Welcome to the Coeur Mining first quarter 2020 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I'd now like to turn the conference over to Paul DePartout, Director of Investor Relations. Please go ahead.
Thank you, and good morning. Welcome to Coeur Mining's first quarter earnings conference call. Our results were released after yesterday's market close, and a copy of the press release and slides are available on our website. I would like to remind everyone that our press release, slides, and some of our comments today include forward-looking statements from which actual results may differ. Please review the cautionary statements included in our press release and presentation, as well as the risk factors described in our first quarter 10-Q and 2019 10-K. Now, I'll turn it over to Mitch.
Thanks, Paul. Joining me on the line are Tom Whelan and Terry Smith, along with several other members of the management team. Before discussing the quarter, I'd like to provide a brief COVID-19 update. Since early March, our two objectives for navigating through the impacts of this global pandemic have been to protect the health and well-being of our fellow employees, their families, our contractors, and our communities where we operate, and to ensure the continuity of our business operations as best we can. To date, we have had no positive COVID-19 cases anywhere in the company. Early last month, we put a series of controls and procedures in place focused on controlling and limiting access to our operations, thoroughly screening employees and visitors, and reducing exposure and transmission risk through a range of social distancing protocols and sanitizing and cleaning procedures.
Office employees are all working from home, and non-essential travel has been eliminated. We are continually reassessing these procedures as the situation evolves and as we gain additional information. The level of engagement, support, and outreach by our employees to the communities in Western South Dakota, Northern Nevada, Southeast Alaska, Chihuahua, Mexico, and British Columbia has been truly inspiring. Slides 15 through 17 highlight several of the efforts being made by our employees. In terms of business continuity, our three U.S. assets remain in operation with minimal adjustments or disruptions. Our Palmarejo mine suspended operating and exploration activities in accordance with the decree issued by Mexico in late March. Our Silvertip operation in British Columbia safely suspended mining and processing activities just ahead of the COVID-19 outbreak, and all ongoing site activities, along with our drilling program, are continuing there.
We remain in close contact with our suppliers and with our smelter and refinery customers, and we have not experienced any significant disruptions to date. Like many companies, we have taken steps to increase our frequency and methods of communication, bolster our liquidity levels, and be as prepared as possible for a wide range of potential scenarios going forward. Overall, I think our strategy is serving us well during these unprecedented times. Our focus on operating a balanced portfolio of assets located in North America with a particular focus on the U.S. is helping us reduce our overall risk profile. Our shift over the past several years toward more gold and less silver has removed a significant amount of volatility and has us well positioned for the current environment. Our collection of organic growth projects offers investors compelling near, medium, and long-term growth.
Our commitment to a higher sustained level of exploration, particularly near our existing assets, provides our stockholders with exposure to the upside potential associated with new discoveries and to opportunities for high-return mine life extensions from successful reserve and resource growth. Finally, our U.S. listing and location, as well as our liquidity and access to capital, are key differentiators, especially during times like this. Now, turning to our results. Overall, the quarter was in line with our expectations, mostly due to strong performances from Palmarejo and our Kensington gold mine in Alaska. Those two operations offset a lighter quarter from both Wharf and Rochester as anticipated, both of which are expected to deliver stronger results during the remainder of the year. I mentioned our collection of growth projects. The two most impactful near-term opportunities are the expansion of Rochester and a potential restart of Silvertip.
At Rochester, we achieved a major milestone on schedule for the POA 11 expansion project when we received the Record of Decision from the Bureau of Land Management last month. We plan to accelerate work later this year and complete this important project by late 2022. We are also on track to issue an updated technical report in the fourth quarter incorporating an updated capital estimate, optimized mine plan, and economic analysis. At Silvertip, a pre-feasibility study for a potential mill expansion is now underway, and we expect to have some results mid-year. The drilling program at Silvertip kicked off last month, and we remain optimistic about what this program will deliver.
Finally, speaking of exploration, other key elements of our 2020 exploration program, the largest in our company's 92-year history, are off to good starts. The bulk of our near mine exploration investment during the first quarter went to Palmarejo and Kensington, while our single largest allocation of resource expansion drilling went to the Sterling and Crown deposits in Southern Nevada. We plan to provide a mid-year exploration update later this year, given the size and importance of these programs for the company. With that, I'll go ahead and turn it over to Terry.
