Q3 2024 Torex Gold Resources Inc Earnings Call
Good morning, and welcome to the Tor ex Gold's third quarter 'twenty 'twenty four conference call and webcast all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.
Speaker Change: Your question. Please press Star then two.
Speaker Change: Please note that this event is being recorded.
Speaker Change: I will now pass the call over to Dan Rollins Senior Vice President corporate development and Investor Relations. Please go ahead.
Dan Rollins: Thank you operator, and good morning, everyone.
Dan Rollins: On behalf of the <unk> team welcome to our Q3 'twenty 'twenty four conference call.
Dan Rollins: Before we begin I wish to inform listeners that a presentation accompanying today's conference call can be found under the investors section of our website at www Dot Taurus gold Dot com.
Dan Rollins: I would also like to note that certain statements to be made today by the management team may contain forward looking information.
Dan Rollins: As such please refer to the detailed cautionary notes on the page two of today's presentation as.
Dan Rollins: As well as those included in the Q3 2024 M D N a.
Speaker Change: On the call today, we have Jody cause danko, President and CEO, Andrew Snowden CFO.
Speaker Change: Well, Dave step of NATO Executive Vice President technical services and capital projects.
Speaker Change: Following the presentation Jodi, Andrew and Dave will be available available for the question and answer period.
Speaker Change: This conference call is being webcast and will be available for replay on our website.
Speaker Change: Last night's press release, and the accompanying financial statements an M. D. M D and are posted on our website and have also been filed on SEDAR plus.
Speaker Change: Note that all amounts mentioned in this call are U S dollars unless otherwise stated.
Speaker Change: I'll now turn the call over to Jody. Thank you Dan and good morning to all in line Q3 was another consistent quarter of strong operational results backed by yet another record quarter, the average realized gold price, which in turn fuel.
Jody Danko: The record revenue.
Speaker Change: We are solidly place to deliver our production guidance for the sixth year in a route.
Speaker Change: Costs are trending downwards quarter over quarter as expected yet we're still tracking to be at the top end of guidance for the year, primarily due to higher royalties and profit sharing that come along with the strong gold price.
Speaker Change: Our liquidity position has not changed quarter over quarter. This is notable this is a result of the strong cash flow from E. L. G. Essentially funding the entirety of the $114 million of capital that was spent through the quarter I'm Betty I'll do not.
Speaker Change: This is a testimony to catch them into the free cash flow and capability at the outset that further bolsters our expectation that we will return to positive free cash flow by mid next year.
Speaker Change: Starting with an update across our strategic pillars, which are shown here on slide four.
Speaker Change: As you will have seen in the update last week. The media Luna project is now 87% complete cross engineering procurement underground development and construction and surface construction.
Speaker Change: We announced that we were scheduled to tie in period to February 2025, given the timing of the delivery of the switch gear and our associated state of readiness to take the time and period.
Speaker Change: Well, we all want the project done the overriding business priority has always been to keep the tie in period to no longer than four weeks, whether it happened in Q4 Q1 was much less of a concern given the contingency production buffer we developed with the open pit pushback.
Speaker Change: The revised tightened schedule will boost production in 'twenty 'twenty, four and support Derisking, the commissioning period by allowing us to test key process equipment like the V. F. T Ball Mill Motors are ahead of the tie in period during our regularly scheduled December maintenance period at the plant.
Speaker Change: This also comes with a further benefit of potentially reducing the tie in periods of less than four weeks and allows us to continue to build stockpile ahead of commissioning given the rescheduling has no impact on mine production from video Luna, Dave when he gets into his commentary will provide more details on the project.
Speaker Change: On the next pillar of our strategy of integrate and optimize Marella. We released the results of an internal pre feasibility study on E. P. O in September which on the reserve case alone demonstrates the ability to maintain and you will go to equivalent production of at least 450000 ounces through 'twenty 30 within scenario.
