GAU Q1 2026 Earnings Call
Operator: Hello, and welcome to the Galiano Gold First Quarter Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to withdraw your questions, you could press star 1 again. I will now turn the conference over to Matt Badylak, Galiano's CEO. Please go ahead.
Matt Badylak: Thank you, operator, and good morning, everyone. We appreciate you taking time to join us on this call today to review Galiano Gold's first quarter 26 results we released yesterday after market close. We will be making forward-looking statements and referring to non-IFRS measures during the call. Please refer to the cautionary notes and risk disclosures in our most recent MD and A as well as this slide of the webcast presentation. Yesterday's release details our first quarter 26 financial and operating results. They should be read in conjunction with our first quarter financial statements and MD and A available on our website and filed on SEDAR plus and EDGAR. Also, please bear in mind that all dollar amounts mentioned in the conference call are in US dollars unless otherwise noted. With me on the call today, I have Michael Cardinaels, our chief Operating Officer Matthew Freeman, our Chief Financial Officer Chris Pettman, our Vice President, Exploration. For this presentation, I will initially provide a brief overview of the quarter, Michael will discuss operations. Matthew will discuss financials, and Chris will highlight the exciting growth potential at the SAF and our ongoing exploration success at Aboure. I will then provide some closing remarks and open the call for Q&A. Turning to Slide 5, Here, we can see the team delivered another solid operational quarter in line with our expectations for the period. Let me walk you through some of the key highlights. Safety continues to be our top priority, and I am pleased to report that we recorded no lost-time injuries in Q1, extending our LTI free period to more than 12 months. This milestone reflects the team's ongoing focus and commitment to maintaining a strong safety culture across the operation. Turning to production, the Asanko Gold Mine reached an important milestone during the quarter, marking its 10th year of continuous operations. Over that period, the mine has produced more than 1.9 million ounces of gold or just over 190 thousand ounces per year on average. In Q1, we produced 34.5 thousand ounces of gold slightly above the midpoint of our first half forecast. Our full year production guidance remains unchanged at the 140 thousand to 160 thousand ounces During the quarter, we executed a 4-year extension to our mining contract with Rabotec, who have been actively mining at Assassi and at Abore since 2024. This strengthens an existing relationship with a highly qualified domestic service provider and highlights our commitment to local content requirements in Ghana. Our balance sheet remains strong, and we ended the quarter with $115 million in cash despite increased stripping activities at Enkran and an impact of higher royalties. Including the $75 million revolving credit facility added in Q4, total liquidity now stands at approximately $190 million, positioning the company well moving forward. Exploration activities also progressed well during the quarter, with the team advancing work streams focused on expanding mineral reserves at Assassi and growing underground mineral resources at Abore. With that, I will now pass it over to Michael to discuss production in more detail.
Michael Cardinaels: Thank you, Matthew, and good morning, everyone. Starting with safety, our improvement from last quarter continued into Q1 2026. We recorded no lost time injuries and no recordable injuries. And I am pleased to report that at the March, we reached 12 months lost time injury free. That milestone brought our lost time injury frequency rate down to 0. And our total recordable injury frequency rate to 0.11 per 1 million hours worked. Turning to mining. RTSI ramped up production in Q1 as planned, And together with Abore, we increased total tonnes mined by 9%. Mill feed in the first half of 2026 is planned from these 2 pits, Zaborre and Esasi. And ore tonnes mined increased 6% compared to the previous quarter. As the year progresses, strip ratios, especially in Abore, are forecast to decrease That gives us access to more ore and allows us to preferentially feed higher grade material to the mill. Supporting higher gold production in the second half of 2026. At Encran, cut 3 stripping continued. Volumes mined increased modestly by 8% in the quarter, and we expect material movement to build through the year as additional equipment is mobilized to site. Now if we move to the next slide, I will walk you through our processing performance for the quarter. Overall, the year has started well. In Q1, we completed a substantial plant maintenance program. Including relines for both mills and replacement of the primary crusher pitman. As a result, tons treated were lower, but as expected, Importantly, with the circuit optimizations we have implemented, throughput is now performing in line with expectations. Grades and recovery met plan or were better during the quarter. That translated into gold production of 34.7 thousand ounces. And sales of just over 34 thousand ounces. We are well positioned to achieve the upper end of our previously communicated production range of 60 thousand to 70 thousand ounces for the first half of the year. And we remain on track to meet our full year guidance. So in summary, both mining and processing areas of performing as expected, and we are tracking well against our 2026 guidance. I will now hand over to Matthew Freeman to discuss the Q1 financial results.
