Discovery Silver (TSX:DSV) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.
Access the full call at https://events.q4inc.com/attendee/749292221
Summary
Discovery Silver is on track to more than double gold production at Porcupine to over 500,000 ounces per year and develop the Caro project in Mexico with a target of producing 14 million ounces of silver annually.
The company announced a significant acquisition of Glencore Kidd operations, which will enhance milling capacity and provide exposure to critical minerals like copper, zinc, and silver.
Q1 2026 saw revenues of $285 million, a 4% increase, with EBITDA growing 41% quarter-over-quarter to $178 million, driven by higher gold prices.
Discovery Silver’s cash balance at the end of Q1 was $384.9 million, with free cash flow generation strengthening its balance sheet.
The company is advancing exploration and drilling projects, with notable progress at Hoyle Pond and TVZ zones, aiming for a resource estimate by year-end.
Management remains confident in achieving 2026 guidance, emphasizing increased production in the latter half of the year and ongoing improvements at the Dome Mill.
Full Transcript
Sarah (Conference Operator)
Good afternoon. My name is Sarah and I will be your conference operator today. At this time I would like to welcome everyone to the Discovery Silver’s first quarter 2026 conference call and webcast. 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 STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Thank you. I will now turn the call over to Mark Utting, Senior Vice President, Investor relations for discovery. Mark Utting, you may begin your conference.
Mark Utting (Senior Vice President, Investor Relations)
Thanks very much operator and thanks everyone on the line for joining Discovery Silver’s first quarter 2026 conference call and webcast. Joining me today are many members of the Discovery senior management team. Speaking will be Tony Makuta, our president and CEO Allison White, our Chief Financial Officer Pierre Roc, our Chief Operating Officer Eric Calio, our Senior Vice President, Exploration and Jose Javalera, our Senior Vice President, Corporate affairs and Sustainability in Mexico. And again, there are many other members of our senior executive team in the room as well. Before we get started, I’ll remind you that during today’s call we will be making forward looking statements. These statements are based on current expectations and projections about future events. They’re subject to risks and uncertainties and actual outcomes may not be what is included in those statements. I refer you to slide two as well as our website for further information. In addition, we will also be making reference to a number of non GAAP measures during the presentation. These measures do not have any standardized meaning and they under Generally Accepted Accounting Principles (GAAP) and therefore may not be comparable to other issuers. I refer you to slide three on our deck as well as our website for more details. Finally, all dollar amounts will be in US dollars unless otherwise indicated. Now turning to the quarter.
Tony Makuta
To begin with, as many of you know, you know we’re working towards more than doubling gold production at porcupine to over 500,000 ounces per year. the same time we working towards developing our Cordero project in Mexico through which we will produce about 14 million ounces of silver per year at least over the first 10 years. You know, we plan to achieve these levels of performance while averaging the lowest half of the global cost curve for both gold and silver. And we’re going to achieve these milestones using a disciplined approach to investment with a focus on investor returns. During the first quarter there were a number of key developments in support of achieving our Growth objectives. Specifically, we announced the acquisition of Glencore Kid operations in Timmins. We also reported continued outstanding exploration results in and around Timmins. And we continued with our investment programs through which we will both grow and optimize our current operations. Getting into those in a little bit more detail. Looking at Kid on Slide 6. We announced the acquisition of the Kidd operations on March 2. We expect that transaction to close very soon, likely over the next few weeks. This is a major milestone for our company. To achieve over half a million ounces of annual gold production. We require additional milling capacity through the Kid Met site. We have an opportunity to dramatically grow processing capacity and to process different kinds of ore. There’s lots of other benefits as well, including adding valuable infrastructure that will support the future expansion of both Hoyle Pond and Tamworth, including the development of TVZ. It gives us exposure to critical minerals, copper, zinc and silver through Kid Creek Mine. Adds significantly more exploration potential to our already very large and highly prolific portfolio. Delivers cost synergies and this is a very important point. Adds a very large, highly skilled workforce that’s going to help us with our existing growth plans. Going to the next slide. This gives you a view of Kid Net site and a conceptual plan for what we expect to do and are currently evaluating. It’s a conceptual plan but it kind of points or shows you our thinking in terms of path forward. And maybe at this point point I’ll turn it over to Tony to talk about that. Okay. And maybe I’d just a couple simple things. I mean people should understand first off that the Hoyle Pond underground operations are actually under. Under the Kid Met site. And you can see that the blue rectangular box here and it’s trying to show where the location could be for the new. Any new vet phrases we we can establish for the Hoyle Pond mine as well as central location would be for a new shaft if we wanted to develop for the TBZ zone. But also I think what we show here there’s as we’ve alluded to before, there’s four circuits at the Kidd Met site and you can see where it says A division. And we sort of tried to conceptualize on here what would be involved in building and show the location of why we built a new facility. 