Good morning. My name is Ben, and I will be your conference operator today. At this time, I would like to welcome everyone to Hemlo Mining Corp.'s third quarter 2026 financial and operating results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one again. Thank you. I would like to turn the meeting over to Jason Banducci, Vice President, Corporate Development and Investor Relations. Please go ahead, Mr. Banducci.
Thank you, operator. I would also like to welcome everyone to Hemlo Mining's third quarter 2026 financial and operating results conference call. Before we begin, I would like to note that we will be making forward-looking statements during today's call. I will direct you to the second slide of the earnings presentation, which contains important cautionary notes regarding these forward-looking statements. The earnings presentation, including the cautionary notes, can be found on Hemlo Mining's corporate website. All dollar amounts discussed today will refer to U.S. dollars unless otherwise indicated. Our news release, MD&A, and financial statements for the third quarter of 2026 are available on SEDAR+ and on our corporate website at hemlomining.com.
On the call today, I am joined by our President, CEO, and Director, Jason Kosec, Chief Financial Officer, Jon Case, Chief Operating Officer, Eric Tremblay, Vice President Exploration, Raphael Dutaut, Vice President Operations and GM, Garett Macdonald, and our Executive Chair, Jonathan Awde. Today, we are pleased to provide an operating and financial update for the third quarter of 2026, followed by a live Q&A session. With that, I would like to hand the call over to Jason Kosec to kick things off.
Thanks, Jason. Good morning, everyone. Q3 demonstrated the resiliency of the operation and continued execution against our strategic priorities. Slide four highlights the progress we have made during the quarter, starting with safety. Our team has now worked more than 5 million hours without a lost time injury. This is an important milestone and reflects the continued focus on zero harm across the organization. Operationally, the Hemlo mine continued to perform well despite an underground electrical substation outage during the quarter. Higher-grade ore from Interlake helped us maintain stable production, with attributable production of 25,652 gold ounces and sales of 29,830 oz.
While the outage primarily affected the pace of our planned ramp-up, the operation continued to deliver while we invested in people, equipment, and initiatives needed to support higher production over time. Operational performance, together with a strong gold price environment, translated into another stable financial quarter. Revenue was $135 million and an average realized gold price of $4,234 per ounce sold, with mine site all-in sustaining costs of $2,660 per ounce sold. Adjusted net income was $15.6 million, or $0.05 per share, and we ended the quarter with a cash balance of $144 million, leaving Hemlo Mining in its strongest financial position to date and with significant flexibility to continue investing in our business.
We also continued to advance several important strategic initiatives during the quarter. We invested in our workforce, our underground fleet, advanced exploration, and other growth opportunities across the business, and announced our inclusion into the GDXJ. Overall, Q3 was another quarter of consistent execution. We maintained stable production through an operational disruption, delivered strong financial results, and continued investing in the initiatives that we believe can drive higher production growth and long-term value creation at Hemlo.
Before I hand the call over to Eric, I wanted to take a step back and put the quarter into context of where we are going over the next several years. Hemlo is a multi-year growth story. We do not expect the path of higher production to be defined by one quarter or to be perfectly linear quarter-to-quarter. Our objective is to grow production, mineral reserves, and resources over time and translate that growth into increased value on a per-share basis. There are two key pillars to that strategy, and they are very much interconnected: mill throughput growth and mineral reserve and resource growth. Higher throughput requires additional ore sources and new mining areas, while growing and converting the resource base provides the inventory and the mine planning flexibility needed to bring those areas into production.
Importantly, we are pursuing both from an operating mine with substantial existing infrastructure rather than a new mine build. On the mill throughput, we are taking a staged approach. We have averaged approximately 3,700 tons per day year to date through September. Phase one growth will take throughput rates to 4,800 tons per day, phase two to 6,000 tons per day, and phase three to 10,000 tons per day, which is currently the nameplate capacity of our mill. The key is ensuring that each step up in throughput is supported by new mining areas and/or inventory required to sustain it. The second pillar is mineral reserve and resource growth.
Measured and indicated mineral resources increased by 34% to 4.8 million ounces in our 2026 update, and we are continuing to advance our 130,000 m drill program to support a major update for the asset in the second half of 2027, which will include updated mineral resources and reserves, a life-of-mine plan, and a technical report. That update will bring these work streams together to provide a clear path on the long-term growth opportunity at Hemlo. With that, I will hand the call over to Eric to walk you through the third-quarter operating results.
