Tahoe Resources Inc. (TAHO) CEO Jim Voorhees on Q2 2018 Results - Earnings Call Transcript

Tahoe Resources Inc. (NYSE:TAHO) Q2 2018 Earnings Conference Call August 2, 2018 10:00 AM ET

Executives

Alexandra Barrows - Vice President of Investor Relations

James Voorhees - President and Chief Executive Officer

Elizabeth McGregor - Vice President and Chief Financial Officer

Edie Hofmeister - Executive VP of Corporate Affairs & General Counsel

Thomas Fudge - Vice President Operations

Analysts

Mike Jalonen - Bank of America

Ralph Profiti - Eight Capital

Michael Gray - Macquarie

Mike Parkin - National Bank

Cosmos Chiu - CIBC

John Tumazos - Tumazos Very Independent Research

Anita Soni - Credit Suisse

Matthew O’Keefe - Cantor Fitzgerald

Operator

Thank you for standing by. This is the conference operator. Welcome to the Tahoe Resources Second Quarter 2018 Conference Call and Webcast. [Operator Instructions]

I would now like to turn the conference over to Alexandra Barrows, Vice President of Investor Relations for Tahoe Resources. Please go ahead.

Alexandra Barrows

Thank you, and good morning, everyone. Welcome to Tahoe Resources Second Quarter 2018 Earnings Call. Our results were released yesterday evening and a copy of the press release and slides for today’s call are available on our refreshed website. Our conference call today is being webcast live and is also available on the Investor Relations page of our website by clicking on the webcast link to the call.

Before we begin, I’d like to remind everyone that we’ll be making certain forward-looking statements during today’s presentation, and actual results may differ materially. We’d like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our MD&A and 2017 Annual Information Form.

Joining us on today’s call we have Jim Voorhees, President and CEO, Ms. McGregor, EVP and CFO, Edie Hofmeister, EVP, External Affairs and General Counsel, Tom Fudge, Vice President, Operations, and Brian Brodsky, Vice President, Exploration. After our prepared remarks, we’ll open the call for questions.

And with that, I’d like to turn the call over to Jim.

James Voorhees

Thanks, Alex, and good morning, everyone. Before getting into the review of our second quarter results, I’d like to make some introductory comments and take the opportunity to tell you a little bit about myself and what you can expect from me in this new role. I’ve spent my entire career in the mine industry. I was COO of Glamis Gold from 1999 to 2006 and led a tremendous period of growth in mine building in the Americas.

Before that, I held various senior management positions with Newmont, Santa Fe Pacific Gold and Western Mining, and over the course of my career, I’ve worked in various countries including Guatemala, Honduras, Mexico, Uzbekistan and Australia, as well as across various parts of the Western United States. I have broad based experience in both open pit and underground operations. And I’ve been on the Board of Tahoe since the company’s founding in 2010. Most recently, I was the Chair of Tahoe’s HSEC Committee, where I spent a significant amount of time supporting the executive team, developing our current sustainability strategy and initiatives, and I’ll come back to that in just a minute.

But before I discuss that, I want to make clear to you, at my new role as CEO, I am keenly aware that my job is to be a steward of your capital and to generate superior returns on that capital. In order to do that, given Tahoe’s current circumstances, I’m focused on 3 clear priorities in the near term. First, getting Escobal back up and running, second, completing our 2 expansion projects that Shahuindo and Bell Creek in order to get our gold business free cash flowing, and third, reevaluating our existing exploration and development pipeline in order to more clearly define priorities and the initiatives required for the company’s next phase of growth.

Underpinning each of these priorities is a clear recognition that we must focus on creating sustainable value for all of our stakeholders. You may have seen earlier this week that we just refreshed our website and have a new mission statement, which outlines our commitment to mining for sustainable value. This isn’t just on branding or PR exercise or an opportunity to use the buzzword sustainable, I’m talking about creating true and lasting facilities across all assets of our business, and the technical competency through operational and financial efficiencies, to superior management, to social and environmental responsibility. I fundamentally believe that is when we find this critical balance between each of our stakeholders that we are best positioned to deliver lasting value back to our shareholders.

