Q4 2022 Torex Gold Resources Inc Earnings Call
Thank you for standing by this is the conference operator welcomed to the Torok Scold Resources, Inc. Fourth quarter and full year 2022 results conference call.
As a reminder, all participants are a listen only mode and the conference is being recorded.
After the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal the operator by pressing Star N zero.
I would now like to turn the conference over to Dan Rollins Senior Vice President corporate development and an Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone.
On behalf of the torch team welcome to our queue for.
Full year 2022 conference call.
Before we begin I wish to inform listeners without a presentation accompanying today's conference call can be found under the investors section of our website at www Dot <unk> Dot com.
I would also like to note that certain statements to be made today by their management team may contain forward looking information.
As such please refer to the detailed cautionary notes on page two of today's presentation.
As well as those included in the queue for 2022 M D N a.
On the call today, we have Jodie cause echo president and CEO .
Andrew Snowdon CFO as.
As well as Dave Stephan noodle, EVP technical services and capital projects.
Following the presentation, Jodie, Andrew and Dave will be available for the question and answer period.
This conference calls being webcast and will be available for replay on our website.
Last night's press release, and the accompanying financial statements and M. D. N. A are posted on your website. It had been filed on SEDAR.
Also note that all mouths mentioned in this call R. U S dollars unless otherwise stated well.
Well now I'll turn the call over to Joey.
Thank you Dan and good morning to all on the line welcome to the <unk> Q4, and year and 20 twenty-two results call.
I'll open my remarks, this morning by saying that we delivered another strong ear and 20 twenty-two with record production and ongoing cost control, resulting in very healthy EBITDA cash flow and free cash flow.
With these results, we've now achieved production and cost guidance for the fourth year in a row.
Opening highlights include one record production driven by record milling rates and record contribution from the L. G underground.
To our ongoing focus on cost control lots of strong total cash cost and a stick margins, which in turn resulted in the further strengthening of our balance sheet.
Three in addition to the operational successes our project team made steady progress with the development of many of Luna, which remains on budget and on schedule for first production in Q4 of 24.
And finally on the highlight reel at the beginning of the year, we released our inaugural five year production of luck.
What's even further optimises the case that was set out in the 2022 Technical report and see his tour acts as a minimum for 150000 ounce producer through to the end of 2027.
In terms of the agenda for the call same as usual I'll provide a brief reminder of the strategic pillars that we continue to execute on then I will step you through the key business and operational highlight specific to the fourth quarter and year and.
Then over to Andrew Snowdon to provide a review on the financials and finally, they've Stefan noodle will provide a progress update on both Muttiah Luna and exploration and then of course, we're happy to take questions from any of our listeners.
Starting on slide four I wanted to quickly review, our strategic pillars, which set out the longterm vision for tour X R.
Our strategy remains unchanged and you can see on this slide the five really key areas of focus as we head into 2023.
Oh, and optimize it and extend E. L. G. The five year outlook that we released earlier. This month demonstrated further improvements to the mine plan three to 20 twenty-seven centered around two key areas first drilling success in the pits has resulted in additional mill feed from L. A mall.
[noise] Altimo store, which has extended the life of the open pits by six months to mid twenties twenty-five providing even further comfort in the transition period from El G Intermedia Luna.
Second grader contribution from El G underground, but mining rates expected to hit 1800 tons per day by year end of 23, and 2000 tons per day by year and 24.
These rates are higher than the 14000 tons per day assumed in the technical report.
On the second pillar of Derisking advanced media Luna as that year ends project completion stood at 15% across engineering procurement underground development and surface construction.
We have 26% of our project spend in the committed category with pricing tracking well to feasibility study estimates.
Schedule critical procurement packages remain on track and the why has tunnel is advancing well.
On the pillar of girl reserves and resources are reserve and resource update will be released in the coming weeks.
On the north side of the river drilling in the open pits has allowed us to offset some depletion and extend pit life.
Staying on the north side at E. L. G. Underground you can expect on reserves that will mostly replace depletion and expand to resources given the success. We saw at sub still self and Elina also are deep.
And on the South side of the buses were real focus is you can expect both an upgrade and expansion of resources at E. P O and media Luna.
