TRX Gold Corporation Q2 2023 Earnings Call
Speaker 1: And I think we have everyone with us now, Christina.
Speaker 2: Okay, great. Thank you, Gail. Good morning everyone and welcome to the TRX Gold Corporation second quarter 2023 financial results presentation and webcast. We thank everyone for joining us today. We appreciate your time and your following.
Speaker 2: Today I have with me our executive team. We have on the call Steven Maloney, our Chief Executive Officer, Michael Leonard, our Chief Financial Officer, and Andrew Cheadle, our Chief Operating Officer. So we will go through the presentation and toward the end of the hour we will follow up with a queue.
Speaker 2: reason you have trouble connecting today, please reach out to me personally via email or phone call and we'd be pleased to answer your questions.
Speaker 3: So, Stephen, I'll pass the floor to you. Yeah, thank you, Christina, and welcome everybody to our Q2 2023 results webcast.
Speaker 3: To start off, obviously I have to mention the cautionary notes and forward looking statements. You can find this on our presentation on our website and I'll just leave it at that.
Speaker 4: So for those...
Speaker 3: new to TRX. I'll just go through this very quickly. A lot of the investors and people on this call are familiar with this slide. TRX, what does this stand for? We're a team of experienced leaders. You see us on the line. We continue to deliver on various milestones and are rapidly growing the Buck Reef project.
Speaker 3: as we get through the presentation. And the Buck Reef property, a special mining license, has significant exploration upside. There are lots of targets on this property. And we've displayed this over the last year or so, particularly with Anfield, the Eastern periphery, even the extensions to our Buck Reef main zone.
Speaker 3: So just a brief overview of the Buck Brief Gold Property. It's a two million ounce plus gold deposit and they measure in indicated categories. Now the 600,000 ounces in the inferred categories located in Tanzania. What we like about this deposit, it comes to surface, it's flat.
Speaker 3: It has great widths of 20 meters, approximately 20 meters broad. It has consistent gold mineralization throughout the deposits along a 1.5-2 kilometer strike at about the main zone. We're fully permitted, which means we can continue to grow this asset and production profile without getting the major overarching permits in place.
Speaker 3: The current special mining license goods of 2032 is an extendable for 10-year periods to the end of life of mine and deposit. Our processing plant is consistently beating production guidance. It's also straightforward metallurgy in a grind crush CIL. We have minimal environmental footprint.
Speaker 3: So with regards to the Q2 2023 highlights, again, our 1000 ton per day mill is operating great. We declare commercial production on that mill in November 2022, and the last quarter produced over 5600 ounces of gold.
Speaker 3: which is 164% increase over last similar quarter in 2022. Records at Buck Reef, we recorded positive operating cash flow again, which is funding our exploration and operational growth. We are going to advance a third mill expansion.
Speaker 3: We did have a release that we had over a million hours with no lost time incidents. That continues to be the case, which we're very lucky for and I'm going to knock on wood on that because I'd like that to continue. So, without further ado, I'd like to hand the presentation over to our.
Speaker 3: Chief Financial Officer, Mike, and he will go through our Q2 2023 results.
Speaker 5: Thank you, Stephen, and good morning everyone. Thank you for joining us. Stephen touched on it. Q2 was another strong quarter for the company and we continue to see the benefits through the financial results. Again, it was the first full quarter of our new 1000 ton per day mill operating at capacity.
Speaker 5: As a result, in the operational time, we produced a record of 5,636 ounces in the quarter. We sold just over 5,500 of those ounces at a realized price of $1,845 per ounce, benefiting from the recent rise in gold prices, which is a pretty good number.
Speaker 5: of course, touched north of $2,000 an ounce very, very recently.
Speaker 5: In the quarter we recognized revenues of over $10 million dollars, an operating cash flow of almost $5 million dollars, which we substantially reinvested back into the business.
Speaker 5: And amongst other things, you know, I've expanded our tailing storage facility, for example, which will accommodate our much, much larger production that Stephen touched on earlier. We relocated a road, which will allow us life of mine access through the main zone. We continued to drill. We did over 1,400 meters that Andrew will touch on shortly.
Speaker 5: of exploration drilling as well as grade control drilling.
