Resolute Mining Ltd
ASX:RSG

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ASX:RSG
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Earnings Call Transcript

Earnings Call Transcript
2024-Q1

from 0
T
Terence Holohan
executive

Good day, ladies and gentlemen. This is Terry Holohan, the Chief Executive of Resolute. I am joined today by Chris Eger, who is our CFO. And we'd like to take you through our performance over the first quarter of 2024. You'll be able to follow the presentation as I take you through. It should be on the webcast platform in front of you, but also the slides are fully available on our website. Move to Slide #2. That shows our disclaimer. I just want to highlight there that the guidance is there of 345,000 to 365,000 ounces for this year at a cost of between $1,300 and $1,400 per ounce. What will unfold going forward through this presentation that we are very comfortable with these numbers after what we think is a very comfortable and good performing Q1. As we move across to Slide 3, just to remind you who we are. We have the 2 gold mines in Sayama, Mali and Mako in Senegal. And we're conducting exploration in both those 2 countries as well as Guinea, and we're very excited about the results that we're starting to achieve. If we move across to Slide 4, we produced 76,000 ounces, which is exactly where we expected to be, given the sulfide plant shut that we performed, and I'll go into that in a bit more detail later. What is particularly pleasing is our all-in cost of $1,487 -- despite the lower production, we maintained it plus or minus where we were in last quarter, a much higher production rate. And this is because of the ongoing initiatives that we've put in place over the last year. And we do expect these costs to come down, as I alluded to with our guidance going forward. In terms of cash flow, we're now making really strong numbers. We're starting to see $ 62 million after the working capital changes, and that's put us in a very good position. And Chris will take us through those numbers in a bit more detail later. Capital expenditures, all on track, and we're starting to hit our strides now for 2024 with all the projects that we've got going. On the exploration, what is really exciting is the Tomboronkoto mineral resource estimate that we've put out, where we've initially seen 400,000 ounces at inferred, grading about 1.2 gram a tonne, but it is fully open on depth and on strike. We're actually drilling as we speak right now. What is really exciting there is that all these results are within 100 meters and eyeballing the their models, the strip ratios are looking particularly good. We will give you a further update later. In Guinea, we are drilling at the Mansala prospect and expect to produce an initial estimate in the second half of this year. The big news for us is, as we expected, our net cash is now growing. We are at $34 million at the end of this quarter compared to $14 million at year-end. We have now paid the final tranche on our term loan facility, and we're actually unhedged going forward, which is very exciting. Cash and Bullion at the end of the quarter, $81 million, as we expected compared to $75 million at the end of the previous quarter. In terms of ESG, we're now LTI-free for 2.6 years. This is from our Mako site where, as I've told you before, Syama, we're comfortably over 5.5 years now lost time injury free. And it says here, we have no significant environmental incidents. -- regulatory. We've got no non-compliances going all the way back to 2020. And -- so we're really proud of our stats as we present them here today. Moving to Slide 5. We show our near term and medium to long-term growth. We believe we're now fully on track to take this company all the way to 500,000 ounces within the next 5 years. The main areas of organic growth that we're focusing on is initially the Phase 1 sulfide conversion, where we're converting the oxide plant to be able to treat sulfide. That will take us 250,000 ounces plus at Syama by the middle of next year. We're working closely now with the Mako mine life extensions, where we've got the 3 satellite projects with Tomboronkoto significantly progressing. We've kicked off these studies for the Phase II Syama expansion, which will take the Syama operation up to 400,000 ounces or more -- and with the studies commencing now, we expect to give you an update on that in the second half of this year. Also with Guinea, we are starting to hit metal there, and we expect to have, as I mentioned previously, our first or initial mineral resource estimate by the second half of this year. Moving to Slide 7. Let's go into a bit more detail on Syama. I'll talk initially about the sulfide operation, where we noted the mine grade has come up slightly. We're now very confident that throughout the year, we can achieve our originally planned grades of over 2.6 gram a tonne. Moving on to the sulfide plant. As