for purposes of modeling for the rest of the year, they're pretty stable. I don't see any big differences from what we have right now. As you can see, we have a strong working capital and a strong balance. So I would say they would pretty much stay, keep that same trend.
Okay. And then, sorry, sorry, anyone else on the line. I just have one last one. On now that you are starting to generate positive cash flow and earnings, I guess on tax timing, is it best to model it as your underlying earnings are incurred? Or I guess, are there any subtleties there that we should be aware of?
... No, I mean, everything is sold, and we get paid within 30 days, and that's, you know, I would say no. No, no difference-
Okay.
from where we stand.
Okay. So just model kind of cash tax and-
Yeah.
Along with underlying earnings?
Correct.
Okay, great. Thanks a lot, guys. I really appreciate the color and the call, and congratulations.
Thank you, Justin.
Once again, if you would like to ask a question, please press Star and One. Our next question comes from John Sclodnick from Desjardins. Please go ahead with your question.
Hi, guys. Yeah, thanks for taking my question here, and congrats on the good quarter, and yeah, great to see that free cash flow generation. I guess a little bit further on those third-party ore sources. Just wondering if you're seeing, you know, fixed cost purchase opportunities or fixed margin?
I would say we're looking at both. John, good, good to talk to you. We're pursuing, as Alberto already mentioned, trying to get new long-term contracts under fixed prices. And we're also, you know, looking at more spot prices for the spot purchases as well. So, yeah, that's what we have right now, John.
Okay, so it should be a blend. Okay, great. And then I guess a little more on capital allocation. I mean, yeah, you guys are generating free cash flow. FDF construction's largely behind you. NCIB is complete, just beyond, I guess, acquisitions, which it sounds like you're still actively looking at. Just curious how you're thinking about that or just happy to continue to build the treasury and add to those marketable securities?
Yes. Well, yes, John, to be specific on that, we have always told the market that we're actively looking for opportunities as they come across to us, and we're open to deploy our war chest or our cash flow strength. We have a very strong cash flow position. We're still under leverage. We can still look, even this cash flow generation entitles Andean to even look at another acquisition that we hope will be transformational, depending on what's available in the market. But I can just say that we're actively looking.
Fair enough. Yeah. No, I know it's always a, a tough question on, on a conference call. And I guess just turning to, to Soledad Mountain, just curious what, what you're seeing on, on the exploration front and if there's any kind of, oxide targets that you're excited about.
Yeah, we will be. It's definitely something we're working on. Our intention is, probably before the end of the year, we present a more comprehensive exploration plan. We have been working on it. So, yes, before the end of the year, the intention is to present a plan that will, you know, extend the life of mine.
Okay, excellent. Well, that's it for me for questions. Exciting to see you guys generate that free cash flow and, yeah, thanks a lot for that color.
Thank you, John.
Ladies and gentlemen, seeing no additional questions, we will conclude today's question and answer session. I'd like to turn the conference call back over to Alberto Morales for closing remarks.
Operator, our colleague, Amanda, has received,
One question.
One question from our investors. So if you don't mind, before we close the call, I'll let her raise the question openly.
Yeah, the question is just if the company has any plans to renew the NCIB program?
To that effect, what I would say is that we have exhausted the numbers of available shares to be repurchased back under our current NCIB program. And we're certainly, in order, to consider the renewal of this, we would need to get advice from counsel, as I believe the regulatory environment requires for some waiting period on it, which... So for now, I cannot go one way or another. We'll basically need to get advice from counsel as to the waiting period that this might represent. And, if there is any, no more further questions, then basically I would like to thank you all for joining us today and for your continued support. As we have expressed, we remain committed to driving our business forward and to look forward to sharing our progress in the coming quarters ahead.
Thanks again, and have a great day.
This brings to a close today's conference call. You may now disconnect your lines.