Speaker 5: And we've also purchased pieces of capital equipment, things like gen sets, generators, which effectively will replace equipment that we have rented previously and over time bring down costs for us. So in summary, we continue to use that organically generated cash flow that the operation is generating to help grow the business.
Speaker 5: On the cash cost side, we recorded cash cost per ounce at $888 an ounce, which was above what we recorded in Q1, but in line with our expectations and our mine plan. The mine sequence for Q2 had us undertaking a stripping campaign, which was meant to unlock high-grade ore blocks, which we expect to see the benefit in Q3 and Q4.
Speaker 5: gave rise to that higher cash cost per ounce number, but on a full year basis, again, expect Q3 and Q4 to be our strongest quarters of the year and continue to expect our full year guidance to be between $750 and $850 an ounce on the cash cost side.
Speaker 5: As far as gross margin goes, it continues to be very, very strong at around 50% for both the three and the six month periods to date. And again, demonstrate that the new plant is operating very, very efficiently and very, very profitably as Stephen touched on.
Speaker 5: On a year-to-date basis, we produced and sold over 11,000 ounces.
Speaker 5: generating revenues of almost $20 million, operating cash flow of over $11 million. We did it at cash costs at around $808 an ounce in line with our full year guidance and again, again very, very strong gross profit margins of around 50%. And again, we continue to use that cash flow that we generate to make value of creative investments right back into the day.
Speaker 5: of around $9.5 million. We have working capital of about $5.5 million and EBITDA of around $4 million, which again is a good proxy for cash flow. All of this really demonstrates strong liquidity to fund that organic growth that we discussed a little bit earlier. And again importantly, we expect Q3 and Q4 to be our strongest quarters of the year.
Speaker 5: We're working to improve on all the operational and financial metrics as we grow this business. And now that the plant is up and running, fully expect that to be the case.
Speaker 3: I will maybe pause there and hand the presentation back to Stephen. Stephen? Yes, Mike. Thank you. Just to give the investors in the group a sense to all the activity that is ongoing at Buck Reef. There is a new road being put in place around the SML. We also have works around tailing facilities, new generator sets going in.
Speaker 3: There's a lot of activity happening on the Buck Reef site currently. There will be activity I don't see slowing down. I actually see it ramping up as we continually expand the asset at Buck Reef. On that front, Andrew is joining us today from Cardiff in the UK. He's actually right now at SRK's offices there. I'll switch over to the next slide.
Speaker 6: and he will...
Speaker 3: tell us about some of the things that are ongoing for the much larger project that's currently being planned. But in order to plan that out, we got to do the proper work and we got to de-risk it properly. And that's what the team has been doing and a lot of that has been through our Chief Operating Officer, Andrew Cheadle. Andrew?
Speaker 7: Over to you. Thank you very much Stephen and greetings to everybody from Cardiff, Wales in the UK.
Speaker 7: So we have been extremely busy with a lot of the preparatory work for
Speaker 7: work on building out the bigger mine. I'll take you through the list here. We have completed our infill drilling program, where we've been focusing on inferred mineral resources. We're looking to upgrade those to indicated. And we've been drilling both to the north and the south of the historical mineral resource. And we've also done some infill work on the industrial complex and within the largest gigs of mine, and have completed our hygiene guidelines. And the notes of the BC
Speaker 7: Eastern porphyry, which I'll get into in a minute. I'm pleased to say that the metallurgical samples from 18 holes of 19 drilled have gone now to South Africa. They have been received by SGS, who are recognized global experts in this field. They undertook the first set of work we did.
Speaker 7: some two years ago. So we benefit from continuity on that. The geotechnical study has been ongoing. We've completed now the drilling and the field work. This is again with SGS Terrain, again Terrain being a global expert in that field and had already been.
Speaker 7: two sites in terms of looking at some of the underground and early stage open pit work.
Speaker 7: So that is now back in Canada with rock samples now going to laboratories for their testing of rock strengths.
Speaker 7: In terms of the long-term planning as well, this continues to also be ongoing. We've completed conceptual work with Orsenco in terms of mine layout and the plant expansions for the 2000 tons a day and also very importantly, the
Speaker 7: where do we place the life of mine, TSF? And we have a number of locations of which two have become very evident to us as the ones to go for, and we're now planning in terms of design, geotechnical work for those two locations.
