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Yamana Gold (AUY) Q2 2022 Earnings Call Transcript

Motley Fool - Fri Jul 29, 1:00PM CDT
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Yamana Gold(NYSE: AUY)
Q2 2022 Earnings Call
Jul 29, 2022, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Thank you all for joining us this morning. Before I turn the call over, I need to advise that certain statements made during this call today may contain forward-looking information and actual results could differ from the conclusions or projections in that forward-looking information, which include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the timing and amount of estimated future production, cost of production, capital expenditures, future metal prices and the cost and timing of the development of new projects. For a complete discussion of the risks, uncertainties and factors which may lead to actual financial results and performance being different from the estimates contained in the forward-looking statements, please refer to Yamana's press release issued yesterday announcing second quarter 2022 results as well as the management's discussion and analysis for the same period and other regulatory filings in Canada and the United States. I would like to remind everyone that this conference call is being recorded and will be available for replay today at 12:00 p.m.

Eastern Time. Replay information and the presentation slides accompanying this conference call and webcast are available on Yamana's website at yamana.com. I will now turn the call over to Mr. Daniel Racine, the president and CEO.

Please go ahead, sir.

Daniel Racine -- President and Chief Executive Officer

Thank you, operator. Thank you all for joining us and welcome to our second quarter 2022 conference call and webcast. Presenting with me today is Jason LeBlanc, our senior VP finance and chief financial officer. Peter Marrone, our executive chairman will also talk about the Gold Fields agreement.

The rest of senior management team is also available for the Q&A portion of the call. Peter is in transit returning from meetings with South African shareholders. So we hope his connection remain adequate throughout the call. The health and safety of our employees always come first.

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Our total recordable injury rate was point 0.81 for the first six months of 2022. And I would like to thank all our employees for remaining focused and committed to our safety values. Despite our excellent track record, this is something we are always working on improving and getting better at. The company continues to implement its class -- of its climate action strategy during the quarter, including work on the analysis to support the conversion of approximately 50% of Cerro Moro's electricity requirement from diesel to the wind power.

This will help meet the green gas -- greenhouse gas emission reduction required between now and 2030 to achieve the company 1.5 degree Celsius science based target and also reduce operating costs, expanded mineral reserves and extend the mine life. Work also continued to progress on other climate action objectives, including advancing the evaluation of other operational projects to reduce greenhouse gas emission and the estimation of our Scope 3 emission. I am very pleased with the Yamana named one of the Canada's best 50 Corporate Citizens by Corporate Knights Magazine for the second consecutive year. The company's ranking improved to 30th overall and we remain the top ranked Canadian mining company on the list.

We are very proud of this exceptional recognition achieved by the dedication and hard work of our all employees and business partners. Further demonstrating our deep commitment to ESG excellence earlier this week, Yamana's ESG rating, as determined by the MSCI was upgraded to A from BBB, triple B. The upgrade is the result of improvement in our corporate governance rating, which reflects our effort to further improve our corporate governance and management policies and practices. Yamana has a long history of prioritizing the health and safety of its people, protecting the environment and the community, where we operate and we are committed to continuing to improve our responsible development strategy.

Turning now to our second quarter highlights, we continue our track record of operational excellence and produced over 232,000 ounces of gold exceeding our plan for the quarter. The standout results were driven by Canadian Malartic's Cerro Moro, Jacobina and El Penon. Notably, Jacobina achieved record quarterly gold production. Silver production of nearly 2.36 million ounces was in line with plan as Cerro Moro delivered strong results with increased mill feed from higher grade zones.

GEO production of nearly 261,000 ounces was in line with plan despite the gold to silver ratio being near an all-time high and significantly above budget. With the strong year-to-date performance, Yamana is well positioned to meet its annual guidance. As you know, during the quarter, Yamaha entered into an Arrangement Agreement with Gold Fields. More information will be provided by Peter later on the call.

