Q4 2024 Cerrado Gold Inc Earnings Call
Actual results conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After 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 Mike Mcallister, Vice President Investor Relations with Sorretto Gold. Please go ahead.
Thank you operator, and good morning, everyone. Thank you for joining us I'd like to note that this call may contain forward looking information that is based on the company's current expectations estimates and beliefs. Please review this slide too and any other forward looking information contained on slide two of today's presentation as well as in the company's annual information form.
It's publicly available on SEDAR plus on the Companys website. The accompanying presentation for today's call is available for download from the homepage of the company's website Cerrado girl Dot com. The accompanying press release is also posted on our website and on SEDAR plus. Please note that all dollar amounts mentioned on today's call are in U S.
Dollars unless otherwise noted.
As the operator noted following managements presentation and remarks, there will be a Q&A period to follow joining us on today's call are Mark Brennan, our CEO <unk> Chen.
Speaker Change: Chairman and CEO Cliff Hale Sanders, our president Jason Brooks, our CFO, Carl <unk>, Our Vice President legal counsel, David Ball, our Vice President corporate development with that I'd now like to turn the call over to Mark Brennan. Please go ahead. Thank.
Speaker Change: Thank you very much Mike and thank you very much ladies and gentlemen for joining us.
Speaker Change: And what is our.
Speaker Change: Inaugural financial quarter.
Speaker Change: Quarterly financial call that will continue now to two two to replicate as we moved through future quarters.
Speaker Change: You know 2025 24 have been tremendously transitional periods first serrato twenty-five obviously will be a.
Speaker Change: Extremely transitional year for the company for the first time in our operating history, where we're now in a stable state operations for the next three years are producing approximately $55 to 60000 ounces per year.
Speaker Change: Gold at a very healthy cost, which generates a lot of cash and cash flow, which has had a really strong impact on our balance sheet.
Speaker Change: We are now in a very strong financial position.
Speaker Change: Where we've cleaned up a lot of the existing debt that we had on our balance sheet. Previously we're now in a position where we're generating very strong cash and this cash is now going to be used to really drive growth initiatives.
Speaker Change: The first growth initiative is going to really come up.
Speaker Change: First and foremost of them or M. D N operation the Minera, Don Nicholas operation in.
Argentina basically what we're looking at is a project that has been transitioning to a heap leach operation over the course of the last year. We're now looking to ramp that operation to the four to 5000 ounces per month run rate.
Speaker Change: All in sustaining cost are targeted between 15 and $1700.
Speaker Change: With gold prices today are at $3200, we generate a lot of cash from that operation.
Speaker Change: The second element that we have aside from expanding our production will be driving the life of mine and our resource growth.
Speaker Change: We have recently initiated a new initiative for exploration.
Speaker Change: Minera Don Nicholas.
Speaker Change: With a very senior executive who exploration is who has tremendous access globally, but also on the Disney how to massive at Haas channel. It's a San Jose project, we anticipate to see drilling an aggressive drill program starting in <unk>.
Speaker Change: The second and the third quarter in June.
Speaker Change: And our expectation.
Speaker Change: This program will be to add approximately 300 to 800000 ounces over the course of the program.
Speaker Change: Do we need to be successful with this they would dramatically expand our resource.
Speaker Change: Life, which would give us a really strong long term picture to continue our expansion in and and in Argentina, and I'll remind people. We started this operation during Covid, we took it from 20000 ounces to the current level of 55000 ounces and we see this as a pre.
Speaker Change: Reject which is still very nascent and deserves a lot more exploration that were expecting to to for full and follow through with them. So we expect to see some really good news coming out of Argentina.
Speaker Change: On the exploration side as we move forward. Our second growth initiative is going to come from Laguna. So got a logos all got a we announced an acquisition of a Senate resources and their Laguardia So got a project.
Speaker Change: This is a project that.
Speaker Change: It is a multi.
Speaker Change: Multi commodity product are probably you know product, which are based in Portugal. It has a feasibility study completed however, theres been a lot of work, which has been going on which is really seeing some strong strong growth in the economics and this is coming from improved improved metallurgy, which is.
Speaker Change: <unk> increased the grades are which is and improved recoveries.
Speaker Change: We've seen an increase in resources and.
