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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 2020 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, President and CEO.
Thank you, operator. Thank you all for joining us and welcome to our second quarter conference call. With me today is Jason LeBlanc, our CFO. It has only been a few months since the emergence of COVID-19, though it feels longer. The pandemic has changed our lives. And while there is no doubt that we will go -- get through this, the uncertainty created by the virus has not been easy for anyone, including our employees and contractors. But our people have persevered and done an outstanding job through the first half of the year. So I want to take a moment to recognize and thank our employees and contractors for their remarkable dedication, commitment, professionalism and compassion. I'm proud to be your CEO. While COVID-19 remained prevalent in Latin America, we have the full support of our employees in both communities to continue operating. We are grateful for this support and do not take it for granted. We have implemented strict protocols and precaution at our operation to protect the health and safety of our employees, contractors and communities. Physical distancing, use of PPE, enhanced cleaning and disinfecting, enhanced screening procedures and a rapid contact-tracing protocol are just some of the measures we've implemented to contain the risk of infection. I should note out that in Chile, where we operate 2 mines, the infection rate is declining and some businesses are starting to reopen. While there is some concern about -- around mining in the country, this is primarily in relation to the copper industry where some companies have experienced high rate of infection. In the town of Jacobina in Northeastern Brazil, the number of cases is limited and on the decline. We have, from the earlier stage of the pandemic, been supporting our host communities in the fight against COVID-19, providing various donation along with critical equipment and supplies. We will continue to work closely with our community partner to understand their needs and do everything we can to support them through this challenging period. Turning now to our safety performance. Our total recordable injury frequency rate in Q2 was 0.38. That compares to 0.6 in the second quarter of 2019. During the quarter, Canadian Malartic reached a collaboration agreement with 4 nearby Anishinabeg First Nations' communities, setting out measures to increase training, job and business opportunities, and environmental production. Both Cerro Moro and Canadian Malartic resumed mining activities in April following temporary suspension due to government restriction related to COVID-19. The ramp-up at Canadian Malartic progressed faster than expected, with mill throughput in May and June exceeding 60,000 tonnes per day. Daily throughput in May of nearly 64,000 tonne was a record for the operation, a remarkable achievement considering that it occurred on the eve of the suspension. At Cerro Moro, interprovincial travel restriction resulted in a reduced workforce in the second quarter, extending the length of the ramp-up. The operation is implementing new initiatives to improve efficiency and production, including optimizing mine sequencing, improvement to drill and blast procedure and a review of the mine design to lower cost and accelerate development of high-grade zone. This initiative will provide long-term benefit to Cerro Moro that's far outweighed in the short-term impact of the travel restriction. We delivered strong operational and financial results during the quarter. Gold production of 164,141 ounces was driven by exceptional performances from Jacobina, El Peñón, Minera Florida and Canadian Malartic, which all exceeded their target production. Silver production of 2 million ounces reflect a strong performance from El Peñón. While the price of gold, which hit a 9-year high this week, is contributing to our strong financial results, the price of silver is also up sharply in recent months and bringing upside to our margin and cash flows. GEO production of 183,582 ounces was in line with plan, while cash costs and all-in sustaining costs of $715 per GEO and $1,125 per GEO, respectively, were better than plan despite the GEO ratio being higher at 105.14 than guidance of 98.85. Cost was positively impacted in the quarter by foreign exchange movements. Adjusted net earnings of $63.3 million or $0.07 per share, while cash flow before net change in working capital came at $118.1 million. When normalized for costs associated with COVID-19, cash flow from operating activities before net change in working capital were $137.3 million. Net free cash flow during the quarter was $60.3 million or $41.1 million without normalizing for the impact of the temporary suspension, standby and other incremental COVID-19-related costs. Despite these impacts, gross margin and free cash flow on a per GEO basis increased in Q2 over Q1. Yesterday, we announced that we are increasing our annual dividend by a further 12% to $0.07 per share. It is the fourth increase to our dividend announced in the past year for a cumulative increase of 250%. We will continue to take a gradual and progressive approach to dividend increases as our cash balances continue to grow from rising cash flows and successful initiatives to monetize our portfolio of nonproducing asset and financial instrument. At the new annual dividend rate, the dividend paid will be above $70 per GEO, in line with our target of between $50 and $100 per GEO. We reiterate our 2020 guidance for 890,000 GEO, which is compromised (sic) [ comprised ] of 786,000 ounces of gold but -- and 10.25 million ounces of silver. Our all-in sustaining cost guidance for the second half of the year is for $1,020 and -- between $1,020 and $1,060 per GEO. Production is already tracking ahead of