Hello, welcome to the Andean Precious Metals conference call for the second quarter ended June 30, 2022. As a reminder, this call is being recorded today, Thursday, August 11, 2022, for replay purposes. Your host for today is Trish Moran, VP of Investor Relations. Ms. Moran, please go ahead.
Thank you, and good day, everyone. Before we get started, I would ask that you view our MD&A for cautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our MD&A, financial statements, and relevant filings are available on SEDAR and on our corporate website, andeanpm.com. With us on today's call is Simon Griffiths, Andean CEO, and Jeff Chan, our Chief Financial Officer. Following our formal remarks, we will then open up the call for questions. Now over to Simon.
Thank you, Trish, and welcome everybody. It was a solid quarter for Andean, and while we still have some work to do, we have made some operational adjustments, including implementing cost reduction measures to ensure that we attain our production and cost guidance for 2022. Since Jeff is here today, to lead you through the financials, I'll focus my comments on our key strategic priorities for the remainder of this year and beyond. Here we are at the midpoint of the year. We continue to focus on positioning the company for our next stage of growth, accretive opportunities that will generate sustainable growth for the company and for our investors. Firstly, we continue to target opportunities to extend the mine life at San Bartolomé.
Discussions are ongoing with the Bolivian government and with counterparties in country to ensure that we can secure long-term oxide materials from San Bartolomé. It is the only commercial oxide plant in Bolivia. Secondly, on M&A, we have a well-defined list of M&A targets. We are currently working through this list with our advisors. We have looked at a number of targets during the past 6-12 months. Our focus is on acquiring an attractive production asset to move us beyond being a single asset producer. Our criteria is specific, and it includes either a public or private company located in Bolivia or another jurisdiction in the Americas. Ideally, an asset with a mine life of greater than 7 years or a target with the ability to achieve an annual production of 6-7 million ounces of silver or gold equivalent.
In terms of all-in sustaining costs, the targets we look at, we look to assets that are producing or could produce at below $14 all-in sustaining cost per ounce. Accretive M&A growth is a key priority for Andean, and we have increased our budget. We have increased our focus on M&A screening due diligence, which underscores the importance of this strategy for growth. Our pipeline remains full of promising opportunities, and we are poised to execute from both an operational and a financial perspective. Our balance sheet is the standard amongst our peer group with more than $90 million in cash and securities. To help us achieve these M&A goals, we are increasing the bench strength of our senior leadership team. To this end, I'm pleased to announce two additions. Benjamin McCormick joins us as VP Corp Dev.
Ben has extensive experience, including with Newcrest Mining. I'm also pleased to announce we have Trish Moran, who's joined us as VP Investor Relations. Another experienced individual to our team. Trish is an IR veteran with more than 25 years of capital markets experience. Moving on from M&A, the third strand of our growth strategy is the expansion study, which we've discussed in the past. Concurrent with M&A, we continue to advance our technical studies at San Bartolomé. We are assessing the viability of reprocessing our fines disposal facility and our dry stack tailings, which includes a metallurgical test program, engineering, and processing review. We've now completed drilling on the dry stack facility as well and are currently evaluating the mineral resource estimates that exist in the dry stack. We will provide the market with a detailed update during August.
On exploration front, we are nearly complete on the latest drilling at San Pablo. While we've yet to intercept ore deposit of interest, we are building deep geological understanding with the high potential signatures evident. Based on the findings to date, we have recently expanded the exploration tenement holdings. Again, we expect to update the market on our exploration progress in the very near future. I'd like to hand over to Jeff to run through the financials.
Thank you, Simon. Before I get started, as a reminder, our financials are in US dollars, unless otherwise noted. I'd like to begin by highlighting two items impacting our results this quarter. First, our unit costs were impacted by lower than expected silver production, driven by lower realized recoveries. As Simon noted, operational adjustments have been made, and we're seeing positive changes beginning in H2. Second, consistent with Simon's comments on M&A, we recognize an increase in corporate development costs this quarter as we ramped up our M&A efforts.
In respect of our operations in the second quarter of 2022, we produced 1.3 million silver equivalent ounces and 1.4 million ounces in Q2 of last year. Year to date, we've produced 2.5 million silver equivalent ounces against our full year target of 5.3-5.8 million ounces, and we are reaffirming our full year production guidance. Processing throughput of 0.4 million tons at San Bartolomé was consistent with Q2 of last year. While average silver head grades per ton increased during the quarter to 126 grams from 115 grams in the prior year, which is positive. We reported revenues of $29 million this quarter, compared to $38 million last year.
