Q3 2024 Galiano Gold Inc Earnings Call
Ludi: Good morning. My name is Ludi and I will be your conference operator today. At this time, I would like to welcome everyone to the Galliano Gold, Inc. 3rd Quarter 2024 Financial Results Conference Call.
Ludi: All lines have been placed on mute to prevent any background noise.
Ludi: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star followed by the number two.
Speaker Change: Thank you. Mr. Matt Badylak, President and CEO of Galeana Gold, you may begin your conference.
Thank you, operator, and good morning, everyone.
Speaker Change: We appreciate you taking time to join us on the call today to review our third quarter 2024 Galliano results we released last night.
Speaker Change: We'll be making forward-looking statements and referring to non-IFRS measures during the call. Please refer to the cautionary notes and risk disclosures in our most recent MD&A as well as this slide of the webcast presentation.
Speaker Change: Yesterday's release details our third quarter 2024 financial and operating results. They should be read in conjunction with our third quarter financial statements and MD&A available on our website and filed on CDAR Plus and EDGAR.
Speaker Change: Also, please bear in mind that all dollar amounts mentioned in the conference call today are in US dollars unless otherwise noted.
On slide 4
Speaker Change: With me on the call today I have Matt Freeman, our Chief Financial Officer, and Michael Cardinals, our recently appointed Chief Operating Officer.
Speaker Change: For this presentation I will initially go through the highlights, Michael will give an operations update and Matt will discuss the financials.
Speaker Change: I'll then provide some closing remarks and open the call for Q&A.
Speaker Change: Here on slide 5, please note that I am discussing Galliano's results on a 100% basis.
Speaker Change: I'm pleased to report that as mining at Ebora advanced, gold production rose by 13% this quarter, reaching nearly 30,000 ounces.
Speaker Change: Mine productivity continued to ramp up and we saw a 32% increase in tons mined, total tons mined, moving 10.4 million tons of material over the quarter.
Speaker Change: On the financial side, despite investing close to $40 million in stripping activities at a borough this year, Galliano's liquidity remains robust.
Speaker Change: We are in a strong position with approximately $121 million of cash on hand and continue to be debt free.
Speaker Change: During the quarter, the team made significant progress on the work related to the life of mine optimisation, the updated mineral reserves and resources, and the planning to restart the NCRAN pit.
Speaker Change: At NCRAN we advance discussions with a preferred mining contractor and mining rates and costs are now clearly defined.
Speaker Change: On the exploration front, while results were quieter this quarter, we continued to advance the AGM exploration pipeline, with drilling focused on the SkyGov B and Abore North targets.
Speaker Change: Drilling at SkyGold B began in August with approximately 5,200 metres of air core, RC and diamond drilling aimed at testing the highest priority targets.
Speaker Change: We expect a complete drilling and receive all assays in Q4. We should then be in a position to share results from this first phase.
Speaker Change: A follow-up drilling program at the Coma Target has been defined and is scheduled to commence in Q4.
Speaker Change: Now turning it over to Michael and a discussion on our progress in operations during the quarter. Slide six please.
Thank you.
Thank you, Matt, and good morning, everyone.
Speaker Change: As Matt mentioned during the introduction, I joined Galeano recently on September 3rd and I spent my first three weeks with the company on site, which enabled me to take a good look at the operations and I'm encouraged by what I saw.
Speaker Change: Starting with safety, we had one recordable injury and no lost time injuries this quarter, resulting in 12-month LTI and TRI frequency rates of 0 and 0.3 respectively.
Speaker Change: Health and safety remain our top priority, particularly in operational areas where activity is ramped up due to the resumption of mining activities and the progression of projects within the plant.
looking at our mining performance during the quarter.
Speaker Change: Despite challenging conditions with backfill material, we saw improved mining production performance from the Aborey Pit, with a 32% increase in total material movement compared to Q2.
Speaker Change: Average daily tonnage rose to 113,000 tonnes per day, with a 43% increase in all mines compared to the previous quarter.
The End
Speaker Change: Blasting frequency increased as we advanced through the transition zone into fresh material and parts of the pit, yielding good results from our operational improvements.
Speaker Change: On processing performance, crushing limitations impacted mil throughput during the quarter as we processed more AborAor, resulting in a 13% decrease in total tonnes processed compared to Q2.
Speaker Change: However, higher feed grades and improved metallurgical recoveries, which increased from 82% to 91% in the quarter, helped offset the reduced throughput, resulting in higher gold production.
Speaker Change: We produced 29,784 ounces of gold during the quarter, which was 13% higher than Q2.
Speaker Change: This performance keeps us on track for the lower end of our annual guidance.
Speaker Change: of between 120,000 and 130,000 ounces of gold. On to slide seven, please.
and John Lennon. Thank you. Thank you.
