Q4 2024 Lundin Gold Inc Earnings Call
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This call is being recorded on Friday February 21 2025.
I would now like to turn the conference over to Ron Hochstein, President and CEO. Please go ahead.
Ron Hochstein: Thank you Andrew and good morning, everyone.
Ron Hochstein: Thank you all for joining us today I'm joined by Terry Smith, Chief Operating Officer, <unk>, <unk>, our Chief Financial Officer.
Ron Hochstein: We're going to take you through our results for the fourth quarter and full year of 2024.
Ron Hochstein: Please note lending Gold's disclaimers on this slide.
Ron Hochstein: This discussion includes forward looking information.
Ron Hochstein: Actual future results may differ from expected results for a variety of reasons described in the cautionary.
Ron Hochstein: <unk> regarding forward looking information and statements section of our press release.
Ron Hochstein: Let me go over to the U S dollar reporting entity and all amounts in this presentation refer to U S dollars unless otherwise indicated.
Ron Hochstein: Let me Ingalls had a banner year in 2024, breaking several records, both operationally and financially.
Ron Hochstein: With respect to operations company exceeded production guidance of $450 to 500000 ounces and achieved record annual production of 500 to 502029 ounces, while having unit cost guidance, having achieved cash operating costs of $712 per ounce sold.
Ron Hochstein: In Asia of $875 per ounce of gold sold.
Ron Hochstein: I am, particularly pleased with our team's exceptional cost management in 2024.
Ron Hochstein: Our operational excellence initiatives continued to drive down base operating costs.
Ron Hochstein: <unk> mitigating impact of several external factors.
Ron Hochstein: These factors included higher gold prices, which led to increased royalties and profit sharing.
Ron Hochstein: A portion of which is recorded in operating cost.
Ron Hochstein: It's important to remember that our 2024 guidance was based on 19 $800 per ounce gold price with royalties and profit sharing tied to oil price each $100 increase translates to roughly a $10 increase in both cash operating costs in ASIC.
Ron Hochstein: Given our average realized gold price of 2000 and $462 per ounce in 2024.
Ron Hochstein: This added approximately $55 per ounce to our cost.
Ron Hochstein: We also saw increased diesel consumption as we strategically utilized our onsite generators to reduce reliance on the national grid.
Ron Hochstein: Despite these factors our teams cost control efforts allowed us to deliver on our guidance and achieved strong financial results.
Ron Hochstein: Before we move on I want to address our safety performance we.
Ron Hochstein: We were challenged on the safety front in 2020 for recording 10 lost time incidents and 13 medical aid incidents.
Ron Hochstein: This resulted in a total recordable incident rate of <unk> six six per 200000 hours worked.
Ron Hochstein: This is not where we want to be.
Ron Hochstein: We must do better.
Speaker Change: And we are committed to improving our safety performance Terry.
Ron Hochstein: Terry will speak about our safety initiatives in more depth later in this presentation.
Ron Hochstein: Turning to our financial achievements for 2024, we generated a record adjusted free cash flow of $540 million or $2 26 per share.
Ron Hochstein: And ended the year with a strong cash balance of $349 million.
Ron Hochstein: We achieved a debt free status by purchasing a stream loan credit facility and offtake commitment in the second quarter of 2024 for $330 million.
Ron Hochstein: Reflecting our confidence in our financial performance.
Ron Hochstein: And our commitment to returning value to shareholders. We've made the decision to increase our quarterly dividend to <unk> 30 per share payable on March 26 2025.
Ron Hochstein: As triple our dividend rate at the start of last year and equates to approximately $300 million on an annualized basis.
On the growth front, our plant expansion project is substantially complete and we are on track to meet our 2025 production and cost targets.
Ron Hochstein: With the publication of our annual mineral reserves and resources statement, we've achieved our highest level of contained ounces to date.
Ron Hochstein: We more than replaced our 2024 mining depletion.
Ron Hochstein: Increased our measured and indicated resources and added one 7 million ounces of inferred resources through successful drilling with most of the contribution coming from F DNS and exciting new area neighboring have Dee Ann.
Our exploration potential remains strong.
Ron Hochstein: We completed over 80000 meters of drilling in 2024.