Speaker 7: Stephen, you mentioned the mineral resource updates. We now have substantive information to do that update and I'm working very closely with SRK, again, global experts in mineral resource evaluation and I'm here with their team as the company's QP.
Speaker 7: working with the SRKQP to make sure this all goes smoothly.
Speaker 7: And then in terms of the economic study for Buckreef, part of my work here as well is working with SRK management to define that work. So we have all of this going ahead and the objective for us is to also expand the scope of the 2018 PFS.
Speaker 7: The numbers were reached on the right. This work was done at a $1,300 an ounce call price. Mike, as you mentioned, we have been seeing $2,000 an ounce. We're hopeful and expect to see improvements in all of these metrics that you see here. And I think with some of the results we're seeing, we were hopeful to be able to show that this property also has a...
Speaker 3: underground potential. Carry on Stephen. Yeah, no, thank you Andrew. There's a lot of work going on and this work needs to be done by the right people. It's being done by the right people in the right firms. Obviously our goal here is to make significant improvements on that 2018 PFS.
Speaker 3: capital numbers for what we're experiencing are way under, given how we're building this out. Certainly,
Speaker 3: the geotech work needs to be done to get proper strip ratios and things like that. We're hopeful that there will be steeper pit slopes than the 52 degrees that were in this study. A lot of this work is ongoing and we're cautiously optimistic of where it's going to go.
Speaker 7: That's right. I mean, certainly as we've done this work, Stephen and…
Speaker 7: We've taken a fresh look at the mineral resource. We're seeing certainly some sections here with just fantastic continuity and grades. But we've got to pull the whole thing together and we're hopeful to have some answers in the very near future.
Speaker 3: Yeah, so on that front, Andrew, one of the things is that the work that's being done is on what's not.
Speaker 3: today. So the next slide is what's unknown and what we're doing on the exploration side. And these sort of models and updates keep on getting refined as more and more resources come into them and are found on the Buck Reef property. So let's get into that on the exploration side.
Speaker 7: what we're doing. A lot of the investors have heard this before, but bring them up to speed on what we're actually doing now. Yeah, thank you very much Stephen. That's a great segue. We have been drilling some more holes in Q2. These have been centered on the eastern porphyry and a few of them on the Anfield zone.
Speaker 7: The assay results have been returned and we're busy putting those results together and the plans and the maps together and we're expecting to publish those results in a few weeks.
Speaker 7: Support-free, I think.
Speaker 7: presents an opportunity for us to have a second mining front at Buck Reef.
Speaker 7: And so it's receiving very close attention from the draw bit and also our estimation process.
As you mentioned, we also continue to do a road deviation around the northern part of the pits. Stephen, if you have the cursor there, you can just maybe just highlight where the road comes through the pits.
Right about here. Just about there. You got it. Yeah. So where the road comes through, the existing road comes through the pit, it actually comes through a very nice high-width, high-grade area. So once we open up the new road around the mine, around the SML, we'll have unfettered access now to the existing deposit, which...
which is good news from the mining point of view.
The other thing is that the deposit does remain open on strike.
particularly to the southwest and to the northeast.
on the main zone. But I think from an exploration point of view and for those doing your exploration, to reiterate the point that between the eastern porphyry and an operating Chinese mine just south of us, there's over three kilometers of defined mineralization by the virtue of the artisanal.
grams a tonne. But there's an awful lot of work to be done there. In terms of an exploration play we have no deposit to the north.
of work to be done there. In terms of an exploration play we have no deposit to the north east.
Thank you, Andrew, for that. And now with regards to guidance, I'll hand it back to Mike who will reiterate our guidance that we provided in our Q2 MDNA. Thanks, Steve. I touched on a little bit of this earlier, but as mentioned, the new mill, the 1000 tonne per day mill, is operating at full capacity. Q2 is the first full quarter of the mill operating at capacity. It's operating really well, really efficiently as Stephen touched on. We've done over 11,000 ounces of production to date at the half year. Certainly well on track to achieve our full year production guidance targeted between 20 and 25,000 ounces of gold. So we are reiterating that to that figure. I touched on it earlier, but
on the cash cost side. We touched on one of our growth platforms which was looking at a third mill expansion. I'm pleased to say that we've made a down payment on that larger mill. That mill I believe is on the water and on the way to Dar es Salaam. We expect once we integrate that mill and expand the plant.