Thanks, Mitch. Good morning, everyone. Slide six highlights our production performance at each operation during the quarter and provides an outlook for the remainder of the year. Starting with Palmarejo. Throughput increased by over 25% year-over-year and improved recovery rates from several optimization initiatives helped drive higher gold production quarter-over-quarter. As anticipated, silver production decreased due to lower grades in our mine plan during the first quarter. Higher gold recoveries and throughput, along with a slightly higher gold price, combined to generate over $20 million of free cash flow at Palmarejo. It's also worth pointing out that we'll be well-positioned to safely and efficiently ramp back up once the suspension in Mexico is lifted. Switching over to Rochester. We mentioned on the last call that crusher production was hitting its stride early in the year.
I'm happy to report that crusher performance during the quarter was 11% higher than our target and 33% higher than the fourth quarter. We have now rebuilt momentum on our leach pad that we lost late last year but have not yet seen the benefit of improved ore placement rates and restocked metal inventories as we were operating on deeper sections of the pad in the first quarter. We expect production to improve during the second quarter and climb steadily through the remainder of the year. Before moving on to Kensington, I'll add some color to Mitch's earlier comments on our expansion plans at Rochester. We plan to spend roughly $30 million-$35 million on the expansion this year, which includes a mix of procurement and early stage earthworks. We have several purchase agreements already in place for long lead items, including crushing and process equipment.
FLSmidth, our third-party EPCM contractor, has progressed detailed design to around 50% completion to date. We are also conducting a targeted drilling program, which we are optimistic will help us upgrade our mine plan as we work towards an updated technical report at the end of the year. Switching over to Kensington. Production was on budget for the quarter as we saw a positive grade reconciliation from the Kensington main deposit. Financial performance remained strong as unit cost decreased by 5% to under $930 per ounce, helping to generate just over $14 million in free cash flow during the quarter. We were able to produce just over 2,500 ounces from Jualin at an average grade of 0.33 ounce per ton or 11.3 g per ton, and now expect Jualin to account for 15%-20% of Kensington's production for the full year.
We expect a slightly weaker second quarter due to fewer anticipated Jualin tons but expect Kensington will deliver another strong year for the company. At Wharf, adverse weather impacted first quarter crusher performance, leading to weaker than expected production levels. We have mobilized a third-party crusher contractor to accelerate our placement rates and help us catch up on and deliver on our full year plan. As a reminder, we are planning to increase our strip throughout the year.
We expect it to revert to historical levels in 2021. Before passing the call over to Tom, I'd like to thank our workforce for stepping up during this difficult period. We had a solid quarter of safety performance despite this additional time of stress and distraction. Please continue to be mindful and focused on the task at hand. We appreciate everything you are doing and your continued dedication to the company. Next, Tom will cover the financial highlights for the quarter.
Thanks, Terry. As presented on slide 10, we have a very sound balance sheet with no near-term maturities and over $250 million of liquidity. With improved margins, our LTM EBITDA increased 44% to $195 million versus $135 million just 12 months ago. Higher EBITDA, along with our 2019 debt reduction initiatives, led to total and net debt leverage ratios at the quarter end of 1.8 x and 1.5 x, respectively. We've been completing various scenario planning analyses to consider the potential impacts of COVID-19 on our business, specifically focusing on liquidity. From volatile gold and silver prices to estimating the impact of the temporary suspension at Palmarejo and other potential downside scenarios, we have modeled numerous cases to determine a range of financial impacts. We believe that it's prudent to have a wide variety of options available to maximize our financial flexibility during these unprecedented times of volatility and uncertainty.
Based on our analysis, we've taken the following key actions to be well-positioned under various potential downside scenarios. First, we've added foreign currency hedges to lock in operating cash flow gains relative to our budget. Secondly, we drew down an additional $100 million after quarter end on our revolving credit facility. Third, we developed an internal list of opportunities where CapEx and exploration could be deferred. Fourth, we've also put a $100 million at-the-market equity program in place, which is available as a source of liquidity if needed. To date, we have not begun the deferral of any capital projects or exploration investments, and would not expect to reduce these key internal growth initiatives unless certain downside scenarios became likely.
Looking at our financial results on slide five, we expected the first quarter to be our weakest quarter of 2020 and are pleased to be ahead of our internal budget on operating and free cash flow. Digging into the numbers, our first quarter results include $47 million of adjusted EBITDA, which is a 79% improvement over Q1 2019. We had a strong kickoff to our 2020 exploration programs, we had modest negative operating cash flow of $8 million, which was impacted by the timing of the annual Mexican EBITDA tax, the payment of our annual bonuses across the company, and the buildup of inventory on the leach pads at Wharf and Rochester. The temporary cessation of active mining and processing activities at Silvertip also had a notable impact on our Q1 2020 results.
