Calibre Mining Corp

TSX:CXB

Earnings Call Transcript

[Operator]

Good day, and thank you for standing by. Welcome to the Calibre Mining Corp.'s Third Quarter 2023 Financial Earnings Results and Conference Call. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Ryan King, Senior Vice President, Corporate Development and Investor Relations. Please go ahead.

[Ryan King, executive]

Thank you, operator. Good morning, everyone, and thank you for taking the time to join the call this morning. Before we commence, I'd like to direct everyone to the forward-looking statements on Slide 2.

Our remarks and answers to your questions today may contain forward-looking information about the company's future performance. Although management believes that our forward-looking statements are based on fair, reasonable assumptions, actual results may turn out to be different from these forward-looking statements. For a complete discussion of the risks, uncertainties and factors, which may lead to actual operating and financial results being different from the estimates contained in our forward-looking statements, please refer to the Q3 2023 MD&A and consolidated financial statements available on our website as well as on SEDAR+. And finally, all figures are in U.S. dollars, unless otherwise stated.

Present today with me on the call are Darren Hall, President and Chief Executive Officer; David Splett, Senior Vice President and Chief Financial Officer; and Tom Gallo, Senior Vice President of Growth. We'll be providing comments on our third quarter and year-to-date 2023 results, after which we'll be happy to take questions. The slide deck we'll be referencing is available on our website at calibremining.com under the Events section. You can also click on the webcast to join the live presentation.

And with that, I'll turn the call over to Darren.

[Darren Hall, executive]

Thanks, Ryan. Moving to Slide 3. Good morning, and thank you for taking the time to join us today. I'll start by thanking all Calibre employees and business partners for their continued support, which resulted in our fourth consecutive record-breaking quarter.

I'm very pleased with the team's performance, which included responsibly delivering record gold sales in excess of 73,000 ounces, a 50% increase year-over-year at a total cash cost of $1,007 per ounce and an all-in sustaining cost of $1,115 per ounce.

Year-to-date, the company has delivered a record adjusted net income of $74 million and earnings per share of $0.16. The company continues to deliver strong free cash flow with $16.3 million this quarter. Our cash position grew 26% over Q2 to a record $97 million. With year-to-date performance favorable budget, we remain in a strong position to deliver into the upper end of our full year production guidance.

During the quarter, we announced numerous favorable exploration results and a maiden mineral resource of Volcan, which is located less than 10 kilometers from the Libertad mill, all of which continues to demonstrate our ability to expand existing and discover new resources. During the year, the team has successfully delivered both the Pavon Central and Eastern Borosi open pit mines into production, which marked significant milestones that further demonstrate our ability to not only fulfill our full year commitments, but also to grow our business organically.

Turning to Slide 4. Since the acquisition of the Limon and Libertad operations in late 2019, our exploration programs have resulted in a 280% reserve growth after producing 750,000 ounces of gold. Recently, we are seeing success across the Limon property, most notably along the Panteon and VTEM Gold Corridor.

Following Panteon's discovery in 2020 and subsequent development and production in 2021, we identified the high-grade Panteon North deposit and VTEM Gold Corridor, which continue to reveal high-grade potential along strike. I anticipate that the success we've seen along the VTEM corridor this year will positively impact our year-end mineral resource estimates.

During the quarter, we announced drill results from the high-grade Atravesada Underground located 2 kilometers West of the Limon plant, which further demonstrates the overall resource expansion and discovery potential of the enduring Limon district, which has produced in excess of 4 million ounces since its inception.

Moving to Slide 5. Since 2019, we have demonstrated the effectiveness of our operating strategy, responsibly obtaining permits and developing satellite deposits to responsibly grow production while utilizing the existing processing infrastructure at Libertad. A recent testament to this is the initial open pit mineral resource at Volcan, which is located less than 5 kilometers from the Libertad plant.

In addition, our resource expansion drill program within the Libertad Complex unveiled high-grade gold mineralization just 100 meters below the existing underground development at the Jabali underground mine, confirming its expansion potential.

Additionally, scout drilling has identified new target areas located within 10 kilometers of the Libertad mill, presenting opportunities for further discovery and resource growth. I look forward to talking about ongoing results as we continue to advance our drill programs across the assets.

Turning to Slide 6. As we continue to self-fund exploration and development whilst concurrently increasing our cash reserves, I'm confident that Calibre continues to present tremendous opportunity for all of our shareholders. Our commitment to responsible, sustainable and transparent operations that shows long-term prosperity for all of our stakeholders.