Speaker Change: Here I would like to highlight the progress we have made at the site, specifically with the ramp-up of mining operations at Aboray.
Speaker Change: As previously communicated, we've expanded the Obore reserves by 45%, which required a pit expansion to fully leverage this increase.
Speaker Change: This move has allowed us to implement improved mining practices, including adjustments to the mine planning, drill and blast procedures to enhance ore recovery and minimise our loss and dilution.
Speaker Change: Changes to pattern design and explosive powder factors are also improving fragmentation which will aid melt throughput as we continue to face crusher constraints.
Speaker Change: We are making good headway through the backfill material and expect to have it mined to completion by the end of November.
Speaker Change: Clearing this material will open up more of the pit, allowing for better utilization of all the available equipment.
Thank you.
Speaker Change: Our mining contractor has fully mobilized all equipment, positioning us well to achieve our planned production rates.
Speaker Change: They also set up a mobile crusher at the Obore Rumpad at the end of October, which will improve our hauling efficiency and further support mill throughput.
Speaker Change: Despite some heavy rains in September, overall precipitation was lower this quarter than in Q2.
Speaker Change: Our increased pumping capacity, combined with the expanded operational area, have strengthened our ability to manage production levels through the wet and dry seasons.
Thanks for watching!
Speaker Change: As we continue to expose larger areas of the ore body in the pit, grade control activities have also ramped up. I'm happy to report that our state-of-the-art photon assay lab is running extremely well, enabling rapid turnaround of the grade control samples.
Slide 8 please.
Thank you.
Speaker Change: Here I'd like to provide a brief update on several of the key AGM projects currently underway.
Speaker Change: We're on track to commission two additional CIL tanks in Q4, which will provide more residence time in our circuit as we see throughput increase.
Speaker Change: As I've mentioned, crushing capacity remains a challenge, but we're making good progress on the secondary crusher project.
Speaker Change: Foundation work continued during the quarter and all major procurement packages have been awarded. We expect project completion and commissioning of the secondary crusher circuit in Q3 next year.
Speaker Change: The oxygen generation plant expansion is nearly complete, expected in Q4 as well, and the new carbon regeneration kiln has been manufactured and is currently on transit.
Speaker Change: In addition, the gravity circuit upgrades are progressing well and should be completed by year-end.
[inaudible]
Speaker Change: And with that I would like to turn it over to Matt Freeman to discuss the company's financial results.
Thanks Mick, good morning everyone.
Matt Freeman: Here we've outlined some of the key financial metrics for the quarter.
Matt Freeman: We generated revenues of $71 million in the third quarter at a realised gold price of $2,446 per ounce.
Matt Freeman: Mine operating income totaled $26.4 million and culminated in net income of $1.1 million with EBITDA of almost $31 million.
Matt Freeman: This enabled us to generate 24.4 million dollars of cash flows from operations.
Matt Freeman: We continue to focus on the cost structure of the mine and are pleased to report that operating costs in aggregate remain consistent with recent quarters.
Matt Freeman: Mining costs being approximately $3.50 per tonne mined is a key component of the cost structure and has helped us maintain our strong margins in this high gold price environment.
Matt Freeman: We also remain disciplined with capital deployment only to spending when critical and with a clear line of sight to value creation.
Speaker Change: On that front, as Mick mentioned, our largest ongoing capital projects include the construction of two additional CL tanks with the aim of increasing residence time and improving recovery rates across all of our deposits.
Speaker Change: We're also installing the secondary crushing circuit, which, as we've said, is critical to maintaining throughput at or above nameplate levels, even when processing the harder, fresh raw material, men, crone, and oboe.
Speaker Change: and as a result of some budgetary savings this year and timing we've also slightly revised downwards our anticipated capital spend for the year.
Moving to slide 10
Speaker Change: In the third quarter, as expected, we've continued to invest in the Boray deposit, as illustrated with the high strip ratio. This has led to elevated oil and sustaining costs compared to anticipated life of mine costs, as outlined in our technical report.
Speaker Change: However, if we exclude the impact of capitalized stripping, which is really an investment in future oil production, the oil in sustaining costs would reduce to approximately $1,500 per ounce sold, offering a much clearer picture of third quarter operational performance.
Speaker Change: And as noted before, we've been happy with the cost control generally, so we're maintaining all in sustaining cost per ounce guidance of between £19.75 and £2,075 per ounce sold.
On to slide 11.
Speaker Change: Here you can see that this close attention to costs aligned with the strong gold price has kept our liquidity and balance sheet robust even while undertaking such a significant stripping campaign to access and foray ore.
Speaker Change: We've ended the quarter with $121 million of cash and still have no debt.
Speaker Change: The chart on the slide clearly demonstrates how a cash balance has benefited from the transaction to consolidate the Isenko gold mine and has remained strong ever since.
