Calibre Mining Corp

TSX:CXB

Earnings Call Transcript

[Operator]

Good day, and welcome to the Caliber Mining Corp. 2024 Q4 and Full Year Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to your host today, Ryan King. Sir, 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 and 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 previous quarter's 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 Schummer, SVP and Chief Operating Officer; Daniella Dimitrov, SVP and Chief Financial Officer; and Tom Gallo, Senior Vice President, Growth. We will be providing comments on our fourth quarter and full year 2024 production and cost results and an update on the Valentine Gold Mine, after which, we'll be happy to take questions. The slide deck we will be referencing is available on our website at calibermining.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 this morning. Firstly, I would like to thank our employees and business partners for their continued commitment to safe and responsible operations. This commitment is demonstrated not only by a 20% reduction in our lost time injury frequency rate year-over-year but delivering record production of 76,000 ounces in Q4 and 242,000 ounces for the full year, exceeding the upper end of our production guidance. This strong operating performance has continued into 2025, with consolidated production 15% of budget and cash increased 23% to $161 million as of mid-February. Additionally, Dave Schummer and the Nicaraguan team continue to identify operational efficiencies to drive further improvements in Nicaragua.

The Valentine feasibility study forecasted an average 195,000 ounces per year for the first 12 years. With the build on budget, and first gold expected in Q2, I anticipate 2025 production to be between 50,000 to 100,000 ounces. This would be in addition to our pre-Valentine production guidance of 230,000 to 280,000 ounces. In addition to delivering Atlantic Canada's largest gold mine, 2025 will be a noteworthy year for exploration with a 200,000 meter company-wide drilling program, the largest in Caliber's history. In particular, the exciting discovery drilling at Valentine's Frank Zone and Limon's VTEM gold corridor have the potential to meaningfully increase our mineral resources.

Moving to Slide 4 and Valentine. During 2024, we attracted a very capable operating team at Valentine, which has considerable commissioning experience who are working with Reliable Controls Corporation to oversee pre-commissioning, commissioning to ensure a seamless transition from construction to operations. Valentine construction is on track with notable progress, including the primary crusher is ahead of schedule and ready for commissioning, mill motors to be set within the week and substantively complete by month end, structural steel installation is at 91%, CIL tank piping on target for completion early March, cable installation is set for completion in March, reclaimed tunnel, steel and apron feeders are progressing and on track for commissioning in April, and finally, the ADR plant and gravity circuit are nearing mechanical completion and ready for turnover.

We have made substantial progress on technical studies to increase Valentine's throughput in a Phase 2 expansion. While the feasibility envisaged an increase in throughput from 2.5 million tonnes per year to 4 million tonnes per year starting in 2029. We are now actively advancing plans to accelerate the time line for scaling up production to an excess of 5 million tonnes per year. We have commenced program management activities and are on track to award detailed engineering in March with the intent of committing to long lead times before year-end. Given the strong exploration upside at Valentine, our approach positions us well for long-term growth and value creation.

Turning to Slide 5. Valentine offers an impressive 5 million-ounce resource base from which to grow both near mine and the numerous exploration opportunities which exist across the property. Ore control drilling has confirmed grade and added 29% more tonnes at the Leprechaun pit, resulting in a 30% increase in gold compared to the 2022 mineral reserve. Importantly, the grade distribution indicates that applying a higher cutoff will result in the potential to progress -- process higher grade material for longer. Similarly, ore control drilling at the Marathon Pit yielded 40% -- 47% higher gold grades, resulting in 44% additional ounces over the 2022 mineral reserve for the same tonnage.