2025 program is off to a solid start and is already expected to be larger than we originally planned as we have added an additional surface rank and are evaluating bringing in additional underground rigs to target F. DNS.
Ron Hochstein: We have drillers drilling results pending and I look forward to disclosing these soon.
Ron Hochstein: We are also planning to release, an initial mineral resource for our bonds a short project later this year.
Terry: With that I'd now like to turn the call over to Terry.
Terry: Thanks, Ron and good morning, all before going through operational results I'd like to talk about our 2020 for safety performance.
Terry: As Ron mentioned earlier, we had 10 lost time incidents and <unk> medical incidents over the course of the year.
Terry: A lot of these incidents were related to contractors and many of these incidents where hand injuries.
Terry: However, we did have some injuries that had the potential to be worse.
Terry: Even though we are a small company we want to continue to be an industry leader in safety performance.
Terry: Our strategy is simple we focus on instilling the right behaviors with strong visible leadership and training.
Terry: Actively identify hazards before we start works and.
Terry: And we foster open communication to enable everyone to be a safety champion.
Terry: If we stay focused we know we can improve.
Terry: Now moving on to operations, despite the challenging power situation in Ecuador.
Terry: It's still generated a strong quarter mining.
Terry: Mining activities were modified to allocate available power from the national grid and self generation to ensure continuity in process plants operations.
Terry: We ended the year strongly with fourth quarter gold production totaling approximately 135000 ounces.
Terry: 106000 tonnes of ore were mined while the mill processed 427000 tonnes of ore at an average throughput of 4642 tons per day.
Terry: The average ore grade milled was 11 three grams per ton with an average recovery at 87, 1% both improvements from the third quarter of 2024.
Speaker Change: For the full year 2020 for SDN achieved record annual gold production of approximately 502000 ounces comprised of about 320000 ounces in concentrate and 182000 ounces as dory, which as Ron mentioned exceeded the company's 2024 guidance a great accomplishment by our operations.
Terry: Team.
Terry: A total of approximately one 7 million tons and $1 six 9 million tonnes of ore was mined and processed respectively.
Terry: Mill production was slightly higher than previous year due to an increase in mill throughput. Despite more scheduled downtime due to the plant expansion project.
Terry: The average grade of ore milled was 10 five grams per ton with an average recovery at 87, 8%.
Speaker Change: Moving to slide seven the overall plant expansion project, which targets increased throughput to 5000 tonnes per day and an increase in average recovery of 3% was substantially complete at the end of the year.
Speaker Change: Numerous tie ins were completed in the quarter highlighted by commissioning of the first name is itself at the end of November.
Speaker Change: Since then recovery recoveries have been positively impacted and throughput of 5000 ton per day has been demonstrated.
Speaker Change: To complete the balance of the expansion project, including the commissioning of the remaining two Jameson cells. We took advantage of a planned Sag mill realigning originally scheduled in Q2 and moved it to early February to coincide with the remaining tie in work.
Speaker Change: This gives us runway through the balance of 2025 with no major planned downtime ahead.
Speaker Change: The Jameson cells are currently going through commissioning and we expect to be fully up and running with our new flow sheet by month end.
Speaker Change: Our 2025 production guidance is based on an average throughput of 5000 tonnes per day and plant recovery of 90%.
Speaker Change: It is important to note, we expect gold production to be slightly weighted towards the second half of the year.
Speaker Change: Production in Q1 is expected to be most affected due to the downtime associated with misery lining, which I spoke about earlier.
Speaker Change: Completion of the expansion project and optimization of mill performance. After the plant expansion is complete.
Speaker Change: In addition, we anticipate grade variability quarter over quarter as we execute our mine plan.
Speaker Change: Given this production profile, we expect lower unit costs in the second half of the year relative to the first half.
Speaker Change: Earlier, I mentioned the power prices due to a record drought in Ecuador, I am happy to report that following increased rainfall and Ecuador since the start of 2025.
Speaker Change: The power supply from the National grid is normalized.
Speaker Change: As we've discussed in previous quarters, we invested in additional diesel power generation capacity and we are on track to complete this project at the end of Q1.