Thanks, Jason. Good morning, everyone. The slide decks provide a more detailed look at the operating results for the quarter and, importantly, the progress we continue to make in strengthening the underlying operating platform. Starting with safety, performance remains strong. As Jason notes, we surpassed 5 million lost time injury-free hours during the quarter, with no reportable environmental incidents, maintaining that performance remains fundamental as we increase activity levels across the mine. Turning to operating results, the Hemlo mine processed a total of 342,000 tons in Q3, essentially in line with Q2, resulting in an average mill throughput of approximately 3,720 tons per day. Average processed grade increased to 3 g per ton from 2.6 g per ton in Q2, and recovery improved slightly to 95%. The increase in the grade was driven by access to higher-grade stopes in Interlake.
Interlake processed 45,000 tons at an average grade of 6.15 g per ton, compared with 61,000 tons at an average grade of 3.05 g per ton in Q2. That higher grade contributed to help offset the operational constraints we experienced elsewhere in the mine and support attributable production of 25,652 oz, modestly above the 25,188 oz produced in Q2. As disclosed during the quarter, the planned production ramp-up was impacted by an outage of an underground electrical substation servicing a portion of the Alimak production area. The outage reduced available power in the affected area, constraining mining rate and delaying the planned ramp-up. We responded by temporarily resequencing the mine plan, shifting production activity to other areas, and reorganizing the underground power distribution, which reduced the operational impact of the outage.
Subsequent to quarter end, we relocated and commissioned a similar substation from another area of the mine, and an additional spare substation remained on track for delivery in December 2026. Despite the substation constraint, several of the underlying operating indicators continued to move in the right direction. Production drilling increased 35%, and paste filling increased 13% compared to Q2. These are important leading activities for sustaining development and production rate as additional mining areas move into the sequence. We also continue to build the workforce and the fleet. At quarter end, the mine had 555 full-time employees and 373 contractors, with approximately 75% from local communities.
Seven additional units of mobile equipment were delivered during Q3, bringing total deliveries to 17 of the 21 planned units. These investments are intended to increase mining capacity, flexibility, and reliability as we advance our staged growth plan. Turning to unit costs, mining costs were $116.33 per ton mined. Milling costs were $24.38 per ton milled, and mine-site G&A was $23.33 per ton milled. Attributable total site costs were $1,799 per ounce sold, and attributable mine-site all-in sustaining costs were $2,660 per ounce sold.
Overall, the key takeaway from the quarter is that production remained stable despite the substation constraint, while the work required to support higher mining rates continued to advance. We are adding people and equipment and continuing the mine optimization work needed to bring additional mining areas into production. I will now hand the call to Raphael to discuss exploration.
Thanks, Eric. Turning to slide seven. South -Rim continues to demonstrate the exploration potential immediately adjacent to active underground mining and infrastructure. Before discussing South -Rim, it is worth putting the results in the context of our broader exploration program. We are executing approximately 130 km of drilling across resource conversion, high-definition, and growth programs. This supports near-term mine planning and longer-term mineral resource and mineral reserve growth. South -Rim is a good example of our strategy in action.
The newly interpreted South -Rim zone has now demonstrated approximately 500 meters of high-grade mineralization within an interpreted 1.5 km zone. It is located around 50 to 150 m from active C-Zone mining and existing underground infrastructure. Importantly, these strong results have led us to expand the program and add conversion drilling to potentially advance portions of the zone toward indicated classification.
Recent results include 16.1 g per ton gold over 8.1 m and 89.9 g per ton gold over 3 m. The zone remains open, with drilling continuing to define continuity and test extensions of the mineralized systems. South -Rim is particularly compelling because of its proximity to active mining and existing infrastructure. This creates a potential for low-capital mineral resource growth. We have a significant amount of drilling underway across the deposit, and we expect additional assay results in the coming months, including from South -Rim and our resource conversion program, as we build toward the updated mineral resource and reserve estimate, life-of-mine plan, and technical report targeted for the second half of 2027.
Turning to slide eight. Our exploration opportunity extends well beyond the current mine footprint. An exciting development this year has been the evolution of our porphyry model at Hemlo. It is providing a new geological framework to reassess our 45,000-ha land package for additional mineralized systems. Our understanding of the Moose Lake porphyry associated with the Hemlo deposit is now being used as an exploration blueprint to identify and characterize regional targets with similar geological characteristics. At the Pic Property, Beggs and Wire have emerged as two compelling targets.
