Americas Gold and Silver Corporation (USA) Earnings Call Transcript & Summary

Greetings, and welcome to the Americas Silver Corp. Fourth Quarter Investors Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, Monday, March 9, 2020. I would now like to turn the conference over to Darren Blasutti, President and CEO, Americas Silver Corp. Please go ahead, sir.

Thanks, Dave. And before we start, it's Americas Gold and Silver for all of you so we haven't forgotten. Thanks for joining us on a pretty difficult day over all the markets today. Before I get into the presentation, I'll just advise everyone that we will be making some forward-looking statements, mostly towards our guidance and our 2021 outlook. So obviously, we try to do our best to predict what will happen in the future but not always easy. So just make sure you've read Slide #2. On to Slide #3. Joining me today in the conference is Daren Dell from Nevada at the Relief Canyon operation. In the office here today with me, Warren Varga, our Chief Financial Officer; Peter McRae, our Chief Legal Officer; Stefan Axell, our Vice President of Corporate Development and Communications; and Shawn Wilson, our Vice President of Technical Services, all of them to help me with questions in case there are any during the course of the presentation. Before I get into the markets and what's going on and our views on gold price and that kind of stuff, we're going to take you through what we did in 2019 and where we think we're going in 2020 and '21 and where we think commodity prices are going and how we think we can really outperform our peer group. Just as a 2019 overview, the Relief gold mine in Nevada has successfully poured its first gold 9 months from the start of construction, slightly later than we would have hoped but still very successfully -- sorry, I haven't moved the slide for everybody. On Slide 4, very successfully done it from start to end in 9 months to get to gold pour. We were within our budget of $28 million to $30 million guidance and within our Board budget of around $27.8 million. The construction at Relief Canyon is complete. The ramp-up is proceeding quite well. I'm sure, Daren, during, of course, the questions will give us a bit of an update out there. And we expect to have commercial production -- to reach commercial production in Q2 2020. As with the acquisition of Relief Canyon and our silver growth from our existing operations over the course of the year, we increased our gold equivalent reserves by approximately 230%. That includes the adjustment for Galena, given about 5 million ounces of silver was taken out of that calculation as Eric bought 40% of the mine. And that that increase of 230% is going to drive an increase in precious metal production by probably almost 600% in -- by 2021. So very exciting time for the company as we move forward despite the challenges that have been going on in the market. Our production from our Cosalá Operations in 2019 increased year-over-year across all key metrics and increased mill tonnage to over 1,750 tonnes per operating day. If you remember, the feasibility study was a -- pre-feas was about 1,600 tonnes a day. We operate generally around 1,800 tonnes, but when you have a few days here and there for maintenance, it kind of drops you down over the course of an operating day, over the course of the year. But that operation has exceeded almost all targets that we have set forth, which is fantastic. Unfortunately, we'd like to see a better market -- into a better market and we'll talk a little bit about that. We also announced the joint venture with Eric Sprott on Galena. I mean when we talk about the loss in 2019, it's really around what happened at Galena, lower metal prices and the underperformance of the Galena mine. We solved that issue, we believe, by having Eric come in and put $20 million into the operation -- will put $20 million to the operation over the kind of 18 months. And we'll follow that up with another $5 million for $25 million. And we think that will get the mine to increase resources, production, and reduce operating costs at the mine and be back into our guidance in 2021. And again, we've already seen that the recapitalization is starting to work. We've been focused on mine development through the fourth quarter and into the first quarter. We bought new equipment which is now starting. We're starting to see the benefits of that productivity of this new equipment. And exploration is beginning to start as we've drifted out at the 4300, 5500 levels, and we believe we're going to expand silver resources, known silver resources over the next year and make this mine profitable. And finally, in 2019, Pierre Lassonde and Trinity Capital are now a key shareholder for the company, so our 3 largest shareholders, Eric Sprott, Sandstorm Gold, and Pierre Lassonde make up about 20% of the overall shares of the company. So very excited about that. I'll talk a little bit about our summary of 2019 results. We processed a lot more ore this year as a result of the ramp-up in -- at San Rafael. And silver, although silver was down because grade was down because the majority of the silver came from the San Rafael mine rather than the Galena mine as Galena had lower production and then was taken out of our results for the fourth quarter. But zinc, you can see up materially, lead a little bit down as a result of the underperformance at Galena and silver equivalent production slightly lower. But if you kind of add it back the fourth quarter for Galena, you'd kind of get to where we similarly were in 2019 for production. So really, a great year in Cosalá offset by not such a great year at Galena. And again, the reason for the joint venture and the money we'd be putting in. You could see silver grade was down as a result of more production coming from Mexico. Zinc grades were higher and lead grades a little lower again as predominantly Mexican production there. Cost of sales was pretty much equal from year-over-year. Cash costs were up and all-in sustaining costs were up as a result of lower silver production as well as decrease in metal prices for the year. So and again, none of these include a fourth quarter from Galena, which would have had more production through the course of the year. We look at financial