Speaker Change: Overall, Galliano still remains in great financial shape to execute on a corporate strategy and to continue to add value to the Isenco gold mine.
Matt Freeman: With that, I'll turn the call back to Matt to wrap up.
Speaker Change: Thanks Matt. This brings us to our last slide looking at how we're investing in our future.
Matt Freeman: We continue to maintain a strong balance sheet with no debt. I dare say one of the strongest balance sheets in our peer group.
Speaker Change: We're executing on our organic growth profile, positioning us to become one of the largest single mine producers, operating a cash-generating, ounce-producing asset in Ghana, West Africa.
Speaker Change: As we advance operations at Aboray and fully transition away from low-grade stockpiles, we expect our all-in sustaining cash costs to trend downwards.
Speaker Change: Adding to the reduction in all in sustaining cash costs, we are progressing through a heavy stripping phase at a borough which will lead to lower capital costs and stronger production profile overall.
Speaker Change: Over the past 18 months we've invested a significant amount of time and resources in near mine exploration.
Speaker Change: with an update to global mineral reserves and resources expected in early 2025.
Speaker Change: This mineral reserve and resource update is being developed alongside an optimised Life of Mine plan.
Speaker Change: And just a reminder, the 2022 Life of Mind Plan was delivered under a different set of circumstances.
Speaker Change: At the time, we were in a joint venture with Goldfields
Speaker Change: Gold prices are now at all-time highs of nearly $2,700 an ounce and our team continues to work diligently on re-sequencing our picks to accelerate cash flows.
We expect to release these reports in early Q1 2025.
Speaker Change: Galliano's value propositions remains compelling and we are confident in our vision for long-term value creation and growth as a company.
Speaker Change: With that, I'd like to turn it back to the operator and open it up for any questions. Thank you.
Speaker Change: Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, simply press a star followed by the number 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press a star followed by the number 2. Once again, please press a star 1 to join the queue.
Speaker Change: And your first question comes from the line of Heiko Ile with HC Wainwright. Please go ahead.
Heiko Ile: Sorry about that, I had you on mute. Good morning, thanks for taking my questions.
Morning, Paiko, how are you?
Speaker Change: Not too bad. Hey, just thinking out loud here conceptually a bit, at what point in the gold price, I mean you know it just keeps rallying here somehow, at what point in the gold price does something that's currently considered waste suddenly become ore?
Speaker Change: and building on all of that, do you have the capacity to, you know, take advantage if gold were to keep rising, which we all hope it does?
Speaker Change: Thanks for your question, Heiko. I think it's a very good question, obviously one that we and all mining companies consider on an ongoing basis. I think, from our perspective, we're in the fortunate position that, as you mentioned,
Speaker Change: Gold prices are running to all-time highs and we're at the point in time where we're also Updating our life of mine plan concurrently. So, you know, we're in a position to be able to look at that
Speaker Change: now in real time and you know we will be taking a look at that as we're updating a life of mine plan over the coming months and as we mentioned on the call you know that will be released in early Q1 next year. So I don't have specific numbers for you in terms of what it does to cut off grades etc and potential.
Speaker Change: improvements to mineral reserves and resources but suffice to say the team's looking very very
very closely at that at this point of time.
Fair enough.
Speaker Change: And then you have a very different issue, or rather it's not even an issue, it's a real benefit for most of your peers. Your transportation costs have decreased quite a bit, and it's ticking down quarter by quarter.
Speaker Change: And then in the release, you state that the mobile crushing unit that was installed at the bore pit is expected to increase fragmentation, da-da-da, and you expect it to increase haul truck load volumes.
Speaker Change: Now, building on all of that, what should we be modeling out, both for Q4, and then I know you probably don't want to go into 2025 too much, but maybe just provide what we should be looking at with our models for next year as well.
Speaker Change: Sure, in terms of throughput specifically, Pytho, is that what you're referring to? Transportation costs.
Speaker Change: Okay, Matt, do you want to go? Hi, hi, it's Matt here, the other Matt.
Matt: I think I wouldn't expect any step changes next year. I think that one of the reasons that the aboard transportation costs...
Matt: have been a bit lower in the last quarter or so is the higher percentage of a boring material. In the past when we were we captured in all transportation costs
Matt: The transportation from Sarsi, that's basically double the distance from the Naborias, so therefore those costs per ton are that much higher.
Matt: As we move through, obviously we'll be providing better insight, as Matt said, when the Life and Mind Plan comes out, but ostensibly we'll be most likely largely relying on a boring material through the next 12 months, so therefore I would imagine that...
Matt: You could imagine that those oil transportation costs should be pretty similar to what we're seeing at the moment.
Matt: There might be some marginal gains, hopefully, from the work that Mick and the team are doing, putting that new crushing circuit in at Obore. Probably not dramatically material to this, but hopefully we'll see some marginal gains on that. The main aim for that is to get the throughput up, which is clearly absolutely pivotal to us to keep delivering the ounces in this gold price environment.