5 to 7 million ton per annum conventional gold circuit at the plant with the Oregon crushing and how that would. How that would fit in. We still continue to use the B division which is the base metal circuit. It’s flotation circuit. The C division we’re working pretty hard right now on that. That’s about a million ton a year capacity. So looking at the aspect of bringing the board nors and run it, run it through this division as early as we can over the next six to 12 months. And that would unlock two to 3,000 tons of AM capacity in the Dome mill for conventional processing. And you can see that these circuit that’s where it’s here which is which we would turn into a cold refractory flotation circuit. But on the other side Both all the A.B. the B and C and D circuits that are here could always be utilized as combination base metal circuits if needed and old circuits as required. So give you the sense on what this could unlock for us. Basically if I you know you can look 5, 6 to 6 to 8 million sorry 77 to 9 million ton a year new gold processing assessing capacity at the Kid Met site. The A division has a conventional circuit the C division for processing 1 million ton a year for processing the board Norris and the D division which we would then use to process refractory ores in Timothy. And effectively the refractory oars would be the TVZ as we’re talking about and then general location where it is. This map doesn’t, sorry this figure doesn’t show where the Pamworld operations are in here but the Pamour open pit operations are less than a half a kilometer from the bottom of it page. And the idea would be all the Pam ores would be would be trucked and same as the oil pond ores would be trucked and processed through this new circuit. Just going on to slide 8. We’ll get to the next next key development that’s exploration progress and you know for all the production that we have and we’re going to be adding you know this is, we think it’s one of the most compelling exploration stories in the industry as well. You know we issued a press release on April 23rd. That’s our latest one. I’m not going to get into a lot of the details. Eric will get into the details of that release shortly. I’ll just at a high level say we continue to get very good results from resource conversion and extension drilling at Royal Pond Ford in Pamour. And included in that release was excellent results at a number of district targets near those operations and positive results at our near term projects, specifically Dome and tbz. And again there’s a lot more information that you’ll be hearing very soon about that. Slide 9 looks at our investment programs in the first quarter. Sustaining capital for the quarter was about 21 million mainly related to capital development, mobile equipment and infrastructure investments at Hoyle Pond and Gordon. And I’ll mention we were very much on track with our capital development activities at those mines. Also contributing with new mobile equipment at Pamour and some investments at the TMA 6 or tailings facility project as well. Staying capital was somewhat lower than we planned, which was primarily related to to the shifting of delivery schedules for new mobile equipment to the second quarter and just other quarters of the year. Growth capital totaled 40 million. Investment in the TMA 6, including our new acquisition strategy and pre stripping at Pamour accounted for the vast majority of that. And again pre stripping at Pamour was very much in line with expectations. Just going to Slide 10. This gets to the operating results during the first quarter. Allison will get into all the financial numbers in a few minutes and Pierre will then add some additional color on operations as well. You know, in our year end results we indicated that production in 2026 would be weighted to the second half of the year and the Q1 would likely be our lowest quarter of production for the year. Well, production was 60.2 thousand ounces for the first quarter. What I will say is a highlight of the quarter was Hoyle Pond. It had a very good quarter in Q1 with an average grade exceeding 12 grams per ton. Also, our total mine tons increased by 4% and we ended the quarter with stockpiles of close to 1.3 million tons, which will help us manage both our throughput levels and grades over the balance of the year. Like production, our unit costs are expected to improve significantly in the second half of the year. You know, one reason our guidance ranges were as wide as they are is because of the variability we saw coming in the quarters. I will say our AISC number for the quarter was in line with our guidance and we do expect that number to improve as we get into the second half of the year. Going to slide 11. It shows a visual of, well, Dome Mill, but specifically in the foreground, the crushing circuit. As we mentioned, we expected quarterly production this year to be lowest in Q1 and a significant reason for that was mill throughput. We did 698,000 tons in the quarter. You know, the reduction from the previous quarter. Most of that was expected. An expected reduction due to scheduled downtime and our understanding of the implications of severe winter on our crushing plant at Dome. We’ve indicated since we announced the porcupine deal beginning of last year that we were looking at replacing the three stage crushing system that it needed to be replaced. You know, that’s because it’s inefficient and contributes to high unit costs because it’s prone to breakdowns, particularly in winter conditions and ultimately because we’re going to need to move it to get it out of the way as we push back the dome pit when we bring dome mine into production. The longer term solution for this is single stage crushing and a sag mill. And that’s part of our plans going forward in terms of achieving our growth targets. The near term plan is that we are keeping increasing levels of critical spares on site and there is a newly designed secondary screening system that’s going to be delivered at the end of June that will be installed during the scheduled shutdown in July. And these steps we’re taking now are designed to help us when we get to next winter. Just going on to slide 12. This shows you our guidance and I can say we remain on track to achieve all of our guidance for 2020 26, we completed the lowest quarter of the year. We expect to see significantly higher production, particularly in Q3 and Q4. An important contributor there will be Hollinger. We began ramping up Hollinger in Q1 and actually this quarter mining about 2,000 tons a day. We expect to get over 40,000 tons from Hollinger this year. There was only a few thousand in the first quarter. We also expect to see higher levels of mill throughput supported by the large stockpiles I mentioned. With that, I’ll turn the call over to Allison White, our CFO to look at the financial results.