On the pillar of Poodles prudent capital management, we closed the year with over $620 million of available liquidity.
That current liquidity in conjunction with strong forecast free cash flow from E. L. G leaves us very well positioned to fund the $750 million and remaining capex on many of Luna.
Continue to invest $35 million to $40 million annually in exploration and drilling.
And maintain our own internal target of $100 million on the balance sheet throughout.
Turning to slide five.
We delivered record production of 474000 ounces in a year, surpassing the 468000 ounces produced in 2021.
This production coupled with strong margins resulted in adjusted EBITDA of $479 million operating cash flow of $408 million and free cash flow of $130 million.
Importantly, we closed the year with $376 million in cash on hand, and $623 million of about available liquidity all earmarked for financing our growth plans at Morelos.
Turning now to some operational highlights on slide six in the top left you can see there that we produced over 116000 ounces of gold during Q for marking another quarter of consistent production.
Top right milling rates were lined with prior quarter's.
Bottom left process grade you can see it increase during Q4, but it's important to note here that while we see minor fluctuations and had great from quarter to quarter with our disciplined blending plan. The average process grade 420 twenty-two came in at 3.6 grams per ton very consistent with what we saw annually for.
The last three years.
And on the bottom right you can see our plan to push mining rates as he at Yale G. Underground is materializing nicely with 685 tons per day delivered in Q4.
The goal for our team is consistent production quarter over quarter and year over year and we are delivering you can expect similar results over the coming quarters.
Slide seven outlines operational guidance for 2023, there's a few things to call out here first we expect production and twenty-three to look a lot like it did in 2022.
That said, we narrowed the bottom end of the guidance range slightly given the stability we've seen out of R. E. L. G operation.
Stuck in the mid point of guidance implies a 30 dollar per ounce increase in our total cash costs year over year.
With the increase is primarily related to higher prices for consumables, such a cyanide better bisulfide steel and the labor.
Third the mid point of a sick guidance implies a 100 dollar per ounce increase year over year. This reflects the higher T. C. C that I just talked about as well as higher capitalized stripping related to additional optimizations any open pits.
Why not spend of approximately $10 million on power upgrades.
And a higher amount of underground development I E. L. G now classified as sustaining capex versus nonsustaining in the year prior.
The other point of attention here should come as no surprise, you can see them materially increase the nonsustaining Capex, which reflects the fax at 2023 is planned to be our pizza spending year on the media Luna project.
Over to slide eight the sets out our five year production outlook and you can see how the outlook has evolved and improved over the last three years.
When we started this worth the goal was to deliver gold equivalent production of 450000 ounces per year through at least 27, and we're now confident that we have plans to do just that.
Relative to the 20 twenty-two technical report the higher numbers reflect an additional six months of production from the open pitch and greater contribution from El G underground.
Which has allowed us to defer processing of a portion of lower grade stockpiles to later in the mine life.
Important to note here that these improvements are all E. L G driven.
Mind plan for many of Luna and the five year outlook is consistent with what you saw in the 2022 technical report.
Minor note. We have work ahead of us to even further improve the production outlook. In 2024 currently we have assumed a one month tie in for upgrades to them the processing plant in order to begin processing the media Luna or in Q4 of 24, we've challenged our project team to work with the site team to reduce that day.
One time by completing some of the Titans earlier in the year during regularly scheduled maintenance when we have a plan on that we'll update you accordingly.
Turning to slide nine we delivered a key E. S. G milestone in 20 twenty-two with our inaugural climate change report.
We're targeting at absolute reduction of 10% by 2030 with a plan that includes the design decisions incorporated into the development of Medi Luna battery electric vehicle fleet ventilation on demand and construction of a solar plant.
Date of another way that's common in the sector that 10% absolute reduction implies a 25% reduction from the business as usual case.
What would otherwise have been if we had built many alumina without these design decisions being made.
Notably our climate plan is based on data, it's realistic it's executable and it's funded true to our reputation of making commitments that we plan to deliver on.
Importantly in 22 on the safety side, we exited the year with the lost time injury frequency of 0.28 still very much industry, leading but reflects chew lost time injuries during the fourth quarter.
With the rapid increasing number of contractors on site.