Speaker Change: And we really expect that when the feasibility study is completed on this project in the third quarter are that people will be very surprised at the strong strong.
Foundation that we have here is a new asset.
Speaker Change: It'll continue to be a gold it will it will continue to have a gold focus at our company.
Speaker Change: Even with the inclusion of La go.
Speaker Change: Having a current spot price was 42% of the revenue base will be silver and gold.
Speaker Change: We will still have 81% of cerrado being gold focus so were still continuing our gold focus as we develop Laguna sell got it with the Goa, We expect a construction decision in the fourth quarter and.
Speaker Change: That our cash flow is building in the way that we see are our assistance with the funding yeah. We have the U K export credit agency, who are looking to help us with our funding of the project with the Santander Bank of Spain.
Speaker Change: We anticipate that we will be able to drive this project with minimal dilution and.
Speaker Change: And look to be in production sometime in <unk>.
Speaker Change: In the second quarter of 2027 I'll.
Speaker Change: I'll remind you on a feasibility study that was completed in July of 2023. This project drove about $75 million of cash flow for the first five years.
Speaker Change: We expect that the economics coming on this project will be significantly higher and significantly better than we saw in the previous feasibility. So from that perspective, we're very excited with Laguardia La go out just like Minerva Dr. Nicholas in Argentina is a very nascent asset with very limited exploration drilling completed to date.
Speaker Change: Where we see lots of potential for significant upside and the resource has the company at a legal is currently about 27 million tons and we see the potential for multiple expansion on that resource. So we're very very excited again, even based on on the previous feasibility study.
Speaker Change: This will be one of the lowest cost producers of zinc equivalent metal and in the world. So low cost strong fundamental growth with the tremendous upside on the on on resource growth.
Speaker Change: Third asset by no means are it's more especially in Quebec, which we're very very excited by this project is currently in the feasibility mode. We expect to complete a feasibility study by Q1 of 2026, we expect to see extremely robust economics following.
Speaker Change: From from the past year's work, where our we've done metallurgy to bring the project to a D. R. I high grade high purity iron ore product that will have.
Speaker Change: Substantial cash flow potential as we move forward.
Speaker Change: But that is a that's a project for the future. The focus in the short term will certainly be an M. D M in Argentina as well as our <unk> as we look at that construction decision in the fourth quarter.
Speaker Change: So so we are now for the first time in the company's history, and a very strong financial position with repetitive cash flow.
Speaker Change: And we continue our aggressive growth story.
Speaker Change: Our real focus is to drive very strong cash flows.
Speaker Change: With that I'll go into the Oh, I'll will start looking at the presentation as Mike mentioned as on the company's website and I'll introduce Jason Brooks are the company's CFO to go through the initial pages.
Jason Brooks: Thanks, Mark and thanks, everyone for joining this morning as Mark just said I will go through the financial highlights of 2024.
Jason Brooks: Starting with production. So production for 2024 was 54494 gold equivalent ounces, which was in line with our guidance as compared to 52230.
Jason Brooks: Gold equivalent ounces in 2023, which was a 4% increase year over year.
Jason Brooks: In Q4, we had production of 10431 gold equivalent ounces as compared to 15744 in Q4 of 2023.
Speaker Change: Now as Mark just alluded to that that as I was we're transitioning away away from.
Jason Brooks:
Jason Brooks: Less CIL ounces, we're ramping up our heap leach that that was the main driver of the difference in ounces in Q4 2024 versus Q4 2023 with over.
Jason Brooks: 50% of our ounces produced in Q4 2024 from the heap Leach operation.
Jason Brooks: Moving to EBITDA, our 2024, adjusted EBITDA was $24 4 million as.
Jason Brooks: As compared to $17 seven in 2023, which is a 38% increase.
Jason Brooks: In Q4, our adjusted EBITDA was $4 5 million as compared to $2 4 million in Q4, 2023, and 88% increase.
It's primarily that the increase in EBITDA as we got the benefit of a $616 million more revenue in 2024 as compared to last year, which was driven by $377 per ounce.
Jason Brooks: Cold realized higher as the metal prices, one went higher during the year and as we all know that trend has continued into 2020 foot 25.
Jason Brooks: Additionally, EBITDA was benefited by a $2 million decrease in G&A.