I mentioned, we took the plant offline for 2 weeks -- this was to do some significant maintenance on the plant, given that we did the major overhaul 2 years ago. We stripped out the mills right back down to the backing plate so we can clean them out and refurbish them to give them 5 years life going forward. We took off the roaster plant to check everything was 100% correct there. We did a few ancillary improvements, and we got the plant back online during February. Last week, the Chief Operating Officer, Jeff and myself went to visit site to have a look at all the improvements that were made right through the crushing plant. If you remember, we've been talking about a crushing plant for a year, that is completely debottleneck now. So, all the focus now is on the mills. Over the shut, we took the mills offline as I mentioned, and we're happy now slowly inching up the throughput through those mills. So, we're really excited about that plant. It's going to perform slightly above target, we believe, for this year. Moving over to the oxide operations. In terms of tonnes mined, we had some delays on the Paysans pit. We've corrected those now, and we will catch up that material that was deferred from Q1. We'll mine it over Q2 and start processing it over to Q2. We lost about 1,000 ounces there, but we will recover that later down the track. Instead, we did use a lot of our stockpile material. Just for information, we do have over 2.4 million tonnes of stocks at 1.3 gram a tonne, and we are planning this year to be processing a lot of that. If we look at the oxide recoveries, we maintained our 85%. But as I mentioned, our gold port is about 1,000 ounces down for the quarter, but we will recover that later when we get the pay sands material back into the plant. So, in summary, we're very comfortable with the Sayama operations going forward. If you remember, we've got a range of 205,000 to 215,000 ounces. We think we're going to hit that somewhere in the middle. And if you look at the cost there at $14.18 per ounce, we think that's very aggressive already, given that our range here that we set was $1,400 to $1,500. So, I think with all the initiatives still on the go in terms of cost at Syama, we should see some exciting numbers towards the end of the year on cost. Moving on to Slide 8, on the Mako operational highlights. We had a very good quarter as expected. tonnes mines good, mine grades starting to creep up now, and we expect that towards the middle of the year to start going over to 2 grams a tonne and end the year on 2.3 gram a tonne, which will just ramp up the ounces produced from this operation. On the processing side, you can see we're up on tonnes, and that was because of all the work that's been done over this last year with the mill slicer and the crushing stages focusing on crushing. And also, it's very interesting to note that our recovery now is stabilizing at 93%, given we put the oxygen plant in at the end of last year. If you look at the Mako costs, 1,451, that is as expected. But if you remember our guidance, given the grade is going to come up for the rest of the year, we are comfortable we're going to be somewhere between $1,100 and $1,200 per ounce produced, given that all the large strip that we've done over Stage 7 has been completed, and we're now starting to park up some of the equipment. So, we're comfortable with the 140,000 to 150,000 ounces that we will produce out of Mako this year at a very, very good price. Moving on to Slide 9. It shows our Senegal exploration. As I mentioned, we've got 3 satellite projects that we're very keen to develop over this next 2 years. Tomboronkoto, as I mentioned, we put out a mineral resource estimate. We've got 3 drills now turning, and we're locating another drill for the next one, which is the [ Banteka ] project. Chris was actually on site last week, and he came back after talking the geologists and explained that we're really excited about the drill results that are coming out there with those drills turning at the moment. And we will be publishing a new mineral resource update in H2 of '24. We've also given the mineralization that we can see there. We've already started our mining studies with a view to support an open pit mining operation out there. And what is particularly pleasing is the strip ratios there look very, very good, given that this is a surface deposit. On Slide 10, on the Guinea, as I mentioned, we do have drillings happening at this point in time there. We have 5 properties on the Secure Basin. We did recognize some mineralization last year, and we're doing the infilling as we speak right now. We will also have a result of the mineral resource estimate, and we will publish that in the second half of this year. So again, this is another exciting area for us to be focusing on. With that, I'm going to hand over to Chris, and he's going to take us through a bit more detail on the financials.