While I won't spend too much time on the numbers on this slide, given that we pre-release our operating results, I don't want to take the -- I do want to take the opportunity to comment on our operations staff -- comment on our operational staff and the excellent results achieved to-date. Turning to the individual drivers of our performance, Canadian Malartic delivered a strong second quarter, which exceeded our plan. We are also continuing to advance the development of the underground Odyssey project, which remain on budget and on schedule. The underground front is now at 380 meter vertical depth below surface and 2.3 kilometers of ramp completed to-date.

Shaft sinking is scheduled to begin in the fourth quarter of this year and we are expecting first production from Odyssey South during the first quarter of 2023. We continue to see huge opportunities at Odyssey in the future. Exploration work has delivered promising results at East Goldie extending mineralization to the east as well as the Odyssey South Internal Zone, which demonstrate the potential to add mineral resources. Jacobina had a record quarter driven by higher ore ton mine with production for 2022 on track to increase the ninth month -- for the ninth consecutive year.

Underground mine development work continues to gain access to new mining panels. And together with the higher ore ton mine provides additional flexibility to the development of stockpiles supporting higher throughput expected from the ongoing phased expansion. This positive trend should continue as the Phase 2 expansion throughout -- throughput objective was realized in July, establishing Jacobina sustainable production profile at 230,000 ounces per year. Cerro Moro continued to benefit from access to additional mining phases, which supported the increase in mill feed coming from higher grade underground ore, which account for over 80% of the now stabilized throughput.

At Cerro Moro, we are continuing to advance in parallel the scalable plant expansion study and potential heap leach project and are evaluating option for alternative source of power, which include the connection to the grid and wind power. Increased mill feed coming from higher grade underground ore and improved recovery has contributed to step change in the year-over-year production. This trend is expected to continue in 2022 with additional contribution of ore from Zoe. As planned, El Penon delivered solid gold production result driven by access to higher gold grade.

We expect that gold production will remain stable throughout the year, but a strong second half will account for approximately 60% of the silver production due to mine sequencing. One of the key strategy to increase value at El Penon is to establish additional mining sectors and increased mining flexibility. With exploration success, the objective at El Penon is to utilize the excess plant capacity and increase production. Minera Florida delivered production in line with plan and we expect annual results to be in line with the plan.

Operational efficiencies remain an area of focus at Minera Florida and we have identified several new opportunities to increase recovery at the processing plan as we continue to work toward the planned debottlenecking study, which is expected to allow for increased throughput in 2025 when it receive its permits. Yamana continues to advance strategic initiative across its portfolio and we were pleased with our partner Agnico Eagle to announce positive exploration results at Odyssey and Wasamac on Wednesday. These results further support the strategic outlook and the company's effort to meaningful meaningfully extend its sustainable production platform. Notable highlights at Odyssey include East Goldie exploration and infill drilling, which continues to highlight significant expansion potential.

Recent drilling has extending the East Goldie deposit to the west by approximately 225 meters and to the east and that by approximately 500 meters to more than 1,700 meters from the current mineral resource outline. Shallow drilling at the East Goldie expansion also extended the mineralized plane, an additional 900 meter update from previously reported drilling. With 12 drills -- 12 surface diamond drill active on East Goldie as well as four underground drills on Odyssey South. Ongoing drilling is expected to convert a significant portion of the 2021 year-end inferred mineral resources to indicate in mineral resources for 2022 year-end reporting and as well significantly expand inferred resources envelope.

These new indicated resources will provide the basis for the updated technical study in 2023 that will allow definition of mineral reserves for Odyssey underground project over the next few years starting at the end of 2022. We are very excited about the generational mine life potential at Odyssey and the project represents one important step toward realizing the board approve Yamana 1.5 Plan as it will establish a large sustainable annual gold production platform between 500,000 and 600,000 ounces on a 100% basis, with a strategic mine life well into the 2040s. Importantly, only 47% of the current mineral resources are included in the 2021 mine plan. And as our exploration success has shown, we believe there is potential for significantly higher production well into the future.

