Q4 2021 Osisko Development Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to our fiscal development Q4 and year 2021 results conference call.
After the presentation, we'll conduct a question and answer session.
If you'd like to ask a question. Please press star followed by the number one on your telephone keypad.
Please note that this call is being recorded today February 25th 2022 at nine a M eastern time.
Today on the call we have Mr. Sean Roosen chair of the board of Directors and Chief Executive Officer, Mr. Alex Dawn, Chief Financial Officer, and Vice President Finance, Mr. Chris Lodder President, Mr. Luke Lasalle Chief operating officer.
I would now like to turn the meeting over to your host for todays call Mr. Shutting in Houston.
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Finally, I'm going to.
Welcome to the fourth quarter core results call for us its been evolving corporation, everybody and thank you for taking your time out today.
Busy session.
We'll be looking at the fourth quarter results for the Cisco Development Corporation and some of the things that are going on.
On the balance sheet, but first I wanted to take a chance to discuss the results for 2021 from a catalyst standpoint.
And I will get into in after I read the forward looking statements.
I'd like to remind participants all amounts discussed.
On this call will be denominated in Canadian dollars.
Also note that statements made during this call will include forward looking information.
And future oriented financial information regarding its business and disclosure regarding possible events conditions or results that are based on information currently available to management.
Indicate managements' expectations of future growth results of operations business performance and business prospects and opportunities.
Such statements are made as of the date hereof and the company assumes no obligation to update or revise them to reflect events disclosures or circumstances, except as required by applicable securities laws such statements involve significant risks and uncertainties and are no guarantees of future performance or results.
A number of these risks and uncertainties could cause results to differ materially from those results.
That work that are discussed today, given the risks and uncertainties one should place undue reliance on these statements and information. Please refer to the risk factors forward looking information.
Huge oriented financial information sections of our public filings, including without limitation. Our recent 2021 annual financial statements MD&A and earnings in the press release and earnings press release for additional information.
Which was filed on SEDAR yesterday, we released our 2021 annual and fourth quarter results before we get into the financial results I did want to take a pass to give you an update on your shareholders company.
And a quick overview on the acquisition of the Trixie project in Utah.
The.
Mine project in Utah.
Take property is.
It's about 14000.
Plus acres.
And that consists of a 23 previous producers now what's most exciting what's eating high grade discovery.
That that happened in 2020.
And developed by the operator of the project.
This is a new type of mineralization that hasnt been seen as projects putting production for over 100 years, most recently by Kennecott.
And this new mineralization has been numerous high grade and led to.
Trixie mine being highest doing production mine last year at 59 grams, a tonne at grade mined.
Although albeit very small scale.
We consider this to be significant.
Opportunity for the OLED oded shareholders.
As we get further into it.
In terms of our growth plans are on that project will come back to you after the deal closing and.
And giving you a further update an insight on that project as it evolves.
In terms of our growth plans, we continue to add ounces along with a 43 101 compliant resource.
Development update and drilling campaign that is ongoing at the Cariboo Gold project.
As well as what we're doing in Mexico.
The assets that we have on the go right now are all evolving.
It's really development curve and into the production side.
Going through construction here in the next 24 to 36 months for the most part.
Projects are the <unk>.
<unk> project in particular.
Permitting is underway for a 4750 ton per day operation that permitting cycle is in good shape and we expect to see.
Except the ability to get in the second half of 2022.
With a feasibility study due out in the first half of 2022 of this year so by June .
And that that project has also experienced significant amount of drilling last year.
With 158000 meters of drilling completed and.
In 2022 to infill and set the table for that.
One mine plan on that project, which we expect to announce with the feasibility study.
As well currently production is ongoing at the B L. Two project, which is part of the Cariboo, but larger project.
I see north of 20000 ounces.
We're operating at QR mill, and obviously two.
2020, and 21 were challenging years due to the Covid.
Impact on operations there so we're happy to see and thank the team for all the hard work to get us to.
So where we are and pouring gold there are significant weight as we speak today.