Yeah, thank you Mike. Greatly appreciate it. Now one thing I wanted to get into in this call is we've gotten a lot of comments back on ESG and I wanted to make sure that investors understand our philosophy around ESG. ESG to us is something that...
is kind of ingrained and you just do it in business operations. But it also has to be something that benefits.
the shareholders and the corporation in general. Part of that is social license and part of that is actually managing costs. So a lot of our ESG initiatives are focused on prioritizing local content.
And when you prioritize local content, you create jobs in the region. And you also help to reduce costs and manage supply chain issues that have occurred in the economies around the world over the last couple years as a result of COVID.
So on the ESG front around corporate costs, obviously we want to be on a hydro grid. It's a lot cheaper than being on diesel. We want to utilize local suppliers as much as possible. As I said, we want to bring supply chain closer. Also labor rates in Tanzania are lower than elsewhere. And then we also do not get import taxes for instance. We want to have training of local employees as well.
We want them to be as local as possible. If they live in the communities, they don't live on site.
And we do normal things like recycling water and things of that nature that are just good practices. This ultimately leads to a lot lower social risk as Andrew mentioned. Before there are artisanals in this area, so we work and engage with the local artisanal small-scale community. We've actually hired some resources at times from.
this local community to work on site and to help us advance the project. Our employees are predominantly local so they live in the area and if they live in the area we want their children to be going to decent schools, having decent medical facilities, those sort of things that people remember the mining history of 40-50 years ago even in Canada.
So the whole goal of the ESG program is to integrate with the community.
be doing the right things to increase our productivity and the governance of our boards and things of that nature has all been put into place. But it's really integrated into operations and is not a charity by any means, but it's good practices. Andrew, you're very close to a lot of these initiatives. Got anything to add?
Yeah, Steve and Ashley, that was very, very well put. Thank you very much.
Let me just illustrate by an example perhaps. Many mining operations build massive concrete walls with razor wire on top to try and keep communities out. Because we have very, very good relationships with our local community.
in many respects they are in partnership with us as it were. We don't need and we don't have the security risk to build those kind of barriers between ourselves and community, which includes autismal minors. They know that they're not allowed to come onto our ground and they don't.
So this obviously cost benefits from that, but there's also less friction in our environment as a result of that. I think some of you might have also heard me talk about the...
The fact that our CIL tanks, the big blue tanks you see in the picture here, carbon and leech tanks, have all been built locally in a city called Mwanza about three and a half hours away from where we're working by a shipbuilding community.
They build big ships that we would be used to sort of seeing Whether it's in the Caribbean Sea or crossing the Baltic Sea things like that four or five hundred people size ferries they can build ships to have all the equipment laser cutters plasma welders They can bend still which they do
And once we've sent them the engineering drawings, which we worked with Orsanco, in terms of all the engineering specifications, we did not have to draw one extra hole or bend one extra piece of steel. It all worked.
That gives us a huge amount of credibility in terms of our community, in terms of our local and federal government. So that's been very, very successful.
But it's also, from a business point of view, and from a shareholder's point of view, it's a lot less cost.
And instead of bringing in from Turkey or from China or from South Africa, we substantially de-risked operation by working with people who are only three and a half hours away.
Yes, I'm just going to finalize this Andrew is.
What we do is work. I don't know if any mining company has done these types of expansions this quickly and for this cost.
and then for it to actually be breaking the expectations that we have put in place on the production side of things has been great. So our strategy is working and has benefited the shareholders to date in the development of the Buck Brief project.
Stephen, I'd like to just add a bit of quantity to those numbers.
Typically at a thousand tons per day we had been receiving EPCM quotes in the order of about 40 million. We've built a thousand tons a day, shall we say, for just about 6.4 million dollars.
So that's been a huge benefit to the shareholders and the speed at which we've been able to do this has also been very good in terms of bringing revenue forward to allow us to continue to grow and drill the operation.
a huge benefit to the shareholders. And the speed at which we've been able to do this has also been very good in terms of bringing revenue forward to allow us to continue to grow and draw the operation. So with regards to what's upcoming...
So obviously, we got a lot of work ongoing. You'll see the shareholders will continually see expiration and infill drill program results coming into the market. There will be continued news on our third mill expansion over the next six to nine months.
