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Endeavour Silver Corp  (NYSE:EXK)
Q2 2019 Earnings Call
Aug. 08, 2019, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Endeavour Silver 2019 Second Quarter Financial Results Earnings Conference Call. [Operator Instructions] After the presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Galina Meleger, Director, Investor Relations. Please go ahead.

Galena Mellinger -- Director, Investor Relations

Thank you, operator, good morning, everyone, and welcome to the Endeavour Silver Corp. 2019 second quarter financial results conference call. With me on the line today, we have the Company's CEO, Bradford Cooke, as well as our President and Chief Operating Officer, Godfrey Walton and our Chief Financial Officer, Dan Dickson.

Before we get started today, I'm required to remind you that certain statements on this call will contain forward-looking information within the meaning of applicable securities laws. These may include statements regarding Endeavour's anticipated performance in 2019 and future years, including revenue and cost forecasts, silver and gold production, grades and recoveries and the timing and expenditures required to develop new silver mines in mineralized zones. We do not intend to and do not assume any obligation to update such forward-looking information other than as required by applicable law.

So with that, and on behalf of Endeavour Silver, I'd like to thank you again for joining our call today. And I'll now turn it over to our CEO, Bradford Cooke.

Bradford Cooke -- Chief Executive Officer

Thank you, Galina, and welcome everybody to this conference call on our second quarter financials. As usual, I'll start off with a high-level overview of our second quarter performance. And then we'll take a brief look ahead to the rest of the year and open it up for Q&A.

So, as per our new release this morning, we pointed out that we had yet another challenging quarter both in operations and financially, but really just a continuation of the issues that we identified in Q1. As a result of that companywide review of how to improve our operations, we initiated -- put a number of changes at each of the mines. And two of the four mines have already responded -- started responding to those changes.

So coming back to the highlights of the second quarter, our financial performance was generally lower year-on-year, largely due to lower production and higher unit costs. Specifically, our revenue was down 24% to $29.4 million that drove mine operating cash flow before taxes of $2.6 million. We reported about $1 million loss in cash flow from operations and the net loss came in at about $10.1 million. Cash costs were up during the quarter to $13.67, all-in sustaining costs up to $20.90 per ounce net of the gold credits. We do maintain strong a balance sheet. So notwithstanding the operating issues during the second quarter, we finished the quarter with a strong working capital position of $46.6 million and a cash position of $23.1 million.

So I think looking forward, the main questions are how fast can we move to get the operations back in the black and what about our growth projects? So let me touch briefly on those. I think -- by the way, before I go into that, we obviously did also revise our guidance based on the soft first half of the year. We previously, in July, revised our production guidance to the kind of 4.5 million ounce silver, 40,000 ounce gold range. That's about 7.4 million to 8.2 million ounces of silver equivalents. Because of that obviously, we've now in this news release today, revised our cost guidance. So our consolidated cash costs, we revised to $10 or $11 per ounce net of the gold credit. That does imply $8 to $9 in the second half. And our all-in sustaining cost, we revised to $17 or $18, implying about $15 or $16 in the second half.

In terms of how to get the operations back on track, we acted very quickly in Q2 with some fairly sweeping changes, changes in site leadership and management, reductions in the workforce, new equipment and other changes to help turnaround the performance; primarily at Guanacevi, and secondarily at the other operations.

The good news is that Guanacevi has responded and it continues to respond through the development of two new higher grade orebodies at Milache and Santa Cruz Sur. We're seeing both the tonnes and the grade starting to drift higher, recoveries were higher.

And at El Compas, we did declare at the end of the first quarter, commercial production. And through the second quarter, we saw continued improvement of throughput grades and recoveries. There's still work to do on recoveries at Compas. But it's now performing pretty close to plan. And Guanacevi, we want to see it back on the revised plan here by the end of the third quarter. Bolanitos, we only made changes in June, July. So the bulk of the performance turnaround at Bolanitos is not forecast until end of Q3, Q4 and Cubo is just chugging along as planned.

So that's kind of the brief overview of where we are at in the operations. We recognize we had problems. We made a number of changes, we've seen the benefits of those changes. We will need the rest of the year to see those operations back in the Black.

In terms of our growth outlook, Compas was first of three new mines that are in our growth pipeline, and now that it's performing a commercial production, our attention is obviously turned to Terronera and Parral. Terronera as a reminder, is proposed to be the next core asset of the Company with the prefeasibility study last year forecasting 5.2 million ounces of annual silver equivalent production for nine-and-a-half years. Since the publication of the PFS, we've made significant strides with better economic performance, longer mine life, larger reserves and resources and revised mine plans. We have commissioned internally, a couple of optimizations to the previously PFS and we expect to go public with the final PFS here in the third quarter.

