Sierra Metals Inc

TSX:SMT

Earnings Call Transcript

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to Sierra Metals' Q4 2019 Consolidated Financial Results. [Operator Instructions]I would now like to hand the conference over to Mike McAllister, VP, Investor Relations. Thank you. Please go ahead.

[Michael McAllister, Vice President of Investor Relations]

Thank you, operator, and good morning, everyone. Welcome to Sierra Metals' Year-End and Q4 2019 Results Conference Call. On today's call, we are joined by Igor Gonzáles, our President and CEO; as well as Ed Guimaraes, our CFO.Today's call will be followed, as mentioned by the operator, by a question-and-answer period. Today's companying presentation is available for download through both the website and from the company's website, www.sierrametals.com. Yesterday's press release and the financial statements and the management and discussion and analysis are also posted on the company's website.Before I turn it over to Slide 3, before I turn the call over to Igor, I would like to indicate that this earnings call contains forward-looking information that is based on the company's current expectations, estimates and beliefs. This forward-looking information is subject to a number of risks, uncertainties and other factors. Actual results could differ materially from our conclusions, forecasts or projections as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information is contained in the company's annual information form, which is publicly available on SEDAR or EDGAR via Form 40-F or on the company's website. Please note that all dollar amounts mentioned in today's call are in U.S. dollars, unless otherwise noted.With that, I would now like to turn the call over to Igor Gonzáles, our President and CEO. Please go ahead, Igor.

[Igor Alcides Gonzáles Galindo, President, CEO & Director]

Thanks, Mike, and good morning, everyone. Before I begin, I would like to take a moment to provide you an update about the COVID-19 pandemic and how the company has been impacted today and the actions that we are taking to mitigate the risk to our workforce and the company.On March 16, the Peruvian government declared a state of emergency for 2 weeks. And with that came a lockdown of the country, plus a curfew for the population at nighttime. Following these orders, we demobilized plus 500 employees on the 16th and we order every employee from the administrative areas to work from home. We were able to keep essential services crew at our Yauricocha Mine. Then on March 26, the government also declared an extension of the state of emergency for additional 13 days until April 12 and where we plan to get back to normal operating capacity. Permits have been also deferred until after the emergency. We have no cases of COVID-19 within our company employees. And the essential services crew remains at the mine, following all health protocols of the Peruvian health authority and the World Health Organization, daily medical checkup and no contact with outside personnel. The essential services crews basically are doing some support activities on the infrastructure in the mine. And we are doing some maintenance, some stockpile processing at the processing facility and some on hand concentrate shipping.In the case of our Mexican operations, last night, the Mexican government declared a sanitary emergency in Mexico for 30 days, throughout April. So far, our operations in Mexico have been normal. And we're waiting for official word of the government to clarify whether our operations are included in this emergency or if we can continue to operate. So far, we've been operating on a normal basis in Mexico. And of course, this is a very dynamic situation.Now moving on to Slide #6. Based on the COVID-19 update I just provided and looking at our outlook for the company, I would like to mention that due to uncertainty of the effect of COVID-19 pandemic could have on our company's operations, financial condition and rapidly changing developments, the company is currently implementing a proactive and reactive mitigation measures to minimize any impact of potential COVID-19 might have on our people, communities operations, supply chain and finances. I should mention also that we have a Crisis Committee formed in each one of our mines, and we have daily calls to make the appropriate decisions and in order to cope with this crisis. This also includes the preservation of capital, deferring capital programs where appropriate to improve liquidity. The company is maintaining its guidance due to its operating flexibility at our Yauricocha Mine in Peru and the normal operations of its Mexican mines at this moment. If material changes occur, the company would update its guidance promptly and expects to provide a more comprehensive update, including more data points on metal prices and operating development as part of the Q1 2020 reporting process.Turning now to the highlights on Slide #7. We will now provide the highlights for the full year. 2019 was a phenomenal year for the company as we completed throughput expansion and completed production ramp-up at both of our Mexican mines. This provided for a significant increase in the consolidated production for all metals over 2018. Also, we recovered the tonnage that was lost from the illegal strike action at the Yauricocha Mine in Peru.In 2019, we faced lower base metal prices and higher in treatment and refining charges. As well, we realized increased labor and contractor costs, primarily related to increased development work, which was required to achieve higher throughput throughout the year. Despite these challenges, the company generated a significant amount of operating cash flow, which have been allocated carefully and prudently in order to fund capital expenditures and maintain liquidity. Furthermore, we continue to realize strong returns on the capital invested in our growth projects.Looking now at Slide #8, revenues from metals payable in 2019 were $229 million, with $65.3 million of adjusted EBITDA and consolidated throughput of 2.7 million tonnes of metal production and of 112 million copper equivalent pounds or 19 million silver equivalent ounces or 268 million zinc equivalent pounds for 2019 year. We finished the year with a cash balance of $43 million.Turning to Slide 9. You can see that on a consolidated basis, we had a year of solid operating performance with a 15% increase in the number of total tonnes processed and increases in all metals produced compared to 2018. The metals mix, the percentage of revenue has copper leading the way, representing 38% of revenue, which is expected to continue and possibly increase in the future. It is followed by 25% from zinc, 19% from silver, 12% from lead and 6% from gold.Turning to Slide 10 and taking a closer look at each mine now. Yauricocha saw a 20% increase in throughput during 2019 versus 2018 as we continue to run the mine at higher throughput rate, working successfully to recover lost tonnage from the strike earlier in the year. Higher zinc, lead and gold head grades and higher recoveries of all metals resulted in a 43% increase in zinc equivalent pounds produced during 2019 as compared to 2018. Cash costs of $0.46 per zinc equivalent payable pound were lower at Yauricocha in 2019 over 2018. Whereas, the all-in sustaining costs were 8%, at $0.79 per zinc equivalent payable pound, higher as a result of higher sustaining capital and an increase in zinc treatment and refining costs as compared to 2018.

