i-80 Gold Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 13, 2024

There are 10 speakers on the call.

Operator

Good morning. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the IAT Goldcorp Q3 2024 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you.

Operator

Mr. Young, you may begin your conference.

Speaker 1

Well, thank you, John, and welcome, everyone. Turning to Slide 2, I'd like to draw everyone's attention to our safe harbor language as we will be making forward looking statements through the course of today's presentation. Joining me on the call is our President and COO, Matt Gille our CFO, Ryan Snow and 2 new hires, Dave Savory, our Senior Vice President, General Counsel and Leila Mumme, who is our new Vice President, Corporate Development and Strategy. Turning to Slide 3. Before we begin our formal remarks, I'd like to address today's share reaction share price reaction to our announcement.

Speaker 1

And the team internally, we expected the stock could trade down for a period of time as the market absorb the new plan and the strategy moving forward. I think we would say internally that the markets overreacted. I think when you look at any company, there are 3 things that you look at. The first is the quality of the people. And I'll tell you that this is a great team that I'm joining.

Speaker 1

As the press release indicated, we've added further bench strength that will address some of the issues that we'll talk about today, mainly the balance sheet. But the quality of the asset base and the location are first rate. And we have a new development plan that would see this company move to a mid tier gold producer with Nevada production of 400,000 to 500,000 ounces per year. And the capital intensity for these five projects is very low. And there's a lot of organic growth within the gold portfolio as well as base metal.

Speaker 1

In terms of the balance sheet, the balance sheet is fixable. It's something that we'll work on with our current lenders and we've been in discussion with additional sources of capital and we will resolve it and we will work to minimize solution to shareholders. One of the things that Leily and the team will focus on is working with the Street to understand what the NAV of this company is and could be. It will take 3 to 6 months as we complete the various studies and we expect to have studies out for all 5 of these gold projects before the end of March. And with that, investors will see what the current value is and what the potential value of this asset base is.

Speaker 1

And then we will make decisions on the restructuring of the balance sheet that minimize shareholder dilution. And for the group that's coming in, we've done this in the past where we had a great asset base and a poor share price. So we levered up balance sheet and we executed and we took the stock from $3 to $15 And so we believe that we're going to create significant value and we'll fix the balance sheet and we'll execute and turn this into a mid tier gold producer through the balance of the decade. So with that, I'll now turn to Slide 4 and we'll commence the formal part of our call. So upon my arrival, we conducted a review of the strategic direction of the company.

Speaker 1

As a result of that review, we have adopted a new development plan, which presents our view of the most effective strategy to generate free cash flow, while progressing our earlier stage projects to provide a pipeline of growth in the medium and long term. During today's call, in addition to normal review of the quarterly operating and financial results, we'll review this new development plan, provide an update on the base metal joint venture discussions at Ruby Hill, speak to our recapitalization plans and finally discuss the organizational changes that will enable us to achieve this new plan. We're electing to prioritize our most advanced stage gold and silver projects with established resources and technical studies. As such, exploration development work on base metal targets have been deferred to focus on projects with the fastest timeline to cash flow generation. Overall, given the company's balance sheet constraints and additional capital required for the new development plan, all higher risk projects with lower certainty of economic viability have been deferred until the balance sheet is in a stronger position and the Board approves allocating risk capital to these projects.

Speaker 1

To achieve this, we intend to pursue a recapitalization of the balance sheet, which we believe will be best supported by focusing on our advanced stage gold projects, Granite Creek, Archimedes Underground, which was previously Ruby Deep's and 426 Zone as well as McCoy Cove. These projects are expected to have low capital intensity and a clear path to cash flow generation. What is new is the decision to accelerate permitting and development of the 2 large oxide open pit deposits, Granite Creek and Mineral Point. Mineral Point has the potential to become a large scale heap leach mine and a PEA is underway and we'll have that complete before the end of the Q1. While the base metal opportunities at Ruby Hill may ultimately be significant, the project is at a far earlier stage than our other gold projects within I-eighty gold portfolio and the timeline to cash flow generation is longer and undefined.

Speaker 1

Now I'd like to turn the call over to our President and COO, Matt Gille, who will present our development plan in more detail as well as

Speaker 2

our

Speaker 1

Q3 operating results. Matt?

Speaker 3

Slide 5. Thank you, Richard. The new development plan is focused on near term cash flow generation, advancing a pipeline of growth. We are now focused on the ramp up, permitting and development of 5 gold deposits through the balance of the decade, including 3 underground mines and accelerating the permitting and development of 2 large oxide open pit deposits, Granite Creek and Mineral Point. The Lone Tree autoclave remains the centralized refractory ore processing facility in the new development plant and management intends to continue its work towards completion of the refurbishment feasibility study next year.