results, obviously, revenue down as a result of silver equivalent, realized silver prices were a little bit higher, but you could see lead and zinc were quite lower and you had less production coming out of Galena so it was really the move in revenue. The net loss, I'll explain on the next chart, which is obviously, nobody wants to see a $34 million loss. I think it's in relatively, unfortunately in line with most of the silver producers in the industry as it was a very difficult year for the silver industry last year. So the company ended the year with a cash balance of around $20 million. Around $13 million of that is at the Galena Complex and around $7 million of that was used for continuing to build or is being used for the continuing to build the Relief Canyon as we move forward. Talking about the next slide, we're on the waterfall chart. And if you look here, you could see the net loss was really a combination of a couple of things, higher TC/RCs for zinc. So really, we basically paid $10 million more to process our zinc in 2019 than we did 2018. A lot of that -- about 80% of that was pricing and 20% was volume-related there. And then we had decreased Galena production year-over-year for about $8 million, so you got about $18.6 million there. You had the transaction costs from Pershing, which gets you to $21 million. And then we had an accounting conversion loss on the Sandstorm convert as it's in the money for about another $4.4 million. So just there, you're talking about $26 million of loss in 4 relatively small items. So although San Rafael's production increased the value, the higher TCs/RCs ate into that and the Galena production. So you see a much higher net loss. Obviously, it's one of the things we thought about as we looked out and bought Relief Canyon and a high return product in gold because it's been very difficult for the last 7 or 8 years to make money on the silver side. We're still hopeful that silver will do better but it led us here and one of the reasons why we're actually here. So I'll give you a little bit of an update on Relief Canyon. As everyone knows, we poured gold in mid-February, a little bit later than we wanted to as a result of some equipment from the manufacturer, the back-ended plants on the mercury abatement equipment. That supplier has been a trouble for a number of companies. We were aware of it. We just were not aware of how difficult it was going to be to get some of the equipment that we needed. But regardless of that, the mine tonnage at Relief Canyon is tracking ahead of schedule. The ore stacking is ramping up. The rate is ramping up every day. 14,500 is the stacking and conveying tonnes per day. On a bad day, we're doing 8,000 tonnes. On a good day, we're doing 12,000 tonnes. So as our 24-hour a day process is now working up as operating experience and operating time is increasing, we're getting more good days rather than bad days, and we believe that is ramping up on schedule for our commercial production. Second quarter. We've got 250,000 tonnes of ore currently stacked on the pad. We've got nearly 200,000 tonnes of ore stockpiled ahead of the crusher. And waste stripping is well ahead of the schedule as the back-ended plant was slightly delayed from where we were. That allow us to strip a lot more, which will benefit the mine as we get it into commercial production for the rest of the year. And most importantly, we're seeing heap leach permeability, leaching characteristics of the ore are meeting our expectations. We expect that to be pouring. We've poured twice since start. We're going to pour again, I think, somewhere this week. And we're starting to see that ramp-up of solution in the plant. And again, we're moving towards that end of Q2 or during Q2 commercial production timing. So all things are going well there. There's always teething problems and issues. But as I said, I think the biggest challenge we've had is operating experience on that second shift, getting people in place. There's obviously a bit of a shortage of workforce across the U.S. No different in Nevada, but we're managing with a lot of training and the guys down there are doing a great job. And again, I'm happy to report that we built the mine within our budget expectations to get it to the first gold pour. We're now in the working capital phase until we get to profitability. And as we've discussed, there'll be around $10 million additional number of working capital as we work through to get to that commercial production number. Cosalá, I think it's pretty clear that across all metrics, it was a success with respect -- with the exception of prices on lead and zinc. And the zinc TC/RC charges were negative but the mine did very, very well. It produced at a very low cost of silver. It improved all its metrics across the year from recoveries to grade to tonnes milled. And again, once we've also managed to spend the money to get up into the Upper Zone, which will be a key part of the 2020 towards much late end of 2020 mine plan when we start to access areas of the high grade on a consistent basis from the Upper Zone. The main zone obviously was doing 1,800 tonnes on its own, but we're making the choice to start bringing on some more silver at the end of the year and mixing those ores together. That development ramp reached just around December, I think. We're into some lower-grade areas for a bit comparable to the main zone. On silver, maybe a little lower on lead-zinc, but it comes with a very, very high upside of silver towards the end of the year, which is obviously we're a silver and gold producer, that's what we want to be doing. We obviously are -- I think everybody's seen the press release. We're being impacted by [ in ] illegal blockade. The blockade has nothing to do, and I'll reiterate a number of times, nothing to do with our relationship with the local workforce or the workforce's view of the company. It's really about some individuals who are looking to basically benefit from trying to bring in a new union and bring in somebody who could take over the trucking contracts. It's a very standard procedure these days in Mexico. Unfortunately, it's impacting us. So it impacted 6 or 7 other companies in the last little while. So it's illegal. We are working with all levels of