Equally as important the capital expenditure to achieve this largely offset by -- is largely offset by pre-commercial production. Assuming the current gold price, 72% of the initial expansionary capital through 2028 will effectively be offset by peak commercial production as we move into the upper part of the ore body starting in early 2023. The exploration success continue that our Wasamac development project. Infill drilling results continue to confirm or exceed expected grade and with highlighting the continuity and tenor of mineralization.

Exploration drilling also delivered a positive step out drill result from Wildcat South, where drill holes provided confirmation of the new mineralized plane, which remained open at that and alongside. Additional exploration target under property included the adjacent Francoeur, Arntfield and Lac Fortune properties provide further upside. The positive infill and exploration drilling result to-date provide support for an expanded production scenario within an adjacent to the known mineral envelope. We believe there is a potential for a strategic mine life of 10 to 15 years at 200,000 to 250,000 ounces of gold per year compared to the life of mine average of 169,000 ounces in the feasibility study at very attractive all-in sustaining costs.

These explorations result together with Jacobina reaching the Phase 2 target throughout throughput and the Wasamac bought sample approved by our board, demonstrate that we are delivering step by step on the sensible growth and value creation we laid out in our Yamana 1.5 Plan. Our board approved Yamana 1.5 Plan has identified a path to progressively increase production to 1.5 million gold equivalent ounces via a series of projects and optimization with very modest capital requirement and low capital intensity. This responsible growth is fully aligned with our capital allocation strategy with balances -- which balance the shareholder return balance sheet and low capital intensity growth. This low capital growth was to strengthen our already leading free cash flow generation.

It's also important to note that this responsible growth is underpinned by multiple low risk, low capital projects that have the ability to be mixed and matched to optimize free cash flow generation. Such flexibility allows us to rearrange, adjust, deferred or move forward project at our discretion, thus having confidence in achieving our overall growth plan, while answering cash flow growth and growing shareholder return. And with that, I will now pass the call over to Jason who can go over our quarterly results in more detail.

Jason LeBlanc -- Senior Vice President, Finance and Chief Financial Officer

Thank you, Daniel, and good morning everyone. Turning to our second quarter financial performance, our continued operational strength helped revenue reached $485.6 million, up over 11% from the same period last year. Gross margin, excluding DD&A rose nearly 17% to $292.9 million, up from $250.9 million in the year earlier period. Earnings during the quarter were $72.1 million or $0.07 per share compared to a loss of $43.9 million or $0.05 last year.

But on an adjusted basis, earnings were $0.09 per share versus $0.08 per share last year. We delivered strong cash flows again in the quarter, with cash flows from operating activities before net change in working capital at $195.9 million, up nearly 17% from the same period last year, while cash flows after working capital were $187.8 million during the quarter compared with $153.5 million last year Q2. We also generated free cash flow before dividends and debt repayments of $53 million during the quarter or up about $2 million from last year despite about $30 million of higher capital spending a planned, primarily from the advancement of the Odyssey project. And we ended the year with cash and cash equivalents -- we ended the quarter, sorry, with cash and cash equivalents of $545.1 million, inclusive of $218.3 million available for use at the MARA project.

As Daniel already noted, we expect free cash flow to increase quarter over quarter with the strongest free cash flow generation anticipated in the second half of the year and in particular during the fourth quarter, which is expected to result in cash balances steadily increasing throughout the year. Lastly, although inflation has been a headwind to our financial results, we have successfully mitigated the impact with our strong production in productivity initiatives at our operations in addition to our ongoing procurement efforts and provisional inventory builds from earlier this year. We are confident we will be able to continue this trend for the balance of the year. And with that, I will hand it back to Daniel for some final remarks.

Daniel Racine -- President and Chief Executive Officer

Thanks, Jason. Before completing our presentation, as we have Peter on the call, perhaps Peter, you can give a summary of the status of the Yamana Gold Fields deal.

