Q4 2024 Torex Gold Resources Inc Earnings Call
Speaker Change: 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, an operator by pressing Star then zero I would now like to turn the conference over to John Rowland Senior Vice President corporate development and Investor.
Relations. Please go ahead.
Speaker Change: Thank you Gayla and good morning, everyone.
Speaker Change: On behalf of the <unk> team welcome to our Q4 and full year 2024 results conference call.
Speaker Change: Before we begin I wish to inform listeners that the presentation accompanying today's conference call can be found under the investors section of our website at Www Dot Taurus gold Darko.
Speaker Change: I'd also like to note that certain statements to be made by the management team may contain forward looking information.
Speaker Change: As such please refer to the detailed cautionary notes on page two of today's presentation.
Speaker Change: Well as those included in the Q4 2024 M D N a.
Speaker Change: On the call today, we have Jody cause Blanco, President and CEO and Andrew noted CFO.
Speaker Change: Following the presentation Jodi, Andrew and I will be available for the question and answer period.
Speaker Change: This conference call is being webcast and will be made available for replay on our website.
Speaker Change: Last night's press release, and the accompanying financial statements and MD&A are posted on our website and have also been filed on SEDAR plus.
Speaker Change: Also note that all amounts mentioned in this call are U S dollars unless otherwise stated I will now turn the call over to Jodi.
Jodi: Thank you Dan and good morning to all on the line welcome to the Q4 and year end 'twenty 'twenty four is forex yourself called the.
Speaker Change: The agenda and speaker for today's call it will be a little bit different than usual first the big news is that we've officially started our planned shut down at the process plant to enable many of them in a tie in.
Speaker Change: This means that James Stephanie would O R. E V. P of projects does that site. This week and I will provide the met either in a portion of the quarterly update.
Speaker Change: So I'll take you through the usual business highlights for the quarter and the full year, then the medically and a progress report Andrew will then address the financial results for the quarter and year end and Dan Rollins will join the call this quarter to provide the update on exploration.
Speaker Change: But before we get on with our usual business I feel compelled to start the call today with some commentary on safety.
Speaker Change: What are you familiar with the tour X story or not if you follow the industry, you'll know that Forex had an unthinkable event occur on December 5th where three men lost their lives to carbon monoxide exposure.
Speaker Change: Two experienced staff employees and one contractor.
Speaker Change: If you do know the toy story, you would know that a massive part of our company vision and my own personal vision is to set the standard in the mining industry in safety and we'd been doing just that 18 million hours lost time free lost time injury free at our operating sites seven years fatality free winning awards and recognitions for our safety culture.
Speaker Change: Performance yet on December <unk>, we had multiple fatality incident on our El G Underground mine.
Speaker Change: Carbon monoxide is a well known and well understood hazard an underground mining its a byproduct of blasting gases got created in C. O is one of them.
Speaker Change: For this reason the entire mine schedule is set up around blasting and blast gas clearing as ours was Buddy L. G underground.
Speaker Change: P O above certain limits does immediately deadly you cant see it you cant smell lets you can't taste it and for this reason we have strict protocols in place about wearing personal feel monitors and restricting areas pending ventilation being installed and this was all in place on the date of the fatality.
Speaker Change: On December 4th we took a long hole blast at the end of day shifts nothing in the area happened on that night shift and they ship December 1st it's two contract employees were assigned to establish ventilation to the area.
Speaker Change: A few hours later to stop employees, our ventilation supervisor and a blasting engineer the actual engineer who designed the blast approached the area.
Speaker Change: The evidence of the surviving contractor has actually told us to employees not to enter the area of ventilation Hasnt been established yet and this is supposition on my part you'll never know these two employees entered.
Speaker Change: I think the blasting engineer would have wanted to be the first to see the results of his hard work.
Speaker Change: The rationale is taking that risk probably on some sort of logic of I'll just be there for a second and they entered on foot.
Speaker Change: One went down one ran out for help.
Speaker Change: And that one enrolled the other two contractors to rescue.
Speaker Change: The downs employee.
Speaker Change: All three went in one came out.
Speaker Change: So in a matter of a minutes three men are dead when survived and has recovered families friends colleagues and our team here are still picking up the pieces.
Speaker Change: This shows US a few things first the mining is inherently hazardous we cannot engineer out that hazard.
Speaker Change: It also shows us that we even we have all of the best systems rules culture and conditions and when they are all in place, we're down to human behavior and human choices people make choices.
Speaker Change: Do something for just one second.
Speaker Change: And invite everybody on this call to think about that the next time you choose to look at your phone, while you're driving Ortega just one second to risk.
Speaker Change: It also shows me that we have more work to do with our employees at all levels about risks related choices and we're doing just that.
Speaker Change: Now turning to our full year performance I wanted to open with the usual overview of our strategic pillars on slide four which you may have noticed have evolved slightly from our Q3 earnings call. Our strategy is not changing it's evolving in subtle ways to reflect how much progress we have made over the last four years on execution.