guidance, with Q4 expected to be an exceptionally strong quarter on both production and costs. As a result, we are evaluating an increase to current production guidance. We are also reaffirming our 2021 and 2022 outlook for production of 1 million GEO in each of those years. Gold production, as you can see, will be slightly higher in 2022 at 885,000 ounces compared to 873,000 ounces in 2021, while silver production will be at 11 million ounces next year, dipping to 10 million ounces in 2022. Turning now to our operational result by mine. Jacobina posted its sixth consecutive quarter of record-setting gold production at 45,646 ounces. The record production reflect higher grade and increased throughput, which averaged 6,850 tonnes per day, well above the Phase 1 target of 6,500 tonnes per day. El Peñón delivered another strong quarter with both gold and silver production higher than planned, primarily due to processing higher-grade ore. As mentioned, the ramp-up at Canadian Malartic progressed faster than expected, while the ramp-up at Cerro Moro was steady despite the impact of travel restriction in Argentina. Production at Cerro Moro in June was almost 50% higher than in May. Production at Minera Florida in Q2 was better than plan, benefiting for higher grade -- higher feed grade and increased tonne processed, largely due to continuing improvement in productivity. As mentioned, our overall production is tracking ahead of guidance and expect it to be more heavily weighted towards the second half, in line with annual trend with Q4 our highest-production lowest-cost quarter. I will also add that we now expect second half to be higher than the 54% weighting that we had previously forecasting. There were a number of positive catalysts during the quarter. We delivered significant exploration update that support mine life expansion at Jacobina and El Peñón. We also provided an update on the Phase 2 Jacobina expansion plan, announcing robust project economics. A few key highlights as a reminder. The plan has a modest capital cost estimated at $57 million, using a conservative exchange rate of BRL 4 to USD 1. I would note that, that capital is tracking closer to $50 million based on the current exchange rate. $1.7 billion in cash flow in the first 10 years under the expected extended case scenario, assuming a gold price of $1,550 per ounces in the same conservative exchange of 4:1. Average gold production of 230,000 ounces per year at an average feed grade of 2.4 grams per tonne, a 31% increase compared to the Phase 1 rate of 175,000 ounces per year. We are now doing a backfill study for a 2,000-tonne per day plan. We are studying 2 options. First option is a hydraulic backfill plan that will cost between $7 million and $10 million, the base -- and the [ basefill ] plan as a second option between $15 million and $20 million. We have both options very well studied right now, and it's leaning towards the hydraulic fill, again, between $7 million and $10 million. We would have -- we would complete the study in the second half of this year and come back with the decision and more precise number in the coming quarters.During the quarter, we also announced an option agreement on the Suyai project. The agreement with Consultores Asset Management, a privately-held portfolio management and capital market in Argentina. It is an important step that we believe will advance ESG matter related to the project. At Canadian Malartic, we have authorized the construction of surface infrastructure and exploration ramp into Odyssey and East Malartic. With governmental approval already in hand, construction of the surface infrastructure and portal in preparation for development of the ramp is expected to begin in August of 2020, with a budget of $6 million for the remainder of the year on a 50% basis. The ramp development should start in Q4. Once complete, the new ramp will allow us to carry out a [ bulk ] sample of up to 40,000 tonnes of ore. We advanced the integration of Agua Rica with Alumbrera to create the significantly derisked Agua Rica-Alumbrera Integrated Project. We also continued to advance the permitting and feasibility study for this long-life, low-capital-intensity project. We completed internal studies for the advancement of Monument Bay as a high-grade underground project, and developed a plan for exploration of significant down plunge expansion and satellite areas. You may have seen our release earlier this week announcing our intention to list on the Main Market of the London Stock Exchange. We're in the advanced stage of the listing process and expect to begin trading in the next few months. The London listing will improve our liquidity and expand our share register in a large, underserved market for pure gold play players with assets in the Americas. Our goal is to become the investment of choice in -- on the LSE for those looking for exposure of gold equities in the U.K. and Europe. And we believe our rising cash flow and dividend profile, high-quality asset portfolio and strong balance sheet will help us achieve this objective. I should also note that we do not intend to raise equity capital in conjunction with the LSE listing. During the quarter, we have also completed the sale of the Royalty portfolio for total consideration at closing at $64.2 million, including a 13% in Nomad Royalty. Nomad has a strong balance -- a strong base of growth mandate, and it is already beginning to generate value for us due to share price appreciation that takes the value of our stake to $102.6 million as of July 22 compared to $64.2 million when the transaction closed in late May. Finally, we completed the sale of 12 million units of Equinox Gold for gross proceeds of CAD 120 million with a unit structure that's expected to generate an additional CAD 81 million for a total proceed of over CAD 200 million. I will now turn it over to Jason to discuss the financials.