the government of Mexico and Canada at the state and federal levels to remove the blockade. This has gone up to the President. These things usually run about 2 months has been the history. We're now a month in. So we're reasonably confident that we're making some progress. We have taken a zero tolerance level with the people. We are not doing any negotiations with the people that have blockaded the mine. It is an illegal blockade and they're not people that we're going to negotiate with. Our -- we're very happy and very thankful for the support we've gotten from our workforce and from the local community. We're somewhere around 50% of the GDP of a 6,000-person town. And so we're -- they've been very helpful not only in the local town of Cosalá. They've been to the State of Culiacán and they've been to Mexico City to see the Minister of Labor and other departments and talk about how well the company has treated them and how they want to get back to work, and we'd like to see them back to work as well. But our focus is on the long-term benefit of our employees and of our asset and not about getting something done in the short term. We can always make a deal in the short term to get back to work. We want to get back to a place where we're going to have long-term ownership over a great mine going forward, and that's the way we choose to negotiate as we move forward. On the Galena Complex joint venture with Eric Sprott, again, about $20 million. You can see Galena has a large resource base of almost 70 million ounces across P&P, M&I and inferred resources. And we're -- to find a mine with as much infrastructure as Galena, with as much resource in the ground would make it very valuable, except in current silver prices made it very difficult to kind of operate a profitable mine. So our options were to go out and do an equity raise for our shareholders to raise the $20 million, to shut the mine down or find an investor. We think we found the perfect joint venture partner in Eric Sprott. He believes in much higher silver prices. He believes in the mine. He believes in the management of the company. So that Recapitalization Plan, which is about $25 million over the next 18 months, will allow us to basically increase production, increase working areas, bring in more productive equipment and find more additional resources that could be mined to open up more working faces. So that Recapitalization Plan began on October 2019. As far as the joint venture, really started to see some progress in mid-November. We're now at the end of February. We think that the Recapitalization Plan has impacted productivity, worker morale and worker safety. Obviously, with morale, where people don't know if they're going to have a job or not, it's hard to be excited to come to work every day. And knowing that the morale is better and that people are excited to come to work, safety has been also better, which is probably, if I could say anything, it seems weird that money would make a mine more safe. But I think what we're finding is, workers are very excited to be at their jobs. They're taking safety more seriously and we've really improved our safety record. I'm really happy that Darren, [ Anton ] and their team to see that as well. So equipment, 4 pieces of equipment have arrived on site. I think one has in service. One has been literally cut into pieces, put back together underground and is about to get commissioned and 2 more pieces are getting cut up right now as we speak. So it has to go down the shaft and then be put together. So by the end of March, early April, that equipment will start to show productivity gains so we're excited about that. The extensive repair to the 5500 level and 4300 level drifts are ongoing. That allows not only for production upside but allows us to test some deep drill holes that we're very interested in. We've seen some good results so far but we're not a junior exploration company. As we compile a lot of those results, we'll look for new areas to mine. But we have had some interesting holes but these levels are where we're going to be able to really drill deep into those silver vein areas where it traditionally was 20-ounce silver and 1% to 2% copper. So we're going to be getting to those kind of at the end of the second quarter to be able to drill those out. So I think as we look at where we've gone, we've started to see productivity rates in January and February exceed where we were in the back half of 2019, which is important. We're not profitable yet, but we're moving there every day. And we're seeing the impact that this has on not only, as I said, morale and safety but production and profitability as we go forward. And again, just to reiterate, none of the numbers that you see that we're going to put out have Galena in them, but we will be putting them out sort of in 2021 time frame. Before I go on to 2020 guidance and outlook, I've been getting a lot of phone calls about what's going on in the broader market. Obviously, we've seen the coronavirus and now the oil, the OPEC-Russia oil relationship breakup causing the market to really underperform, getting a lot of questions about why gold isn't performing better and why the company's stock price has traded from $4 to kind of mid-$2 now. And what I can tell you is, I don't think any of us are surprised. If you look back at history, during the financial crisis in 2008, gold sold off initially. In fact, gold had gotten to a high of about $1,000 and flew all the way back down to under $700 in October 2018, only to rocket back up to $1,900. So I take a quite -- I'm quite impressed with how well the gold prices stayed in because if you could think about what's happened in the oil sector, what's happened in the general markets, people are on margin and they're selling stuff like gold and gold equities to cover their margin calls. We're always going to get caught in the front end of this trade. Everybody is down. The more silver you have, the more you're down, the more junior gold, the more you're down. So we're obviously unhappy about it. I personally acquired some stock at $3.51 last week, or to -- and I'm obviously down about $25,000 already. So but long term or in the short term, we think we're going to see gold really start to move. We're going to see