Maintaining our systems, our standards and our culture on safety remains a key focus for our entire team.
Allow pass the call over to Andrew who will speak to the financial performance for the quarter Envy you.
I'll tell you some sturdy good morning, everyone.
Start from here on the slide 11, but you can see 2022 was another one.
Performance report.
Despite the inflationary as headwind respectful towards.
The amount of your basic commodities.
[noise] worked hard today to deliver on an annual cost guidance closer together with spiritual cash cost of $750 and I don't just below the upper onto the garden range.
With an old into streaming pulse of $1008, an ounce towards the mid points of the range.
Oh realized dull parts of the year was $1809 an ounce, which included a realized price of 17 94 announced drawing coupons.
Two four we did benefit from from.
Over 5 million dollar realized.
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I missed it positively impact.
Crunched by law.
And.
Just realized drove price and a strong cost performance resulted in a group of small children. You can see on this slide with total tosh call smaller 60% on all of the studies.
Which generates with close to $400 million just to do the dogs are on the.
But you can also assumable too much of a slug regenerates at $130 in free cash flow through the including over $40 million in the fourth quarter.
But I do want to highlight to the free cash flow generation.
Right to your ability.
G operation.
Excluding me approximately $160 million spent on repeat inappropriate capital I'm dwelling in the E. L. G generated close to $300 million of free cash flow of 2022.
I'm, just really demonstrates differential strength, we have to support the bill.
With an elevated level of capital plumbed out for all of 2023 I've been to the first half of 2024, we do expect free cash flow to the executive over the next several quarters.
That being said with a robust balance sheet strong liquidity on the strong free cashflow demonstrates E. L. G.
Well positioned to fund the development Luna.
Turning it off to slide 12, I, just wouldn't be quite a bit more complex to about 20 twenty-two profiling performance.
Focus on controlling costs some money she consumption levels.
The system inflation inflationary pressures during the year.
Those are an open pit mining pulse you can see hippies were higher year over year increase we handling cost to insure optimal blend to the mill.
<unk> availability during the second and third quarters.
How ya diesel and it's closest due to inflation.
Inflationary pressures.
On underground mining.
Modestly you every year with rustled underground mining rights, providing the economies of scale.
Let's look into approached reference.
A lower driven by which you sign on consumption.
Which offers to about 2.5 kilograms per ton last year.
4.7 kilograms per ton of 2021.
These improve consumption level, how tough strap a higher prices way to define aren't that much of my soul food.
Finally hit a profit sharing with hiring 20 twenty-two to practice wanted to 21, which reflect higher profitability.
No just one religion to 2021, which gave rise to a 2.6 million adjustment puts in the first quarter.
Updated guidance.
Government all the formulas to calculate your pizza you.
Certainly not to slide the cheating review of all cash movements. During the year you can see here. When was mentioned earlier, we ended 20 twenty-two was $376 million in cash.
Note that I'm not going to.
Increase of $121 billion in cash during the year.
I'll just highlight some of our key movements.
Wonderful.
Virtually changes in non-cash working capital, you'll see a 26 million dollar publicity inform her which reflects movements in accounts payable prepayments as well as continued benefit from strong V. I T collections, drawing the strongest for basketball I'll talk to you.
Fortunately all capital expenditure reinvested over 270 something familiar.
Capital expenditure during the year, including.
I'm $43 million I'll meet you Luna appropriate capital.
For 2023 with guided to 392 440 million of media Luna project capital, which is expected to be the pizza of investment.
Based on current flow assumptions, we expect reportedly run right in 2023 to continue through the first half of 2024 before declining as a project transitions from construction into the ramp up phase.
Finally on this slide I just wanted to provide some some colorado tax related items, particularly as it relates to 2023.
Especially on tax depreciation similar to 20 twenty-two we expect tax depreciation and 23 to approximate $19 billion for the year and this is lower than the accountant depreciation which around people will be in the range of 175 million to $200 million in 2023, both of those are consistent with what we saw last year.
<unk> payments would expect monthly, Texas stolen from 2023 to continue with the levels that we saw in 2022 is approximately $7 million a month.
But I was in private yeah. We also expect to make a number of annual tax payments during Q1.