San Antonio Heap Leach project in Mexico.
There's a million ton stockpile that we're currently putting on the leach pad were hoping that that rate.
Right.
LOE down to the pad to between four and 6000 tons by the end of this quarter and.
And we should achieve first gold.
<unk> SaaS. It here in Q1 early Q2 next next quarter on that project as we processed that stockpile set the stage for the larger projects.
We believe that will be.
We should receive a permit for that sometime.
In the second half of the year and we will decide that.
How do we want to scale that project as we're looking at some leach kinetics coming in now suffice it to say the drill results that we put out on San Antonio will have met our expectations and then as of recent.
And we continue to see good growth on that asset.
As we as we go on with it so quite an exciting year and I would say that.
And in the gold business, a high grade assets and shallow in good jurisdictions are like waterfront.
On the Riviera and the addition of Genentech gives us let's just.
Good about and the shareholders that waterfront.
A lot of high grade with a large project that caribou in the background and a low cost Capex project in Mexico, and I think we have a very good mix of assets in the company.
For our future growth in various other phase III, a mid tier producer as we said that we would within the five year window that we had a lot of.
As we came out with this company in 2000, and 2021 I will now pass.
Mike over to Alex Dan our CFO to.
To give you an overview of 2021 Q4 financials, Alex or do you.
Okay.
Thank you Sean and good morning, everyone gross revenue was approximately $3 million for the fourth quarter from the sale of 1236 ounces of gold at.
At an average realized gold price of 1766 U S dollars per ounce.
For the 12 months ending December 31, the company sold 3175 ounces.
<unk> $7 $7 million of revenues and.
And realizing a 1800 to U S dollar per ounce gold price.
In the fourth quarter, the company incurred a net loss of approximately $56 $4 million or <unk> 42 per share.
The main driver for the losses, the recording of noncash impairments totaling $47 $8 million.
It is comprised of two amounts.
An amount of $42 million related to the exploration.
<unk> assets.
Held in northern Quebec, and the South of Mexico.
With the company's resources focused on its current active projects and the addition of the <unk> project in the company's portfolio.
Management deemed prudent to impair these properties.
Okay.
The second non cash amount of $5 $8 million is related to the reevaluation of the stock pilots or buchi due to an increase in the estimated processing costs.
For 2021, the company incurred a net loss of approximately $133 $3 million or $1 <unk> per share.
The loss for the year is mainly due to the noncash impairments of assets recorded in Q4 and prior quarters totaling approximately $122 million.
G&A for the quarter was in line with the previous quarter.
General and administrative expenses for the full 2021 year totaled $21 $7 million.
And the increase compared to last year is due to the ramp up of activities in workforce at all the projects and the head office.
Other income net of other expense in the fourth quarter was a gain of $3 $8 million compared to $3 5 million in the same quarter last year.
For 2021, a recorded gain of $13 5 million compared to $9 $8 million in the prior year.
Increases in income is mainly due to the recognition of a premium on the flow through and charity flow through share issuances.
Were completed in the first quarter of 2021.
Our cash and cash equivalents balance at the end of the year was approximately $33 $4 million.
The main drivers affecting cash in the quarter were as follows.
Cash flows used in operating activities for the full year was approximately $41 $4 million compared to $6 million in the prior year.
The increase is due to the ramp up of the G&A to meet operational requirements and also a negative change in the amount of cash working capital.
Cash cash flows used in investing activities totaled approximately $180 million to $157 million for the year compared to $62 million in the prior year.
The increase is mostly reflected in the ramp up of the mining interest and property plant and equipment at the Cariboo Gold project.
<unk> and San Antonio projects.
Set by the proceeds from the disposal of certain investments.
And finally cash flow provided by financing activities for the full year were approximately $34 $7 million.
Which was due to the flow through financing was completed in March of 'twenty to 'twenty, one that generated $33 $6 million of gross proceeds.
I will now turn the call back to Sean for closing remarks.
Okay.