the gold equities come back. We're already hearing from our friends in the brokerage community, the generalist investors are coming into the sector. They're obviously looking at the senior producers right now and the royalty companies, and they will be the first guys to come in. But as the sector starts to show these high free cash flow yields at spot prices with attractive balance sheets, I think this disconnection between gold price and equity price will change, and we've seen that. So although we're unhappy to see our stock price down, we're happy that we're bringing on a gold asset into much higher gold prices. If you remember, we bought Relief Canyon at $1200 -- about $1,185 gold when we announced the transaction. At $1,290 gold, we had about $150 million NPV. We paid $38 million for it. If gold price is at $1,675, you can more than double that number. So we're very excited as we move forward to be bringing it on. We think the gold price will recover. And I said I'm actually quite -- I think it's holding in quite well given what's happened historically, and I think we're going to see a quick reversal on the equities in the next couple of weeks as people start to look for more exposure to the sector as they're underweight. And I think that will only bode well for us. You've got gold price at all-time highs in Canadian dollar terms today, in Mexican peso terms. So again, it may not be performing as people are flying to the U.S. dollar right now for safety, but you see negative yields there on the curve. And then you see currency devaluation across all the sectors other than the U.S. market. And I think it's only going to bode well as interest rates continue. So again, we're very bullish on gold and we're very happy to be bringing on a really low-cost asset. So what does that low-cost asset do for us on Slide 11? You see gold production going to 50,000 to 60,000 ounces. You see silver production going down a bit this year as a result of no Galena in our guidance. But overall, we're going to go from 14,000 gold equivalent ounces to between 60,000 and 70,000 gold equivalent ounces, that moving to around 100,000 ounces in 2021. You're going to see costs start to come down between 2020, 2021 as you've got a bit of a ramp-up going on at Relief Canyon this year. So again, we're going to talk -- we've talked about being in a relatively low price environment in 2021, producing almost 100,000 ounces of gold. And gold where they are, that will be pretty significant free cash flow generation for the company starting at the end of the third quarter, going into the fourth quarter this year and carrying through, through 2021. You can see our sustaining capital is quite low for both years. We don't have it big now that the mine is built. We don't have a very big capital program outside of Galena, which is being funded separately. And so that again is going to generate free cash flow for the company. So we're very excited about our outlook. We're very excited about the gold price. Sometimes, we trade more as a silver producer like we did today. I think as I said, as gold stabilize and continues to go up and people see production coming out of Relief at commercial production, which is not very far away, we think our stock is going to outperform our peer group. And again, I look at the guidance and say, we're doing our best estimate. We've been conservative with the leach ramp, with leach curves and ramp-up. And we hope that we could do better, but I think this is where we feel we can be confident about delivering to you in these numbers. And people are going to ask about, well, you've got 800,000 or 900,000 ounces of silver here. You've got a blockade at Cosalá. Again, we may lose a month or 2. But when you divide 800,000, 900,000 ounces by 80, you're really talking about a very small percentage of that gold equivalent ounce. It's really Relief Canyon driving that growth. And so we're pretty comfortable with our guidance where it sits, and so we're happy about where we are. Moving on to growth in precious metals. Again, you could see here Relief Canyon now in ramp-up after first gold pour. San Rafael, once it gets back up and running at steady state and Galena coming out in 2021, increasing that profile beyond what you see there. So a lot more leverage to the precious metal prices as Galena comes back in, in 2021 that I don't think is being reflected in our stock today. And of course, we got EC120. If we decide that lead and zinc are going to underperform, we'll look at our higher-grade silver and our ability to bring that on faster. And so again, they're just projects and optionality that we can deliver into depending on where we see prices going as we move forward. So finally, just to end off before questions, what did we achieve in 2019? We got initial construction completed Relief. We poured our first gold in February 2020. We closed the joint venture with Eric Sprott and got an investment from him. We ramped up San Rafael to full production beyond all of our -- all expectations of the pre-feasibility study and got another great shareholder in Pierre Lassonde to join the company. What are our key milestones for 2020? Our first year of gold production into a rising gold price environment. And again, we think as we get between the third and the fourth quarter, we're going to start to ramp up towards full production, which will be exciting for us. So that's the quarter to watch as we go into 2021. Commercial production on track for Q2, of course, and again, you'll see some updates on strategic Recapitalization Plan at the Galena Complex. Don't write it off yet, we've got some great exploration results coming. And the mine is -- mine and the workers are rejuvenated as the capital is going into the mine. And hopefully, we continue to see an increase in silver prices beyond $17. And the most important and relevant thing about a 500% to 600% increase in precious metals between our production last year and 2021, that gold contribution from Relief Canyon, the mining the higher-grade silver in the Upper Zone at San Rafael and then on top of that 500% or 600%, that additional silver from Galena. So with that, I will turn it over to the operator for any questions. And operator, if you want to go ahead and see if there are any.