Peter Marrone -- Executive Chairman

Daniel, thank you very much. And as you can see from our second quarter results, our board of directors took a business as usual approach. This is a forum for as you have adequately done a discussion and promotion of Yamana's operational strength, financial performance and prospects and opportunities. Our board felt that there were forums for discussion of the deal.

This was a forum for discussion of the second quarter results. However, an important point is at the substance of the Gold Fields-Yamana deal is Yamana and its value and its prospects. And in taking a business as usual approach, we are implicitly promoting the deal with further explanation of what we see as value and what Gold Fields saw as that value in its diligence. As an update on the deal itself, we have begun an engagement with our and Gold Fields shareholders.

Some are aware that we were invited by Gold Fields shareholders in South Africa to present our company to them. As mentioned earlier, I am returning from that engagement and meetings and it seems to us that those meetings and presentations, including also some in London and New York have gone well both on substance and governance grounds. The value proposition and the industrial logic of the deal is in focus. And while shareholders are expressing an understanding of the deal and support good governance principles tell us that it's critical that shareholders should want to see full detail and that full detail is provided when we and Gold Fields provide our information circulars.

And for formal commitments and support, we certainly expect that, that will be forthcoming once those circulars are present. Interestingly, our circular will provide context for the deal in background, which is typical. We will go into great detail on that background not only on the deal, but more broadly, but similar to London Stock Exchange rules, Daniel, the Johannesburg Stock Exchange requires that we include a valuation on the company and that valuation will demonstrate that the implied value in the offer is modest and there is considerably more value in our company than what is on offer. Next steps include continued engagements with our and Gold Fields shareholders, Gold Fields' publication of its first half year results in August, likely in late August, publication of Information Circulars in September, and shareholder votes in October.

One final comment that I'll make before passing the call back to you. On operational synergies, we have been taking a responsible and almost literal view of these operational synergies and optimizations. We have identified several and are critically assessing the dollar value of these. However, they are substantial and more than support the deal terms.

Some of the obvious ones are Salares Norte, the asset in Chile that is in development by Gold Fields, likely garnering more production based on a faster and better transition from development stage operations, particularly with El Penon steering that transition, a possible fast cracking of Phase 4 Jacobina. Advancing a more aggressive exploration program on the Jacobina Greenstone Belt with Gold Fields generations of experience with Paleo-placer deposits such as these. Possible development and even optimizations of MARA given Gold Fields' experience, along with ours, in South America with development of large open pit projects. Finally, and as we reported on Wednesday and as you mentioned earlier on the call, Daniel, Odyssey is bigger and better and with the extension to the west and up dip, as you mentioned, our and Gold Fields' deep shaft underground experience will look at how we can, with the support of our partner at Canadian Malartic fast track for a possible second shaft to the west.

We will have more to say on these synergies and optimizations likely before our information circulars and we expect to be able to do that in time for the Denver Gold Forum in September. And with that, I'll pass it back to you, Daniel.

Daniel Racine -- President and Chief Executive Officer

Thanks, Peter. This quarter further demonstrate our operational excellence that our Americas-focused portfolio is continuing to deliver as we progress toward the Yamana 1.5 plan in a financially prudent manner, with exploration optionality providing even greater upside. And with that, I will turn it back over to the operator for questions. Operator?

Questions & Answers:


Operator

[Operator instructions] Our first question is from Anita Soni from CIBC World Markets. Please go ahead.

Anita Soni -- CIBC World Markets -- Analyst

Hi. Good morning, Peter, Daniel and team. I just had a couple of questions. Peter, you've sort of addressed it.

Firstly, I was going to ask why the Wasamac update was with this release and perhaps not with the life of -- or the investor day that you had where you targeted the 1.5 million ounces and you've kind of showed the market all of your projects on tap but didn't release this one. So is this -- was out not ready yet at the time three months ago when we had that investor day?