Discovery drilling at the Frank Zone, located 1 kilometer southwest of reported mineral resources, continues to return significant broad intervals of gold mineralization. Importantly, recent drilling has now traced mineralization to surface, highlighting the potential for another open pit. Initial drill intercepts include 172 meters grading 2.4 grams, 2.12 grams over 95 meters, 2.26 grams over 78 meters and 3.08 grams over 48 meters. These new intercepts geologically aligned with ore from the Marathon, Berry and Leprechaun open pits. While exploration of the Frank Zone is still in its early stages, current data indicates that the zone remains open to the southwest and to the north and now has been traced for over 1,000 meters along the strike and to a depth of approximately 500 meters. Historically, drilling at Valentine is mainly focused on a small portion of the 32-kilometer Valentine Lake Shear Zone. This structure remains highly prospective for discerning additional ore resources, throughput and represents only a small fraction of the broader 250 square kilometer land package.

Moving to Slide 6. With record gold prices, consistent operating performance, exciting exploration results and Valentine on track to deliver first gold in Q2, which will diversify our production profile and unlock peer-leading production growth, but I'm confident that we will continue delivering superior value and provide a compelling re-rate opportunity for all shareholders.

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

[Operator]

[Operator Instructions] And the first question comes from Francesco Costanzo with Scotiabank.

[Francesco Costanzo, analyst]

This is Francesco calling on behalf of Ovais Habib. Just want to start by saying congrats on the earnings beat this quarter. Maybe I'll start with the Valentine project. Darren, could you just reiterate briefly that sort of production outlook you gave for Valentine for this year?

[Darren Hall, executive]

Yes, Francesco, thanks for joining the call this morning and your continued support. Yes, if we look at Valentine in the feasibility study, it had been foreshadowed for 195,000 ounces a year for the first 12 years of production. Given we're looking to first gold in Q2, and we think if there's a ramp-up here, it's reasonable to expect that 50,000 to 100,000 ounces of production in 2025 is a reasonable place to start to create expectations around.

[Francesco Costanzo, analyst]

For sure. And so given that production outlook, when do you think that implies that you'd be reaching commercial production and then nameplate capacity at the mine?

[Darren Hall, executive]

Yes. I kind of stay away from terms like nameplates and commercial production because I find them as that the cool, neat things that people refer to. But what our focus is this year is safely delivering the asset and then ramping up production to be at an annualized rate of around 2.5 million tonnes by the end of the year. And if we want to call that nameplate, let's call it nameplate at 2.5 million tonnes. But I think as we've discussed before, the rate-determining step in the current design is milling capacity and the milling capacity, given the power studies we've done, has an implicit through rate of about 3 million tonnes a year. So again, at 2.5 million tonnes, we still see opportunity for growth beyond that. But we're targeting to be at 2.5 million tonnes by the end of the year.

[Francesco Costanzo, analyst]

Yes, that's great. I think that's helpful. Maybe just on the planned mill expansion. So given that you're progressing detailed engineering for an expansion over the prior feasibility studies expansion, when do you think you would be looking to release a new technical report that could outline the cost and time line associated with that?

[Darren Hall, executive]

No. And we've commenced the work this year to do the detailed engineering to get us to a more definitive estimate in terms of time lines and costs for that. I think we'll be in a position around that July time frame to make commitments into the next stage of work. But in terms of a technical report, the next formal technical report would be after the end of this year. But I think that for Valentine as a whole, but in terms of being able to provide more clarity, I'd say it's in kind of late Q2, so maybe associated with our Q2 results.

[Francesco Costanzo, analyst]

Okay. And then I just want to ask one final question on the Sprott Loan facility, given that it's almost fully drawn. Could you speak to what the best available options for refinancing that facility are and maybe when you would explore refinancing if it would be at the next available opportunity or maybe later on, perhaps in '26, when you get to a point where you can refinance penalty-free?

[Darren Hall, executive]

Yes. No. I'll pass over to Daniella for any kind of more granularity in and around the Sprott facility. But under the arch, we have the ability at the end of this year to refinance that facility. As we progress through this year, we'll investigate what our best structure is around balance sheet and how best to be able to use funds that are available to us. So no, I think it's early to be able to commit to how we would go about that. But I think that given our balance sheet strength, given our production growth and the cash flow that we're going to see from our combined assets over the next couple of years, I think we're going to have a plethora of opportunities and choices in and around strengthening the balance sheet and looking at how best to position ourselves with that debt. I mean, Daniella, is there anything you'd like to offer?