Silvertip used $32 million of free cash flow during the quarter, a figure we will expect will be much smaller going forward as the site focuses on exploration, pre-feasibility work, and ongoing maintenance activities. We forecast that ongoing carrying costs will be $4.5 million per quarter, down from the $6 million figure that we guided towards at the beginning of the year. Exploration and pre-feasibility costs remain in line with our previous estimates. One additional note on Silvertip. Given the precipitous drop in zinc and lead prices during Q1 2020 and the significant increase in the 2020 benchmark treatment charges for zinc and lead concentrates, which were finalized during March 2020, we remain confident that the temporary cessation was a sound decision. Before handing the call back to Mitch, I wanted to draw everyone's attention to slide 11, where we summarize our hedging program.
We continue to take advantage of the stronger gold price by implementing additional price protection. You'll see that we've extended our zero-cost collar gold hedges to cover a portion of our production in 2020 with a $1,600 floor. As I mentioned earlier, we also laid in some forward currency hedges over the next two years. Our hedging strategy is designed to support cash flow generation and help fund key internal growth projects, most notably the POA 11 expansion at Rochester, which we anticipate funding with a combination of internally generated cash flow and borrowings from our revolving credit facility. I'll now pass the call back to Mitch.
Thanks, Tom. To quickly wrap up, slide 12 hits several of our key priorities for the remainder of the year. Of course, our top priority remains the health of our employees, their families, and members of our communities as we continue to manage our way through the COVID-19 crisis. We remain optimistic about our exploration programs and the results we expect to see over the course of the year. We're also looking forward to seeing Rochester's production levels rise based on the higher crushing and placement rates the team has been delivering. All of us are excited about the operations' future growth potential as POA 11 is set up to gain momentum during the second half.
I'm also enthusiastic about the work that is now underway on the pre-feasibility study at Silvertip. We look forward to sharing results with you later in the year. Finally, we will continue to further improve upon our strong safety and environmental performance as we strive to deliver consistent operating and financial results. Okay. With that, let's go ahead and open it up for any questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing your keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Michael Dudas with Vertical Research Partners. Please go ahead.
Good morning, Mitch, gentlemen, and glad to hear things are going safely and healthy for everyone.
Thanks, Mike. Good to hear from you.
First question regarding Palmarejo. Maybe you could share some additional thoughts on expectations on some of the government in the news we're hearing about continued extension of the COVID situation, what maybe other angles are being worked on down there to kind of alleviate that for first. Secondly, how quickly do you figure you can ramp up once you get the green light? Third, what are some of the carrying costs that we should anticipate in the Q2 given the cessation of the mining down there?
Yeah, sure. Thanks, Mike. I'll start and then Tom, I'll ask you to step in as well. Just in terms of the overall status in Mexico, just to rewind the clock, March 31st, the Mexican government issued the emergency decree regarding restrictions on non-essential businesses. Then we received some further clarification on April 6th, that made it clear that precious metals mining was not an essential business according to the decree. Then on the 7th of April, we announced that we were going to begin the process of temporarily suspending operating activities at Palmarejo. That decree, earlier this week, was officially extended out to May 30th. There are areas with little COVID-19 impact that will be allowed to reopen on May 18th, and currently Palmarejo sits in one of those zones of little to no COVID-19 impact. We'll circle the 18th of May.
Meanwhile, on a separate path, we submitted an application for exemption to the decree under guidelines published by the Undersecretary of Mines. That's a case-by-case process, where they'll take the applications, discuss it with public health officials to determine whether or not mines can restart sooner than those May dates. We'll keep pushing on that angle as well as gearing ourselves up for a restart, worst case, hopefully in the middle of May. Kind of like the ramp down that takes two or three weeks, there'll be a similar two or three-week ramp-up process to get ourselves back up and going, whenever we do get the green light, whether it's the 18th of May or sooner. That's how we're thinking about it.
In terms of impact and costs, obviously, that depends heavily on when we are able to restart so that we can measure how many days we were not producing. Tom, do you want to go into another level of detail there as far as potential impact?
