Welcome to the Equinox Gold Second Quarter 2021 Financial Results and Corporate Update Conference Call and Webcast. [Operator Instructions]. I would now like to turn the conference over to Rhylin Bailie, Vice President, Investor Relations for Equinox Gold. Please go ahead.

Thank you, operator, and thank you, everybody, for joining us this morning. We will, of course, be making a number of forward-looking statements today. So please do take the time to visit our website, SEDAR and EDGAR to download our continuous disclosure documents. I will now turn the conference call over to Christian Milau, CEO for opening remarks.

Thanks, Rhylin, and welcome, everyone, to the quarter 2 results call. We're pleased with the quarter. And as usual, there's been no shortage of news and activity. The company has just been so active in the first half of the year and really pleased to get to this point where we said this was a year of big investment. As we invested in our mines, we look to get projects ready to build or continue building them to explore our assets and to keep investing money in to build the future of this company. And we have a long-term vision that's in place here. And things are - basically ended this quarter as expected. It was a quarter very similar to quarter 1. We produced about 125,000 ounces of gold, and we had a good safety record for the quarter. Pleased with that performance. COVID continues to sort of moderate. Obviously, the new Delta variant does seem to peek its head a little bit in various locations, although it's had minimal impact on the operations. And really pleased with how the operations have adapted to the new environment with COVID there. We've probably hit that trough, which we thought we would do around midyear this year, where we said the first couple of quarters will be a little tougher. We are coming out of the rainy season in Northern Brazil as well and with the investment periods at Mesquite and Castle ramp-up. And Obviously, we've had a challenge with Los Filos over the last year, as we've taken over ownership, but pleased to be coming through a period and getting towards, hopefully, a period of stability going forward here at Los Filos. So we're turning to a very catalyst-rich period of the year in the second half of this year…

Thanks, Christian. During the quarter, we sold 125,000 ounces at a little over $1,800 an ounce for revenues of $226 million. Cost per ounce basis, our costs actually came down from Q1, about $50 an ounce for cash cost to a little over $1,080 an ounce and about $100 an ounce to about $1,382 on an all-in sustaining cost per ounce basis. That resulted in mine operating earnings of $46 million, which is an increase of about $4 million over the prior quarter. As Christian mentioned, we had a very busy quarter on the corporate activity front, resulted in a lot of net income for $326 million or earnings per share of about $1.10. Included in there are a number of noncash gains, including $50 million on the sale of those Solaris shares that Christian mentioned. In addition, with the sale of the shares, we have a change in classification of how we account for that investment from effectively a cost basis to a fair value basis. That resulted in an increase or a gain of $186 million. We had a gain on the sale of Pilar of $45 million. And then we have the other items that typically are noncash items, which were gains for the quarter like unrealized gains on foreign exchange hedges, et cetera, for about $43 million. When you adjust our net income for those items, we arrive at $3.1 million on an adjusted basis and $0.01 a share earnings also on an adjusted basis. Our cash flow before changes in noncash working capital was $32 million, and that equates to about $0.11 a share on a basic basis. With all of the activity in our operations with respect to our balance sheet remained strong, our June 30 cash and equivalents was $334 million, and our…

Thanks, Pete. I just - I would like to say that there are 2 main themes for the operations on how - what's happened in the first half and how it affects in the second half of the year and going into 2022. The first one is waste stripping, where we've had large programs at Mesquite and RDM as well as waste stripping happening at Aurizona and Los Filos. So all of those investments in the waste stripping makes for a stronger second half of the year into next year. And the second aspect is a big effort on our - by our exploration team. 51,000 meters have been - has been drilled so far this year. And that's an investment in the long term at each one of our mines, both within the mines and near to the mine. So I look at those as how they affect the future for each one of our operations. If we look at Mesquite, we completed the Brownie stripping campaign, and we're looking at a stronger H2, as we mine oxide ore in that pit. The exploration has been focused on mine life extension, and that's the same thing we've done every year with Mesquite, where there's opportunity to be able to extend the life. It is a very giving overall system there. Q2 production, 24,185 ounces and an all-in sustaining cost of $1,520 per ounce. At Castle Mountain, we've continued to - our team has continued to work on optimizing the leach pad and plant. We have had issues with percolation on the leach pad, but we've managed to see the daily ounces being doubled and Q2 versus Q1 has been a doubling of the ounces being produced at Castle Mountain. Q2 production was 6,128 ounces at an all-in sustaining cost…