Daniel Racine -- President and Chief Executive Officer

It wasn't ready, Anita. We got the results on exploration after that. So we knew it was coming. We knew that the drill holes.

We knew that we intersect the zones, but we didn't have all the information at that time.

Anita Soni -- CIBC World Markets -- Analyst

OK. And then the second question was with regards to shareholder engagement, and that's probably with a question for Peter on the Gold Fields deal. Could you just give us a little bit of more color in terms of what you're seeing with the investors that you meet with and the kinds of color and detail that you're giving and that's incremental to what you put out there publicly.

Peter Marrone -- Executive Chairman

Mostly, it is information, Anita. There's nothing that is new other than, of course, what we publish as new information similar to what you asked about Wasamac but it's informational -- is starting -- in some respects, it shouldn't be startling to us that we feel that we are a company that should be well known in market, but it's a big market, and many people don't know the company. And so what I mean by informational is that what we're doing is we're educating the shareholders of Gold Fields and what Yamana is all about. I said earlier that the substance of this deal is Yamana.

What's being paid for it? Is there more value there? How do you recognize some of the synergies to which we've alluded, so mostly, this is about engaging with the shareholders and presenting the company and giving an indication based on our experience and knowledge of the company of what the company is all about and value proposition to which I referred. And I have to say that those meetings have gone well. Certainly, on some of the governance side, shareholders, principally in New York and in London that have asked, how did we get to this point? I think that they've taken comfort on that. And on the substantive side, it certainly seemed to us, in particular, based on sidebar discussions after these presentations, it seemed to us that it was a refresh that those shareholders were becoming very comfortable with what Yamana was all about and the value proposition to which I referred.

Anita Soni -- CIBC World Markets -- Analyst

OK. And then just one more. In terms of -- I think when you presented a couple of weeks ago and increased the -- sorry, I noted that you guys were going to be -- the increase in dividend, I noted that will be -- the Gold Fields will be listing in Canada. You mentioned something about other approaches, and that information would be in the circular.

I didn't follow-up on that call, but I was wondering if you could provide a little bit more color about sort of the approaches that you've had. And if anybody's approached you since this deal was announced.

Peter Marrone -- Executive Chairman

Well, we would not be in a position to be able to say anything about that, Anita. What I would say is, if you see our arrangement agreement, it contemplates what is the level of engagement that we have with this company, why we're committed to this deal also talks about as is typical under governance principles with boards of Directors. It talks about what would be and would not be superior proposed. But I think the more important point is the first part of your question in that first part of your question, it really goes back to -- for our board of directors in 2020.

I don't know if you would agree, but our board of directors came to the conclusion that while substance and quality will always matter, we're increasingly in a world where relevance comes from size. And so we looked at it from a number of different lenses. One is how can we grow organically? And you are aware, based on our 1.5 plan and what we announced at our investor day earlier this year. How we get to those 1.5 million ounces? Daniel have discussed that on this call earlier and how that number could also be larger as a result of what's in the portfolio.

But we looked at a host of other things as well. What can we buy? What are the possible transactions where it is closer to business combinations of mergers of equals? And if we were to sell ourselves, who would be the interested parties and how would those deals make sense. So it was a broader engagement than only this one. This one was the one that was the bright shining light for our board of directors and understandably so.

Because of the level of experience that Gold Fields has that's comparable to ours. The fact that we are a plug-and-play with this Americas portfolio by comparison to the assets that they have, the nature of the geologies of their ore bodies and their mines by comparison to ours and where we can get some synergies as a result of the combination of the two companies. So -- and of course, what the result is, and the result is not just the size of the company, but also the quality. And again, I'm repeating things that we discussed on the call a few weeks ago, but it's not just that we've become a bigger company and among the super elites in our industry, but it's also that we have longer mine life, better free cash flow generation, better growth, although managed growth, as Daniel earlier said, this is growth that comes at very low capital cost.