Yeah, sure. As we talked, we've been thinking about tons of scenarios around this. The number that I would use for a 30-day shutdown, which feels like our best estimate at this stage, would be about $10 million, in terms of less free cash flow for the year for Palmarejo. If we really wanted to grind into how we came up with that, just an estimate of a 12th of the revenue lost. We think we can reduce our operating costs by about 50%, or obviously, stop the drilling and there'll be less CapEx. That's to give you some numbers about how to get to that $10 million. The other thing I would just remind everybody is that, the peso is really devalued here. As mentioned, we put on some hedges. About 50%-60% of our costs are denominated in Mexican pesos.
With those hedges, we've locked in roughly the same amount of lost free cash flow from operations. Anyway, just to give you a sense. We'll come back with, obviously, a clearer picture as Q2, but hopefully that gives you some numbers to play around with.
Tom, that's perfect. Thank you. Mitch, thank you for the thoughts on that, and hopefully the 18th is sooner rather than later. Second question is turning to Kensington. Just to clarify, so it sounds like second half, you're getting a lot more ore processed through Jualin. Is that mix going to be, you said it's 15%-20%, is that over the 12-month period, or so therefore it would be maybe a much higher mix in the second half of the year? Is that how I should think about it?
That's right. First quarter, Terry, remind me, it was single digits, right?
Yeah.
In terms of contribution, a lot of that, Mike, had to do, back to COVID-19, in terms of workforce availability. A decent amount of our workforce at Kensington flies up from the lower 48 to work their scheduled rotations. That had impacted in the first quarter, and in particular March, availability of workers in Jualin. That is a reason why we were a little lower in the first quarter than we expect to be in subsequent quarters. I look at it as a positive that with only 9% or whatever of the tons coming from Jualin, it had a great quarter on its own. Hopefully with a little bit higher contribution through the rest of the year, we'll see the results reflect that.
That's great. I appreciate that, Tom. Just finally, and maybe back to Terry on the scenario analysis, or maybe the hedging front. I assume since you've been putting through this hedge program on gold over the last few quarters, you're going to continue to think through that as the markets move forward, and with higher collar balances, I would assume. From another scenario concept, looking at the potential spend on the deferrals and such, it seems like you have enough liquidity to crush through this and not have to defer some of the important work that you're doing. Would it be just price change or concerns about that or if Palmarejo would be out for several months? Would that be some of the negative scenarios that would impact that?
Yeah. Tom, you can chime in with our thoughts on the market and the hedging program that we've been carrying out. Having a $1,600 floor under a good chunk of our gold production goes a long way toward helping to ensure that we've got sufficient cash flow from Rochester and elsewhere to fund that expansion project. That's a project that doesn't have a lot of room to be deferred or moved because as we stack on the Stage 4 leach pad, there's a point at which that pad is full, and we need to have this new pad down and ready to start stacking on. That is late 2022. We're working on that basis and on that schedule. Between our revolver and cash flow, especially feeling better about that downside of $1,600, gives us a lot of comfort that that's sufficient.
If Mexico continues on longer than what we all hope and expect, that makes the numbers obviously a little bit tighter, but we still feel comfortable that we'll have sufficient liquidity. Mike, on a separate but related point, I mentioned Silvertip and the pre-feasibility study and a potential scenario of a restart. That's a project that we have a lot of flexibility on in terms of if and when we would ever pursue that. Obviously we're thinking through and mindful of not only relative returns on these projects, but how do they sequence and slot in to our financial capacity to deliver on them. Rochester's clearly the one that has the highest priority. Tom, anything on the hedging that you want to add?
Yeah, I'd reiterate, Mitch, that $1,600 floor is definitely a target. The beauty of doing it in layering is we're not trying to time the market, and obviously the more patient you are, the higher the ceiling that we're able to achieve. Just as a reminder, in March, we did see gold drop below $1,500 and silver went below $12. We definitely want to protect the downside to ensure that we've got sufficient funding for POA 11, as Mitch mentioned. That timing is we really don't have that much flexibility to move around that capital spend.
Appreciate all the thoughts, gentlemen. Please stay healthy.
Yeah, you too, Mike. Thanks. Take care.
Our next question will come from Joseph Reagor with Roth Capital Partners. Please go ahead.
Morning, guys. Thanks for taking my questions.
Hi, Joe.
Hi. Just first thing, thinking about the scenario with Rochester, with building out the additional leach pads, would you need to have all of the capital to do that in hand when you embarked on that? Or is that something where you can have a certain portion day one that would make you feel comfortable?
Yeah, I think it's the latter, Joe, in terms of we have the revolver balance day one, but with the cash flow from Rochester and then from the other operations, that of course will come over time, during 2021 and 2022 to act as another key source of the funding. That would come as we go. Tom, anything to add to that?