[Operator]

Hi, Igor, this is the operator. Hi, Igor, your line is a little choppy. Are you able to move closer to the microphone?

[Igor Alcides Gonzáles Galindo, President, CEO & Director]

Is this better?[Technical Difficulty]Management continues to focus on cost reduction initiatives under implementation at Yauricocha going forward.The Yauricocha Mine continues to be a solid performer for the company, and we continue improving the mine with a focus on the expansion to 3,600 tonnes per day expected in the later part of 2020. Work has been completed on the tailings of dam expansions, and we're awaiting permits to commence production at the higher throughput level. However, government processes related to permitting applications are deferred during the state of emergency due to COVID-19, which may result in delays to the permits being issued. Work also continues on a ramp to connect the 820 level with the 720 level at Yauricocha, which will provide for an additional at least 10,000 tonnes per month of increased capacity to move forward waste from the mine and alleviate the head grade. These projects will help the mine to run more efficiently and help to further reduce costs.Furthermore, surface drilling has commenced on high-value targets such as Doña Leona and Victoria where we recently received permits. However, this nonessential exploration is being deferred to preserve capital until we have more clarity on COVID-19 pandemic.Finally, the Yauricocha reserve and resource update was issued in December with a full NI 43-101 Technical Report filed in February 2020. Mineral reserve tonnage decreased 5%, which included mine depletion, mineral classification improved as the proven reserves increased 45% and the probable reserves decreased 18%.Turning now to Slide #11. At Bolivar, we had an excellent year, realizing 23% increase in throughput, which was a record, along with the record metal production, which included a 28% increase in copper equivalent pounds produced when compared to 2018. Bolivar realized an 11% reduction in copper head grade that was offset by a 46% increase in throughput, a 59% increase in gold head grade and a 12% increase in silver head grade. Additionally, we were able to achieve improved copper and silver recoveries at the plant due to the significant plant improvements the company has made during the year. We expect copper grades to modestly improve in 2020 as we source more ore from Bolivar West zone, as this zone has higher copper, silver and gold grade.Cash cost per copper equivalent payable pound increased to $1.73, and the all-in sustaining costs were higher at $2.86 in 2019 versus 2018. This is attributable to higher labor and contractor costs related to stope and ramp development within the mine to increase throughput. Additionally, sustaining capital expenditures were higher due to equipment purchases, mine development costs, exploration drilling and plant improvements.Bolivar reached an average throughput of 3,628 tonnes per day in 2019 and is expected to ramp up to approximately 5,000 tonnes per day by the fourth quarter of 2020. An updated Mineral Reserve and Resource Estimate was issued today, March 31, 2020, which includes drilling programs completed between November 2017 and December 2019 as well as production data up to December 2019 and represented a 5% decrease in mineral reserves tonnage. Total indicated mineral resources increased by 48% from the 2017 Technical Report and 68% from the December 2019 update. Total inferred mineral resources increased by 268% from the October 2017 Technical Report and up 29% since December 2019 update. A NI 43-101 Technical Report will be filed within 45 days. It's worth mentioning that the drilling occurred mainly at the El Fierro mine or El Gallo Inferior where the grade is typically no higher than 0.7, 0.8 copper in situ.Infill drilling is still planned for the Bolivar West and West extension and the Bolivar Northwest zone, which are considered high-value targets, but which could not be drilled due to contractor delays in the development of these areas which would have contained a strategically placed in drill stations. These areas contain higher copper grades, up to 1.5% copper in situ as well as increased gold and silver grades, which were previously reported. Subsequent infill exploration programs are planned in these areas in the coming year with the goal of increasing tonnages and grades at Bolivar. Also based on the large increase to the mineral resources, the company is committed to updating the PEA for the Bolivar Mine, which will provide us with a clear path forward to further potential expansions at the mine. The previous PEA recommended an increase of production to the 5,000 tonne per day level by 2021, and we are very close to achieving that level of production.Turning now to Slide #12. In 2019, Cusi average throughput was 815 