Allison White (Chief Financial Officer)
Thank you Mark and good afternoon everyone. On the call on slide 13. Let’s look at what a solid quarter and start. We had 2026, which reflects the continued momentum that we are building on from last year. We had robust revenues during during Q1 of 285 million, an increase of 4% quarter over quarter, primarily reflecting the higher than average gold prices throughout the quarter. We lose more tons during the quarter and coupled with the number of ounces sold over the same period, cash costs per ounce were $1,417. As previously mentioned, unit costs are projected to be the highest in the first half of the year and are scheduled to improve during the second half of 2026 as production and sales volumes increase and benefits are realized from the investment to optimize the company’s operation. All in sustaining costs averaged $2,041 per ounce sold, reflecting the higher operating cash cost per ounce sold and is partially offset by lower spend from the sustaining capital during the period. The lower than planned sustaining capital is due to the delayed timing that Mark had mentioned earlier for the delivery of new mobile equipment and for construction work that’s ongoing at the tailings TMA6 project, EBITDA grew quarter over quarter to 178 million, an increase of 41% from Q4 2025, which is driven by an increase in revenue as gold prices climbed. Discovery has continued to have progressively strong momentum since its transition to an operational company last year, continuing to grow EBITDA during each quarter of 2025 and now again in the first quarter of 2026. We also continued the trend to generate solid free cash flow with adjusted free cash flow of $63 million, reflecting an adjustment of 87 million for a payment made during the quarter to Satisfy the company’s 2025 income tax obligation. Further, Discovery deployed $67 million in capital expenditures to further advance the asset base at porcupine, continuing onward with the vision and capital allocation plan of reinvesting in the business to add value. Q1 2026 net income was 81.7 million, an increase of 25% from Q4 2025 and both earnings per share and adjusted earnings per share. The increase in net income quarter over quarter resulted from the one time 45 million reclamation expense for non operating mine sites that occurred in Q4 2025 as well as the benefit of higher revenue and lower depreciation and depletion expense during Q1 2026. Partially offsetting all of this was the impact of an income tax recovery of almost $5 million in Q4 2025 that was also offset by a $49.6 million of income tax expense in Q1 2026 for the current year and higher share based compensation costs that also occurred during the current quarter. The income tax recovery in Q4 2025 resulted from the 40.9 million in a deferred tax recovery that was related to revised reclamation cash flow. And as we end on that tax note, let’s move to slide 14 to review financial metrics. We’ve continued to build on the momentum that began last year across all of our key financial metrics. Revenue and EBITDA have increased each of the last four quarters and equally through strong earnings generation. We continue to see positive momentum in our operating and free cash flow with Q1 adjusted operating cash flow of $130 million and adjusted free cash flow of $63 million that I mentioned previously. The positive free cash flow generation strengthens the company’s balance sheet and allows for capital redeployment into the business so let’s take a look at our liquidity position on the next slide, please. Discovery’s cash balance totaled 384.9 million at the end of the quarter. The stronger gold price environment translated into 130 million of adjusted operating cash flow, partially offset by the 2026 tax payments and continued capital investment that were covered earlier. Discovery’s liquidity position remains robust. With $385 million in cash on hand and a $250 million revolving credit facility with $100 million accordion feature, we have meaningful financial flexibility. We believe that this balance sheet strength gives us the foundation to achieve advance our strategic priorities with confidence. And with that, I’m going to pass it over to Pierre, our chief Operating officer.
