Pan American Silver Corp. (NASDAQ:PAAS) Q1 2023 Earnings Call Transcript

Pan American Silver Corp. (NASDAQ:PAAS) Q1 2023 Earnings Call Transcript May 11, 2023

Pan American Silver Corp. beats earnings expectations. Reported EPS is $0.1, expectations were $0.02.

Operator: Good morning, ladies and gentlemen and welcome to the Pan American Silver Corp. First Quarter 2023 Unaudited Results Conference Call and Webcast. This call is being recorded on Thursday, May 11, 2023. I would now like to turn the conference over to Siren Fisekci, VP, Investor Relations. Please go ahead.

Siren Fisekci: Thank you for joining us today for Pan American Silver’s Q1 2023 conference call. This call includes forward-looking statements and information and makes reference to non-GAAP measures. Please see the cautionary statements in our MD&A, news release, and presentation slides for our Q1 2023 unaudited results. All of which are available on our website. I will now turn the call over to Michael Steinmann, Pan American’s President and CEO.

Michael Steinmann: Thanks, Siren and thank you everyone for joining our call today. The first quarter was transformational for Pan American with the closing of the Yamana acquisition on March 31 and to result in an increase in scale and quality across our portfolio as outlined in our recently released consolidated 2023 operating guidance. Due to the timing of closing, the addition of the Yamana assets is not reflected in our Q1 production and cost numbers, but Yamana’s cash and debt have been added to our balance sheet at the end of the quarter. While Q1 excludes the benefits of the Yamana acquisition, our continued focus on operational excellence helped us to deliver results ahead of expectations despite ongoing inflationary pressures.

In Q1, we sold nearly 4.5 million ounces of silver and 133,000 ounces of gold. Silver segment all-in sustaining costs were $14.13 per ounce and $1,196 per ounce of gold segment. Silver segment Q1 production costs and our 2023 guidance reflect the restricted mining rates in the high-grade zone of the La Colorada mine until the new shaft ventilation project is commissioned. Thinking of the 5.5 meter diameter concrete line ventilation shaft reached a depth of 228 meters by the end of Q1 and is on track to be completed by the end of this year. The shaft will be equipped with ventilation fans connected with the adjacent deep underground East Candelaria workings and commissioned to significantly improve ventilation rates in this high-grade area of the mine around mid-2024.

This new ventilation infrastructure will benefit both the long-term development of Siscon project as well as the current Wayne system operation. Until this new system is operating, we are restricting mining rates in the higher grade, deep eastern portion of the Candelaria deposit, which is reflected in our guidance for 2023. Gold segment production and costs were impacted by leach sequencing at Dolores and La Arena. In addition, production was interrupted for 7 days at Dolores by local contractor terms were revised in preparation for the completion of mining and the transition to a multiyear leach cycle, which we expect will begin in late 2024. Like last year, production at La Arena is back-end weighted as the higher rates of waste mining extend into Q3, followed by higher rates of ore mining and production in the last quarter of the year.

A large net realizable value or NRV inventory adjustment at Dolores decreased all-in sustaining cost at that operation by $775 per ounce and lowered consolidated gold segment all-in sustaining costs by $165 per ounce. As a reminder, NRV inventory adjustments are accounting adjustments to recognize the production costs of heap leach inventory relative to the market value of that inventory at a time of assessment. NRV inventory adjustments are non-cash movements and do not affect cash costs. Revenue in Q1 was $390.3 million, which included finished goods inventory draw-downs of 779,500 ounces of silver and 11,300 ounces of gold. Net earnings in Q1 were $16.5 million or $0.08 per share. This includes $18.9 million in transaction and integration cost related to the Yamana transaction and $12.7 million in severance provisions.

Adjusted earnings were $21.2 million or $0.10 per share in Q1. Cash flow from operations totaled $51.3 million, which includes $30.7 million in cash taxes. Our annual tax payments are typically the highest in Q1 and Q2. We are in a strong financial position with a cash and short-term investment balance of $513 million and $425 million available under the sustainability-linked credit facility. We assumed two senior notes, one for $283 million and another one for $500 million as part of the Yamana acquisition, both with attractive coupon rates and have $325 million drawn on our credit facility. Our capital allocation priorities for the expected increase in cash flow generation from the expanded portfolio are consistent with our history, reduce debt, invest in growth and provide dividends to shareholders.