We have a lot of studies ongoing and a lot of work being done there on the MET study, geotech study, resource model updates, tailing facilities, a lot of work ongoing, so a lot of news fall from that. And then the planning and execution of a much larger goal.
much larger scale gold operation is coming. And the work is being done, it's being put together. It's very methodical, so it does take some time to get it right. But it is certainly in the plans and Andrew has been, and myself, I've been meeting with suppliers around this, as well as our general manager, even with guards too.
a much larger mill for the property over time. A lot of milestones upcoming and hopefully good news to come in the future over the next year or so. With regards to where we are right now, the share price has been...
going up with regards to gold price going up and as well as as we start to you know get into positive operating cash flow. Hopefully that continues and certainly that is our expectation as we continue to successfully execute the growth at the Buck Reef Gold Project.
So on the last slide, I'm going to leave it on this slide as we get into Q&A. As I mentioned on a previous slide, a lot of work ongoing.
A lot of things happening and very rapid progress continues at Buck Reef and we're hopeful that it's going to continue to happen.
So without further ado, Christina, let's hand it over to the Q&A.
Friend l seon gaveily enough to you.
Sure, if you wish to ask a question, please click on the Q&A icon on the left-hand side of the screen and you'll see the options. Raise your hand to join the question queue and ask your question verbally or write a question to submit your question in writing. When you're introduced, your line will be...
and opened automatically. Analysts, so. So, Helena, perhaps I'll get into, do you want me to get into the Q&As that are in the queue?
I could announce that the analysts in the better in audio queue if you like. Yeah, why don't you do that and then we can get into the written Q&A.
the analysts that are in audio queue, if you like? Yeah, why don't you do that and then we can get into the written Q&A. Sure, okay.
So the first caller on the line who has a question is Jake Sikelski with Alliance Global Partners. Please go ahead. Hey guys, thanks for taking my questions and congrats on a strong quarter.
caller on the line who has a question is Jake Sikelski with Alliance Global Partners. Please go ahead. Hey guys thanks for taking my questions and congrats on a strong quarter. Thanks Jake.
Growth is obviously a big focus right now and just looking at the additional ball mill that's on its way to site. Can you remind us of the total cost of the mill and maybe some color on the installation cost there? Mike, you want to give just an overview of the cost of the mill and then I think there's a question in the queue.
improve upon that cost I think is probably the best way to put it. It's effectively layering in a much larger mill with some supplementary tanks so I'd expect you know conservatively something slightly less than what the first thousand ton a day mill cost. Yeah and Mike also we need to upgrade to transformer as well for the larger operation so and the generators that have been brought on the site will accommodate the
the larger expansion and they're being installed as we speak. So we haven't given full guidance, but for instance, there are seven tanks right now on site. There needs to be an additional two tanks onto that. Three. Three, additional three tanks. So I don't expect this to be.
To be quite honest, it won't be as expensive as the first thousand-tonne pay plan.
And I think the only thing just to mention to add to the shopping list, Mike, is just some adjustments to the front end with our crushing circuit.
And I think the only thing just to mention to add to the shopping list, Mike, is just some adjustments to the front end without crushing circuits. Yeah.
Does that answer your question, Jake? Yeah, no, that's helpful. That'll be another low-cost mill expansion for you guys, and I'm assuming it's not the last. Be able to just share, even just at a high level, any thoughts for future additional expansions and what that might look like down below.
into a large-scale mining operation and thus we envision this being a 3-4 million tonne brand of mine at some point in time.
And we're now starting to work to lay that out in the ground work, to lay that out in the shareholder creative fashion.
Part of that is going and evaluating what mills are available worldwide. We've been doing that. We've been talking to various parties around that, have a sense of what that major capital cost may be. Ultimately, we want to get this to be 100,000, 150,000 ounce type of property or even larger than that over time.
You're right, there will be future mill expansions. How they're going to look and how Quikbeater will come online, that's part market and that's part...
right there will be future mill expansions. How they're going to look and how quickly they're going to come online, that's part market and that's part with the work that we're doing now and what the outcome of that work is.
And I think Stephen, particularly with that exploration side of it, right, in a very positive scenario, we may well have two parallel pits. Correct. Okay, thanks for the color there. And then just lastly, and that segues...
into my last question for Andrew. On exploration, are you seeing or are you targeting any higher grade areas that you might be able to bring into the larger mine plan for 2024 going forward?