Pierre Rock (Chief Operating Officer)
Thank you. It is pleasure to be presenting today. I will be speaking to slide number 16. During Q1 we produced 60,269 ounces of gold with total gold pour of 59,258 ounces. As Tony mentioned earlier, we expect production to ramp up particularly in the second half of the year. The change in production in Q1 2026 versus the previous quarter reflected lower tonnes process. The impact of this reduction was partially offset by a 15% improvement. The average grade reflecting a significantly higher grade at Hoyle Pond and a higher average recovery rate. More than three quarters of the reduction in tons process was planned and related to the scheduled maintenance as well as the impact of severe winter conditions on the crushing circuit. Company is currently advancing plan plans to replace the crushing circuit. Total ore tons mined increased by 4% compared to Q4 2025 and we have close to 1.3 million tons of stockpile material that is available for processing at the end of Q1. Tony discussed the crushing circuit at the mill. In his remark, I’ll point out that during operating days the dome mill continues to show improved performance. Daily throughput at the mill exceeded 11,000 tons per day on 26 days in Q1, including 10 days when the mill exceeded the operating capacity of 12,000 tons per day. Operating cash cost per round soldier average 1417 compared to 1185 in the previous quarter. With the increase mainly reflecting the higher mining costs. Given the increased mining rate in Q1 2026 and the impact of lower gold sold site level all in sustaining costs average 1875 around 80 sold similar to the previous quarter as the impact of higher operating costs was partially offset by a reduction in sustaining capital expenditures. I’ll now turn the call over to Eric Calio, Senior Vice President Exploration.
Eric Calio (Senior Vice President, Exploration)
Thank you Pierre and good afternoon everyone. I’m on slide 17 we’re starting just like today. It’s been another great quarter for exploration, another 67,000 meters drill, excellent success with both operating mines and growth projects. So this in mind, we have again a lot of new information, but my plan today is just go through some of the highlights starting with the current fly at Hoyle Pond as shown on the slide which is a long section looking south. Rook at the mine continues to focus on the lower F zones, including another five holes near the lower limit of the crest resorts with very positive results with several holes containing visible gold and high grade directly down plunges across the piece and others indicating potential new high grade lenses to the west Concerned above. We’re very happy with progress here so far. We plan to keep at least two to three rigs active here for the near term, but also integrating another two to three rigs in the mid to upper part of the mine to start advancing those projects as well. Turn to the next slide which is number 18. See the TVZ area which is another important drill project for us in Q1. As mentioned in the past, TVZ is a significant zone of mineralization in the southeast part of the Balcon mine that was partially drilled and defined by past operators. But we are now back adding more holes to support a major resource estimate for later this year. With that in mind, what we see here on the slide is an overall view of the target area including the main zones, drill platforms and even the workings from Balmat Mines. Well slightly on the main target here. What we’re looking at is essentially a large northeast plunging structure which is based on drilling state extending from at least the 850 to the 16 to 80 levels, the remaining open in both directions. Internally the zone consists of a series of lenses which you show here in various colors, the largest being the TVZ2 which is a large green one sitting on the south side of zone, and the remainder the flay beams which sit to the north. And then in terms of drill platforms, just point out that the project already has a number of areas with drill platforms that’s been set up from past work and these activated fairly quickly, but just a little bit of work. Aside from that, all of our new drilling has actually been from just the 1210 and 1680 level. And then we’ll be certainly starting from 1410 as well. Turning on to my next slide number 19, we see more detailed view of the zone in long sections including recent drill results as indicated. All looking good so far in terms of 1210, which is in the upper right hand side of the slide. We had multiple new holes with wide high grade intercepts nearby to our first hole that we announced in Q1 and on 1680 several more which intersected attractive grades and width near the lower limits of past drilling. Just to give you a flavor for what we’re seeing intersections on 1210 we’re including numbers such as 4.23, 55, 6.41 over 11, 5.18 over 9 point and then intersections from 1580 which is 4.32 over 19, 4.24 over 10 and 4.73 over 6. Important to note is that all these new intersections are similar or better to other previously drilled holes in both areas and the drilling below the 16 level 16 Newton level is still very limited. So given above we’re very happy with progress so far. The program is continuing with three fields active on 12th timing 1680 and 1410 levels, so expect to see a lot of additional new results from the upper and lower parts of the zone very shortly. We’re also starting on rehab of new platforms on the 1430 level and the 900 which will provide even more platforms as the year progresses. Returning on to the Next slide number 20 we see the Oil Creek area where we completed another 12 holes near the historic test as well as at the 750 zone which is 750 meters to the east. Indicated gear drilling near the historic pit included eight new holes resurfaced in the 650 meter level with very encouraging value. Multiple holes intersecting wide high grade zones near the east side and another continuing to enlarge the overall footprint to the west. Key intercepts to these confirming the wide wider grade zone include values such as 4.11 over 39 over 3, 5.24 over 10, 4 over 13.8 and the key intercepts to the west includes 4.5 2.2. Drilling at