Beggs is a large porphyritic intrusive center with extensive historical gold mineralization, including more than 120 historical surface samples above 1 g per ton gold and individual samples as high as 109 g per ton. Immediately south, the Super G Zone has returned historical surface samples up to 734 g per ton gold and historical drilling of 133 g per ton over 2 m. We also see opportunities close to the mine. This includes the potential western continuation of Hemlo system and prospective regional corridors at Hemlo North.
The key points are that we now have a geological model to systematically evaluate the broader land package. We have identified priority targets, and we are moving those targets toward drill testing. Fieldwork and regional geophysics are advancing, and the highest priority targets should move toward drilling in 2027. With that, I will hand the call over to Jon, who will walk through the financial results.
Thanks, Raphael. Turning to slide nine. The third quarter generated strong cash flow and strengthened our financial position while supporting continued investment across the business. Revenue for the quarter was $135.5 million, while operating cash flow was $54.6 million, and adjusted net income was $15.6 million, or $0.05 per share. Importantly, we are generating cash flow while continuing to invest in the operation. We invested $29 million in sustaining and growth capital during the quarter, with the increase from Q2 primarily reflecting mobile equipment deliveries and continued investment in the operating platform. Free cash flow for the quarter was $25.5 million. We also continued to strengthen the balance sheet in the quarter. We repaid $7.5 million on the term facility during the quarter and ended the period with $144.8 million of cash and net cash of $2.3 million.
The key financial takeaway from Q3 is that Hemlo Mining is generating strong cash flow, investing it back into the asset, and strengthening the balance sheet at the same time. That gives us significant financial flexibility as we advance the operating, exploration, and growth initiatives discussed today. With that, I will hand the call back to Jason Banducci to walk through our key objectives and corporate timeline.
Thanks, Jon. Turning to slide 10, we have outlined the key work streams and milestones supporting the staged growth strategy that Jason discussed earlier. As we look ahead, our focus is on execution. On the corporate front, our addition to the GDXJ during the third quarter was an important milestone that broadened our visibility with institutional and retail investors. We continue to evaluate opportunities to further broaden our investor base and market presence, including a potential future U.S. listing. Operationally, we continue to advance the work required to move through the staged throughput targets discussed earlier while investing in the people, equipment, and infrastructure needed to support higher production over time.
On exploration and geology, the drill program will continue alongside the regional exploration initiatives that Raphael discussed. We expect to report additional drilling results through the balance of the year as we continue to grow and increase confidence in the mineral resource base. The major milestone bringing these work streams together is the updated mineral resource, mineral reserve estimate, life of mine plan, and associated technical report targeted for the second half of 2027.
We expect that work to provide a much clearer picture of Hemlo's long-term production potential and growth opportunity. We have never been more confident in the bigger opportunity at Hemlo. Sustainably higher production supported by a larger and growing resource base. With an operating mine, significant existing infrastructure, and multiple avenues for growth, we believe Hemlo Mining offers a unique risk-adjusted return profile and a compelling opportunity to create long-term value for our shareholders. With that, I will turn the call back to the operator to begin the Q&A session.
At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ralph Profiti. Your line is open.
Hey, thanks, operator, and good morning. Thanks for taking my question. Jason, on the bulk mining test stope, in an upside case, how much ore can we expect to extract from that area? When you think about the trade-off study, is it simply going to come down to sort of a break-even gold price? Do you have any views on that? Or are there other factors that may need to be considered, something like labor availability? Thanks.
Yeah. Thanks, Ralph. Are you talking about ounces this year or next year?
Sorry, in dimensions and potential extraction in total.
Yeah, so we're just going through all the Redoing some of the designs, but it'll be around 10,000 -ish ounces. We're still going through the trade-off work, and the team's doing a great job advancing that. We should have the first test stope on the floor. They just drilled the slot raise, so they should have that on the floor in the next couple of weeks.
Okay, great. I appreciate that. Then just switching to the potential of higher grades at South -Rim. In an upside scenario, if all goes well, could we potentially see some of that come into the mine plan in 2027, or is more likely 2028, or maybe even ahead of the technical report?
We are working on converting all of that South -Rim right now. South -Rim drilling right now, and we will have pretty much all of it in the updated technical report. As for being in the mine plan for next year, it will not be in the mine plan for next year, but hopefully it will be in there for 2028.
Great. Looking forward to that. Thanks so much.
Thanks.
Your next question comes from the line of Eric Winmill. Your line is open.
Oh, great. Hi, Jason, team. Thanks for taking my question. Just want to follow up. There was a comment in your disclosures here about added labor to support the ramp-up. Any comments in terms of which areas you are supplementing here and maybe quantum of the costs and how long you think that might continue?