At the end of the day, sustainable efficient operations are productive operations, and productive operations lay the groundwork necessary for profitable growth and strong cash flow generation. As I focus on these priorities, I know that some of you may have questions about my time horizon. It’s a fair question and it deserve the candid response. I’ve built in my mind throughout my entire career it’s what I’d like to do and I have a great opportunity to do that here, while rebuilding value for shareholders in the process. I serve at the pleasure of the Board of Directors and I’m prepared to remain as CEO for as long as it proves to be in the best interests of Tahoe’s shareholders.

And with that, let’s talk about the second quarter results. I’m going to turn the call over to Liz to provide a brief update on our performance for the quarter. Liz?

Elizabeth McGregor

Thank you, Jim, and good morning, everyone. Tahoe reported a net loss for the quarter of $15.6 million or $0.05 per share, reflecting the care and maintenance costs of Escobal, slightly higher G&A costs related to organizational changes and equity [indiscernible]. We also incurred a slightly higher interest expense as we drew down $75 million on our credit facility. We produced 103,000 ounces of gold and we sold just over 97,000 ounces at an average price of $1,303 per ounce.

Other operations, we reported record production at Shahuindo for the quarter and we also achieved record quarterly throughput at the Bell Creek mill. While we continued leaching during the 13-day strike at La Arena in late April, we did curtail stacking. So we are now slightly behind on ounces leached. However, this is a timing issue and we fully expect to meet our full-year production guidance.

Production costs were $70 million, depreciation was $35 million and corporate G&A was $13.7 million. We continue to incur costs related to the care and maintenance of Escobal of just over $8 million for the second quarter. On a per ounce cost basis, we were lower this quarter than the first quarter at total cash cost of $708 per ounce and all-in sustaining of $1,060 per ounce. We continue to track to meet our full-year production and cost guidance.

Total capital expenditures for the quarter were about $77 million, of which over 2/3 was project capital. We continue with our heavy capital spend as planned and we work towards the completion of our 2 expansion projects later this year. As you know, we plan to drive between $70 million and $100 million on our revolving credit facility this year to complete our expansion projects. During the second quarter, we drew $75 million on the facility and ended the quarter with consolidated cash and cash equivalents of just under $70 million. While we intend to draw additional funds from the facility this year, the extent of that draw will depend on several factors, including the timing of an Escobal restart and the speed at which we spend our capital budget.

I want to emphasize that we are well funded to complete our 2 growth projects as planned, regardless of when Escobal restarts. Once our 2 projects are completed, we will look to the appropriate time to repay the credit facility with cash flows from our gold operations. However, the timing will depend on our capital allocation priorities at that time that.

So with that, I’ll now turn the call back to Jim.

James Voorhees

Thanks, Liz. Let’s look towards the future now and talk some about our expansion projects. Both of our projects continue to track well and are expected to be completed by the end of the year. Looking at Shahuindo, construction of the full 36,000 tonne per day primary project is still on schedule for completion in the fourth quarter. The team took the opportunity to accelerate a portion of pad 2B, and I’m pleased to report that just last week construction activities were completed.

Detailed engineering of the 24,000 tonne per day circuit is significantly advanced and construction during the quarter was focused on civil works. Procurement of critical items is substantially complete. The expansion of the ADR plant is about 84% complete and we continue to make progress on the electrical substation and transmission line, with the expectation that the line will be energized in the fourth quarter.

In terms of spend, the project remains on track within the original guidance of $170 million to $180 million; approximately $121 million has been spent through June 30, of which about $34 million was spent during the second quarter. This includes an acceleration of approximately $6 million per pad 2B, which was previously expected to be spent in 2019 as sustaining capital. As we mentioned to you last quarter, approximately $35 million of the total Shahuindo expansion guidance is expected to be spent for secondary projects in 2019 in order to support and sustain the full 36,000 tonne per day.

Turning to Bell Creek. Construction of the shaft project continues to progress well. I had the opportunity to visit Bell Creek right after I started about a month ago, and I’m very excited about what this shaft is going to allow us to achieve with our operations there in terms of efficiency and depth and the potential upside we may see as a result of this project. The shaft remains on track for completion of construction in early Q4 with final commissioning and full ramp-up by the end of the year. I’m also pleased to report that all shaft excavation is now complete. Construction activities underground are progressing very well at the loading pocket, conveyor gallery and ore/waste chute installations and at both truck dump stations.