the 750 zone included one new hole which is designed to confirm and extend mineralization near the 250 level and at the lower limits of the historic drilling and was also very successful with an intercept of 5.76 over 4 1/2 2.57 over. Given the above, we continue to be very pleased with the progress of the project to date and plan to continue with two drills for the near term. Then turning to slide 21 we see an overall view of the board in mine where we add another 24 holes in the northeast portion of the mine shown here. The focus for current work continues to be on the main zone which is the farthest target on the east part of the right hand part of the slide. All drilling being done from the 585 drift testing mostly down plunge northeast of the mine working. Additionally, we also saw drilling start on the lower part of east lower zone or elz which is another mineralized structure with similarities to the main zone 500 meters to the west. Important to note that both zones still have limited drilling down plunge ribbing open for expansion. So yeah, I’m not going to go into a lot of details here in terms of the results. They’re well summarized in our press release. But I guess I could just mention that we continue to have a lot of success here with the building getting very good grades investment in both areas both inside and outside resources and so very optimistic about. Then Turning to slide 22 we have the PAM warp where we completed another 67 holes near the Pier Oakland Pit resort as well as Tamworth West 1.4km to the west and the north contact zone north of the base. Two pit drilling near the open pits included 56 new holes designed to upgrade and expand resources and so Q4 results were easy. Unique expectations with multiple highlights from all areas. Drilling at Pamour west with another six holes found in the historic mine at the Grandland property. Now this is Q4 also 15 inches that varying edge values along strike of Pamore and the similar geologic setting. And then drilling at the north contact zone included five new holes to test the major east west contact north of the Samoa pit and also started to show very positive results. Important to note there’s none of the material from Panama west or north contact area is included in the current resource estimates. We’ll be working hard to incorporate this in our next update later this year. Programs continue with four drills, two focused on extensions of Pamore Pit, one at Pamore west and one at North Compact. Then going on to slide 23 we see the dome we’re at continuation of drilling in preparation for the new resource estate estimate later this year. As indicated on the image, the vast majority of new drilling targeted the northeast part of the resource pit was also included final holes from the area to the southwest. Drilling in the northeast area included 10 holes to evaluate mineralization on the Dome fault near the lower portion of the Kirk Resort. Very successful indicating close correlation of geology, similar better grades and width to historic hole which were drilled mostly before 1970. Drilling to the southwest includes four holes exploration targets. The South Loop occurred over fifth as the Q4 continued to identify UFO opportunities for future expansion really to sites continuing with two rigs both now located on the north side of the pit considering results and progress to date project remains on track for a new resource by the end of 2026. So in summary, thanks to well and lots more to come. So with that we’ll pass over to Jose Javalera, Senior vp Corporate affairs in Mexico.
Jose Javalera
Thank you Eric.
Tony Makuta
Hi everyone. In Cordero in Mexico we continue advancing the project. We’ll be in that advancing. We’re including the studies on water and power and that. And also after the last event of the Plan Mexico event with the president when she announced incentives on the investment, we got a meeting with senior Mexican authorities and that comes for they said it a site visit of the project to go in the final process of the evaluation for our mia. So we will have that message on the next week to continue advancing on the processing of the permits for Semana so that I pass the words to our CEO Tony Makuta. Okay, thanks Jose. Thanks everybody for presentation. We had a fairly solid quarter. The quarter where really our mines definitely outperformed the mill in terms of throughput. The mill had some challenges and terms of weather. But as we’re moving on we’re now we’re working having these things corrected and we expect to have really solid processing results as the year goes on and really want to thank the hard work of all the people in the company that the ones that did all the work and got all the success in the year. We really appreciate that. And then to wrap up on the other side, you can see from exploration and a few other things we had some significant developments in the first quarter that supports our growth objectives. The acquisition of Kidd. Kidd is one really important value driver for the company and one of our. There’s a lot of synergies and a lot of value in terms of what we inherited with Kidd and take advantage here. Main thing is the unlocking of processor capacity. You can see, you know what I try to show you somewhere between 7 and 9 million tons of new processing capacity that could be unlocked with that. And you just do the math yourself in terms of when we talk about
Operator
where we think that you go. We have lots of resources, Eric Calio, to tell you about continued exploration success and is there still a lot of gold left around, Timmins? And some of these are right within existing operating mines and on operating infrastructure. We continue to invest and we invest properly in terms of building the value and like I said, as Mark talked about our growth objective to reach over half a million ounces of gold production and you know, you can do the math. We have significant plans in place and maybe even somewhat Exceed that anyway, you know, with that maybe I’ll just thank everybody for participating in the call and be happy to take any questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question comes from Larry Lu with cibc. Your line is open.