Speaker Change: Our first pillar for example, now reflects that media Luna construction is nearing completion and our focus turns to ramping up to commercial production.
Speaker Change: Hitting the designs mining rate of 7500 tonnes per day.
Speaker Change: With the excellent progress we've made on our underground development. We now expect to achieve this mining milestone by mid 2026 six months ahead of the schedule, we set out for ourselves in the technical report.
Speaker Change: And then no scenario, we'd done the first we're onto our next mine up Morello were investing 30 to 35 million this year to kick off E. P. O construction in the middle of the year. Now this is a much simpler faster cheaper built in video Luna. We expect first production from E. P. O by the end of 2020 six.
Speaker Change: Our next pillar focuses on our optimization plans for marella immediately when it gets up and running this year, we're already planning to optimize various aspects of production and logistics looking for ways to streamline performance to run safer faster and cheaper.
Speaker Change: Next on grow reserves and resources, you'll recall that we've increased our exploration budget. This year to a record $45 million up from $30 million last year, and Dan will touch more on this.
Speaker Change: Before the end of the call.
Speaker Change: Our disciplined growth and capital allocation, our balance sheet remains in excellent condition with over $330 million of available liquidity.
Speaker Change: Coming out of the media Luna build in a solid position to begin returning capital to our shareholders. This year and Andrew will cover off our financials in detail shortly.
Speaker Change: I'm retain and attract talent our workforce transition program for media Luna, that's tracking to plan with over 80% of the workforce required for media Luna now in place, which included transferring almost 200 employees from El G. Open pits during the course of 'twenty 'twenty four and recruiting another new 140 employees.
Speaker Change: Yeah.
Speaker Change: And finally, an industry leader in responsible mining subsequent to year end, we saw good improvements on our S&P corporate sustainability assessment.
Speaker Change: We now rank in the 87th percentile of the metals and mining sub industry. Our score is now 52 out of 100 compared to the average score for our sector of 30 out of 100.
Speaker Change: This assessment covers all facets of our operation So I'm pretty proud here of the good work that goes on behind the scenes that gets reflected in our score improvements each year.
Speaker Change: On slide five the chart you see on the left reflects the consistent performance tour X has come to be known for in 'twenty 'twenty four I'm proud to say that we achieved our annual production guidance for the sixth year in a row.
Speaker Change: While our cost performance land or towards the upper end of our guided range. Our margins remains robust at 49% for the full year, we generated record annual revenue in 'twenty 'twenty four of over $1 $1 billion and.
Speaker Change: And record annual adjusted EBITDA of over $540 million.
Speaker Change: Q4 marked the last quarter of significant spending on immediately on that so overall, we were free cash flow negative on the year as expected. However, and this is important including the excluding the nearly $450 million, we invested on media Luna through the year the strong performance from E. L. G.
Speaker Change: Right of free cash flow of $326 million.
Speaker Change: Bolstering our already excellent liquidity position and a very good indicator of what is to come for tourists.
Speaker Change: Our operations also set new records in 2024, which are highlighted here on slide six.
Speaker Change: Q4 production and throughput up the processing plant were lower compared to prior quarters, given the temporary suspension we experienced in December.
Speaker Change: However, annual recoveries, where more than 90% at 96%, which is a record for the company.
Speaker Change: At E. L. T underground mining rates were well above 2000 tonnes per day for most of the year setting a new annual record of nearly 2100 tons per day and you can expect to see rates here at El G. Underground averaged around 2800 tonnes per day during 2025, given our plan to leverage long haul open stoping, whereas some of the pause.
Speaker Change: Is it steepens up in the underground mine.
Speaker Change: Speaking more broadly to 2025 guidance on slide seven.
Speaker Change: Given the four week shut down at the processing plant needed to complete media Luna tie and production is expected to be lower this year compared to last with quarter, one being the weakest quarter.
Speaker Change: We expect production for the remaining quarters of 2025 will return to more usual levels can be relatively consistent quarter over quarter starting Q2.
Speaker Change: Given the production plan all in sustaining costs are also expected to be higher than in 2024, reflecting the lower finished ounce production and the fact that we'll be ramping up and building out economies of scale at the media Luna mine.
Speaker Change: The higher costs also reflect the impact of the higher metal prices in 2025 guidance is based on $2500 per ounce gold versus $1900 per ounce in 2024.
Speaker Change: I want to caution here that the calculation of gold equivalent sales is highly dependent on the metal price ratios for example.
Speaker Change: <unk> gold price relative to copper and silver this year will lead to a lower gold equivalent sales number and therefore higher a sick the opposite would occur if the price of gold were to weaken relative to copper and silver.
Speaker Change: Notwithstanding the year of 2020 minute twenty-five itself given the production plan costs will likely trend above the top end of the guided range during quarter, one before improving slightly in quarter. Two and then further in Q3 and Q4 with Q4, a sick expected to be near the low end of the range all else being equal.