With respect to Q1, we announced a dividend of $0.10 per common share in March, a bit earlier than normal in order to align with Yamana’s timing for dividends. Future dividend declarations will revert back to Pan America’s previous schedule. We have been paying dividends consistently since 2010 as an important means of returning capital to shareholders. Moving on to growth projects. Earlier this month, we released additional drill results for the La Colorada Skarn. We completed nearly 14,122 meters of infill and exploration drilling on the skarn in the quarter. The new drill holes both extend the 902 zone and confirm that there are multiple zones of higher grade within the limestone and skarn, which align with surrounding porphyry intrusives and epithermal veins.

Some of the drill holes returned spectacular grades like 64.3 meters at 391 grams per ton silver, 10.8% lead and 8.5% zinc, including 23.25 meters at 914 grams per ton silver, 25.2% lead and 16.7% zinc. We have now drilled over 20 holes into this area, which remains open to the West and Northwest. An infill and exploration program of 28,000 meters from surface and underground drill stations is currently underway. We also progressed other projects for the skarn, including engineering work associated with the preliminary economic assessment or PEA. We are planning to provide an updated technical report on the La Colorada property in the second half of 2023 that will include the PEA of the skarn deposit, describing our view of project development operating costs and capital estimates and overall economics.

In 2023, project capital will also be invested in completing Yamana’s planned upgrades at Jacobina, construction of new dry stack tailings storage facility at Huaron and installing a paste backfill plant at our Bell Creek Mine in Timmins. At Escobal, the ILO 169 consultation progress is progressing well. The consultation meetings held in March and April and the next meeting planned for later this month. The 2023 guidance detailed in our Q1 disclosure is largely the same as the guidance we provided on April 27. The only change was an increase in project capital for the La Colorada Skarn project to reflect updated estimates for completing the PEA and advancing exploration drilling. The guidance provided in our Q1 disclosure now includes the forecast for G&A, care and maintenance and exploration expense in 2023.

We are expecting to produce 21 million to 23 million ounces of silver in 2023 and 870,000 to 970,000 ounces of gold. We expect all-in sustaining costs of between $14 to $16 per ounce for the silver segment and $1,275 to $1,425 per ounce for the gold segment. Please note, this reflects 9-month ownership of the mines we acquired from Yamana and the full 12 months for Pan American’s original mines. You can see estimates for individual mines and quarterly breakdown of consolidated production costs in our Q1 MD&A. We plan on releasing our 2022 sustainability report later in Q2, which will report on the performance on environmental, social and governance metrics for Pan America’s original assets and our goals in these areas. Information on all former Yamana assets following the Yamana acquisition will be included in the 2023 Sustainability Report that will be published next year.

Before I hand the call over for questions, I would like to address our integration efforts for the former Yamana assets. The integration is advancing very well, in a timely fashion, and we have started harvesting the $40 million to $60 million of annual synergies we announced earlier. We have welcomed a large group of new colleagues that joined Pan American at the end of March and it is an absolute pleasure working with the new team. And with that, I would like to open the call for questions.

Q&A Session

Operator: Thank you. And your first question comes from the line of Cosmos Chiu from CIBC. Please go ahead.

Cosmos Chiu: Thanks, Michael and team and congrats on a very strong start to 2023. Maybe my first question is on Mexico. Mexican peso has strengthened and we have heard from others operating in Mexico that it has had an impact on cost. Maybe could you comment on the Mexican peso, I believe right now, you are assuming 18.75:1, I think now it’s closer to 17.5? And then overall, if you can also talk about – we have also heard in Mexico, labor, power, consumables might have actually increased in prices as well. Is that impacting you as well?

Michael Steinmann: Hi, Cosmos, it’s Michael. I will start and then hand it over to Ignacio. But just in general, it’s a great question and the impact that we see in our costs in general from foreign exchange rates during the years, it can be very big positive or less positive impact as we have – even before with the original Pan American assets, probably around $600 million of our cost in local currencies. So it’s not only Mexico, of course, moves on the currencies have a big impact to our costs. Just in general, I would like to – statement there when you probably saw on the cost side, we assume I think about around 5% inflation for this year. We see probably a bit more push on wages and less so on energy costs. But that’s just a general remark. And maybe, Ignacio, you can give us a bit more flavor on Mexico.

