Q2 2026 Galiano Gold Inc Earnings Call
Speaker #1: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2026 financial and operating results conference call.
Speaker #1: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. To ask a question, press star 1 on your telephone keypad.
Speaker #1: To withdraw your question, press star 1 again. Please limit questions to one and one follow-up. It is now my pleasure to turn the call over to Matt Badylak, CEO.
Speaker #1: Please go ahead.
Speaker #2: Thank you all for adding up. And good morning, everyone. We appreciate you taking time to join us today to review Galiano Gold's second quarter 2026 financial and operating results we released yesterday after market close.
Speaker #2: During today's call, we'll be making forward-looking statements and referring to non-IFRS performance measures. Please refer to the quarterly notes on slide 2 of the webcast presentation and to the risk disclosures in our most recent MD&A.
Speaker #2: Yesterday's news release should be read together with our second quarter financial statements and MD&A, which are available on our website and filed on Cedar Plus and EDGA.
Speaker #2: Unless otherwise noted, all dollar amounts discussed on the call today are in US dollars. Joining me today are Michael Cardinals, our Chief Operating Officer, Matt Freeman, our Chief Financial Officer, and Chris Hetman, our Vice President, Expiration.
Speaker #2: I will begin with an overview of the quarter. Michael will then discuss mining and processing. Matt will review the financial performance, and Chris will update you on exploration.
Speaker #2: I will then return to provide some perspective on our near-term catalysts and close the prepared remarks before we open the call up for questions.
Speaker #2: Turning to slide 4, our first half performance has put us in a solid position to deliver our 2026 plan. We produced 34.4 thousand ounces of gold in the second quarter, bringing the first half production to just over $69,000 ounces, near the upper end of our previously communicated indicative range of $60 to $70,000 ounces.
Speaker #2: This provides a solid foundation as we enter the high production portion of the mine plan, which we expect to improve as mining advances at a greater rate.
Speaker #2: Our full-year production guidance remains unchanged at 140 to 160 thousand ounces, and our all-in sustained cash cost guidance remains unchanged at 2,300 to 2,600 dollars per ounce.
Speaker #2: Safety remains our highest priority. We recorded no lost time injuries and no total recordable injuries during the quarter. At June 30, our team has worked approximately 11 million hours without a lost time injury, and achieved 456 consecutive incident-free days.
Speaker #2: These are meaningful milestones, and I'd like to recognize our employees and business partners for the discipline and care that made this possible. We also maintained a strong financial position, ending the quarter with total cash of $105.9 million.
Speaker #2: This includes approximately $26 million of restricted cash, which Matt will expand on shortly. Importantly, the company remains debt-free, and we continue to invest in the future of the Sefwi Gold Mine.
Speaker #2: This includes waste stripping at Encran, and exploration activities at A Sase and Abore. Overall, Q2 was a quarter of both delivery and preparation.
Speaker #2: We delivered against our current mine plan while putting the building blocks in place for the next phase of growth. With that, I'll turn the call over to Michael, to review our operating performance.
Speaker #3: Thank you, Matt, and good morning, everyone. Here on slide 5, mining performance in the second quarter remained aligned with our plan and continues to support our full-year guidance.
Speaker #3: During the quarter, we mined approximately 1.8 million tons of ore at an average grade of 0.9 grams per ton. Ore tons increased approximately 15% from the first quarter, while grades remained consistent with expectations.
Speaker #3: This increase in ore availability keeps us on track for the planned production growth in the second half of the year. A bore rate remained our primary source of mill feed, contributing approximately 77% of total ore mined during the quarter.
Speaker #3: Mining advanced into deeper phases of the pit, where we expect to access higher grades as the year progresses. This mining sequence is a key driver of our anticipated second half production profile.
Speaker #3: Mining at SASE also continued as planned and provided supplemental feed to Cut 3. We continued to make strong progress on development activities.
Speaker #3: The team mined 6.1 million tons of waste during the quarter, representing a 30% increase from Q1. We invested $22.1 million in pre-stripping during Q2, bringing year-to-date investment to $35.6 million.
Speaker #3: Additional equipment is scheduled to arrive during the third quarter to support the planned ramp-up in mining rates. The work underway today is critical to unlocking access to the higher-grade Encran ore that supports our future production profile.
Speaker #3: Importantly, this progress was all achieved while maintaining our strong safety performance, which Matt highlighted earlier. Turning to slide 6, processing performance remains solid during the quarter, despite some unplanned maintenance activities.