All right. Thanks, Doug. And I'm going to step back and look at the bigger picture on the next few slides here. And do want to emphasize our long-term focus here has been on growth. It's been on building a large diversified, top-tier gold mining company and during the downturn in the gold cycle. Although, obviously, gold held nicely at $1,800 and our producing assets are generating good cash flow, but what we see here on Slide #13 is the diversified portfolio is starting to come into place. And we've been really focused on all 4 of these countries and regions. We've been building 1 mine per year. We're working on expanding virtually every one of these countries in terms of production levels and reserve bases. The asset values and production will be split about a quarter, a quarter, a quarter between all 4 of these countries when we finished our job of expanding and developing them. And really what you do see is potential production growth from our expansion projects and exploration in all 4 of the countries. So our goal here is not to be reliant on any 1 key asset or whatever, it's to have a nice diversified portfolio that can weather the ups and downs of the sector and cycles. So well on track to creating that through this portfolio. And when you look at the next slide, this is something we have talked about in the past. But I don't want to lose sight of here. We're moving towards 1 million ounces of production there in that second column. We'll be in that top tier of the mid-tiers and moving towards that senior level. our growth profile in the third column is at the top of the chart, the highest amongst peers of almost over…

Perfect. Thanks, Christian. Operator, can you please remind people how to ask the questions.

[Operator Instructions].

Thank you. While we wait for our phone callers to queue up, I'll take a couple of questions from online. Let's just get the inevitable out of the way. What steps have you taken at Los Filos to manage the risk of further disruptions?

Yes. I mean, that's something that we're obviously laser-focused on, and stability there is the key goal, and partnership is a word we use a lot. So it's been a tough go since we've taken over. We've had obviously the COVID overhang and taught us significant ability to visit the site to build relationships. We did change the senior level management during this process in about 5, 6 months ago. And I think they've done a great job of actually getting engaged and involved with communities. And really establishing that we are all in this together and having that mine operating is to the benefit of all stakeholders there locally. And that's something we've learned even more so in this most recent blockade situation is that all parties want this mine operating; government, unions, employees, us, all stakeholders that are getting some kind of benefit from it. And I think what's happened here is we have taken a fairly principled approach to resolving this. We're always open to working with our communities, employees and other stakeholders on finding resolutions and sharing in the benefits that this mine will provide for many years to come. But also, we do have to manage it ethically and responsibly and make sure that things are fair and fairly distributed. And a number of the requests that have come from whichever of these parties that's had a challenge to the mine is looking for almost sole access to contracts, jobs, the economics. And we do have at least 3 communities to manage. We have a union, we have employees, and we have governments as well. And we are fine to obviously create as much local sharing of the pie as possible, but we do need to make sure it's fair as possible. And when we…

We'll now take some questions from the phone, please.

The first question from the phone is from Dalton Baretto from Canaccord.

I kind of want to follow up on that same line of questioning there. So you touched on this a little bit in your prepared comments. But Christian, can you give us a little bit more color in terms of how the blockade actually did get resolved? And what, if anything, you had to give up?

Yes. I mean I'll give you a bit more color. Obviously, I don't go into all the intricate details, but the union situation, there's requests for bonuses that are well beyond what's owed and due in contracts and formulas. And that's in a situation also where the mine is having a very challenging time. We can't be entertaining that kind of demands, which ultimately are being demanded and not owed at all. And so unfortunately, I guess, it resulted in this block - a legal blockade. And at the end of the day, what I think most of the employees realize is that actually lost wages add up to more than that very quickly and jobs are vitally important in the region and steady income. And at the end of the day, I think there was a loss in support for the action. And the groups voluntarily agreed to come back to work. We didn't have to really give up much, I mean, other than obviously the downtime and the impact on our financials and the morale, et cetera. But they came back to work in the end. So I wouldn't say we've given up a lot in that sense. I hope we've earned some respect and trust in that process. In terms of the community, again, I think it's a brand-new community. They only own about 2% of the land. Most of it is, I think, in Guadalupe, and they have some exploration land. So very different than the other communities. There's very few people that actually work at the mine. So I think part of the process is, I'm going to call it, education, maybe that's not a fair word, but also getting familiar with mining, the economics of mining. We can't process the ore in their community…

Okay. And then I know you said there's no guarantees in your last response there. Is there anything you can put in place prior to sinking some real capital into the spend to build the plant and so on?