So Terronera is basically ready. We see the final government permit to build the Terronera operation in June and so we're now in addition to the final engineering and final PFS turning our attention to the financing package of debt equity package to build Terronera and we ideally would like to have that in place this quarter.

And last, but not least, Parral, there'll be some news on it next week but basically, it's been our biggest drill [Phonetic] program last year. We see significant opportunities at Parral while we expect it to become mine number six in the group, but there might be a way to accelerate that.

So that's my overview looking forward for the second half of the year with forecast of improved operating performance, improved financial performance quarter-on-quarter and with the attention now turning back to our growth projects.

I think, I'd like to stop there, operator, and why don't we open this up for Q&A. We've got our COO, Godfrey Walton here for operating questions and our CFO Dan Dickson for financial questions.

Questions and Answers:

Operator

Certainly, sir. [Operator Instruction] Our first question comes from Chris Thompson with PI Financial. Please go ahead.

Chris Thompson -- PI Financial -- Analyst

Hi, good morning, guys. Thanks for hosting the call. Couple of quick questions here. We'll start off with Guanacevi. Obviously, a lot happening with the asset, what's your expectation as far as the unit costs i.e. dollar per tonne milled here 1Q you bring Milache on?

Dan Dickson -- Chief Financial Officer

Yes, Chris, it's Dan here. Thanks for the question. Unit cost on a consolidated basis we expect to get down right now to $145, recall historically we have average $85 and $90 per tonne. We don't think we can get back down there $80 and $90 right now, but as we come out of the Santa Cruz mine, where we're pumping we're quite low and it's quite narrow actually at the depth for that. As we come out there and increase the production coming out of Milache, so about one-third of our production actually in Q2 came from Milache, and that's going to rise closer to 50%. And then we are going to have additional production come out of that new orebody Santa Cruz Sur, which has actually got wider vein from what we're seeing at Santa Cruz. That will help us get down from a cost per tonne 7 points. We are expecting the back half of 2019 to be about $105 to $108.

Bradford Cooke -- Chief Executive Officer

This is actually -- Chris, it's Brad here, there is a third area of potential production in the second half. If you recall we announced in early July, the acquisition of the expiration -- exploitation rights to some ground immediately adjacent to Milache and Porvenir Cuatro. And in fact the Porvenir Cuatro mine workings stop at the property boundaries. So we are aggressively exploring and developing that boundary area for Porvenir Cuatro here in the third quarter and we even see some of our first incremental production from that area if we're successful.

Chris Thompson -- PI Financial -- Analyst

Great. Thanks for that, Brad. I guess, moving on Bolanitos, obviously the intention is to return throughput to 1,000 tonne a day. You said there in the second half, any sense of whether it should be fourth quarter weighted?

Godfrey Walton -- President & Chief Operating Officer

Hi, Chris. This is Godfrey. We are actually pushing forward and we are seeing some changes happening -- coming -- happening in Bolanitos. So the production is picking up, but it's probably going be late Q3 early Q4, before we see some -- getting back to filling the ground.

Dan Dickson -- Chief Financial Officer

And again Chris, if I could chip in. We've just moved the General Manager from Compas back to Bolanitos where he came from Jorge Cross. You met Jorge on the last mines we did there. He's been there a few years and I think that Bolanitos suffered in his absence. It's not the only issue at Bolanitos, but bringing him back we think is a good part of the resolution of what's going wrong there.

Chris Thompson -- PI Financial -- Analyst

Okay, great. Can I ask a general question, I mean, obviously tough metal prices for silver producers, I would imagine that you've -- I am not going to say you stop the assets from a sustaining capital perspective, but the other metal prices look like they are -- they are with us now hopefully going higher. What would be the rate -- what you're looking for by way of a good run rate, annual run rate for the assets on a sustaining capital basis?

Dan Dickson -- Chief Financial Officer

Yes. Chris, I mean, that's always an easier question when after time and historically at Guanacevi we spent basically $10 million to $12 million. Now that we're getting into new orebodies with Milache and Santa Cruz and you are right, we did start-up, especially Guanacevi and Bolanitos versus start-ups in 2016 and 2017 with prices down. I think that caught up to us this year a little better. It essentially has even in the last two years at Guanacevi, but we've put significant investment in last year try to catch up and get it done. And if you recall we've always historically ran kind of 18 months cycle of mine development ahead of stocks [Phonetic] that had got to under a year and so to get back up there our plan this year of $10 million was actually at Guanacevi.