Surface construction continued with the installation of [indiscernible] on top of the headframe. In terms of spend, the shaft project remains on track within 5% of the original $80 million guidance, approximately $71 million has been spent through June 30, of which just under $11 million was spent in the second quarter. As both of these projects near completion later this year, it’s critical that we focus on our internal pipeline in order to plan for our next phase of growth. My priority over the next number of months is to re-evaluate our existing exploration and exploration and development assets. I intend to establish more rigor around our capital allocation process and how we assess each of the projects in order to determine where to deploy your capital and ultimately create the most value for our shareholders.

I’m very, very excited about the La Arena II project and plan to progress it in the near term once we complete our heavy capital spend this year. Beyond that, we also have a lot of exploration assets identified in Canada and some targets around Shahuindo that we need to better understand and assess. Clearly this evaluation will not happen overnight and it will take some time, but you should expect to see some more clarity from us regarding our pipeline in the coming months.

In terms of our exploration activities this quarter, we spent $4.4 million. In Peru, exploration activity concentrated on the north drilling the North Corridor targets, east and north of the Shahuindo mine. And we completed drilling of the deep oxide zone at La Arena, below the existing life-of-mine pit. We are now working on the geological model to understand the potential adjustments to the existing mine plan. And we’re also focused on advancing some early stage exploration at select targets in the districts surrounding La Arena and Shahuindo.

In Canada, at Timmins West, we focused our efforts on the Timmins West Mine and the Gold River trend. At Bell Creek, our efforts focused on the east strike extension of the NA, NA2 and hanging all 6 zones from underground drill stations. And at Juby, we started drilling there in May and we continued our work to refine the geologic model and examine new exploration targets.

And finally before we conclude, I’d be remiss if I didn’t say a few quick words on Escobal. Clearly that situation has been incredibly frustrating for all stakeholders. We continued to eagerly await a decision from the Constitutional Court. Unfortunately, I don’t have insight into potential timing of that decision. I don’t believe it’s productive to speculate at this point. I can tell you that the entire team of in country and here in Reno continues to work tirelessly. We remain as focused as ever on getting Escobal back up and running, important social and community work continues and we’re making progress at the roadblock daily. I wish I could give you more clarity on the situation but for now all I can tell you is that we are absolutely focused on controlling what we can. And with that operator, we have concluded the formal portion of our prepared remarks and we’ll be happy to take questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] The first question comes from Mike Jalonen, Bank of America. Please go ahead.

Mike Jalonen

Jim, welcome back after 12-year sabbatical. Nice to talk to you again. Just, I guess, you’ve being CEO there for a brief time at Tahoe, you’ve kind of elaborated on some of them, but where do you see the strength for your organization asset base and the challenges to overcome. I guess, Escobal falls in that latter category and I have a second question after that.

James Voorhees

Yes. Thanks, Mike, for that. I think all of us are aware out there that this company has some incredibly good talent. It’s been a pleasure to get to know people in more detail now that I’m here in the office daily. So to me, that’s one asset. The other big asset, of course, is our development pipeline and I am very focused in La Arena II, but I don’t want to shortcut what we have going up in Canada either. So re-evaluating those is high in priority list. And, of course, Escobal has slowed our advancement on those, but we’re looking forward to getting that resolved and moving forward.

Mike Jalonen

Okay. Thanks for that I guess, just turning to Escobal, I know I’m going to come out at a different way. On April 14 there was a new President of the Court and you guys have wrote in the press release back then that she wanted to deal with the backlog of cases quickly and I guess it hasn’t happened in Escobal yet, but has this occurred with other outstanding cases before the Constitutional Court, and if so, why is Escobal still hanging out there?

James Voorhees

Yes. I might pass that on over to Edie who has been very close to this over the last year and she probably has the best insight into that. Go ahead Edie. Thanks.

Edie Hofmeister

Hi, Mike. Yes, the court is, under Dina Ochoa, the new president’s mandate, I think they’re taking a look at their backlog, which is substantial and they’ve said publicly, I mean, Dina has said publicly even recently that she is going to make the Escobal mine case a priority. So I think we have to take her at her word there, and I understand that it’s an independent judiciary, so as Jim mentioned, we control what we can control here, but we would expect that thing would be true to their word on putting making us the priority. But, yes, they do have a substantial number of cases backlog.