Speaker 3

Following the completion of the study, a series of trade off scenarios will be considered comparing full auto clay refurbishment, the alternate tow milling and ore purchase agreement options that could potentially be available. Slide 6. Granite Creek is comprised of an underground mine, which is currently ramping up and expected to be in commercial production in 2026 and an open pit project that is in the permitting process. Slide 7. As mentioned, Granite Creek Underground is currently ramping up to commercial production.

Speaker 3

Mining rates and gold production for the quarter 9 months of 2024 were lower than planned due to an increase in groundwater ingress into the underground working areas, which negatively impacted productivity and development advancement rates. To address the higher water rates, the mine is adding additional pumping capacity, deepening an existing dewatering well and reworking the dewatering system to allow for additional flow capacity in the water treatment facility on-site. We expect that production and costs will continue to be negatively impacted until these measures are completed and groundwater flows return to easily manageable levels, which is expected to occur by the end of the Q3 of 2020 5. On a positive note, the ore control reconciliation on the bench level in the 2 zones mine today has been positive. In the OG zone where most mining has occurred, we have seen more tons plus 40%, better grade plus 37% or more ounces plus 90%.

Speaker 3

On the first level of the South Pacific zone, we saw nearly a 3 fold increase in tons at expected grade for nearly 3 times more ounces. As a result, we feel confident that once we address the water issues, cost will decline and production will increase. This is also the asset that we believe has the most exploration upside given its location of less than 10 kilometers from a world class mine with over 25,000,000 ounces discovered to date. Slide 8. The Granite Creek open pit is a relatively low capital intensity project given that it is a previously producing mine using heap leach process.

Speaker 3

The mineral resource sits at over 1,000,000 ounces at an average grade of approximately 1.4 grams per tonne, making it one of the highest grade oxide deposits in Nevada. The 2021 pre feasibility study envisioned a heap leach end mill scenario. We are updating the prior technical report and we will perform trade off studies of heap leaching the entire deposit, building an oxide processing facility on-site or utilizing process infrastructure already in place at other properties to process the higher grade material through a mill while continuing to heap leach the lower grade material. This study is expected to be released near the end of 2025. We have begun the permitting process.

Speaker 3

We expect the process will take approximately 3 years followed by 18 months of construction. Slide 9. Ruby Hill Complex is comprised of the Archimedes underground formerly known as the Ruby Deeps, the Mineral Point Oxide open pit project as well as the Gold Hill Oxide deposit. Additionally, the Ruby Hill complex host significant base metal potential at the FAD project, Flapjack and Hilltop. For the time being, base metal projects and the Gold Hill project have been deferred to focus on the more advanced gold projects that have a clear and shorter pathway to generating free cash flow.

Speaker 3

Brian will expand on the base metal JV later on the call. Slide 10. We expect permits for underground mining at Archimedes in Q1 of 2025, allowing us to begin development and achieving production in late 2026. Arkemenis underground is on track to be our 2nd producing asset. While it has the lowest grade of our 3 underground mines, it has the most favorable mining conditions, which will allow us to mine the deposit utilizing more efficient mining methods.

Speaker 3

As we develop the lower portion of the ore body, we will complete the required drilling to permit the lower portion of the ore body over the next few years. We will have a PEA for our communities underground by the end of Q1, 2025. However, we anticipate that we will not issue a feasibility study on the Archimedes underground until we complete the drilling program, which is currently targeted for 2027 once construction of the underground drill platforms are completed. Therefore, we envision the Archimedes feasibility study to be published in late 20 27 or early 20 28. Slide 11.

Speaker 3

Mineral Point has the potential to be our flagship mine. It hosts our largest gold and silver resource in the portfolio. Based on the internal scoping study, it has the potential to be a multi 100000 ounce mine at solid cost. It will be our most expensive mine to build, but the expectation is that by the time we begin construction targeted for 2,030, we anticipate to have 4 producing gold mines generating significant cash flows to fund the development of Mineral Point in combination with the project finance or corporate facility. We expect to release a PEA in Q1, 2025.

Speaker 3

Slide 12. Cove is our 3rd underground mine. Like Granite Creek, grades are over 10 grams per ton, making it one of the highest grade underground mines in North America. The mining conditions at Cove were better than Granite Creek, but perhaps not as favorable as our Kuwaiti's. The baseline work to advance our final permit application is proceeding on schedule.

Speaker 3

We expect to submit the final permits in mid-twenty 25 and expect final approvals by the end of 20 27. Construction is scheduled to take 18 months. Construction scope of work consists of dewatering and portal development with associated infrastructure. There is no planned processing facilities at Cove. An infill drill program is underway.