Well, I think something that we do want to do is get out and talk to them, get the messaging in front that we want to build some stability in partnership here, as we make decisions to invest in this mine. Obviously, we're investing in Guadalupe and Bermejal as we speak, and they're benefiting very significantly. And I think those were the 2 key areas that, that these groups focused on is there's new jobs, new contracts, new investment there, and they want as much of that pie as possible. The CIL will be the next one, obviously. And we want to proceed cautiously with that and build stability before we start investing in that, but we'll take a bit of time, but we're going to have to communicate. I'll go see them with some of our senior leadership here and at site. And they need to understand that there are consequences ultimately to not having stability. We have 3 other extremely attractive countries and sites where we're investing, call it, $1 billion of capital. And we'll continue to allocate the capital there. And as this one becomes more stable, we'll reallocate capital back here.

Okay. Good. And then just 1 last one for me and then I'll jump back in queue. So the blockade was in place for about 34 days. A 50,000 ounce guidance cut seems disproportionate even with the Bermejal underground being pushed out. Can you add some context around that? Like, I mean, how much are you actually expecting from the Bermejal underground? And is there anything else at play here?

Yes. I mean I'll let Doug piggyback on any of my comments here. But don't forget that this is a big leach pad, you don't just turn it on and off. So there's - unfortunately, there's time to ramp it up, and you have to get the solution flow going again. And this time, they absolutely ramped it right down when they had that union blockade. So we had to turn the taps off in a certain sense. And so it will take a little time to ramp it up. But what it does also with all this development is it pushes some of those good months that were meant to add quite a few ounces into the new year. And that's probably one of the biggest disproportionate impacts as well is that those ounces just get pushed out. And really Bermejal, I don't think attributes many tonnes of ore this year now, unfortunately.

No, it's mostly development with small contribution at the very end of the year. So it sort of really pushed out the production from Guadalupe, pushed out ore contribution from Bermejal underground, and the impact of essentially bringing down the ounces on a leach pad and then having to bring it all back up again. It all pushes out what would have been a very good Q4, still going to be a better second half of the year. But the very good finish to the year will actually be spilling over into 2022.

And we do take it really serious. So we have almost 2,000 people working down there with COVID testing and getting people back to work. It doesn't again just happen overnight. So we do have to work through that process and ease people back in, sort of retrain or redo some of the safety protocols just to get them up and ready to go. And so it's a little bit of a big shift to turn.

The next question is from Kerry Smith from Haywood Securities.

So Christian, maybe just to follow up on Los Filos again. If you've got 2,000 employees and you've already got 30 employees that are from Xochipala. I mean if they want more, it seems like they're already kind of at their pro rata share, if you will. It's roughly 2% or maybe it's even right around 2%, I guess. So how do you deliver more jobs for that community when it seems like the pro rata formula maybe wouldn't suggest that they deserve more jobs because that has to come at the expense of the other communities?

Yes. I mean it is always tricky with all the communities on that kind of front. And certainly, with Xochipala 1 thing that we are doing is we've committed to training program so we can end up with some skilled labor in the region from that community. I think we're making a little bit more of a - call it, an overt commitment to hiring some of those people that come out trained. So it's not perfect. But the other side of it too is, I think - I don't want to get too far ahead of myself, but sort of looking at Scott and Doug around the table is some of the future exploration upside and that is in their land. They have a long, call it, strip of land coming to their community right into ultimately the Guadalupe pit. And some of the future exploration and excitement certainly is in that exploration area. So what we see and we're articulating to them, and I think we need to continue to do this, is we have a small piece of actually exploitation land that they get paid for sort of job, et cetera. But that exploration, probably a lot of that feature, is on their land. So there's more to come, but we can't jump ahead of the queue, and they do need to allow us the time to explore. We pay less, obviously, per hectare for exploration land because we're not exploiting it, and it will come. And so I think a little bit of patience is required there and education on the timing and process. So that's how I see it.

Okay. And just on the 3 communities that just so aren't clear, do you have agreements in place with all 3 communities today? And Xochipala just chose to basically ignore that agreement. Is that kind of what happened?