Speaker Change: Taking into account potential resource conversion, indicating a clear potential to maintain this run rate through at least 2033.
Speaker Change: Our goal was to fill the mill for 10 years, and we're getting very very close.
Speaker Change: On disciplined growth and capital allocation due to the strong margins and ongoing cash flow from E. L. G.
Speaker Change: Funding for the media Luna Bill does well in hand, and we have more than ample liquidity to finance the remainder of the build and support our strategic objective of maintaining $100 million of cash on the balance sheet, Andrew will provide more detail on our financial position shortly.
Speaker Change: On grow reserves and resources drilling activity has picked up since the first half of the year and we expect to have several press releases out over the next couple of months discussing the results of this drilling at both E. P. O N E L G underground.
Speaker Change: On talent recruitment of personnel for media Luna is progressing well with 55% of our media Luna workforce transferred from previous E. L. G operations. The transition training program now stands at 40% complete and will ramp up even further as open pit production continues to wind down.
Speaker Change: And finally on ESG, although it occurred after quarter end and I want to use this call to acknowledge our team at site for being awarded.
Speaker Change: Silver hard hat from the Mexico mining chamber for the safest mine in Mexico in 2023 in the category of open pit mining with more than 500 workers.
Speaker Change: This award speaks to the World Class safety culture, We've built a tour X for me and my entire executive team, there's nothing more important than the safety of our employees and contractors and our heartfelt congratulations goes out to the entire team in Mexico for this accomplishment.
Speaker Change: Turning to specific quarter highlights on slide five with production of 119000 ounces in the quarter and nearly 350000 ounces year to date, we're well on pace to achieve the new annual guidance.
Speaker Change: Cash cost of $926 per ounce and all in sustaining cost of just over $1100 per ounce are both down by approximately $100 per ounce compared to the prior quarter driven by slightly higher processed grades and although our strip ratio at the open pits.
Speaker Change: Partially offset by further gains in the gold price as well as ongoing elevated cyanide consumption, while the gold price has put pressure on royalties and profit sharing the record gold prices allowed us to generate robust margins and that plus our cost discipline has given us an eight six margin of 52% during quarter three.
Speaker Change: Record quarterly revenue of $314 million helped drive robust EBITDA and cash flow, placing us on solid financial footing to finish media Luna with only a modest level of net debt, which we will repay quickly next year as we returned to strong free cash flow by the middle of the year.
Speaker Change: Over to slide six this just speaks to the operational consistency at El G. Production. This quarter was delivered by slightly higher grades and recoveries in quarter. Two the top right chart clearly illustrates the reliability of the mill, which had yet another quarter of processing and the 13000 tons per day range.
Speaker Change: Bottom left chart shows the gradual increase in grades we have seen quarter over quarter. This year, while the bottom right chart demonstrates that EOG underground mining rates are delivering the expected steady state of 2000 tonnes per day.
Speaker Change: Moving to slide seven this is just a snapshot of how we're tracking against our annual guidance. Our 2024 guidance remains intact with the exception of the increase to annual production guidance because of that four weeks of additional production, but the tie in period rescheduled.
Speaker Change: Gold only production guidance has been increased to 450 to 470000 ounces compared to the previous guidance of four to 450.
Speaker Change: As noted earlier, we expect to end the year at the upper end of the guided range on total cash costs and all in sustaining costs and I'll turn the call over to Andrew who can give more details on that.
Andrew Snowden: Thank you Jody and good morning, everyone.
Andrew Snowden: I'll start by just summarizing all financial highlights you can see as shown on slide nine in Q3.
Andrew Snowden: Exceptional financial quarter Forex.
Andrew Snowden: Our discipline on cost containment achieved an all in sustaining costs of about $1100, an ounce and when combined with the record gold prices produced and all in sustaining cost margin of 52% during the quarter.
Andrew Snowden: Up from 44% achieved in Q2.
Andrew Snowden: With the strong performance in Q3 Adobe touched on earlier, we continue to attract top end of our cost guidance for the year.