Jason Brooks: However that was offset by a $9 million increase in costs during the year.
Jason Brooks: Moving on to all in sustaining costs, we had.
Jason Brooks: All in sustaining costs of $16 51 per ounce in 2024.
Jason Brooks: As compared to <unk> 27 in 2023.
Jason Brooks: That increase again is due to the costs I just alluded to and primarily that's higher labor costs in Argentina, which is a result of the inflationary pressures that we face during the year.
Jason Brooks: On a quarterly basis, all in sustaining costs were $19 53 per ounce as compared to <unk> 94 per ounce in 2023.
Jason Brooks: And that metric is higher than in 2024 again due to the production, which we just spoke about in 2024 of those ounces were driven primarily from the heap Leach operation as that ramps up to 4000 5000 Geo ounces per month.
Jason Brooks: As compared to the CIL production in 2023.
Jason Brooks: Moving to the balance sheet.
Jason Brooks: Certainly.
Jason Brooks: You know the obvious strengthening of the balance sheet in 2024 as compared to prior lease prior year, specifically 54, and a half million dollars improvement in working capital.
Jason Brooks: That working capital improvement was driven by a $38 million increase in current assets as well as a $16 million decrease in current liabilities.
Jason Brooks: Those assets are increased primarily due to the increase in cash is as you can see on the balance sheet.
Jason Brooks: We're up to $26 million in cash at the end of 2024, and that's due to the sale of our Brazil assets, which I'll talk about in a moment.
The current liabilities decreased primarily due to a decrease in payables.
Jason Brooks: We've made a concerted effort to pay down liabilities and in debt during the 2024, which is evidenced in our balance sheet.
Jason Brooks: I'd also mentioned in addition to the <unk>.
Jason Brooks: Improvement in working capital there is a reduction of $20 million of long term debt during the year.
Jason Brooks: And finally in terms of proceeds we received proceeds of $34 million due to asset sales and option payments during the fourth quarter.
Jason Brooks: And 40 about $49 million for the full year.
Jason Brooks: About $49 million is broken down into $45 million from the sale of our Brazilian asset to Haas shops.
Jason Brooks: As well as $4 million from our option agreement.
Jason Brooks: On the Michelle property in Argentina.
Jason Brooks: Now in addition to the 40 $49 million will be received in 2024 and.
Jason Brooks: We have the potential to receive up to $25 million further.
Speaker Change: 15 of that 25 is guaranteed from the sale of our Brazil assets I'm, just Haas shelved with $10 million expected in June of 'twenty, six and $5 million expected in June or excuse me in March of 2027.
Speaker Change: The further $10 million as a potential payment from the option agreements.
Speaker Change: Should serve about quite yet.
Speaker Change: Opt in to that Michele property in future years.
Mark Brennan: And with that I'll turn it back to Mark.
Mark Brennan: Okay. Thank you, Jason and again really just a very very proud to see our 52% reduction in net debt levels over the past 12 months.
Mark Brennan: Which also represented 64% reduction from peak debt levels in June of 2024.
Mark Brennan: So thusly working capital improvement as Jason mentioned of $54 million in the last 12 months. So it's been a it's been a tremendous transition near year.
Mark Brennan: Putting us in a very strong position moving forward.
Mark Brennan: While stones that we anticipate going forward, we will see the southern shareholder vote on May six and in the next week.
Mark Brennan: The expectation is that we will see the transaction closed by the end of may subject to the.
Mark Brennan: Favorable vote by shareholders.
Mark Brennan: Further we expect at Lagunas, so got to see the receipt of the environmental impact assessment permit.
Mark Brennan: For the Laguardia, So got a project, we expect that sometime by the end of May as well.
Mark Brennan: We will report our Q1 financial results for M. D N in the last week of May and we expect to.
Mark Brennan: See a very strong and significant high value targeted drilling program commencing in June where we'll start to see results filter through in Q3 of 2025.
Mark Brennan: Further we expect in a buy by early in the third quarter.
Mark Brennan: Late second quarter to see an updated feasibility study for the La <unk> got a project as I mentioned the previous project.
Mark Brennan: The economics, we had in the P. A with we're an NPV of $146 million.
Mark Brennan: With the IRR, but 39% after tax we expect.
