Earnings call transcript: Discovery Silver beats Q2 2025 forecasts, stock surges

Discovery Silver Corp., with a market capitalization of $2.28 billion, reported its second-quarter earnings for 2025, surpassing both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.0552, exceeding the forecast of $0.0524, representing a surprise of 5.34%. Revenue came in at $195.85 million, significantly higher than the expected $166.77 million, marking a surprise of 17.44%. Following the announcement, Discovery Silver’s stock rose by 6.68%, closing at $3.92, reflecting positive investor sentiment. According to InvestingPro, analysts maintain a strong buy consensus on the stock, with 15+ additional exclusive insights available to subscribers.

Key Takeaways

• Discovery Silver exceeded EPS and revenue forecasts for Q2 2025.
• The company’s stock price increased by 6.68% post-earnings.
• Acquisition of Porcupine gold operations boosts production capabilities.
• Strong cash flow and strategic capital expenditures support growth.
• Positive outlook with higher production expected in upcoming quarters.

Company Performance

Discovery Silver demonstrated robust performance in Q2 2025, driven by strategic acquisitions and operational efficiencies. The company’s acquisition of the Porcupine gold operations and integration of underground mines like Hoyle Pond and Borden have strengthened its production capacity. With 50,000 ounces of gold produced in just 76 days of ownership, Discovery Silver is well-positioned in the competitive gold production market.

Financial Highlights

• Revenue: $195.85 million, up from the forecast of $166.77 million.
• Earnings per share: $0.0552, surpassing the forecast of $0.0524.
• Operating cash flow: $67 million.
• Free cash flow: $27 million.
• Cash balance: $252.5 million as of June 30.
• Total capital expenditures: $44.2 million, with $16.1 million in sustaining capital and $28.1 million in growth capital.

Earnings vs. Forecast

Discovery Silver’s Q2 2025 results showed a positive deviation from expectations, with EPS and revenue both outperforming forecasts. The EPS surprise of 5.34% and revenue surprise of 17.44% underscore the company’s strong operational execution and effective cost management. This performance reflects a continuation of positive trends from previous quarters, reinforcing investor confidence.

Market Reaction

Following the earnings announcement, Discovery Silver’s stock price rose by 6.68%, closing at $3.92. This increase positions the stock closer to its 52-week high of $4.02, indicating strong market confidence. The stock has delivered an impressive year-to-date return of 416.9%, according to InvestingPro data. The stock’s movement outpaced broader market trends, highlighting investor optimism about the company’s future prospects. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value.

Outlook & Guidance

Looking ahead, Discovery Silver expects higher production in the third and fourth quarters of 2025. Analyst projections compiled by InvestingPro suggest strong growth potential, with price targets ranging from $3.09 to $4.36. The company aims to achieve commercial production at the Tamar project by Q4 2026 and is accelerating its exploration programs. Strategic initiatives include planning studies to establish reserves at key projects such as Hoyle Pond, Borden, and Tamar. Subscribers to InvestingPro can access the comprehensive Pro Research Report for detailed analysis of Discovery Silver’s growth trajectory and market position.

Executive Commentary

CEO Tony McCutche expressed optimism about the company’s trajectory, stating, "We are off to a very strong start with the Porcupine plant operations." He emphasized the opportunities ahead, noting, "There is a lot of work to do, partly because there’s so much opportunity." McCutche also highlighted the company’s profitability, saying, "We have a new gold company that’s actually generating profit, making money now."

Risks and Challenges

• Fluctuating gold prices could impact revenue.
• High all-in sustaining costs of $2,100 per ounce may pressure margins.
• Integration challenges from recent acquisitions could affect operational efficiency.
• Exploration and development risks in new projects.
• Potential regulatory changes in mining operations.

Q&A

During the earnings call, analysts inquired about asset performance versus technical report expectations. The management clarified the path to commercial production at Tamar and addressed complex Franco Nevada royalty accounting. Exploration potential in the Timmins camp was also a key topic, with management expressing confidence in the region’s geological prospects.

Full transcript - Discovery Silver Corp (DSV) Q2 2025:

Rob, Conference Operator: Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Discovery Second Quarter twenty twenty five Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

Thank you. I will now turn the call over to Mark Utting, Senior Vice President, Investor Relations for Discovery. Mr. Utting, you may begin your conference.

Mark Utting, Senior Vice President, Investor Relations, Discovery: Thanks very much, operator, and thanks, everyone, on the line for joining us today for Discovery’s second quarter twenty twenty five conference call and webcast. As you heard, I’m Mark Gutting, Senior Vice President, Investor Relations. Joining me today are most of our members of our senior management team. Speakers who will be taking part in the presentation are Tony McCutche, Discovery’s CEO Alison White, our Chief Financial Officer Pierre Rock, our Chief Operating Officer Eric Calio, our Senior Vice President and Exploration Jose Hevelera, our Vice President, Corporate Affairs and Sustainability in Mexico, and Tony will conclude with some concluding remarks. Before we get going, I’ll point out that, as you know, we issued our Q2 results premarket this morning.

Our press release, MD and A and financials are all available on our website discoveriesilver.com as well as at SEDAR plus Before beginning, I’d like to remind you that during today’s call, we will be making forward looking statements. These statements are based on current expectations, assumptions and projections about future events. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. I refer you to Slide two in our slide deck as well as disclosures on our website for more information about forward looking information. In addition, we will also be referring to non IFRS measures during the presentation.

