Prepared remarks
Good morning. And welcome to the conference call to discuss Coeur's Second Quarter Results. All participants will be in a listen-only mode for the duration of the call. And should you need any assistance today, please signal a conference specialist by pressing the star key followed by 0 on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To withdraw your question, you may press star, then 2. Note that this event is being recorded today. I would now like to turn the call over to Mitchell J. Krebs, President and CEO. Please go ahead.
Hello, everyone, and thanks for joining our call to discuss Coeur's second quarter results. Before we start, please note our cautionary language regarding forward-looking statements and refer to our SEC filings on our website. Starting off on Slide 3, Coeur's record second quarter results were driven in large part by the first full quarter of contributions from the recently acquired New Afton and Rainy River operations. Quarterly revenue passed the $1 billion mark for the first time in the company's history on the way to record quarterly adjusted EBITDA and free cash flow. Lower prices, inflationary pressures, below-plan grades at three of our operations and the pace of production ramp-ups at Rainy River and New Afton were all headwinds during the quarter, which also included a $140 million, or $0.10 per share, non-cash impact to second quarter EPS and EBITDA from the acquisition accounting driven by Rainy River stockpile inventory that is worth highlighting. Off the back of nearly $400 million of quarterly free cash flow, our ending cash balance exceeded $1 billion for the first time in history, and is expected to continue increasing rapidly, turning the balance sheet into a significant source of strength. We intend to continue deploying this cash into record levels of exploration investment and into our organic growth projects to help us deliver peer-leading ROIC. We also showed in the second quarter our commitment to returning capital to shareholders as we began to more actively repurchase shares under the expanded $750 million buyback program in the second half of the quarter. And we paid the company's first dividend in 30 years. The company's growing financial strength leaves us well positioned, which is expected to further increase with a significant second-half weighted production and cash flow profile. Hitting on a couple of second quarter highlights, Rochester in Nevada achieved an important milestone with a new quarterly record of 6.8 million metric tons crushed, a 15 percent increase over the prior quarter. This progress establishing crusher consistency and predictability has been a true team effort that deserves acknowledgment. As Mick will walk you through, the team also completed the Phase IIa leach pad expansion during the quarter, leaving Rochester poised for very strong second half silver production given the significant number of ounces placed close to liner. It was also great to see Wharf bounce back with a strong quarter as they returned to more normal operations after recovering from damages to the crusher last November. We issued an exploration update last month highlighting the ongoing success we are having at our two Mexican operations. Recent results at Palmarejo, with the continued emergence to the east, and at Las Chispas, with drilling in the gap zone and at other new targets, underscore the continued impact of our brownfield exploration investments on our efforts to drive higher returns on invested capital. While our five legacy operations remain on track to deliver their full year guidance, we recalibrated New Afton's and Rainy River's guidance ranges for the nine months of Coeur's ownership in 2026. The Rainy River adjustments reflect a more gradual expected ramp up in underground production rates this year than previously assumed, and the New Afton modifications reflect the rate of cave growth we are seeing since the C Zone development was completed in April. Mick will provide additional details on the great work being done to safely and sustainably deliver the performance that we expect from these two new assets. Meanwhile, I am pleased to report that our post-acquisition integration efforts are advancing according to schedule. Before turning it over to Mick, our addition to the S&P MidCap 400 Index announced on June 8th was another example of how our U.S.-based North American platform of seven well-balanced operations offers investors liquid, high-quality exposure to the positive long-term outlook for gold, silver and copper. Mick, over to you.