C
Christopher Eger
executive

Thank you, Terry. Now moving to Slide 12. I... So we had a very strong quarter with 76,000 ounces of gold production. However, we only sold 69,000 ounces. As some of you may remember, the quarter ended on the Easter holiday weekend. And so, the banks with their closed days, we had a lot of trouble selling the gold, and that's why there was a significant difference between what was sold versus produced. Also worth noting that in the quarter, the average sales price was $1,960 versus was actually achieved in the market of $2,070. This negative impact was a result of the remaining hedges that are now completely extinguished, and we are now fully unhedged as a business, which we're very excited about. Also, as Terry highlighted, our all-in sustaining costs came in at $1,487, which is pretty much in line with our previous quarter. We're very pleased with this number as it really showing our cost initiatives working through the system because of the lower production and ounces this quarter over next. CapEx came in at $25 million, which was an increase over last year. As you remember from our guidance, we expect CapEx to be between $115 million and $145 million for the whole entire year. And so, we're expecting CapEx to increase in Q2, Q3 and Q4, mostly as a result of the expansion project spend coming through in the remaining quarters. And finally, on operating cash flow. We are very pleased with the quarter that we achieved a $53 million operating cash flow versus $39 million from the previous quarter. Again, this is a result of the strong ounces that we've produced and at the lower cost profile, and we expect operating cash flow to continually increase throughout the year. So, moving to Slide 13. We remain really excited about the cash flow generation of this business, as was attributed in the first quarter with net cash increasing to $34 million from $14 million at the end of last year. So, this strong cash flow generation was achieved, obviously, because of the strong operating cash flow as you can see. But we're also making significant strides in monetizing our working capital, driving inventory down, extending payable terms and being a lot more efficient in the quarter that resulted in close to $9 million of savings. And we also expect that number to increase. So again, for the full year, we're expecting to generate substantial cash, ideally well over $100 million of free cash flow that will be used for future growth profiles. What's also very exciting in Q1 is that we repaid our final tranche of our term loan facility of $25 million, and we are now fully on hedge. So, within our, call it, banking facilities, we have a number of overdraft facilities, which were used to manage working capital in both Mali and Senegal, and we'll continue to do so, but we currently have no senior facilities in place at this time. That being said, we are working on putting in a possible new facility in place, and we'll provide announcements in due course. So, at the end of the quarter, we had available liquidity of $81 million, which included cash of $46 million and l5 million. So, we remain well on track to hit our guidance for the year, both in production, ASICs and CapEx. And with that, I'll turn it back over to Terry. Thanks, Chris.

T
Terence Holohan
executive

So, I think in conclusion, we think we are in a very, very good position now as a company. We're already on a growth path, which we've put a lot of work into. And we've got the free cash flow now generating from the operations to be able to fund that. So, our focus going forward is on organic growth, the assets as well as productivity and cost improvements. Thank you very much.

Operator

Thank you. [Operator Instructions] Our first question comes from Justin Chan from SCP Reserve Finance.

J
Justin Chan
analyst

Hi Chris, hi Terry [indiscernible] my first one is on my first question is on just operating cash flow and reconciling that with cash costs. So, if I take your gold price received your 1950 and subtract '14 '18 cash cost, they get about $530 an ounce margin on either 76,000 ounces produced or 69 sold. I get roughly $36 million to $40 million of margin. And I'm just trying to reconcile that with the 53% of operating cash. Were there any rebates or other items that I've kind of mentioned from the [indiscernible] -- just trying to make the financials why not given that we don't have a full quarterly balance sheet, et cetera.

C
Christopher Eger
executive

Justin, it's Chris here. Look, there will be a number of noncash accruals that make its way into the ASIC number, and that's where you'll see some discrepancies. But I'll need to come offline and give you a bit more reconciliations. I don't have the full numbers in front of me, but that's usually what that difference is.

J
Justin Chan
analyst

Okay. That's really helpful. And then I'm just curious on, I guess, the second quarter and the mine plan. So Mako, I noted that you expect rates to come up to 2.3% for the rest of the year. And then Syama will be better as well. I'm just curious how much of that improvement should we expect in Q2 as opposed to the second half.

T
Terence Holohan
executive

Yes. If you look at Q2 macro, we expect that. I mean we did about $28,000 in Q1. We expect another 10% on top of that now this next quarter. And then Q3 will be a higher one. We think about $42 million and then will come down about 37 million for Q4. So really, Q3 is going to be the peak quarter for Mako. That's when we get through to the really high growth in 2 in Stage 7.

