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Thank you for standing by. This is the conference operator. Welcome to the First Majestic Silver Second Quarter 2018 Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Keith Neumeyer, President and Chief Executive Officer. Please go ahead, sir.
Well, welcome, everyone, to our second quarter production call and renewed guidance call. We've got a full room here in Vancouver starting with myself, obviously, Keith Neumeyer, CEO and President. Beside me, I have Ray Polman, Chief Financial Officer; also, Dustin VanDoorselaere, Chief Operating Officer; Jill Arias, VP of Marketing; Mark Carruthers, Manager of Investor Relations; Andrew Poon, Vice President, Finance; Todd Anthony, VP of Corporate Development; Connie Lillico, our Corporate Secretary; and Ramon Mendoza, VP, Technical Services. So we have a whole team here. If there any questions, I may choose to pass on questions to any of the individuals in the room. But before we start, I'll first go to Connie.
Thanks, Keith. Prior to us beginning today, I'll read our disclaimer on forward-looking statements. Certain statements contained in this conference call regarding the company and its operations constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and Section 21E of the United States Securities Exchange Act of 1934 as amended. All statements that are not historical facts including, without limitation, statements regarding future estimates, plans, objectives, assumptions or expectations of future performance, constitute forward-looking statements. We caution you that such forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and future events to differ materially from those anticipated in such statements. Such risks and uncertainties include fluctuations in precious metal prices; unpredictable results of exploration activities; uncertainties inherent in the estimation of mineral reserves and resources; fluctuations in the cost of goods and services; problems associated with exploration and mining operations; changes in legal, social or political conditions in the jurisdiction where the company operates; lack of corporate funding; and other risk factors as discussed in the company's filings with the Canadian securities regulatory agencies. Resources and production goals and forecasts may be based on data insufficient to support them. The company expressly disclaims any obligation to update any forward-looking statements. Back to you, Keith.
Thanks, Connie. First off, before I get into some highlights, when the public companies put out -- particularly mining companies put out quite positive news, they always hope for the metal to actually be at least flat or if not up to date, you put out announcements of the nature that we just received or released. And this is, obviously, an extremely positive news release that we just put out last night, and we have silver prices, unfortunately, today hitting 52-week lows. The last I checked, silver was down about 1.5% and our stock has a very high beta to the price of silver and it's not unusual to see our share price move 3 to 4x what the metal price does, whether it's positive or negative, and today, obviously, it is negative. So we're being, unfortunately, affected due to that. And our news release, which should be viewed quite positively, unfortunately, gets lost in the whole wind of the metal price move. But just going to some highlights, there's nothing we can do about the silver price. All we can do as a management team is just keep working hard and then doing the right things to build the business. And shareholders will see -- well, they just see there's a record Q2 numbers in the history of the company. Q3, we're expecting another record as with San Dimas being a full quarter. We're expecting H2 to show an increase of about 55% to 71% increase over the first half of 2018, which is obviously a pretty significant increase half-over-half. We did mention that in the news release. We've also increased our guidance as well, which obviously is pretty interesting. We were expecting to see double-digit growth over the next couple of quarters.We're seeing -- finally, we're seeing some improvements in La Encantada, with the grades slowly improving there. I know that we did lose some production in Q2 as a result of grades and the delay in the roaster, but now that's all slowly turning around in Q3 and Q4. And the microbubbles, which we've been talking about for several quarters now, are due to be delivered in H3 and installed in H4 and -- primarily -- they will be delivered in Q3 and be installed in Q4 and Q1. And we did announce the unfortunate decision of placing one of our mines, the La Guitarra mine, which is our smallest operation, producing just slightly less than 1 million ounces of silver annually in care and maintenance. It was a difficult decision but I think it's the best for the company. There's about $19 million in budget that was destined for that asset, which we've now moved those dollars over to San Dimas, and you can imagine the internal rate of return on that capital is obviously pretty substantial compared to what would have been if that investment stayed at La Guitarra. So that's really it for my highlights of the news release. I'd like to open this call up to questions. Looks like there's a few people coming into the question queue.
[Operator Instructions] Our first question comes from Gabriel Gonzalez of Echelon Partners.
Just wondering, of the $22.4 million that was indicated to be destined for San Dimas in the second half of 2018, I was wondering if you could just go over which of the projects that were outlined on Page 5 of the press release will correspond to that CapEx.
Just hold on a sec. Yes. We don't have the breakdown for the purpose of this call. We can -- Todd Anthony or Mark Carruthers can speak to you offline and then give you those details. You have to go to finance and get the breakout.
Our next question comes from [ Andy Showpick ], private investor.
I wanted to ask if you could just update us on the doré and the concentrate mix from the mines and especially San Dimas. Could you go over that with us?