Thanks, Mitch. Coeur's operating results for the second quarter included several important developments that bode well for the strength of our enhanced portfolio as we look forward to the second half of 2026 and beyond. As Mitch mentioned, we saw lower-than-planned grades at Kensington, Rochester and Palmarejo which are expected to rebound in the second half consistent with our guidance. A strong second half tailwind at Rochester, aside from the higher planned grades, is the impressive progress of the crushing circuit, which continues to deliver strong, more consistent performance. Of the record 6.8 million tons crushed in Q2, that Mitchell mentioned, approximately 97 percent ran through all three stages of crushing highlighting the enhanced efficiency and flexibility of the operation as the crushing train moves further into a consistent operating rhythm. The pace of construction for Phase IIa of Leach Pad 6 accelerated during the quarter. Some of you may recall the initial flush of silver and gold production in 2023 following placement and irrigation of first ore close to liner on Pad 6 Phase I. With Phase IIa ore placed exceeding 4 million tons through July and growing, we expect a similar spike to underpin strong second half 2026 production at Rochester. Phase IIb of Pad 6 is well on schedule and we expect it to be completed in the fourth quarter of this year providing additional capacity close to liner. Turning briefly to Wharf, the team continued to exceed expectations and completed all repairs ahead of schedule following the fire incident in the crusher building last November. Two contract crushing units augmented ore placement rates on the pads as the repaired Wharf crusher achieved full capacity in May. Contract crushing has been fully demobilized, and normal operations have now resumed. Moving to the Canadian assets, we have continued to work closely with the New Afton and Rainy River teams over the last four months on integration and mine plan optimization. At New Afton, the primary focus remains on prioritizing healthy cave growth, executing disciplined cave draw management in these early days, the most important factor we control to protect the long-term health and productivity of the C Zone. We increased tonnage draw from the western portion of the cave at similar grades to the north draw points and we are still limiting tonnage from the higher-grade eastern portion of the cave following completion of its construction in April. Daily mining rates during the quarter averaged approximately 12 thousand tonnes per day. We are pleased to report that we saw mining rates tick up further in July, including reaching 14 thousand tonnes per day during the last week of the month as we have begun to increase draw rates in the west. We expect to achieve targeted throughput of 16 thousand tonnes per day early in the fourth quarter compared to the end of the second quarter as assumed in the original New Gold 2026 budget they approved late last year. As a result, we have refined New Afton's partial year guidance to reflect this prudent approach as summarized on slide 12. At Rainy River, solid production from Phase 4 of the open pit drove free cash flow of $123 million, the highest free cash flow of any mine in Coeur's long history. Open pit mining, processing and underground development all performed well during the initial full quarter of Coeur's ownership while waste stripping activities on Phase 5 of the open pit remained ahead of schedule. It is important to note we kept the mill full all quarter via the operation's significant stockpile inventory. In the third quarter, we will be building up a new stockpile to provide that important level of flexibility with a goal of keeping the mill full at all times. Second quarter production was affected by lower-than-planned underground mining rates, which reflected some short-term execution challenges with the underground mining contractor. I am pleased to report that after assuming control of the operation and addressing the gaps we observed, underground mining rates are now on the rise as evidenced in the performance improvements we saw in July. The gaps did require a relatively modest amount of additional capital and operating costs that Tom will highlight. However, we are expecting a very quick payback. Just to give you a sense, after averaging 2.3 thousand tonnes per day in the second quarter, underground production rates jumped over 40 percent to approximately 3.3 thousand tonnes per day in July, and we now expect to achieve our target of 5 thousand tonnes per day by year end versus the third quarter as assumed in the original New Gold 2026 budget that they approved late last year. Revised partial year 2026 production guidance at Rainy River is shown on slide 13, which reflects this slightly slower assumed ramp up of underground mining rates. With that, I will turn the call over to Tom.
Thanks, Mick. Turning to slide 9, I will briefly run through our consolidated financial results. Despite being our second-lightest expected production quarter this year, our balanced seven-asset portfolio produced quarterly record financial results off the back of the inclusion of our first full quarter of our Canadian assets. Some of the many quarterly records included record quarterly revenue of $1.1 billion, a 27 percent increase quarter over quarter. Record EBITDA of $478 million despite the $141 million non-cash expense related to Rainy River's fair value uplift of the short-term stockpile that must flow through EBITDA, the P&L, and our reported CAS number. And record free cash flow of $388 million or more than $4 million per day, an increase of 45 percent versus last quarter. Our Canadian assets delivered 45 percent of overall quarterly free cash flow, approximately $175 million, despite both assets being in ramp up mode. Our second quarter results did see lower realized gold and silver prices than in the first quarter, particularly in June. We are also seeing some signs of cost inflation, specifically diesel