With that, we're happy to take questions. I'll now pass it back to you, operator.

[Operator]

[Operator Instructions] Our first question comes from the line of Farooq Hamed with Raymond James.

[Farooq Hamed, analyst]

Darren, I guess my first question was just related to kind of the outlook for the rest of the year. So you've had strong performance year-to-date, especially on the production side and well set up, and you said that you're aiming for the top end of your production guidance. Maybe just as it relates to the fourth quarter. Do you continue to expect to see like a similar milling rate at Libertad as you saw in Q3? It seems that it was quite high in Q3. And then secondarily, do you continue to expect a similar type of contribution from Pavon Central in Q4?

[Darren Hall, executive]

Yes. Thanks, Farooq, and hope you well. No, the runway we've established in Q3 would anticipate to continue in Q4. And as you've kind of highlighted there is that we would anticipate our current rates to deliver into the high end of production guidance. And the deliveries from Pavon Central, we've been ramping up both from Pavon Central and Eastern Borosi during the course of the year. And we would anticipate similar deliveries to what we've seen in the latter part of Q3, which, on average, have been around 450 tonnes a day from Eastern Borosi and around 1,000 tonnes a day from Pavon.

[Farooq Hamed, analyst]

Okay. Well, that's quite good, and that bodes well for the fourth quarter and your guidance for the year. My second question is related to your announcement prior to the earnings release about the NCIB that you guys have put up. My question really is can you provide some commentary on why chose an NCIB or share buybacks as your vehicle for shareholder returns as opposed to something like a dividend?

[Darren Hall, executive]

Yes. No, thanks, Farooq. And I guess that it's not a decision in isolation. As we've demonstrated over the last 4 years, I think we've generated significant shareholder returns from our organic investment into exploration and then subsequent development of the assets. We've demonstrated that we can take things from discovery to production in really a month rather than years. That remains our focus, is to continue along that path. That's our #1 priority in terms of use of funds.

However, as we've demonstrated the ability to do that and concurrently build cash, we're in the luxurious position of having that large cash build. And so we, with the Board, had discussions around what's the best use of that. And one of the things we identified is that establishing an NCIB puts us in a position to be opportunistic if such an opportunity presents to be able to leverage off a blip on the share price, for example.

It's not at the expense of or in preference to a dividend. It's just that having that vehicle in places allows us to be opportunistic, as we were with any investment. As you're aware, we're thoughtful, methodical, but to remain agile to be able to deploy that cash in whatever provides the best shareholder return. And that's really the basis, Farooq. So it doesn't preempt that we won't do other things. It just says that we're putting these things in place so that we can leverage off it when the opportunity presents.

[Farooq Hamed, analyst]

Okay. No, that's very helpful and clear. So if we continue to see the success and build up of cash and free cash flow every quarter, we might, in addition to an NCIB, we might, in addition to that, see other shareholder returns. That's fair to characterize it that way?

[Darren Hall, executive]

Absolutely. Our single largest focus is to return value to shareholders. And we'll be opportunistic to seize whatever opportunities are presented to us to be able to do that. Absolutely.

[Farooq Hamed, analyst]

Perfect. And one last one for me, I promise. Just on your reserves at year-end, and I know we're not at the end of the year yet. But maybe could you give us some color on do you expect to increase reserves or replace reserves at year-end? And what are you thinking in terms of gold price that you're going to be using?

[Darren Hall, executive]

Yes. Good question, Farooq. Again, we've got a lot of drilling happening across all the properties. And as we've demonstrated, we've seen lots of exploration success, which kind of leads as a good segue into where our programs have been morphing to during the course of the year.

The focus over the last couple of years have been more confidence and conversion to establish that reserve base. And as we've highlighted, we've had nearly a threefold increase in reserves after producing 750,000 ounces, which is a great position to put us in. Now as we start to look at identifying mineral inventory and then subsequently progressing that through to resources, there's a little bit of work that is to be done at the end of the year to able to foreshadow what that looks like. But I would anticipate that reserves at consolidated at the end of the year will not be any less than what they were this year with the same goal for us.

[Operator]

[Operator Instructions] The next question comes from the line of Justin Stevens with PI Financial Corp.