Yeah, Jake, we have seen, as we reviewed historical information on the eastern porphyry, there are some higher grade zones in that that grab our attention. And we were going to also continue to drill through from eastern porphyry to Anfield where we did have those higher grade grab samples.
To give you a little bit of a sense, Andrew, of what the type of work that's going on.
from a mine planning perspective, in a new resource model that's being updated, SRK and the team have gone through and put all the sections in place. We have a much better understanding of where the high-grade zones are in this deposit than we have before.
And certainly when you lay out a mine plan, given that it's predominantly based on that present value, then you will target those zones earlier in the mine life, if possible.
Yeah, and Stephen, I did mention earlier in the presentation that once the
a new road is open, which is a matter of weeks now.
That enables us to go then through the position of the existing road.
and there are some indeed high-grade blocks, very wide, very good grade, sitting immediately to the north-west, which will now be accessible for mining. And JQ specifically asked, I think also 2024, I think it's fair to assume that we would continue to extend the pit now northwards.
into that ground. Perfect, okay thanks for that. That's all on my end. That answers the question how we're going to pay for it all.
Perfect, okay thanks for that. That's all I'm asking. That kind of answers the question how we're going to pay for it all.
Yeah. I mean, Stephen, I think you said the deposit, obviously it ranges in width, but at its widest points, this deposit is 40 meters wide. Okay. The next question is from Heiko Elie with HC Wainwright. Please go ahead.
Can you hear me all right?
Hey, can you hear me alright? Yeah, we can. Well how are you?
Perfect. You made a pretty good lead over to my first question. That's impressive what you guys have done there in the last, you know, over two years. Um, the...
Looking through, you mentioned some equipment earlier that you're buying versus renting, like the gen sets on this call. In fact, I was, more or less, your last comment here a little bit ago. It means you're front-loading some expenses. Can you give us some representative rates of return that you anticipate from buying stuff versus renting it?
Yeah, the example that I use is always a loader, so we're going to buy some loaders for the processing plant.
They'll cost around $300,000 and we're currently renting two loaders, for instance, for 70 grand a month. So, you could guess the return on that is significant. With regards to the chance that.
The return comes on two bases. We no longer rent them. We'll avoid their rental cost. Also, they're now variable gensets. When the electricity goes down on the line right now, we would need to turn on the gensets 100% for the processing plant.
When the voltage goes out of the line going forward, the gensets will only come on to supplement the voltage. So it'll burn a lot less diesel going forward. So the return on that is going to be, it's a matter of months as well. It's probably around six, seven months is...
is around that. So if you apply that to a model in IRR, you got significant.
returns on those type of investments. And we're doing that right across the whole operation now, and that is up and running, going in and finding those cost savings.
Fair enough. Q2 was the first full quarter with the newly expanded plant. Q3 was the first full quarter with the newly expanded plant.
I mean this thing is now obviously humming, but is there anything else that might be a bottleneck? I'm also asking this in part with the expanded milling circuit and see if there are any lessons that can be learned as that is getting built.
Yes, so we're always open with the improvements we're making and the challenges. And challenges are always opportunities. So one thing that we need to do and is well under control is expand the tailing facility. So we're working with authorities now to get that new tailing facility up and running.
That's well advanced and also the borrow pit for that is well advanced as well. So we don't anticipate any issues on that. Longer term, we need to, as Andrew mentioned, have the long-term tailings management under control. We're well advanced on that of identifying sites, working with local authorities around land, both on and off the property for that and we're working with Sanco to design that. And the goal for that is to make sure that we have the right
the one year in operations.
when you're doing stripping, you can move it over and build your tailing facility over time versus building it all up front. So it will be a tailing facility that's built for waste from the pit essentially over time. So that's one thing that we need to be doing. Another challenge too is there's a step change here going from
1,000 tonnes per day, doubling that capacity 2,000 tonnes per day and then thereafter. So we need to organize mining rates, mining equipment, employees, all of those sort of things will take time and challenges to bring in appropriately. So this expansion won't be ramped up as quickly as the other one because we have to get all of those sort of logistical issues correct. It takes some time for that to be planned out properly and to be ensured of the proper equipment and...
human resource skill sets on site to manage it. It's very helpful. Thank you all and keep up the good work. Thank you, Heiko. Yeah, thank you, Heiko. The next question is from Mike Neuhauser with Ross MKM. Please go ahead.