Chester: With that I'd like to now turn the call over to Chester to discuss our financial results.
Chester: Thanks, Terry and good morning, everyone.
Chester: For the full year 2020 for Lundin gold recognized record revenues of $1 2 billion from the sale of approximately 495000 ounces of gold at an average realized gold price of $24 62 per ounce.
Chester: Income from mining operations was $703 million compared to $435 million last year, primarily a result of the higher gold price.
Chester: This lundin gold generated adjusted earnings of $422 million or $1 76 per share for 2020 forward curve.
<unk> to $2 4 million or <unk> 86 per share a year earlier.
Adjusted EBITDA was a record $780 million for the year.
Chester: It should be noted that these figures were impacted by a $10 million adjustment to our stock based compensation expense and corporate G&A.
Chester: Given our strong free cash flow, we expect our board to elect to settle share units intent going forward, which resulted in a reclassification of our psus and rfps to fair value accounting.
Chester: As a result, our share price appreciation since the grant date of outstanding share units were recognized during Q4.
Free cash flow in 2024 was another record and it was supported by a strong gold price for.
For 2020 for regenerative generated 662 million net cash from operating activities and $540 million and adjusted free cash flow or $2 26 per share compared to adjusted free cash flow of $263 million or $1 11 per share a year earlier.
Chester: We expect to continue generating significant free cash flow in the future based on our production and ASIC guidance, especially given increased exposure to strong gold prices and no debt service costs.
Chester: During 2024, we generated $662 million from operating activities, but of the stream and offtake for $330 million and doubled our dividend in the third quarter paying out $144 million for the full year.
Chester: Our cash position after these payments increased from $268 million at the beginning of the year to $349 million at the end of the year.
Chester: With record gold prices being realized in 2025, and our production and unit cost guidance I am very optimistic that we will continue to generate significant free cash flow.
And having said that I'd like to talk about our commitment to returning value to our shareholders through our dividend policy and our broader capital allocation strategy.
Chester: We are pleased to announce a significant 50% increase in our quarterly dividend.
Chester: Effective February 22025, the dividend has been raised from 'twenty.
Chester: To <unk> 30 per share.
Chester: On an annual basis. This represents approximately $300 million return directly to our shareholders. This.
Chester: This marks the second dividend increase in the last 12 months.
Chester: Youll recall, we doubled our dividend from <unk> 10 to <unk> 20 per share during the third quarter last year.
Chester: This increase reflects our confidence in <unk> ability to maintain free cash flow at record levels recently achieved and our commitment to shareholder returns.
Chester: Even with the substantial dividend increase we expect to continue to review our dividend policy, while maintaining cash reserves for other strategic capital allocation initiatives, including conductive conducting expansive exploration programs to ensure the long term growth of our resource base.
Chester: Funding future capital projects and expansion opportunities and pursuing inorganic growth opportunities through corporate development potentially adding new assets to our portfolio.
Chester: Furthermore.
Chester: We've also initiated a normal course issuer bid our NCI program.
Chester: This provides us with an additional tool in the toolbox to enhance shareholder value.
Chester: Glee repurchasing shares when we believe it's in the best interest of the company.
Chester: Our capital allocation strategy demonstrates our commitment to balancing shareholder returns with strategic investments that will drive sustainable growth and value creation.
Ron Hochstein: For a more detailed discussion of our financial results I encourage you to turn to the MD&A now I'd like to turn the call back over to Ron.
Ron Hochstein: Thank you Chester.
Ron Hochstein: Turning to slide 15, I'd like to talk about our updated resource and reserve statement, which we put out earlier this week.
Ron Hochstein: We're incredibly pleased to announce a significant milestone for lending goal in our fridge don't lock time mine.
Ron Hochstein: As of December 31, 2024, we've achieved a new high and contained gold ounces in both of our mineral reserves and mineral resources.
Ron Hochstein: Our proven and probable mineral reserves have grown to 554 million ounces, even after accounting for 2024 mining depletion.
Ron Hochstein: This increase is a result of successful conversion drilling.
Ron Hochstein: Mine design improvements and updated technical parameters.
Ron Hochstein: Measured and indicated mineral resources have also increased to 7.06 million ounces.