There's added labor throughout the mine from truck operators, scoop operators, jumbo operators, and bolters. The bulk stope right now is fully subcontracted to Manroc. They've also brought in another crew to increase our Alimak mining. I think the biggest inflationary pressure that our entire industry is facing is labor. We've had to increase our wages, which equated to about $5 a ton on our labor costs. I think that inflationary pressure is frankly here to stay, as you look at the global unemployment rate for the mining sector of around 0.9%. Historically, it sits around like 5%-7%.
Okay, great. Thank you. Really appreciate the color. Maybe just one more from me, if you don't mind. It's good to see, I guess, you're working on the offtake, some changes there. I guess, should we assume and model here that you'll continue to proceed with paying out the rest of the offtake here? Any comments here?
Yeah, I think you can expect us to continue to pay down that offtake. I'll pass it off to Case to give you more granularity.
Yeah, thanks for the question, Eric. Subsequent to quarter end, we did amend our offtake, giving us the ability at our discretion to progressively reduce that offtake and fully eliminate it if we choose to. There's going to be more details available in Q4. I know everyone's impatient, but very simplistically, without getting into details about volatility and present values, we're buying back our own production at around $40 an ounce. That's in line with recent transactions in the market. The most recent was around $46 an ounce, so a little bit below that. Year-to-date, it's cost us about $117 an ounce with the elevated vol right now. So we see value in terms of NAV accretion, but really, more importantly, it's really about the margin, the increased margin we get from reducing it.
But it is an option, not an obligation to reduce it, so we will continue to make those decisions as they come over the next four quarters.
Okay, great. Thank you very much. Really appreciate that. Yeah, great to see the operation ramping up and look forward to seeing the continued progress. Okay, cheers.
Your next question comes from the line of Don DeMarco. Your line is open.
Thanks, operator, and good morning, Jason, Jon, the rest of the team. It is great to see the power restored to the Alimak area, and the spares on track for December. Can you provide an indication of the current mining rates after the restoration of power, and whether you expect the mining rates in Q4 to be comparable to Q3?
Yeah, Don, thanks for the question. We should be fully powered up by the end of the month. We will now, I believe the substation arrives December 4. We sent one out for rebuild, so we will always have two at site at all times. I think you will see mining rates slightly increase into Q4, but we are still in the early days of that.
Okay. Great. You also have this new equipment that is being deployed, and that provides tailwinds to the mining rate. How is the deployment of that equipment going? When we look ahead to guidance for next year, that will be released in Q1, should we assume just a continual progressive ramp-up of mining rates, or would you expect more of a step change as that new equipment hits the stopes and so on? Thanks.
It is more around, keep hold on, and you will see a gradual increase. It will not be just like one step change. It will not be in a linear fashion, as I spoke to earlier. I think as we get more equipment arriving and more people trained on those pieces of equipment, you will see that gradual increase.
Okay. Great, guys. That is all for me. Good luck with the rest of the year. Thanks.
Thanks.
Your next question comes from the line of Jeremy Hoy. Your line is open.
Thanks, operator. Hi, Jason and team. Thanks for taking my questions. I guess I'd like to think about some of the longer-term potential of the operation. You've outlined a progressive throughput increase up to 10,000 tons per day, and you're looking at trade-off studies between open pit and underground for those resources under the pit. If I recall back to the site visit, there was actually some discussion about throughput rates above that 10,000 ton per day, around the 13,500 level, if I recall correctly. This was tied to a potential decision towards an open pit, which higher tonnage would obviously benefit.
Could you provide any color on what the thinking is there? With this study end of next year, could we see throughput rates beyond the 10,000 ton per day you've looked at now? Could you provide any indication of which way you're leaning in terms of the open pit or underground decision? Thank you.
Yeah, thanks for that. The 13,500 is the permitted capacity of the mill, and given us changing out the liners and having one line running at 7,000, I think there's the potential to do more than that, which will then obviously favor the open pit. I'll pass the rest of the question off to Eric.
Yes, we have started some testing. As you know, the grinding system can reach those 7,000 tons on separate line, but we need to understand if the pumping system, the rest of the mill can fill the capacity and what we have to modify to reach for a long drive, those tests. We are early testing right now. It looks good, looks promising. The liner gives us that capacity, but now we need to have a look of the rest of the mill, the pumping, and all the rest of the system, the flotation.
Understood. In terms of which way you're leaning for open pit versus underground, are you able to provide any indication at this time, or is it too early?
Can you repeat?