Speaker Change: Further economies of scale are expected through the year of 26 and into 'twenty seven as many illumina reaches full throughput of 7500 tonnes per day and E. P. O comes online.
Speaker Change: The message here is twofold first 2025 will be anomalous on ASIC at 1400, 1600 that we've guided.
Speaker Change: And the issue will be most pronounced through the first half of 2020 five.
Speaker Change: Finally on this slide on Capex guidance, 'twenty 'twenty, four and marks the final year of heavy investment in media Luna and as such total non sustaining capex is forecast to be in the 90 to 100 million dollar range. This year.
Speaker Change: Difficultly less than the $460 million incurred in 2024.
Speaker Change: Sustaining capex this year is forecasted to be a little bit higher than last year, reflecting the startup of somebody Luna. So our development costs, our equipment lease costs and other media Luna costs will now be in sustaining moving forward post quarter what.
Turning to an update on media Luna here on slide nine firstly, it's likely on the minds of many I know certainly on mine that's what I opened with earlier. This week. We commenced the four week time period for media Luna, bringing us one step closer to bringing the project to a close.
Speaker Change: This started on February 18th and when everything goes as planned we expect to restart the mill on March 18th.
Speaker Change: In terms of broader project progress we provided our Q4 media Luna update released a few weeks ago.
Speaker Change: At year end overall project progress sat at 94% complete, but the largest single outstanding item being construction completion of the paste plant, which will happen towards the end of quarter one.
Speaker Change: Engineering was completed last year in quarter, three and procurement is essentially complete with all major deliveries required to support the startup of operations now on site.
Speaker Change: Only minor deliveries remain outstanding, including some automated valves, the minor instrumentation and some underground pipe for the paste distribution system.
Speaker Change: Importantly, we're tracking very nicely to plan and in some cases ahead of plan in media Luna underground and I want to emphasize that this work does not stop during the process plant tie in period.
Speaker Change: Most of the definition drilling drilling for the 2025 mine plan is now complete and we've already commenced the definition drilling for the stopes that are in plan for the year of 2026.
Speaker Change: We're targeting to have at least one year stope inventory at all times that medical Luna going forward.
Speaker Change: Additionally, monthly underground development rates are tracking at 1300 meters per month compared to the budget of 1200 meters per month and this is with our own crews. So we don't expect any transition issues moving forward.
Speaker Change: The headway we've made both on definition drilling and underground development has put US ahead of our feasibility study timeline to achieve media Luna design mining rate of 7500 tonnes per day six months ahead of schedule. So the target for that is middle of next year.
Speaker Change: Elsewhere on surface works paste plant construction is coming along nicely and is on track for commissioning in early quarter two.
Speaker Change: Installation of the power infrastructure is now substantially complete with a 115 kv system, that's our low voltage system fully energized and operational that happened in December.
Speaker Change: And the transmission line between the 230 Kb switch yard and the 230 kv substation that sort of high voltage tie in.
Speaker Change: That will be completed this quarter and energized in Q2 concurrent with the commissioning of the paste plant.
Speaker Change: With the plant tie and having just started we're on track to produce first copper concentrate by end of March we've given ourselves nine weeks to bring the new flotation circuits up to steady state and this is with respect to recoveries and copper con copper concentrate quality that nine weeks we.
We do expect commercial production will be declared prior to the nine weeks towards the end of April.
Speaker Change: The Bill is not expected to be an issue ramping up given that it's the same front end grinding circuit. We currently operate we've got plenty of experience stopping and starting mills something that occurs each maintenance period.
Speaker Change: Slide 18 shows some of the pictures of the areas I just touched on the flotation circuit Theres on the top left you can see it's currently undergoing tie in and commissioning pre commissioning activities.
Speaker Change: With the copper concentrate storage facility at the top right substantially complete we will be ready for first copper calling at the end of March.
Speaker Change: The 230 kv switch yard I, just talked about as shown in the bottom left picture and it will be connected to the national grid in quarter two.
Speaker Change: And you can see the progress being made on the paste plant construction in the bottom right, where the focus is on mechanical assembly of the two large filter presses.
Andrew Noted: And with that I'll turn the call over to Andrew for financials.
Andrew Noted: Thank you Jody and good morning, everyone.
Speaker Change: So I'll start my comments first.
Speaker Change: Slide 12, just to walk through our Q4 and full year 2020 core promotional performance.
Speaker Change: As Jody mentioned, our strong operational results supported by the backdrop of a strong gold price resulted in record revenue of $1 $1 billion.
Speaker Change: Robust margins of 49%.
Speaker Change: Record adjusted EBITDA.
Speaker Change: Both of them.
Speaker Change: This performance supports further investment in media Luna.
Speaker Change: Maybe limit capital spending pretty much behind us now expenditure will decline.