[Daniella Dimitrov, executive]

That's exactly what I was going to say, Darren, will be -- there are certainly available capital for us. And as we get into the second half, we'll be looking and balancing flexibility in the balance sheet, cost of capital and the capital allocation to Phase 2. And one other comment around the Sprott debt that was fully drawn in 2022. And the reason why you're seeing continued increases in that balance is because 75% of the interest gets capitalized to the loan quarterly until middle of this year, and that's when our payments start. So that loan is fully drawn. We've got $25 million remaining in our escrow account. We will see that come out in the first quarter, and our payments will start in the second half of the year.

[Operator]

And the next question comes from Don DeMarco with National Bank Financial.

[Don DeMarco, analyst]

So Darren, my first question is on Phase 2, and great to hear that work is advancing. We'll look forward to details on costs and so on. I'm just wondering though about -- is it contingent on any assumptions on a ramp-up of mining rates or perhaps exploration success in order to provide a bigger resource to sustain that higher throughput that you envision? Any color on that would be appreciated.

[Darren Hall, executive]

Yes. No, thanks, Don. And again, it's without just sort of getting into a lot of detail in and around the feasibility study. It is important to note that within the feasibility study because it was a bankable document that Marathon put in place to be able to raise funding, it could only value 2P or they're in reserves. And within that, there's 2.7 million ounces of reserves within a 5.1 million ounce resource base. So it shifted a little bit over 50% of the metal was considered in that plan. So within that plan, it defined -- I think it was a 14-year life. And within that life, it had actually built stockpiles early in life.

When we look at that incremental capacity associated with Phase 2, all we've done to be able to substantiate it is actually to draw those stockpiles sooner. We haven't yet looked at the opportunities to accelerate mining resequencing pits, not only with what's in the reserve, but also to include the material that's resourced because we won't need a bankable document per se. We can value resources and look at how that would contribute to the mine plan. So we see a great opportunity to improve on the existing resource base without adding to resources from what we've seen from the Leprechaun infill drilling, from the extensions to the southwest and now for the material discovery we see there at the Frank Zone.

[Don DeMarco, analyst]

Okay. That's helpful. And on mining rates, what's your projection for ramp-up of mining rates to be able to accommodate a higher throughput perhaps a couple of years down the road?

[Darren Hall, executive]

I think that in part as part of that question, is there an opportunity to be able to mine faster, to be able to further improve the economics associated with that? And that's something we can look at. But what we saw was from the initial phase to go from what was the original defined Phase 2, so from 2.5 million to 4 million tonne to increase that to 5-plus million, we saw a payback in less than a year from going from 4 million to 5 million. So mining rates can be flexed and we'll continue to see significant opportunity to substantially improve the economics associated with that expansion.

[Don DeMarco, analyst]

Okay. And final question. It's encouraging to see the recent drill results from the Frank Zone. Could you walk us through -- I recognize it's still early but provide some time lines for your continued exploration plans there and when we might see something on the order of a technical report to get some idea of resource or other milestones.

[Darren Hall, executive]

Yes. No, I'll kind of -- I'll make some comments and then pass it over to Tom to see if there's anything additional he would layer. But from a technical report perspective, I mean, we're in no great rush to put out a revised technical report. I mean, our focus at Valentine this year is to safely and responsibly to deliver the product. In parallel, run the detailed engineering on Phase 2 and continued exploration. And the focus for the exploration is less about converting resources to reserves or extensional drilling to existing resources, even though we see great upside for that. It's really about understanding -- having a better understanding of what the scope is for Valentine as a whole.

As I kind of alluded to, we've only touched a small portion of what is a highly prospective 250 square kilometer land package. And within that, with the Valentine Lake Shear Zone, which is a subset of that, we've only touched 6 to 8 kilometers of the 32 kilometer Shear Zone. So I think what we're doing right now is getting our kind of hands around the tail of the beast in terms of what this is likely to look like as a generational asset as we discover -- as we uncover the kind of the next mining cap. So yes, probably avoided the question specifically in terms of timing of tech reports, but I don't think we'll see anything in the next 12 months. I mean, Tom, is there anything you want to layer on that?