Yes. We do have agreements in place with all 3 communities. And with Xochipala we do have an exploration and an exploitation agreement. I'll be really straight up here is that there's also a misunderstanding, I think, by them on really exploration versus exploitation. They see it as all the same thing. If you're at there drilling on land, it's almost like you're mining it. And Doug, if you had any comments, please add them. But that's - I think part of the process is kind of explaining that once we're mining for gold and making profit from it, we obviously pay a higher rate for, call it, access to that land. But when we're exploring it, it's all of our risk capital going into the ground.

We had agreements with Carrizalillo and Mezcala for since the start of the mine, I guess, in 2008 or so. And the agreements for those 2 communities were renewed in 2019. Xochipala, this was the first time an agreement had been established with Xochipala. So it's a new relationship. But as Christian mentioned, very important properties on the south end of our mining leases - mining license, very prospective, and it impacts the Guadalupe open pit very small piece of ground, but it's important to us. And so it's been essentially working through the buildup of a newer relationship with Xochipala versus the other community that we've been working with for over a decade.

Right. And so Doug, the agreements you have with Carrizalillo and Mezcala, those were renewed in 2019. And were they 6-year or 5-year terms, I forget?

5 for Carrizalillo, and I think it's 10 for Mezcala.

Okay. And then the new agreement that you struck with Xochipala, what would the term be on that agreement? Is it 5? Or is it 10?

No. The new one there is 20 years. Exploration, I think, is a shorter term. I think it's - I'm not sure it's annually, but every few years it gets renewed, but the exploitation is a 20-year.

Okay. Got you. Okay. And just a question on - maybe Doug can answer this on Castle Mountain. Why - what is the issue with the percolation means of oxide ore body? I've been there. There's really no clays at all. I'm just wondering why you're having these percolation issues. And then secondarily to that, the mining cost per tonne seems really high at Castle Mountain. I'm not sure why that's the case. Mesquite seems like probably a good comp, and it's significantly less on a per ton basis. So I just wonder if you could comment on those 2 issues.

Sure. It's find, not place. This is JSLA material is - previously mined material is put into the JSLA open pit. So there's a fair component of find in that material. And when we initially were irrigating the leach pads with spray emitters essentially, there was a penetration problem. So several things have been tried. I would say the most productive approach has been varying emitters, which is, of course, takes a while to step through and try each change. If you do model it once, you don't know which thing is working. So it's been a process of working it through. And the bearing of the emitters has been the most successful one, which has allowed us to ramp up our gallons per minute that are being applied to the pad and essentially doubling the production between Q1 and Q2. We continue to work on other efforts, but we know that the percolation is a key item and driven by high percentage of clients. Mining costs, it's essentially...

It is a contractor, number 1, versus owner mining.

Yes, and trucking over to the leach pad. So it's been run of mine, and I'd have to look into if there's anything else abnormal about it, but...

Yes. I think it's also - it's Peter here. It's in part just a lower denominator, Kerry. While the production has come up significantly from Q1, it's not quite at the level we would expect it. And so - and obviously, it's not a large production volume. So with that reduced denominator, it just amplifies on a per unit basis.

So the lower - the denominator you're referring to is lower tonnes, not lower ounces, obviously?

Yes.

Yes. Okay. Okay. And so Doug, is the bearing emitters, do you think that's the best solution now like you've kind of got that fine tune and that's the solution you're going to run with and now you can focus on other areas to try and get the production up? Is that kind of the goal here?

No, we're not resting on that. We've got more to do. And it's been a very - I'll applaud the efforts that have been done by the team at site for the series of actions that they've taken and to methodically work their way through. And they have a couple more things that they want to try, which we're just going through at the moment. So I would say that it's an important process of being able to step through and get higher percolation and obviously better recovery overall, and that's what we've been doing. It takes a while in the leach pad.

Yes, of course. Okay. Okay. And maybe just 1 last question for Peter. The G&A quarterly run rate. I mean, it fluctuates a lot quarter-over-quarter. What would be a good run rate going forward on a quarterly basis or an annual basis, whatever you prefer for G&A?