Larry Lu (Equity Analyst at CIBC)
Hi Tony Allison Pierre, Eric Martin. I guess I’ll start off my first question by asking about Kidd Creek. Would you mind reminding us, you know what are some of the opportunities you see here? Does the acquisition of Kidd Creek change the way we should look at the near term mine plan as well as you know. Can you also remind us what are some of the steps between now to closing our transaction in Q1 2026?
Tony Makuta
Well, I think you know the first thing in terms of the acquisition of Kidd we, you know the mine’s still operating. We do expect the mine to operate and continue to produce ores definitely for the rest of this year. We’re working hard in terms of what can be done there and done safely and effectively. I think that’s somewhat of an opportunity. There’s significant exploration lands acquired here. I mean that’s really part of a long term exploration program. But again going to slide seven where I tried to show the biggest part here is unlocking the value of the metallurgical site. What that brings to us in terms of adding mill capacity we do with very minimal capital investment we can process of ordinars at the site. At Sea division we’re looking to process, you know, retracting old ores such as TV said in the D circuit. Again these aren’t significant capital expenditures for here and they’re not necessarily significant time too. So we expect that you know, things go properly. We’re doing some test work right now and working on firming that. It could be between September and March of September of this year and March of next year that we could be actively processing board Norris here. So that unlocks 2 to 3,000 plus tons a day capacity at stone mill pretty quickly for the cold ores. We mentioned about, you know Mark mentioned about the significant amount of stockpiles we have on surface as we’re building stockpiles from mining. So there’s a lot of opportunity there. And you know the big part is we’re going to start engineering now and working on what we need to do to build a whole new mill circuit at Pamour. Sorry that Kidd treat the Pam wall ores and that’s a 5 to 7 million ton a year conventional gold Circuit. One of the really advantages here with this you have a brownfield site where you have over 100 megawatts of power already. We have all the water we need. We have a site that cleared site with actual concrete foundations in place. Not the final foundation for all what we do, but definitely an area that, that was used in the past for, for metallurgical work that we can, we can, we can go in here, build a, put a, put a course or bin in, put a primary crusher, a sag mill and. And then you know can great that like say a 5 to 7 million ton a year gold circuit to process all the pam ores and really unlock the value then of dome mills. You know, think about it. It gives us somewhere between 7 and 9 million tons a year of processing capacity between six months from now, you know, growing from six months from now to three years from now. We see the opportunity here and that, that’s the main part. And in terms of closing, I mean things are working well. We’re transferring, working towards some, you know, final transfers or closure plans, et cetera with the provincial government. And you know we’re kind of thinking we’re going to have this thing closed because for the end of the month. But there’s always something that can happen. But we’re I think pretty much dotting the I’s, crossing the T’s as to speed.
Larry Lu (Equity Analyst at CIBC)
Yeah, for sure. Thanks to Lee for that answer. I guess, you know, kind of a follow up here on Kidd Creek. Not diving too deep as well. How you know, are you comfortable adding copper, zinc and silver to your portfolio and should, you know, would this be a good experience for having some processing base metal capacity from Cordero potentially in the future?
Tony Makuta
Oh yeah. I mean, you know, as part of this part, you know, we have the offtake in place with Glencore and pretty much the offtake terms are not very much different than the offtake terms that they provided to their own circuit site itself. It gives us that lead in, in terms of working. So it’s a going concern business. It’s producing, you know, 3,000 tons per day or it’s running at a 1.2 million ton a year capacity currently. And it will continue on that for the rest of this year. You know we still have to work with them on plans once we, once we take over. So the operation will continue to produce, you know, a copper concentrate and a zinc concentrate. The copper concentrate goes to the horn smelter, the zinc concentrate goes to Quebec, to Montreal and that those in place, we have that agreement in place with Glencore in it. And it’s great learning capacity for what we do as we advance Cordero as well.
Larry Lu (Equity Analyst at CIBC)
Perfect. Sounds good. And sorry if I can, Allison, I do apologize in advance. This is going to be a tax question. So if I look at this quarter’s free cash flow before being adjusted, a large item would be the taxes paid for last year from Porcupine taxes. So going forward, should we expect more of a monthly installment or how should we look at taxes? Cash taxes being paid going forward.
Allison White (Chief Financial Officer)
Yeah, Larry, so you’re exactly right. First of all, thanks for the question. Taxes are never anybody’s favorite topic to talk about, so you’re great to ask it. But nevertheless, yes, you’re right and we will be. And we are paying monthly installments in 2026. The one time event for 2025 payment was largely just because last year was our first partial year of operations.