It will be the run rate to maintain that and we're pushing ahead a little bit of Guanacevi and we're actually starting to get ahead of ourselves. And at Bolanitos, historically it's actually been $4 million to $5 million. I don't see that any changing. We've been pushing both those operations in the last handful of years. Cubo is always been a different beast and we have never had more than a year, or had a rough there and this year we actually haven't spent much capital. It's been going into operating costs and so what you'll see from a Cubo standpoint is whether we can increase reserves at the end of the year arguably it will be about $4 million $5 million of sustaining capital there for Cubo going ahead. And Compas it's small, your are talking about less than a $1 million.

Chris Thompson -- PI Financial -- Analyst

Right.

Bradford Cooke -- Chief Executive Officer

And Chris, it's Brad again. I just want to turn our attention to the ability to fill the plants is really one of the keys to our positive cash flow. We've fallen below plant capacities at all three mines in recent years and with the new orebodies at Guanacevi, there's absolutely no reason why we can't go back to 1,200 tonne plant capacity, which is one of the keys to profitability.

At Guanacevi, we can do better than we're doing at Bolanitos maybe not a ,1600 tonne plant capacity yet, but certainly 1,200 tons. This is doable. Once we fix the issues, the operating issues, primarily people issues at Bolanitos.

Cubo's got a mine life problem which we can only deal with exploration and so we're not going to forecast plant capacity there this year but we will take another look at that year end and Compas is already is at plant capacity. So I think throughput is definitely a key to Guanacevi and to a certain extent Bolanitos.

Chris Thompson -- PI Financial -- Analyst

Okay, great. And then you know, guys a final question. Obviously, you guys are tough with -- I am not going to say -- I don't want to say, but writing the ship or shoring the ship up at your operating base at the moment as well as potentially building another asset here. Can you do both?

Bradford Cooke -- Chief Executive Officer

Yes, we can and we have to. We actually built the company on fixing other people's problem and that's kind of ironic. We know how to fix our own problems in order to get the operations backup where they should be. And to be honest if we take a step back and look at the last three years, the main area that's come back to bite us, say Guanacevi, Bolanitos and El Cubo is the site management. That's the area that we've had the biggest challenge in finding the right people. We've gone through a number of people of those positions. And that's primarily the house cleaning that we've done at Guanacevi and Bolanitos' site leadership and not just production leadership, but safety leadership and security leadership, all of it goes together. So I think that is being addressed now. And that's what addressed in the first and second quarters. That's why we feel we can do both the operational turnaround and get back building new projects.

Chris Thompson -- PI Financial -- Analyst

All right. Quick question, final question; labor, severance, unions any issues?

Dan Dickson -- Chief Financial Officer

Chris, Dan again. El Cubo, we incurred $1 million severance in Q1, basically, the downsizing and running it 100 tonnes per day. We haven't had any issues knock on wood since that. I mean, we always have our daily discussions back and forth with the union at El Cubo. At Guanacevi, we incurred $12,000 [Phonetic] that was laying off 80 employees and reducing contractors by over 100 in Q2. That's sitting in our cost of sales.

Bolanitos, subsequent to the quarter end, we did another $300,000. Again, to what we've actually seen from these cuts at Guanacevi and Bolanitos is, we've actually seen production improve and ultimately, it's changing the cultures and getting people back to work and working hard. But from a labor negotiation or labor relationships standpoint, taxes have been relatively positive since those cuts. Now you have special circumstances with various individual that happen time to time, but in general, from a macro standpoint, it's been positive at Guanacevi and Bolanitos since those severances.

Chris Thompson -- PI Financial -- Analyst

Great guys. I've chewed up a lot of time. Thank you for the comprehensive answers to my questions.

Bradford Cooke -- Chief Executive Officer

Thanks Chris.

Operator

Our next question is from Joseph Rieger with Roth Capital Partners. Please go ahead.

Joseph Rieger -- Roth Capital Partners -- Analyst

Good morning, guys, thanks for taking the questions. Still, yeah. So two items. I guess, first one, Terronera. I mean, it's a big part of the feature of the Company. Assuming you arrange your financing package during Q3, what does the development timeline look like for you guys maybe with some details as far as how things will roll out?

Bradford Cooke -- Chief Executive Officer

Yes, maybe Godfrey, you want to address that?