Thank you, Daniel, and good morning, everyone. Turning now to our financial performance. Revenue in the quarter was $303.4 million compared to $463.5 million in the same period last year. Aside from the inclusion of Chapada in last year's results, we also had the impact of COVID on our sales level during Q2, mostly from mines that had temporary suspensions during the quarter. But as Daniel mentioned, those impacts are largely behind us as Malartic had a very quick ramp-up and Cerro Moro had a steady performance since Q2. Higher year-on-year G&A expenses reflect an $11.8 million increase in historical stock-based compensation from the increase in the company's share price during Q2. On a cash basis, however, G&A expenses were $14.6 million during the quarter, in line with plan and lower than the $17.9 million in the second quarter of 2019. Earnings during the quarter of 0 per share were impacted by a number of items, including $19.2 million in COVID-related costs that I'll talk about more in a moment. On an adjusted basis, net earnings were $0.07 per share compared to $0.02 per share a year earlier. One of the other impacts from COVID has been an underspending on planned capital during Q2. In future quarters, capital will increase more in line with the values you see here for 2019. So that's just over $40 million of sustaining capital per quarter and $20 million of expansionary capital per quarter for each of Q3 and Q4. This tied to our revised guidance for the year. The same is true for our exploration spending. For the full year, we expected $64 million of capitalized expiration, and we spent $23 million year-to-date. So that leaves about $20 million per quarter for the balance of the year. We also guided $20 million of exploration expenses for the year and have spent about $5 million to date. So that's about $7 million per quarter remaining for Q3 and Q4. Beyond our regular exploration program in years past, we announced an additional generative exploration program earlier this year to advance our pipeline of prospective projects, mainly in Canada and Brazil. This primarily includes the Monument Bay and Domain properties in Manitoba in the Lavra Velha, Borborema, Ivolandia and Jacobina Norte properties in Brazil. As we've said, our objective is within the next 3 years to increase at least one resource base from our Genera Program to 1.5 million ounces, which would represent the next mine in our portfolio. Quarterly cash flow performance continues to reflect the impact of strong production in gold prices, with cash flows from operating activities of $118.1 million during the quarter. Normalized for the $19.2 million in outflows associated with COVID-19, cash flows on the same basis would have been $137.3 million. Free cash flow before dividends and debt repayments during the quarter was $38.3 million and marked our fifth consecutive quarter of positive free cash flow generation. We also reduced our net debt during the quarter by a further $101 million to $768 million. During the quarter, we brought CAD 120 million in the treasury from the sale of Equinox Gold units, which consisted of 1 common share of Equinox owned by the company and 1/2 warrant, with each full warrant exercisable into a further Equinox share at CAD 13.50 per share until January 2021. As of today, the warrants were in the money. And if all the warrants are exercised, that represents about CAD 81 million. In addition to this likely warrant exercise, we also hold a further 1.2 million shares of Equinox, valued at just under CAD 20 million as well. As Daniel mentioned, we added $10 million in cash to treasury from our sale of our Royalty portfolio during the quarter. In addition to that upfront cash, we also hold Nomad shares in deferred consideration worth over $90 million as of today. Finally, in June, we repaid $100 million of the $200 million borrowed in March on our revolving credit facility as a precautionary measure due to the uncertainty around the global pandemic. We expect to repay the remaining $100 million by the end of the year. From a balance sheet perspective, you should expect to see a steady reduction in our already low debt levels quarter-by-quarter. As mentioned, we incurred $19.2 million of COVID-related costs during the quarter. These can be broken down into 2 categories as follows: temporary suspension and standby costs, which include costs associated with placing certain mines in care and maintenance, the subsequent ramp-up of those operations and the underutilization of labor and contractors in relation to our pre-COVID mine plans; and incremental costs resulting from COVID-19, including community support, additional PPE, higher transport costs and overtime costs resulting from lower headcount levels at the site to accommodate social distancing. You can see this -- the breakdown by site and by category on this slide. We expect the temporary suspension and standby costs to be minimized for the balance of the year as the mines return to full production levels. The incremental costs are also expected to decrease prospectively over the rest of the year, but this will ultimately be dependent on the path of the COVID virus. Despite the impact of the pandemic in Q2, our free cash flow, gross margin and all-in sustaining margin per GEO were higher in the quarter compared to Q1. This sets us up for a strong second half from a margin perspective as we expect lower unit costs for the balance of the year with the kicker that the gold price per ounce is about $200 per ounce higher than Q2, so with -- so both will positively impact the margins you see here. As well, our production will increase sequentially over Q3 and Q4, so that higher margin will apply to more units as well. And with that, I'll turn the call back over to Daniel.
Thanks, Jason. In closing, I'll come back to my remark at the end of Q1 call and double down on them. We believe our business may be in a better position than it has ever been. The temporary headwind at Cerro Moro, notwithstanding our operation, are executed exceptionally well and will add into the stronger second half of the year. Our net debt continues to decline and cash flow continue to rise, giving us the financial flexibility to advance our organic growth opportunities while further increasing shareholder returns. And despite the gain in our share price in recent months, we believe we are in the early days of the cycle, that our share remains undervalued relative to our peers and that considerable and sustainable upside remains. And with that, we'll be happy to take your questions. Operator?
[Operator Instructions] And the first question is from Fahad Tariq from Crédit Suisse.
On Cerro Moro, can you talk about the plans to increase throughput in the second half of the year? And how we should be thinking about that? It sounds like grades will improve from the underground mines, but maybe just talk about throughput and some of the efficiencies that you're seeing with the lower workforce.