cost, as shown on slide 11. Slide 8 illustrates the tremendous impact of these accelerating cash flows on our balance sheet. Cash of $1.1 billion at June 30 represents a doubling of the balance versus year-end 2025. We paid out approximately 45 percent of our second quarter quarterly free cash flow with $110 million of buybacks through June 30, the payment of an inaugural $0.02 dividend and the elimination of $39 million of our higher cost capital lease debt. We exited the second quarter with liquidity of over $2 billion, leaving no doubt about our balance sheet strength. With expectations for significantly higher production during the second half of 2026, Coeur is poised to deliver even higher quarterly free cash flow for the remainder of the year. Based on revised guidance and our updated forecast pricing of $4,000 per ounce of gold, $60 per ounce of silver and $6.00 per pound of copper, we expect to generate 2026 EBITDA of approximately $2.3 billion and free cash flow of approximately $1.5 billion despite significantly lower assumed metals prices in the second half of 2026 and only nine months of lower-than-originally-planned contribution from New Afton and Rainy River. What an amazing story. I wanted to highlight the key changes in our updated guidance on slide 21. We have tweaked our overall 2026 CapEx guidance at Rainy River to reflect $45 million of Phase 5 capitalized stripping costs previously guided as an operating cost and $25 million of expenditures related to underground development, equipment and infrastructure to assist with the gaps Mick and his team identified. Revised CapEx guidance also includes an additional $15 million at Silvertip for 2026 pre-feasibility study and related costs. Cash taxes were guided downwards to reflect lower assumed metals prices and lower Canadian taxes. Amortization guidance was also reduced as we completed our initial purchase price allocation for the newly acquired Canadian assets. Adjusted CAS guidance for gold and copper at New Afton increased as a result of the lower expected production. However, it is important to note that we did not see an overall increase in total operating costs at New Afton. Adjusted gold CAS guidance at Rainy River also increased as a result of the lower expected production. We are also expecting a 10 percent increase in total operating costs or approximately $30 million during 2026 for additional labor, rental equipment and maintenance to address the gaps Mick and his team identified. I did want to spend a minute on the acquisition accounting related to the short-term inventory, including the significant short-term stockpile at Rainy River that we acquired at the transaction closing. The fair value uplift of the acquired inventory, as required under U.S. GAAP, is an important accounting matter to clearly understand given the magnitude and the pervasive impact it has on our financial results. While the impact is non-cash, the full year total will be $244 million at Rainy River, and $20 million at New Afton. We want to emphasize this non-cash amount must be included in our EBITDA, net income and CAS. During the first quarter, approximately $85 million of the fair value uplift hit our EBITDA, net income, and CAS. The second quarter impact was a further $140 million, approximately $0.10 per share, and the remaining $38 million is anticipated to flow through during the third quarter as we expect to have depleted the remaining acquired short-term stockpile at Rainy River by the end of the quarter as Mick mentioned. To give a better sense of the order of magnitude of this non-cash impact on our CAS, the second quarter impact at Rainy River was $2,036 per ounce of the total $3.79 thousand CAS per ounce. And on a consolidated basis, it represented $834 per ounce of the total $2.44 thousand CAS per ounce. I hope that made sense, and I will get off the accounting soapbox. We remain extremely excited and proud of this platform we have created as a unique North America-only precious metals producer with a heart of silver. We are set up for a strong second half of free cash flow, continued capital returns and cash accumulation on the balance sheet as we continue to deliver on our strategic plan. I will now turn the call back to Mitchell.
Thanks, Tom. Before opening it up for Q&A, our key strategic priorities for the remainder of the year are shown on slide 20. We are looking forward to delivering sharp increases in production and cash flow during the second half that are expected to lead to record full year 2026 results leaving us well positioned to deliver another record year in 2027. With that, let's go ahead and open it up for questions.
Questions and answers
We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. Our first question will come from Wayne Lam with TD Securities. Please go ahead.
Yes, thanks. Good morning, guys. I just want to understand the reset in the expectations for the New Gold assets after just the first quarter of operations post-combined guidance. Starting with New Afton, what was the previously budgeted timeline to get to this 16 thousand-tonne-per-day target? Was the revision here also largely grade-driven? I think most of it baked in a ramp up to reach the run-rate capacity, but it also seems like a second haircut taking New Afton now from what New Gold management had previously guided to what was outlined in the combined guidance a few months ago to now.
Yes, we will start there with New Afton. The original plan for New Afton coming into the year was for them to be at 16 thousand tons a day by the end of the second quarter. What we are seeing now is hitting that level early in the fourth quarter, so roughly three months slower than what they came into the year assuming. The reset in the guidance ranges there was driven more by that timing. There is a little bit of a grade differential, just as we draw from different parts of the cave in response to how the cave is propagating since construction was completed in April. Mick, can you go a layer deeper on that?