Speaker #3: Average feed grade was approximately 0.9 grams per ton, metallurgical recovery was 90%, and gold production totaled 34,391 ounces. Mill availability was impacted by maintenance on the bore mill gearbox in June, while work on the primary crusher pit and continued throughout the quarter.
Speaker #3: Despite these interruptions, the processing team maintained strong recovery rates and delivered production in line with expectations, demonstrating the resilience and stability of the operation.
Speaker #3: The remaining crusher work is expected to be completed during the third quarter. So, looking ahead, our priorities for the second half of the year are straightforward.
Speaker #3: Complete the remaining repairs of the critical spares for the primary crusher, continue advancing the mining sequence at a bore rate, and deliver the higher-grade ore planned for the balance of the year.
Speaker #3: With more than 69,000 ounces produced in the first half, we are well positioned to achieve our full-year production guidance. I will now hand the call over to Matt, Freeman, to review the financial results.
Speaker #2: Thanks, Michael, and good morning, everyone. Turning to slide 7, the second quarter gain demonstrated yearning and cash generation capacity of the business, even as we continue to fund significant development activity.
Speaker #2: Revenue for the second quarter was $156.6 million, on sales of just over 35,000 ounces of gold, at an average realized gold price, before the impact of hedging losses, of $4,432 per ounce.
Speaker #2: This translated into strong earnings, with adjusted EBITDA of $78.5 million, and adjusted earnings per share of $0.09. Also, as we have discussed previously, we're getting close to the end of our hedge book, such that from 2027, our financial results will be able to fully participate in the gold price, leading to a natural inflection point in our cash flows.
Speaker #2: I must note that at the end of the quarter, approximately 26 million of our cash became restricted following court order relating to a longstanding contractual dispute with a former service provider.
Speaker #2: This was in direct contravention of the existing court order and, as such, we are confident the restriction will be lifted in a timely manner.
Speaker #2: Excluding the IFRS presentation of restricted cash in our cash flow statement, the mine generated cash flows from operations of $31.9 million, which shows that the operation continues to generate meaningful cash flows.
Speaker #2: The key point here is that our balance sheet remains very healthy, we've maintained substantial liquidity while funding the investment in our growth projects, such as the significant infield drilling campaign at a SASE and accelerating the pre-strip program at Encran cut 3.
Speaker #2: Turning to slide 8, we're pleased that despite elevated diesel prices since the start of the Iranian conflict, all in sustaining costs was $2,473 per ounce for the quarter, and $2,418 per ounce for the first half of the year.
Speaker #2: And as production increases and grades improve in the second half of 2026, we expect better unit cost leverage. Therefore, our 2026 AISC guidance remains unchanged, at $2,300 to $2,600 per ounce.
Speaker #2: It's through this disciplined cost management that we continue to be able to direct capital towards value-enhancing projects, such as the Encran strip and exploration work, which is expected to provide the foundation for mine life extension of the asset.
Speaker #2: And now I've turned the call back to Chris to discuss the progress made on these exploration priorities.
Speaker #4: Thanks, Matt. Exploration work through Q2 was primarily focused on executing our aggressive drilling campaigns at a SASE and a bore rate in order to deliver results in time for the addition in the 2027 MRMR update.
Speaker #4: The exploration budget for 2026 has been expanded to a very healthy $25 million, up from the previous $17 million, meaning we are well-resourced to deliver on our objectives.
Speaker #4: Following Q1 drilling success in the first phase of the SASE infield and conversion drilling program, the full expanded program consisting of approximately 32,000 meters was approved, and drilling was immediately ramped up with a total of 7 drill rigs turning at a SASE by June.
Speaker #4: The program was approximately 50% complete by the end of Q2, with the team achieving a total of 13,748 meters in the quarter and drilling remains on schedule for completion in Q3.
Speaker #4: Results received to date continue to indicate the program will meet its objectives of converting a high percentage of the targeted inferred resource to the indicated category, ahead of the 2027 MRMR update.
Speaker #4: This work is specifically designed to dramatically increase the open-pit mineral reserve at Asase, which will anchor the future life-of-mine transformation.
Speaker #4: Drilling also continued at a bore rate, as we work to expand the underground resource, which was first released last quarter. 4,565 meters were drilled through Q2, bringing the full-year program of 30,000 meters to 54% complete.
Speaker #4: We remain excited by the growth we are seeing at Abore, and are anticipating completion of the remainder of the drilling at Abore by early Q4.
Speaker #4: That excitement is reflected in our ongoing planning efforts for potential construction of an underground exploration added at a bore rate. Permitting and planning efforts advanced well through Q2, and we are on track to make an investment decision for a potential construction start in 2027.