Speaker Change: As we approach first concentrate production at the end of March and then declared commercial production shortly thereafter.
Speaker Change: We guided to approximately $60 million of project related expenditure.
Speaker Change: In the first half of this year.
Speaker Change: This amount approximately half is related to underground development.
Speaker Change: Otherwise stated.
Speaker Change: Capital.
Speaker Change: And that's given the rescheduling of Italian period.
Speaker Change: From last November.
Speaker Change: The remainder of the capital relates to Finalization of some sort of construction activity, including the plant volume.
Speaker Change: Construction.
Speaker Change: We're just decline in project spend we're well on track to pivot back to public to free cash flow mid this year with the ramp up of media Luna.
Speaker Change: Our spot nickel prices I would expect over $400 million of free cash flow per year going forward starting mid 2025.
Speaker Change: Non sustaining expenditure.
Our potential future growth opportunities.
Speaker Change: Turning next to slide 13.
Speaker Change: I just wanted to briefly review our unit cost performance for the year.
Speaker Change: Firstly, you can see here with you.
Speaker Change: We saw how your unit costs year over year, the volume of material mined reduced with these operations approaching end of life.
Speaker Change: In addition, maintenance costs were higher.
Speaker Change: Extended the life of the aging fleet to avoid avoid higher cost replacement.
Speaker Change: Pardon me this year.
Speaker Change: We've also done great work on transitioning all can put workforce.
Speaker Change: <unk>, which required us to backfill.
Speaker Change: Compositions with contractors.
Speaker Change: Understood and could have some marginal higher operating culture.
Speaker Change: EOG underground not much really to note there was mining costs were consistent year over year.
Speaker Change: Oh, the plums processing costs did increase compared to towards 23, I'm not really just reflects a higher cyanide consumption.
Speaker Change: Due to increased levels of copper and item. If you will as what was slightly lower tons processed year over year.
Speaker Change: And finally on Pizza U S. This is linked to our profitability.
Speaker Change: The record oil prices. This year. It did result in higher Pizza U.
Speaker Change: Yeah.
Speaker Change: Turning next to slide 14, you can see here our cash position continues to remain above $100 million strategic objective, although it's lower compared to the end of 2023 really driven by $450 billion or maybe even at a loss.
Speaker Change: Yeah.
Speaker Change: To support this capital investment.
Speaker Change: While maintaining a $100 million of cash we did draw down about $65 million on our credit facility December 31st.
Speaker Change: As we finalize the media Luna built from Q1.
Speaker Change: The impact of a full shutdown and the seasonality of our cash flows.
Speaker Change: I expect to have a total of 150 to 200 billion drawn on our credit facility at the end of <unk>.
Speaker Change: Q1, so around another 85 $235 million draw in the quarter.
Speaker Change: Chris will have us exiting maybe if you learn to build with between 50 and $100 million or net debt excluding leases with this debt being repaid back quickly in 2025, given the projected free cash flow going forward.
Speaker Change: On the theme that with Q1 being our peak drawdown period on the credit facility I did want to just remind those on the call again on the seasonality of our cash for this is Rob.
Speaker Change: Illustrated on slide 15.
Speaker Change: Q1 is in place it should be all the lights this quarter from a cash flow perspective, and really driven by a number of factors.
Speaker Change: The four week time point.
Speaker Change: For the media Luna project. So that will result in Q1 being the lowest quarter of production for the year.
Speaker Change: In addition, there are several royalty tax payments in the quarter firstly the payments for the trip or bi monthly income parts installments to our final tax return in March.
Speaker Change: Expect that will be about $45 million, which is higher than the prior year given the strong profitability.
Speaker Change: It's also the annual mining royalty.
Speaker Change: Throughout the year and also paid in March.
Speaker Change: <unk> 24 year this payment will be approximately $35 million again higher than prior year, driven by Michael approach drug.
Speaker Change: And just to note starting in 2025. This royalty did increase by 1% from seven 5% to eight 5% our missile impacts the payment is due in March 2026, but will not have any impact on the payment to them coming up here in March 'twenty funds.
Speaker Change: And finally for Q1 was also the 0.5% royalty relates to proceeds from Goldman Silver cycles. This royalty is also accrued monthly slowly paid annually in Q1 of the following year.
Speaker Change: I expect this payment.
Speaker Change: $5 billion this quarter.
And also going forward. This royalty did increase from 0.5% two 1% and that will be impacting all payments in Q1 of 2026.
Speaker Change: While we're talking cash flow seasonality just a brief note on on Q2 as well Q2, we'll see the impacts of the Mexican profit sharing payment okay enough crews accrued.
Speaker Change: Accrued monthly pay down annually.
Speaker Change: The payment that we expect somebody.
Speaker Change: By 2025 will be approximately $32 million.
Speaker Change: Slide 16 shows our balance sheet and liquidity position at the end of the year.
Speaker Change: Liquidity.