tonnes per day, which was a 28% increase over 2018. The mill has the capacity to produce at 1,200 tonnes per day level, but due to a subsidence at the mine and the need for additional development, the mine continues to ramp up to 1,200 tonnes per day level, which is expected to reach in the second quarter of 2020.The increase in throughput resulted in a 27% increase in silver equivalent ounces produced despite the lower head grades and recoveries realized for all metals. Development delays due to the heavy rains as well as an issue with the subsidence in the third quarter required a 16-meter high pillar left in place for stability purposes. As a result of the delayed development, lower grade zones that were accessible were mined, resulting in lower silver grade in the later part of the year. New contractors arrived at the mine site in October with a focus of improving development rate in the new areas and stope access. We're also focused on the development of the level 1704 and 720 at the Santa Rosa de Lima to provide higher-grade ore for the mill. Work also continues enlarging the ramp size to 4.5x4 meters, allowing larger trucks to haul more ore from the mine to the plant. With these changes, Cusi is expected to reach 1,200 tonnes per day level throughput and become a profitable operation.Cusi cash cost per silver equivalent payable ounce was $21.38. And the all-in sustaining cost was $30.89 per silver equivalent payable ounce, which was higher in 2019 compared to 2018. Unit costs were higher compared to 2018 as the slight increase in silver equivalent payable pound could not offset the increase in cost of sales and sustaining costs during the year, which included higher capital expenditures at the mine related to additional mine development as a consequence of a ground subsidence event at the mine earlier this year. The company expects to have an updated NI 43-101 Technical Report for the Cusi mine at the end of Q2 2020 and is expected to include the results for additional infill drilling currently being completed at the mine to improve the quality and classification of the resources contained within the NI 43-101 Technical Report.Sierra Metals had a solid year with consolidated throughput and metals production and is ramping up production in Mexico. We continue working to improve our per share value, but in light of the COVID-19 pandemic, we're facing lower metal prices and uncertainty in the markets. Management is on top of this extremely fluid situation and the Board and the management teams are consistently reviewing and adapting to the current market. We're scaling back on nonessential exploration programs currently to preserve cash, but continue with certain programs with a goal to improve quality, add an additional resources. The company continues to have a solid financial position and the liquidity to support our operations and expansion programs, which always represents a prudent use of capital and provides for an excellent return on investment for the company and its shareholders.With that, I would like to review our cash flows for 2019 in more detail. Turning to Slide 13. During 2019, our operating cash flows before movements in working capital were $66.4 million. We had negative working capital adjustments of $4.6 million. We paid $22.2 million in taxes. We invested $54.6 million in capital expenditures in Mexico and Peru. We spent $60.8 million to repay loans, credit facilities and on interest payments, and we also paid 2.8 million repurchased shares of the company. We received proceeds from the issuance of senior credit facility of $99.8 million, leaving us with a cash balance of $43 million as at December 31, 2019.On Slide 14, the company is in good financial health, and we maintain a strong balance sheet with $43 million in cash, our total debt of $99.8 million at the end of Q3 2019, with a net debt of $56.8 million. For 2020, the company focus remains on cash flow and the allocation of operating cash flows to sufficient capital growth to provide funding for the remaining capital expenditures planned in this year.Management continues to review metal prices and retain the ability to further adjust capital expenditures with respect to metal changes within the year. Furthermore, in a previous press release dated January 8, 2020, in anticipation of free cash flow during the year, the company was contemplating returning capital to its shareholders for which the company Board of Directors had approved a plan to return up to $30 million to shareholders during 2020, which represented a portion of the EBITDA guidance issued for 2020. However, due to the highly uncertain economic situation as a result of COVID-19 and its impact on the company's operation and metal prices, the company has decided to postpone the substantial issuer bid share repurchase program.With that, I will now turn the call back to Mike.