Ignacio Couturier: Hi, Cosmos.

Cosmos Chiu: Hi, Ignacio.

Ignacio Couturier: Sure. Yes. So for sure, the Mexican peso has been one of the strongest performing currencies over the last year. A lot of it has to do with the high interest rates in Mexico relative to other rates. So it’s something that we’ve been monitoring throughout the year. We do have a Mexican peso hedge program that’s detailed in our MD&A. There is a table there. So today, approximately, I think, 24% of our Mexican peso costs are being covered through our exposure being covered through our hedge program. Yes, it’s been tough managing that. However, this industry all of all mines operating in Mexico are facing the same challenge. So we will continue to monitor it and when there is opportunities to lock in some favorable rates, we will do that.

Cosmos Chiu: Of course. That’s great to hear. Maybe also on Mexico on April 29, the Mexican Senate passed the amendment to the federal mining market changes include 50 to 30 years in terms of the concessions and also 5% contribution to social funds in the country. Have you looked into it? I’m getting mixed reviews in terms of is it retroactive? Is it not retroactive? And even if it’s not retroactive, would it impact, say, something like a La Colorada Skarn maybe if you can comment on that, Michael?

Michael Steinmann: Sure, of course, we are looking into it, monitoring it very closely. As you know, it’s changing. Right now, there is more and more information coming out every day. So there will be more changes down the road for sure once we have all the details available. At the moment, I understand it really applies to new concessions. So as you know, our two operations are on concessions that are established for a long time. There will be, for sure, some impacts, but I don’t have any final numbers from it. But like the timing on the new concessions obviously would only apply to state new concessions with exploration ground, for example.

Cosmos Chiu: So something like a La Colorada Skarn would not be a new concession. It would be will be part of the existing concession?

Michael Steinmann: Yes. La Colorada Skarn is right below our current producing mine the wanes. So it’s on the same consortium than the current production at La Colorado.

Cosmos Chiu: Perfect. Got it. Maybe switching gears a little bit. Thanks again, MD&A. I’m sure it’s a lot of work in the Page 28. You actually gave us quarterly projections. And I see that it is back-end weighted. Q4 appears to be the best quarter that you’re projecting. Could you maybe talk about that? What are some of the key drivers here in terms of the back-end weighted production?

Steve Busby: Yes, this is Steve.

Cosmos Chiu: Hi, Steve.

Steve Busby: The back end, yes, is driven largely through La Arena is a good example where Michael mentioned the typical pre-stripping schedule at La Arena opens up most of the ore flow at the end of the year in Q4, a little bit in Q3 as well. We’re seeing a similar trend on back-end loading at Jacobina in their mine sequencing, they are sequencing into higher grade goals as well. And then also at Cerro Moro, Cerro Moro, we’re going to see higher silver and gold and higher silver and gold. And those are all just mine sequencing according to their mine plans that they are currently offering. Those are the main drivers.

Cosmos Chiu: Great. Thanks, Steve. And then maybe one last question on the guidance as well. Thanks again for giving us guidance on sustaining costs for silver and gold. Just one confirmation, those guidance numbers, do they include the NRV adjustment? Is it before or after? And then in terms of NRV adjustments, again, Michael, thanks for explaining it to us earlier. Is that going to be even more of – even a bigger number later on because I believe my understanding is that the biggest changes or the biggest numbers come from heap leach and El Peñon, I believe, that’s a heap leach, are we going to see an even bigger adjustment, especially for gold on a go-forward basis?

Ignacio Couturier: Hi, Cosmos, this is Ignacio again. Yes. So as Michael mentioned in his opening remarks, there was a large – there was an NRV adjustment and it was a positive NRV adjustment. And basically, NRV is a calculation on the recoverable amount on our inventories. And one of our largest inventories are the heap leach pads. And if you notice the – from the ACE numbers, it’s mostly in the gold segment, and that’s directly related to Dolores. So one of the biggest drivers in that positive adjustment was not just the quantities or the recovery curve, but most importantly was the prices. So we saw an increase in metal prices from December 31 to March 31, and that was the key driver in that positive adjustment. In terms of going forward, NRVs are excluded from our guidance numbers, they are very difficult to project.

And from the new operations, none of them have heap leach pads. So we don’t expect the new operations to be driving big NRV adjustments going forward. So El Peñon does not have a heap leach pad.