Hi guys, you can hear me okay? Yeah, Mike, how are you doing? I'm good, great, I hope you're well.
Question for Mike, can I get you to repeat about the the new ball mill when that's going to be coming online? I think what I heard was maybe toward the end of fiscal 2023 so kind of the first full quarter or wrapping up would be in the first fiscal quarter.
2024, is that right? Yeah, I can touch on that. It's towards the the back end of the calendar year this year, Mike. So you're right, you'd likely expect to see some benefit in the early part of next fiscal year, correct?
Yeah, so we're dealing with calendar 2023, Mike, as opposed to fiscal 2023. Okay.
calendar 2023 Mike as opposed to fiscal 2023. Okay.
Also, you mentioned that the head grade was off in the quarter. I couldn't find that. Do you know what that was approximately?
I think, Andrew, I don't know if you have that number handy. I think it was somewhere around just over two gram, but a little bit less than what we rolled up in Q1, Mike. Andrew, maybe you can touch on the impact the wet season has on things like GRADE. Yeah, certainly, Mike.
The grade has been quite consistent. The variations are a little bit minor but obviously when it's a wet season and we're dealing with the the upper part of the deposits we're in clays and so as we've had to go deeper to get the higher grade we've had to also mind those wet clays.
It slows down the equipment is the best way to describe it guys is, but we know this. We have to plan and we have to be strong in all seasons. So what we did.
is access parts of the stockpile which is deliberately there for us to ensure that we have a consistent mill feed of a thousand tons a day. The way I like to characterize it for those that fly is that the high grade is always fast tracked in our mind.
and then the medium grade is sort of in the economy class queue. And so we just had to put a bit more of that in for this quarter. And Mike, that's why you're sort of seeing the higher grades coming in now towards the end of this quarter. And Mike, I think you also alluded that the last two quarters are stronger quarters in this fiscal year. Yeah, and Mike, to specifically answer your question, do you think the strikes will end exactly the same as Returnhop changed in that for a decade? I agree with Mike, so I'm not sure whether wants to talk about glutting quotas or not, but I definitely think that for sureuked or not it spaghettiing like we decide to have a large money. If the strikes will be like I said in aorgical sense they won't actually have to hop inHey Mikeie I thought we would, if we have to, do shorter term
The head grade that we rolled up in Q1 was 3.06 grams per ton and in Q2 was 2.07. So quarter over quarter that was part of the impact on the ounces produced.
Yeah, thank you. The drill program for either calendar or the rest of this fiscal year, can you give us an idea of what your goal is for drilling, either holes or meters? The usability of our equipment looks good in times of maintenance and generally, it
Yeah so in terms of holes Mike what we're going to focus on is grade control drilling and a bit of sterilization. In terms of the diamond drilling on the deposit we will be focusing at the eastern porphyry and the Anfield zone.
The airfield itself is a fairly early stage brownfield. The eastern pore field would now be an extension. That's pretty exciting. Do you have an idea of the size of the program?
We're still working our way through that, Mike.
Okay it's obvious. Whole yes, any sense of why we're focusing on there is.
the top part of the main zone is really densely drilled. So we know that those ounces can come into production really quick.
And thus we're focusing on the surface in Anfield and Eastern Port for a reason, because we believe that those ounces may be able to come in fairly quickly too. Yeah, and provide additional production of flexibility.
The last question. No problem here. You are doing a lot of network and drilling and resource assessment. It almost seems like you are moving closer to realizing your...
aspirational concept and I'm getting the feeling that you're basically moving from the oxide and really understanding the area in between that and the sulfides.
I'm getting the feeling that you're basically moving from the oxide and really understanding the area in between that and the sulfides.
I'm thinking this calendar year is going to be a big year for really coming away with an understanding of the project's potential. Is that close?
Yeah, you're 100% right. That's exactly why all this work is being done. With regards to getting into what you say transitional and harder material, some of that material has already gone through mills, mixed in with the oxides, and as reported in the corridor, there has been no reduction in recovery rates, which is possible. Yeah, yeah. Of course.