J
Justin Chan
analyst

Got you. And then at Syama, I guess, what are your expectations for -- or just maybe could you give some guidance on the profile for the rest of the year?

T
Terence Holohan
executive

At Syama, yes, we did about just under 35% now. We're expecting 38% to 39% and 29% in Q2, Q3 from the sulfides and about 42% for the sulfides in Q4. On the oxides, we did close to $4 million. We'll probably do the same in Q2. We dipped down a little bit in Q3. The rain does affect us just getting the material through the processing plant come down about 11.5%, then back up to sort of 14%, 15% in Q4. So, if you look at our profile, we're looking at 76 90, 92, 96. So it's sort of ramping up consistently through the year. And what will happen is... Balance out the oxide in Q3.

J
Justin Chan
analyst

And then just maybe a last one, similar -- same question, but on CapEx. Clearly, it takes some time to ramp up, and we're a little bit below the guidance rate. Just curious, should -- is that a fairly linear ramp-up through the year or did a little bit less in Q3 because of the rainy season. Just wondering what expect...

C
Christopher Eger
executive

It will be pretty linear. It's going to keep ramping up because the expansion spend is going to start really building the civil works that are happening now. So, we're going to see a much bigger Q2 CapEx spend and is a continued growth. So, we think we will be right in the middle of that total guidance number.

J
Justin Chan
analyst

Okay. Got you. I'll free up the line. But thanks very much. Congratulations on the really cash flow quarter.

C
Christopher Eger
executive

Thanks, Justin.

Operator

Reg Spencer, Canaccord.

R
Reg Spencer
analyst

Thanks Terry and Chris... There going to the prior great quarter. Would you see things starting to hum. I was just wondering if you could -- I might have missed it, apologies, but if you could just maybe expand on those scheduling complications you have the oxide at Syama?

T
Terence Holohan
executive

Yes. We had a few equipment problems. We had some discussions with the locals there on -- yes, it's particularly hot and dry in this time of the year. I don't know if you're watching techs in Syama, we've been up to 48 degrees. And it's been difficult to wet the roads, et cetera. So, we've had some few discussions with the people. Everybody is excited about the project. But we actually backed off a little bit and then discuss it a bit more with them. picked up a few things on the roads, et cetera, and everybody is happy again now, so we're able to go forward. But we did have some renegotiation on equipment, et cetera, and we had a couple of downs on equipment. So, there's a couple of things that were all piled in together, but it's all sorted out. happy.

R
Reg Spencer
analyst

[Indiscernible], you're happy to -- that is really good. Okay. That's good to hear. And just on the -- at Mako, you talk about a high strip business you get into high-grade material. And maybe one for Chris. But are you able to quantify perhaps how much of that strip was capitalized?

C
Christopher Eger
executive

Yes. So, I think there is, in the press release, I'm trying to picture a breakout of the sustaining, which is not sustaining CapEx. But better with me one second. If not, let me come back to you on just don't hold up the line, but I will give back to you on the difference between the sustaining us staying for Mako. It would have been several million dollars... Yes, no problem.

R
Reg Spencer
analyst

Okay. No problem. In Guinea, you talk about an initial resource there at Masala. I know you haven't been able to talk too much about what you think you might have there. But -- and I think last quarter, I might have asked you what your resource expectations were. I think you wanted to see a little bit more drilling under the Bill Ford. But what are we expecting in Guinea -- because if we have a look at your long-term production growth chart and shooting for 500,000 ounces within 5 years. And if I look at your calling chart there, there's not an insignificant chunk of production potentially coming out of Guinea. Are you in a position to now to give us a bit of a clue as to what it is that you think you've got there and how big and what about later?

C
Christopher Eger
executive

It's -- I'm pretty careful just to say that we are actually modeling it now on the computer. We're looking at our initial resource estimate as we speak, and we should have that on the model completed within 2 weeks or so. The drilling is there. We're drilling over a kilometer. We've done some GFS there, but it looks like it bifurcates it splits at the top. So, there should be maybe 1.5, maybe 2 kilometers of strikes, close to surface. So, I just don't want to come out with any numbers now, but I think you won't have to wait too long, Reg. I'm sorry. But we're excited about it.