Speaker Change: It was about 313 billion, including a $110 million of cash and be tuned from $21 billion available on our credit facility.
Speaker Change: We're really posed to exit the building to build in a strong financial position without losing upside on our margin pardon me for royalty or stream or diluting our shareholders from the build.
Speaker Change: Buildings, almost all funded with our own operating Catchwords.
Speaker Change: As noted earlier I expect we'll finish the build with a net debt position excluding leases of between 50 and 100 billion Boes.
Speaker Change: Pushing that external hedging position on slide 17, given the volatility we saw in the Mexican peso last year was not good in parts of our operation talked through the year.
Continue to look at ways to prudently manage our exposure to potential swings in the peso.
Speaker Change: Entrance or a mixture of zero cost collars on forward contracts to provide protection to our peso denominated operating costs.
Speaker Change: The details of these hedges are summarized on the slide you can see here I'll provide protection for about 60% of our pizza operating cost exposure.
Speaker Change: Gold sales Q4 marked the final quarter of goes forward contracts entered into to protect immediately to build.
Speaker Change: And there were no plans to place any further go forward contracts going forward.
Speaker Change: However to note we did purchase some attractively priced.
Speaker Change: $2500, an ounce to protect downside risk to the gold price and the media Luna ramp up here, while leaving us to fully benefit from upside in the gold price.
Speaker Change: Finally on slide 18, I just wanted to take a moment to remind everyone about our transition to being a producer of adult rich copper concentrate in late March of this year.
Speaker Change: And that will be a primary product for us in addition to ongoing production of gold Dore.
Speaker Change: This transition will bring changes to our sales logistics revenue recognition on the working capital.
Speaker Change: Firstly just to note there'll be no change to the revenue recognition on sales cycle of Dorian, but will continue as we always have been.
Speaker Change: But this year, we are about 50% of our revenue will be sourced from the gold rich copper concentrate.
Speaker Change: You may recall I touched on our copper sales process with our Investor day. This past September.
Speaker Change: So I feel free to go back to the presentation on our website for further details.
Speaker Change: Well I'll just make a few recap comments through the reminder, on some key points here.
Speaker Change: So the copper concentrate that we reopen.
Speaker Change: Producers cite as a reminder, that we'll be trucked daily component to the ports of months.
Speaker Change: Pacific Coast of Mexico trends, it will take about a about two days.
Speaker Change: This material will that accumulates.
Speaker Change: Pull through for our warehouse that until it reaches the optimal size for shipment and that was between five and 10000 tonnes before being shipped to the destination port for processing at the smelter.
Speaker Change: Although total copper con production.
Speaker Change: Towards 25, 80% of this roughly will be sold to traders and about 20% directly to smelter.
Speaker Change: But we've also left some room within our sales strategy to sell a portion of our concentrates in the spot market as required.
This slide also provides a bit of a breakdown on pay ability on payment schedules between traders and smelting.
Speaker Change: Trade is we expect to recognize revenue on delivery to the pulsar months EMEA will elect to receive weekly advanced payments based on a deliberate deliveries.
Speaker Change: For these sales I would therefore expect very little impact for revenue on working capital.
Speaker Change: Will there be quarterly mark to market adjustments recognized on these sales based on the movement in forward commodity prices until final settlement occurs.
Speaker Change: The smelter sales revenue will be a bit lumpier as I expect we will recognize revenue on loading of the vessel and so it would be.
Speaker Change: Need to accumulate the full locked before recognizing revenue this could take between one to two months.
Speaker Change: And then post recognition we will also have the mark to market adjustments until final cert from them.
Speaker Change: On collection.
Speaker Change: For those sales the smelter terms are all much more delayed.
Speaker Change: However, I expect to have a financial intermediary between us and the smelter to accelerate payments.
Speaker Change: If anyone wants to talk through any of the details related to these copper concentrate sales happy to do that so feel free to reach out.
Tom: With that ill turn the call over to Tom.
Tom: Thanks, Andrew turning to slide 20.
Tom: 2025 marks the next evolution of our exploration strategy, given we have now shored up the production profile for the next 10 years with the addition of Epo to the mine plan.
Tom: In 2024, we spent roughly $26 million on drilling and exploration, which was below the original budget of $30 million.
Tom: The amount of drilling was impacted in 2024 by the move to a new drill contract contractor, which impacted the pace of drilling during Q1.
Tom: The pace picked up significantly in the second half of the year.
Tom: Turning to the 2025 program the key focus will be getting us to a place where we can consistently replace reserves and resources year after year.
Tom: We will starting to test high priority targets Pri.
Tom: Primarily from areas, we don't currently have mineral resources.
Jody: As Jody mentioned.
Jody: We have budgeted $45 million for drilling and exploration this year more than a 50% increase over last year's spend.
Jody: We expect to drill just under 125000 meters. This year across the whole property, which is almost double the meters drilled in 2024.
Jody: The largest component of the spend is within the media Luna cluster.