Matthew Freeman: Thanks, Mick. Good morning, everyone. As Michael outlined, we are pleased with the first quarter delivered in line with our plan. The continued strong gold price environment enabled us to generate record revenues of $166 million and cash flows from operations of $47 million. Our headline earnings numbers continue to be impacted by the losses on the hedges, but we now have only about 45 thousand ounces of gold left to settle. As production ramps up, these ounces will present a lower percentage of production allowing us to more fully participate in gold prices going forward. Adjusting for the unrealized losses on hedges to be settled in the future, we recognize adjusted net income of $0.11 per share. From a treasury perspective, the balance sheet remains very healthy with approximately $115 million in cash and the $75 million credit facility remains undrawn. This Slide 9 illustrates our operating costs remained consistent period on period and have generally been well controlled by the site. As Matt mentioned, we are pleased to sign the extension to our mining contract with Rabotec in April, which provides some cost certainty over the next 4 years while being able to ensure strict compliance. Local content requirements in-country. We have seen some inflation in recent months following the situation in The Middle East. Notably on diesel, From the general assumption that this will be short term in nature, we are not expecting material impact on the overall cost structure of the mine in the full year 2026. Thus far, we have also not experienced any supply issues for consumables needed to operate the mine. CapEx remains focused on critical projects as the tailings dam raise, We are also starting to invest some of the village relocations that are required. So we expect growth capital to increase through the year in line with guidance. With respect to our ASIC guidance, we are in line with where we expect it to be. Back in February, we guided all-in sustaining costs for 2026. as being between $2,000 and $2.3 thousand per ounce, but noted that should the Ghanaian government implement the new royalty regime, it could add an additional $375 per ounce to the cost structure. I think everyone is aware, the new sliding scale royalty regime was enacted in March, Where we sit currently with prices, the royalty rate is 12%. We were pleased however that the government did provide a marginal offset by reducing the growth and sustainability levy from 3% to 1%. Now that we have certainty over the legislation, we have clarified the expectations reiterating guidance to between $2.3 thousand and $2.6 thousand per ounce. Fundamentally no change to what we previously outlined. The chart on Slide 10 clearly demonstrates the increasing royalty burden we have seen over the past 5 quarters, as a result of the significant increase in gold prices and then in Q1 26 where we started to recognize the impact of the new regime. But it also demonstrates that the unit costs we can control have been consistently maintained and very much levered to production. Such that as production improves over the next several quarters we expect this to reduce. We are pleased that our cash balance has grown to $115 million with ASIC margin growing to $17.6 per ounce. As we look forward, the end of this year marks a real inflection point in cash generation. 2027 and beyond should see another ramp up in production and will be past of the current hedge program. And therefore fully exposed to the price of gold. The company expects to generate significant cash flows to shareholders from this point going forward. And with that, I will turn the call over to Chris to run through the excellent exploration results we saw in Q1.