Speaker #4: This project will be a significant milestone for exploration and the AGM, as it would represent the first steps toward transitioning the Asankranso belt deposits towards underground operations, as has been done very successfully at both the SEPI and Ashanti belts, which lie immediately adjacent to us.
Speaker #4: Back to you, Matt, to discuss our near-term catalyst.
Speaker #1: Thank you, Chris. Turning to slide 10, I’ll point out that Chris’s update is important because exploration is an integral part of our strategy to extend mine life and strengthen the future production profile.
Speaker #1: Our immediate priority remains a safe delivery of our 2026 guidance. Looking beyond this year, however, we expect the operating and financial profile of the business to change meaningfully.
Speaker #1: Production is expected to increase in 2027 once the hedge program rolls off. We expect to benefit from higher production and full exposure to the gold price, supporting stronger free cash flow.
Speaker #1: This combination represents the key financial inflection point we see ahead. Beyond that near-term inflection, Encran cut 3 is a key driver of a production profile of more than 200,000 ounces per year.
Speaker #1: A SASE and a bore rate also contribute to that scale and provide opportunities to sustain and extend the production profile through reserve conversion and underground resource growth.
Speaker #1: Together, Encran, a SASE, and a bore rate support both scale and the longevity of the Asanko Gold Mine. The chart on the left shows that Galiano trades at a discount to many of our peers on an enterprise value per reserve ounce basis.
Speaker #1: We believe this discount does not reflect the value of our existing operations, the strength of our balance sheet, the visibility of the expected cash flow inflection, or the organic growth opportunities across Encran, Asase, and Abore rate.
Speaker #1: In our view, the current valuation understates both the strength of our business today and its long-term growth potential. Let me close by bringing the quarter back to our broader strategy.
Speaker #1: In the near term, our task is clear. Operate safely and deliver our 2026 plan. Our first half production of 69,000 ounces near the upper end of our indicated range provides a solid foundation for the balance of the year.
Speaker #1: Our full-year production and all-in sustaining cash guidance remains unchanged. At the same time, we are using our debt-free balance sheet to fund Encran Cut 3, progress reserve conversion at Asase, and advance underground growth at Abore, while maintaining substantial liquidity.
Speaker #1: We are therefore able to invest in the future of the mine while continuing to execute the current plan. The result is a clear path to a improved operating and financial profile beginning in 2027.
Speaker #1: Higher production, stronger free cash flow, greater participation in the gold price, and multiple opportunities to expand reserves, resources, and mine life— that combination gives us confidence in Galiano's ability to create meaningful, long-term shareholder value.
Speaker #1: Thank you to our employees and our business partners for their continued commitment, and thank you to our shareholders and analysts for your interest in Galiano Gold.
Speaker #1: Operator, we are now ready to take questions.
Speaker #2: As a reminder, to ask a question, simply press star 1 on your telephone keypad. Please limit questions to one and one follow-up. Again, that is star 1 to ask a question.
Speaker #2: Our first question comes from the line of Heiko. Island with HCW, please go ahead.
Speaker #5: Hey guys, it's Heiko Elick with HCW. Thanks for taking my questions and sorry for the background noise. I'm standing at the airport here.
Speaker #1: Hello, good morning, Heiko.
Speaker #5: Life is good. Hey, let's talk about the general administrative costs on a dollar per mil basis. You went from $7 to essentially $8.50. And I get that that's a small number overall, but on a percentage basis, the change is quite pronounced.
Speaker #5: Can you maybe give a bit of color on where we should model that out going forward, and what exactly happened? I assume some of that is just labor costs?
Speaker #1: Ronnie. Hi K, it's Matt Freeman here. I think, simplistically, the large part of it is just the denominator there. The tons milled was obviously a bit lower this quarter.
Speaker #1: Given some of the issues that Mick alluded to. Otherwise, nothing really substantial in there. We had a few other maintenance costs that maybe flow through there a little bit, on some sort of not kind of plant-related ones.
Speaker #1: But really, it's just the denominator—so your tons milled. So, modeling going forward, I would think this was a bit of an anomaly. I would think you can look back at the previous couple of quarters, and that would be a much better way of looking at it going forward.
Speaker #1: We're certainly not seeing any major unexpected movements in our general cost base at all across the operation.
Speaker #5: That's what I would have expected and hoped you guys would say. Okay, so that makes a lot of sense. And then also, you mentioned that diesel prices in the release, you discussed it briefly earlier on this call.
Speaker #5: Can you just give a bit of color on how much you actually spend on fuel per quarter, and what you've been seeing with this figure throughout the first half of Q3?