Jody: Where we will resume step out and infill drilling at the main media Luna deposit.
Jody: <unk> continued drilling off media Luna West.
Jody: Drill test media Luna East and commence an inaugural drill program at total Santos.
Jody: Drilling will also continue at Epo was.
Jody: Was the pace of drilling more back half weighted.
Jody: Coincides with the development of underground exploration drift off with soap portal upper.
Jody: This decline is expected to allow us to more efficiently drill off Epo and improve the drill density within the main area.
Jody: Like prior years drilling at EOG underground will remain a key priority as we look to continue the trend of extending the life of the deposit by expanding and upgrading resources and upgrading resources to replace reserves.
Jody: We're also looking to improve the overall grade by targeting higher grade mineralization, specifically, where the faults intersect the main structural corridors.
Jody: 2025 will also see us expand our regional program with initial drilling plan at both at scholar in El Dorado, two high priority targets were.
Jody: We're actually quite excited but at scale, it's a very large area of the land package and right now 16 targets have been identified and will drill the first three off in 2025.
Jody: Slide 21 shows how these targets rank on our exploration pipeline. It speaks to the numerous opportunities we see at borrowers, which can improve the overall profile of the business.
Jody: Over the near medium and long term.
Jody: With our year end reserve and resource update in March we'll update this image to show the progress we've made in 2024.
Jody: I believe these targets will see us deliver on strategic and our strategic objective of sustaining annual gold equivalent production of at least 450000 ounces through 2033, while allowing us to continue to extend the overall mine life umbrellas.
Jody: News flow wise I expect we will release the results of drilling for media Luna West in the next several days and Polish our initial year or our year end mineral reserve resource update before the end of March.
Jody: Given the pace of drilling expected in 2025, I expect a more consistent consistent cadence of drilling on put on drilling releases this year likely with the release of drilling about every two months.
With that I'll turn the call back over to the operator for the question and answer period.
Speaker Change: Thank you well 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 two.
Speaker Change: Our first question is from Cosmos <unk> with CIBC. Please go ahead.
Speaker Change: Hi, Thanks, Jody and good.
Speaker Change: Maybe my first question is on media Luna.
Speaker Change: As you mentioned you are expecting to declare commercial production.
Speaker Change: Shortly after the tie in.
Speaker Change: Complete what's your definition of commercial production.
Speaker Change: And when can we start expect when can we.
Speaker Change: Start to expect depreciation on the media Luna Catholics do we should we take them.
Speaker Change: Cosmos. Thanks for the question, it's Andrew here.
Speaker Change: I'll take that.
Speaker Change: And so when we looked at commercial production as of a few different metrics that we looked at both underground underground mining rates and development rights as well as plant throughput and recovery rates. We expect we will hit those those various criteria relatively quickly I think the.
Speaker Change: The expectation at this point would be about 30 days from bringing the plant back up will likely decline around them on patents.
Speaker Change: Reporting easier and so the way that I would kind of think about commercial production would be kind of at the end of April of 2025.
Speaker Change: Mhm.
Speaker Change: And then we would start to depreciate.
Speaker Change: Media Luna assets from.
Speaker Change: From effectively made for going forward.
Speaker Change: Today's coach total thank you.
Speaker Change: <unk>.
Speaker Change: Maybe another question.
Speaker Change: Or maybe Jody, but it's on taxes.
Speaker Change:
Speaker Change: As you mentioned there is a true up for Mexican taxes.
Speaker Change: That will be paid in March.
Speaker Change: As you mentioned the trips a bit higher this year compared to <unk>.
Speaker Change: Previous years, given the higher profitability.
Speaker Change: I'm just wondering like.
Speaker Change: A bit of money on the Capex for media Luna I would've thought that there would be some kind of tax benefits or tax offset coming from that.
Speaker Change: Capex or is that coming from somewhere else.
Speaker Change: Yes, so you're right talked about Andrew Henry game up to be.
Speaker Change:
Speaker Change: We won't get a benefit from that would be the lunar expenditure really we start to take the tax deduction almost consistently with when we kind of hit commercial production and so we haven't really seen the benefits of that expenditure yet, but as we start to depreciate the.
Speaker Change: For accounting purposes. This year. It will also start to depreciate the asset for tax purposes, and we will see that benefit come through.
Speaker Change: I'll kind of later in 2025 through all installment payments and then with any true up that we have in 2026.
Speaker Change: Right.
Speaker Change: And maybe one last question.
During this time period 28 days, what kind of news flow can we expect from the company to maybe help us with gaining confidence that the Italian is going well.
Jody: Hi, Jody here Cosmos.
Jody: I'm gonna be day by day or a week by week, certainly we'll be tracking that internally, but I wouldn't expect.
Jody: Our regular news flow during the tie in period, when all things I'm not using the word S. Here, but went all things go well you can expect our information from our March 19th March 18th that we're bringing the mills back up and I expect the big Splash will come at the end of March when we have our first copper concentrate production.