Chris Pettman: Thanks, Matthew. The year got off to a fast start for us in exploration. We started the 2026 Abore step out and infill drilling program in the first week of January in order to maintain resource expansion momentum on the back of a very successful 2025 campaign the release of the maiden underground resource in January. Drilling has progressed well with 11.6 thousand of a planned 30 thousand meters completed in the quarter with another 3 thousand meters completed in Amri as discussed in the company's press release issued earlier this week. Some of the headline results are shown here at the bottom of Slide 12. And I will discuss these further in a few minutes. The Asassi resource conversion drilling program was brought forward in the exploration schedule and was kicked off in February. This program is a critical pillar in the Galliano organic growth strategy, on the back of initial positive results from the first 2.5 thousand meters drilled in Q1, we have significantly increased the program to its full scope and budget in order to aggressively grow the open pit reserve base, ahead of the 2027 MRMR update. With support of senior leadership and the board of directors, The 2026 exploration budget has been increased from $17 million to $25 million. Asassi is the AGM's largest deposit with over 1.7 million ounces of inferred mineral resource and a reserve of 532 thousand ounces, and through an aggressive campaign to maximize near-term reserve growth will underpin Galiano's strategic organic growth plan for the AGM. Because of the amount and density of historic drilling below the current reserve shell, Assassi is uniquely positioned to quickly leverage elevated gold prices. And deliver significant near term value to the company. Multiple pit optimization studies have been completed using this data across a range of gold prices. These have demonstrated that the deposit is highly sensitive to higher gold prices and that the reserve can grow substantially while maintaining strip ratios in line with the current reserve As shown here in Slide 13, a long section through Asassi shows the potential impact of successful conversion of inferred resources can have on the reserve shell at gold prices up to $3 thousand an ounce. The amount of historic drilling also means that we expect to see very high conversion rates from this program as a large portion of the inferred resource is spatially bound by indicated material. I will show an example of this in a moment. I mentioned on the last slide, drilling got underway at Assassi in February. 2.5 thousand meters of the first phase of the program completed in Q1. On the back of positive results from this initial drilling, the program has now been expanded to its full scope of 33.4 thousand meters. Production has accelerated at site, and we now have 5 drill rigs active at Asassi On this Slide 14, we are showing an example of cross sectional view of a conversion drilling target zone in the central portion of the Asassi main pit. Inferred resources shown in red are spatially bound above and below by indicated resources shown in green. In areas such as this, we have high confidence in the model and our ability to convert a high percentage of these inferred ounces to indicated with a small amount of new drilling. This section also shows the impact converting these ounces can have in terms of the scope of potential pit expansions at higher gold prices. Increasing the open pit reserve at Assassi will not only provide near term value, by unlocking quality ounces and tonnage that are currently undervalued, but is also a critical first pillar that will underpin Galiano's long term vision for transformational life of mine plan that includes a future transition to underground mining. An expanded Assassi has the potential to be large enough to supply quality open pit tonnes to cofeed with higher grade underground material from Abore and/or Nkran well beyond the current life of mine. To that end, while we are growing the Assassi Open Pit Reserve, are aggressively working to expand the underground resource at Aboure I will discuss in the next couple of slides. At Aboure, we continue to be excited about the results we are seeing, we have now completed approximately half of the planned 30 thousand meters of drilling for 2026. The maiden underground resource released by the company in Q1 provided the baseline from which we are now focused on growing the underground opportunity at Abore. Q1 drilling was focused on infilling areas at adjacent to but outside the current mineral resource, while also continuing to step out at depth to expand the known extents of the Abore mineralizing system. The image here on Slide 15 outlines the primary areas of drilling so far this year, and where results to date are likely to drive resource growth. Current step out drilling has intersected mineralization up to 180 meters below the existing underground mineral resource, while infill drilling has significantly improved continuity across key mineralized zones but also stayed outside the resource. Drilling below the main and south pit areas continues to confirm robust extensions of mineralization, both down plunge and along strike of existing ore zones, new high grade zone has been identified under the northern end of the Abore main pit which is open along strike and at depth. Representing a compelling new target area for follow-up drilling throughout 2026. A more detailed discussion of these results are available in the company's press release issued on Monday of this week. Continued drilling success at Aboure provides increasing confidence in the ability of the underground resource become a key pillar of an expanded life of mine in conjunction with reserve growth at Assassi. In order to most efficiently delineate an eventual underground mineral reserve and test people deeper targets, the company is progressing the early stages of permitting an underground exploration adit at Abore. Permit applications have now been submitted to the relevant regulatory bodies in Ghana and dependent on both external and internal approvals, our goal is to begin construction of a portal and decline in 2027. And with that, I will hand it back to Matthew.