Speaker #5: Is that something where the analysts can just, once we have the total, we can essentially take it and then take global diesel prices and sort of model it like that?
Speaker #1: Yeah, Heiko. I think, on average, we're at about 3.5 to 4 million liters a month. And, obviously, as we increase the profile of stripping at Encran over the next, sort of, I guess, 18 months or so, we would expect that to increase a little bit over time.
Speaker #1: Honestly, we're not seeing it being particularly material to the business. Obviously, we've seen the spike through the summer. And obviously, it's been hugely volatile.
Speaker #1: Particularly what we're seeing at the pumps in Ghana. But I think, say, we're guiding, we're comfortable with our guidance range. We're certainly comfortable where the costs are sitting.
Speaker #1: Hopefully, the Middle Eastern situation will calm down a bit and we’ll see the reversion in prices. But, as I say, at the moment, it’s not that material to us.
Speaker #1: We're keeping an eye on things and managing it where we can.
Speaker #5: Fair enough. And essentially, on a usage basis, flat for the rest of the year is the way to go.
Speaker #1: Yeah, I mean, we're modeling it within our expectations as being kind of around where it is now, slightly elevated. And hopefully, say, things could come off lower than that, and we might have a slight benefit there.
Speaker #1: But say, as of now, we're very comfortable with our cost guidance. So you can kind of expect us to fall within that range comfortably.
Speaker #5: Perfect. I'll get back in Q. Thanks for taking my questions.
Speaker #1: Thanks, Heiko. Safe travels.
Speaker #2: Your next question comes from the line of Frederick Bolton with BMO Capital Markets. Please go ahead.
Speaker #6: Good morning, team. Thank you for taking my call. I have a few questions. You produced your development guidance this year—can you talk us through the primary drivers of that reduction?
Speaker #6: Because I noticed that your guidance for the Encran cut 3 hasn't changed at all. I don't mind just going through the questions one by one.
Speaker #6: So if you start with that, please.
Speaker #1: Hi, Fred. It's Matt Freeman here. Yeah, we've as we said in the MZNA, we expect development costs to be slightly down on what we'd originally said.
Speaker #1: There's a bit of a delay in some of our relocation projects in terms of the timing, but no change in sort of overall cost structure for the life of mine.
Speaker #1: It's just a timing shift, probably between this year and next year.
Speaker #6: Okay. Okay. Thank you. And with respect to this legal dispute, do you have this legacy issue? What's the current status on the appeal process, and what are the engaging factors or milestones?
Speaker #6: Are you needed before you can unlock some of that restricted cash?
Speaker #1: Yeah, as I said, this is actually a very recent thing. So, as we've said, we believe it to be a contravention of an existing order out there.
Speaker #1: So we're working with the local council, going through a legal process in Ghana to get that rescinded. It's difficult to give indications of exact timing, obviously, because these are legal processes, and through the summer, there are various court delays and holidays and things.
Speaker #1: So we're expecting, hopefully, something to be resolved in the short term. Can't give you precise timings, but certainly we're working as diligently as we can with Council to get it resolved.
Speaker #6: Thank you. Great. And so I think one more question on the Q3 mobilization of the Encran fleet. In Q3, well, this is the additional fleet.
Speaker #6: Can you just give us a bit more color on what was driving that particular timing for this additional fleet, and whether there's a chance to expedite some of that fleet sooner rather than later?
Speaker #5: Oh, Fred, it's Michael here. I can provide a little color on that. Our mining business partner, RockSure, has actually mobilized the full complement of trucks to site at this point in time.
Speaker #5: And there are two additional excavators which are currently sitting on the ground on site and going through commissioning phases. So, those will be completed in Q3 and then put into operation.
Speaker #5: So it was just primarily a timing delay for acquisition of those new excavators from the manufacturer.
Speaker #6: Thank you. And so, therefore, Q4 is when we should really start to see the ramp-up of the road stripping.
Speaker #5: That's correct. We'll see an increase in Q3 as we put those new units to work, and then they should be at full complement by Q4 as well, as you say.
Speaker #5: And further increase.
Speaker #6: Okay, okay, great. Sorry, I didn't mean to hog the line, but can I just ask one more question on the prioritized drilling at Asase?
Speaker #6: Because I read in the release that the Asase drilling has been prioritized ahead of Aburi. What was driving that? Is that because you were trying to prioritize the resource conversion there?
Speaker #6: As opposed to the completed drilling that's been done at Aburi and so on. So, can you add a bit of color to that, please?