These measures are included to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with accounting standards. I will refer you to Slide three in our slide deck as well as in our financial disclosures issued today for more information. Finally, all dollar amounts today will be in U. S. Dollars unless otherwise indicated.

To that point, Q2 twenty twenty five represents our first quarter as a U. S. Dollar reporting issuer. With that, I’ll turn the call over to Tony Macrouch, Discovery’s CEO. Thanks, Mark.

Good afternoon, everyone, and thanks for getting on the call. It’s kind of nice to be able to be hosting Discovery’s first quarterly investor call here. It’s our first quarter as a new Canadian gold producer. Since we took over the operations for Newmont, I mean, we’ve had some success and we’ll give you some sense of what’s been going on and then give you a sense for maybe some color for how we’re going to proceed throughout the year. And in terms of the results, Q2 was a quarter of transition.

We integrated systems, reorganized management, began implementing investment plans. We had the operations for seventy six days of the quarter and point out that there was also a two week scheduled mill shutdown shortly after the deal closed in April. But at the same time, we also in spite of all this, we did turn into solid quarter of operating and financial performance. Over the next I’ll skip over the next two slides. This is forward looking statements, etcetera, that Mark I think already alluded to or made reference to.

Turning to Slide four. I’ll start with a brief look at the Porcupine acquisition. Through it, we have changed two operating gold mines, both Hoyupon and Borden, both underground gold mines. And then the Panama open pit project is ramping up the commercial levels of production, which we expect to achieve sometime by 2026. We have I think some of the other exciting parts about it, though, is we still we have a substantial large resource base, a very attractive near term growth projects two of these main targets being the TVZ zone and the oil pond at Oil Pond, sorry, and the mine project.

And they say lots of exploration upside throughout the Timminskamp and at Borden. You of you look at Timminskamp and you say it would have been 75,000,000 ounces of gold mined over one hundred years. And we come up with a major resource here as part of the acquisition of over 15,000,000 ounces. But that’s really only a subset of a lot of other things, projects and targets that we could advance. I’m sure Eric and the guys will go through stuff, give you some color and where the excitement is there on the exploration side.

I’ll turn to Slide six. I’m just really just as part of as we reached the porcupine and the agreement for porcupine and in order to support financing, did complete the test report to a PEA level. And I’m just going to discuss it briefly as we see that it’s based on mix to improve. The results from the report were favorable. There was average production of 285,000 ounces over the next ten years, a total minus twenty two years.

And based on a 3,300 gold price, the net present value of that is $3,400,000,000 For anyone who thinks that our share price has had its run on market cap as of yesterday was just around $2,000,000,000 Very importantly, almost none of the upside we see in Porcupine is included in the PEA. That includes main opportunities to grow and improve existing operations and reduce costs. Major new projects like going to TVZ and all the exploration outside in the story. And obviously, it also doesn’t include any value for Cordero in Mexico, which is one of the new world’s leading development stage silver project, which once built would be probably the second largest silver mine in Mexico, maybe the largest, depending on timing, and definitely one of the top 10 zinc mines in the whole of Mexico. Turning to Slide seven for Q2 twenty twenty five.

Just giving a sense of the performance for the quarter. We did commence a number of key investment programs aimed at growing production, lowering costs of extending mine life. We finalized plans for studies to be done at both PBZ and Rome. And at the same time, we turned in some strong results. Production for the seventy six days we owned for Cepine was 50,000 ounces of gold.

Our gold sales were 42,000 ounces. That kind of gap between production sales is not something you’ll see again. One of our KPIs is always going to be gold recovered, gold gold poured, gold sold. This is just some timing issues and some growing pains in terms of getting ounces properly poured and so we worked out those funds. All in sustaining cash costs for the quarter was just over $2,100 per ounce sold.

At the site level, Porcupine’s ASIC was about $18.72 dollars an ounce. And I want to point out that these costs do not include PAMA, which is a capital approach that’s still ramping up. Going to Slide eight now, deals with the financial performance. I know Alison will get into more details a little later. I’ll just say that we generated some solid financial point results.

Rob, Conference Operator: Adjusted net earnings per share were

Mark Utting, Senior Vice President, Investor Relations, Discovery: $4 a share. The adjustments were the exclusion of acquisition and transition related costs and some noncash FX losses. Speaking of cash, we generated strong cash flow. We had $67,000,000 of operating cash flow and $27,000,000 of free cash flow. We had sold everything we produced.

That cash flow would have been meaningfully higher. It’s not often that gold companies start out with producing assets. It is even less common to start off with producing assets that are profitable and generating free cash flow. With Park’s fine, that is what we’ve done. So we have a new gold company that’s actually generating profit, making money now.

We can take some credit for the ability to move forward in the assets we obtain. Definitely, the gold price helps us. And I guess as we progress over the next few quarters and into the next few years, you can judge us maybe on our own performance, not just on the gold price and the market’s doing for us. That is a fund for us. Slide nine looks at the investment.

I mentioned that we commenced a number of investment programs during the second quarter. Total capital expenditures were $44,000,000 $28,000,000 of which was growth capital. We made some good progress at the Dome Mill during Q2. We took advantage of the mill shutdown in late April to advance a number of programs. We also advanced a major tailings project.

Tamar accounted for more than $20,000,000 of the total CapEx. A large piece of that was pre stripping. You will hear more from Pierre that we produced 7,000 ounces from Tamar in Q2.