Godfrey Walton -- President & Chief Operating Officer

Sure. Thanks, Joe for the question. Yes, so assuming that we can arrange financing in Q3, the schedule that we're currently looking at is actually building the camp this year and starting on ground development in January February next year. With the PFS' that we've put out so far, suggests a 15-month to 18-month schedule for construction for that plant, add about a 12-month schedule for the mine. So you would be looking at really starting production in Q1 2021 or Q2 2021. But we are looking at ways to be able to produce from one of the veins earlier and actually process that in one of our plants. So there's an opportunity there to actually get some production from Terronera all the way to actually have that operating onsite.

Joseph Rieger -- Roth Capital Partners -- Analyst

Okay. And so if I get all that correctly, a fair thing for us to assume is a ramp-up during 2021 toward full production rate?

Bradford Cooke -- Chief Executive Officer

Yes, when the plant is ready, the mine will be able to produce 1,500 tonnes a day. But we can probably produce -- so we'll have a ramp up actually during 2020 as we access both veins and are able to stockpile some material before the plant starts up. And in some cases, the higher grade material will actually look at moving out to either Bolanitos or Cubo.

Joseph Rieger -- Roth Capital Partners -- Analyst

Okay. And then switching gears a bit, at El Compas, the costs, when you look at it on a percent revenue basis, they're still very elevated. What more can be done there to get cost down? Is it just a matter of getting production up and the fixed costs become a smaller component? Any other color you can give would be great.

Dan Dickson -- Chief Financial Officer

Yeah, sure. Joe, it's Dan here. There's actually a couple things inside the MD&A as you get through today. Our PA had a plan of about $110 cost per tonne. But flowing through the $138 that you're seeing and $130 that you're seeing for the year is NRV. So we have to take a writedown on our stockpile, which is the early stockpile as we ramped up the mine. Our cost per tonne were higher because we weren't hitting our outputs. If we pull out the NRV, the cash cost on that, which is about $500,000, we're actually moving that tonne through the plant through royalties for $111. So right on plan and we expect that to come through. So what also has happened, we've seen the grades come up, [Technical Issue]. And then since quarter end, we've got into the Orito vein and our products is seeing that Orito vein and we've seen our recoveries come up to plan.

So right now in our recovery through the first six months was just under 78% and I think it was about 76%, and plan was 85%. Since the end of June, we went up into the 80 percentile. So if we can hold that with our cost per tonne being $110, we should be hitting plan of what we expected. And then ultimately having that cost per ounce come down and using the silver byproduct basis with gold as a byproduct which effectively Compas really a gold mine, that puts into negative cash costs to where we expect. So Compas is actually trending exactly where we expect it to trend. It just takes a little bit of time to ramp up. And then as you know, we hit commercial production March 15. So three-and-half months and hopefully here Q3, Q4 performance from a cost standpoint, like I say, is trending in that way.

Joseph Rieger -- Roth Capital Partners -- Analyst

Okay. So it'd be fair to say free cash flow positive by year-end?

Dan Dickson -- Chief Financial Officer

Yeah. Not a large amount of free cash flow because it's such a small operation, but we should be positive. Free cash flow. Yeah.

Joseph Rieger -- Roth Capital Partners -- Analyst

Okay, great. I'll turn it over. Thanks, guys.

Bradford Cooke -- Chief Executive Officer

Thanks for your questions.

Operator

Our next question comes from Mark Reichman with Noble Capital Market. Please go ahead.

Mark Reichman -- Noble Capital Market -- Analyst

Good afternoon. When I look at the costs, it looks like the second half of the year both in terms of cash costs and all-in sustaining costs are expected to be pretty much in the range of your original guidance. And Brad, you talked about the goal of filling the plants. When you look ahead, I mean, do you see more improvements into 2020? And kind of what's -- is the latter half of the year just -- you're kind of -- it's going to be more around your original expectations or are there some additional items in there that -- or actions that you've taken to get those costs down?

Bradford Cooke -- Chief Executive Officer

So thanks for your question, Mark. In general, yes. Clearly, our tonnes and grades drive profits and we had a pretty crappy start to the year and just getting back to not only our original plan, but with the new production area on the adjacent ground being explored and developed. Now, 2020 should actually be a good year for production. And so, yes, because of anticipation for higher tonnes per day in 2020 and higher grades from the three ore bodies, we should actually have a good year next year.