James Voorhees

I don’t want to speculate on timing here, Mike. I mean, we were all pushing for this to move forward, of course, but it’s, as we have shown over the last number of months, it’s pretty futile to say next week, we are going to see a result. So we are holding firm to it.

Mike Jalonen

I guess, I’m more interested in other cases that court has already ruled on in three and half months she is in President, are there any?

Edie Hofmeister

Well, they’ve ruled on cases here and there, but nothing, nothing at the level of our case. They’ve made rulings they issued some rulings here and there, but not on the case of our import.

Mike Jalonen

Edie, may I can get it for one more question. It’s in the current press release today or last night, Tahoe mentioned recently seeing progress, aimed at peacefully resolving the roadblock. What exactly does progress mean?

James Voorhees

Yeah, thanks Michael. I can answer that one. It continues today. We expect it may continue until there is a court ruling and people are certainly waiting on that ruling. I know, with that said, we are engaging in active dialog with all of the roadblock leaders, community members, religious leaders, the community itself, and through direct engagement with the roadblock leaders, we’re hearing their concerns and hopeful that we can find a mutually beneficial solution that will lead to a peaceful resolution, that’s our focus here is a peaceful resolution of the blockade. And then start up again at Escobal the steady state.

Mike Jalonen

Does that mean that Tahoe representatives go right to the roadblock and talk to them right at the roadblock?

James Voorhees

That is correct. We have some new talent on the ground in Guatemala and that’s exactly what they’re doing.

Mike Jalonen

Okay. Thanks for answering all my questions.

James Voorhees

Hey, thank you, Mike. Good to talk with you, here.

Operator

The next question comes from Ralph Profiti, Eight Capital. Please go ahead, sir.

Ralph Profiti

Yes, good morning. Thanks for taking my question and congratulations, Jim.

James Voorhees

Hey, thank you very much.

Ralph Profiti

Jim, Phase 2 at La Arena looks like one of the more interesting opportunities to me because it’s the advanced to PEA stage. I’m wondering if you could tell us a little bit more on how you see it fitting into the Tahoe strategy and maybe more specifically when will we be looking at a strategy update.

James Voorhees

Yeah thanks for that, Ralph. How does that fit to our strategy? Well, there’s nothing like owning a great deposit already, right. So from a strategic standpoint, I’m looking forward to advancing that next year where, you know, we will be free cash flowing from our gold business next year and that’s going to provide our funds so that we can start moving that project forward. So that’s clearly our focus after Escobal and getting these current projects completed advancing La Arena too.

Ralph Profiti

So maybe somewhat of an update to sort of a feasibility study stage sometime 2019, early 2020, that’d be too far of a stretch?

James Voorhees

Yes, don’t have the timing nailed down yet. But we’ll look for some news on that in the new year certainly.

Ralph Profiti

Sure. Okay. And then second question, Jim, regarding this 10% increase at Bell Creek mill to 4,400 tonnes a day, should we think about this in the context of this now needing to move up in the exploration priority list, because the reserve life is relatively limited and I’m not sure if we are going to get sort of a proportionate increase in gold production, but just as how the exploration strategy fit with the mill optimization here.

James Voorhees

Yes, thanks. The, it also ties directly into with the Bell Creek shaft, of course. I mean, I was thrilled what I saw there at Bell Creek and got some really good detailed look at that project and the future. So I see the shaft is the opening up a whole new avenue, the underground exploration works advancing. So looking forward to a bigger contribution of Bell Creek. In terms of the mill itself, there are some minimal capital expenditures that are needed. I think we ran around 3,900 tonnes a day last quarter. I’ve been talking with the folks up there, and they think we are going to get up around 4,400 tonnes a day. And the mill is going to have the capacity, now it’s up to right there in the mines to proceed that mill and that’s our next, next step with that.

Ralph Profiti

Okay. Jim. Thanks very much. Look forward to hearing an update.

James Voorhees

Hey, thank you, Ralph.

Operator

The next question comes from Michael Gray who is with Macquarie. Please go ahead.