Eric Callio, Senior Vice President, Exploration, Discovery: This is

Mark Utting, Senior Vice President, Investor Relations, Discovery: preproduction ounces. We expect these numbers from Tamar to go up over the next few quarters as the strip ratio comes down. And as I say, we intend on achieving commercial production sometime in by 2026. And once we get beyond that, we expect production to normalize somewhere around 150,000 ounces a year. Of the 16,000,000 ounces of sustaining CapEx in the quarter, the majority of it was at Oil Pond and Borden, largely related to capital development.

In terms of exploration, I’ll let Air Talia discuss it in more detail. I will say that we are ramping up an extensive exploration program. We expect to do about 140,000 meters of drilling this year. And really, it’s the beginning of setting ourselves up, and we’ll be doing that and even more up to double that on an annual basis, would like to believe, for about ten years. That may be a forward looking statement, but that’s also a goal that we’ve got a lot of place to explore, and Eric’s building up a solid exploration team and a lot of exciting new discoveries that can come.

Slide 10 outlines some of our key priorities over the next while. A lot of the drilling we are doing is focused on resource conversion. We plan to complete a study updating this year’s technical report that will include an initial reserve at Hoyle for Hoyle on Borden and Tamar, and that study will be released sometime around the middle of next year. We will also complete studies for Dome Mine and the TBZ Zone at Boyle Pond for expected release in the 2026. The Dome study will fully be incurred resource and provide a little bit more understanding on how we can move that forward.

As well, the TBZ study will include the release of an initial resource statement. Now I’d like to turn the call over to Alison White, our new CFO. Alison was most recently CFO at SSR Mining, and prior to that was with Newmont in a number of roles, including CFO of North American Operations. Very pleased to have her on board. Carry on.

Alison White, Chief Financial Officer, Discovery: Thanks, Sunny, and it’s a pleasure to be here as a part of the Discovery team. I’m going to start on Slide 11 and review our financial performance for the quarter. Overall, it was a strong quarter, as Tony mentioned. As you heard, our adjusted net earnings were $28,400,000 or $04 per share. Very importantly, we generated robust cash flow with operating cash flow of $67,000,000 and free cash flow of $27,000,000 bolstering the balance sheet.

Looking at the $27,000,000 of free cash flow, it’s important to keep in mind a couple of things. First, as Tony mentioned, our gold sales were 8,000 ounces below gold produced. We will make up those ounces in terms of sales during the third quarter. Secondly, we had close to $20,000,000 of acquisition and transition related costs that will not be repeated on a go forward basis. When you consider those factors, our $27,000,000 of free cash flow was encouraging, but it could have been significantly higher.

In future quarters, assuming similar pricing conditions, we do expect that it will be much higher. Turning to Slide 12. This slide shows the details of adjusted net earnings and reduced the difference between our net earnings of $5,500,000 or $01 per share and our adjusted net earnings of $28,400,000 or $04 per share. As you can see, there were $16,600,000 of acquisition related costs, primarily expenditures for legal, consulting and advisory services and other expenses related to the completion of the Parcocaine acquisition. There were $1,600,000 of costs related to the acquisition on an after tax basis, including a variety of activities around Discovery’s integration of the Porcupine operation.

We also had after tax FX losses of $4,700,000 largely a function of the weakening U. S. Dollar during the quarter. As you’ve heard earlier in the call, we became a U. S.

Dollar reporting issuer starting in the second quarter. So as I move to Slide 13, Slide 13 looks at EBITDA, which totaled $55,200,000 in Q2. If I touch on each of the add back items, let’s look at financing costs first. The $14,300,000 of financing costs mainly relates to the accretion cost of $7,800,000 from reclamation and deferred consideration as well as $6,500,000 in interest expense related to the Franco Nevada royalty and its associated accounting impact. Depletion and depreciation of $16,400,000 related mainly to the addition of over $560,000,000 of depletable mineral interest and $314,000,000 of depreciable plants and equipment related to the Forcupine acquisition.

Finally, income tax expense of about $19,000,000 is attributable to the revenues from production during the quarter. Moving on to Slide 14. This breaks down both cash costs and all in sustaining costs. I want to reiterate one more time that our consolidated cash costs and all in sustaining costs do not include Timor, which is a capital project that’s ramping up toward commercial production levels. I won’t go through each contributor to the costs that are shown here.

However, I’ll highlight that the site level ASP of $18.72 dollars an ounce excludes the $213 an ounce gray box in the chart, which represents G and A and share based payments. There is also about $38 an ounce in the $441 an ounce of sustaining capital expenditures, which is deemed corporate and related primarily to the Cordero project costs. We move on to Slide 15. It dives into capital expenditures. I know that Pierre Rock will also discuss CapEx in his operating review, but I’m going to touch on it briefly before we get there.

Total capital expenditures during Q2 were $44,200,000 Sustaining capital was $16,100,000 while growth capital totaled 28,100,000.0 Just looking at the chart, you can see that Primor accounted for the largest component of total capital. CapEx at Primor totaled $22,300,000 all included in growth capital expenditures. Of the $22,300,000 $14,000,000 related to pre stripping, with the remainder mainly reflecting allocated capital for the tailings management project. I will point out that for reporting purposes, CapEx at the mill and the six tailings dam are allocated to the operating mine. The tailings project in total accounted for $16,000,000 of capital expenditures.

I’ll let Pierre give you more details on that project a little bit later in the call. The other significant areas for capital investment involve sustaining capital expenditures at Borden and Hoyle Ponds. The largest component of these expenditures is capital development. And as we continue to set the mines up for future production, we have also commenced investment programs to update infrastructure and equipment fleets. And if we turn to Slide 16, we can take a look at our cash balance.