[Operator Instructions] And the first question comes from the line of Heiko Ihle.

Probably more of a comment, I mean, the quarter obviously caps off a very transformational year. And I think it really set you guys up for the current environment or the gold facility ratio is at just under 99:1. And Darren, as to your earlier comments, let's hope that many of the markets subside soon. But given today's events, with the price of oil collapsing, this is purely out of curiosity, how much would you guess you budgeted on fuel this year? And what was the actual spend on fuel in 2019? And in your past experience, how long has it taken for the lower prices to make it through the supply, refinery chain and be felt at the site, please?

Yes. So just some specifics I can recall off my head while others are looking quickly for answers. Traditionally, oil is about 40% of an open pit operation. That's probably a little bit high for our operation. But obviously, you're talking about a 3- to 6-month kind of time period to see through cost of the operation from an oil price perspective. We're not hedged. It was a conversation internally in today as we talked a little bit about where oil prices are. But again, traditionally, 40% to 50% of an open pit is fuel prices, costs and about 15% to 20% of an underground operation. So obviously, seeing -- and we're also using, I believe, diesel gensets there, too, so that will be helpful. So I think we're going to see a strong -- that would be helpful to us, at least. But the question is, how long is it going to last. So in my perspective, this year, I mean, I try to remember, we budgeted about $2.10 a gallon for diesel in the feasibility study and our budget. I think it was $2.15. So obviously, prices are going to be well below that so I think it will be helpful. You're not going to see -- again, you're not going to see cash costs after commercial production. So if oil stays low, again, Heiko, I think you're going to expect to see some changes with lower costs than we're expecting. So I think that's helpful and it will start to benefit Galena relatively soon. And Mexico, it won't benefit until we get back up and running. But again, it's 40% to 50% on open pit, 15% to 20% underground. And usually, it's within 3 months when we start to see that trickle down into the cost perspective. So I don't know, Warren, if you have any more specific numbers right now. I mean, the mine is just ramping up. Just then we've got -- when we use a contract miner, so I'm just trying to remember what the -- Daren, do you have any ideas? Mr. Dell?