Speaker Change: Got it. Perfect. That's it for me. I'll get back in queue. Thanks for taking my questions.
Excellent. Thank you, Heiko.
Speaker Change: And your next question comes from the line of Raj Faye with BMO Capital Markets. Please go ahead.
Speaker Change: Thank you, Albert. Good morning, Matt and team. I have a couple of questions, one following up on the throughput. You did mention in the MD&A that you expect throughput to improve into Q4.
Speaker Change: Can you give us some guidance as to, with the mobile crushers, what...
Speaker Change: What the level of throughput do you have good confidence on? You said you will probably won't be able to get to 5.8 without the secondary pressure in place.
Speaker Change: And secondly, with respect to the fact that the next 12 months you're mining a boray, predominantly, is it safe from a modeling perspective to use the, or close to the boray reserve grade in terms of modeling out
Speaker Change: the next 12 months. And on that, I know it's still early days, how's the reconciliation going so far with your reserve model?
Speaker Change: Thanks Raj, thanks for your questions. Yep, appreciate it. So I think there was there were three questions in that.
Regarding throughput, the first one
I think this quarter might probably end.
Speaker Change: low point in throughput with regards to what we're expecting on a quarter by quarter basis.
and 1.2 so you know
Speaker Change: That's the kind of range for Q4 that I'd suggest in terms of tons.
And then looking...
forward to 2025.
Again, I mean, I'd be...
looking to the lower end of the five.
Speaker Change: million times per annum mark. But again, Raj, I mean, listen, we're going to have these answers for you all fully baked and ready in January next year. So, you know, you'll have access to them relatively early in the year and, you know, after the team's looked at that. And then the last question.
Speaker Change: Reconciliation, yes. So reconciliation at the moment, you know, we're pretty comfortable with where we are, knowing full well that we're going to be further and further more reliant on
Speaker Change: diamond drill holes which we tend to feel are more accurate with regards to the assays that we see from them and more and more reliant with regards to governing resource models as we mine deeper into that pit.
Speaker Change: that should certainly give us even better reconciliation into 2025 and 2026.
Speaker Change: And then I think you also asked me a question about whether or not you should be modelling an average grade for a bore rate into 2025.
Speaker Change: The answer to that is no, it will be biased low in 2025.
Thank you for joining us for this Reserve Update.
for a Borey.
Speaker Change: We intercepted some really high grades at the base of that deposit. Some of the highest grades that we've encountered across the entire tenements.
Speaker Change: historically and so you're going to see a bias higher grade in 2026 coming out of a bore rate compared to 2025.
So I think I've captured everything you've asked me there.
Matt Freeman: and Matt. Yeah, that's great. Thank you very much. That's from me.
Thank you, Raj.
Speaker Change: And once again if you would like to ask a question, seem to press the star followed by the number one on your telephone keypad.
Speaker Change: Your next question comes from the line of Matthew Baker with RBC. Please go ahead.
Speaker Change: Morning, I'm Matthew Bader from RBC Demand and Securities. I was just looking...
Speaker Change: If you guys could elaborate a little bit about the unrealized losses on the gold hedge instruments and if all of that has been unwound and really just answering how exposed is Galliano to future gold prices?
Matt Freeman: Hi Matthew, it's Matt here, the other Matt, well there's lots of Matts on the call this morning. So yeah, with respect to the hedging, we've included some details in the MD&A of what we did and we've spoken about this over the last year. We put a programme in through out to the end of 2026, a modest amount of ounces hedged that just as a risk management exercise.
Matt Freeman: What we're seeing is that the longer range calls that we've got in, in 26, are all north of $3,000 an ounce.
So clearly out of the money at the moment
Matt Freeman: Yet from a financial derivative standpoint they have I think they've got like a 13 million dollar Fair value on those so at the moment those are completely out of the money So when you look at the numbers our total exposure if you look at spot now around 2700 is no more than about 10 million dollars
Matt Freeman: and the rest would fall off if gold stays where it is. So that's roughly what we're looking at. So it's a little bit of a misleading number just the way we have to value these things and we'd see that sort of unwind over the next
12 to 18 months if gold stays where it is.
Matt Freeman: But ultimately we're super happy that gold's at $2,700 an ounce. It's a net benefit to the company, so it works out well.
Thank you.
All right, thank you very much.
Matt Freeman: and I'm going to be talking about the the the the the the the the the the the the the the
Speaker Change: Thank you and there are no further questions at this time. I would like to turn it back to Mr. Matt Badylak for closing remarks.
Thank you.
Matt Badylak: Thank you operator. Once again I'd like to thank everyone for dialing in and participating on the call today. We certainly look forward to continuing to provide updates throughout the quarter and to catch up again following our full year results in early 2025. Thanks a lot.