[Michael McAllister, Vice President of Investor Relations]

Thanks, Igor. That ends the presentation portion of the call. As mentioned earlier, we'd now like to open up the call to questions from participants. Operator, if you could please open up the lines.

[Operator]

[Operator Instructions] Your first question is from Heiko Ihle with H.C. Wainwright.

[Heiko Felix Ihle]

So all-in sustaining costs, this is a quote in 2019, were 8% higher at Yauricocha, 34% at Bolivar and 40% at Cusi. Can you guys attribute this to higher cash costs, higher treatment and refining costs and higher sustaining CapEx? Can you break this down a little bit more? I mean, the 34% to 40% increase in all-in sustaining costs, I mean, I would assume the treatment and refining costs are just a very small part of that. I mean that's got to be a fraction. Can you just maybe provide a little bit more color on these numbers that are reasonably high?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

It's Ed. Thanks for the question. And the all-in sustaining costs does contain a much higher treatment cost and refining cost. It's not a de minimis amount. The increase from 2018 to 2019 was in the ballpark of somewhere between $15 million and $20 million. Most of that was in the zinc treatment cost, so very significant. And that affects your net smelter revenue, but again, this goes all the way down the line and affecting, obviously, EBITDA and your cash.

[Heiko Felix Ihle]

But can you break it out just a little bit more, maybe quantify it a bit?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

I don't have that in front of me right now, Heiko. But essentially, there was sustaining capital across all mines, an increase from where we were in 2018, but the significant impact was the TCs and RCs.

[Heiko Felix Ihle]

Got it. And then just a clarification. You said you postponed the substantial issuer bid share buyback due to COVID-19. Do you plan on announcing when this postponement is lifted? And do you think you might even revise the amount? And also just to clarify, how much has actually been returned in Q1 under this program before this whole COVID stuff started to happen, please?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

Okay, Heiko. So just -- do you want to take it, Igor?

[Igor Alcides Gonzáles Galindo, President, CEO & Director]

Go ahead, Ed, and then I'll complement.

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

So just starting with the second part of the question first. Nothing was repaid or repurchased in Q1. If you recall the press release back on January 8, I believe, we were planning to launch this substantial issuer bid beginning in Q2 of 2020. Obviously, the effects of COVID-19 have put this on hold for the time being. And we're not prepared at this time to comment on when that could be reinstated or launched. Again, that's going to have to depend on metal prices, macroeconomics to get us to essentially where we were to basically the end of -- into the fourth quarter of 2019 and the fundamentals at that time, which led us to make the decision to launch the share buyback program. So I think there's still a lot of work that needs to be done in terms of the economy getting back on its feet. So I'm not prepared to say when that might be.

[Igor Alcides Gonzáles Galindo, President, CEO & Director]

Yes. What we're doing, Heiko, is given that the realized metal prices to date in 2020 have been continually dropping, this has forced us to put a team in place in Sierra and we're reviewing different scenarios. Of course, we're reviewing, first of all, growth capital, to see if we can defer or stop some of the capital projects altogether during this period of time. We're also reviewing sustaining capital, operating costs, contract, administrative costs and also all the contract. So that work is ongoing. Each one of the mines has its share cut out for them, and they are supposed to be reporting on a weekly basis, and we are making the decisions in order to save capital and reduce our costs. So we will update the market once we have all the scenarios defined internally. However, you have to understand that Mexico and Peru are continually evolving in view of this pandemic. So far in Peru, we think we're going to have, for example, a shutdown period of 28 days. We don't know yet if it will be extended or not. If it's not extended, then we'll go back to operations on April 12. If it's extended, we'll have to reassess.

[Operator]

Your next question is from Mark Reichman with NOBLE Capital Markets.

[Mark La France Reichman, Senior Natural Resource Analyst]

I think Igor may have answered part of this question. But when you talk about trying to conserve on some of the nonessential exploration, I think in the past, you had talked about this Bolivar expansion going beyond 5,000 tonnes per day. That, that was kind of an aspirational goal and you'd kind of look at it when you get closer to reaching that target. And so I was just wondering in terms of where you try to conserve, do you have a specific target in terms of hard dollar amount in mind? And how much could be gained from pushing out that expansion, including maybe the PEA or whatever, to trying to get Bolivar up above that 5,000 tonne per day rate?