Mark Brennan: At a minimum to see $175 million an M. P V and and we're hopeful that that potentially we will see that north of 200 million. So very very optimistic with the new developments that we're seeing at Laguna So got it.
Mark Brennan: On the back of that feasibility study, we'd see a construction decision.
Mark Brennan: And in Q3 late Q3 early Q4.
Mark Brennan: With the project moving into construction in the first quarter of 2026.
Mark Brennan: In the first quarter of 2026, we also see a feasibility study to be completed for the most associated high pretty iron project.
Mark Brennan: Again, we are we published a P E and in 2021 with an NPV of $1 $6 billion U S.
Mark Brennan: We anticipate that the numbers in the feasibility study will.
Mark Brennan: It will be equal to the to the project.
Mark Brennan: The project Economics, we saw on the P. A is our expectation.
Mark Brennan:
Mark Brennan: In summary, I just want to highlight the fact that we have a company that has steady state production coming out of out of Argentina.
Mark Brennan: We can we can as per the Pea that was produced in the third quarter.
Mark Brennan: Our expectation is that we have three three in that three to four years of production at that 55000 ounce per year level on the basis that there's no exploration success. We are also going underground in Q2 in late Q2, and we expect they will be producing revenue out of the underground operations in Q3.
Mark Brennan: Q4.
Mark Brennan: The reality here is that is very nice for us to be driving additional revenues from the underground.
Mark Brennan: Operations. However, what we really want to do is go in and explore the underground potential which is where we've seen most mines on the Disney would've messy really gain the traction in terms of bulk and size. So from that perspective, we're very optimistic to look at the underground program.
Mark Brennan: At at at a M D M to drive further production growth.
Mark Brennan: Which we hope will be a feature moving forward for the company.
Mark Brennan: The so so we have the very strong.
Mark Brennan: Short term potential coming out of out of M. D. N. A we're also looking at it at a near term near term medium term production coming out of the Goa, which we're very very excited by again. This this looks to be a very significant project that that's only going to grow.
Mark Brennan: And then in the longer term, we have the optionality with the more associated which we're very very excited about the the dynamics of that project. It's a very large a very substantial project that could generate the equivalent of 300000 ounces of gold.
Mark Brennan: At a very attractive price, giving very very strong returns so combined with are well funded.
Mark Brennan: Balance sheet and financial position.
Mark Brennan: Which I believe is only going to get better between now and the end of the year.
Mark Brennan: We feel that the cerrado is in a very very good position for future growth and maximizing shareholder value.
Mark Brennan: We believe that that you know we are now.
Mark Brennan: As we move out of this transitional period.
Mark Brennan: Shareholders and shareholder value, we will start creating at <unk> at a higher level.
Mark Brennan: Level than where we are today and.
Mark Brennan: And that's focused on the fact that we currently see an NPV of about $111 million based on the E. P. A that was published in <unk> and in the summer at M. D N.
Mark Brennan: With 150 million NPV over Laguna So Garda.
Mark Brennan: Combine those two and I think that you've got a situation in our view and my view that it is undervalued.
Mark Brennan: <unk> to our peers.
Mark Brennan: The same applies for our cash flow so.
Mark Brennan: We are keeping our heads down and we're working hard we're bringing production we're looking at growth opportunities and we feel that theres, a very very strong future for cerrado moving forward.
Mark Brennan: With that that concludes the management presentation portion of the call.
Mark Brennan: And I guess, operator, we would now like to open the call to Q&A from from participants.
Speaker Change: Certainly we will 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 ritalin acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question Press Star then two.
Mark Brennan: Well pause for a moment as callers join the queue.
Speaker Change: Okay.
Speaker Change: Once again, if you have a question. Please press Star then one.
Speaker Change: Okay.
Speaker Change: There appear to be no questions.
Speaker Change: I'd like to hand, the conference back over to Mark Brennan for any closing remarks.
Speaker Change: Thank you operator, and thank you everyone, who joined US today as I previously mentioned are a recording of this call along with the presentation is available or will be available on the company's website at cerrado girl Dot com.
Speaker Change: We thank everyone for joining us today and.
Speaker Change: With that operator, please open the call.
Speaker Change: Thank you this brings to a close today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
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