Andrew Snowden: And as I noted on our last call the price of gold although of course, a positive frozen supporting margin expansion. The gold price also increases our cost base through high royalties and pizza you will profit sharing requirements.
Andrew Snowden: With a realized gold price being about $2200 an ounce for the first nine months of the year.
Andrew Snowden: Compared with the 1900 Dolby assumes.
Andrew Snowden: In our guidance, we have seen this cost pressure yet tonight.
Andrew Snowden: Recall for every hundred dollar an ounce gold price.
Andrew Snowden: Reported cash costs and all in sustaining costs were impacted by about $12, an ounce all else being equal $3 a barrel.
Andrew Snowden: Royalties in the remainder of Q2 the appropriate Sherman.
Andrew Snowden: All sorts of cost pressure from a higher gold price, though is it.
Andrew Snowden: We are finally seeing from the peso, which is now trading around 21 U S dollar and that compares to what budgets are about 18 to warm.
Andrew Snowden: Year to date, the peso is now almost in line with the budget.
Seven.
Andrew Snowden: This offset some of the cost pressure before earlier on in the year.
Andrew Snowden: On capital.
Speaker Change: And for next question then what are the implications on 2025 production by giving the tie in in February like obviously, you're going to lose approximately four weeks of production, but are there other impacts permanent associated delay in our production ramp up I mean, I understand there's no impact on mining.
Andrew Snowden: And then just following up to that is there is positive free cash flow still on track for midyear.
Speaker Change: And so I'll start with your last question first Don because that's important from our perspective positive free cash flow, it's still very much on track for mid year and what you can think about in terms of the impact on production as we're essentially flopping Q4 of this year for Q1 of next year. It really is just that simple four weeks that we were going.
Speaker Change: Taking a quarter one quarter four we're gonna take in quarter. One the rest of the mine plan is on track for media Luna development is occurring quite aggressively we hit another new record in October and many other NASA feeling very comfortable with that and the process plant ramp up schedule what remains unchanged. It just has a different start.
Date.
Speaker Change: Okay, great. Thank you very much that's all for me good luck.
Speaker Change: I would add one more point, we talked about potential for shaving off a couple of days on the four weeks.
Speaker Change: Things with having that additional time in December it's a long shutdown. Its 80 hours in December so Dave and the project team have additional time to test other systems, which will further de risk of that ramp up. So we haven't shortened the ramp up period at the process plant, but where we're more comfortable about it than we would have been if we would take.
Speaker Change: The time period.
Speaker Change: In November of this year.
Speaker Change: Okay, great well, maybe I'll describe another question to that I mean.
Speaker Change: With regard to the tie in I mean, there was a number of factors hurricane season supply chain interruptions.
Speaker Change: Brenda deliveries for the switch gear.
Speaker Change: I mean, we're all happy to see the production in 2024 go up.
Speaker Change: But why February in particular couldn't have done it in late January.
Speaker Change: And when do you expect to see the switch gear like looking at the reasons for that.
Speaker Change: Pearl is.
Speaker Change: Is there any time that we can be quick here.
Speaker Change: Yeah, what I will say John in one of the things. We're most delighted about is that risk associated with taking delivery of the electrical called equipment is now behind us we have everything we need to do the tie ins. So it's down over the next three months our team to execute on the final construction and wiring.
Speaker Change: Essentially connecting the cables to the electrical and I mean could we have done it in January could be do it late January early February we're talking a shift of a matter of days here now.
Speaker Change: I did a detailed review of the project schedule, particularly given a contractor schedules over that late December early January holiday period, we wanted to make sure that we gave ourselves enough time to do it. It may end up coming in a couple of days earlier it won't change the impact of Q1.
Speaker Change: Okay. Okay.
Speaker Change: Okay, well, thanks for that and good to hear that the free cash was on track.
Speaker Change: The right next.
Speaker Change: Next steps.
