Galiano Gold Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 15, 2023

There are 4 speakers on the call.

Operator

Good morning. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the Galliano Gold Inc. Third Quarter 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise.

Operator

After speakers' remarks, there will be a question and answer session. Thank you. Mr. Badalak, President and CEO of Galliano Gold, you may begin your conference.

Speaker 1

Thank you, operator, and good morning, everyone. We appreciate you taking the time to join us on this call today to review the Q3 2023 Galliano Gold results that we released last night. We'll be making forward looking statements and referring to non IFRS measures during the call. Please refer to the cautionary notes and risk disclosures in our most recent MD and A as well as on this slide of the webcast presentation. Our release yesterday detailed the Q3 2023 financial and operating results.

Speaker 1

They should be read in conjunction with our Q3 financial statements and MD and A available on our website and filed on SEDAR Plus and EDGAR. Please also bear in mind that all dollar amounts mentioned on the conference call today are in the U. S. Dollars unless otherwise noted. With me on the call today, I have Matthew Freeman, our Chief Financial Officer.

Speaker 1

I will initially go through the highlights and then take you through the operations. Matt will then focus on the financials, and I'll then wrap it up and open the call up for a Q and A session. Here on Slide 5, please note that I'll be discussing these results on a 100% basis. On the safety front, during the quarter, we had one loss time injury and 3 recordable injuries. This results in a 12 month rolling LTI and TRI frequency rate of 0.54000000 and 1,610,000 man hours worth, respectively.

Speaker 1

Health and safety continues to remain a top priority throughout the organization, Particularly as activity ramps up during the recommencement of mining. We consistently strive to reinforce our commitment to 0 harm and the implementation of best Safety Practices at the AGM. Our gold production from stockpile processing again reached the high end of expectations. We produced nearly 36,000 ounces of gold during the quarter and expect to reach the higher end of guidance for the year, closer to 130,000 ounces. On the cost front, we recorded all in sustaining cost of $14.45 per ounce.

Speaker 1

We continue to seek ways to optimize our costs and have revised cost guidance downwards to between $1500 $1600 per ounce for the full year. This is down considerably from when we started the year and marks the 6th consecutive quarter where the team has outperformed our cost and production guidance. Our liquidity at the JV has continued to grow, now sitting at $145,000,000 in total liquidity. As the guidance and based on the technical report we released earlier this year, we also recommenced mining operations on October 1. On Slide 6, it is important to point out that the recommencement of mining marks a critical point in the future of the Sanco Gold Mine.

Speaker 1

It comes on the back of 18 months of work where our team is focused on advancing our technical understanding of our known deposits and defining a realistic future for this asset. I was on-site last week and was pleased to see the progress the team and the mining contractor are making on the mining front. The fleet was partially mobilized in Q3 and will currently have sufficient equipment on-site to achieve our expected material movement for the remainder of the year. Additional fleet continues to arrive on-site, and we full mobilization to be complete by Q1 2024. As you can see from the image to the right of your screen, we are currently removing 3 dig saprolite material and expect to commence drilling blast activities towards the latter part of Q4.

Speaker 1

Although we don't expect to see material ore delivery to the mill prior to Q2 2024, we are pleased that grade control drilling has already identified small profitable across larger areas than expected. Encouraging as this may be, I caution that this material is not large in volume and is not expected significantly impact gold production over the next two quarters. In light of the elevated gold price environment, a conversion drilling program is underway at define the limits of a potential larger $1700 per ounce reserve pit. Initial results from this program are also better than expected and we'll report in our recent exploration news release. We estimate that successful conversion of inferred ounces In this zone could yield at least 100,000 ounces of additional reserves.

Speaker 1

We are pleased that with the timely recommencement of mining, we remain on track to deliver our stated life of mine plan. On Slide 7, I'd like to highlight some of the key points of our life of mine plan. You can see on this slide the step change in gold production that we anticipate over the next 24 months as we commence feeding high grade material to the mill. The processing facility will continue to operate existing throughputs of 5,800,000 tonnes per annum throughout this period. The life of mine plan is self funded with existing cash at the joint venture and future cash generated from the asset and sees us producing 1,850,000,000 ounces of gold over an 8.5 year period at an all in sustaining cash cost of $11.50 per ounce.

Speaker 1

The operation is also highly leveraged to gold price, and you can see that our NPV at a 5% discount almost doubles dollars 530,000,000 at a gold price of $1900 per ounce. On Slide 8, I'll briefly touch on some high level corporate highlights before heading the time over to Matt. Galliano ended the quarter with a total liquidity of $56,000,000 and remains debt free. During the quarter, the company reported a net income of $11,400,000 or $0.05 per share. We remain in an enviable position amongst our peers of having a clean balance sheet and access to cash.