Yeah, thanks for the question. It is really about healthy cave propagation. With respect to grades, we chop the cave up into six main areas — north and south, each split into east and west zones — and there are different grades across the cave. But the key to the start of the cave is really about drawing it and getting it balanced and flat so that it comes down as a block. Our higher grades are in the south and the east, and we have to draw more on the west and the north at the moment to get the cave to propagate in a flat manner. As we see that come to bear over the next quarter, we will see draw rates increase and grades should improve between now and the end of the year. Does that help, Wayne?
Yeah, that is great. And then maybe on Rainy River, can you give a bit more detail on the challenges with the underground contractor this quarter and the prior timeline to ramp up to 5 thousand tonnes per day? Also some color on the underground grades. And then for Tom, if you are chewing through more of the stockpiles at a faster rate resulting in a greater non-cash impact near term on the purchase price adjustment, does that mean that non-cash impact to CAS goes away at some point soon? I'm not sure if I'm thinking about that correctly.
I will try to answer that second question first because it's a fairly quick answer, which is yes, it should go away with the third quarter. Tom mentioned that about $38 million is expected to roll through the P&L in the third quarter, and then we should be done with that acquired inventory impact. On the Rainy River front, those short-term execution challenges were more tactical. As throughput rates started to climb, some gaps surfaced in trucks, personnel availability and some infrastructure-related constraints that will be covered by the CapEx increase that Tom flagged. Mick and the team at Rainy River did a very good job identifying these gaps as they started ramping up and put a plan in place quickly. It is encouraging to see in July the effects of that work as rates started to climb and that has continued into early August. That gives us confidence about ramping up to 5 thousand tonnes per day by year end. On the underground versus open pit grade mix, in the second quarter the underground contributed roughly nine percent of total tons and that should be almost twice that in the second half. The underground grades are almost three times higher than the open pit grades. So as underground tonnage increases to 5 thousand tonnes per day, those higher grades will be a nice tailwind for second half production at Rainy River. Mick, anything to add?
Really just that we are very happy with the response of the remaining contractor and how we are working together. The early part of the Oneveron development — focused on development rates — had a contract structure prioritizing that. Once we addressed development and ramped that up, it outpaced mining rates and exposed other bottlenecks that we had to address. We have worked with the contractor to address those, and we are already seeing an uptick in performance with the contractor now focused on mining rates to balance against development. We are seeing real improvement.
Okay, great. Looking forward to the operational improvements in the back half of the year. Last one at Rochester: can you walk through expectations into the second half on grades and recoveries? I know the quarterly guidance had accounted for some of the lower grade this quarter and there's a pretty big step change on silver into the fourth quarter. Given the longer cycle for silver recoveries that we've seen in the past, is it still realistic to expect those ounces to come out quickly as per guided expectations?
The three big drivers at Rochester are consistent crusher performance, the higher grades, and a significant quantity of material now sitting close to fresh liner. Those ingredients should produce a dramatic second half relative to the first half. Mick, do you want to add?
During the first part of the year we produced a lot of material as an overlay for the construction of the new pads, and that material was at a higher size fraction which lowered crushed performance. We have worked through a lot of that. There are still some overlay materials for the next phase of the expansion, but overall we are in good shape for the uptick in the second half. There are many tonnes sitting on the new liner that have not even been started to irrigate yet, so I am looking forward to that production coming through.
Okay, perfect. Nice to see a lot of free cash flow coming through despite the slow ramp-up. Best of luck in months ahead.
Our next question will come from Cosmos Chiu with CIBC. Please go ahead.
Thanks, Mitch, Mick and Tom for the presentation. My first question is back to New Afton. I noticed that recovery was slightly lower quarter over quarter — 85.1 percent for gold and 90.6 percent for copper. Two parts to my question: one, as you talked about grade potentially coming back up later in the year, does that help in terms of recovery? And two, as you recalibrated guidance for the year, what kind of recovery rate are you assuming for the rest of 2026?
Thanks, Cosmos. As we go into the second half of the year and as Mick alluded to, we will see both a throughput increase and a grade increase as they start drawing on other areas of the C Zone, and that should flow through to higher recoveries on both gold and copper relative to what we saw in the first half. Mick, do you want to add?
You nailed it. Those lower recoveries were all really about cave draw management. As grades come up, we should see appreciation in the recovery rates.
Great. Is what we saw in the first quarter a better sort of run rate? I forget in terms of the technical report what kind of recovery rates are expected life-of-mine for copper and gold.
That first quarter was only 11 days for us following the transaction, so it's a small snapshot and I can't recall those exact recovery numbers offhand for that period. Mick, do you want to comment?