We had cash of $252,500,000 as of the end of the quarter on June 30. Just yesterday, our cash balance was $279,000,000 As that suggests, we’re continuing to generate solid free cash flow. And as you can see from the chart, the main contributor to the buildup in cash during Q2 was the financing package that we arranged concurrent with the FortiPine acquisition. The $468,000,000 you see is comprised of 300,000,000 received from Franco Nevada for the 2.25% life of mine royalty and the 2% royalty linked note. The other $168,700,000 represents the net proceeds from the subscription receipt financing completed in February.

With the closing of the acquisition, the $275,000,000 separate fees were exchanged on a one for one basis into common shares. The other major contributor to higher cash was the $67,000,000 of operating cash flow. These inflows were partially offset by the 200,000,000 of cash consideration paid to Newmont for the acquisition. The cash component of our capital expenditures was just under $40,000,000 and we had $51,600,000 of restricted cash, which is backing government required financial assurances in relation to closure plans involving the Parkview Pine assets. I’ll also point out that in addition to our cash costs, we have $100,000,000 credit facility from Franco that remains undrawn, which is adding to our total liquidity balance.

And if we flip over to Slide 17, we’ve obviously had and continue to have a significant accounting exercise following the completion of the Parkupine acquisition. This slide shows the purchase price allocation for the second quarter. I want to stress that the numbers represented the preliminary estimate of the fair values of identified assets that were acquired and the liabilities assumed from Newmont. It’s a complex exercise, and we will finalize the determination of the fair values of the assets and the liabilities acquired and the deferred taxes within the period allowed, which is twelve months from the acquisition date. You’ll see that the value of the net assets listed on the closing date was $524,000,000 That’s higher than the purchase price disclosed when the deal was announced.

That’s entirely due to the significant increase in Discovery’s share price following the deal’s announcement. Basically, Newmont benefited from the market’s view that Discovery entered a very good deal and the share price reflected that growth between the timing of the deal announcement and the finalization of the acquisition. And with that, I’m going to turn the call over to Pierre Ross, our Chief Operating Officer.

Pierre Rock, Chief Operating Officer, Discovery: Thank you, Alison. I’ll start with Oil on Slide 18. For those who may not know, Oil is one of Canada’s highest grade gold mine with an excellent track record for replacing reserves. Total of 45,160 tonnes were mined from April 16 to the June 2025, an average mining rate of five ninety four tonnes per day. Production mainly came from the Lower S Zone on the 1965 and 1985 levels.

Total material milled was 98,000 tonnes at a grade of 5.5 gram per tonne. Both the tonnage and grades milled largely reflected the processing of stockpiles during the quarter. Going forward, we do not anticipate processing much stockpile material during the second half of the year. Operating development during 2025 was mainly focused on the main production areas in the lower end zone as well as in areas of the upper mine where access to narrow high grade veins is currently commencing. Capital development activities during the quarter mainly involved continuing to extend the main branch to that in the lower end zone.

Production costs in Q2 totaled around $20,900,000 with operating cash costs per ounce sold averaging $15.66 dollars and all in sustaining costs per ounce sold averaging $2,036 We expect lower all in sustaining costs in the second half of the year as average grades will increase. Sustaining capital expenditures mainly related were mainly related to capital development activities as well as oil pond allocation of capital expenditures that are related to the tailings management area. Turning to Borden on Slide 19. As you may know, Borden is close to the town of Chateau, approximately 190 kilometers from the dome mill We track the ore to dome. Borden is located on a large land position that is underexplored and has significant exploration upside.

Eric will talk about this in a few minutes. Commercial production started at Borden in 2019, and the mine has produced around 600,000 ounces to date. During Q2, the mine produced 27,000 ounces from processing 166,000 tonnes at an average grade of 5.6 gram per tonne. Mine production during the quarter was 124,000 tonnes on an average mining rate of just over 1,600 tonnes per day. The issue we had was trucking availability.

By adding stockpiled ore from earlier in the quarter, we were able to process about 2,000 tonnes per day for the quarter. Operating development during the quarter was mainly focused on the West, Central and Upper East zones. The capital development primarily related to the continued advancement of the main ramp and the exploration drift on the 575 level. Production costs in the second quarter totaled 2,000,000 with operating cash costs per ounce sold averaging $11.75 dollars All in sustaining costs per ounce sold averaged $16.21 dollars for the quarter. Sustaining capital expenditures totaled $9,000,000 with capital development accounting for $5,700,000,000 and the remainder related to allocated tailings management area expenditures as well as investment in infrastructure and new equipment.

Turning to Tamor on Slide 20. Within our open pit project, Initial production was recorded in early twenty twenty five, and we are currently ramping up towards commercial levels of operation, which we expect in 2026. This timing is driven by dewatering requirement. It has been a wet year so far in Timmins. There was considerable pre stripping activity ongoing during the second quarter.

We moved 2,700,000 tonnes of waste versus 104,000 tonnes of mineralization. Milky from the mines during the second quarter was mainly from Bench Number 19 of the Phase one open pit, with production from Bench Number 13 commencing late in the quarter. Mill feed from Tamar is expected to increase significantly in the second half of the year, with the strip ratio expected to average below ten:one during the final quarter of the year. In addition to mine production, 132,000 tonnes were processed from stockpiles during the quarter. As with Toripon, we don’t anticipate processing meaningful amounts of stockpiles from Tamar going forward as the strength ratio comes down and we increase mill feed from the mine.