This year-over-year decrease over the second quarter of 2021 was mostly attributable to a 15% decline in the average realized price of silver. We realized a silver price of $22.60 compared to $26.70 last year. Combined with our operational adjustments to production, we're prudently reviewing cost efficiencies and we're expecting to lower our unit costs for the second half of this year. At Cachi Laguna, we extended our contract with COMIBOL to purchase and transport ore to our San Bartolomé plant, which helped to mitigate production impacts of lower recoveries realized in Q2. We continue to evaluate additional opportunities to expand our ore sources in other parts of Bolivia. This quarter, cost of sales, including royalty expenses linked to commodity prices, was $24.5 million, which was generally consistent year-over-year.
G&A costs were $3.6 million compared to $2.2 million in the prior year's quarter. This increase was driven primarily by higher corporate development costs, which I spoke about at the start of my remarks. Our all-in sustaining costs per silver ounce this quarter was $21.38, and $20.15 year to date. This compares against $18.97 in Q2 of last year and $18.15 in the first half of 2021. As I mentioned, cost reduction measures are being implemented to ensure that we meet our full year all-in sustaining cost guidance of between $17.25 and $18.75 per ounce. The macroeconomic environment remains a key topic for most companies this earnings season, and this is something we continue to monitor closely.
Our industry, like many others, is feeling the impact of inflation. However, as we touched upon last quarter, Bolivia has proven largely resilient to rising costs, and we continue to see stability there consistent with the outlook of both the IMF and the World Bank. This quarter, we reported adjusted EBITDA of -$0.7 million, a net loss of $6.2 million, and income from mine operations of $3.6 million. Each of these metrics is down versus the prior year quarter due to the significant decline in average realized silver prices. While economic conditions are volatile, it is important to note that we ended the first half of the year with a strong balance sheet and no debt. As at June 30, we had cash of $88 million and marketable securities of $4 million.
Thank you for your time today. Operator, please open the line 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're 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 is from Justin Chan from Sprott. Please go ahead.
Hi. Morning, Simon. Morning, Jeff. Thanks for hosting the call. My first one's on just in terms of recoveries, what are you expecting for the second half? I guess between Q3 and Q4, should we expect much change between those two quarters or have the changes been implemented in pretty steady state?
Yeah. Thank you, Justin. Thanks for joining the call. We did have lower than expected recoveries in the latter part of Q2. We've made some adjustments to rectify. At the moment, in July, we're seeing high 70s%, so 78%-79%. That would be a realistic target for the remainder of the year. Second part of your question, Justin?
Oh, yeah. That was the main part. Just in terms of tons and grade, do you expect them to be similar to Q2 in terms of grade? It was a pretty good quarter for grade.
Yeah. Look, grade has been one of our highlights. Positive to see the feed grade higher than anticipated. Last year, we did have some challenges with grade. As you know, we have multiple blend ore sources, which gives us some flexibility, but at the same time, it has to be managed. It's quite pleasing to see a higher than anticipated grade. We certainly expect that to continue into H2. On tons throughput, the plant is typically consistent, extremely reliable. It's in the field, Justin, where we're focused. As you can appreciate, with so many different ore sources, we have to ensure we get the mark out. The geological ore control has to be of a high standard before we load the material into the trucks.
The plant itself is performing as it always has been, extremely reliable.
Gotcha. For the second half, expect similar tons and grade, better recoveries as discussed. Is that a reasonable summation?
It is, but we do have the Q4 mine plan does have slightly higher grade, higher ounces. At this stage, we're expecting to meet guidance.
Okay. That's really helpful color. Thanks. Just a couple more. On the FDF, can you share the, I guess, the early findings on the met?
Yeah, absolutely. All the met results are in now. We haven't completed the analysis, but certainly all the results are in. We did have some delays with laboratories, which we've previously spoken about. Look, in the coarse fraction, we're getting extremely positive results in terms of recovery of tin and silver. The dam itself is quite distinct in its coarse fraction. The front part of the dam has much coarser material carrying the metal expected to be much easier to recover. The northern part of the dam has much finer material. It's understanding how we can recover the vast amounts of tin and silver from the finer material. That's where we're focused in our efforts. We do think we'll go to PFS.