[Igor Alcides Gonzáles Galindo, President, CEO & Director]

Yes. It's scenarios that we're evaluating will give us that target number. I cannot give you that number right now because we're in the middle of the evaluation. But yes, we're considering first to defer any capital that is nonessential at this point in time, although it was approved earlier in the year. For example, the Yauricocha shaft, we can slow down its implementation, but we can also make sure that we build the ramp which will alleviate the Yauricocha shaft. So that's the type of trade-offs that we are doing right now. Also, the communication between Esperanza and Cachi Cachi at the 1070 level will also alleviate the Yauricocha shaft. So those are the trade-offs that we are doing now. And if we see that those 2 projects alleviate enough the Yauricocha shaft, then we can then slow down the Yauricocha shaft. So those are the things that we're doing. In Mexico, we also, for example, we were building a tunnel to communicate all the Bolivar underground works with the plant. We have to slow down that project and now we're very close to stopping all work in that project just because we need to conserve some capital.

[Mark La France Reichman, Senior Natural Resource Analyst]

On the flip side, I mean, are you seeing yet any benefit from the lower oil and fuel costs? Or I mean, how much sensitivity do you have to that in terms of maybe offsetting some of these uncertainties in some of the other areas, at least throughout 2020?

[Igor Alcides Gonzáles Galindo, President, CEO & Director]

We have seen -- go ahead, Ed.

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

The change in oil prices doesn't impact us, diesel or oil. A lot of our machinery underground is electric. And the amount would be less than $1 million, if you will, on an entire year. It's really -- the bigger ones are obviously metal prices and you do have a little bit of savings in terms of the weakening currencies. But again, that doesn't even come close to the impact on metal prices.

[Mark La France Reichman, Senior Natural Resource Analyst]

Right, right. Okay. Great. Well, that's very helpful.

[Igor Alcides Gonzáles Galindo, President, CEO & Director]

The big parts of the energy consumption for both Peru and Mexico comes from the grid. And of course, we have contracts around those prices. So we don't expect to see any drop in those unitary costs, power costs.

[Operator]

And your next question is from Lee Cooperman with Omega Family Office.

[Leon G. Cooperman, President, CEO & Chairman]

Let me just first compliment you on your performance under very difficult circumstances. You're doing a very fine job. Unfortunately, the price of commodities are undermining you. I'm just curious, without any specificity, do you expect to generate cash during the course of 2020? I'm not looking for any specific forecast. That would be one. I have 3 questions. That'd be my first question.

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

Thanks for your question. It's too early to tell based on the pandemic and how long it lasts. We're not prepared to answer that at this time. We're hoping to give more clarity on our May call for our Q1 results.

[Leon G. Cooperman, President, CEO & Chairman]

Got you. Second question, I noticed that the exhibit that you used to include of the NAV of the company was omitted in this slide deck. Any particular reason other than you didn't like the results?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

No. It was essentially that information was based on information from 2017 in terms of PEAs. So that's really become outdated. And now that we have NI 43-101s completed at Yauricocha and Bolivar, and we'll soon to have an NI 43-101 reserve resource on Cusi coming up before the end of June of 2020, we'll be in a position at that time to assess updating PEAs and then reinstating that sort of schedule.

[Leon G. Cooperman, President, CEO & Chairman]

Do you have a view as to whether that number would have been higher or lower if you published it today?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

I'm not prepared to answer that today, Lee.

[Leon G. Cooperman, President, CEO & Chairman]

Got you. Okay. And lastly, what was the analysis that went through that formulated the decision to buy back stock? I think you did the right thing by canceling the buyback. But I'm just curious, what was the analysis that was your conclusion that given everything you looked at, the stock was selling below the intrinsic value of the business and it was a good thing for the shareholders to reduce the cap? Is it as simple as that or was there something more subtle?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

I'm not sure I understand, Lee. Are you...

[Leon G. Cooperman, President, CEO & Chairman]

Why were you motivated to buy back stock when you announced the -- were you motivated because you thought the stock was mispriced?

[Igor Alcides Gonzáles Galindo, President, CEO & Director]

Yes. Two reasons, Lee. One, that in our budget 2020, when we submitted to the Board, we were trying to position ourselves with a very good cash position. And as such, we wanted to make use of that cash. And given the price of the stock, then we thought it was one of the best options to buy back. But that was with the budget 2020. Since then, as metal prices dropped, then those numbers have been changing.