Ron Hochstein: This demonstrates the success of our conversion drilling program, which is reclassified inferred resources into higher confidence categories and what's more this conversion occurred right on the reserve boundary.
Ron Hochstein: Our inferred resources have seen a substantial 59% increase now totaling $2 $3 6 million ounces of gold.
Ron Hochstein: This growth is largely attributed to our successful near mine exploration program, particularly at <unk>.
Ron Hochstein: FTM has produced approximately two 4 million ounces since mining began in 2019 and have successfully added $3 1 million ounces of reserves compared to the 2016 Technical report.
Ron Hochstein: This growth in our resource base is a testament to the hard work and creativity of our team.
Ron Hochstein: And the inherent quality of the new fruit at NRT deposit.
Ron Hochstein: We are confident in our ability to continue delivering strong exploration results.
Ron Hochstein: Searching drill rigs are currently turning on the FDA, an Afghan near mine exploration program.
Ron Hochstein: 2024 was a great year for Lundin gold, having broken so many records.
Ron Hochstein: Now looking ahead to 2025, we have a clear set of objectives that will drive our continued growth and success.
Ron Hochstein: First and foremost we must improve our safety.
Ron Hochstein: Heard from Terry and we have implemented enhanced measures to reduce lost time incidents and the all injury frequency rate.
Ron Hochstein: The safety of our workforce is paramount.
Ron Hochstein: We will successfully commissioned in a plant expansion project. This is a key milestone that will significantly increase our processing capacity and support our production growth we.
Ron Hochstein: We are focused on achieving our 2025 production and unit cost guidance, we have a solid plan in place to deliver on these targets.
Ron Hochstein: Our exploration efforts will continue with a minimum of 80000 meters drilled as mentioned at the onset. We're currently looking to bring more drill rates to site, which will support resource expansion and discovery.
Ron Hochstein: We will prioritize the conversion of the fruit <unk>, south inferred resources to measured and indicated categories and further grow the inferred resources.
Ron Hochstein: <unk> enhanced our confidence in our resource base and unlock future value.
Ron Hochstein: We are on track to publish an initial resource estimate for bonds assure this is a significant milestone that will demonstrate the potential of this exciting deposit.
Ron Hochstein: We will establish a new five year sustainability strategy, which will guide our efforts to operate responsibly and create long term value for all stakeholders.
Ron Hochstein: And finally.
Ron Hochstein: We plan to pay off $300 million to shareholders and we'll continue to review the dividend policy as we go through go forward, especially given this gold price environment.
Ron Hochstein: We are confident in our ability to achieve these objectives, we have a strong team.
Ron Hochstein: World Class asset and a clear strategy for success.
Ron Hochstein: Ruta del Mar Te is one of the best gold mines in the world, having one of the lowest cost structures and highest production profiles.
Ron Hochstein: With now close to 10 million ounces of resources on the books and 13 drill rigs turning on site as we as we speak with more to come.
Ron Hochstein: Excited more than ever about the company's future.
Ron Hochstein: Thank you all for joining us and for your continued support is very much appreciated.
Andrew: I will now open the call for questions over to you Andrew.
Ron Hochstein: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question. Please press the star followed by the number one on your Touchtone phone.
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Speaker Change: One moment. Please for your first question.
Speaker Change: Your first question is from Don Marco from National Bank Financial. Please go ahead.
Don Marco: Thank you operator.
Don Marco: Good morning, Ron Congratulations on a strong year and great afternoon, SMS and resource update starting with that.
Speaker Change: Your thoughts behind the cutoff grade that you selected pretty F DNS base case.
Speaker Change: Yes, good morning, Donna and thank you for the kind words, yes, we decided made the decision to be consistent across the entire resource and maintained the cutoff grade of three grams per tonne.
Speaker Change: Which is what was behind that.
Speaker Change: Resource estimate that we produce as you've seen in that table F. DNS.
Speaker Change: <unk> be slightly different mining methods more or less on a long haul stoping versus transfer as long haul stoping. So we may look at increasing the cutoff grade, but debate, saying Don the other thing factor is.
Speaker Change: We know we've got potential.