Speaker 3

It is expected to be completed in Q1 of 2025, which will allow us to finalize the feasibility study for the mine in 2025. Slide 13. I've already spoken to the pending feasibility study, which will allow us to optimize the value of the permitted autoclave and loan treatment. We continue to realize value for the oxide material mine at Granite Creek through the existing ore purchase agreement, while we pursue alternatives for the processing of our refractory material, either through an extension of our tow milling agreement or alternate processing solution. The Lone Tree open pit project, however, continues to have a variety of financial, technical, environmental and social issues to be worked through.

Speaker 3

It is expected that project will likely remain deferred for another decade. We believe new technologies and other solutions may become available in the future to allow us to unlock the value of this large open pit project. Slide 14. We mined over 53,000 tons of Granite Peak underground nearly 50% more than Q3 of last year. Mining of processing grade material, which is grade equal or above 5 grams per ton is largely in line with last year's production.

Speaker 3

An overall increase in the number of mining headings available has allowed for comparable production in spite of the dewatering issues discussed earlier. The significant increase in oxide mineralized material mine when compared to 2023 is due to the inclusion of oxide material grading between 2 grams per ton. When oxide mineralized material, grading in this range is encountered. This material is classified as incremental material transported to the Lone Tree facility for leaching on the heap leach pads at that site. For clarity, no stopes are planned at less than 5 grams per ton.

Speaker 3

The incremental material is encountered when developing the decline or while accessing to or between stope blocks. Development rates continue to ramp up when compared to the same period in 2023, but still are not meeting our plan again due to water. Sharp reduction in exploration drilling footage is a function of both a large exploration and drilling program in 2023 as well as shifting our strategy for exploration drilling from surface to underground in 2024. This shift has delayed our timing of drilling as we complete the excavation of the underground drilling platform. I will now hand the call over to Ryan Snow to walk us through our financials.

Speaker 4

Thanks, Matt, and good morning to our listeners. Yesterday after the market, the company reported our financial and operating results and the company's financial statements and MD and A for the 3 9 months ended September 30, 2024 can be found on SEDAR Plus, EDGAR and our website. Highlights of our results include revenues in the quarter totaling $11,500,000 compared to $13,200,000 in the comparative prior year period. This difference is due to lower volumes sold partially offset by higher gold price. 3rd quarter gold sales totaled 3,063 ounces at an average realized gold price of $2,422 per ounce, resulting in revenue of $7,400,000 compared to gold sales of 4,585 ounces at an average realized gold price of $18.95 per ounce, resulting in $8,700,000 of revenue in the Q3 of 2023.

Speaker 4

In addition, during the Q3, the company recorded mineralized material sales totaling 14,696 tonnes for revenue of $4,100,000 compared to mineralized material sales totaling 16,059 tonnes for revenue of $4,500,000 in the comparative prior year period. The company recorded a loss per share of $0.10 for the quarter, a decrease from the $0.01 loss recorded in the comparative period a year ago. This change is primarily due to expense recognized in the period of $10,300,000 related to losses on derivative instruments and warrant revaluation compared to an income of $21,500,000 for the same instruments in the comparative period. Cost of sales increased by $3,200,000 compared to the Q3 of last year, primarily due to an inventory write down at Granite Creek related to the increased costs for the water issues Matt described earlier. We ended the quarter with $21,800,000 in cash, representing a decrease of $26,000,000 from the end of the second quarter, primarily due to cash used in operations and capital expenditures.

Speaker 4

In addition to the 2,210 ounces that were delivered to Orion in the quarter relating to the deferred gold deliveries from the 2nd quarter. Also during the Q3, the company began utilizing the previously announced at the market equity program to raise capital. In total, 11,500,000 shares were issued for gross proceeds of $13,100,000 As for our recapitalization plan as shown on slide 16, as Matt and I have outlined today, our first gold mine and only source of cash flow, Granite Creek, continues to ramp up. And given the water issues Matt described, we currently do not expect the mine to generate free cash flow until late in 2025 or early 2026. As a result, we need to recapitalize our balance sheet.

Speaker 4

Company's ability to continue to operate and execute its new development plan and fulfill its commitments as they come due is dependent upon its success in restructuring the current debt obligations and obtaining additional financing. While management has been successful in raising additional funds in the past, there can be no assurance that it will be able to do so in the future. Regarding the recapitalization plan, we envisage a 2 step recapitalization process, which will include demonstrating a viable path to generating free cash flow and rescheduling and or refinancing the existing debt obligations. This plan will include finding a solution for our short term commitments, including the deferral of the upcoming gold and silver deliveries to Orion scheduled for late December early January. Discussions with Orion have initiated for this deferral and the company expects a positive outcome in the coming weeks.