[Justin Stevens, analyst]

Congrats on a pretty solid quarter, making a habit of this, which is nice to see. Mostly just a couple of ones for me. Obviously, you've done pretty well in terms of your costs sort of metrics here, the tracking on the high end of production relatively well in terms of those costs. Anything that's sort of been pushed out from a cost perspective into the back part of this year or into '24 here? Or has it mostly been sort of pulling things forward on the development side like in Eastern Borosi?

[Darren Hall, executive]

Yes, Justin, is that like a trick question. It's -- I appreciate your support and questions. There's been nothing that we've deferred from this year to next. It's more the contrary, is we've simply been opportunistic with the success we've seen at Volcan to actually advance some of our growth capital spend related to land acquisition.

So we're stacking the deck in our favor for the securing our ability to deliver into expectations in the medium and longer term. So yes. No, definitely no deferrals. Quite the contrary. And you'll probably see that as you dig through the MD&A, and you'll see some increased growth spend.

It's been opportunistic. We've got the cash position, and we continue to build cash even after that further investment.

[Justin Stevens, analyst]

No, yes, it was good to see. And that's actually a good segue to the next one. On Volcan, obviously, nice to see sort of an initial reserve trapped around that. And I think that the upside just from some of these in your mine targets will be retired pretty high. But other than acquiring service rates, what's sort of needed to be able to bring some of these, either these new open pit targets into the mine plan? And what's the sort of timeline we'd be looking at there?

[Darren Hall, executive]

Yes. Justin, it's -- Volcan is relatively early in the development cycle. But I would anticipate, I think in a position to do groundworks out there in 2024. So what that would mean is, is between now and then, we'll be going through the consultation and permitting process.

So again, it's -- there's nothing we can see there from a permitting perspective that would be different than the other 4 or 5 significant improvements we've delivered over the last 4 years. And that within a 12-month period, we should be able to deliver into permits. So it's really about looking at where it sits into the development sequence and use of capital in terms of what we're bringing and where. And it's a first world problem to have. But as we've seen, significant exploration success over the last, well, number of years. But in particular, further refilled over the last 6 months. It's assessing what fits where into the program.

So no, no, it's a good problem to have in a very positive way. But Volcan is a very interesting opportunity, as you've highlighted. Even though I may not have the bonanza grades that we see at Panteon North, for example, is that being very, very close to the mill, near surface, oxide, moderate strip ratios, if we can become very accretive from a cash flow perspective, given the 1 million tonnes of surplus capacity, which remains at Libertad.

[Justin Stevens, analyst]

For sure. And just another one on -- in terms of other targets here. Obviously, nice to see those results of the Jabali Underground just over a week ago, I guess. Any plans -- I mean I think that little underground operation is not tracking from the train for the near term here. But how are you sort of looking at maybe accessing, being able to drill a bit deeper below with the existing sort of drill holes now and maybe densifying that drilling to pull it in? Because obviously, pits like that could go quite a long ways to building some inventory there.

[Darren Hall, executive]

Yes, absolutely. And again, the focus at Jabali is that the operations team have done a tremendous job at assuring up that asset over the last year. And then with the exploration success we've seen, it now starts -- we're now starting to talk about putting a track in front of that train.

And I would anticipate that we probably foreshowed the Jabali Underground kind of coming to conclusion some time in 2024. I would expect with these results, we'll comfortably see another year or 2 added to it with what we know today. Given the intercepts, we see very close to existing development. And we're talking about months to get to it, not years from a development perspective.

[Justin Stevens, analyst]

Got it. And I mean last one. Obviously, I know you're still probably putting numbers together and the like. But given what we've seen in the exploration success, I think I'm pretty comfortable in assuming that your exploration budget is going to stay relatively high through '24 just to be able to keep building out and following up on all these solid hits here. I'm assuming that's not too far up this.

[Darren Hall, executive]

No, absolutely, absolutely. As we've demonstrated that investing in new assets has created significant value for us and shareholders. So we'll continue along that approach. I think the most significant investment that we can make outside of maintaining our social license has been keeping track in front of the train, which comes from the drill bit. So no, we're absolutely committed to that. And if we ever found ourselves in a situation we had to skim on costs, that will be the last place we'd look to cut. .

[Operator]

I would now like to turn the conference back to Mr. Darren Hall, President and Chief Executive Officer, for closing remarks.

[Darren Hall, executive]

Thank you, operator. I'd like to thank all of our shareholders for their continued support and everyone's participation in the call this morning and the questions we received. As always, Ryan and I and the entire leadership are available if you have any further questions as you read through the documentation. And with that, take care. Have a wonderful day, and back to you, operator.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.