Based on the material we've pulled from the cave, recovery is tracking well and actually better than the model in the technical report in those areas we've tested.
Great. Going to Rainy River: you mentioned underground development caught up and mining rates are now catching up. You did 2.3 thousand tonnes per day in the second quarter. Do you have internal targets you can share for what you expected in the second quarter? Also, getting to 5 thousand tonnes per day by year end is almost double the second quarter rate — what's the cadence of that increase? Is it linear or more parabolic? Should we use 3.3 thousand tonnes per day for the third quarter?
You're asking for precision, but the ramp of underground production between now and year end is fairly linear and gradual. The 5 thousand tonnes per day is our target for year end; it's not an average for the fourth quarter. Think of a steady ramp from July's level to December.
Okay. And how's the pre-stripping of Phase 5 going?
That's a good news story. The open pit is performing well. The mill is doing well. The strip is ahead of schedule and we expect a fair amount of material from Phase 5 in the second half as we finish Phase 4 and transition into Phase 5 by the end of the year. Mick, anything to add?
Yes, the strip is ahead, and we expect significant material from Phase 5 in the second half. The mill has been full thanks to stockpiles which have provided the flexibility we needed, and we are in good shape.
Great. One last question: I see in your CapEx discussion you allocated an additional $15 million to Silvertip. Any updates there?
Good catch. Since the first quarter, in early May, we wrapped up the initial assessment and have progressed into a pre-feasibility study. That was a board decision in mid-May. The additional capital is to fund that pre-feasibility study work, which we hope to complete in early 2027. Exploration is fully funded for the year and is peaking in the third quarter to try to expand the resource. The capital for Silvertip funds the studies we are proceeding with.
Great. Thanks, Mitch, Mick and Tom. Enjoy the rest of your summer.
Our next question will come from Joshua Wolfson with RBC Capital Markets. Please go ahead.
Yes, thank you. I appreciate all the disclosures and details for the New Gold assets. A question on how balancing the cave at New Afton might affect future years: if you draw the cave more evenly now, might the higher grades previously expected in 2027-2028 be smoothed out versus the previous mine plan, or is this cave change limited to 2026?
We are re-running the plans and will know more through the third and fourth quarters as we set the 2027 budget. For the moment, we are focused on balancing the cave and drawing from the right points to get that balance. My expectation is we will see grade timing adjust through the next period, and we'll have a clearer picture by year end.
Similarly at Rainy River, I believe the technical report contemplated underground throughput closer to 6 thousand tonnes per day over the next two years. Is that still a reasonable ultimate target and should we expect some ramp up in 2027?
Good question. The technical report is a solid starting point, and we will continue to refine the outlook as we get closer to 2027. Our near-term plan is to reach 5 thousand tonnes per day by year end and carry that into 2027. There is work to do to define the balance of underground versus open pit going forward and the optionality at Rainy River that we'll factor into our planning for 2027.
And on capital allocation: given the high cash balance and initial buybacks, how should we think about the cadence of the buyback through the approved period? Should we expect similar levels or will it change based on share prices? And where would the company look to invest in growth that could start to be spent in 2027?
Great capital allocation question. We set up a buyback program that has an automatic component during blackout periods and an opportunistic component in non-blackout periods. We do not feel pressured to complete $750 million by a fixed date, but we will be aggressive when the share price appears undervalued. That will drive the pace of repurchases. As for growth, we will prioritize high-return brownfield exploration where we can efficiently deploy capital. The larger growth opportunities include advancing K Zone studies at New Afton, advancing Silvertip studies, East Rochester longer-term options, further exploration at Palmarejo east of the Franco-area, and studying potential mine life extension infrastructure at Rainy River. Those are the main areas we'd consider deploying incremental capital.
You nailed that. We are happy with the buyback design. We will come out of blackout soon and if the share price is attractive versus our view of value, we will be aggressive.
Thank you very much.
Our next question will come from Kevin O'Halloran with BMO Capital Markets. Please go ahead.
Hey Mitchell and team. At Palmarejo, can you remind us what your goal is in terms of building out the resource inventory outside the area of influence? And how much production do you expect to shift outside that Franco area over the next few years?