And with a true value proposition because our market capitalizations combined is still well below those of the companies.

Anita Soni -- CIBC World Markets -- Analyst

OK, thank you very much. And congratulations on a solid quarter and keeping costs under control in this inflationary environment.

Daniel Racine -- President and Chief Executive Officer

Thank you, Anita.

Operator

Thank you. Next question is from Fahad Tariq from Credit Suisse. Please go ahead.

Fahad Tariq -- Credit Suisse -- Analyst

Hi. Thanks for taking my questions. First on Wasamac, and I appreciate there's a lot of information that's been provided. Can you just remind on the ASIC commentary that it's likely to be below the feasibility study average of around $830 an ounce and that the capex for the project is unchanged at $416 million? Can you just talk about how to think about that in relation to inflationary pressures? Has that been considered or are there production offsets? I'm just trying to understand how that's factored in?

Daniel Racine -- President and Chief Executive Officer

Right. Thanks, Fahad. Good question. Look, the guys are working on a constant basis to see on the cost, and then we have identified opportunities to reduce costs in some areas.

And as you mentioned, we have pressure on other areas. We are looking at improving the recoveries -- improving recoveries by 1% or 2%, make a big difference. So this is on the cost side. We think our -- and if we produce more ounces, the divider is higher.

So this is why we are very confident that we are going to come with a revised feasibility study at some point with the success we have in exploration to reduce the all-in sustaining cost. It will be one of the best. And then maybe I will pass it to Yohann to complement on my answer.

Yohann Bouchard -- Senior Vice President, Chief Operating Officer

Hi, Fahad. Yohann here. Thanks for the question. Just want to say, I mean I have to Daniel, what's saying here that to support the bulk sample, we redid the cost analysis and mining sequence and all that.

And for sure, we adjust slightly the cut, but we also find some cost-saving initiative that's offsetting those costs. So overall, even by increasing throughput, we don't see additional, I would say, capex investments in the processing plant. And basically, the underground is still about the same because it's a wider -- the sober really wide. We have some good results with infield drilling.

We find a stope slightly bigger. So that supports nicely. I mean that increase of that new plant. So for now, I mean considering the cost, I mean we came up to about the same capex.

Fahad Tariq -- Credit Suisse -- Analyst

OK, great. So would it be fair to say that by 2024, when maybe the production begins, there is productivity offsets you have mentioned, but it could be the case that maybe we are in a more normal cost inflation environment, right? Would you -- is it fair to say that you could even see potentially lower capex if things normalize?

Daniel Racine -- President and Chief Executive Officer

Yes, it's been normalized, yes. But this is why I said and Yohann said we are working and looking constantly how we can improve. And at the end of the day if costs normalize and they go back down to where they were before. And that means that the capex will be similar or even lower -- and like Yohann mentioned too, one of the big things we are finding is the flow sheet we have for the mill, that we were -- we designed at 7,500 tons per day and then you know we are going to process 7,000 tons per day.

We see that even that mill can process a lot more ton. Jacobina is a good example, the 6,500 tons per day that we are running at 85% now. So by optimizing recoveries, by optimizing the flow sheet, reducing even in some areas, some costs or changing equipment, this is how we arrived at now in today's world with today's cost of equipment and everything at the same capex. So it's possible by 2024 when we get the permit and go ahead with construction, then cost will be similar or hopefully lower.

Fahad Tariq -- Credit Suisse -- Analyst

OK, understood. And just maybe one question for Peter, not to belabor the point on the Gold Fields transaction. But are you finding just at a high level, is there a different sentiment when you talk to Yamana shareholders versus the sentiment when you talk to Gold Fields shareholders? And are you finding different lines of questioning from each shareholder base? Thanks.

Peter Marrone -- Executive Chairman

We've only begun to -- the engagement with Gold Fields shareholders is a new thing for us. We have only recently begun that, literally over the course of the last few days and this past week. I would say that the engagement is similar to the extent that our shareholders are looking to learn a bit more about Gold Fields. Those at least that do not know or did not know the company.