Yes. If I remember correctly, feasibility -- I couldn't -- I got cut off there. So I lost most of your answer. But from what I recall, the feasibility was at $2 a gallon and every $0.10 move in the price of fuel was about $0.04 on a tonne moved. So that's how it impacts Relief Canyon. Diesel impact is much less at the underground operations, both at San Rafael and at Galena.

So $0.04 a tonne. And Daren, what are we seeing for diesel prices out there today?

I don't know.

Okay. We'll get that to you, Heiko.

I don't think they've moved this afternoon.

Yes. All right. You already sort of hinted the answer at my next question or follow-up question, rather. It sounds like you are considering hedging given that meetings were held in the office today to discuss this?

Well, again, I mean, when you think about how much you're talking about and where oil price went to, which has now been a 10-year, 11-year low, again, we will look at hedging our input commodities. We always have lead and zinc, as you know, with the Mexican peso we have. And so there's no reason why we wouldn't take the opportunity to look at it very seriously if prices have dropped. The question is, what price you're going to get and for how long? And how much is that going to cost you in capital on the balance sheet to be able to hedge that much dollars out? So those are the questions. But yes, the answer is yes. If we can -- if there's an opportunity to be able to lock in lower costs than our budget, then we will definitely look at that.

Got it. Okay. And then just a clarification at Relief Canyon. How much, if any, money still needs to be spent at the site other than $28 million to $30 million? Is that all completely already spent or is there anything left to do?

Daren, you want to answer that?

Everything's done. There is some capital that goes in this year. We've got a little bit of leach pad work to do. There's some work that's to be as budgeted for a wash bay and a mine apartment and for a truck shop but -- and a water well. And those are the major items that we've got planned for Relief Canyon this year.

Next question comes from the line of Jeffrey Rossetti.

Great presentation. Glad you covered it all like that. And Heiko asked a couple of my questions already, but I have one. I'd like to clarify a little bit about Galena. Can you give us a picture of how Galena's going to develop over the next 2 years, please? And how much money that's going to require?

Yes. Well, I'll give a bit of an overview and Mr. Dell, who's in Nevada, once can talk over me and just to make sure I've got it right. But the plan was about a $20 million spend, of which about $6 million to $8 million would be development, about $5 million will be equipment. It was going to be a little bit higher with the hoist, but we're going to delay some spending on the hoist and another about $6 million on exploration drilling. To get to that kind of $20 million number, that was the original contribution. And then we were leaving basically around $5 million unallocated so that we could figure out whether development or more exploration drilling was more important depending on where we were with the mine. And so when we look at that $20 million and then the extra $5 million, like that was really the concept was increase productivity faces, increase reliability of equipment and increase the productivity of those faces, and then with exploration and resource drilling, find more resources so that we can open up new working faces beyond 2021 so that we can really start to increase production. So I think if we think about it last year, we were doing around 10,000 or so tonnes per month at 6 and 6. And I think where we'd like to get this year is kind of 12,000 tonnes or 11,000 to 12,000 tonnes per month at slightly higher grades and then get well into the 15,000 to 18,000 tonnes at much higher grades in 2021. So that's the general kind of way we look at it. And so this year, we're going to produce around 1 million ounces out of the mine. What we'd like to get to, we think, a really good state for that is about 2.2 million ounces or so. And that's going to require the work that we're doing now and some exploration drilling to get to that number but that won't be until that 2021 time frame. Mr. Dell, anything to add to my overall thought there?

Just that it is a pretty ambitious program that we've got. We're hitting our targets that we set out for ourselves right now. You identified that the capital, you can put it loosely into 3 buckets: redevelopment, equipment, and exploration. And really, everything for the future is going to hinge on how much success we have with that exploration. And not exploration -- just want to point out, that exploration is spread across the mine. So we are hoping to find something new and exciting at depth, but that's not to minimize the potential that we've got in the Upper levels, which -- where we have good infrastructure already installed and where mining conditions are often a little bit more user-friendly.