Speaker 4

This plan will also include further utilization of our at market facility. Phase 2 of the recapitalization plan involves working with our current partners as well as seeking new debt providers to restructure our existing debt and provide sufficient capital to execute on the company's new development plan, with repayment terms that align with the company's ability to service that debt. Management has initiated work on this topic, including discussions with existing and potential new partners and aims to complete this process in the Q1 of 2025. Turning to slide 17. As we discussed in the quarterly press release, we believe that a base metal focused joint venture at Ruby Hill no longer makes sense in light of the new development plan.

Speaker 4

As you may recall, in November of 2023, we entered into a non binding letter of intent with a third party to consider a joint venture for Ruby Hill with a focus on base metal exploration and development. It's important to note that in addition to deposits with base metal potential, namely Blackjack, Hilltop and FAD, the joint venture also included all gold and silver deposits at Ruby Hill. The proposed structure of the JV had the potential to impact the timing of the advancement of the existing gold deposits on the property and potentially impact the company's ability to restructure the balance sheet. In addition, upon careful assessment of the joint venture terms and economics, considering the potential value of the existing gold resources in a rising gold price environment and taking into account the limited understanding of the base metal potential, IED's Board and management have elected to terminate joint venture discussions. We believe the base metal potential at Ruby Hill may ultimately be significant and feel it's prudent to better understand the upside potential prior to a joint venture deal.

Speaker 4

I will now turn the call back over to Richard Young, our CEO, to discuss the company's organizational structure and provide closing remarks. Richard?

Speaker 1

Well, thank you, Ryan. To support our new development plan, as the company evolves into a developer and producer, the organizational structure and skill sets needed need to evolve. We envision becoming a mid tier gold producer of between 4,500,000 ounces of gold per year by the early 2030s. The 3 most significant changes facing I-eighty gold today are 1, the increased emphasis on technical skills to ramp up, permit and construct 5 projects through the balance of the decade 2, the requirement to restructure and recapitalize the balance sheet in a manner that aligns the new development plan and 3, the additional legal and reporting requirements of becoming a U. S.

Speaker 1

Domestic issuer. To meet our growing and changing demands, the company has promoted 4 senior technical personnel and hired 4 new senior positions. We believe these organizational changes include the promotion and new hires, add the necessary experience and bench strength to further de risk the execution of the development plan. The cost of these changes is expected to be partially offset by lower third party consulting costs. On the operational front, the promotion of 4 senior technical personnel is a reflection of the importance of these 4 individuals in reducing our execution risk as we ramp up, permit and construct 5 mines through the balance of the decade.

Speaker 1

On the legal front, the hiring of Dave Savory as our new Senior Vice President General Counsel will bring in house industry specific legal experience, while improve our approach to our compliance with our governance and contractual commitments while allowing sorry, third party legal costs. Further, this addition will immediately reduce the burden on existing management to manage the legal process in an increasingly complex environment while adding additional strength as we execute on our new development plan. On the finance front, the company has added 2 senior financial roles, a VP of Treasury in charge of Treasury and Financing, Katerina De Luca and a VP of Strategic Planning, Curtis Turner, who is transitioning from VP Finance to this new role. These new positions are required to meet the increased workload associated with the balance sheet restructuring and debt reporting as well as enabling the new development plan to be executed. The VP Finance function will be managed by an incoming hire, Cindy Hsu.

Speaker 1

Finally, Lele Amumi has joined the team as Vice President, Corporate Development Strategy, who will also be in charge of Investor Relations. This position replaces the outgoing existing Vice President of Corporate Development, Matt Gollad, who is instrumental in the formation of I-eighty Gold since its exception in 2021. Mr. Gollat has agreed to remain as an advisor in the transition to focus on the new development plan. The company would like to thank Mr.

Speaker 1

Gollat for his contribution to the company. The new VP, Corporate Development will execute the new vision of the organization, play a key role in developing and maintaining the company's life of mine models as well as understanding the value of IAT goal and conveying that message to the market. Joining Leily will be Jim Mackay, who will work alongside of Leily. All of these new hires are people that I've worked with previously, some for nearly 20 years, all of which have the skill sets, required skill sets and values that will round out what is already a very strong team. With that, I would like to turn the call back over to John, our operator, so that we can respond to questions from the listeners.

Speaker 1

Thank you. John?

Operator

Yes, sir. Thank you. Ladies and gentlemen, we will now begin the question and answer session. And we have questions that came through. We'll now take the first question.

Operator

This comes from the line of Kent Whitaker from KP7 Investors. Your line is now open. Please go ahead.

Speaker 5

Thank you. A couple of questions. Well, first off, congratulations on instilling some discipline in the company there and actually developing a development plan. So I first of all appreciate that. It seems like the market has some questions on survivability.