Yes. San Dimas is 100% doré bars. Approximately 50% of the value of the doré bars are in silver and about 50% of the value is in gold. Santa Elena, the second largest mine, is about exactly the same mix, all doré bars as well, about the same value on a 50-50 basis. La Parrilla is doré bars, mostly all silver, very little gold, but it also produces a lead concentrate and a zinc concentrate. It's the only mine that actually produces zinc. Del Toro produces a lead concentrate only with silver. And by the way, the silver [ reports ] the lead concentrate at La Parrilla as well. No silver reports of zinc. And San Martin is 100% doré, about 20% of the value is gold. 80% of the value is silver. And then La Encantada is 100% doré. 100% of the doré is silver. You can see we're very much a doré producer. And that's one of the -- just to further comment. One of the reasons why the La Guitarra operation was put in care and maintenance is because that mill is quite an old mill and it shouldn't really be producing doré bars, but obviously to build a brand-new mill there, it's going to take capital to convert that over. It's a plan that we've had on our books for quite some time but we just never got around to doing it and it was actually going to be done in the next couple of years. We are just all -- we are in the process of doing all the engineering. And then San Dimas came along, and then we ended up buying it, of course, and it's now taken priority. So ultimately, La Guitarra should be producing doré sometime in the future, whether it's under our ownership or somebody else's ownership. Time will only tell.
Given what you've told us about La Guitarra, I'm wondering to what extent you may be able to comment on any financial charges that will be associated with putting that mine in maintenance and everything will be -- and whether everything will be taken and charged in the current quarter or the next quarter.
Yes. There's about 400 people, I believe. Is it, Dustin? 400?
Yes.
About 400 total people being affected. Some of those people will be moved to other areas of the company. By law, they'll all be severanced out according to law. I think -- I forget the dollar amount, it's a couple of million bucks.
It's $1.5 million.
$1.5 million of severance will be paid out to those workers. And then there'll be a skeleton staff, a security staff maintained on site. We'll continue with some permitting stuff that we've been wanting to do there and just keep it in care and maintenance. So there'll be ongoing costs of a couple hundred thousand dollars per quarter just to keep it in care and maintenance.
Our next question comes from Jake Sekelsky of Roth Capital Partners.
Just wondering, is the 1,700 tonne a day run rate something you guys expect going forward over the medium to long term? Or do you think this is something you guys might go back and reevaluate as the improvements are made over the next year or so?
Well, we're trying to be conservative. We've got a couple of people internally, I can tell you, that would love to see it a lot higher and we've got people on site that are pushing for bigger numbers. But we'd like to just take a bit of a step back and not push the mine. The mine has lacked investment for a long time and we don't want to do anything foolish. So we think the numbers that we placed into the news release, 1,700 tonnes per day, with estimated silver grades of 345 grams and estimated gold of 3.9, those are decent numbers and then, we're comfortable that those numbers can be maintained. But this mine has produced more and it's capable of producing more. But it's only been in our portfolio for a short period of time. We've been on site since January, but we've only been operating it for really 2 months now. So when we do our 2019 guidance, I'm not to give you any kind of indication of what the numbers are going to look like, but I wouldn't be surprised to see it slightly higher.
[Operator Instructions] Our next question comes from John Tumazos of John Tumazos Very Independent Research.
I know things have been pretty good at your mines this year in Mexico, but there was some noteworthy press in May concerning train derailments and robberies on the line from Veracruz to Puebla and sensational TV footage of 7 derailment and robberies. And the national statistics for the last year or so have averaged about 200 train robberies a month. Are you having any disruptions in your raw material supplies, spare parts, reagents, et cetera? And have your costs related to securities stayed about the same?
We don't use the rail system at all. The concentrates are shipped by vehicles that are -- they're followed with security and so on, and the doré bars are transported by air and by armored vehicle. Everything's insured, of course. There are -- we had a robbery in, I think, what, early 2017?
March 2017.
March 2017. It was the first ever robbery in the history of the company, but it was insured. The insurance company actually paid us in full within 30 days, I think, it was, right? So it was a pretty good experience. They were so on top of that situation. Some of the bars were recovered and -- but we have security, obviously, and we do take security pretty seriously, but we generally have been pretty unimpacted by these activities. The states that we're active in are pretty mining-friendly states, Durango, Zacatecas, Sonora, Jalisco. These are pretty mining-friendly areas.
[Operator Instructions] We currently have no questioners in the queue.
Okay. Well, I guess we can close off then. Nice, short, to the point, sweet call. Please feel free to call Mark or Todd with any further questions, any further details that anyone would like to have. And we look forward to a great second half of 2018. And as I said, Q3 and Q4 look like they're going to be pretty good years -- or pretty good quarters, I mean. We've got the [ big ] mills arriving in the end of the year and we'll be installing it in Q1, which is also going to bring some pretty interesting improvements to the operations. So despite the silver price, there's lots of really good things happening in First Majestic. So hang on and feel free to call us at any time. Thank you.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.