Very much Alex obviously, what's going on in terms of.
The evolution of the company when we had transitioned this company from.
Or balance sheets LTV, we have taken some of these exploration projects with us shortly.
Pending development of the company and our listing on the NYSE, we wanted to make sure that all issues regarding the balance sheet were dealt with in this quarter.
So we've looked at the ability to do that and we've also.
<unk> initiated two financings.
Non brokered for $110 million and $90 million.
Bob deal that was.
Scheduled to close shortly and proceeds of $230 million plus C.
Existing cash balance and equity book.
Company setting.
<unk> available liquidity.
Somewhere north of $300 million as we.
As we close those financings.
Our current workforce is sitting at around 500 people.
Including contractors as we push.
Push these projects.
Along the way and as everybody knows in this.
And this sector, the COVID-19 and supply chain impact.
I have to be dealt with and that's what's been part of our Ah reality throughout through 2020 in 2021, but we feel like we've turned the corner and taken advantage of those.
Those moments as best we can and we're in line to have.
Three fully permanent mines in production by the end of this year.
There'll be it in small scale and then scaling up the larger production as these projects continue to take their natural evolutionary course, setting the table to be one of the more exciting.
Assets in the gold space with a Canadian <unk>.
A large scale project at caribou and evolving asset in Utah, which could be poly metallic we talked about the high grade gold deposits at Trixie theirs.
Though a silver lead zinc mine called.
Called the Bergen there.
And a significant exploration targets on a copper porphyry.
We believe it is important as well on that property. So.
Quite a bit to do this year and are very exciting times and I think that we have a lot of catalysts.
For the <unk> shareholders this year.
Operator, I'll open up for questions now thank.
Thanks, everybody for listening and we will be presenting at the BMO conference in Florida.
This week on Wednesday morning at $9 45.
If not if you happen to be here in Florida for the conference were also available too.
To book just virus will find a time slot on that operator please.
We'll take our first questions.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad well pause for just a moment on public Q&A roster.
Again, if you'd like to ask a question press star one.
And your first question comes from John Tumazos from John Tumazos, very independent research. Please go ahead.
Good morning, Sean Thank you.
Could you.
Just refresh us.
With the feasibility study and.
Permitting schedule.
When you think the first gold.
From the full Cariboo mindful.
Be produced.
With annual production rate will be.
In the first several years.
Thank you John .
The Cariboo project is online for the acceptability acceptability.
To be completed in the fourth quarter of this year.
Scheduled for third, but assuming with some COVID-19 lag on the permitting.
And the developer will start in earnest the near the.
The end of the year or in early 2023.
With the underground portal at Caribou, sorry at Cal Mountain.
And we'll be in construction throughout 2023 and 2024.
All of that assumes that project financing and the green lighting on the permitting is in place for the early works.
So we will be looking to be staggered production increase we would increase that we would start.
To feed the <unk>.
QR mill in your order at lower tonnages, as we develop that mind, but we'd be looking to by the end of 2024.
Be in and around that 2040 750 tons a day.
Development and the construction of the flotation concentrate or at the well site would be complete by then.
I think on the current schedule.
So that would set the stage for production in the north of 180000 ounces, a year and while we would be targeting somewhere between two and 250000 ounces a year.
From where we sit today.
The feasibility study is not complete so we won't put that feasibility out here by the end of the second quarter.
I just wanted to make sure I'm understanding clearly Sean.
I'm going to try to take baby steps, so theres going to be some noncommercial production, possibly in 'twenty three 'twenty four from development Mark.
That's correct.
The commercial mind.
We will be drifting into the Cal Mountain and then doing a bulk sample this.
For this year.
From the low heat side.
And that will set the stage for the first.
Cal Mountain style of mineralization to be processed with the ore sorter.
And then we would continue to try and develop that once we've got the EAA E.
To continue to operate in QR mellow, yet reduced tonnage is while we get that larger concentrate are up and running.
That will come out of the feasibility study, but we would hope that.
Through the bulk sample at and is that permit evolves that we can.