That's huge. Also, just lastly, just a comment. I think the comments you made about working with your buying locally from a timing, from an investor point of view, from quality building relationships is an unrecognized value here. It doesn't happen overnight, so congratulations.
So gentlemen, I think there are a few questions along the same line of topic here from a few of our shareholders who would like some more information on our joint venture, the status thereof with D'Amico who obviously is a...
non-controlling interest in our financial statements. Can we speak a little bit to that relationship and how basically that works out and how we see that in our financial statements? Yeah, so the good question. The non-controlling interest does show up in the income statement of the financial statement.
With regards to the relationship with STIMINKO and the government relationships, it's very strong. So we have a good working relationship in Tanzania. We built up a considerable amount of goodwill over the last two years through strong execution on the ground. That's both from the shareholders that are on the call today as well as from all the local stakeholders that are in Tanzania. With regards to how net income is split.
We don't split net income, it's split for accounting purposes, but from a cash perspective, the operating cash flow is reinvested back into the business to continually expand the business.
Also, as part of that agreement, we get capital repatriation back first. So any capital that we spent at Buck Brief gets to return to TRX first, prior to any dividend splits in the future. So right now, most of the income that's generated in cash flow is reinvested right back into the asset to grow.
pay for that third expansion, I expect there to be enough cash.
That's in the forecast. When we roll up a budget, there are expenditures for the third mill expansion. As we mentioned, it should come online at the end of calendar 2023. That is the expectation currently to be paid for out of cash flow for the business. There are also other ways. I think this goes into more shareholder dilution question.
on paying for the expansion is. There are other forms of financing that are available for that. We can do more on a gold prepay for instance. We can bring on some debt at the asset level which we haven't done at this point in time. So there are other ways to pay for that expansion if necessary. Yes, and I will just maybe add to that Stephen. The way we go about our budgeting is very, very conservative.
and we do build in contingency for variances. Mining is a variable business as we all know, so we certainly build in contingency. But in terms of conservatism, we ran our budget at $1650 an ounce, for example, and we ran our half-year forecast at $1700. So certainly some upside on things like gold price, but do have contingency for any unforeseen expenditures as they come up. Great, thanks gentlemen.
Another question comes to us on the topic of possible M&A or purchasing of new land or titles. Can we speak a bit to that subject? On M&A, obviously we have property right now in Tanzania, Buckreeve property is a great property.
And it requires a lot of a lot of our time. Would we look at any opportunities that may be a creative and utilize the skill set that we have. We're able to go in.
turn around an asset very quickly, build an asset out very cheaply. If there's any complementary types of M&A opportunities out there that could utilize that type of skill set, then obviously we'd be doing shareholders a disservice.
I'm not looking at those type of opportunities that can be turned around. It would be very shareholder created very quickly
Okay, thank you Stephen. So yeah, we would look at M&E opportunities that complement our skill set.
Great, thanks. And I think lastly for the moment I'd like to remind again the callers, the people listening in if they do have a question to ping us while we're here online. If for any reason you're having technical difficulties you can indeed reach out to us again after the call to me directly if you will.
For the moment, the last question comes from a long-time shareholder. If we have any thoughts or can foresee in the future paying a dividend? I get asked this question on every quarterly call. Right now, the asset is extremely capital intensive as we continue to grow it.
there is more benefit in reinvesting the asset from a shareholder appreciation perspective is the increased metrics like EBIT per share, net asset value per share, all of those types of metrics. So in the foreseeable future, which is a short to medium term, I do not see the payment of a dividend. Providing Languages and Ger act fit about how EBIT operates through EBIT, there has been a lot of innovation for start and stops with EBIT famed for it earnestly not following
at this point in time. I know that may be different than what was long-time shareholders may have been told, but that is the current business philosophy of growing value for the company.
Wonderful. After that, once we get into a much larger project, all those options are on the table.
Wonderful. After that, once we get into a much larger project, all those options are on the table. Great.
So I don't see any questions remaining in the queue. On behalf of the TRX Gold team, I'd like to thank everybody for joining us today. We are always available to you, so please don't hesitate to reach out to us. And I'd like to wish everybody a great day.
This concludes the meeting. You may disconnect your lines. Thank you for participating and have a pleasant day. Thank you. Thank you. Thank you.