Michael Gray

Hey, good morning. On the Bell Creek mill, just a follow-up on the throughput, this quarter being plus 3,900 tonnes per day. Can you give us a little bit more color on what drove this performance, and in the near term can that be sustained?

James Voorhees

Yes, that’s great question, Michael. I’ll turn it over to Tom, who has got a lot of that detail about how the last quarter went production lines up there. Go ahead, Tom. Thanks.

Thomas Fudge

Sure, Jim. And one of the things to keep in mind that the main player of 3,900 tonnes per day was a bit conservative, and that wasn’t based on actual operating results and the guys have since we’ve fired up the SAG mill there, they’re constantly looking at how they can get a little bit more through all the time. A lot of that’s dependent on the work index of the various orders we see, et cetera, et cetera. So they’re always pushing it and always looking for ways to maximize the mill throughput. And sometimes this comes down to having pump capacity on the back end of the mill to keep the solutions moving through, having the stripping capacity in each circuits, et cetera. And we’ve been able to do all of this without spending a lot of capital. And so it’s just a real excellent testimony to the guys there on the ground that are always pushing it as best as they can.

Michael Gray

Any maintenance scheduled to the second half of the year on the mill?

Thomas Fudge

Well, nothing out of the ordinary.

Michael Gray

Okay. So SAG mill liner changes and things like that?

Thomas Fudge

Well, that’s just all part of our 92% availability calculation. So we can actually run the mill a little bit above 4,400 tonnes per day for any given day. But of course we have to factor in those things such as no liner changes and the other kind of maintenance associated with the handling slurries.

Michael Gray

Okay. Just switching back to Escobal and Guatemala, the news release really laid out all the things that were delivered in early April as to the Constitutional Court requested. It’s including just focused on the third-party review of the environmental impact study and third-party review of MEM consultation process, is that a 100% done, and it’s just a matter of the courts reviewing that and analyzing that information, or is there any outstanding work required by the third parties?

James Voorhees

Yes, it’s done, and Edie, did you have some more color on that?

Edie Hofmeister

Yes, it was done a little while ago, and I think the court is still looking at those studies and digesting them a little bit. I mean, that was a pretty extensive list of things that they got from the outside sources.

Michael Gray

Yes. So being 3 or 4 months in is, it seems to me like a reasonable amount of time notwithstanding any backlog. But I guess, as you’ve stated, there really is no outlook on timing?

Edie Hofmeister

I think we’d be speculating

James Voorhees

Yes. We, definitely would be.

Michael Gray

Last question, Jim, on you mentioned there’d be some clarity on the pipeline over the next few months. Can you elaborate it all in terms of would this be including noncore asset sales or what kind of clarity on the pipeline?

James Voorhees

Yes. I mean, the clarity really comes down to exactly what we’re going to see as we I don’t want to say, well, re-study what we’ve got up there and really understand and there’s a new focus that we’ve taken rather than trying to advance multiple areas concurrently. We are really going to start zeroing in those projects that we see have the greatest potential in the very near term. So that’s how we’re heading with that. Anyhow we got our budgeting process coming up here over the next few months and that’s when we’ll have that better clarity and that’s when we’ll get back to you.

Michael Gray

Okay. Very good. That’s it for me.

James Voorhees

All right. Hey, thanks, Michael.

Operator

The next question comes from Mike Parkin with National Bank. Please go ahead.

Mike Parkin

Hi, guys. Just a question on Shahuindo, with Pad 2B, does that now give you pads base for all of the reserves or where does that stand in terms of capacity once 2B is complete?

James Voorhees

Yes, that doesn’t give us pad space for all of the reserves, but it certainly with the acceleration brings us in the really good situation going into the new year.

Mike Parkin

And when would you have to do another one by?

James Voorhees

Tom, what do you think on that timing-wise?

Thomas Fudge

Well, the pad 2B capital we’ve talked about so far is for the expansion capital. And this is really the base of this valley fill leach pad. And so it is it’s got additional under-drains and abutments and things like that. So it’s not your typical leach pad space. So it’s part of the expansion capital, everything after that will be part of our ongoing sustaining capital. So every year, we’ll add a little bit too, but this gives us actually with the 22 hectares we’ve completed, it gives us 1.5 plus capacity. So we always like to have a little bit ahead of ourselves in case we have any hiccups in ongoing construction.