Cosmos Chiu: It doesn’t. Okay. Clearly, I’ve never covered Yamana. Thanks, Ignacio for letting me know. Great, till lot of questions I have. But I will get back into queue.

Ignacio Couturier: Thank you, Cosmos.

Operator: Thank you. And your next question comes from the line of Craig Hutchison from TD Securities. Please go ahead.

Craig Hutchison: Hi, good morning, guys. A question on Escobal, you guys have been in the Phase 2 consultation process for about a year now. Can you just give us a high-level view kind of where those discussions are at and whether you sort of see potential time frame to kind of wrap up that phase and move it on to the Supreme Court? Thanks.

Michael Steinmann: Yes, correct. Thanks. It’s actually less than – a bit less than a year, but I’ll pass it on to Sean McAleer here, who is running our activities in Guatemala. He can give us some more details, Sean, please.

Sean McAleer: Yes. Good morning. There is certainly a time line published on the MEM website. You can access that through our website. There is a series of activities that are coming up in the computation. Right now, it’s information sharing evaluation of information with the consultants and a series of meetings. I would expect there is – after the meeting we have on May 19, we will probably have monthly meetings. And then at the time line that’s published shows some field concentration activities taking place in July, August with a target end date in October this year. So we’ve seen some delays in the process in the past. And so I’m always cautious about that, and I don’t know if we’re going to have delays anymore in the future. But that’s basically the time line that the MEM, Ministry of Energy Mines and Guatemala has published.

Craig Hutchison: Does the consultation phase going to end is some kind of impact benefit agreement or is that not necessarily the case?

Sean McAleer: Yes. I think that’s the idea and you’ll see that time line talks about reaching agreements. And so I think the intent is that there’ll be some agreements, again, the content and what the exact parameters that will be discussed, that’s still open right now. So I can’t say specifically what kind of activities or mitigations we would need to do or other commitments we would need to make at this point.

Craig Hutchison: Okay. Thanks for that. And then just maybe in terms of capital returns, you guys should be generating some substantial free cash flow going forward with the Yamana assets. Is the priority just to sort of pay down the RCF over the next couple of quarters or do you guys sort of plan to build up cash? Thanks.

Michael Steinmann: Yes. Look, nothing has really changed in our capital allocation priorities. It’s really paying back at the moment, our line of credit for sure. It’s always nice to have that all available for whatever else, we want to do or comes up on our capital side. That will be focus number one for this year. As I said in my remarks, they are always looking for and working on really high-quality projects. We have quite a few in our pipeline already. And of course, we will continue to return capital to our shareholders in the form of dividend.

Craig Hutchison: Perfect. Thanks, guys.

Michael Steinmann: Thank you.

Operator: Thank you. And your next question comes from the line of John Tumazos from John Tumazos Very Independent Research. Please go ahead.

John Tumazos: Congratulations on all the work. I especially impressed with the new balance sheet that there is no goodwill or intangibles. With $1.1 billion of debt, including the Yamana acquisition, how much is the debt level that you’re comfortable with for the new Pan Am. I know historically, you’ve been conservative on liking a strong balance sheet. And how much would you need to reduce the debt to before you would go ahead with any of the major big dollar projects at hand like La Colorada Skarn or Minera project or is it right sulfide, etcetera, etcetera.

Michael Steinmann: Yes, John, look, I mean, I’m very comfortable with the debt level now. I think if you look at the size of the company, it’s a very comfortable level. But I think everybody knows me for a while and knows that I like to have a very conservative balance sheet. So as we alluded in the last question, there will be excess cash that will be used to pay back on our line of credit for sure. There are two bonds that we took over from Yamana that very attractive interest rates and will run quite long. I think one is maturity in at the other is like 27. We received an investment grade from S&P and Moody’s on that. So we’re very comfortable and happy about that as well. Just when you look at new projects, this does not exclude progressing on our projects.

I mean like La Colorada Skarn, the advancements there and the work for the PA is in full swing. These projects are not ready right now to receive huge investments. We saw the investments that we do this year at La Colorada Skarn, for example, for the PEA and for the drilling to prepare that project to go forward. So the big spend will obviously come down the road. So everything goes parallel. So we will repay our line of credit as the first line item, while our technical team will continue with their work on most of the projects you mentioned, I mean, we don’t need to work on La Arena sulfides. We still have oxides that we mine on top of that port that will last probably well into 2026. But all other projects are ongoing as normal, as I said, the big capital spends will be coming later.