[Leon G. Cooperman, President, CEO & Chairman]

Yes. It was very understandable. All I would suggest to you is, only buy back stock, okay, if, with a sharp pencil, you are convinced the stock is very undervalued. If you cannot convince us we're undervalued, you're better off just returning the money through the form of dividends.

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

Lee, I appreciate that. We concur. And that was one of the reasons as well. It's definitely the intrinsic value was not where -- the share price did not reflect that.

[Operator]

[Operator Instructions] We do have a question from Jim Young with West Family Investments.

[James Young, VP & Investment Analyst]

A couple of questions for you. Number one, following up on the cost that was raised earlier, can you give us a sense as to -- on Page 8 of your corporate presentation that you had up on the web your -- the expectation for 2020 cost guidance all-in sustaining costs are dramatically below what you reported in the fourth quarter and in 2019. And the question is, assuming the current production levels hold, your production guidance holds, I would assume that also that the TCs and RCs that you mentioned had increased, but that was already built into these expectations for your guidance, and so how confident are you that you can still drive cost and the all-in sustaining costs down to $0.77 at Yauricocha, $1.75 at Bolivar and $15.18 at Cusi?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

Jim, thanks for your question. And yes, the TCs and RCs were built in already into the cash costs and all-in sustaining costs that were included in the guidance. Prior to the COVID-19 pandemic, yes, we were very confident that we could hit those numbers. And as well, we had our throughput expansion plans in place as well, which will help reduce your fixed unit costs. So definitely, we were confident that we could get there.

[James Young, VP & Investment Analyst]

Okay. So Ed, what I'm hearing is that as long as your production guidance is able to be maintained, your costs should decline quite dramatically in 2020?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

Based on the guidance provided, yes. If this COVID-19 situation didn't happen, that is correct. A great example of that, Jim, was in terms of production, at Yauricocha, last year, we had an illegal strike that took 24 days offline of production and Yauricocha still managed to come back and meet its production targets. So we'll see how long this lasts, but if, again, I think we'll be in a better position in May when we issue our Q1 results, and we'll provide better guidance at that time.

[James Young, VP & Investment Analyst]

Okay. The second question is regarding your gold production. In the last 2 years, your gold production has basically doubled in ounces. And the question is, is the outlook for gold production continuing at the prior rate or can you give us a sense as to what the gold production outlook is like over the next couple of years?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

Yes. Just in terms of where we were in 2019 to 2020, we're expecting a 10% to 15% increase in gold production. But again, it's not significant in terms of ounces. We go from approximately 11,000 to just over 12,000 ounces. That's what was guided.

[Igor Alcides Gonzáles Galindo, President, CEO & Director]

Yes. Yes. The increase in gold production is coming mainly from Bolivar West in Mexico. And as you can see in the last quarter of 2019, we averaged 4,250 tonnes per day. Our target for this year in the first quarter of 2020 was 4,500 and we're very close to that number. And with that addition, of course, and then the percentage of ore coming from Bolivar West is now at close to 50%, so that is what is making the impact on gold production. We expect to stay at that throughput rate and even increase it further as we approach second and third quarters in 2020. And of course, that will drive some additional gold production from Bolivar.

[James Young, VP & Investment Analyst]

Okay. And then my last question is, although -- and I would agree with the action to not go forward with the share buyback program at this time given the uncertainties in the environment and the like, but the question is, from the management's ability to buy stock, can you share with us when your blackout period ends and how long the window is open for giving you, as the senior management team, an opportunity to buy stock yourself in the market?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

The blackout period will end after the conference. It's ended now once we release our year-end results. And we'll go back to a blackout just before -- a month before releasing our Q1 results. So it's a small window.

[James Young, VP & Investment Analyst]

So basically, you've got about 2 weeks or so because if the first quarter results, I mean, we're already at March 31, so they're going to be released, what, by, middle of May?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

Right.

[James Young, VP & Investment Analyst]

That gives you basically about 2 weeks?

[Edmundo Gontardo Guimaraes, Chief Financial Officer]

That's correct.

[Operator]

All right, ladies and gentlemen, this does conclude the Q&A period. I'll now turn things back over to Mike McAllister for any closing remarks.

[Michael McAllister, Vice President of Investor Relations]

Thank you, operator. That concludes today's call. On behalf of the management team, I would like to thank the participants for joining us today. A replay of the webcast and materials can be found on our website. If there are any further questions or concerns, you may reach out to us at any time after today's call. Our contact information can be found in today's presentation as well as on the company's website. Operator, please conclude the call.

[Operator]

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.