Which includes $30 million in relation to the 7.5 per cent paid annually.
Annually March.
March each year.
And then $20 million related to the final 2022 income tax, including certain withholding tax payments.
Tell me not to slide 14.
Slide really highlights strength of off balance sheet to December 31st.
I've known to be close to a year with 372 $6 billion in cash no debt and just for a million and financial leases.
We also have $247 million available and credits on our credit facilities with only 3 million of those credit facilities utilized through electrical credit.
As a result total December 31st liquidity sort of 623 million.
Which in conjunction with strong free cash flow from E. L. G.
On solid footing to fund the $750 million remaining Luna capital.
A strong balance sheet further improved by Joel price protection, we put in place specifically to support capital spending all media Luna.
How's outlines hair on 515, you can see we've had schneider approximately 25% a quarterly production through to the end of 2024, not such an average price of 1924 announced for 2023 1939 is almost the 2024.
Joined Q full we also suckled 30000 ounces of forward styles that we had hedged Q4 2022 and this resulted in a realized gain a $5.3 million in the quarter.
Due to the strength of the gold price in December we did recognize an unrealized loss of $25 million.
Q for financial results.
Unwound unrealized gains recognized earlier in the year.
A total of 8.8 million it's been recognized on these phone confronts 5.3 billion of which has been realized a 3.5 million currently unrealized.
Well that concludes my remarks today popsicle over today, Stephanie Church provides an update on progress media Luna as well as exploration I'm enjoying the fourth quarter.
Thank you Andrew.
Slide 17, we recapped the progress made at media Luna during the quarter, which was also highlighted in a standalone press release earlier. This month this will become common practice moving forward.
Overall after nine months of the 33 month project build development of media lunar remains on budget and on track for first production in Q4 of 2024 at year end the project with 50% complete with 14% of projects expenditures incurred and another 12% of costs committed for total project commitment of 26%.
The date cost and delivery windows for schedule critical procurement packages are tracking to plan with purchase orders or letters of intent in place for a majority of our key deliverable, including the battery electric and diesel portions of our mining production sweet.
Following receipt of the media integral in Q3, we now have all required approvals in hand to construct and operate media Luna, we expect to submit an amendment letter later this year to allow for input tailings deposition in Nevada is open pit, which is expected to be depleted later this year.
We have also received approval to increase the power draw at the site to 65 megawatts by tying into the nearby 230 T V line.
This builds on approval to increase the power draw from the existing hundred 15 kv transmission line to 45 megawatts with these two approvals we have enough power to support the media Luna project and allow for further growth in the underground mines.
Turning to slide 18, we've made consistent progress with our underground development at the end of January the Goddess Tunnel has advanced close 3.5 kilometers with the tunnel successfully crossing under the bosses river rates have been quite strong achieving a record advanced rate of 7.2 meters per day with the team work.
<unk> hard to top the average daily advanced reading of February .
Ah South portal lower challenges with water inflow related to confined water with incur structures has been resolved and rates are now hitting over four meters per day consistently over the last weeks.
The main 1.5 kilometer tunnel decline of South portal lower hasn't been completed with development of the 650 meter spyware ramp to the north quite as tunnel well underway.
Self portal upper work is also progressing well with underground development advancing to plan over multiple petty.
Turning to slide ninth 19, we highlight a few images of the project, including our upgraded development ventilation nuts health portal lower.
<unk> Zappa bypass road pad preparation for the peace point and backup generators and raise boring as part of the <unk> tunnel ventilation.
[noise] moving to drilling and exploration on slide 21, 2022 was another active you're drilling with strong results, both north and south of the bosses River at the E. L. G underground. The primary focus was on testing new potential mineralization, which is identified in two new potential mining France.
At sub still self and all of them all certainty.
Given the greater focus on expansion drilling relative to in soldierly, we expect to replace a majority of the underground mine depletion and expand the overall resource size.
As outlined on slide 22, we have also plenty success south of the bosses River, we expect to release additional results from drilling immediately Nina and E. P. O over the next couple of weeks with the drilling expected to upgrade and expand resources.
[noise] mineral reserves and resources are expected to be released before the end of March.