Mark Reichman -- Noble Capital Market -- Analyst

And then secondarily, Dan, because your comments last quarter were so helpful, I thought maybe you might want to just address a little bit about the liquidity position and capital expenditures and exploration going forward, because I know you've kind of cut back on some of exploration and kind of how you're managing your balance sheet?

Dan Dickson -- Chief Financial Officer

Yeah. Brad touched on -- we had working capital of $46.8 million at the end of June and we did have our ATM raised $7.5 million. We want to make sure we protect our balance sheet. We have very little, as far as debt on the liability side of the balance sheet, we have picked up some loans related to equipment. So we've had equipment availability issue at Bolanitos that goes hand-in-hand with the culture or the change that we need from a personnel standpoint to make sure that we're taking care of our equipment and maintaining it properly and going through those proper preventive maintenance program. And since quarter-end, we picked up more equipments through loans. So in general, I'd say our balance sheet is very strong. We are in a position and we want to be in a position that we could add some debt to build out Terronera.

Going forward, we feel like we have the liquidity. We do have that potential that we'd be able to continue touch ATM with $18 million in last as of June 30th on it. And ultimately it comes down to the long-term growth of the Company. We have Terronera there. We also have -- we're doing significant explorations still at Parral and Parral has been positive and we are going to have needle on that in the coming weeks. But it's still it's not about next year or the year after. It comes down to a long-term profitability of the Company and what are things we have pipelines in and we do have an exploration program to $10 million in the year. We slowed that down, but we do have exploration commitments that need to be spent in Chile.

Two projects that Brad's previously spoken to publicly Paloma and Cerro Marquez, will probably still go forward and that's when we see a difference in silver price and gold price, which we don't anticipate. Additionally what we don't have in our future cash flows even like cost profile, is our cash costs were project using $12.75 gold as a byproduct, figurely we are well above $12.75. We also projected our cash flows using $15.50 silver, clearly, we're well above that $15.50 at $17. So we think, despite what we put into our press release and we like to be considerate. There is an opportunity there to be a bit more positive cash flow.

As far as capital expenditures in the back half of this year they should less than the front end of the year, excluding that capital that we've loaned and leased. So basically cash payments on those loans that are over four years. So we expect to have done the way market has -- the Company has been growing is with the drill bit and exploration success with the drill bit. We're excited about what we have in Chile and ultimately, hopefully we have good news that comes out there in the back half of the year and we just did -- the staff mentioned in meetings potentials on all the mapping and the geo camps and the geophysics works that we've done on those properties and dropping in a little bit of cash for the drill holes we expect to have success on the other side of it.

So that's going to continue our exploration dollars for the year. It will be about $8 million to $9 million which is a little bit lower than what the original profile was. Capital is basically in line with the 2019 projection and the guidance that we had over. So all in all, I know it's a long-winded answer. Our balance should be strong and everything will change once we have a Terronera decision.

Mark Reichman -- Noble Capital Market -- Analyst

That's very helpful. Thank you very much.

Bradford Cooke -- Chief Executive Officer

Once your question...

Operator

[Operator Instructions] Our next question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Tyler Bisset -- H.C. Wainwright -- Analyst

This is Tyler Bisset calling in for Heiko. Thank you, guys, for taking our questions. In your MD&A, you stated that direct operating costs we're estimated to be in the range of $90 to $100 per tonne and achieving the operating cost is predicated on the ability to meet mine output. In the second half of the sentence, is that a placeholder or are there real specific factors that management is worried about? And if the latter, can you maybe provide some additional color on the not so obvious factors the firm is currently grappling with?

Godfrey Walton -- President & Chief Operating Officer

Yes, sure, Tyler I mean is it a placeholder? I mean I guess it partly is a placeholder. At the end of day in our MD&A, in our AIS, we have standard risk factors. In mining as much as we've got experience and dealing with our operations, we've been at Guanacevi for almost 15 years and Bolanitos for 12 years, there's all those things that come with that change and when we put out our guidance, we take into everything that we consider but everything is an estimate and ultimately tomorrow we could wake up in additional rainfall in the [Indecipherable] areas during rainy season can impact those costs or a labor issue arises and that impacts those costs. We had a rock fall and unfortunately in the end of June, we had a fatality and that impacts our output in any given months. So you kind of want to put that placeholder in there because, quite frankly, we open up ourselves to shareholder discontent if we miss on our guidance and guidance is a difficult thing to put out. And it puts the target for us and we have that, but as much as you can estimate there's one thing that you can sure to be about an estimate that it's going to be wrong so much more comes up.