John Tumazos: Michael, it was notable that the cash balance is consolidated from MARA project are large. When you booked the acquisition March 31, what is the carrying value for the MARA project, it must be at least $400 million if the cash was over $200 million?

Michael Steinmann: Yes, I will start and hand it over to Ignacio. But you are right, there is just north of $200 million in our cash balance is for MARA as a sign to MARA, that money is consolidated on our balance sheet because we are the majority holder on that project with over 56%. So, that’s the reason why it chose up on our balance sheet. Ignacio, do you have – can you give us some more details?

Ignacio Couturier: Hi John, this is Ignacio here. So, I will point you to Note 9 of our financial statements, where we have the breakdown of the property, plant and equipment. Now, just to let you know, we did assign values to all the new assets. However, those are preliminary numbers through our purchase price allocation exercise. We have a year to refine those numbers. And as the year goes by, some refinements may come. But currently, if you look at that table, the carrying value assigned to MARA net is around $1.3 billion. And that is around 26% of the total value assigned to the – to that properties. Now, the total acquisition cost for Yamana was around $2.8 billion, but that’s the net number of assets and liabilities are assigned in our balance sheet, so those liabilities are offsetting the assets.

John Tumazos: So sometimes, we say plan for the worst and let the upside take care of itself that I am thinking sort of in the converse way just in case lightning struck and Escobal got the green light in six months and La Colorada is getting closer to getting ready. And maybe Glencore really wants to build MARA given how much enthusiasm they have for all those projects and tech. If you have three projects that are ready to go, around the same year or 2 years, and they all look good, how do we manage that wonderful scenario?

Michael Steinmann: Look, I mean as I have said, like the La Colorada Skarn, there is a lot of work going on right now, but we are not ready to build a project there. So, that’s the way I thought – sorry, it’s not possible that, that would happen all in the same year. We will present the PEA later on this year and then take next steps from there. But as we do all that technical work and we will be able later in the year to share with everyone how those numbers look like, the scenario that everything will come through in 1 year and this year is not possible just because of La Colorada. There is a lot of work going on at MARA as well. As I mentioned, we are over 56% owner. The rest is with Glencore does an approved budget there and as I have said, there is some money set aside for some of the work as well on our balance sheet. So – and just Ignacio has something to add to this.

Ignacio Couturier: Yes. Just one last thing, John, just to clarify, that $1.36 billion that I mentioned, that’s for – that’s the 100% value. We own only 56.25% of that.

Michael Steinmann: So, that was the value for MARA. So yes, so John, even if everything lines up perfectly, they are wonderful projects, and they will come in due time into our pipeline and not altogether, so that would be a very nice scenario, yes.

John Tumazos: So, I don’t want to minimize the future work ahead for Don, Ignacio and you, Michael. But Glencore is the most spectacular partner. We have a company in the U.S. called Century Aluminum that had Glencore as a trading partner and Glencore owns 43% of the public stock now and has been taking – has been saving the day for Century Aluminum since 1990. And for Polymet Metal since around 2006, where they own 70% of Polymet now and merged it with tech. What sort of creative solutions are there for financing MARA and do you have to do any work at all? And can you just simply rely on the good graces of Glencore that can finance all their partners?

Michael Steinmann: Look, we – of course, Glencore is a great partner to have in a project. We are working together with Glencore in many, many fronts on our trading side. For people who are familiar with my bio, they will see that I worked for Glencore actually before I joined Pan American for quite a long time. It is a great partner to have. But look, we only own those – these assets now, the former Yamana assets for about six weeks. So, it’s – of course, as I have said before, asset management and optimization of our portfolio will be a focus going forward here, but we need a little bit more time to work on all that. So, we will have more answers for you as the year progresses.

John Tumazos: Excuse my answers.

Operator: Thank you. And your next question comes from the line of Adrian Day from Adrian Day Asset Management. Please go ahead.