Mike Parkin

And does this solution flow through the first pad from Phase 2 or are they separate pads?

Thomas Fudge

Yes, they are separate pads. Pad 2A is up at the top of the valley, and Pad 2B is down at the bottom. So they’re actually 2 solution flow circuits Pad 2A reports to PLS 1 and PAD 2B reports PLS 2.

Mike Parkin

Okay. And then just maybe a follow-up on Mike Jalonen’s question about negotiations with the blockade at Escobal. Have you got a sense of like what are their key demands and why they’re holding a blockade there?

James Voorhees

Yes, we’re really not at a point where we want to talk about that in any detail. We just are continuing that dialog and it’s been really good to see that dialog with the leaders are to open to that talk with us, so we’re getting ready to get our permit and our license back and get running again.

Mike Parkin

Okay. And can you confirm that as you suspected it’s manned by more than one party?

James Voorhees

Yes. I mean, this is a broad community there. There are lots of different individuals involved.

Mike Parkin

Okay. All right. That’s it for me, thanks, guys.

James Voorhees

Hey, thank you, Mike.

Operator

The next question comes from Cosmos Chiu with CIBC. Please go ahead.

Cosmos Chiu

Hi, thanks, Jim and team. Maybe a few questions for me here. First off, on care and maintenance, I see that your care and maintenance costs for Q2 was $8.8 million, it decreased quarter-over-quarter, but it’s still quite substantial. Jim, could you remind us what’s included in that number? And from that perspective, is there any opportunity in terms of decreasing that cost?

James Voorhees

I think, Liz is probably got the best detail and I’m going to turn that over to her.

Elizabeth McGregor

Sure. So included in there, you have your general things like your payroll. One of our larger costs in addition to payroll is always going to be the physical security that we have there at the mine sites. Regardless of whether we’re operating or not, we haven’t changed our security standards. We also have some ongoing maintenance costs, things like that, legal costs as well as we’re looking at dealing with the Constitutional Court and roadblock things like that. So essentially right now all of our costs that are incurred in Guatemala are going to our care and maintenance. We’re constantly looking at areas where we can reduce it, but there are certain areas like I mentioned, security that just cannot be reduced regardless of our situation.

Cosmos Chiu

And I would imagine like water pumping is a substantial costs as well?

James Voorhees

Yes, we definitely are keeping those pumps running.

Cosmos Chiu

And then I guess again, following up on that, you drew about $75 million or you did draw about $75 million from your line of credit. In the case where Escobal doesn’t come back in 2018, do you foresee needing to draw on the line of credit once again in the second half?

James Voorhees

No. We’re staying within our guidance there of $70 million to $100 million for the year, and I don’t see a need to change that.

Cosmos Chiu

And then maybe switching gears a little bit, in Canada, in Timmins, I see that your head grade improved in Q2, 3.81 gram per tonne. Could you maybe comment on that? It is higher than your reserve grade. Is it sustainable? Is it due to mine sequencing, Jim?

James Voorhees

Yes, we’re running a bit higher. In the second half, we expect to average about the same. It’s been some positive grade reconciliation that’s been helping it out in the period.

Cosmos Chiu

And where is that, is that mostly the positive grade reconciliation in Timmins or is it Bell Creek, where is it coming from?

James Voorhees

That’s in Bell Creek.

Cosmos Chiu

Bell Creek. And on that, when Bell Creek comes on with a new shaft, how could we or can we expect any kind of grade improvement long term at the mill or is it mostly going to be throughput?

James Voorhees

Yes, I mean, it’s definitely the throughput change and I want to go back, Cosmos, to let you know that it’s actually 3.6 grams per tonne, that’s what we’re running and second half will be about the same. But, yes, going forward, it’s going to be about the throughput in the mill in the near term.

Cosmos Chiu

Yes. Sorry, the 3.61 is your year-to-date in 2018 – 3.81 that I had mentioned earlier was for the quarter in Q2.

James Voorhees

Yes, exactly.