Tyler Bisset -- H.C. Wainwright -- Analyst

That makes sense. Thank you very much. And you IVA receivables are still sitting on about $14.2 million and this breaks down into $4.7 million for El Cubo and $6.5 million for Guanacevi, which gives us $11.2 million. So two questions there, is the remainder just considered to be non--recoverable, and if so, how much longer will stand the balance sheet? And on the same token given that the balance sheet is mostly unchanged from end of the year, when a total IVA balance was $15.4 million, at what point do you think the government will actually start sending meaningful refunds to you and one would think then, the current geopolitical climate they want to seem as friendly as possible to the mine industry?

Dan Dickson -- Chief Financial Officer

Yeah. IVA is always been -- the ebbs and flows of the IVA change depending on if the Mexico has a cash flow to the pay it back. You are right to look at our segments disclosures to see [Technical Issue] Compas' IVA has already grown the most on a percentage basis and that's a function of we haven't collected a lot of from the Zacatecas state government and sometimes it's just educating the bureaucracy of what mining does and building that relationship, and we've submitted all of our IVA claims in Zacatecas for that $3.5 million and we have spent six months providing support for it. Ultimately, we expect to receive that IVA. If we don't deem it to be collectible and there are instances in the past where we've written off $600,000 at IVA, $100,000 at IVA we've taken that approach but we believe all this is collectible and we have legal means that allows us to go through the course to collect that.

And in Guanacevi's case where you've noted we have $6.5 million, $5 million of that related to 2015. So we've actually collected the IVA from 2017 and 2018 and part of 2019 still remaining but that's all relatively current. We have about $4.5 million that was denied by the Mexican government. What we believe is unfavorably denied because they deem some not to be collectible or just didn't understand the mining, and we won those in court. The government has six months to pay it back and I think we're about months three or four of that. So we actually should see an inflow from Guanacevi about $4 million but for the 12 years that I've been in with Endeavour and working in Mexico, we've seen that ebb and flow.

So if you look back, we actually peaked at $22 million of IVA last year and we've actually driven that down to $14 million. The run rate that should be there should be about $8 million to $10 million give or take.

Tyler Bisset -- H.C. Wainwright -- Analyst

Per year?

Dan Dickson -- Chief Financial Officer

Give or take at any given time. So basically, we are paying out our value-added tax which should collected but that balance will sit about $8 million to $10 million, which is just the three, four months of timeline takes to turn that over.

Tyler Bisset -- H.C. Wainwright -- Analyst

Perfect. That's super helpful. Thanks for taking my question.

Bradford Cooke -- Chief Executive Officer

Yeah. You're welcome. And just to maybe I could add to Dan's answer that we do receive either refunds every year. I mean, it's not like that they are stuck there that forever. This is not a static account balance. It turns over every year. It's just because you do filings every month, every quarter, some filings are readily accepted and you get the money back quickly, some filings are not readily accepted and you have to fight for them. So I think Dan's point that we took the account balance from $22 million down to $14 million in the last year, is actually -- shows that we're making headway. And the normal balance would be like $10 million. So we're about $4 million outside of where we think we should be and that's not such a bad thing in the context of where Mexico is at with the new administration and all new people in the tax collection group. And the need of mining companies to educate these new appointees on how the system works.

Tyler Bisset -- H.C. Wainwright -- Analyst

I appreciate that color. Thanks, guys.

Bradford Cooke -- Chief Executive Officer

Okay. Thank you for your question.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Bradford Cooke for any closing remarks.

Bradford Cooke -- Chief Executive Officer

Thank you, operator, and thanks all for listening. It's not easy to report the quarter like we did for Q2 but at least it's improving our Q1 and we see significant improvements quarter-on-quarter moving forward I think we're going to come into more fun and more profits in our near future. So stay tuned for our next quarterly call, in -- Galena, late October?

Galena Mellinger -- Director, Investor Relations

Early November.

Bradford Cooke -- Chief Executive Officer

Early November. All right, thanks all.

Operator

[Operator Closing Comments]

Duration: 36 minutes

Call participants:

Galena Mellinger -- Director, Investor Relations

Bradford Cooke -- Chief Executive Officer

Chris Thompson -- PI Financial -- Analyst

Dan Dickson -- Chief Financial Officer

Godfrey Walton -- President & Chief Operating Officer

Joseph Rieger -- Roth Capital Partners -- Analyst

Mark Reichman -- Noble Capital Market -- Analyst

Tyler Bisset -- H.C. Wainwright -- Analyst

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