Speaker Change: Kind of constrained our drill spacing there on the <unk>. So we've got wider drill spacing and we're seeing that truck is going to be our focus for 25 is to infill that.
Speaker Change: Such that we'll be able to bring this on and then have even a better feel.
Speaker Change: For going into 2025, but the key was.
Terry: Just to be consistent not been not have different cutoff grades Terry do you have anything else tab event.
Speaker Change: I think you've covered it.
Don Marco: Was the reason Don we added that cutoff.
Don Marco: Cutoff grade sensitivity to give everyone a sense of of where the grade can go as the cutoff grade Ratchets up.
Don Marco: And as we advance us towards reserves of course, we'll we'll get a we'll get a good handle on the mining method is wrongly described as the operating costs, we anticipate and look forward to that.
Don Marco: Okay, Great and then.
Speaker Change: <unk>, maybe a little more color. If you could just reminder, curt elaborate on permitting requirement development requirements to access the or potential timing of first production and offer do you intend to use it to supplement or extend existing Afghan mine plan.
Speaker Change: The answer to the first zero permitting zero, it's all part of the original.
Speaker Change: Part of Afghan so that's.
Speaker Change: No efforts.
Speaker Change: Activity required there.
Speaker Change: The it we should should mention actually done that we did receive actually our permit for our expanded tailings.
Speaker Change: Facility here just in the past 10 days so.
Speaker Change: <unk> would be the only permits required as it guys. We increase resources, but we did get that permit here in the last 10 days.
Speaker Change: With regards to how it fits in the mine plan I'll take a shot and then I'll ask Terry I think what we're seeing is.
Speaker Change: This could augment the existing ft and mine planning bring and we see this as a higher grade resource versus some of the outer edges of FTE and the southern parts of FTM proper and so thats may augment Jeremy.
Speaker Change: And we've already got two two.
Speaker Change: Levels right through F DNS.
Speaker Change: Terry and the team right now are looking at some more development that will help us to drill it out better.
Speaker Change: But Terry do you want to add.
Speaker Change: The question of is it.
Speaker Change: Extending our growing our production profile I think both.
Speaker Change: It does.
Speaker Change: Ed.
Speaker Change: This 5 million ounce run rate and we'd like to keep at that level for as long as we can and so as we bring this material and can differ.
Speaker Change: First some of the lower grades in our life of mine plan and we can just keep that run rate going so I think it will it'll enhance and extend the mine.
Speaker Change: Okay great.
Speaker Change: Great and then just as a final question congratulations on the dividend increase.
Speaker Change: You see here.
Speaker Change: Intentions here with respect to capital allocation now some of the companies in the London Group had previously issued a special dividend.
<unk> diamonds years ago May have been others is that something you might consider and also in implementing the NCI be given your close limited with certain insider ownership do you have any concerns in that regard.
Speaker Change: I think that's why both gestured I stated increases.
Don Marco: Increased this dividend, but we are reviewing the policy Don I think.
Don Marco: Where are you going to be generating significant cash and we just wanted to give the analysts you in <unk>.
Don Marco: <unk> shareholders. Unfortunately, this isn't kind of set now we're looking at the future and look for opportunities whether it is special variable as we've said to date, we want to keep a sustainable dividend and what's really encouraging as <unk> run a bunch of numbers and even at much lower gold prices. We see today this $300 million is.
Don Marco: Anable.
Don Marco: With regards to Ncnb chest, you mentioned, it's opportunistically. So this is not something that.
We just wanted habits that toolkit in our belt, but.
Don Marco: And we're going to be on.
Don Marco: Very opportunistic scenarios that we would look at.
Don Marco: Using it.
Speaker Change: Okay. Thanks for that and that's all for me good luck with Q1 and the rest of the year.
Tom: Thanks, Tom.
Speaker Change: Your next question is from Anita Soni from RBC World markets. Please go ahead.
Tom: CIBC.
Speaker Change: Sure the RBC analysts will not be please to hear that.
Speaker Change: Just a question with respect to the SDN and <unk>.
Speaker Change: Deposit I think.
Speaker Change: Hum.
Speaker Change: We just we don't maintain current levels.