Speaker 1

With this in mind, our team continues to seek accretive value adding opportunities for the company to grow and deliver long term performance to our shareholders. With that, I'll turn the time over to Matt Freeman, our CFO, to review the financials.

Speaker 2

Thanks, Matt. Good morning, everyone. I'd like to remind everyone that Galliano operates its anchor gold mine under a JV with Goldfields. This somewhat complicates our financial statements, and to the fact that we're required to equity account for the interest. On Slide 9, I'd like to initially discuss the results of the mine itself on a 100% basis and then following that, how that impacts the financials of Galliano itself.

Speaker 2

The Atanko Gold Mine another strong quarter operationally and financially in Q3. As you know, we continue to process stockpiles, which continue to perform in line or slightly better than planned, resulting in production of over 35,000 ounces, which means we expect to come into the top end of our production guidance of 130,000 ounces for the year. Purchasing stock part material doesn't incur mining costs. And as a result, we've been able to generate significant cash, which bolters our balance sheet and ensures our ability to execute on the next phase of the life of mine plan that we disclosed earlier in the year. The Asanko Gold Mine ended the quarter with cash of 137,000,000 an increase of more than $45,000,000 since the start of the year with free cash flow of $24,000,000 in the quarter.

Speaker 2

Gold prices remain positive, realizing just over $1900 per ounce in the quarter for total revenues of 68,000,000 We focused hard on trying to keep costs down within the context of the global inflation environment. So I'm pleased that pricing and G and A costs remain broadly across the year. This all culminated in net earnings for the quarter of $21,000,000 at the Asanko gold mine level. With the mine ramping up towards the restart of mining activities on October 1, we've seen an increase in capital expenditures to $15,000,000 for the quarter. Notably, this was spent on raising of the height of the tailings storage facility and the Oboro site establishment, which includes getting the site itself ready and cleared, building a hall road diversion and a new public road.

Speaker 2

This all resulted in an expected increase to our all in sustaining cost compared to Q2 to $14.45 per ounce. We're expecting the 4th quarter all in sustaining costs to be elevated as well, largely due to the pre stripping of the Abroy pit. However, because of the outperformance of the stockpile this year and our continued focus on cost, we're able to reduce our 2023 all in sustaining cost guidance to between $1500 per ounce $1600 per ounce compared to $16.50 to $17.50 that we had guided to for the Q2. Finally, at the Asanko Gold Mine, as Matt touched upon, we continue to invest heavily in exploration, forecasting to spend approximately $15,000,000 this year. On Slide 10, we can see the increase in liquidity at the Asanko Gold Mine.

Speaker 2

So that by September 30, We have $143,000,000 in total liquidity. As Matt mentioned previously, our team remains focused on operational and financial performance. You can see the continuous cash accumulation within the JV having increased over $50,000,000 in the past 5 quarters. And now looking at Galliano, we've kept our cash balance above $55,000,000 whereby the annual 7% service fee we earn for our Prokujiu Senko gold mine, plus interest being earned on a cash balance largely offsets the G and A burn from running the corporate office. Galliano also remains debt free.

Speaker 2

This provides us with a healthy treasury to be used for future value enhancing opportunities. As I mentioned before, the income statement is a bit challenging with us recognizing our interest income earned from the JV. But with the $9,000,000 recognized from the JV, the service fee for managing the mine and interest earned on a cash balance. After deducting our G and A costs, we ended up with net income for the quarter of $11,000,000 or $0.05 per share. So in summary, we've ended the quarter in a very healthy financial position.

Speaker 2

Not the corporate entity nor the joint venture has any debt. Galliano has more than $55,000,000 at its disposal and the JV has more than $135,000,000 in cash available to restart mining at Abroad, invest in the next phase of the life of mine plan and execute on our aggressive exploration strategy. Gold prices remain very supportive, which helps to ensure we have the financial capacity to execute on our corporate strategy. With that, I'll turn it back over to Matt.

Speaker 1

Thanks, Matt. Moving on to Slide 12. I just want to point out that our new management team is heavily focused on continuously delivering to our stated guidance and building integrity with our existing and future stakeholders. We understand that this can only be done through consistently meeting our targets quarter on quarter. Apart from outperforming costs and production guidance and increasing the joint venture's cash balance by over $88,000,000 over the last $88,000,000 over the last 18 months.