No, you nailed it again. Joe, we think we've got between the internally generated free cash flow from our mines as well as the revolver capacity. Based on the scenarios that we've run, we're feeling pretty good about our ability to fund POA 11.
Okay. With Rochester, a big portion of the decline in production there has been related to tonnage. That stepped back up in Q1, that probably won't flow through to fill Q2, just as you rebuild inventory. Is there any difference in the ore makeup from, say, mid last year to now? Are you guys experiencing any changes even though maybe the model says it should be fine? Is there anything geologically different about the ore that you're mining today?
Terry, do you want to cover that?
Hi, Joe. Yeah, thanks for the question. No, there's nothing significantly different over that time period that you're thinking about. One of the things that we benefit from at Rochester is just uniformity. I think there's some differences in terms of hardness. We see drilling differences and crushing impacts from hardness, but nothing geologically or mineralogically that is different.
Okay. Given that, and given my layman's terms understanding of the high pressure grinding you're doing, there's really nothing but time standing between you guys and getting to where you want to be.
I think that's fair. Every time we put HPGR crushed ore on or near liner, we see the kind of recovery results that all the test work had indicated. That's certainly comforting and validating. It's really about the timing, like you said, Joe, of getting not only ounces down through deeper sections of that Stage 4 pad, but building up that tonnage, those stacking rates and placement rates that the guys out there have done a good job of reestablishing. In large part, the blasting in the pit has gone a long way toward helping improve the crusher performance. We like what we see at HPGR, and you're right, it's more of a function of time than anything.
Okay. I just wanted to confirm and cross all the Ts.
Yeah.
One last one. At Silvertip, are there any remaining payments, or did you guys make the final contingent payments in Q1?
Yeah, we made that. No more now to go.
Okay, great. I'll turn it over. Thanks, guys.
Okay. Thanks, Joe.
Again, if you have a question, it's star then one to ask a question. Star then one if you have a question. Our next question will come from Brian MacArthur with Raymond James. Please go ahead.
Hi, good morning. I have three quick questions. Just back to Tom's point about layering. You said you had 99,000 ounces in 2021, and then the press release just sort of gave us 56,500 with the first half and the second half. Can I assume those other ounces were sort of layered in the first half and the second half equally?
Tom, do you want to cover that?
Yes is the answer. There's probably a little bit more weighting to the first half of the year, but the goal would be to have them spread out evenly when we complete the program.
Okay, great. It's just there, like 56,000. You kindly gave us 56,500 ounces of prices in a press release, and I saw you got up to 99,000 as you said in your presentation. Second thing, just the $100 million draw on the revolver. I get it. If you draw $200 million, you're going to pay more and there's fees or whatever.
I assume that $100 million was sort of, in the context of guaranteeing cash to finance Rochester, obviously you'd want to have a buffer just in case things didn't go wrong. Is that just the way you came up with $100 million? You did all your testing, you made analysis, and $100 million sort of seemed like the right number, and you could have taken, I presume, $150 million or $200 million and maxed it out, and then you'd have had more cash on the balance sheet. Is that the thinking that went into where the $100 million came from?
You're definitely on the right track there. Tom, you want to provide some color?
Thanks, Brian. We went through a bunch of different scenarios. A couple of comments. One, this is a different crisis than 2008. It's not a banking crisis, it's an economic crisis. We chatted with all the banks and just made sure that there was no restrictions to be able to draw on the revolver. This had nothing to do with that. It was just, we thought a precautionary measure just to make sure that we had some cash on hand if some of these downside scenarios were to come together.
The hope is that we'll never need to draw on it again. I'd just reiterate, as of right now, this moment, we have no intentions to stop any CapEx or exploration. At $1,700 gold, we're feeling actually pretty good, last thing you want to do is rest on your laurels and get caught short in a time like this. We've never seen times like this, we just thought it was the prudent thing to do.
Yeah, it makes total sense, a lot of other companies have done that, too. I figured that's where that number came from with the polls. I could argue just to be really sure, you take the whole $200 million, I guess, is the debate.
Yeah. Sorry. We also thought, again, we've talked about all the responses that are our response to COVID-19, and we just didn't think drawing all of it was commensurate with all of the risk mitigation that has happened, and we thought it would probably send the wrong signal. As you point out, we could have done the whole thing, but it just didn't feel right to us.