Sly twenty-three outlines are drilling and exploration plans for 2023, we expect to invest a similar amount and drilling selfish Baucis River in 2023 as we did in 2022. This year's program will be targeting to upgrade and expand resources that Epo as well as test the mineralized potential between.
E P O immediately know west targets.
E L G underground drilling and it will be focused on upgrading mineralization at sub so-so, an element deep with the aim of upgrading the middle or mineralization within the zones to reserves I will now turn the call back over to Jodie.
Thanks, Dave well 20 twenty-two was certainly an excellent ear for <unk>, we had record operational performance, resulting in robust financial performance and of course, the kick off of the many other than a project.
As we look to 20 twenty-three we want more out of the same though to be L. G. On safety production costs, you Wanna continue to spend money on exploration.
And it will be a key year in the development of medical Luna.
With a solid plan in hand strong balance sheet robust forecast cash flow from E. L. G and a team that has a proven track record of execution for well positioned to advance our strategic priorities, which we expect will result in a further rewriting and value creation for our shareholders. We're very much looking forward to the year.
[noise] ahead.
So with that said well now open the call to any questions.
Thank you.
Now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request if you're using a speaker phone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then to once again to join the question.
Can you. Please press Star then one now or.
Our first question comes from Wayne Lamb of RBC. Please go ahead.
Hey morning, guys.
Yes first question just.
Just wondering a coupla years ago as you guys mind deeper into the pits. There are a couple of quarters with levels of iron and copper increased resulting in.
Can be greater cyanide usage.
Approached depletion over the next couple of years are you anticipating something similar in terms of the iron content or have you guys been able to optimize towards the level of cyanide required is pretty steady through the end of the mindless.
Yeah, I'll take that one way and it's Jodi here. Thanks for the question soluble Iron No question as the primary consumer of our site and which is one of our most expensive reagents, it's really stabilized over the last number of quarters that roughly 70000 P. P M, which is a high rate for sure, but what we've done.
To deal with that is a focused on our blend of plan to ensure that we're not chasing peaks and valleys on iron input and our solution with cyanide dosing N b.
Introduced additional oxygen to the leech circuit and have Trialled and now implemented a mock reactor, which essentially blows bubbles into the solution oxidize as the iron reduces cyanide consumption and may even give us a bit of a pop on recoveries.
So as we're getting deeper into the pits at <unk> and <unk>, we feel pretty comfortable that we've achieved steady state with our cyanide consumption and with potentially some even further improvements as we complete our mark reactor program.
Okay, great. Thank you and then the next one just on the EOG underground the mining unit costs looked like they took a nice step down. This corridor, what was driving that and is that sustainable run right to think about is the underground ramps up yeah.
Yeah, I'll take that one again weighing unit costs were driven lower as we focused on a couple of things one increasing rates. So a higher denominator Ah number two equipment.
Fish and see an optimization and so what we now do we have a national contractors supplying our equipment means at Yale G. Underground, that's driven down some of the costs instead of checking that into our development contractor costs and paying overhead on that and then with the optimize rates and improve.
<unk>, we're seeing lower unit costs, we accept expect that trend to continue as we pushed that underground to 1800 by the end of this year and then 2000 tons per day by the end of next year. Once we hit that 2000, I don't see much more than that available in that underground. The key then will be to extend it.
And to extend it so that's E. L. G underground becomes a contributor to our main plan in that post 2027 period, when we're looking to fill the milk.
Okay, great. That's it seems like quite a bit of cost savings.
And then maybe just last one media Luna.
Have you seen the pricing on tenders now they've kind of come back and.
Where have you seen the pressure points of course, and where are the places where maybe some of those precious disease.
Alright, well you know do stuff noted here I'll take that one so so far to date or costs are tracking well relative to our estimates and the technical report, we're certainly seen offsetting increases and decreases both negative and positive movements on appeals to date, but no discernible major trends at this time tip.
Macleay you know mechanical equipment has been priced within our F. S targets, we're seeing a little bit of pressure on electrical equipment supply, but nothing that we haven't been <unk> been able to manage through early commitments.
Okay, Great. That's all for me. Thank you very much.
<unk>.
Once again, if you have a question. Please press Star then one.
Oh is there appear to be no more questions. This concludes today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
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