Larry Lu (Equity Analyst at CIBC)
Amazing. Sounds good. All right, thanks so much, Tony and team for the response and I’ll return to the queue. Thank you.
Operator
Your next question comes from John Tomazos with very independent research. Your line is open.
John Tomazos (Equity Analyst at Very Independent Research)
Thank you for taking my question. I’m trying to envision or anticipate the fourth quarter technical study. The January study last year described resources of four deposits and production from three of them based on the drilling results. Well, we have resources from four more deposits, TVZ, Owl Creek, if you’re taking material from Hollinger. And now we’ve acquired Kidd Creek. So will the new report describe eight distinct resources and envision production from all eight of them?
Tony Makuta
Well, that’s a good question, John. Some of that really. You’re not, you’re not offline? Well, you know, say we had the three main ones, which are the operations, you know, we were an update on those. And then we’ve got Dome and TVZ. That’s, that’s the base plan for sure. I mean, we’ve had good results. That’s like to say, you know, we see if we have enough drilling to do a resource there by year end. But really it’d be those five rating forks that you’re in and you do have. We do have Hollinger that we could discuss or include. And there will be some things out of kit, but we’re still working on kit. Whether that’s part of our. We will give something out of kit, but it might be part of a separate report there. John,
John Tomazos (Equity Analyst at Very Independent Research)
is the 131 million tons that Glencore reported for Kidd good enough to meet your standards?
Tony Makuta
Okay. I’m not sure if it was Quite that number. But I mean the level of drilling and the level of quality of workmanship, we’re not questioning that at all, John. We didn’t produce 43-101 reports. This is your report done in the past. But I mean the drillings have been always done to a measured and indicated standard for the mining modified areas really where most of the resources into the deep part of the mine so really could be added to the resources. But it’s really not because of the quality of designation or the drilling that they’re not putting it in. They have uncertainties with other parts of the mining approach.
John Tomazos (Equity Analyst at Very Independent Research)
Just want to make sure I heard you right, Tony. Did you say that there’ll be a resource for Hollinger or Owl Creek or not? Right now we don’t have plans to do it, but depending on how the drilling goes, we could do one. If you’re taking material from Hollinger, do you have resources without drilling them based on earlier data since you’re putting ore through the mill?
Tony Makuta
This is broken ore. Yes, there is. There is material at Hollinger and you know, it’s a valid point that this material Hollinger we’re mining that would but part of a historic resource or resource from previous operators. And you know, it’s work we’re doing and something we’re considering. But it may be more work, John, for 2027 only because, you know, in terms of the level of drilling and the software where the other work we needed to do to verify to 43-101 level report, it may more roll into 2027 for Owen, but it is one of the key areas and a lot of potential for sizable resources.
John Tomazos (Equity Analyst at Very Independent Research)
If I could ask one more, when do you expect to have the single stage crusher at the Dome Mill and where will you put it? Will it be away from the existing mill site in case a decade from now you move the mill site?
Tony Makuta
So what we’re looking at doing, John, is right now in terms of the primary crusher, what we’re looking at doing is either getting some putting an ore bin at site and in short to bring an ore bin at site, the new ore bin and truck pump at site and do fine crushing, bring crush material from PAM or do primary crushing at sites. That’s one alternative. Second alternative would be to put that there. But we’re just working on now there’s some work in the back. If I had a drawing up, I can show you. There’s working in the back. It’s around the secondary and tertiary crushing plant and going into the Tannings where we would execute, doing some foundation work, where we would put it. Right now that would be the first phase of what we do at the Dome Mill. And yeah, the reality is we could keep the mill where it is, have a variation of crushing there and continue to run and run the dome pit for anywhere from depending on throughput rate that we want to mine at 10 to 15 years before we even have to move and replace the mill at that zone.
John Tomazos (Equity Analyst at Very Independent Research)
Thank you and congratulations on all the progress.
Operator
Once again, if you have a question, it is Star One. Your next question comes from Ken Ilodibe with SCP Results Finance. Your line is open.
Ken Ilodibe (Equity Analyst at SCP Results Finance)
Hello Tony and Tim. Just congrats on the quarter and thanks for taking my question. Well, just switching gears to operations. So you talked about production and costs improving through H2 as throughput and mining rates ramp up. So my question is, what are the main things that we should be watching over the next couple of quarters to see if the ramp up is progressing as expected and maybe just broadly, are you seeing anything so far in April into May from an operational standpoint that gives you confidence in this ramp up?
