On August 11, Integra Resources (NYSEAMERICAN:ITRG) reported second-quarter results that showed just how fast Florida Canyon has changed over the past year. Gold production jumped 30% from the first quarter to 16,379 ounces, and the mine moved more total material than at any point in its history, averaging 87,867 tonnes a day. Revenue climbed to $70.8 million from $61.1 million a year earlier. But the same report showed costs climbing just as fast as output.
More Ounces, More Cash Flow
The quarter’s headline number was mining volume. Florida Canyon mined 4.4 million tonnes of ore, up 44% from 3.1 million tonnes a year earlier, and 3.6 million tonnes of waste, up 21% from 3.0 million tonnes, using new equipment folded into the fleet over the prior two quarters. About 4.2 million tonnes of that ore went onto the heap leach pads during the quarter, a 45% jump from the first quarter, and management said the resulting inventory of recoverable gold should keep supporting production through the rest of the year. The company kept its full-year guidance of 70,000 to 75,000 ounces intact.
Free cash flow reached $9.3 million, or $0.05 per share, up from just $2.1 million, or $0.01 per share, in the second quarter of last year. Cash and equivalents rose to $111.1 million at the end of June from $63.1 million at the start of the year, helped by a $57.5 million bought deal offering completed earlier this year. Integra is also leaning on studies that look past this quarter. Its updated feasibility study for Florida Canyon outlined an eight-year mine life, a 74% increase in proven and probable reserves, and $601 million in after-tax net present value. A separate feasibility study on the DeLamar project put its after-tax net present value at $774 million using base case gold and silver prices of $3,000 and $35 an ounce, or as high as $1.9 billion at recent prices of $4,500 and $65.
The Cost Of Digging Deeper
Getting those extra ounces out of the ground cost more than planned. Cash costs averaged $2,495 per ounce in the quarter, and mine site all-in sustaining costs averaged $3,371 per ounce, both well above the $1,849 and $2,641 per ounce Integra reported a year earlier. The company pointed to higher tonnes mined, stacked and processed, lower ounces sold earlier in the year, bigger royalty and excise tax bills tied to stronger gold prices, and higher diesel and explosives costs. Integra raised its full-year cost guidance to match, lifting expected cash costs to $2,300 to $2,500 per ounce and AISC to $3,300 to $3,500 per ounce, roughly $400 to $550 higher than its original targets.
Recovery rates slipped too, averaging 57.8% in the quarter compared with 60.5% a year earlier, meaning more gold stayed in the rock for every tonne processed. Mine operating earnings of $23.4 million came in below the $25.2 million recorded a year earlier, even with higher revenue, a sign that rising costs are eating into the benefit of stronger gold prices. On the development side, the environmental review for the DeLamar project is not expected to produce a final decision until the second half of 2027, so construction there remains years away.
What The Market Is Pricing In
Hedge fund ownership fell from 16 funds to 13 heading into the most recent quarter, pointing to some institutional trimming even as production improved. Short interest sits at just 2.85% of the float, a level that suggests little organized skepticism toward the stock. At the same time, shares trade at a forward price-to-earnings ratio of just 6.01 as of September 10, cheap enough to suggest the market is not yet pricing in much of the growth outlined in the Florida Canyon and DeLamar studies.
The Tension Still Unresolved
Integra’s second quarter captured two things happening at once: a mine finally running at the pace management always said it could, and a cost structure that has not kept up with that pace. The Florida Canyon and DeLamar studies point to a much bigger, longer-lived business than the one investors were pricing a year ago. For that case to hold, the current cost pressures need to ease as production climbs further. For the market’s caution to be justified, those costs would need to keep outrunning the ounces coming out of the ground. Either way, the next few quarters should make clear which story is winning.
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