I think it's a little too early. He's asking if there's any indication of which way we're leaning. I think it's a little bit too early. We need to see how the bulk stope behaves from a geotechnical perspective. We've taken large stopes before. But we need to see the data that will really drive the decision between which avenue we go or hybrid.
Yeah, fair enough. Okay. Looking forward to the results of that study next year. I will step back in the queue.
Your next question comes from the line of Simon Wildsmith. Your line is open.
Thanks, operator, and morning, team. Thanks for taking my questions. Just a few for me. Maybe just starting with test mining for the bulk mining. Just want to confirm that that's ramp haulage out of the portal in the open pit. I guess just want to contextualize, I heard the number 10,000 oz. Is there an opportunity for supplemental tons to come out of this in 2027? If so, if this is successful, just wondering how you could frame the potential impact next year on upside.
Yeah, I will answer it, and then I will pass it off to Eric. Yes, we are going to be using our ramp that comes through the pit for that bulk material. Next year, when we look for guidance, we will separate main mine versus the bulk because the three test stopes that we are taking this year, only one will be on the floor by the end of the year, and the remaining two will fall into next year's numbers. But we are still in the process of just going through the final stope designs on the second and third one, so I am not going to really give you a number on how many incremental ounces will impact for 2027. I do not know, Eric, if you want to elaborate on anything else on that.
No, it's pretty much that. We're going to have probably half of a stope done this year, and after that, 2.5 next year. That's going to be the incremental, but again, it's some stope test. We're testing the limit of the geotech, so promising somewhat what's going to be the amount of ounces is going to be a little bit too much there, but it looks pretty good right now. The drilling, no deviation on 50 m, so everything looks good. Let's see the full test going on.
Okay. Just confirming, like, that can be crushed on surface? Like, that doesn't need to be crushed underground?
It's going to be crushed on surface. We're going to do stockpile. We have our own cone crusher there that can, the gyratory crusher that can process.
Okay. Thanks for that. Maybe next question, just looking at grade, like, with the substation fix, like, last time, in the last update I heard this was still targeted for December, but are you guys expecting maybe to have a grade rebounded from the Williams zone once this sort of comes back online, like, into first quarter next year?
Yeah, just on the grade, year-to-date block model reconciliation is around ± 3%, which is what we really expected. What we're doing now is we're processing more development ore to switch the mining method from top-down to bottom-up. So the amount of development ore going through is higher than the amount of stoping ore that's going through. But the block model is reconciling right in line with where we expect it to be, but I think, like we've told all of you, I think to expect the grade to be between 3 and 3.5 consistently.
Okay. Okay, thanks. Then maybe sort of just the last question, just again trying to understand this offtake amendment economics. Seeing you guys are already executed the first sort of tranche there. So, I heard $40 an ounce incremental cost. I just want to make sure I'm understanding that right. $40 an ounce incremental production or off of every amended off that offtake. Is that the right way to understand it?
The reference to $40 an ounce was, if you look in the MD&A, there's a reference to a 3.2 million ounces as a cap. You got to reduce the Interlake, or 50% of the Interlake gets you to a lower number than the cap, and then it's 50% of that is what's the kind of attributable ounces that have to get delivered into the offtake. The math works out to kind of 1.25 million ounces left to be delivered under that offtake. So, round numbers, $50 million divided by 1.25 gets you to $40 an ounce. So that's the valuation mark. Now, we only bought back 10% of it at this time, right? So now that 50% has dropped to 40%. But I'm giving the valuation mark if you were to buy out all of it or even one ounce.
That's effectively what we're buying those deliveries back at. Then I reference the cost of what those ounces have cost us year to date at $117 an ounce because of the elevated vol we're seeing. So the difference between the two is effectively the value that you're buying back, undiscounted.
Okay. Okay, understood. And sorry, I think you probably answered this before already, but do you guys intend to execute all those as they become available?
Sorry, can you repeat that?
I just confirming, you may have answered this already, but just confirming, like, you plan to execute all those offtake amendment, as they sort of become available? The rest of the-
No, I mean, we'll evaluate it as the option exercise dates come up, and we'll look at the market and our balance sheet, and we'll make a decision as those options expire.
Okay. Okay. Cool. Got it.
We haven't pre-committed to anything.
Sounds good. Okay, that's it for me. Thanks. Thanks, team. And congrats on the quarter.
There are no further questions at this time. Mr. Kosec, I will turn the call back over to you.
Yeah, thank you, everyone, for joining. Much appreciated all the questions. If you have any further questions, please feel free to reach out to the team, and have a great day.
This concludes today's call. Thank you for attending. You may now disconnect.