For G&A - sorry, I didn't hear the initial part of your question. Yes, it was higher in the quarter for a couple of different reasons. One, we obviously had a lot of transaction costs that flowed through with respect to professional fees due to corporate activity, the sale of Pilar, the Premier acquisition. And then also during the quarter, there was a cleanup item related to share-based comp, and that was about $4 million. And that was an integration of the Leagold and Equinox plans that carried over, unfortunately, until now and was resolved in this quarter. We expect about $7.5 million a quarter overall as a run rate. We tend to think of it in dollars per ounce. And so on an annualized basis, normalized basis, we would expect to be in around $40 an ounce.

Thanks, Kerry. I'll take a couple of questions from online. We have a whole bunch of questions about all-in sustaining costs, and I'm going to try to combine into one. So you've raised your all-in sustaining cost guidance, but you say there will be lower cost in the second half of this year. So just trying to figure out what your all-in sustaining costs are going to look like sort of into '22? And then even further down the road, when you hit that 1 million-ounce goal, what would your all-in sustaining cost target be at that point?

I mean I'll take the high-level question. Pete, please jump in if there's anything more granular or details that you can add. From an overall long-term perspective, I think what you're going to see is, as we move into and finish these investments in some of the mines, you'll see the costs naturally come down. We're putting big investment into areas like Mesquite and RDM, stripping in that. And a lot of that or part of that goes into, call it, sustaining capital, so it affects all-in costs, but also when you're opening up some of these new areas you end up with higher grades, more production, bigger denominator. So you'll naturally see some of those costs come down. Then you have the additional impact and benefit of Santa Luz, Greenstone, certain expansions, projects that will be naturally lower cost. Those are the projects that are the prize for us where we want to get Greenstone up and running, which has got a very low all-in sustaining cost. As we get Santa Luz up and running, it has a lower all-in sustaining cost. So you have the benefit of the operating mines we're investing in coming down over time. The bigger kind of longer-life, high-quality projects that we're developing and putting into place will actually have a lower cost. So the average will come down. In terms of this year, just H1 versus H2, I think the increase in the all-in sustaining cost, there's probably 2 key factors that jump out to me are Los Filos had a big outsized impact for H1 is $2,000 an ounce effectively. So that brings up our all-in cost across the whole year because you're going to have a much lower cost for the second half, but you had a much higher cost in the first half, so your average is higher. Just a simple math of it. And we have 1 or 2 sites in addition to that, that have a similar metric where H1 was higher cost. So on average, just bring up this average for the year. But also there's a bit of inflation in there. And I don't want to overplay that, but give or take, 5% in certain areas, fuel, reagents, et cetera, that's having a little bit of an impact as well. We're still getting benefits of FX or foreign exchange offsetting that and certainly in Brazil.

Good. Okay. Given the undervaluation of your stock, are you considering share buyback?

It's a really good question. I mean it's something we'd love to do. But 1 thing we are focused on right now is we have a lot of capital in front of us, a lot of investment to make. And we have to look at those trade-offs. And I think with Greenstone coming up, finishing off Santa Luz, still investing in a couple of other assets, that's where our capital is best allocated and spent today. As we start to get more visibility come through that, announce those projects, start to deliver on them, we certainly - if the share price isn't moving, we certainly want to be looking at something like share buybacks along the way. But I think for as of today we want to commit that capital to investing in our assets.

And I think it's fair to say that, longer term, we absolutely want to be returning capital to shareholders. That's the whole plan of investing now for future growth and then returning that - making those returns for shareholders.

Operator, we'll take the remaining questions from the phone, please?

The next question over the phone is from Anita Soni from CIBC World Markets.

First question is with regards to Los Filos and the $83 million that you have in non-sustaining capital there this year. Could you just give me an idea of what that's being spent on this year then?

I mean, I'll give a very high level, and either Doug or Pete has a little granularity, they can add to it. But I mean, the key areas, obviously, are opening up Bermejal and Guadalupe. There's lots of stripping that was particularly in the first half of the year at Guadalupe and Bermejal. That kind of continues on for this year. As those are brand-new ore bodies adding to the mine life, those are, call it, growth projects for us. Those are the 2 key areas.

Yes.

Okay. So that number - was that reduced from prior number? Or was that the same number that you had before?

No, it's slightly reduced.

Yes. We reduced it by $12 million from before.