Cosmos Chiu

Okay. And then maybe Shahuindo here, Jim, your recovery or what we can call recovery looks to be improving, it’s always difficult given that this is a heap leach and it’s given the leach kinetics. But at least looking at what you stacked versus what’s come out in terms of gold production, gold deployed, it looks like it’s improving. Could you maybe comment on that?

James Voorhees

Yes. Sure. Actually, we were really pleased with what we’re seeing there. Of course, we targeted our start-up hits an area that had good material types and as we’re building the C&A plan, this gives us a nice boost along the way. We’re obviously really pleased with the recovery we’re seeing. It’s an apparent recovery. I’m not going to take it to the bank yet at this point. It has a lot to do with timing of solution application rates and locations, et cetera. So right now, I’m optimistic going forward about what we will see at Shahuindo, it’s just too early to nail it down at this point, but our guys are definitely looking at it.

Cosmos Chiu

And maybe it’s too early to answer this question as well, but in Q2, you mentioned that 80% of what your stack was coming from run-of-mine, the other 20% was coming from what was crushing and agglomerated. Do you have any idea at this point in time what the difference is in terms of recovery, how that improves after you’ve crushed and agglomerated it?

James Voorhees

Yes. Again, it’s early time right now. We’ve got, like I said, some good news coming out there and the guys are investigating as we speak, understand that that differential between run-of-mine and the crushed material and really how to optimize use of that circuit.

Cosmos Chiu

Great. Thanks, Jim and team. That’s all I have.

James Voorhees

Thanks, Cosmos.

Operator

The next question comes from John Tumazos from John Tumazos Very Independent Research. Please go ahead.

John Tumazos

Jim, congratulations on your appointment.

James Voorhees

Thanks, John.

John Tumazos

If I could ask 2 questions. First, concerning the Guatemala engagement, there appear to have been a mistake back a few years ago by the Mines Ministry or in the approach by Tahoe, where now it’s considered the Xinca people exist and need to be consulted. And the Xinca have a very unusual ethnic history where in the 1700s, the Catholic Church put a bounty out and actually paid cash per person killed, sort of a terrible history. And we all have friends that are Jewish or I have friends that are Armenian or have an unusual psychologies sort of survivors of exterminated people, they tend to be mistrustful of outsiders stick to themselves, paranoid, distorted and I might be reading too much into this, but have you tried to cut through the legal process as opposed to the court and your attorneys and just go and sit down with the Xinca leaders and the country and the Xinca people supposedly at the site. I know they probably don’t even speak Spanish and have their own language, but it would appear that you need to sort of engage these people on the human level.

James Voorhees

Yes. John, thanks for that. And that’s exactly what is transpiring. We are meeting with leaders of the Xinca communities. There’s been some misinterpretation or miscommunication. I don’t think we ever said that they weren’t Xinca individuals in our areas. The question is, are there Xinca communities and that’s probably a fundamental difference back to our earlier work.

John Tumazos

But Jim, do you intend to get down to Guatemala and have a cup of tea with people and just get to know them.

James Voorhees

Yes. I’d love to be able to do that, yes, of course I might have a few other fish to fry right now, but, yes, looking forward, you bet. It’s great to get...

John Tumazos

I am mistrustful of attorneys, sometimes they want to prolong the procedures, so they can bill hours, but if you just meet with the people on a human level, it might go a long way.

James Voorhees

Yes, and we really are. We have got some great people who we just brought in a new guy that’s engaging with the community. So I agree with you 100% and that’s what we’re doing right now. And, yes, so one day it will be awesome that I get it. Thanks, John.

John Tumazos

If I can ask the second question and this is more financial, traditional. For this 10 months 3 months and 6 months, you had $10 million and $20 million of current income tax expense and I’m assuming that’s all being levied in Ontario and Peru. I’m looking at the $8.75 million pre-tax loss for the 6 months and I’m adding back the care and maintenance in Guatemala that’s not deductible in Canada and Peru. I’m adding back the whole G&A and I’m adding back the interest expense and I’m getting about $40 million of pre-tax income. There must be another $10 million or $20 million of expenses that are not deductible in Canada and Peru. What categories would they be in your income statement?

James Voorhees

Yes. Liz would love to answer that. She is jumping out of her chair right now.