Jody: Of course, thank you certainly looking forward to it because all my questions.
We are as well thank you.
Speaker Change: The next question is from Don Demarco with National Bank. Please go ahead.
Don Demarco: Thank you operator, and good morning, Jody and T. J Jody. Thank you for your comments on safety at the beginning of the call certainly something for all of us to take to heart and and congratulations on the financial beat in Q4.
Speaker Change: But first question for Andrew.
Speaker Change: So Andrew 'twenty 25, non sustaining capex is guided at $90 million to $100 million how much of this should we model in Q1 and Q2, how should we think about the distributions this year.
Speaker Change: And so with.
Speaker Change: Within our January guidance.
Speaker Change: No Don I think we probably with bits of color on what was in that sort of balance the main kind of key expenditures relate to $60 million for media Luna I think that's primarily earmarked for Q1 of this year there may be some there'll be some amounts that the continued through the beginning of Q2 until we hit commercial production for the majority of it.
Speaker Change: That would be Q1.
Speaker Change: Hi.
Another key amount within that guidance relates to Epo. So that's about $30 million for the year and that will be backend loaded that will be kind of Q3 Q4.
Speaker Change: In terms of kind of framing it's about right.
Speaker Change: The general guidance that I provided.
Speaker Change: Great. Thanks, Okay.
Speaker Change: That's helpful.
Speaker Change: And then our next question to Dan Dan You mentioned slide 'twenty, one showing the pyramid targets cause.
Speaker Change: Does the company have a target level of resources defined this year or potentially over the next three to five years.
Speaker Change: We have sort of high level targets, what we're looking at from the different assets, but it really depends on the pace of drilling and the focus where we're going to be drilling. This year is the first time really that we stepped out within the media Luna clusters. So you got media Luna West, we'll see more drilling no resource on that this year.
Speaker Change: Potentially we'll have that by the end of this year, maybe where the east really just going to see its first drill holes.
Speaker Change: That we can really step out there till the Santos has never seen a drill hole. So a lot of the drilling we're going to be doing in the cluster is actually looking at defining should those targets be drilled going forward based on success at <unk>.
Speaker Change: To what we're doing at El Dorado and that Skalla really just drinks are drill testing to find out if they pass that next stage gate, if they do they'll see more drilling dollars in the future. We have a long term potential here like we've got a mine plan that goes out for 10 years as we've mentioned to many on the call. We think we'll be mining here for 20 plus years longer we've drilled off a very small amount of the <unk>.
Speaker Change: We're all media Luna cluster of the overall property. So we do see a lot of potential there do we have exact targets not that we're gonna put out publicly right now, but again, we're spending $45 million a year. This year I think that demonstrates our commitment to exploration and growing the overall resource base.
Speaker Change: Okay. Thank you that's certainly a lot of lot of names in that pyramid. So we'll look for this.
Speaker Change: This.
Speaker Change: Continued news flow on exploration.
Speaker Change: In addition to the ramp up of media Luna over this year and years to come.
Speaker Change: Okay. That's all for me. Thank you and good luck with the Q1.
Speaker Change: The next question is from Eric Windmill with Scotiabank. Please go ahead.
Eric Windmill: Great. Good morning, Julien team. Thanks for taking my question I'm, just I'm on the cyanide consumption. There were some interesting commentary in your disclosures about cyanide consumption levels and wondering how we should think about that going forward with media Luna and maybe more specifically in terms of the call.
Eric Windmill: Cost impact there any color would be appreciated.
Eric Windmill: I'll take that one Eric the cost impact of cyanide consumption as we transitioned immediately in our feed has been built into our guidance and so we closed 2024 with our consumption rate for the year of just above three and a half kilograms per ton that was up almost a full kilogram a ton from 'twenty two.
Eric Windmill: Three rates and one of the key reasons for that is as the open pits. We're sunsetting, we had much less ability to blend the feed at the French of pipe going into the plant for levels of soluble copper and levels of iron Sulphides.
Eric Windmill: So our limited ability to blend will continue moving forward as we bring on media Luna underground feed and mix that with E. L. G underground feed but the way you should be thinking about cyanide consumption through 25, and 26 is in a way that's consistent with the 24 year end numbers, so about three and a half kilograms per ton.
Speaker Change: Okay, Great really appreciate it thank you and maybe a bit of a tough question to answer but obviously the tariffs are in the news are front and center. These days.
Speaker Change: Any potential impact. So you think of in terms of imports into Mexico, and some of your reagents things like that.
Speaker Change: Yeah, I mean like everyone. We've run through them the potential tariff scenarios, Canada, United States, Mexico, and China are.
Speaker Change: Through our supply chain, our comments I would make or this.
Speaker Change: The placing of our gold and copper isn't going to be impacted we've got lots of optionality. There. So we're not concerned about that so the big question remains is how its going to creep its way into the supply chain.