Speaker Change: Again, if you have a question. Please press star and then one Andrew.
Speaker Change: And our next question today will come from Jeremy Hawaii with Canaccord. Please go ahead.
Okay.
Speaker Change: Thanks, operator, good morning, Jody, Andrew Dan and Dave.
Speaker Change: I think I'd like to touch on.
Speaker Change: The new Mexican administration, I know, it's still early days, but shy and Bombardier has now been in office.
Speaker Change: Let me for a few months could you comment on whether you've seen any developments or if level of discussions with the administration has increased.
Speaker Change: Whether youre still feeling cautiously optimistic or if theres any changes.
Speaker Change: And your viewpoint on the new administrations are relationship with the mining industry.
Speaker Change: Yeah, Jeremy I'll take that one I think that cautious optimism continues to remain the description as I think about the shine Bond administration developed men's post election, and pre inauguration, while quite at Schoenbrunn, what's precedent of Lac were.
Speaker Change: Were such that we were able to set up a number of meetings with her new administration and post her inauguration. We've also had a number of meetings with them daily sub Secretary, who are assigned to the mining file now what I would describe it is that those discussions have been productive.
Speaker Change: Less political more factual.
Speaker Change: Clear administrative goals our administration goes on infrastructure cleared administration goes on direct foreign investment both of those tie nicely into the need for amplifying mining in the country I would say our decisions have not yet been made.
Speaker Change: About things that are important to the industry. The mining law reform new concessions. The open pit mining ban the important part is that they haven't been made to the negative and we're still talking and so cautious optimism I think continues to be an appropriate description for the shine Bond administration.
Speaker Change: Okay. Thank you I appreciate that color and that's it for me.
Speaker Change: Thanks, Jeremy.
Speaker Change: And our next question today will come from Eric Windmill with Scotia Bank. Please go ahead.
Yeah.
Eric Windmill: Oh, Hi, good morning, Julien team, Thanks, very much for taking my question.
Eric Windmill: Just quickly on the stockpiles are nice to see the balance growing here is it fair to say some of that growth is from a development or or.
Any comments there in terms of our menu.
Speaker Change: Maybe you Ludo.
Ludo: Yeah, some of that growth there Eric is attributed to not immediately when a development or we have about 120000 tons on stock today and that stockpile will just continue to grow and once we commission. The la has tunnel, a conveyor which is coming up here imminently.
That stockpile will grow faster the idea for US is we're commissioning the flotation circuits, we want to have a good steady stream of media Luna feed. So we can get all of the balances in all of the work done on our metallurgy to derisk that ramp up of the flotation circuits.
Speaker Change: Okay fantastic. Thank you very much.
Speaker Change: The other one on Epo I know you said, you're looking to do the feasibility by middle of next year will that be released to the public do you think or.
Where do you expect to be able to provide I guess in terms of Epo.
Yeah, well do something similar that we did to the PFS, Eric I mean, it'll be an internal feasibility study. It is not a complex mine, it's not a complex edition to media Luna. So we will not do a full and I 340 101, our technical team is fully focused on completing media Luna on the sky.
<unk> and putting the finishing touches so that we're satisfied that we have the appropriate plan to start to build out a P O.
Speaker Change: Okay, great. Thank you very much maybe just lastly on M&A, obviously, I know, it's always a topical subject or anything there I mean in the past you've said you know you would look accretive deals, possibly development assets in Mexico any thing we should be thinking of.
Speaker Change: Both on the M&A side.
Speaker Change: Nothing's really changed Erik we're still doing the work and we're committed to doing the right deal at the right time that will create value for our shareholders.
Speaker Change: Okay fantastic well. Thank you very much I really appreciate the color and I'll hop back in the futures.
Speaker Change: Since there appear to be no fourth for further questions. This will conclude today's conference call. You may now disconnect. Your lines. Thank you for participating and have a pleasant day.
Yeah.
Speaker Change: [music].
Speaker Change: Yeah.