Keep smaller scale production say 1000, 2000 tonnes a day ongoing while we complete the construction of the larger product.
And then for 2025 should we be expecting 180, or $2 50, and I wasn't sure what you said.
Well with that these are the PK study that had us at 185000 ounces a year coming out and then we haven't published the feasibility study yet.
So we'll put that number out as I say here, but the public information that theres that right now is that B study from 2020.
So the 2019.
Great or the tons or the recovery could be better than the fees in the pea.
Yes, that's the goal is to increase the tonnage and also to simplify the mine plan.
And to bring our mining costs down by utilizing the <unk> order.
So the optimization right now will be a lot of the information will be gathered this year from.
The bulk sample.
Fully permitted in the in Q4 of last year.
We will be able to give you better guidance on what kind of grade, we're able to mine and what the optimum sweet point of what Greg remind versus what Greg we treat with the <unk> order and what Greg goes in the Q or in the interim and then what grade.
We are producing from.
The content of the floatation concentrator that will be built in 2023.
Thank you in terms of the northern Quebec.
Fruition properties written.
Would these be things that David.
From one Andrea was operating Virginia mines like <unk>.
All of these things in northern Quebec.
That's correct John we inherited those are that that investment during the acquisition of Virginia back in 2015.
There were pass through Cisco royalties as part of the portfolio that we put into the Cisco development last year.
As we haven't been active.
On those lands.
On the <unk> project, we deemed it prudent to take the write down.
Right now as we're transitioning the company and setting the stage for an NYSE listing.
In terms of.
The Guerrero district large lands.
Those have not been written down those are just waiting for a better time to evaluate more fully I guess.
Yes, we've looked at various joint ventures, there and as you know that region is evolving with the.
With with quite a bit of activity in that gold belt, we still believe that the girl belt is probably the most significant gold belt that remains with the remaining upside within Mexico.
So we're looking for the right partner on that asset, but we think that.
We have to bear down and focus on the assets in hand, right now and we will try and find the right partner for that asset base.
It goes in the ground never goes anywhere so you can be patient.
In terms of the <unk> district.
I might have recollections of different companies active in the neighborhood could you just repeat the name of the company you bought out.
It's cheap consolidated resources, and 10 tick tick tick or the companies that are that have the current owners.
We are in final stages of acquisition with <unk>.
My recollection is that maybe five to 10 years ago, Tom patents company with Terra.
I was working in the district.
Had a JV with Shreveport.
Yes.
A very hot area and it remains a very active area.
Or are you not.
Around two or voice.
No the only acquisition that the only acquisition that we're focused on right now.
<unk> and 10, <unk> ground, which is about 14200 acres plus some.
Some JV ground around it.
But we are limited to that footprint at this point in time with all of that.
That's more than adequate.
The amount of opportunity for us at this time.
And you've identified both high grade gold.
Porphyry copper targets at least two different.
So like your big game hunting for.
Tigers in lines at the same time.
Yes, I think this has got a we've got a carbonate replacement zone. That's in the in the Bergen mine.
Previously this property was mostly known for silver lead zinc production.
And most recently was in production and shipping flux.
To the kennecott.
The smelter.
But being in Canyon, which is only 40 miles north.
And Chris is on the line or are we going to have a geological talk afterwards John .
But the age group and the mineralization at <unk> in this region as a it's pretty much bang on with the same mineralization of Bingham Canyon, which is.
North America's premium copper porphyry.
System. So we're quite excited by that and we're doing a lot of science.
On the ground.
And we will be targeting that deeper porphyry.
The system as we get further into the year and Chris and the entire geological team are pretty excited to get it.
Get the targeting completed and have a go at that.
So theres a pea study from 2011 on the Bergen mines, which outlined about a $250 million NPV project.
And Ah study there so we'll be looking to update that on the silver lead zinc side and then the historically the production in the.
75 to 85 zone.
Courts Ranch seven to 10 Gram gold deposits that were being shipped directly to the smelter for flux.