There may be an adjustment in our strategy once we get feedback and advice from the advisors on how to deal with the fines part of the dam.
Gotcha, Simon. When, I guess, should we expect a separate communication on that or just kind of look out for the next quarter and for the next update?
No, no. As the press release indicates, we fully expect to release the findings of the metallurgical test work along with our strategy for the FDF during August. Before the end of this month, Justin, we anticipate updating the market. It'll be quite a technical release, but it should give the market the guidance or the information that is required.
Okay, great. Thanks. Just one last one from me, just for maybe more of a CFO question, but happy for anyone to answer it. Just on, I guess, a couple of things. One on the G&A is that I realize it's related to corporate development. Until a transaction is put forward, is that $3.6 number a number to be expected ongoing until that point? Or is that somewhat one-off, a high number for a quarter? Just, can you update me on where you stand with regard to tax losses and when you expect income tax payables to start?
Yeah. Sorry, Jeff, I'll answer and then maybe you can supplement my answer.
Perfect.
If that's okay. On the tax losses, we anticipate $3.5 million, between $3.5 million and $10 million of tax receipts between now and the end of the year. That would be other income. That would top up our free cash flow position at the end of the year. I will allow Jeff to provide some more detail on that one. On the Corp Dev costs, you know, it's investment. We have to speculate to accumulate. We have to invest. We did a lot of active M&A activity in H1. That reflects the extensive bit of spend there. We are allocating more budget, Justin, from the war chest. We need to put that money to work.
We do need to do the M&A transaction. We do need to fill the pipeline, not just in a producing asset, but also high potential exploration or even smaller development assets. Yeah, more of an investment than a cost. Good observation. Jeff, anything you can add on the tax?
Yeah, absolutely. Thank you, Simon. Justin, just to clarify some of Simon's comments there. The $3.4 million and the $10 million that are being quoted are VAT receivables that we're expecting to enter cash flow between now and the end of the year. That'll impact cash flow. It won't necessarily impact income. In terms of your questions, I think you might be speaking more to our income tax situation rather than VAT. Just as a reminder, in terms of Bolivia, tax filings are due at the end of January for the preceding year. We would be expecting to make our tax payment at that point.
Look, given the losses this quarter and given the silver price, our tax position has changed fundamentally from how we saw it at the beginning of the year. I do believe we're still expecting a small tax payable in January 2023 related to the 2022 fiscal year. We are continuing to reassess, Justin.
Okay, thanks. Just that was very helpful. On the VAT, just to clarify, the $3.5 or $3.4-$10 of VAT receivables, will those be offsetting VAT that you incur and pay in the second half, or should those be considered a net inflow, net of whatever other VAT you pay in the second half?
Great question, Justin. Those should be considered net inflows. If you recall last year, we actually didn't collect any VAT receivables given the COVID situation impacting Bolivia's economy. This year, they're back on track. We have had significant discussions with the Bolivian tax authorities. They have prepared budgets for VAT returns, not only for us, but obviously to the rest of the country. We're collecting quite a bit in sort of back VAT here.
Gotcha. Just for a number for projection, is the middle of that range a reasonable projection or is there any particular reason to assume either the high or low end?
I would probably say the middle of the range is a good expectation, Justin.
Okay, great. Thanks very much. That's it for me. I know I've been on the line for a while. I'll free it up. Thank you very much, both of you.
Thank you, Justin.
Once again, if you have a question, please press star then one. This concludes the question and answer session. I would like to turn the conference back over to Simon Griffiths for any closing remarks.
Yeah. Thank you, operator. In terms of upcoming events and milestones, we have several news releases as discussed in the Q&A there. The update on the FDF expansion study will be released. We'll also give the market an update of our exploration activities. Just to remind everybody that we are hosting our AGM of the shareholders on September the eighth. That begins at 12:00 P.M. Eastern time and will take place at the Toronto offices of McMillan, located at 181 Bay Street, suite 4400. We do encourage you all to participate if possible. Thank you for joining us for today's call. Thank you for your ongoing support. If you have any questions, please do reach out to us. Have a good day. Operator, over to you to close the call.
Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.