Speaker 1

This slide highlights some of the other key milestones the team has delivered to on schedule. This includes the timely delivery of the updated technical report life of mine plan and the lead up to and the recommencement of mining. We are on track to double our production by 2025 And are making significant strides on the exploration side of the business, where we expect additional positive news flows as we continue to aggressively drill both near mine and regional targets. On Slide 13, our final slide, I would like to recap the investment case of Galliano. The asset is located in the top tier African mining jurisdiction, which is governed by the rule of law with a strong transparent mining regulation and a highly skilled workforce.

Speaker 1

We have an enviable resource endowment and hold a large, highly prospective and underexplored land package. The asset is highly derisked being cash flow producing and post construction with all plant infrastructure and permits in place to allow us to execute our stated life of mine plan. We have a clear line of sight with significant value adding event, which sees us doubling production by the year 20 25. The asset remains highly leveraged to gold price with NPV increasing significantly at current metal prices. Having a fully funded mine plan, no debt and a strong balance sheet further strengthens the investment thesis for Galliano.

Speaker 1

With these points in mind, the company is uniquely positioned to deliver superior value to investors through the execution of the life of mine plan and the ramp up of production over the next 24 months. With that, I'd like to turn the call back over to the operator and open the lines up for questions.

Operator

Thank Okay. And our first question comes from the line of Heiko Ihle of H. C. Wainwright. Please go ahead.

Operator

Your line is open.

Speaker 3

Good morning, gentlemen.

Speaker 1

Good morning, Heiko. How are you?

Speaker 3

Excellent. Not too bad. That saprolite rock waste removal, any idea how long that will and how much the whole thing should cost. I don't know how far is it broadly. You assume you don't really need to put anything underneath the waste material, do you?

Speaker 3

Because It's mostly clay, right?

Speaker 1

Yes. So Heiko, the strip that we're talking about here is obviously partially saprolite material, which is free dig and doesn't require, drill and blast activities, and we're kind of stuck into that at the moment. So that's the upper surface of the strip. And As I mentioned on the call, probably about towards the end of this year, we'll be getting into drill and blast activities out there. And that will continue into Q1 next year.

Speaker 1

We expect material or delivery to be delivered to The mill in Q2 next year. So that's when you'll see an increase in grade feeding the mill in Q2.

Speaker 3

Got it. Okay. And how far is it transported?

Speaker 1

Sorry? Yes. So the actual waste material is obviously Stored near the mining facility, but the deposit itself is about 10 to 12 kilometers away from the processing facility. So that's the haulage for the ore. And obviously, the waste is just going to be Stored in waste stockpiles near the pit.

Speaker 3

Got it. Okay. You had a little chart on Page All of your presentation for this call that you're working on several operational optimizations. What exactly are you still doing? What has already happened?

Speaker 3

And can you maybe quantify some of the results you've gotten so far, maybe even what you expect In a quantified terms by the end of the year?

Speaker 1

Yes. I think by the end of the year, we'll still be progressing some of these Optimization works. Obviously, Heiko, I mean, I think we mentioned or I mentioned in the past that we have already utilized Larger trucks for the mining of the borate, and we're expecting to do that for the other pits as well. So in the short term, That's the one optimization that's going to yield better productivity, and we expect better costs The unit moved as well. So on that front, we're using 777 haul trucks at a borate.

Speaker 1

And the feasibility study that we released Earlier this year, described 40 ton ADT trucks for that same deposit. So that's one optimization. The other things that we're looking more longer term is the ability to potentially apply ore sorting at the Sasi deposit, which will help us Potentially increase the amount of lower grade material that is profitable at that deposit. And on the other side of that, it could also increase the grade of the higher grade material that we currently that we will be mining at Esaase as well. There's some other Small optimizations, we do have an ability to add 2 additional CIL tanks in the CIL circuit, which we're looking at in terms of Increasing residence time there and there's also a secondary crusher that we're looking to install by the end of next year, which would Actors reducing costs in the crushing circuit as well.

Speaker 1

So those things we're working on and advancing at the moment.

Speaker 3

Perfect. No, that's helpful. Appreciate it and I'll get back to queue.

Speaker 2

Thank you. Hi, Joe. Cheers.

Operator

Thank you. Okay. There seems to be no further questions from the phones at this time. So I'll hand the floor back to our speakers for the closing comments.

Speaker 1

Okay. Thanks for that, operator. Well, listen, we're certainly at a stage of inflection At the asset level at the moment, and we're certainly looking forward to ramping up production over the next 24 months as stated in the conference call. So I'm very pleased with where the team is at and certainly looking forward to getting stuck into the high grade material as of Q2 next year and appreciate everyone dialing in to the call today and have a good day. Thank you.

Operator

Thank you. This now concludes the conference. Thank you all very much for attending. You may now disconnect your lines.

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Earnings Conference Call
Galiano Gold Q3 2023
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