Fahad, good question. So yes, we see, well first, an increase in throughput. We were quite affected by travel restriction in Q2. It's getting better in Q3 and hopefully it will be almost back to normal in Q4. That's the first thing. Grade will effectively increase quite a lot in the Q3 and Q4 compared to Q2 and Q1. And it's mostly what I said during the presentation, is the area where we're developing right now with a limited workforce but we're developing with higher-grade zone, both on the underground and on the open pit. So we see a lot better second half for Cerro Moro compared to the first half, especially Q2 was affected by travel restriction.
Okay. And just as a quick follow-up, what percentage of the workforce was there in July? I think it was like 48% in June, but where are you now in July?
We're around -- between 70% and 80%. It depends on the shift. It will increase because we had also kept limited capacity. Because of COVID-19, we have to respect social distancing, so where before we had 2 people per room, now we're limited to only 1. So we had to have some room capacity at the camp. We're doing that right now. So this is why we're very confident that into Q3 and Q4 that will increase.
The next question is from Ralph Profiti from Eight Capital.
Daniel, on Jacobina Phase 2 time line, what's your estimate on how long you foresee running at the Phase 1 optimized rate before you start thinking about optimization? I'm just wondering how much we should think about the decision trigger being the feasibility study.
Ralph, good question. The time line is quite clear for us at Jacobina. We have to complete the feasibility study. So we have the pre-feas. We already know that Phase 1 is achieving a lot better than the 6,500 tonnes per day. For the first 2 quarters, we achieved above that. So I'm sure you can all assume that this year, production from Jacobina will be higher than what we are guiding. It will be probably closer to the run rate of Phase 1 we announced before. So we're going to run at that level for the next 2 years because we're going to make the decision after completing the feasibility study early next year, then we have to order equipment and we have to go to the permitting. As you all know, we have already applied for the permit of 10,500 tonnes per day at Jacobina. So we're in the process of completing the feasibility study right now. So by this time next year, we will have made the decision to go ahead or not go ahead with Phase 2. That Phase 2 construction will take 18 months, so by the end of 2022. So early 2023, we would be at the new rate level. Is it going to be 8,500 tonnes per day? This is what we're going to see. What will be Phase 1, real Phase 1, we did over 6,800 tonnes per day in Q2. So we'll see in Q3, Q4, probably Q1 next year, and then that will guide us to what will be the new tonnage for Phase 2, is it 8,500 or above 8,500? We have to see what will happen in the next few months. So that's our time line by second quarter next year. We made the decision to go ahead, and then we're going to run at the actual Phase 1 until Phase 2 construction is completed by the end of 2022.
Yes. That's great.
On the backfill -- maybe to add, Ralph, on the backfill, that might arrive sooner because backfill is a lot easier to -- as a process, to do at the mill, especially if we go with hydraulic fill. We know it's only cycloning the tailings to separate the coarser ore or [ coarser waste to send on the ground ] on the tailing. So that project, we're doing the study right now, will be completed in the second half. And then we might decide to go sooner for that one because it's going to bring extra ounces to the mill that we're leaving in pillars right now that we can recover with the backfill plan.
Yes. Yes, that's clear. Yes. Maybe for Jason on the dividend reserves. With the stronger outlook for free cash flows, right, coming from not only operations but stronger gold and silver prices, how much more work needs to be done on the balance sheet before kind of notionally where -- you are where you want to be?
Thanks, Ralph. Great question. As you know that with the concept we introduced, I guess about a year ago, we wanted to get to a point where we could backstop 3 years of our dividends with cash set aside on our balance sheet aside from the day-to-day need. So we've been steadily progressing towards that with free cash flow generation, monetization of some assets. The dividend increase of today, that 3-year dividend level of about $200 million, is kind of what we're aiming for. If you look at the balance sheet, where we sit here today, we're about $325 million of cash on balance sheet. $100 million of that was from the remaining revolver draw. So if you net that off, you're at $225 million. We've always run about $100 million of maintenance cash. That leaves us about $125 million otherwise on balance sheet. So we see the delta between $125 million and $200 million is kind of like the cash flows were going to be generating just balance the year alone. But both Daniel and I talked about it on the call today, we've got Equinox warrants and the money that would come into treasury by December, a very high probability on that right now. That would take us above that level, not to mention other assets. So I guess the easiest way to say is we feel very strong that we're going to fully backstop that dividend reserve fund over the balance of the year here.
The next question is from Josh Wolfson from RBC Capital Markets.
First off, for Jacobina. Looking at that project and the capital that's required in the context of where gold prices are and where the new dividend level is, it seems like excess cash flow would be still pretty high. So knowing that the current permit still allows to 7,500 tonnes a day, why not consider looking at advancing that project at an accelerated rate, again, just kind of looking at the capital requirements in the gold price today?