We are finding something very similar with the Gold Fields' shareholders as it relates to us. Our shareholders are not as interested in the question of what is being paid for Yamana and understand that we Gold Fields shareholders are more interested in that. The implied price when the deal was launched was $6.7 billion. And so they want comfort that, that amount is not reflective of total value for the company.

And the flip side of that is that the way that we have managed the growth of the company is modular, as Daniel mentioned, can be sequenced and the capital intensity is comparatively light. In other words, it doesn't impinge on our free cash flow. And there certainly is a tendency to focus on free cash flow, not dissimilar to our shareholders and other shareholders. The importance of free cash flow and balancing between spending money on growth projects and returns -- cash returns to investors.

And one interesting point that I think might resonate with you is one of the things that was not well in store is that consensus models, your model others is not taking fully into account all the value that's in Yamana. Our internal model certainly shows a net asset value that is substantially in excess of the net asset value that's in consensus. But one of the thing that was comforting is that what is the implied price that $6.7 billion to which I referred, which is roughly, let's say, CAD 8.50 to CAD 9, is actually an average of the target prices of the analyst community that covers the company. And that's something that was not understood and resonated.

So in other words, what Gold Fields had been saying, and we now punctuated is, this was essentially a normalization, a bit of an equalization like payment to reflect what is likely on the common in the next few months and quarter and no longer than the next year. But implicit in that, there is considerably more value. And this is where we highlight that greater value. So that's the distinction I think I would make between the amount of shareholders and what they focus on.

And what we are now seeing as the focus of the Gold Fields shareholders.

Fahad Tariq -- Credit Suisse -- Analyst

That's very helpful. Thank you.

Daniel Racine -- President and Chief Executive Officer

Thanks.

Operator

[Operator instructions] The next question is from Ralph Profiti from Eight Capital. Please go ahead.

Ralph Profiti -- Eight Capital -- Analyst

Good morning, Yamana team. Thanks for taking my questions. Daniel, if I can start with you. Just some rough estimates, in the context of the strategic life of 10 years to 15 years at Wasamac, gets me to around sort of a 3 million ounce deposit in terms of the reserves required to support that conceptual plan, which is about 60% higher than where we are now.

Is that the right way to think about deposit size in terms of growth potential and how long do you think it will take you to get there?

Daniel Racine -- President and Chief Executive Officer

Good question. Ralph. You have it right. We have about what 2 million ounces now on what we had when we bought, and then once we did.

But when we look at the drilling, we are doing -- Yohann mentioned earlier that we are infield drilling, what we have we are finding wider zone and something like better grades, we have the new discoveries. And we have what I mentioned before we are going to start drilling Francoeur, Arntfield and Lac Fortune and we can compliment. But so far exploration is returning amazing results or in 2022, we have still half of the year to drill next year and 2024. So we are pretty confident by the time we get the permit to go ahead, build a mine, put it into production, that we will reach that number quite easily.

And then remember that we are in the process to ask for the permit to start the ramp. So we will develop that ramp starting next year for the next few years to get the mind ready for production, when the mill will be built. And then we will have the chance to drill from underground, because everything stays open. It's open on all direction, it's open, going deeper, it's not drilled deep, very deep, because it's real from surface, but it's still open on all direction, all the zone and it's open east and west.

So and then we are finding new zones. So we don't think it will be a challenge to reach that. Yohann?

Yohann Bouchard -- Senior Vice President, Chief Operating Officer

Yeah. Ralph, may be too hard to that. I mean we do have about 2 million ounces in our plan and we have MI and infer that can be transferred as well. We are talking about 400,000 ounces to 500,000 ounces there.