Speaker 5

And I know you addressed your reaction to the market's reaction to your development plan. But can I just ask as you come in and you looked over the balance sheet, what do you see as the key risks on not just the balance sheet, but also the other obligations that you've got? And how over the next few months or quarters or year or so, will you address those issues? Thank you.

Speaker 1

Well, that's a great question. I guess, first of all, it's Richard Young speaking. Myself and a number of people that have now joined today have worked in West Africa in much more challenging conditions in terms of fundraising. Coming in, looking at the balance sheet, these are Nevada projects. They're much easier and there's a bigger pool of capital available than there was in West Africa.

Speaker 1

And I think at the time that we sold Taranga, for those who aren't aware, I think we might have $600,000,000 in debt. So I think the consensus of our team was that this is a fixable issue that when you look at the asset base and you compare it to the balance sheet as it currently stands, the debt levels are actually modest. They just don't match the cash flow generation of the assets today. And the additional capital required for this new development plan, frankly, is modest in the big scheme of things when you compare it to other projects globally. And I think that when you look at Orion, they've been a valued partner.

Speaker 1

They've got the biggest balance sheet there throughout our capital structure. And they've got the longest view on value and we will work with them as well as some other partners that the company had been talking to before our arrival. And we do we are very comfortable that we will be able to put a recapitalization plan together over the next 3 to 6 months that will address the mismatch that we currently have between our current obligations and the cash flow generation of the business.

Speaker 5

Do you feel that so Orion is part of the solution here or are they part of the problem?

Speaker 1

They're part of the solution. I don't think they're part of the problem. I think that in everyone's defense, these projects took a little bit longer to develop, than everyone initially expected. But the company has a very good handle on the processes and the timing. And then part of the issue is the base metal success like there was so much exploration success through this portfolio.

Speaker 1

It did cause some strategic direction changes through the course of the last few years, but it just really goes to the quality of the asset base and the fact that you have a pipeline of development, not for the next 5 years, but potentially for the next 15 to 20 years that probably few other companies can match. But what we've had to do is decide on which projects to focus on so that we allocate capital in the most effective manner. And that's what this plan does. So no criticism of the prior strategy or how the balance sheet was constructed. The focus really is now working with our current proposed debt providers on what this plan entails and working with them to reschedule this debt to allow us to be able to generate the value for shareholders that all IED shareholders expected with the formation of IED and with all the drill success the company's had over the last few years.

Speaker 5

Just one more follow-up and I'll pass the line. You got a tremendous portfolio of projects obviously and that is a testament to the exploration successes there. And I've heard you talk about your excitement about these the quality of these assets. Is one option asset sales. I mean you obviously have 5 or more projects that have significant value.

Speaker 5

Is that part of the strategic thinking an asset sale or 2 to alleviate some of the financial strains you're going through now? Or are you going to try to get through this without asset sales? Thank you. I'll pass it.

Speaker 1

Well, thank you. And I think that's a fair question. And look, I think that the Board and management are open to anything that creates shareholder value. But and part of the issue for us is the Street, whether it's the buy or sell side, doesn't have a clear view on value of each of these assets. By the end of the Q1, when we've got PAs out for each of them, it will become clear what the value of these assets are.

Speaker 1

And each one individually has a value much higher than our current market cap today. But there are tremendous synergies between the 300 ground mines and Matt could talk about that if you like. And then these 2 open pit mines create so much value and we see so much opportunity with the group of 5 gold projects together. And we do believe that the recapitalization and the additional capital required are quite modest and we don't at this point believe that a buyer could give us fair value that would make sense for shareholders over the medium and long term. We are taking a longer term perspective with this plan, not focused on the short term, and we do believe that we can solve the balance sheet issue.

Speaker 1

I hope that answers your question. We'll open up to the next question if there are any.

Operator

Yes, sir. Thank you. And the next question comes from the line of Brace Adams from CIBC Capital Markets. Your line is now open. Please go ahead.

Speaker 2

Thanks, Richard and team. Thanks for taking my questions. First one is 5 mines by 2,030, that's a pretty strong goal to set. Was there a consideration to simplifying the development plan and focus on less projects and reduce the finance needs?

Speaker 1

So what I'll do is I'll turn it over to Matt because while we talk about developing 5 mines, 4 of these are very low technically and financial commitment. So Matt, can you just talk a little bit about what's required for the first four before we get to middle point in terms of work to be done and maybe allude to the cost of that? Absolutely.

Operator

All right. So thanks for the call or for

Speaker 3

the question, Bryce. So I look when I look at the 3 underground mines that we're talking about, the Granite Creek, the Archimedes and the Cove, I really think of them, Bryce, is one mine in summation. There are 3 portal mines coming out of existing open pits. And if you're coming from the Nevada background, all of our open pits have at least 1 portal mine coming out of them. In the simplicity of the construction and the ramp up of each of those 3 underground portal mines, pretty simple.