Production costs in the second quarter totaled $12,000,000 Operating costs per ounce sold averaged $2,051 while all in sustaining costs per ounce sold averaged $2,194 All capital expenditures at Pammo in Q2 were growth capital expenditures and related mainly to pre stripping and allocated G and A capital expenditures. I’ll now turn the call over to Eric, our SVP, exploration.

Eric Callio, Senior Vice President, Exploration, Discovery: Thank you, Pierre, and good afternoon, everyone. I’m on Slide 21, and it’s great to be here and talk about exploration again as I believe we have a lot of very exciting things happening. As indicated on the slide, our current plan indicates work on several different projects and about 140,000 meters of drilling. One of the key projects is at the oil pond underground, where we’ll be aiming for about 50,000 meters on three main targets, including six A and D, DDZ and then mid mine targets. Just to share a few details, Work on testing will be from platforms on the eighteen sixty level and focus on infill expansion of the main zone, mostly near the 2,000 level.

Work on the TBZ will be from the twelve ten level and include both infill and nut testing in preparation for the new maiden resource in 2026. The work on the mid mine target will be mainly between twelve hundred and seventeen hundred levels, testing for new discoveries, often an extension of many of the historic stopes that have been mined. In terms of progress, it’s a little slower than expected, but we now have two drills in motion and adding four more this month, which should start to rapidly increase the rate of drilling. Now let’s look Borgen. We’re aiming for about 20,000 meters, with the main target here being the 585 Deep Zone 2, which is basically Northeast extension of the new ore body.

First of the program here will be with three drills parked on the 585 Level and drilling downwards into the zone over a 200 to 300 meter strike length, and this is already well underway. From the Panwar, we have another 40,000 meters drilling, which will be for infill expansion of what we believe is already a pretty good open pit resource. In terms of the plan, what we see happening is drilling along most of the strike length of planned pit and then beyond due to mining activity starting out right now on the East and west extremities. Progress to date here has actually been very good. There’s over 12,000 meters completed to date, which is actually slightly ahead of plan.

And finally, capping it all off here are projects for both regional and dome, where we’re aiming for a further 32,000 meters with 15,000 at Plymouth, 10,000 at Borazi and about 7,500 at Dome. In terms of the plan for all projects, we will pretty much all be focused pretty close to the mine with work in Timmins testing areas left of Fall Pond and near Owl Creek, work at Borden testing north and east of the mine, and work at the dome near the main pit, and more specifically in the area of a possible starter pit, which we believe could provide a shorter term opportunity with minimal impact to items such as the mill. In terms of progress, work on all these projects is just getting underway, but ramping up very rapidly this quarter. So in summary, I believe we have a great lineup of projects and look forward to providing another update on these in the near future. And with that, I’ll pass the call over to Jose Jablera, our VP, Corporate Affairs and Sustainability for Mexico.

Jose Hevelera, VP, Corporate Affairs and Sustainability, Discovery: Thanks, Harry. Hi, everyone. So in Cordero, in Mexico, we delivered our stability study at the 2024. And currently, we are our main permit with EMEA in Mexico is being evaluated by the Ministry Environment, and we hope to have a positive response in the coming months. So also during Q2, we continue derisking the project by evaluating energy options such as gas generation since we have a gas pipeline very close to the project versus power from the grid.

Also, the technical work and some measurements to contribute to the progress of the rehabilitation of the plant, the plan of the rehabilitation of the water treatment plant, it’s ongoing now. An important point in line with derisking the project, last week, were present at meetings in the visit of the Minister of Finance and Foreign Affairs of Canada in Mexico, who was a visit a virtual visit to President Cembon, advancing the visit of the Prime Minister Carney that will be during the next month in Mexico. And we know that in the next visit, the topic or one of the main topics will be mining authorizations in the agenda for Mexico. So thanks very much for the call to Charlie Macphage, our CEO.

Mark Utting, Senior Vice President, Investor Relations, Discovery: Yes. Thanks, Jose. Thanks, everyone, for all the insights you provided on the call. Appreciate that. As you can see, everybody, we are off to a very strong start with the Pokka plant operations.

There is a lot of work to do, partly because there’s so much opportunity, and we’re excited about working forward as they unlock that and get that information out to our shareholders. We do expect to see higher levels of production in both Q3 and Q4. We’ll also continue ramping up our investment in exploration programs and in CapEx with a target increase in the 2025. We’re also accelerating our exploration and initial exploration results should be coming during the second half of the year. Another big thing as part of trying to work out deliverables as we talked about coming into the end of this year, early into next year is to benchmark on a number of studies.

And as I talked about, reestablishing reserves out of are on board in the and to demonstrate the tremendous potential that is just sort of growth projects that both the TV’s heads on and at home. But before I conclude, you know, I always wanna I always reminded of a quote I heard from Indira Gandhi where she said that she talked to her grandfather where he said, there’s two kinds of people in the world. There are those that do the work, and there are those that credit from

Jose Hevelera, VP, Corporate Affairs and Sustainability, Discovery: the work of others, she said.

Mark Utting, Senior Vice President, Investor Relations, Discovery: The grandfather told her to be part of the first group. There’s less competition. Unfortunately, I know as we speak, I know as I’m speaking to today, I’m part of the second group. So with that, I think it’s important that I say thanks to all the people at Discovery, those who supported us to get here and to our shareholders. As I say, most importantly, I want to

Jose Hevelera, VP, Corporate Affairs and Sustainability, Discovery: thank personally those that have done the work, got the results in the court for us. Some of

Mark Utting, Senior Vice President, Investor Relations, Discovery: you are on shift working now. Others are at home resting before coming back for the next shift. Thank you for your efforts, and please continue to work safe. So with that, we’ll just conclude the call, and we’ll be happy to take any questions.