Speaker Change: Our T T our reagents, namely cyanide specifically.
Speaker Change: Won't be impacted by the tariffs that we can see now so we're feeling pretty good about that and we have a roundabout number if all of the tariffs come true here at 25% plus 10% from China about $10 million through the entirety of our supply chain and how that could change of course, depending on what the U S administration does.
Speaker Change: So our Italian retaliatory tariffs from Mexico, and so the goal for US is twofold one crew.
Speaker Change: Create supply chain Optionality, so that we can maintain margins as best possible here and as I said to the team that we think we're in and anything can happen world here for the next four years. Our goal is to tuck in and produced gold at the best margins possible.
Speaker Change: And so we're busy working on that.
Speaker Change: Okay Fantastic again, I know, it's tough to see what's going to happen in the future, but I appreciate the added guidance that helps maybe.
Speaker Change: Maybe just last one for me not to get too granular, but on the exploration. It was interesting the comments here about this sort of first pass drilling some of these targets I think you said on the Rancho and total Santos a movie outs collar just wondering what the status is on some of those targets and are you looking at you know sort of a bowl with diebold when the drill rigs.
And obviously the way for us to come back before you scale up those programs or what's the kind of status of some of these earlier, maybe greenfield original targets.
Speaker Change: Yes. So total Santos for example is now being drilled so that program will it was about 5000 meters. We'll complete that this year and then we'll do the evaluation through this year and decided if it comes back into the mine into the drilling plan for next year. The rest of the programs are sort of between five and 10000 meters will let those initial programs to be completed.
Get the assays and then as we go into 2026th budgeting process, we'll decide on which one should be the priority.
Speaker Change: So none of them really gonna be stop and start we're going to do the initial drilling see how they go and then make a decision if they pass that next stage gate, obviously, when you got media Luna and EOG underground drilling again, we have a little bit more flexibility to be mobile, where we want to drill but again those are pretty solid program through this year and then immediately east.
Speaker Change: Given the potential that we may be able to drill it off from the underground later this year that could get some flexibility and maybe get more meters for the same dollar spending but again right now we're doing we're assuming most of that drilling will come from surface, but if we can get more underground drilling will just get more meters for the same dollar. So I would say most of the program through this year are going to be sort of set is really going to be.
Speaker Change: How those play into the 2026 and 2027 exploration programs.
Okay Fantastic that helps so we'll look forward to the updates there and yeah I really appreciate you taking my questions I'll hop back in the futures.
Speaker Change: Once again, if you have a question. Please press Star then one.
Speaker Change: The next question is from Jeremy <unk> with Canaccord Genuity. Please go ahead.
Speaker Change: Good morning, Cody Andrew and.
Speaker Change:
Speaker Change: Yes.
Speaker Change: Thanks for taking my question on the theme of exploration. Some some great targets there near mine and regionally could you just remind us what's required for permitting to bring that into the mine plan.
Yeah, So I would say that one of the we have sort of most of the agreements in place to get access to the land with permitting the main one we're waiting for is media Luna East, we announced that agreement with the MS. Golla community late last year that will give us access to about 1500 hectares to drill there.
Speaker Change: That's in the pipeline as part of her annual permitting process, we hope to have those permits in place to begin the the drilling program there sort of mid 2025 of the rest of them sort of permits are in place or land access agreements in place to do those drilling programs.
Speaker Change: Okay, and so assuming success nothing major required to actually get in there and buy them.
Speaker Change: That is correct.
Speaker Change: Okay great.
Speaker Change: Last question for me is it.
Speaker Change: If we could just get an update on your thinking around capital returns.
Speaker Change: I believe that you've got the NCI would be in place and have been discussing internally are potentially.
Speaker Change: Low, but sustainable dividend is that still the case and when might we hear more about that.
Speaker Change: Hi, Jeremy it's Andrew I'll take that question.
And so really all our position on return of capital is unchanged.
Speaker Change: Discussing for some time, our intent and desire to commence a return of capital program around mid 2025, once we're through the media Luna build and through the early stages of the ramp up.
Still very much the plan I mean, we expect as I mentioned in my commentary.
Speaker Change: Stopped producing pretty significant free cash flow I'm commencing mid this year and so including a return of capital program within our broader capital allocation framework is appropriate.
Speaker Change: And the way we're thinking about that game is consistent with what you just described Jeremy I think.
Speaker Change: A combination of potentially I E are sustainable.
Speaker Change: Dividend, coupled with depending on what the share price is doing but coupled with a share buyback program and although we did issue. The NCI be late last year, we havent purchased anything back under that program really in the short term in the final stages of the build we were looking at about more opportunistically versus a more fulsome return.
The capital program that we'll look to announce around middle of this year.
Speaker Change: Okay.
Speaker Change: That's great color. Thank you I'll step back in the queue.
Speaker Change: As there appear to me no more questions. This concludes today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change: [music].