Tony Makuta
Just want to make sure I understood your question. You want to know what we’re going to watch for this year and how we’re doing in Q2, correct? Yeah. Right. So of the four sources, we don’t report separately as you know. So I’ll be kind of speaking in general terms. I would say to you that our mining rates are progressing really well. We don’t foresee any issues here at any of our operations. Of course, as Tony alluded earlier, grades do fluctuate up and down, mostly due to sequencing and some adjustment with block models that we’re doing throughout the year. So with that on that aspect, Ken, I don’t anticipate any issues delivering material to the mill, whether it’s Q2, Q3 or Q4 in terms of processing capacity. We did allude to the fact that we had a few mechanical issues in Q1. I just want to bring to your attention and others attention that if you compare what we did process in Q1 of 2026, which was about 7,700 tons per day, and you compare that to the previous, previous operator, which in Q1, 2025, they process around 4800 tons per day, you can see that we have put in place some improvements already. So later this year some of the mechanical parts, secondary screens, to name it, is going to be replaced. So that’s going to increase the availability of the process plant. And as I Did mention earlier we did exceed the nameplate capacity of 12,000 tons per day in Q1. We’re going to work towards exceeding that 12,000 tons per day in the rest of the year. And then alluding to that then the real two primary key indicators if you want them, watch for how we return achieving the ramp up. One would be dating mill throughput. As you see the mill producing, processing more on a day to day basis. Going from average 10,000 tons a day to 10,500 to 11,000 tons a day or whatever. Second part is our quarterly production of gold. So those are two main drivers right now if you want.
Ken Ilodibe (Equity Analyst at SCP Results Finance)
Okay, so is it, is it fair to say that I guess in the long term you’re working on a single stage crusher replacement, but then in the short, shorter term you are confident in the reliability of what you have right now.
Tony Makuta
In the short term what we need to do is get reliability. And the biggest part is screens on a secondary screen. That’s what’s been causing some of the trouble. So there’s lots of areas within the plant. So in the short term it’s reliability on our, on our secondary and tertiary crushing circuit. Mostly the screens that’s, you know, provided your, you know, your sizing of the material before you go to your fine orbit. So that’s critical in the short term. A longer term processing is moving of the actual primary crusher to a different location and working on other areas. A much longer term thing is to replace the three stage crushing circuit with primary crusher and a sag mill. That’s a for dome and then the other aspects. Now what we’re doing with the Kid Met site, we have a number of initiatives there now. One initiative was to get a board north to that through the sea circuit and open up capacity for, for. That gives us like, you know, 700,000 to a million tons a year of new capacity at the Dome mill because we’re processing it at the Kidd Med site. Second part is, is what we’re going to do to build a new 5 to 7 million ton of your conventional gold circuit at the Kidd Med site and the work we’re going to do on that. And then the third part is the refractory gold circuit. Now that we’re going to be able to work with that at the Kidd Med site, our, you know, Eric can go through, you can see what our resources come out. If we just look at the resources Pamour, Oil, Pond, Borden and Dome, we had well over 15 million ounces of resources, you know, and you should be able to, you know, I don’t know. You know, you don’t want to mine that over 30 years. We should be able to mine that faster. So the first part, without any exploration success, we need mill capacity. So that’s a big value driver. Second part, as you can see, Eric, and all the exploration success we’re having. So definitely we need more mill capacity and then we can become more discernible in terms of, as Pierre said, focus on higher grade and proper margin. As we understand all the different deposits, we have the potential to build a lot of new mines here. And with that, the mill capacity and those are the things we’re working on.
Ken Ilodibe (Equity Analyst at SCP Results Finance)
Okay. That’s. Yeah, that’s all from me. Thanks, Tony and the team for taking my questions. Best of luck in Q2 and I’ll pass the mic to next person on the queue.
Tony Makuta
And maybe just to reiterate this is to tell you that by the way, when we talk about mill capacity, we’re not building new mills. We’re in brownfield permitted sites. We’re just. We’re just modifying plants, right? We don’t have to bring in power, we don’t have to bring in water systems, we don’t have to build substantial new foundations or we got actually existing tailings areas we just have to modify permits on. So we’re working on within existing operations to grow this stuff. We’re not going to greenfield building brand new, permanent, brand new processing operations. Sorry, Ariel.
Operator
This concludes the question and answer session. I’ll turn the call to Mark Utting for closing remarks.
Mark Utting (Senior Vice President, Investor Relations)
Thanks very much and again just want to thank everyone for taking part in the call. As you’ve heard. To say the least, we have a lot going on. We’re making a lot of progress and there’s a lot more to come. And that’s good for a bunch of reasons, one of which is we will definitely have a lot more to talk about when we have our next quarterly call. So we look forward to speaking with you then. Enjoy the rest of your day.
Operator
This concludes today’s conference call. Thank you for joining. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
Recent Comments