[Thomas Gallo, executive]

Yes. No, I would echo that, Darren, right? We're just in the process, Don, of really kind of getting our hands around what's going on with Frank. Just -- and we only spoke about Frank. We're also drilling in a couple of other areas. If you look at Frank and its footprint right now, Darren talked about a kilometer or greater than a kilometer. I mean, if you go from the true sort of corner of where it's been drilled at surface to the corner of the Leprechaun Pit, you're talking about 1.5 kilometer. And if you look at Leprechaun itself, mineralogically identical, Leprechaun is about a 700-meter strike length and it contains about 800,000 ounces in reserves. You guys can check my math in the background. But if you kind of look at what Leprechaun is at 800,000 ounces of reserve, you're looking at effectively double the strike length potential at Frank. Now not saying that, that's entirely mineralized but that's kind of what we're looking to identify here. So to echo Darren, we would be pretty remiss to put out something from a technical report perspective until we fully captured what we see to be the potential at Frank to the southwest, also Sprite to the northeast of Leprechaun. Those who follow the story for a while may recall, there's a small inferred resource in and around Sprite very tight to the Valentine Lake Shear. We're doing some exploration drilling in and around there to the northeast of Leprechaun, and we'll hopefully be able to update the market soon with some interesting visual results that we've seen waiting for assays. So you're starting to talk about meaningfully expanding that mineralized footprint just in the southwest corner of the property, let alone further fields. I'd echo Darren and say, I wouldn't expect a technical report in the next 12 months. If we can appropriately capture what we view to be the potential at Frank, then we'd start to look at incorporating that in a new resource reserve update, which would capture some of the stuff from Phase 2 as well.

[Operator]

And the next question comes from Alex Terentiew from Ventum Financial.

[Alexander Terentiew, analyst]

Just a couple of questions for me. First, just on Nicaragua, it is kind of a multipart one here. Do you expect there to be any sort of seasonality with production from that unit this year? And then also your comments in your press release about production being 15% higher year-to-date, is that grades or tonnes driven? I'm just trying to get a sense of how sustainable is that. I mean, your guidance for the year is 200,000 to 250,000 ounces for Nicaragua so kind of a wide range. Just trying to narrow that down a bit.

[Darren Hall, executive]

Yes. Thanks for the questions. From a seasonality perspective, the production this year is not driven from those impacts. There are no seasonal variations we see in production forecasting. What we are seeing is a very favorable start to the year from a productivity and performance perspective, which has driven -- which manifests itself both in tonnes and grade, primarily from Limon, which is processed at Limon and Libertad. No, we're confident in our provided guidance range of 230,000 to 280,000 for the full year. I think it was as much as anything to be able to foreshadow that we had a strong finish to 2024 and that's continuing into 2025. And as we progress through the year, we'll provide updates as reasonable.

[Alexander Terentiew, analyst]

Okay. That's good to hear. Second question, just on the financial side. Your cash went up $30 million since year-end. I guess it's a little bit surprising given you're still in the build phase and you have got some spending still left on Valentine. But I'm guessing or wondering then, that bump in cash, is that really just more a timing of spending and maybe some adjustments on the working capital front?

[Darren Hall, executive]

Yes, I think in simple terms, I think it is. I mean, again, there's a number of things that happened during the quarter, but it's not reflective of spend per se. This is more just to highlight the strength of the financial position we're in and that caliber is well positioned to fully fund the initial project capital at Valentine. And again, we are seeing ball and mill prices, which everyone is participating in at this point as well, which is nice.

[Operator]

And as there are no more questions, I would like to turn the floor to Darren Hall for any closing comments.

[Darren Hall, executive]

Thank you, operator. I'd just like to thank all our shareholders for their continued support and everyone's participation on the call this morning and questions. As always, Ryan, I and the leadership team are available if you have any further questions. And at that point, take care, be well, and have a great day. Back to you, operator.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.