Right. And I think, Jeffrey, it's safe to say that when Eric made his investment in the mine, it wasn't so we could make it slightly better. It was because he believed there was an exploration paradigm shift in the mine. And I use that McKinsey word because there's no other way to describe it. We could keep going and hope silver prices go up and the mine gets from $20 all-in sustaining costs to $12 all-in sustaining costs, but again, what we're really trying to do is figure out whether there's a much bigger, much more profitable mine below where we are. And he had very good success in one of his other companies looking at that and I think he hopes to have the same success. That's why we're doing a bunch of that investment in 4300 and 5500. That allows us to drill into those deeper areas. And so we're not -- those won't -- we won't start to see those results at a deeper level part of the mine, so more to the third and fourth quarter this year. But its -- he's probably -- Eric is probably more focused on that. We're probably more focused on getting to profitability as quick as we can, but he's got deeper pockets than we do. So...

How much of the $20 million that he's going to put in is in your $20 million of cash that you have there today?

So we've spent, I think, so far, the first $15 million went in. We spent, to the year-end, about $2 million.

It's roughly about $13.8 million of that in the cash balance.

Right. But yes, so up to -- that's up to December 31, all of this new equipment is there. So you'll see that number go down. But we still got ample cash. We haven't spent as much as we'd hope to spend just because it takes a long time to get that equipment on site and then underground. But -- so that that money is going to carry us right through 2020, we believe, based on where we are, Jeffrey. So...

Okay. Well, that sounds great. What is your guidance on when you go positive cash flow or haven't you given that yet?

We have not given that. We're basically saying we come out of the Recap Plan in March 31, 2021. So we're thinking we're coming out for a reason.

[Operator Instructions] Next question comes from the line of John Tumazos.

Looking a little further out to the longer term, could you review the hints of data about sulfides beneath the oxides at Relief Canyon and whatever additional work your company has done towards the later-phase potential of the property?

Yes. Thanks, John. I think the first thing is, our first objective was get the mine closed, get the money raised and build the mine and get the cash flow. So I can tell you, we've done almost 0 exploration work from what the guys at Pershing had done at this point. And the reason is, is obviously, we haven't had a lot of money, John, and we haven't had a lot of time on-site when you're trying to build a mine in 9 months. So I think the focus has not been on exploration. I would describe the exploration that was done by Pershing as what they could do to raise money. And so they were much more focused on trying to get drill results out to kind of ensure that they could raise money to make the next quarter and the payroll. And so what we've done is we're contracting a couple of guys. Ex-Barrick guys are going to do some work starting in May, June to help us look at -- because we got to go back to basics. I think there's been a lot of holes drilled without a lot of solid understanding of the geology. And I can tell you that the deep level stuff, there's been nothing below the current oxide that we have done any thought process on today. Obviously, there's a bit of a trend there between Rochester, Packard, and Relief. I think the focus has been on other areas of the property rather than in-pit and kind of between where those other mines are, which is where we're going to kind of focus our time. I can tell you that guys have looked at it believe the potential out of pit north or I'm not sure what direction we're going, towards Rochester is pretty good. To the south of that, there's good exploration potential, but the royalty checkerboard is complicated. And my view would be not to spend a lot of dollars there. So this year, we're going to spend about USD 1.9 million. We're going to go to where the old waste dumps are on the western side of the mine. We're going to do some drilling there. We think we can add -- we can basically -- we can hopefully replace what we're mining this year. And then beyond that, it's really get the basic work done on understanding the geology and what drives the system. And again, we're using some guys from -- as you remember, John, from our days at Barrick that Alex had that are just spectacular at this kind of work. And we're going to -- that won't be kind of until -- seeing any work come out of that until probably the third and fourth quarter this year.

Was there much data that you inherited from the Pegasus days?

Daren, maybe you can answer that because I'm not sure.

No. Unfortunately, all that Pegasus data was lost so we don't have it.

And there are no further questions. Please continue with your presentation or closing remarks.

Okay. Thank you, Dave. Well, everyone, thanks for joining us for the call. Appreciate your commitment to the company. I know it's been -- we had a good year last year. It's been very painful so far this year, but we think we're delivering into Relief Canyon and starting to see the results of our technical team's hard work. We expect the mine to ramp up well and we're excited about the future, so stay tuned. I think you're going to see some great news out of the company as we move forward. And we'll be working hard for you guys to fix what things are not working, much like last year. We had some challenges. We found solutions to them. We made the company better. I think we're going to continue to do that this year as well. So thanks again and we'll talk to you soon.

And that does conclude the conference call for today. We thank you very much for your participation, as you please disconnect your lines.