Josh, good question. Sure. We have the permit to 7,500 tonnes per day. We're going to push the actual Phase 1 to see where we can reach this. It's completed, but we had already bought some equipment for Phase 2, mostly on the gravity circuit. So we're looking to install this equipment as we have the permit, like I mentioned, to 7,500. That might continue to increase, mostly in recovery, it's already high, but probably throughput also. It will be difficult to advance more than that because then the permit will -- we have to wait for it. And then the construction of Phase 2, there's so much we can do. We have to order a mill, we have to have the right size of the mill. For that, we have to complete the feasibility study. We have to look at the crushing, also capacity. And that takes some lead time -- a long lead time to order this equipment. So you can bet that we're going to try to push, [ go for ] that above 7,000, at least for now, and see how close we can get to that 7,500. But to advance Phase 2 faster, we are limited by the permit, one, and then the ordering of the equipment and installing them.
Okay. And when you're looking at the Malartic underground ramp that's now been approved, is there any ability to use this ramp for future production? And would you be in a position to do that maybe in as early as 2 years' time?
Well, we'll see. We're continuing the study. Sure, the ramp will be an exploration ramp, but at the same time, a potential production ramp. And I already mentioned that our permit gave us the option to do 40,000 tonnes of [ bulk ] samples. So as you can bet, we're going to go drive the ramp, go see the 3 zones, the East Gouldie, East Malartic and Odyssey during the next couple of years of developing that ramp. The ramp will start in Q4, like I mentioned. Right now, we're doing overburden excavation. We have then to blast a couple of round in the portal, install the portal, take a few more rounds and then continue to fully put the portal ready for the excavation. It will start in the fall or in the winter, so we have to be ready for that. It will take at least 2 years to develop that ramp to be ready. So yes, there's potential that some of the production might come in 2023, 2024. We're not there yet. We're studying, first, priorities to drive that ramp and drill from underground. So with that, we mentioned it will open a big, big opportunity to drill over 40,000 meters from underground, and it will be a lot cheaper than drill very [ long , low ] from the surface. That's the main goal right now, is to go underground, establish a diamond drill day to drill the East Gouldie deposit that -- it's growing all the time from the underground.
Got it. And maybe one last question. Looking at the London listing, which is, I guess, a bit of a surprise. And you would be -- you have an advantage, I guess, being one of the first North American companies there. What do you see as being either underappreciated or not properly appreciated with the current listing that the secondary listing would be able to surface value from?
Well, we're very happy with the 2 listings we have here in Canada and the U.S., but we have quite a lot of shareholders coming from the U.K. and Europe. And then we spoke with them about this. And also our Board of Director -- the Director, lead in -- lead by our Executive Chairman, Peter, we've discussed about this now for a long period of time. We have [ spoke ] with people, and it makes sense. We got told by our actual shareholder and potential shareholder in the U.K., and some of them, as you might know, can't own shares of companies if they're not listed in the country, in the U.K. So that's another advantage. It will bring many [ accounts ], and then people that are not invested in the business or in gold, to invest in Yamana. And then like you said, this -- we will be one of the first major company to list there. And then we had very positive comments since we did the announcement, and then before that with our actual shareholders and then the people we've met in the past few months in London.
The next question is from Jonathan Guy from Berenberg.
Congratulations on a good quarter. Just a question around the restrictions in Argentina and in Brazil. Have you got any sort of time lines from the government in Argentina around how restrictions will be eased? And what's your expectation over the next 1.5 quarters return to sort of full operations there? And in terms of Brazil, obviously, the COVID situation seems to be bad or even worse than it was previously there. Have you had any sort of official communications around greater restrictions being imposed? And what costs should we assume for the temporary suspension in standby costs and other COVID costs for the next quarter and the second half?
Jonathan, yes, for -- if I start with Argentina. So Argentina, we think travel restriction will stay for the rest of the year. We will be able to bring more people as we will have more camp capacity, but we assume that it will continue to improve. But travel restriction will stay in place probably at least for Q3 and probably Q4. So we don't anticipate that it's going to get worse and probably get better. But if not, then we know what we will be able to do with the people. We're bringing more and more people into each shift change we're doing. We're quite good in the process right now that we need the permit for all the employees. In each 14 days, we're doing a shift change, and it's getting better and better. And then we even moved some of our employees from other provinces. The problem is to move from other provinces to Santa Cruz. And as we mentioned many times, over 30% of our manpower is becoming from -- coming from outside of Santa Cruz, and some of these people have key roles at the mine on blasting and stuff like that. So we even moved people, temporary with their family, in Santa Cruz, in Puerto Deseado, to make sure that, that travel restriction is not becoming a bigger issue in the future. So we only see an improvement going forward in Argentina. On Brazil, Brazil is like Canada, the U.S. and the other country, there's provinces. And then it depends where you are in Brazil. So if you go to São Paulo or cities like that, the infection rate is high. But you go to Bahia, where we are, it's really low. And then you can look at the statistic, it is very low. And in the town of Jacobina, where we are, we had only a couple of cases, and then they came from outside of the town, but the town is quite -- still a big town of 80,000 people living there. It's been limited. We had no cases at the mine. So the business is running. There's basically almost no impact. The small impact you saw on COVID for Jacobina is there's some restriction, like I said, case from outside, but people that needed to come to the site that couldn't come, that generates some of the -- some cost. But on Jacobina, you can assume that from now on there will be no cost. We don't see anything going bad in Brazil for Jacobina. Like I said, where we are, it's a remote location and no issues. And that the state of Bahia also has no problem. It's more where you have big community, big cities, that it seems to be the bigger issues.