Speaker 3

I'm not understating the challenges that every mine will incur, but the development of 3 underground portal mines in Nevada is a pretty normal process and has been done, as I said, in virtually every open pit mine in Nevada already. So it's a big it sounds like a big number, but I'm really seeing that as one task. The next task is, of course, the Grand Creek open pit. This was already an open pit heap leach facility. We're in the process now of permitting for the next stage, essentially a pushback of the existing open pit facility and a new heap leach plant.

Speaker 3

Again, big task, but in the context of where we are in Nevada, this is a pretty normal occurrence. So those are the 3 pardon me, the 3 underground mines and Granite Creek open pit. Mineral Point is a big chunk. And we do appreciate that internally. We see a long process there for completing the technical studies for the permitting and for the construction of that.

Speaker 3

And that's our last asset on the development chain. So by the time we get to the stage where we are looking at the construction of Mineral Point, we will already have the 3 underground mines into the production and development stage and open the open pit at Granite Creek will be well advanced. So that's the way we stage it out, Bryce. That Is that addressing your question? I know, Ryan, you want to touch on

Speaker 4

the cost? Yes, I do. Thanks, Matt. This is Ryan. So, Bryce, just to add to Matt's comments there.

Speaker 4

As he mentioned, the 3 underground mines are portals out of existing pits and the open pit at Granite Creek is on a brownfield site as well. So really what we're looking at there is low capital intensity for all four of those projects to bring them into production in our new plant.

Speaker 2

Got it. Thanks. Yes, that's helpful. Maybe a follow on to that. It's a little hard to see from the slides and from my recollection from visiting site a few years ago, but do you foresee any like interaction between those open pit heap leach projects and then the undergrounds or are they all distinctly independent of each other?

Speaker 3

All right. Another brilliant question, Bryce. At Cove and at Archimedes, there is no interaction between the between the portals and any plans for open pit mining. At Granite Creek, have you been to Granite Creek? Those portals at Granite Creek will need to be reconstructed as part of the open pit mine at Granite Creek.

Speaker 3

There's a staging of the 2 pits such that when you finish the first pit and then you develop new underground portals out of that pit to intersect your existing underground development. That's all worked into the PEA and it adds a little bit level of complexity, but all very easily managed.

Speaker 2

Okay. Thanks. I'll look forward to the PEAs next year. All the best. Thanks for taking the questions.

Speaker 1

Thanks, Bryce.

Operator

Thank you. And the next question comes from the line of John Tumazos. Your line is now open. Please go ahead.

Speaker 6

Richard, it's good to be acquainted again. Thank you for taking my question. It's more traditional to build mines or reopen mines 1 by 1 and harvest the cash flow from the first project and move on to the second. The term in mathematics is linearly sequential 1 by 1. If the market gives you less cash than you want or insists on some simplification, would it be the Granite Creek oxide pit or one particular of the 3 underground gold refractory mines that would be the ones to resume first?

Speaker 6

And I think that people might be misunderstanding your presentation, Richard, that the company wants to do all six things at once and get all the cash up capital borrowed upfront and all the cash to come later and maybe that's frightening people.

Speaker 1

John, I appreciate that. And I'm sure that this was a lot to absorb, but you're right. So when you step back, we're currently ramping up Granite Creek and expect, as Ryan mentioned it, to be free cash flowing at some point in the second half of next year. We will begin construction of Archimedes underground formerly Ruby Hill Deeds. So we'll be building those in sequence.

Speaker 1

And then we'll have both of those underground mines ramped up generating free cash flow before we start construction of Cove and the Grand Creek open pit. And as Ryan mentioned, the capital requirements for those are actually very modest. And so based on our current recapitalization plan, we don't believe we need a lot of additional capital to be able to execute on this plan. We've been conservative internally in terms of the capital and offering from parameters, the gold price, and we believe we have cushion. We believe that a lot of the capital required as part of this plan could come from some sort of debt instrument so that we minimize solution to shareholders and maximize share NAV.

Speaker 1

But we'll consider as we move forward, but we believe that over the next 3 to 6 months, as we put out the 5 PAs and the market gets a clear understanding of the timing and the cost and the value of these assets, because we're not looking to raise equity today. We'll complete the refinancing plan in the Q1. And our objective as a management group is to have the refinance to the balance sheet in place and then be able to go to shareholders with a holistic plan that basically solves our cash flow requirements to allow us to move forward and build essentially all five mines.

Speaker 6

Thank you for that explanation, Richard. Good luck. Thank you, John.

Operator

Thank you. And the next question comes from the line of Jose Camoes from Global Income. Your line is now open. Please go ahead.