Okay. All right. And then next question, I guess, is with regards just more of a big picture. So I noticed on the slide bar on Slide 20-16, you've got - sorry, on Slide 16 that you've got 800,000 ounces, is the kind of what you're gearing towards for 2022 in terms of production. I think that's taking into account the impact of Los Filos. Is there - can you just give us an idea if any proportion of that is maybe assuming a slower start-up at C1 Santa Luz? Or is it still kind of 100,000 plus for next year?

Well, for next year, I mean, whether we achieve 100,000 or not depends on the date we actually pour gold and get to that commercial production, but it probably will not be far off that. We expect to pour gold in the first quarter. So if we have a really quick ramp-up of like Aurizona of 4 to 6 weeks, then you'll be probably pushing towards 100,000. If it's a little bit slower, probably a bit later. But you'll have the addition, obviously, to get the 800,000 of Santa Luz. You have - Mesquite has - it's hitting that brownie stride in Q4, where it's actually stacking a lot of ore in Q3 and 4 this year, and that falls right through to next year. So you see a sort of nice improvement there. Aurizona is producing at a nice steady level. We've got a full year from Castle as well. And obviously, Los Filos, hopefully, will be an uninterrupted year next year.

Okay. And then the last question I just wanted to ask. Given one of your competitors or colleagues, I guess, in the business at Cote is struggling with capital cost inflation in their new project build. Have you taken - or will you take a look at the feasibility study for Hardrock to reassess as you start that capital spend into the second half of the year?

Yes, absolutely. I mean one of the key jobs, I think, for us is we've taken over. We've hired a head of projects here in Vancouver, and her first job is to actually look at that. Also working very closely with Orion and the project team just to make sure when we come out with a capital number we're standing behind it, we're comfortable. Looking at all COVID impacts, cost escalations, which obviously there is some out there and challenges that other operators and builders have had, and foreign exchange is another piece that's separate to the actual project. But it's something that we need to manage as well, which I think we can do from a corporate perspective. So absolutely, when we come out with our initial capital number, we'll factor in any of those points. And hopefully, you'll see that in the next few months.

Okay. And then just in terms of the original capital spend, or I think maybe you guys had indicated that you were trying to sort of push that in the next 24 or 30 months. Could phasing that CapEx spend be an option? Or would you still want to accelerate the capital?

Sorry, are we just talking about Greenstone specifically here?

Yes, we're talking about Hardrock, yes.

Yes. So yes - or sorry, no, we're not planning to phase it. Sorry, I don't want to give you any indication. No, we think the best way to do it, and in our methodology and thinking here, and I know Ross stands behind this as well, build the mine right, don't try and build it in phases or cut corners to push capital into the operating period. We've seen that happen way too many times. Let's make sure it's well financed, well understood, and let's deliver the project that will actually be the best operating project on day 1. So now we don't have any intention to phase it.

The next question is from John Tumazos from John Tumazos Very Independent Research. John, your line is open. Next question is from Wayne Lam from RBC.

I was just wondering, in Mexico, there seems to be a lot more scrutiny recently around subcontracting and PTU payments. I'm just wondering kind of to what extent do you guys subcontract at Los Filos and if you might be able to provide kind of a ballpark amount that's paid out annually in terms of the PTU profit sharing payments at the mine.

Yes. I mean there is some - there are some changes coming to the laws and how that outsourcing and contracting is coming. I mean, it's still in, call it, the investigation and review phase. I don't know that number off the top of my head, I have to admit Wayne. So I can't give you - I'm not going to even ballpark it for you there. But the team at site is well versed in this. They are experienced operators in Mexico, and we'll adapt the mine as necessary with the contractors to make it work. And it may be a slight shifting into a profit sharing into the entity and bringing employees, call it, in-house a bit more. Do we expect it to have much impact? I don't think it's going to have a massive impact. It may shift how our costs. It shouldn't from an outward perspective how much impact or you shouldn't see it, but it may shift on where the, call it the, profit sharing or bonus or whatever is paid out and allocated.

Okay. Perfect. And then just curious, kind of thinking about that path to 1 million ounces, obviously, the expansion at Los Filos was a big part of that. Given some of the interruptions that have happened over the past year, and you guys had talked to, one, to see more stability. Kind of how should we think about the timing of that expansion? And are you guys still comfortable moving ahead with that over the near term and proceeding with the CIL plant?