The next question is from Richard Hatch from Berenberg.
Congrats on a good quarter and a high dividend. I've got 2 questions. The first one is just on Agua Rica, Alumbrera and just with regards to the feasibility study, which comes next year. Just -- I think the last PFS CapEx was around the $2.4 billion number. And can you just be able to just talk around any opportunities to sort of either reduce that? Or how do you feel about that number? Is there any sort of risk to that? And then the second one is just on the potential for increased production into the second half and an update on your guidance. I mean you talked about how Cerro Moro, you'd expect the throughput in better grades to come through and also Jacobina benefiting from throughput as well. Is there anything else worth kind of dragging out of that where we can expect to see either a notch up in grades just as we look at the next couple of quarters?
Richard, good question. The first one of -- on Agua Rica, yes, we mentioned on the pre-feas study, it was for $2.4 billion. Our group, led by Gerardo Fernandez, who's the leader for the company on that study -- the study, the feas study will be completed late next year. As you know, we have delays because of COVID-19 regarding that, and also being able to do some drilling on the project. But we got the permit now, so work should start soon. We have identified many opportunities with the pre-feas study. And then we think that the -- we'll see. I can't say it will be, for sure, less than $2.4 billion, but we have already increased the reserve resources on -- at site by mining, so that will be a plus for the project. There was a lot of opportunities to reduce costs on the conveyor, on the tailing, on the mill, on different areas, so we'll see when the final number comes. But yes, there are opportunities to reduce that CapEx. As you know, we own 56% of that CapEx. We'll see what will happen in the future. On the second half guidance, we said and I said many times during the presentation that I'm confident that we're going to do better than what we guided in April. It's just, right now, we need to take the time to properly assess what it will be. Sure, Cerro Moro, I was clear just a few minutes ago, it will get better but it will still be challenging. So don't expect that Cerro Moro will achieve the guidance that we said in April, even achieve that guidance, it will probably be lower. But all the others, you saw Q2, I mentioned that all 4 of the other operations did a lot better. Even Minera Florida where we were expecting to be just on budget because there was some restriction there from traveling to people from outside of Alhue, where the mine is, the town. And all the other town around, we have employees, they couldn't come to work. Now they can. So it was -- it happened during the end of the second quarter, they were allowed to come back to work. So despite there was some travel restriction, the mine achieved way better than planned. The big difference, I think, in the second half where we will see an increase in guidance, it's all these 4 mines, especially Canadian Malartic, I should mention, because we did the first shutdown. We mentioned in April that we allocated about 8 to 10 days for the shutdown at Malartic to happen because of restriction, again, on the amount of people we were able to bring at the site. The first shutdown with it in July. So early this month went a lot better than planned also, so we gain approximately 2 to 3 days of production. So assuming around 6 to 7 days of shutdown instead of 10, so that brings another 2 to 3 days more per quarter of production for Canadian Malartic. And then as I mentioned many times, Malartic is producing about between 1,500 to 2,000 ounces per day. So that will help the production at Malartic. Jacobina, like I mentioned before, because of tonnage and the grade was also better than planned in Q2, and then we're assuming Q3 and Q4 will probably be the same, so Jacobina will produce more. El Peñón, outstanding 2 quarters, Q1 and Q2, so we're assuming that it will be better. And then Florida should be also a bit better, but similar to what we've seen, achieving at least the guidance for the year. So if 3 are above what we said in April, Florida, about the same and Cerro Moro, a bit lower, then globally, we should be higher. It's too early to say a number. But like -- you can feel in my voice and what I'm saying, we're very confident that we'll be better. So we'll come this quarter in Q3. We won't wait until the end of the quarter to put a new guidance. So stay tuned as we will announce in the coming weeks a revised guidance for Yamana for the rest of the year, both on production and on cost. We already mentioned that the cost will be lower. We established a target already what will come with the production.
And if I -- it's really good to hear. And if I could just ask one follow-up in 2 parts, sorry, guys. First one is just on the Equinox potential to sell their shares, just -- can you just remind us on the tax impact on that one? And then secondly, just on the working capital, just the build in the second quarter, should we just expect to see any kind of flowback of cash from working capital movements into the second half?
Jason?