So there are several targets there and then the newest one and the one that I think is garnering and rightfully so a significant amount of excitement.
A new style of mineralization that we've seen with.
I can tell you right gold system in it.
Behind the traditional ozone and I had never been mined historically, so that's the new discovery.
That will start to everything in motion and the rest of it we will continue to work on.
Yeah.
Thank you.
<unk> had a chance thank you Sean.
Thanks Scott.
Again, if you'd like to ask a question press star one on your telephone keypad and your next question comes from Phil <unk> from Pi Financial. Please go ahead.
Thanks, John and thanks for hosting the call today and congrats on all the recent success.
The first question here on the Cariboo could you just clarify what's happening right now underground.
In terms of the <unk>.
The bulk sample and could you outline what sort of a budget we're looking at.
For this year.
So what's going on underground on the VL. Two is the continued mining we have about we're expecting about 20000 plus ounces. This year out of VL two that mining is ongoing and we're pouring gold on a weekly basis.
<unk> seen some good results at the QR mill as of late.
Recoveries in the plus 80% range, even in those graphite rich.
I'm going to be all too and that's a hats off to our operators there that have gone through a tough winter in BC.
And been able to achieve significant operating progress on that front the portal for the bulk sample has been set the road header.
In there and.
And we will be looking to do green light.
That underground development sometime at the end of March.
And then we've got about seven to eight months.
Drifting ramp.
Get to the target zone for the bulk sample.
And they are shorter is onsite. So we would love to commission the Norris order.
And do the optimization work on.
On the 10000 tons.
Bulk sample that is currently permitted and look to see what else. We can do while we're in there.
Based on permitting and the evolution of the permit on the on Cal Mountain So.
If you look at the pictures on the DAC right now you can see the road headers parked in the in the portal.
Just waiting for weather to lighten up and will have a go with that.
So just for that its about $17 million.
Okay. Okay. So development is suspended as of right now and then with another seven to eight months of.
Progress to get.
So the bulk sample and they are targeted bulk sample zone, where we.
Really not looking to begin processing that material until kind of later in Q3 early Q4 then.
Correct.
Alright, and then what about the underground drilling we would be setting up underground drill stations, along the way or is that sort of.
Kind of on a ad.
That hock basis.
Depending on it.
Progress.
We have about $3 $9 million of flow through left right. Now we're just doing an optimization on the on the resource and we'll probably do some surface drilling a lower <unk>.
To infill that zone in the near term.
And that'll help us with our plans as we get further into the bulk sample as well.
As we are we will want to drill some of those areas from underground as were on their way down there.
Perfect. Okay, and then in terms of San Antonio.
I think the new said.
Referred to some permits you are waiting for is that for actual mine permits of of new zones, there and.
And can we anticipate just the mining for 2020 to be fully from the million tons stockpile.
Right now we are fully permitted for that million tonne stockpile. We have about 16000 ounces contained that we're looking to recover there in the short term.
The permitting aspect for the actual pucci larger project is underway.
We have our own equipment that we bought 15000 tonne a day plant that we bought and shipped to Mexico.
And we will be looking to over the course of the summer.
Decided how big we want to set up for answer Buchi.
And then once we have that permit will decided to green light it but we're taking advantage of the time window too.
The engineer that that plant.
And to make sure that we take.
Some of it some of the exploration results that we received.
And and get those things moving.
And.
As they evolve and we should have some more.
Well results coming out over the next week or two.
A little color on what we're seeing there but.
Okay.
We put 27000 meters of drilling in there mostly there.
The oxide zone, but we've had a few discoveries.
On potential other oxide zones on the property as well so we're continuing to follow that up.
And so would you be using the same leach pad would you need an expanded leach pad once mining <unk> and what sort of capital always would we anticipate upon receipt of that permanently to this year. Yes, we would we would be looking to optimize the leach pad that we have already constructed and there is some of it you can see pictures of it on the website.
We'll take advantage of everything we have now but the Super cheap mine was always envisioned to have its own separate leach pad.
