Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from John Bridges – JP Morgan.
John Bridges – JP Morgan
In your Palmarejo accounts, there's nothing there showing for royalty. Is that payable yet to Franco-Nevada and if so how is it going to be booked going forward?
Mitchell J. Krebs
I'm going to ask Tom Angelos our Chief Accounting Officer to answer that question as far as we treat the Franco-Nevada royalty payments.
Thomas T. Angelos
Basically the accounting rules that we looked at this last quarter was the royalties are considered an obligation so its treated as a debt until we fund the minimum quantity of 400,000 ounces and then it would convert to a royalty.
John Bridges – JP Morgan
So where would it appear in your accounts this quarter?
Thomas T. Angelos
The royalty is on our balance sheet as a liability. And we haven't really started – as we sell the gold ounces its offset against the liability on the balance sheet and it would not reflect in the P&L until we reach the 400,000 ounce minimum quantity.
John Bridges – JP Morgan
When do you expect that to be?
Mitchell J. Krebs
John, that's run rates of production estimated at Palmarejo that would be in another six years or so.
John Bridges – JP Morgan
Just as a follow up, do you have a detailed breakdown of how your capital was spent last quarter?
Mitchell J. Krebs
We do, John, yes. The $42 million of CapEx for the quarter is really driven mostly by Palmarejo obviously. For the three months ended June 30, $32 million of that $42 million was spent at Palmarejo, $6.6 million at Kensington, and $2.6 million at San Bartolome. That gets you pretty much there. There was just a deminimus amount spent at Martha and Rochester, less than $0.5 million each.
John Bridges – JP Morgan
The mill problem at Cerro Bayo was that in any way related to the previous problem?
Mitchell J. Krebs
I couldn't hear that, John. Could you ask that again?
John Bridges – JP Morgan
The SAG mill problem during the quarter was that related the – was there any similarity with the previous problem?
Richard Weston
I think you're referring to San Bartolome there.
John Bridges – JP Morgan
Yes. San Bartolome.
Donald P. Gray
In May we were temporarily impacted by a mill motor issue. That has been successfully resolved.
- To read the full transcript on Seeking Alpha, click here »