Yes, sure. Richard, why don't I address those 2 questions there. I guess on the Equinox, pretty straightforward, no tax impact on those monetizations. We've got shelter at a corporate level for those sales. And as I said, it's got an expiry date on the warrant in January. It's like $2 in the money right now from a probability perspective. I probably tagged that at about a 75% probability if you look through the math from an option perspective. So high probability of those cash is going to come into treasury. And it's not just the -- that $81 million, we do also hold a residual Equinox position worth about $20 million as well. So some significant value there. From a working capital perspective, yes, I think it was -- if we would have looked back to the start of the year, we would have been flat in Q2. So again, another COVID impact. The first -- just very straightforward with the reduction in an overall mining activity. Everything slows down, and you're basically not turning over your invoices as fast as you're paying them. So that's the primary impact here. We just saw that outflow and then similar effects from Q1 in terms of speeding up AP to suppliers, building up the inventories. Over the balance of the year, I'll become conservative and say it's going to be a flat, flat profile over the balance of the year.
And the last question is from Jackie Przybylowski from BMO Capital Markets.
I just wanted to follow-up on the question Josh asked earlier on Malartic underground. Daniel, you said that maybe production could come as early as 2023 or 2024. If the ramp isn't finished, fully constructed until 2022, are you talking about basically just production from that exploration ramp for a couple of years while you're looking at other options like a shaft? Is that sort of the way you guys are thinking about developing underground right now?
Jackie, thank you for the question. Good question. Yes, like I mentioned, the main target right now is to drive the ramp for exploration. Sure, we can use the ramp in the future. We're studying that right now, what we can do. As you all know, for East Gouldie, we're going to need a shaft. So that will take a few years to do the study for that, then order the equipment, start the shaft sinking. The biggest advantage of the ramp also after exploration will be to use that ramp to raise the shaft instead of sinking a shaft. As many of you probably know, raising a shaft is a lot less costly, it's a lot more efficient than sinking a shaft. So that will be a purpose in the future. This is what we're studying. The underground production, if it start in 2023 and '24, we don't know yet. Like I said, we're doing the study. But for sure, if we have the ramp developed, we have access to these zones, why not mining some of them? Production will be a lot smaller than a shaft, for sure, but any tonnes that you can come from underground will be a better grade than the open pit. We're studying also potential open -- other open pit on surface. We have huge land property. We had some success on exploration on surface. We're studying old area where there was mining before. So there's so many things going on right now with Malartic that can change in the future. We're focused on driving that ramp down, probably use it at some point to produce from underground. There's no really need because the open pit can supply the mill for the next 7 years, but anything that's coming from underground can extend the mine life of the open pit. So this is all in the study. This is very good potential to use it and do it. And assuming what we know from us and our partner is there's potential to bring higher-grade ore on surface, look at good cost, we're going to evaluate this and then at the right time to do it. So this quarter and next quarter, we're going to continue the study, a pretty well advanced study that our group in Malartic is doing. Our technical service, we're quite impressed by the job they're doing at the mine. We mentioned already before and then we hope this quarter, we're going to come with an exploration update at Malartic that will show a growing of resources at East Gouldie, and that will be put into our [ PE study ] done internally and then I'll pause to make decision. So don't be surprised before the end of this year or with the release of -- for the year-end that we come with a very good plan on how we're going to develop the underground mine. Are we planning to go mine underground? What will be the timing for everything?
Okay. That sounds great. I -- so I guess when you're looking at designing the exploration ramp, you've got all of this in mind. So where the ramp should go in order to help facilitate things like raising the shaft in the future, is it sort of all part of the designing?
Yes. It's all part of the design. So like I said before to Josh, we have already started excavation of overburden, so we know exactly where the ramp portal will be in the next few months. This is what we're going to do, prepare the portal, install trailers on surface. We got lucky there. Our partner just closed a mine last year at [indiscernible], so we will be able to use the surface infrastructure they had there to install at the project to go underground. So this has already started as soon as it was approved. The mine was waiting for the approval from the partners to go ahead and do it. So they're moving fast. And then again, the ramp will start in Q4. And then I'm sure it's going to go well in advance pretty good in the coming months.
And if I could just maybe ask one other really quick one on sort of the same topic. You just mentioned that there's a lot of information that you're hoping to put out either later this year or with the Q4 earnings results. In the MD&A, you say, there's a further update in the third quarter. So is that something -- do you expect something in the intermediate, I guess, time frame to put out something a little shorter? And then a more extensive update like you mentioned a little bit later this year or early next year, is that sort of the idea on [ this flow ]?
Yes. I think in the short term, it will be exploration. So success on exploration. We got news. We told you September last year when we announced the discovery, we came back in February with an increased resources on East Gouldie. As you all know, we closed for the announcement of the resources in February. We had to close the drilling in October. So we drilled from November up to now. So we have a lot more information on East Gouldie as we have drilled for the past 9 months. So this will mean the main topic is the increase in resources at East Gouldie. It's quite impressive with the new drilling. We have extended the zone on many directions. We have -- our target is to bring some of this into indicated resources by the end of this year, also. So the news will be mostly focused on exploration, but also giving some detail on our plan on shorter term. So what is our plan with the ramps in the next couple of years? And then maybe indicate the type of shaft, and stuff like that. But the full study won't be completed, but we'll have a pretty good idea. So this is the interim probably announcement. Then with the Q4 result in February, we'll see what our partner -- what we can say more. We know already that we're going to release higher resources and then probably even some indicated. So that will come in February and in April next year.