Rob, Conference Operator: Your first question today comes from the line of Larry Liu from CIBC. Your line is open.

Larry Liu, Analyst, CIBC: Hi, Tony, Alison, Pierre, Eric, Jose and Mark and team. Thanks for taking my questions today. I guess I’ll kick off my first question asking about how the from your perspective, how are the assets performing compared to your initial expectations within the technical report? If you look at today’s results, 50,000 ounces came in strong. If you factor in the timing of the transaction as well as the two week mill shutdown.

I’m wondering if we can factor in any further upside compared to the initial technical report at this point.

Mark Utting, Senior Vice President, Investor Relations, Discovery: Maybe I’ll let Pierre give a little bit of color here. But I mean, let me just put it in perspective. You want yeah. Definitely, we took over the assets and and and we did a review, and and you you got a sense of what can be accomplished here. But we also recognize we did inherit, you know, over a thousand very talented, skilled and motivated people working here.

So we’ve got a lot of upside in terms of intellectual property and opportunity that was given to us. There’s challenges, but I think there’s been some unique some significant effort done in the quarter and getting some positive impacts. Don’t know, Pierre, do you have any thoughts there?

Pierre Rock, Chief Operating Officer, Discovery: Right. In terms of the assets, as Tony mentioned, we’re really blessed with the operating crews here, whether it’s at the mill or the mine, they’re really top notch. Thank you for that. And the when you look at the assets themselves, starting with Tambor, referring to the PEA, we were at about 3,000 tonnes per day ore 2025. Well, I can say we have exceeded that, and we’re way ahead of that.

When you look at Foil Pond, we were averaging around 500 tonnes per day. Well, we are ahead of that as well. Right now, would say the only asset that needs a little bit more attention right now is at Borden, where we were planning to get 2,000 tonnes per day. We’re a little short of that in the quarter, but we think that with a little bit of changes in the mining plan and more importantly, changes in the equipment, will be able to achieve and exceed the 2,000 tonnes per day. As I alluded a little bit earlier, truck availability, loaders availability during the quarter was really below expectations.

That’s only due to the age of the equipment. So as we replace the equipment, it’s going to improve for sure.

Larry Liu, Analyst, CIBC: Yes, for sure. Thanks, Pierre and Tony. I guess that kind of leads well into my next question. Speaking of ahead of schedule, I’m just wondering if you can share with us where you are in terms of your ramp up process at Panmore? And then how much more CapEx do you still need to spend to push the asset towards commercial production?

Or how much more do you intend to spend by before the end of the year?

Mark Utting, Senior Vice President, Investor Relations, Discovery: You okay with that, Pierre?

Pierre Rock, Chief Operating Officer, Discovery: I’m going try. So there is still a lot of free stripping. Like if you look at the remainder of the year, we’re tracking with the PEA. So that will be the main expense, I would say, the pre stripping and after that, the allocated portion of the tailings and after that, some equipment replacement that we’re doing there. So it’s still a challenging second half of the year financially, but we think that it’s going to be compensated by an improvement in throughput.

Mark Utting, Senior Vice President, Investor Relations, Discovery: Remember, though, I mean, expect to continue advancing Tamar this year. We don’t expect to achieve commercial production sometime by or before Q4 in 2026. So a lot of work to do, right?

Larry Liu, Analyst, CIBC: For sure. Sounds good. It’s good to see more progress there for sure, and good to hear that things are ahead of schedule. I guess my last question is more numbers driven, might be more accounting, actually. So for reclamation liabilities, I noticed that there is a slight change in discount rate used for the estimate that’s why resulting in an increase in the reclamation liabilities.

I’m wondering what’s the reason driving that change, and should we expect such magnitude of changes going forward?

Alison White, Chief Financial Officer, Discovery: So, Larry, this is Allison. And really, the change in the reclamation liability is all related to the purchase price accounting that we have done during the quarter. And, you know, this is really a a huge quarter of transition for us on the accounting and finance front. We’re getting our arms wrapped around the systems, the people, the numbers. And so part of what we have to do is take a look at, you know, what’s come over from Newmont as well as what’s the reassessment of the fair market value of those reclamation liabilities.

So the increase that you see and the change in the discount rates that you see are all related to those purchase price activities. And we do have a year to finalize those. So if we have new facts that we need to consider going forward, we will. However, we don’t anticipate a change in the discount rate to get back to your question.

Larry Liu, Analyst, CIBC: Got you. Perfect. Sounds good. Thanks so much, Tony, Allison and Pierre for answering my question and congrats again on a strong quarter. Your

Rob, Conference Operator: next question comes from the line of John Tumazos from John Tumazos Very Independent Research. Line is open.

John Tumazos, Analyst, John Tumazos Very Independent Research: You everyone for your service to the company. Allison, could you explain the 75% plus quarter and 100% plus six month tax rate, is it because the transaction expenses and the currency charges are not deductible for tax purposes? And would the tax rate be 35% going forward?

Alison White, Chief Financial Officer, Discovery: Yes. So, John, thank you for the question and very astute observations, would say, first of all. So we are working through a little bit of transition. As I mentioned in the answer that I gave to Larry, just about the process that we’re going through from a finance and accounting lens. But you are correct.