Speaker 7

Hi. Many thanks for the presentation and for taking my questions. I have three questions. So first of all, you have consumed something in the range of $26,000,000 during the Q3. What should you expect in terms of cash consumption for the Q4?

Speaker 1

So Jose, thank you. First of all, as you can see from our financial statements, Granite Creek Underground because of the dewatering issue is generating negative cash flow. So we do expect that we will continue to assume capital through the Q4. We have put all discretionary expenditures on hold until we complete the refinancing and we are working with Ryan to defer the upcoming deliveries, as Ryan mentioned, under both the gold prepay and the Silverstream that are due in December January. And with that, we do expect to have sufficient cash flow to move through the Q1 to allow us a timely and orderly recapitalization of the balance sheet.

Speaker 7

Perfect. My second question is actually regarding the recapitalization plan. Could you be a bit more specific? Or what would be the ideal structure for you to be able to announce during the Q1 of 2025?

Speaker 1

It's too early, Jose, to comment on what that will look like. But what we've laid out in the press release and MDA is just looking to match our debt obligations with our ability to meet those. And so we have a clear understanding of what we think that should look like. But we've got to work with Orion and others to determine what those instruments will look like and how we will recast that capitalization. But we haven't we're not specific at this point.

Speaker 1

We're just we just got it in various pots. That makes any sense buckets.

Speaker 7

Yes, it does. Thank you. My final question is regarding your current debt structure. Is currently debt collateralized with the assets?

Speaker 8

Yes. Yes.

Speaker 1

It is. Ryan or David, who would like to address that?

Speaker 3

Yes, certain of our debt commitment. So the gold prepay arrangement with Ryan has security attached to it as does Silverstream. And the convertible debentures outstanding has security attached to it with the Coico project.

Speaker 1

Jose, did that answer your question?

Speaker 7

Yes, it does. So the final one would be just to confirm, you were saying you're quite confident you will be able to reach a deal and recapitalize this by Q1 2025, just to confirm this point?

Speaker 1

That's correct. And our rationale for that, as we pointed out, is the quality of this asset base, location of the asset base and the low capital required to be able to execute on this plan. So between our current lenders and potential new lenders, there is support to assist us with this recapitalization as well as providing the additional financing required to be able to execute on the plan.

Speaker 7

Perfect. Thank you.

Speaker 1

Thank you.

Operator

Thank you. And the next question comes from the line of Jonathan Silas from Group Capital. Your line is now open. Please go ahead.

Speaker 8

Hello. I am very happy to hear there is a plan in place, but unfortunately, a lot of damage has been done to shareholders. So I just have two questions. Why did the team have a pending joint venture for a year? It was in finalization, but ending up there is nothing.

Speaker 8

And my other question is, did you have any potential M and A deals that you declined throughout 2023 2024?

Speaker 1

Jonathan, thank you. And I'm sorry for all shareholders on where the share price is today. All we can do is look, it's a great asset base that's been put together and we've laid out a plan that will we believe, take our share price even with dilution with the refinancing to levels above where it's traded at in the past. But we'll be time to execute on that. I turn it over to Matt or Ryan to make a comment on M and A.

Speaker 1

And

Speaker 3

Okay. So regarding M and A deals that we could potentially have declined, I mean, as part of the team, we always looked at proposals and suggestions for M and A activity. We've engaged with those teams, but decided through the course of the year that none of them met our objectives for delivery and realize the value of the assets. Specifically, Ryan's covered the discussion on the JV and this was not a decision that we took lightly. We looked at the focus on the JV.

Speaker 3

We looked at the potential free cash flow generation coming from base metals in the near term as opposed to the generation of free cash flow from the gold assets in the near term and have made a corporate decision on the direction of that joint venture. Ryan, is there anything else you want

Speaker 4

to add? The only thing I'd add to that is, I think it's important to remember that over the course of the last year that the joint venture has been potentially active. The gold price environment has changed pretty dramatically. And looking at that and the economics of the property in light of that changing gold price environment had us take a slightly different view when it comes to the property in general and the JV specifically.

Speaker 8

Okay, okay. Well, I wish you the best of luck.

Speaker 6

Thank you. Thank you, Cholanda.

Operator

Thank you. And we have a follow-up question from Bryce Adams. Your line is now open. Please go ahead.

Speaker 2

Thanks again. One bonus question from me. The comments around the carrying value and the going concern, is that simply a continuation of the language used by previous management? Or is there anything new in that?

Speaker 1

I'm sorry, can I go ahead? Yes. No, there's nothing new. But Bryce, when you look at our balance sheet, we are ramping up an asset that is consuming capital and we finished the quarter with $20,000,000 So we do need to restructure the balance sheet. We're very confident that we can do that and we're well advanced.

Speaker 1

But it's just a requirement under both Canadian and U. S. Regulations that we make it clear to investors that we do need to do something that a status quo just doesn't work.