And the last question is from Tanya Jakusconek from Scotiabank.
Just wanted ask, Daniel and Jason, just on your dividend policy, you have that $50 to $100 per gold equivalent ounce that you would like to pay out. What do you need to see to increase that level?
Tanya, a good question. You see it's all related to that reserve fund. So we have built now that reserve fund to be able to pay that $0.07 per share. This is how we see it with increased cash flow from the operation. Sure, also with the increase in metal prices, that brings more cash flow than anticipated. So that reserve fund is building, that is building, and we know quite well the capital that we will need to spend. It's very small at Jacobina. We know roughly what it will be in Malartic in the next 7 years. And then the big capital would be even not that big for the 2 companies when we split the 2 together. So we -- this is how we manage it. We know we don't have any debt repayment until in 2022. So we managed all -- Jason can speak more, but -- because he's the one doing it. But as we reach target on that reserve fund, and then we reach target on putting assigned money to repay down the debt in 2022 with the capital investment needed in the next few years, this is how we decide. So with our Board, we saw that we have reached the money to be able to pay that $0.07. This is why we have decided to go ahead. And then the next time we're going to do it, it's because we have reached the next level to say, okay, if it's $0.08 or whatever the number, it's because we have the reserve fund available. We see our planning, our target, our cash coming into our treasury to say, okay, now we can pay that new amount. And then we made it clear a year ago what was our target, and then we're following on that target. I'm happy that we have almost reached half of our target. So that's quite good and quite impressive.
Okay. So is it safe to assume that -- I mean, you have all of these other proceeds coming in by year-end from these warrants, that will continue to add the cash in addition to the higher gold price and the free cash flow generation. It appears you said you know what your capital spend is going to be in the next couple of years from Jacobina and Canadian Malartic, which really are your only expansionary capital. So it could be something that you can quickly get to your upper limit of your $100 per ounce, and then continue to grow that cash and can make that adjustment. Is that a fair statement?
That's fair. Jason, you want to put some color on your own?
Yes. No, I think it's a fair statement, Tanya. We start with making sure that dividend is sustainable, a. Really that, first and foremost, is backed up by what we would consider unencumbered cash flow, and that's cash flow that we generate, and it doesn't have a home. We don't have a lot of capital intensity over the next number of years, so we can invest in the business. Really hold on to that cash flow in the company. And the outlet for that unencumbered cash is going to be the dividend. I think it just gives us that much more confidence that we can put a reserve fund in like -- in place like we have. And the monetizations have been a theme, I guess, over the last number of years at the company. That's going to continue on, that we have these -- just the options in the portfolio to monetize and to increase the level of that reserve fund. So yes, we think that $100 is in line of sight over the next couple of years here.
Okay. And maybe just one other question for Daniel. Just -- I know that -- on Jason, too -- like the COVID costs of $6 million are small. I'm just kind of trying to understand, what do you believe are the costs that are going to be COVID-related that are going to stick to the business, that we are going to have to take through our cost structure?
Yes. Maybe, Daniel, we -- as I mentioned, I think it's -- we've got an idea, but obviously, this is going to be driven by the path of COVID, and we're going to do all those great things to make sure we've got the protections in place. I think the highest intensity of that spend has been early on here. We've learned how to calibrate that spending most appropriately, so it's going to go down. We were $19 million across all categories in Q2. And I think conservatively, I'd say, over the next couple of quarters, it will be 1/3, maybe a little bit more than that in terms of total costs associated with COVID. And if it's around, then the costs are going to stay around as well. I think that's going to be clear, yes.
Yes. I was just more interested from looking at the business, there's going to be some costs. I know -- I think you've divided the category into like $6 million, which are like COVID. Like the other one was care and maintenance and then $6 million of COVID costs. I know they're not a large number. I'm just wondering what do you believe some of these costs that are just going to stay with us for the business.
Yes. I think we've said it before, and I think, yes, the cost over the longer-term would be low single millions of dollars. So I think, a, outright, something very manageable; but b, we see opportunities to offset those costs. And I think they're still early days to implement some of those lessons learned in the business. But I think full stop will offset it. You look at something and you keep in the movement in the GEO ratio in the shorter term, that's more than complicated for any COVID costs for us. I think that's kind of unique to us given the exposure to silver in this place, and we've been waiting for some time to see that mean reversion in the gold equivalent ratio. We think that time is upon us, and we should have a pretty favorable impact to our business because of that. And that will more than cover the COVID costs multiple times over.
So the bottom line is that the COVID costs are going to be minimal in the overall business for you?
I think that's very fair, Tanya. Yes.
There are no further questions registered at this time. I'll turn the meeting back over to Mr. Racine.
Thank you, operator. So thank you, everyone, for joining us today. We hope you enjoy the rest of your summer, and we look forward to updating you on our third quarter results in October. Please take care and stay safe. Thank you, and have a good day. Bye-bye.
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