Our effective rate is hovering between 3035% right now, and that’s largely based on what’s coming in at Dome. We are in the process of understanding what sort of tax planning initiatives we can put in place and how we might be able to bring those rates down going forward. But we do need a little bit more time to work through that as an organization.

John Tumazos, Analyst, John Tumazos Very Independent Research: Thank you. Pierre, could you explain the thresholds for PAMOR being commercial? It’s confusing to me that the cash cost is $2,000 and there’s a $1,300 margin with $3,300 gold, yet it’s not commercial. So how does the engineering reconcile with the economics?

Pierre Rock, Chief Operating Officer, Discovery: Right. So commercial production, there’s no set rules for that. Internally, we are converging towards 75% mining rate sustained for three months. We’re not there yet. And as I alluded earlier, we’re having dewatering requirements that far exceeds our capability to increase the mining rate right now.

So our efforts are really directed towards dewatering. To the best of our knowledge right now, we will not be in a position to improve drastically the mining rate until 2026, at which point we will meet that self imposed rule, if you wish, of 75% production rate over sustained three months. You have to remember that when we started here in April, previous owner was a little bit behind the eight ball with dewatering. Basically, they didn’t do much. And then the new water treatment plan that they put in place, they forgot to winterize that.

And basically, we had to pick up the pieces in April and May. So that delayed a little bit our start for dewatering. But we’re catching up a little bit, but it’s a very long process. Does that clarify? So if

Alison White, Chief Financial Officer, Discovery: price good, the

John Tumazos, Analyst, John Tumazos Very Independent Research: you’re going to make a profit lower than 75%, but you still won’t call it commercial?

Pierre Rock, Chief Operating Officer, Discovery: Like I said, there’s no set rules for it. That’s the one we decided to use.

Mark Utting, Senior Vice President, Investor Relations, Discovery: I think a big part there, John, is that the, you know, in terms of strip ratio, in terms of what we’re doing and and the amount of work that really set it up for proper mine production is is is is a lot of defining stuff that gets you set up for for achieving your your average throughput. Right now, it’s it is somewhat intermittent and and and not just on tons per day, but it’s also on grade and and being into the, you know, really on being into the ore body and get all the benches proper. So it’s just it’s just a matter of time that we’re gonna get there. You know? Whether it’s you know?

And and, again, it’s at achieving 75 mining effective mining rate mill rate every day for for three months, and then we can call it commercial production. But it’s arbitrary.

Eric Callio, Senior Vice President, Exploration, Discovery: Mike Yeah. We’re making

John Tumazos, Analyst, John Tumazos Very Independent Research: If I can ask one to to Eric. Eric? Yeah. What is what is the distance from the edge of the Pamore Pit to the edge of the idle Hollinger Pit?

Mark Utting, Senior Vice President, Investor Relations, Discovery: I don’t know.

Pierre Rock, Chief Operating Officer, Discovery: Is it two kilometers, five kilometers?

Eric Callio, Senior Vice President, Exploration, Discovery: It’s more than two kilometers. You know, it takes me about half an hour to drive, I guess. So, yeah, maybe 20 over 20 kilometers, I would say.

John Tumazos, Analyst, John Tumazos Very Independent Research: How much information is there? Should we assume that that stretch of land is no geologic information? Or are there areas where you know there’s no gold? Or what is the nature of the information?

Eric Callio, Senior Vice President, Exploration, Discovery: Well, I mean, that stretch of land covers kind of quite a few different types of geology. I mean, there’s a couple of major faults in there, the Beryozanatic Fault that offsets things quite a bit. There is some mining along the full stretch, but, you know, they’re mostly small historic mines that didn’t go down very deep. And it really didn’t show the type of raw halos that you see at the Pamur or the Dome either.

Mark Utting, Senior Vice President, Investor Relations, Discovery: But you also the Panmore the the Hollander McIntyre on the on the sort of, I guess, would say the the western limb of the porcupine syncline and whereas Panmore is off on part of the eastern limb of that eastern end part part of that. So you can’t just go straight across, but you’re going from different from from mineralized or highly perspective, mineralized parts of the structure to an unmineralized structure in the core income. Yes. The middle

Eric Callio, Senior Vice President, Exploration, Discovery: part is quite different, I mean, than what you see either at Panmore or at So it’s not

Mark Utting, Senior Vice President, Investor Relations, Discovery: just a simple geographic line. There’s geology, as you talk about, and faults, it’s figure through that change. But it’s a nice spot. It is. There is a lot of mineral potential mineralization.

And as I think Erica alluded to, it’s an exciting camp. We’re not only seeing new we’re drilling, we find new extensions of existing mineralization. You can follow-up on new targets that can grow in terms of size and resources and there’s potential to find all new discoveries in the camp.

John Tumazos, Analyst, John Tumazos Very Independent Research: So Tony, with the mill fixed up during the quarter and Panmore in startup and Borden at 2,000 day and Hoyle at 600 ton a day, it looks like the mill is ahead of the mines at the moment. Is it worth having a contract miner go to the dome pit and deliver 3,000, 4,000 ton a day while Pamore is starting up? And maybe you could drop a SAG mill into dome mill and get the party going a little better at the dome pit.

Mark Utting, Senior Vice President, Investor Relations, Discovery: I mean, there’s a lot of these are I mean, that’s part of what you’re you can figure out. There’s right now, we’re not mineralization or deposit limited in terms of what we can do. We need to do the technical work to advance with the dome project, PBZ as well as really solidify production from Oil Pond and Borden and get Pamor up. It’s not just about managing production and etcetera, but it’s also about managing costs and really setting yourself up to be a we like to be a low cost producer, one of lower cost producers and focus on responsible mining. There’s a lot of things we need to do.