Speaker 2

Okay. Yes, understood. Just wanted to see if anything had changed.

Operator

Thank you. And also a follow-up question from Jose Camofas.

Speaker 4

Your line

Speaker 3

is now open. Please go ahead. Yes.

Speaker 7

Thank you for the follow-up question. Just wondering, I know it's early to talk about the recapitalization plan, but is a debt to equity conversion on the table? Is that an option? Or would that be like a last resort for you?

Speaker 1

I'm sorry, what was the

Speaker 4

A debt to equity conversion, is that on the table?

Speaker 1

So look, our preference is to and ultimately the Board will make the decision, but you have an asset base located in Nevada that we believe has significant debt potential capacity, which we believe will limit and we will work to limit any dilution. As a shareholder, we would like to issue as little stock as possible moving forward. We want to minimize dilution. And by leveraging the balance sheet, but again, putting a debt structure in place that works for the asset base we have and executing as we and executing as we expect we can. And one of the things that Matt talked about that just want to highlight is that the development of these five assets is frankly low risk.

Speaker 1

These are historic operating sites. We understand the geology, the metallurgy and the mining. And so we don't see a lot of risk within this portfolio. We believe that we'll be able to execute. And we do believe that ultimately we'll be able to put a restructuring plan in place that minimizes dilution to shareholders as much as possible.

Speaker 1

So converting debt to equity is not something we would want to consider.

Speaker 7

Great. Many thanks.

Operator

Thank you. And the next question comes from the line of William Heiko. Your line is now open. Please go ahead.

Speaker 9

Yes. This is Bill Siegel. The question I have relates to the Tawell Milling Agreement. I was under the impression that the toll milling agreement for 1,000 tons a day didn't expire until the new autoclave or the existing autoclave had been refurbished. Can you comment on that?

Speaker 3

Yes. Thank you, Bill. So there is language in the existing tow milling agreement for the autoclave and I'll be very specific to make sure there's no misunderstandings. We have a toll mailing agreement for the autoclave that is at 1,000 tonnes per day that had a initial period of 3 years which expired in October. There is language in the toll mailing agreement regarding the ability to extend that agreement.

Speaker 3

There is also some other scenarios that could be a better and more favorable path for us to process autoclave material in Northern Nevada. So we are currently pursuing all of those options and looking at the different scenarios in which is going to make more sense for both ourselves and any potential business partners with regards to that toll milling. The toll milling agreement for the roaster is a 10 year term that is and so we are in approximately the 4th year of that 10 year term. So that's not affected by any of the discussions we've had today.

Speaker 9

So then in summary, the expiration of the toll milling agreement, do you see that as being or adding a lot of risk to the equation for I-eighty?

Speaker 3

I believe that through discussions and working with potential partners, we will very much come to a solution that will be best value for everyone. So it is a risk. I mean, of course, everything is a risk, but I am very confident that we'll be able to reach solution where both parties are favorable. And Bill And in the main thing

Speaker 1

Pardon me, Bill, could I just add to that, that when you look at production for Granite Creek today, about 25% of production is affected by the toll milling, 75% is addressed through other streams, whether it's heap leaching where we produce gold bars or an oxide agreement. So it's about a quarter of production that's impacted over the next 12 months. But as Matt mentioned, we're well underway in discussions for a solution for that.

Speaker 3

Yes. Thanks for that, Richard. I failed to mention that the current oxide processing agreement still very much in effect and both parties seem very pleased with the results from that agreement.

Speaker 9

And in the meantime, when you encounter sulfide material, you're just going to probably throw it in a storage area waiting for the agreement to kick in again with whatever party?

Speaker 3

Yes, Bill. We put it into a line storage facility as per our permits and that storage facility is on-site.

Speaker 9

Okay. Thank you.

Operator

Thank you. And no further questions have came through. I would now like to hand back call over to Richard De Jong for closing remarks. Please go ahead, sir.

Speaker 1

Well, thank you, John. In closing, I would just really like to reiterate that, please, we look for patience from our current shareholders, give us an opportunity to complete these 5 PAs and demonstrate to the market the value of these assets. We'll move forward with the recapitalization to minimize dilution. But we believe that we've got the right team in place, particularly with the new hires with a lot of deep experience in debt restructuring that we're going to face. And we've got a great asset base in a great location.

Speaker 1

We've got a great technical team and we believe that we will be creating the next mid tier gold producer here in North America. So I hope investors will show some patience and support over the next 6 months as we lay that out for everyone. Thank you.

Operator

Thank you, sir. This concludes our conference call for today. Thank you everyone for participating. You may now disconnect.

Powered by Quartr
Earnings Conference Call
i-80 Gold Q3 2024
00:00 / 00:00