In the engineered several engineering work for that is underway as we speak.
In terms of engine engineering design and optimization. So it would be a separate leach pad build and depending on how many tonnes. A day that we decided to commission at least somewhere between 10 and 25 million U S. Dollar capex the way we envisioned.
And then the question will be how much does the owner operator versus contractor.
Alright, when would you be able to make a decision on that like is it dependent on receipt of that.
Permit or could you get started on that construction.
Sort of mid year.
I think we need to see the permit first and then make the decision.
Best allocation of capital at the time.
Focus right now in the interim will be the closing of the <unk> acquisition and development of the ramp.
At Amtech.
With our partners there to continue the evolution of the permitting process.
Caribou and then.
In a strike position to take advantage of that permit in Mexico as soon as it does come out.
Perfect understood I appreciate the time John Thank you.
Thanks, a lot.
Your next question comes from Ralph properties from eight capital. Please go ahead.
Good morning, everyone and thanks for taking my questions Sean two of them are firstly.
Oh at Cariboo can you bring us up to date on the EIA process. This is a relatively new for the BC government and just wondering in the public consultation what's the feedback been in has there been any surprises.
The public consultation added over 2000 responses, which is relatively light for BC.
And that's been very good and.
We have closed up to public consultation period for phase one.
There will be another period over the course of the summer.
We are nearing completion of response to all of those.
Nothing very surprising or the normal concerns.
About footprint.
Light noise water.
And then effect on community job creation.
And that sort of thing and Thats.
So we've taken a lot of.
A lot of effort to do a lot of engagement that we have been enjoying.
Enjoy good support from our partners <unk> done any who stepped up and had been part of the process.
Well involved in making sure that the.
Meet their.
Our expectations and criteria.
And we continue to make steady progress on that as you say, we are the first ones through the new DC.
They process.
So with enjoyed pretty good support.
From BC government in terms of them allocating resources to their regulators to help get this project moving along.
And we don't we don't see any delays at this point, even with COVID-19, we've been able to hold the line.
In terms of the progress there.
Large count due to our team on the ground led by Chris loader.
And Francois is not on the team.
In terms of responding to that.
We continue to make progress each and every day on that front. So I think we're in pretty good shape.
Okay sounds good.
<unk> should we expect.
Exploration catalysts as part of the story in 2022.
As you drill out of those 15000 meters into the year and 43 101 or is this more of like a bulk analysis approach.
Well, we definitely see the merit in it.
Success that the team on the ground has had with this.
Jack leg and stope ore underground development.
And being able to follow the mineralization, that's so much better than the drill hall to be able to walk through the ore body and see this high grade mineralization you understand it now.
We'll continue on that will be the bulk of the exploration will be from the underground development.
We will be setting up to drill some larger diameter core because of that.
The way to the.
Fairly near surface here and Theres a lot of oxidation in the rocks.
We'll be wanting to drew lifestyle lifestyle.
<unk> core was possibly a mud program to.
You get that property recovery, so there'll be optimization right now, it's too tight to have too much down there.
So we need to continue to develop the underground space and once we have access from the ramp.
We'll be bringing to bear a larger more intense drill program from underground and it's relatively shallow president lift not about 600 feet.
So what level down to 900.
We need to drill, but we would like to prefer to drilling from the underground and from within the mineralization.
Yep understood it sounds good thanks, Sean.
And there are no further question at this time I will turn the call back over to the presenters for closing remarks.
Thank you everybody I think we've set the stage for an exciting evolution for <unk> this year and now.
Certainly look forward to getting a few of you on the site visits.
Year evolves.
I want to thank everybody and especially the shareholders.
For their support throughout 2021.
We are working hard for the shareholders. This year to make sure that we get.
Development assets.
All across the line and I think it says.
It is just right for these development style assets to come to fruition.
Everybody, who wish you luck with your investments and your work.
This concludes today's conference call you may now disconnect.
[music].
The House has ended this call goodbye.
A question.