Galiano Gold Inc

TSX:GAU

Earnings Call Transcript 2020-Q4

[Gregory John McCunn, CEO, President & Director]

Hello, everyone, and welcome to Galiano Gold's Q4 and Year-End 2020 Results Videocast. Please refer to our financial statements and MD&A on our website or filed on SEDAR for further details. 2020 was a challenging year globally with COVID-19 impacting on lives and economies around the world. Despite this backdrop, it was an important transition year for Galiano. Now early in the year, we refreshed our Board of Directors with Paul Wright taking on the role of Board Chair and Judith Mosely joining as an independent director. We also restructured our Board committees, reconstituting the Nominating and Governance Committee and creating a Sustainability Committee, demonstrating our focus on ESG. At the management level, we appointed an EVP, Sustainability, Todd Romaine, and took some important steps in building best practices into our ESG program. During 2020, we appointed an independent tailings management facility panel to act as advisers to the Board of Directors on tailings management at our operations. We also adopted the International Cyanide Management Code standards and are now a fully accredited signatory to the ICMM. And building on our first greenhouse gas emission study, we're working on securing 20% of our operations' power supply from solar for 2022. From an operations perspective, we also appointed a new Chief Operating Officer, Matt Badylak, during the year. Matt has strengthened our technical team, and we've now successfully consolidated our operations, finance and corporate team into a small and dedicated group of professionals focused on creating a sustainable business at Galiano. Now let's take a look at the Q4 and 2020 results from the Asanko Gold Mine, which is our 50-50 joint venture with Gold Fields, managed and operated by Galiano. All information related to the Asanko Gold Mine is discussed here on a 100% basis. The mine had a strong fourth quarter with 65,571 ounces of gold produced, resulting in 249,904 ounces of gold production in 2020, exceeding our production guidance for the second straight year. Mining operations continued to source ore from the Esaase and Akwasiso pits following the completion of mining at the Nkran pit at the end of Q2. Now the processing plant continued to perform well and milled 1.4 million tonnes of ore at an average grade of 1.5 gram per tonne and an average recovery of 95% in Q4. For 2020, the mill processed over 5.9 million tonnes at an average grade of 1.4 gram per tonne with an average recovery of 94%. With continued strong gold prices, gold revenue from the mine totaled $110.9 million during the fourth quarter and $418.1 million for 2020. Turning to costs. The mine's all-in sustaining costs in 2020 averaged $1,115 an ounce, marginally above the top end of our original annual guidance of between $1,000 and $1,100 an ounce. So 2020 was a strong year for cash generation at the Asanko Gold Mine driven by the delivery of stable costs in a rising gold price environment. The mine generated cash flow from operations of $152.3 million for the year, including $48 million in Q4. After capital expenditures, the 2020 free cash flow was $66.9 million, enabling distributions of $75 million to the joint venture partners. As a result, corporately at Galiano, the company's cash and receivables position increased from $35.4 million at the start of 2020 to $65.1 million as at December 31 with no debt. Galiano's equity accounted income from the joint venture was a record $59.1 million, yielding net income of $57.4 million or $0.26 per share for the year. Our annual adjusted EBITDA was $68.3 million. The exploration program at the Asanko Gold Mine had great success during 2020, and this is carried over into early 2021. In 2020, we released positive results from both Akwasiso and Abore that showed the extension of mineralization at both pits. The results from Akwasiso have resulted in potential extension of the mine life of that pit. And stripping for the third phase of mining is planned to commence in the coming weeks subject to approvals from the joint venture. Looking forward to 2021, we've provided production guidance for the Asanko Gold Mine of between 225,000 and 245,000 ounces, with all-in sustaining costs expected to be between $1,100 and $1,300 per ounce. For the third year running, we expect the Asanko Gold Mine to deliver consistent production at stable costs. Some key catalysts that investors can look for in 2021 from Galiano include, first, continued exploration work at the Asanko Gold Mine, particularly from our top priority target at Miradani where a maiden resource estimate is expected midyear. In 2020, the Asanko Gold Mine spent $18.5 million on exploration, and we expect to spend a similar amount in 2021. Second, we expect to update and refine our plan for our Nkran pit pushback, which is scheduled to start in 2022. The updated plan is targeting substantial improvements to the return on invested capital previously outlined from the 490,000 ounces of proven and probable reserves contained in Nkran Cut 3. Third, the continued work on improving operating cost structure and our geological understanding of the Esaase pit is expected to result in an optimized business plan for the mine for 2022 onwards. Finally, with a strong balance sheet and a rebuilt Board and management team, Galiano are well positioned to capitalize on opportunities to grow our business and work towards our vision of building a sustainable gold mining company. Thank you for watching today, and I look forward to our next videocast in May when I'll update you on our first quarter 2021 results.