Elizabeth McGregor

So, I mean, there are always differences between both your timing and your deductions related to things like depreciation and development expenses and in both Peru and Canada, we have differences between the effective rate and the statutory rate. So there is a rate reconciliation at the back in the notes for the financial statements that should walk you through that. And I’d be happy to discuss that with you in more detail offline, John.

John Tumazos

Thank you.

Operator

The next question comes from Anita Soni of Credit Suisse. Please go ahead.

Anita Soni

Hi, good morning, Jim and team. Most of my questions have been asked and answered. I just wanted to clarify on La Arena. With the stacking with the disruption that you had there and the stacking on the pads being interrupted, could you give us some kind of idea of how many days of mining was actually interrupted, so we can get an idea of relative performance in Q3 versus Q4 at La Arena?

James Voorhees

Yes. Certainly, Anita, thanks. We had about 13 days there that we lost on stacking and with the heap leach that follows through, but for the year, we’ll be spot on for our tonnes and grade in ounce production at the site. So it’s just a hiccup in the second quarter that really doesn’t affect our yearly production.

Anita Soni

So, I guess, in terms and it’s bottom end of the production guidance range rather than mid to top end where you anticipating a strike, is that like if you’re, if it’s right on par for your tonnes and grades and then I guess you would have budgeted this for something like that?

James Voorhees

Yes, for La Arena, for the full year, we’re good.

Anita Soni

All right. Thank you and welcome back.

James Voorhees

Thanks.

Operator

The next question comes from Matthew O’Keefe of Cantor Fitzgerald. Please go ahead.

Matthew O’Keefe

Thanks, Operator. Yes, just lot of the stuff has been answered, so thanks for that. Just on Escobal, I want to circle back on that and ask about the longer something’s on care and maintenance and I’m guessing under the underneath the blockade as well, things can slip and I’m just wondering what your current thoughts are on a restart. How much additional capital would that be and how long would it take to spin Escobal back up to full production once you get your license and export credit back?

James Voorhees

Yeah, thanks, Matt. We’ve really kept our people very busy on the care and maintenance side. We’ve done a lot of things while we have this opportunity. So we haven’t we haven’t certainly wasted the time in the last year. So we are at a good spot where you’d see the after a decision, you’d see us up and operating again within a month or so, as the mine is ready to go and that’s we’re looking for that opportunity.

Matthew O’Keefe

But that would be would there would be a ramp up again though, like would it be a quarter to get back up to full capacity or from once from the start-up or already you sort of just

James Voorhees

Maybe not that long, maybe not that long. The mine is in really good shape right now, obviously, we’ve had this opportunity to work on a lot of stuff and it’s in good condition.

Matthew O’Keefe

And so the blockade isn’t really I mean, how is it then inhibiting some of your care and maintenance efforts, I mean it’s just a cost thing?

James Voorhees

Yes, go ahead, Tom. You have some thoughts on this.

Thomas Fudge

As Jim said, we’ve done a lot of things to keep the mine restart ready and that includes ground control in the mine and having to repair some local ground [indiscernible] and things like that. And so we have a lot of that material on hand, that hasn’t been that big a deal. We can get some things through the roadblock. We have to be careful how we do it, but

James Voorhees

We’re not driving semis through the area by any means, no.

Thomas Fudge

No. We’re not doing big shipments of operating materials through, but we’ve our people have been very diligent in how they keep the materials we need to maintain the mine in a restart ready status throughout these since last year.

James Voorhees

Our goal here is to come back up running and have a steady restart and steady production.

Matthew O’Keefe

Okay. Well, sounds good. Let’s look forward to getting that mining license back.

James Voorhees

Yes, tell me about it.

Matthew O’Keefe

Thanks.

Operator

This concludes time allocated for questions on today’s call. I would now like to hand the call back over to Jim Voorhees for any closing comments.

James Voorhees

Yes. Thank you, operator. I appreciate all your questions, and I just wanted to come back and reemphasize that I’m very focused on returning value to our shareholders and lasting value for all of our stakeholders. I look forward to meeting with you and talking more of our investors in the coming weeks and months. And thank you all very much for your time this morning.

Operator

This concludes today’s conference call. You may disconnect your lines. Thanks for participating and have a pleasant day.