Adrian Day: Hi guys. Good morning. I have got three questions, two of them very quick. So, I will ask them all in a row. The first one is, I don’t think you mentioned the cash costs, you just gave the all-in sustaining. Can you tell us what the cash costs are? I realize there is variability among the mines? The second question is again, I realize it’s far too soon to have made a thorough review of all the Yamana assets, etcetera. But is it your intention, should we expect some disposals of properties? Is that an intention or is it still not clear? And then the third one, and I am sorry to harbor on Escobal. I am a little unclear on what the current process is, as I understood that there was a Supreme Court mandated transportation with the government and the local people and you were sort of observers, if you like.

And I thought that was completed in January or February. So, the current process – the current consultation is still government, right? It’s not Pan American. Those are my three questions.

Michael Steinmann: Thanks Adrian. I have Sean starting with Guatemala?

Sean McAleer: Yes. So, the process is – there is three principal actors in the process. The government of Guatemala and the Ministry of Energy and Mines leads the process, the consultation process. The Xinka Parliament, who are the representatives for the Xinka people, and then the company, which is our Pan American Silver Guatemala subsidiary. So, the meetings generally happen. The formal meetings generally happen about once a month. So, as we mentioned, we will have another meeting on May 19th and those meetings will go and continue on through the summer. And so we expect the information sharing process to continue and some of the other activities to continue. And as I mentioned, for those activities are outlined on the Ministry of Energy and Mines website, and that link is on our website, and you can go and look at that outline there.

Michael Steinmann: Thank you, Sean. And Ignacio could you answer the cash cost question, please?

Ignacio Couturier: Sure. So, our cash cost on the Silver segment for the first quarter of 2023 was $12.19. And on the gold segment, it was $1,120. So, factors affecting the cash cost Q1 2023 versus Q1 2022 were the inflationary pressures that Michael mentioned as well as the cessation of mining of activities at MARA project. Those are the main factors.

Michael Steinmann: Okay. And then I will answer your last question on the disposal of assets and plans there. As I have said, we are now owning these assets for about six weeks. We started a big process with our team to go through all the assets. Of course, we know the producing assets very well. We started looking at a lot of exploration ground all – in every country, a lot of exploration projects. There are some advanced projects we are looking at as well. So, there is no – there is absolutely no plan that we keep everything. There will be some disposals and that’s the work we are doing right now. So, as I mentioned before, it’s a little bit early, but you should expect that there will be some disposals coming over the rest of the year.

Adrian Day: Okay. Thank you. That’s helpful. Thank you.

Michael Steinmann: Thanks Adrian.

Operator: Thank you. And your next question comes from the line of Don DeMarco from National Bank Financial. Please go ahead.

Don DeMarco: Thank you, operator and good morning Michael and team. Most of my questions have been answered, but maybe just a question on care maintenance. I know you are guiding about $100 million for this year, and we see that in Q1 expense is in line with that. But is there any visibility to reduce these care and maintenance costs by the way of dispositions or otherwise? Like I get it that Escobal, you are kind of keeping that ready to restart. But to the other care and maintenance projects, does that much money really need to be spent, or can it potentially be eliminated altogether? Thank you.

Michael Steinmann: Yes. Don, thanks for your question. Absolutely, as you said, the big ones on the care and maintenance Escobal and thus for obvious reasons, and we are keeping that operation in great shape. So, when we get the green light, which as Sean said, there is no timing to it yet, we are in good shape to start. So, that’s the reason why we spend our money on care and maintenance at Escobal, so good reasons for that. The other big spend is on MARA and it’s probably, I wouldn’t say the same situation, but it’s the money spent to prepare the project to move forward. So, there is one portion of it really as care and maintenance for us is to prepare it for technical studies and move that forward. So, that will obviously change over time and move into more project capital later on, but the capital right now is under – in our care and maintenance budget.

I think the other ones are fairly small, MARA, we are looking at opportunities, the other alternatives for MARA project right now, so to find a solution there for that care and maintenance.

Don DeMarco: Okay. Thank you. That’s all for me.

Michael Steinmann: Thank you.

Operator: Thank you. And Mr. Michael, there are no further questions at this time. Please proceed.

Michael Steinmann: Thank you, operator, and thanks everyone for calling in. It was a great quarter, and I am really excited to look forward for the rest of this year. As from now on, we have all the additional assets from Yamana in our ownership and our producing. So, looking forward to talking everyone, to discuss Q2 in August, have a great start of the summer.

Operator: Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you all for participating. You may now disconnect.