Speaker Change: Or I was wondering if there was a point at which we thought it might make sense could expand your existing mill facility.
Speaker Change: And to what extent that is possible and how you can count.
Speaker Change: Yes, Thanks Amanda.
Speaker Change: Yes, that's something that we continually look at you know we've been focused as I am sure we've talked with you before.
Speaker Change: Expanding essentially building a new mill facility, one way, where it funds a sewer.
Speaker Change: More so than <unk>, but.
Speaker Change: Again, the exploration results, but Andre and the team continue to do.
Speaker Change: We do we look at expanding that with.
Speaker Change: Existing infrastructure, we have underground there is obviously some limitations, but we do see some upside there to be able to pull more ore out.
Speaker Change: <unk>.
Speaker Change: But it would be more bonds assure probably would be the true driving factor of expanding.
Speaker Change: Our facilities are in that that would take an amendment to our environment that would take some permitting an amendment to our prior environmental M. A&P.
Speaker Change: Okay. So 5000 ton per day. It is at the existing mill facility and only bonds. So it will be the one that would be on your newbuild with permitting.
Speaker Change: Where we're actually score say, we're at 5000 ton now, but we actually are going to 5500 ton per day.
Speaker Change: For 2026.
Speaker Change: And onward.
Speaker Change: And I know the team has left his mark Kevin We do we've gone we originate we went from 35 to <unk> 42, and then we're through Debottlenecking, we're able to get it up to <unk> 45.
Speaker Change: And now with this expansion our nameplate is 5000, but where we're already encouraged by the work that the team is just doing a site to be able to get that 5500 for next year and then we'll look at what more we can do.
Speaker Change: Okay, Alright, that's it from my questions. Thank you.
Anita: Thanks Anita.
Speaker Change: Your next question is from <unk> Habib from Scotiabank. Please go ahead.
Speaker Change: Hi, Ron.
Speaker Change: Lending team, sorry, I got a little bit late joining the call.
Speaker Change: But just wanted to congratulate you on a solid.
Speaker Change: Q4, and a solid 124.
Speaker Change: Just a question on bonds of sore.
Speaker Change: In terms of obviously you have got already.
Speaker Change: Decent strike meant already delineated I believe you are somewhere close around two six kilometers now.
Speaker Change: And when we were there at site in November you were also talking about moving towards I believe the east.
Speaker Change: Is that still the plan and then the question also is.
Speaker Change: When do you pull the pin in terms of.
Putting the resource estimate out on bunzl.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: So yes, we are.
Speaker Change: Looking at still a potential.
Speaker Change: Potentially extending the strike length, we're drilling those south but some of the focus right now is drilling to both the east and west to expand as we see some opportunity is there so bonds assorted very much is still up and it's still growing.
We have we have put a internally have said, we'd like to see a resource SaaS, we're targeting to have a resource estimate out by mid year. Our initial one.
Speaker Change: And once we have the initial resource estimate out.
Speaker Change: Is that kind of.
Speaker Change: New starts some sort of formally worked at or is it just the move to some sort of studies and then and then we will see how things <unk> on that front.
Speaker Change: We've already started doing baseline work.
Speaker Change: Got geotag drilling and Matt standpoint is well underway.
Speaker Change: But also we got Terry.
Speaker Change: I think.
Speaker Change: We're moving the engineering.
Speaker Change: In parallel with the exploration and so when we decided to move ahead with the study and start the permitting process.
Speaker Change: We will be well underway.
Speaker Change: Perfect. Thanks for the color on that guys.
Speaker Change: Good to see also that the energy crisis also now behind us as well so thanks for taking my questions.
Speaker Change: Thanks Tavis.
Speaker Change: Ladies and.
Speaker Change: And as a reminder, should you have any questions. Please press the star key followed by the number one.
Awesome moment for further questions.
Speaker Change: There are no further questions at this time. Please proceed with closing remarks.
Speaker Change: Thanks, Andrew and thank you everybody for taking the time to hear a little bit more about the past year and the exciting 2025, we have in front of US. Appreciate we all appreciate very much your support and hope everyone has a great weekend. Thank you.
Speaker Change: Ladies and gentlemen, ladies.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.