Yes. I think it's still a key part of our investment in the future for that mine. I mean it's a great line and great deposit there. And what we want to do, and maybe we just proceed a little more cautiously here, but we want to rebuild the stability, indicate to them that until we have that clear stability, we won't invest in that CIL yet, but it will be on the radar. So maybe we don't launch into it quite as quickly here in the second half of the year. We still need to get the study out as well, and then we can use that to articulate what the plans are to, call it, the communities and local stakeholders. We will continue, obviously, investing in Guadalupe and Bermejal underground. Those are obviously well underway, and Guadalupe is most of the way there. But we may just take a little bit more cautious approach to the CIL. And the good thing here, I guess, is that we don't need the CIL to operate it. It's more efficient, obviously, with certain parts of the deposit to run it through the CIL plant, but ounces are not lost. They may be just deferred if we put some of that material on the leach pad and ultimately reprocess some of it later.

Okay. Great. And then maybe just on the cost inflation that was flagged. Would you be able to provide a bit more detail in terms of percentage terms and what you're seeing on labor and cyanide reagents within the U.S. and Brazil?

Yes. It's Peter here. We're not seeing as much on labor to date. It's definitely more on the energy. So in Brazil, electricity and diesel and then - and also on consumables. So on an overall basis, you call it about 5%, and we're seeing it similar in the U.S., say, 5% of the overall cost structure in each jurisdiction. And in the U.S., it's more on fuel and reagents as well. Okay, I suppose you could add grinding media to the issue in Brazil. I mean, you hate to use the term, but I think the whole world is probably on a wait and see on are these going to be structural increases or is this just a COVID recovery supply chain issue that's going to come down over time. And we're in the same position.

Okay. Got it. And kind of on that similar line, maybe in terms of budgeting at Santa Luz, I just seen it, it's tracking well on budget, but how are you guys kind of thinking about costs as we head into the ramp-up here?

We're on - for Santa Luz construction, we're on budget, and we've spent a lot of time going through everything in regards to first bills and the remainder of the construction, all the equipment, over 90% of - I think over 95% of materials for the construction is already on site. So we're well advanced on Santa Luz, and I think we're good.

In terms of operations, obviously, we've got Fazenda and Aurizona and others around as, call it, benchmarks. And we're actually even, call it, using some of the similar people that were operating some of our other mines. So we've got a good basis. We're also using the same mining contractor. And we now have the volume benefit. We have 3 mines on the same contractor. And so believe Santa Luz may be our most favorable contract out of the 3. So, hopefully, that helps offset any kind of, call it, cost pressures. And as Doug said, I think the guys are saying the other day there may be only 3 pieces of equipment that still are to arrive on site. And they are peripheral. They're none of the big mills or any of the core pieces of equipment. So fortunately, any of those logistics challenges are probably behind us generally at Santa Luz.

And as a multi-mine producer, we, of course, look at the opportunities where we can for being able to do purchasing beyond just individual sites. So that effort is ongoing in the background because we know that's an important thing to be doing at this time. And it reaps benefits if there's continued escalation. But long term, obviously benefits us no matter what if we can do group purchasing and bring overall costs down. So that's going on as well.

And another thing that we're looking at, and this is a look forward quite a ways, is there's opportunities to look to independent green power in Brazil, but also at other locations. And I'm not going to promise anything today, but there's some major mining, and other companies that are already involved in taking power from these facilities and having production facilities built that are proving fantastic from a cost perspective. But also from an ESG perspective because they're using renewable sources of energy. So kind of win-win in that sense. And we're very serious about looking at those kinds of opportunities, partly because it's a smart business in terms of costs, but it's also great from an ESG perspective. And as we get our baselines for all of our emissions and things that becomes more in focus for us.

Thank you, everybody, for joining us today. That's the end of our questions. If you do think of anything, please do not hesitate to get in touch. I will turn it back over to Christian for closing remarks.

Thanks, Rhylin. And I think it's a pretty comprehensive run-through. And as I said earlier on, we're really looking forward to the second half of this year. It's been a little bit more of a challenge in the first half. We knew it would be. It was well telegraphed. And second half should be pretty exciting. So stay tuned for Q3 and 4. Thank you very much.

Operator, you can now disconnect the lines.

Thank you. This concludes today's conference call. You may all disconnect your lines. Thank you for participating, and have a pleasant day.