We also stood at some zone initially that's going to be put into production, maybe we will look at that with different mining method. And we also sterilize a big block around the old excavation that can be put into the plan as well. You also have to consider that based on the mining sequence that we have, we have four good years of 250,000 ounces per year with what we have. So it means that it give us until 2030 to find those additional ounces and sustain that plan.

So between now and 2030, I think we have plenty of time I mean to increase the value to a project that we bought about no more than two years ago. So it's really promising. And we have to consider Francoeur and Lac Fortune that are close by that we are going -- we are starting to explore. And we would see really good news coming up on that, on those two projects as well.

Ralph Profiti -- Eight Capital -- Analyst

OK, great. That's a good update. I do have a question for Peter. And Peter, I am hoping you can help me to -- help us qualify the shareholder engagement, as it pertains to the 75% thresholds for Gold Fields -- which in some circles are seen as a high hurdle rate, is the goal, when it's all said and done to reach a substantial portion of the shareholder base at the end of the day.

Is that one of the main goals?

Peter Marrone -- Executive Chairman

Well, at this juncture, we're in the information communication stage. We have not asked any shareholders. Gold Fields has not asked any of its shareholders to indicate its support for the deal. And understandably, as I mentioned, earlier, Ralph, shareholders would normally from a governance point of view, want to make sure that they have checked all the boxes.

And that includes looking at the disclosure in an information circular, that's very difficult. And of course, related to that is the proxy advisory services, Glass Lewis and ISS and their commentary on one deal or another, and that would apply in this case as well. But I would say to you that my impression, and our broader management impression, is that the 75% hurdle has to be seen in the context of a 66% and two-thirds hurdle, which is of the shares that are represented at a meeting. So 75% is higher than 66% and two-thirds, but it's not -- it's more than incrementally higher, but it's not substantively higher as a hurdle.

And I go further I would say that, if we look at the shareholder profile of Yamana and the shareholder profile of Gold Fields, Gold Fields has a greater concentration of shareholdings, which means that a smaller number of shareholders will be in a better position to be able to carry their vote. Whereas, we would have to outreach to more shareholders in our case to get to that lower threshold of 66% and two-thirds. So unbalanced, we are not seeing the difficulty of 66% and two-thirds for us. But equally, we are not seeing the difficulty of 75% of the shares that would attend and would be represented by proxy at a meeting for them.

And there are enough large shareholders, particularly those who take a longer term view, who are going through that information gathering stage, who are learning about our company and about the value proposition and what's being created. And our impression is that ultimately, those shareholders, I don't mean to be presumptuous, but ultimately those shareholders would be supportive of the deal. They take comfort in what we are saying, because it underpins what Gold Fields has been saying, which is that we have conducted, I am speaking for them, but we have conducted seven months of diligence. And this is what we come up with.

One more comment that I think is germane here is this requirement of evaluation. So we are required similar to what we have done with the London Stock Exchange. We are required to provide a valuation in the proxy materials. And that valuation, I think will give even more comfort to our shareholders and to the Gold Fields shareholders that the offer price is not reflective of the true value of the company.

Ralph Profiti -- Eight Capital -- Analyst

Yeah, much better understood. Thank you, Peter. And thank you, Daniel.

Daniel Racine -- President and Chief Executive Officer

Thank you, Ralph.

Operator

Thank you. Sir, we have no further questions at this time. So Mr. Racine, I will return the meeting back over to you.

Daniel Racine -- President and Chief Executive Officer

Thanks, operator. Thank you, all for joining us today on our second quarter conference call and webcast. Please take care and stay safe. Bye for now.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Daniel Racine -- President and Chief Executive Officer

Jason LeBlanc -- Senior Vice President, Finance and Chief Financial Officer

Peter Marrone -- Executive Chairman

Anita Soni -- CIBC World Markets -- Analyst

Fahad Tariq -- Credit Suisse -- Analyst

Yohann Bouchard -- Senior Vice President, Chief Operating Officer

Ralph Profiti -- Eight Capital -- Analyst

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