Matt Badylak: Thanks, Chris. In closing, I would like to highlight the position of strength the company is operating from today and the deliberate steps we are taking in 2026 to drive additional shareholder value. Firstly, I am pleased with another solid operational quarter and encouraged by the momentum we are building, keeping us on track to meet our full year guidance. As production levels continue to improve, hedges roll off and the deferred payment is settled in December, we expect a meaningful cash flow inflection beginning in January 2020. Secondly, as Chris outlined, reserve expansion potential at Assassi is meaningful. The company has committed the required capital to execute the drilling program, positioning us to deliver a reserve update in early 27. We believe these results have the potential to extend mine life well beyond the current 8 years. Lastly, drilling at Abore continues to return encouraging results and support resource growth. In parallel, we are advancing permitting efforts for an underground adit to test mineralization continuity at depth, which represents additional upside. With these near term catalysts in mind, a brief comment on valuation. As shown in this image when comparing our African peers on an enterprise value versus mineral reserve ounce basis, Galiano trades at a discount despite operating in 1 of Africa's premier mining jurisdictions. When we layer in the reserve growth potential discussed today, this valuation disconnect becomes even more compelling. Benefiting from being highly leveraged to gold price, a visible near term cash flow inflection point, and a clear line of sight to expanding mine life. Galiano is well positioned to deliver meaningful shareholder value in the near term. With that, I will hand it back to the operator and open the call up for any questions. Thanks.
Operator: Thank you. If you wish to remove yourself from the queue, simply press star 1 again. 1 moment please for your first question. Your first question comes from the line of Heiko Ihle of H. C. Wainwright. Your line is open. Analyst (Heiko Ihle): Hey, Matthew and team. I assume you guys can hear me alright. I am traveling. So there is a little bit of background noise. My apologies.
Matt Badylak: Yeah. We can hear you. Heiko, no problem. Go ahead. Analyst (Heiko Ihle): Excellent. Cut 3 at Nkran, I mean, obviously, almost 5 million tons of waste, big, big operation. You mentioned that there is additional mining equipment that is coming. I mean, we are halfway through Q2 tomorrow. What kind of equipment has already shown up? What else is coming? And we will just maybe give a bit of an overview on what you see with efficiency gains at site. Given that this thing is getting bigger and bigger.
Michael Cardinaels: Hey, Heiko. it is Michael here. Thanks for the question. Analyst (Heiko Ihle): Of course.
Michael Cardinaels: Yeah. We had a third fleet arrive in April, which was obviously after the end of Q1. So additional PC 2,006 triple sevens of have been delivered to site. We still expect 2 additional fleets sometime this year. So we are expecting significant ramp up We will see ramp up, obviously, from the third fleet that arrived in April in Q2. And then Q3 and Q4, we will see subsequent increase in production along with along the lines of our expectations for the budget. Analyst (Heiko Ihle): that is helpful. Again, as I mentioned, we are going to be halfway through Q2 tomorrow. And building on that last question a little bit, anything at site that should surprise us or even better phrase, anything that has surprised you in the last 45 days that may or may not be incorporated in our models quite yet?
Matt Badylak: No, Heiko. I mean, production certainly over the last few quarters has delivered to expectations. And as Nick just pointed out, the strip at Nkran, which is critical for us to deliver high grade ore in late 28 is going to ramp up during the quarter as well. I mean, obviously, Matthew spoke a little bit about the royalties, and that was kind of forecast potentially occur in our previous disclosures as well throughout quarter. We have kind of updated the market on that 1. Maybe there is obviously, the diesel price situation at the moment is something that is affecting everyone globally. We are that supply in Ghana at this point of time that has not been negatively impacted on that front. With regards to costs, I think we are probably paying upwards of about $1.90 at the moment in terms of terms of diesel costs at the moment, but, you know, again, that in due course that will that will come down, and the cost that we are currently paying have been reflected in our in our cash cost guidance update as well. So, there should not be any surprises from the diesel front with respect to costs. Analyst (Heiko Ihle): Got it. And then just 1 quick clarification on the press release. It says there is 4 drill rigs operational at Assassi at the end of 2026. Did I hear you guys correctly that you guys have 5 rigs operational right now, so 1 was added? Between the end of the quarter and today?
Chris Pettman: Yeah. Hi, Heiko. it is Chris. Yeah. that is right. So when Yep. At the end of Q1, we had 4 rigs at Asassi and we actually had 3 operating at Abore. And we have since moved 1 of those rigs from Abore to Asassi. So we have 5 running at Assassi and 2 at Abore. Analyst (Heiko Ihle): Got it. Okay. that is why I thought just double checking. I will get back in queue. Thank you.
Operator: There are no further questions at this time. I will now turn the conference back over to Matt Badylak for closing remarks.
Matt Badylak: And again to everyone who dialed in today and your continued interest in Galiano. And we look forward to updating you on our progress in subsequent quarters. Thank you.
Operator: This concludes your conference call. You may now disconnect.