No, makes sense. I guess maybe just my third question, just with Silvertip, as you mentioned with TCRCs up, zinc prices down, you put in the final payment of $25 million. I guess the stress testing for a write-down, what's the general thought process on that? I assume you're going to wait until you get the new study because then you sort of have an adjusted long-term plan. Maybe you don't need to do one. I'm not saying you do or don't. I was just kind of curious whether that had to be stress tested this quarter.
Tom, you want to cover that, please?
Sure. Yeah. Again, the assumptions that we used in the impairment analysis contemplated a restart in 2023. Again, looking out to where long-term prices would be, I think it was disclosed in the 10-K, what we used in terms of zinc and lead prices back to more long-term. Again, whatever happens to the zinc and lead price here over the next 18 months is not going to impact the amount of the impairment.
Great. Thank you both very much. I appreciate it. That was very helpful.
Thanks, Brian. Take care.
Our next question will come from Adam Graf with the B. Riley FBR. Please go ahead.
Thanks. Hey, guys, just a couple quick questions.
Yeah.
One, at Rochester, the study that you guys are targeting for the end of the year, can you just remind us if that's going to include Lincoln or Wilco, or is that the next study for Rochester?
No. Hi, Adam, it's Mitch. The plan would be updated capital, and then a mine plan that would be optimized and expanded to hopefully include some of those East Rochester ounces that sit underneath the old Stage 1 and Stage 2 pads, and then some additional material from Lincoln Hill. Nothing from Wilco or Gold Ridge further to the west of Lincoln Hill.
Got it. Could you guys just give us maybe some color on any progress in the first quarter exploration at Preciosa and at Sterling and Crown?
Yeah. Hans, do you want to cover that?
Hey, Adam. La Preciosa continues with the engineers looking at our updated geologic and resource model, and we'll do actually a meeting at the end of next week. We'll review it. Sometime in May, we'll have a much better idea what we're going to do there. The Crown and Sterling projects started out with three rigs turning, two up at the Crown area, one down at Sterling. The Crown area had a large truck rig as one of the rigs testing a new geophysical target. Because of the success of that target, now we've moved our smaller RC rig up there and have continued drilling on this target. It's called C-Horst. I'm not sure if we've shown that on any of our maps, but it's up about a mile and a half north of the SNA resource in an area where no prior drilling was. It's a geophysical target.
We've been quite busy with one rig up there. We sent the truck rig home, and we're continuing to drill around the Sterling area. At Sterling, we'll move a core rig in starting on Sunday. The core rig will start doing the infill large diameter core that we're going to use for metallurgical work, engineering work, and look at a pit design at Sterling itself. Both Crown and Sterling have had some nice upside hits in the drill results, which we're going to talk about in our mid-year updates in places we didn't expect. These will be results that I can disclose whenever we put that news release out. Hopefully by that news release, we'll have somewhere around between five and 10 holes to report in those new zones. It's going really well at Crown and Sterling.
Great.
Hans, just in terms of the biggest components of the program this year, Palmarejo and Kensington. Obviously, Palmarejo right now drills aren't turning, but we have 10 rigs there ready to get back into action. We're looking forward to that program and the results from there. Kensington also will have some good results to talk about in a mid-year update. Rochester and Wharf are both more middle to the second half of the year weighted. We've got a lot of good things going on in a lot of places.
Yeah. Silvertip just got started near the mid to end of March, and it was up to three rigs. Now we'll have five rigs by the middle of the second quarter. Visually, things are looking really good there too.
Hans, can you remind us, at Palmarejo, is the focus more resource conversion or resource expansion?
We started out the year with a bit more resource conversion just because of our annual resources and reserves calculations. Typically, we have a data cut-off end of June. If you look at our money spent and feet drilled or meters drilled, they're a bit more in the infill reserve resource conversion category right now. However, it's super important that we find some new veins, new clavos to expand into in a couple of years. You'll see for the remainder of the year that the focus will be dominantly expansion. We're finding some interesting-looking stuff that we're going to end up, like Mitch said, he's got 10 rigs queued up to start up and aggressively drill some new areas north of Independencia and east of Independencia, where we've got some good intercepts that we'll talk about in the mid-year report.
Great. Thank you, guys.
Thanks, Adam.
This concludes our question and answer session. I would like to turn the conference back over to Mitchell Krebs for any closing remarks.
Okay, thanks. Well, we appreciate everyone's time this morning, and we look forward to speaking with you again in the summer when things are hopefully returning to normal to discuss our second quarter results. In the meantime, I hope you all stay healthy and safe, and thanks again for your time. Bye.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.