Great question. The exploration release showed continued success at Palmarejo further east at San Miguel/La Union and in the Guazapares area farther north and east of current operations. That is a longer-term play requiring more drilling and resource growth and then trade-off studies on whether it could be a standalone operation or a haul-in to Palmarejo's processing facility. The nearer-term opportunity is Independencia Sur — the southeastern extension off the Franco area of interest. In the second quarter about 50 percent of our gold production was subject to Franco terms. The goal over the next two to three years is to grow near-term resources in Independencia so we can bring more gold to market at full price instead of selling to Franco for the contract price. So there's near-term, medium-term and long-term opportunity to the east of Palmarejo.
Great. At Las Chispas you had higher throughput in Q2 and slightly lower grade though grades remain strong. How should we think about production going forward? Is there a trend toward higher throughput and slightly lower grade, or was this a typical quarter-to-quarter fluctuation?
They're doing a great job being predictable and consistent. First-half performance versus second-half expectations is well balanced and we expect that to continue. Mick, anything to add?
We have a healthy stockpile inventory which helps balance feed into the mill and smooth grades and production rates so the mill sees what it needs. We expect to be on budget by year end.
I noticed unit mining costs at Las Chispas were up a little in Q2. Was that driven by royalties and the peso or other factors?
There was some stockpile management activity and slightly lower grade, which led to a little more material processed to hit plan. We expect to be on budget by year end.
Okay, great. Thanks for taking my question.
Our next question will come from Eric Windmill with Scotiabank. Please go ahead.
Hi, good morning Mitchell and team. Thanks for taking my question. One on New Afton and the K Zone: any updates? I know you said studies are ongoing — are we likely to see an update later this year or next year?
Yes, K Zone — we are working both exploration and study streams. Mick, do you want to cover the study timing and then Aoife can add drilling detail?
We are preparing for a feasibility study; we haven't set an exact kickoff date yet but it will be soon. The engineering and development work is underway and drilling to characterize the deposit to support the study is ongoing. We are resourced to progress this work properly.
On the exploration side, we are seeing great results from the K Zone. We've expanded the footprint by just over 300 metres this year from an initial ~600-metre shape defined in the maiden resource. Grades are holding up well and we are seeing some wide, high-quality intercepts in the K Zone. We're excited to see what comes out in the next resource update.
Does that suggest a PFS for Silvertip probably early next year and will that be released?
We expect to complete the PFS work and evaluate whether it merits moving to a feasibility study. We'll decide whether to release the PFS based on where the project stands and whether it makes sense to disclose at that stage. If it transitions to an FS, we'd consider releasing results at that point. We also want more drilling to add to the resource so any released study is as robust and economically attractive as possible.
Last question: are you happy with the portfolio after integrating New Gold? Any thoughts on divestitures or additions?
We are pleased with the portfolio. People and infrastructure at the acquired assets are strong. We made adjustments for timing on ramp-ups, but overall we like the North America-only platform, the balance across seven assets, and we are satisfied with the portfolio we have.
Our next question will come from Brian MacArthur with Raymond James. Please go ahead.
Good morning and thank you for taking my question and thank you for all the guidance. Can I ask a bigger philosophical question? You have given good guidance for the rest of the year, but I want to break it into the third and fourth quarters for EBITDA and free cash flow. For EBITDA you are implying about $1 billion over the back half of the year — is 40-60 split between Q3 and Q4 reasonable? For free cash flow, is CapEx in the back half evenly weighted or heavier in Q3 so that Q3 free cash flow ends up being only 25-30 percent of the back half? I know it is detailed but it drives how much free cash flow the market expects and how much you have available for buybacks.
Great philosophical question. I'll hand it to Tom, but generally your 40-60 split between third and fourth quarters for EBITDA is probably reasonable. CapEx tends to be a bit higher in Q3 during the summer season.
Yes, Q3 is definitely higher CapEx than Q4. Exploration activity is heaviest in Q3 with lots of drilling. Look at the production profile we guided to — production sets up nicely in Q3 and steps up even more in Q4, which should help free cash flow growth by quarter.
Thanks. One clarification: the $38 million will flow through in Q3, and then the fourth quarter will be cleaner, right?
Correct. That non-cash purchase price allocation noise should mostly be done after the third quarter, leaving a cleaner fourth quarter. Operationally, the stockpiles have been beneficial at Las Chispas and Rainy River, despite the accounting impact.
Great. Thanks very much.
This concludes our question and answer session. I would like to turn the conference back over to Mitchell J. Krebs for any closing remarks.
We appreciate all the great questions and everyone's time today, and we look forward to talking with you all again later in the fall after our third quarter results. Have a great rest of the day and rest of the summer.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.