R
Reg Spencer
analyst

I'm sure I think be a little impatient with [indiscernible]. Look, just a last question. It just relates to Mali. Obviously, we all noted there's been a little bit of negative recently with respect to was going on at [indiscernible] and Barik. Is there -- are you able to perhaps comment on that just to give us a little bit of comfort that you guys are setting okay?

T
Terence Holohan
executive

Yes, everything is fine. As I mentioned on the call, Jeff and I were there last week. We're in the city there in Bamako. We're out on site. It's calm. It's quiet. I think the good thing is that the -- all the noise with us on the code all died down at the end of last year. We're getting a lot of government support now given the fact that they understand our investment thesis over the next 5 years, are very, very supportive of that. So, we feel we're in a very good position. And in terms of security, we don't see any risk as you know where we are. We're in sort of the Northeast -- sorry, Southeast corner, very close to Cote d'Ivoire. It's a very, very quiet area, and it remains that way. So, we're very comfortable where we are at this stage.

C
Christopher Eger
executive

Reg, it's Chris here. Just wanted to highlight I found the number for you. At Mako of the $5.8 million of total capital, $4.7 million related to capitalized waste at Stage 7.

R
Reg Spencer
analyst

Excellent. Thanks, Chris. And yes, thanks, Terry. Thanks, guys. I'll pass on. Great quarter. Thanks.

C
Christopher Eger
executive

Thanks, Reg.

Operator

The next question is from Cody Hayden from Berenberg.

C
Cody Hayden
analyst

Congratulations on the strong side results. Just a quick question from myself. Now that the final $25 million repayment has the banter non facility, leaving you unhedged, is the intention to remain unhedged going forward? Or how should we think about that?

T
Terence Holohan
executive

Yes. No, that's correct. We should remain unhedged. I think, look, we are strategically reviewing all options, and we have discussions at this at all Board meetings, but I think the current position is that we remain unhedged. We said we're making good progress on cost. We're really funding for growth expansions. And so, it really doesn't make a lot of sense to hedge at this stage. And so that's the current stats.

Operator

Thank you. And there are no phone questions at this time. I would like to hand the call back over to Scott for any webcast questions. Over to you, Scott.

U
Unknown Attendee

Thanks very much for [ Sergey ]. We had a few questions that I've been on the webcast, a number of them have already been mentioned and on the conference call. First question is, please, can Resolute provide an update on future Ravenswood payments?

C
Christopher Eger
executive

So maybe I'll take this one. So, look, with the Ravenswood arrangement, there is a $50 million due in 2027 note. So that's still the plan for 2027. And then the entering those are Australian dollars. There's also a possible AUD 150 million payable once the Ravenswood mine produces 500,000 ounces. We think that may happen in Q2 of this year. And so, we have a possible payable from Ravenswood of AUD 50 million due to us in Q2 this year, and but will provide updates to the market as that it will become due and gets paid.

U
Unknown Attendee

One final. Any comments on the political situation in Mali and engaging with the Mali government.

T
Terence Holohan
executive

I think there's nothing from our point of view, that's affecting us at this stage. As you know, there's a day's gone out there from the government saying that we shouldn't have any political discussions. We still think we're still waiting in terms of the government to understand where they are with the elections. I did say they would still consider elections. They haven't given us a time line at this stage. They're still in n\negotiations with ECOWAS, whether they're going to rejoin that group or not, we're not we're unsure. But with our dealings with the Ministry of Mines and the Ministry of Finance, it is all quiet from our point of view.

U
Unknown Attendee

That was great. Thanks very much for that. We have one further question from the conference call from Philip Matthews. Sorry, would you mind Philip Matthews to, please?

Operator

I believe that Philippe just just canceled his request.

U
Unknown Attendee

No problem. That's fine. So, we get no further questions at the moment. Sorry, if I can hand back to you for any closing remarks.

T
Terence Holohan
executive

I'd just like to thank everybody for their attention today. I know it's a busy time, and we look forward to reporting again in Q2, which we're already into, but we're very excited on the progress we're making. Thank you very much.