Speaker #1: Sure, Fred. It's Chris. Yeah, you're absolutely right. So we moved the rigs to Asase. We wanted to make sure we could get that drilling done in a timely manner for modeling ahead of the 2027 MRMR update, as it is a significant increase in our potential reserve base there.
Speaker #1: So, we wanted to make sure we could get that done. Obviously, Aburi is still important to us, and we've gotten over half of that program finished already.
Speaker #1: And we still feel like, given our timelines, we have all the time to be able to finish that drilling at Aburi. We are seeing good growth in the resource there.
Speaker #1: To be able to get that in by the end of the year as well. Yeah. So, I mean, that's our—at Aburi, that's our underground resource, right?
Speaker #1: And so we released that last quarter. So it was really about getting the open pit reserve prioritized—growth there—over the underground resource growth. We think we'll still see that at Aburi as well.
Speaker #6: Okay, great. No, that's all I had for today. Thank you. I'm looking forward to seeing the site in October.
Speaker #2: Your next question comes from Barricade. Are you with Beacon Securities? Please go ahead.
Speaker #3: Hey, congratulations, guys, on another solid quarter. I'm noticing that production is actually stabilizing—the last three quarters have been really good. And obviously, that has been helped by the grade stabilizing as well, closer to the 0.9 grams per ton.
Speaker #3: But I was wondering, when do we start to see— with Aburi's contribution— those grades start to tick up? Closer to the reserve grade of Aburi, let's say.
Speaker #3: I understand that Aburi is only contributing about 75% at the moment—of the ore. I also want to add, or basically want to ask, the same question that the others have been asking, but in a different way.
Speaker #3: Encran cut three. If I remember correctly, it started somewhere early in the year 2025—February, I believe it was. And we're still at it, and it's ramping up.
Speaker #3: But when do we expect Encran to sort of start to complete the pushback, and start to contribute decently to the mine, to the processing plant?
Speaker #3: Those are my questions for today.
Speaker #5: Hi, Barricade. It's Michael here. I can answer that for you. We are seeing increases in Aburi grades coming into Q3, and then further into Q4.
Speaker #5: We made a slight modification to our Aburi pit design, which has increased the reserves—ounces included in that. And as we push into Q3 and Q4, we will be starting to see an increase in those grades.
Speaker #5: And Aburi will contribute approximately 80% of our mill feed in the last half of the year. So we should be expecting that, as I said, in H2.
Speaker #5: And as far as Encran goes, we will be ramping up our production profile over the balance of 2026 to be at a full complement of fleet and increase at the end of the year.
Speaker #5: So, 2027 should be at full complement of fleet. And as we've previously indicated, Encran will start to produce ore at the back end of 2028 and into 2029, with a meaningful contribution to the grade for the production profile.
Speaker #3: Great. Thank you.
Speaker #2: Our next question is from the line of Medina Abdolina with Freedom Broker. Please go ahead.
Speaker #4: Hello, thank you for your presentation. I have several questions. You said you reduced development capital guidance by approximately $15 million due to delays in village relocation.
Speaker #4: Can you clarify whether these relocations are now expected in early 2027, and whether the delay has any impact on first-order timing from an Encran, or does it simply shift cash spending between years?
Speaker #1: Hi there, it's Matt Freeman here again. Yes, it's purely a timing difference—a little bit of a delay getting some of the organization together with the communities.
Speaker #1: And we'd expect that to slide into 2027, but that won't have any impact on our production profile at all—so just a cash timing difference.
Speaker #4: Okay, thank you. And also, mining unit costs increased 27% year over year due to lower tonnes mined and higher fresh rock exposure. As Aburi transitions further into lower strip phases during the remainder of the year, should we expect mining costs per tonne to decline meaningfully, or does fresh rock mining offset most of that benefit?
Speaker #1: I think, as you highlighted, we were slightly elevated on a cost-per-ton basis this period, which was driven largely by slightly lower tons and also the diesel price increase having impacts on that as well.
Speaker #1: But going forward, I think we should expect it to be fairly stable. Hopefully, if mining rates ramp up a bit, we could see a bit of a reduction there.
Speaker #1: But obviously, as you go deeper in the pits, whole cycles increase. So there are a few offsets up and down, but maybe slightly better. But we're not expecting anything too dramatic to change.
Speaker #4: Got it. Thank you.
Speaker #2: There are no further questions in the queue. I will now hand the call back to Mark Badylak for closing remarks.
Speaker #1: Thank you all, and thank you again to everyone who joined the call today and for your continued interest in Galiano Gold. We certainly look forward to providing you with further updates throughout the course of the year as we progress this year.
Speaker #1: Thank you very much.