We are we do have it as part of our goal. Think as we talk in future quarters about what we’re doing to the dome mill to get it up. But yes, right now, the mines can’t keep up to the mill. There is low grade stockpiles that I guess we could put in if they make sense to keep the mill full. I think Gord’s made a lot of very good progress.

And we have demonstrated that the mill can run at 11,500, 12,000 tonnes a day and get pretty good recoveries in well over 91%, 92%. It’s just a matter of time. We’re working through that. We want to be able to do it consistently and responsibly and similarly get the mines, get them up consistently and responsibly to achieve that. And the big picture is, would say, in two years from now, we’re going to

John Tumazos, Analyst, John Tumazos Very Independent Research: be It’s first hockey game.

Mark Utting, Senior Vice President, Investor Relations, Discovery: Yes, yes, sure. But even before we get our first hockey game there, John, in that sense, got lots of significant upside between all these projects. So there’s as we say, there’s ability to grow this into being a Tier one asset in the gold space. And as defined by some of our senior peers, they’ll say 500,000 ounces a year for ten plus years at the lower half of the cost curve, and that’s part of our goal. Not going get there next year, but and it takes ten years to get there either.

Rob, Conference Operator: Your next question comes from the line of Phil Kerr from Ventum Financial. Your line is open.

Phil Kerr, Analyst, Ventum Financial: Thanks, operator. Everyone at Discovery, congrats on the transformational quarter. Most of my questions have been touched on or taken care of by the presentation, but just a few simple ones here. Just in terms of G and A, the reported number there was relatively quite high compared to your peers. Just curious, I would assume there were some onetime items in there.

And I’m wondering what this number may level off at for the rest of the year moving forward.

Alison White, Chief Financial Officer, Discovery: So you’re right. There were a lot of one time g and a costs that were sitting in the quarter, and that is largely due to the acquisition and the cost associated with that. I think that, you know, the we will not run at that same rate going forward. We don’t have an exact number yet for you. But by and large, the the quarterly g and a that was attributable to the acquisition was close to $20,000,000 So there is certainly a lot of it that’s sitting in there that will be coming or will repeat itself going forward.

Phil Kerr, Analyst, Ventum Financial: Okay. Just in terms of exploration dollars, I think the breakdown of meters allocated about 25,000 meters to regional targets. Would those targets be and those expenses those costs be expensed?

Eric Callio, Senior Vice President, Exploration, Discovery: Yes, Dave, for the most part, yes. Yes, pretty much all.

Phil Kerr, Analyst, Ventum Financial: And and what sort of drilling cost per meter are you seeing?

Eric Callio, Senior Vice President, Exploration, Discovery: Well, drilling cost per meter right now is still kind of it’s kinda hard to really say what we’re gonna get going forward. I mean, they vary a lot from project to project and more. The property didn’t very well, but it is a pretty hard way to see and don’t or call upon, for example, you know, we’ve been underground with only one drill for a while. So, you know, it’s you’re gonna have fairly high cost per

Mark Utting, Senior Vice President, Investor Relations, Discovery: meter there.

Phil Kerr, Analyst, Ventum Financial: Okay. And then

Eric Callio, Senior Vice President, Exploration, Discovery: This varies a lot, but we’ll be able to give you a better answer on that. I mean, they can vary between probably $150 and $300 a meter, I guess. Yes.

Phil Kerr, Analyst, Ventum Financial: Okay. And then just in terms of the Franco Nevada royalty, I did see a line broken out in the production costs. But as we added it up into the income statement, I sort of lost where that I think it was about $6,500,000 where that was being reported or where it was lost in translation from operations to the financial statements.

Alison White, Chief Financial Officer, Discovery: Yes. So that is a complex accounting arrangement that we have entered into in relation to the Franco Nevada royalty. And that’s largely due to a number of terms that are present in the contractors to different tranches that are included in that royalty. And so it it qualifies for embedded derivative treatment underneath our accounting rules. So effectively, the royalty gets recorded as deferred revenue, and then it amortizes over the life of mine.

The deferred revenue ends up being reduced by the ounces produced, and then there’s a royalty and an interest expense reported. So so we’re happy to walk you through anything in terms of model offline, but hopefully that high level just kinda helps you understand the general mechanics of how we’re accounting for that royalty.

Phil Kerr, Analyst, Ventum Financial: Complex accounting said it all. Thank you.

Alison White, Chief Financial Officer, Discovery: I could have stopped earlier. Thanks.

Phil Kerr, Analyst, Ventum Financial: Thanks for the questions.

Rob, Conference Operator: There are no further questions at this time. I will now turn the call back over to the presenters for some final closing remarks.

Mark Utting, Senior Vice President, Investor Relations, Discovery: Yes. Just want to thank everyone for taking the time to participate in the call. Just to repeat something Tony said, there’s a lot of work going on, and there’s a lot of work to do, and that’s a function of there being a lot of opportunity here. And having calls like this give us an opportunity to talk about the progress we’re achieving and certainly what we see going forward. And so we’ll look forward to keeping you updated, and that includes our next quarterly call in November.

Eric Callio, Senior Vice President, Exploration, Discovery: Thanks very much again.

Rob, Conference Operator: This concludes today’s conference call. You may now disconnect.

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