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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to the GCM Mining Corp. First Quarter 2022 Results Webcast. My name is Brandon, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded.
I will now turn the call over to Mike Davies. Mike, you may begin.
Great. Thanks, Brandon, and good morning, and thank you for joining us this morning for our first quarter 2022 results webcast. Joining me on the call this morning is our CEO, Lombardo Paredes. And as is customary, I'll first go through our prepared remarks regarding the first quarter. And then Lombardo will join in through the Q&A session.
Before we begin, let me remind you of our cautionary statement regarding forward-looking statements that may be made by us in this morning's webcast. Last night, we released our first quarter results. The financial markets have been very volatile so far in 2022, and this past week has been no exception. At times like this, we find our best course of action is to focus on what we can control, our cash, our cost and our execution.
We are pleased with our first quarter 2022 results, which highlight our commitment to stay focused on what we can control. Production, cost, adjusted EBITDA, earnings and cash flow results all met our expectations in the first quarter of 2022.
From a capital structure perspective, we have used our normal course issuer bid over the first 4 months of 2022 to repurchase and cancel approximately 400,000 shares, keeping us at 98 million shares issued and outstanding at the present time. At current market prices, we expect to be active starting again next week, using our normal course issuer bid to purchase additional shares for cancellation once the quarter end blackout is lifted on Monday.
We maintained our dividend policy through the first quarter of 2022, continuing to pay CAD 0.15 per share on a monthly basis. This resulted in total dividends paid of USD 3.5 million from our free cash flow in the first quarter. Since we implemented our dividend policy in the second half of 2020, we have paid out total dividends to our shareholders now of USD 17.5 million, and our next monthly dividend will be paid on Monday.
In mid-April, we pre-released our first quarter 2022 production of 50,000 ounces of gold from Segovia. Last night, we announced another solid month in April in which we processed an average of 1,693 tonnes per day at a head grade of 12.4 grams per tonne, resulting in 18,321 ounces of gold in April. This brings the total gold production for the first 4 months of 2022 to 68,272 ounces and for our trailing 12 months to a total of 208,130 ounces, up about 1% over the 2021 calendar year. We remain on track to produce between 210,000 and 225,000 ounces of gold at Segovia this year.
Taking a closer look at our first quarter production, we're seeing a trend that has been taking shape for a couple of years now when you look at our annual reserve and resource updates. El Silencio is continuing at a very steady rate, and Sandra K is continuing to take on a more prominent role in contributing to our production. These were the 2 mines with the largest year-over-year increases in our recent resource update.
Providencia is still making a solid contribution. The grades have come down from about 20 grams per tonne in Q1 of 2021 to 15 grams per tonne in Q1 of 2022, as certain of the super-rich areas we have been mining have been depleted. Carla is starting to make a greater contribution to our production this year, and the small-scale miners are continuing to perform very well. In the first quarter of 2022, we sold 53,645 ounces of gold, about 3,500 more than we produced in the quarter, which represented the production in December 2021 that remained in our year-end inventory as a result of the normal holiday shutdown period at the refinery.
With an average realized gold price of $1,860 per ounce, our first quarter 2022 revenue was $101.3 million, about 5% higher than the first quarter of 2021 after adjusting from our model. Our revenue in the first quarter did not include anything for the zinc and lead from the concentrate production at our new polymetallic plant. We expect that this will start toward the end of the second quarter now that we have selected an offtake customer and expect to commence shipments of the polymetallic concentrates in June.
From a cost perspective, our cash cost came in at $817 per ounce in the first quarter, a slight improvement from the first quarter a year ago of $825 an ounce at Segovia. Our all-in sustaining costs came in at $1,187 per ounce sold in the first quarter, including $159 per ounce of sustaining CapEx at Segovia, largely our ongoing exploration and development at our 4 producing mines. We had $58 an ounce of ESG expenditures in the first quarter, $82 an ounce of G&A and $60 an ounce of cost related to our free trade arbitration proceedings with the government of Colombia.
The free trade arbitration costs were significantly higher in the first quarter of this year as we filed our last major memorial with the tribunal, ahead of hearing scheduled to take place later this year. A decision on this matter could be coming next year. For Q1, our all-in sustaining cost margin was about 36% of our realized gold price compared with 33% for calendar 2021.
Our adjusted EBITDA came in at $45.2 million in the first quarter, reflecting the impact of the free trade arbitration claim costs and quarterly results, but not too different from where we were in the first quarter a year ago at $46 million. Our trailing 12 months adjusted EBITDA stood at $170.5 million, implying a leverage ratio below 2x as expected.
And in the first quarter of 2022, our cash flow metrics remain solid, with $24 million of operating cash flow, bringing our trailing 12-month operating cash flow to $91 million, up from $81 million in the calendar 2021 year.
And our free cash flow after Segovia's CapEx was almost $11 million in the first quarter, more than sufficient to fund our dividends and normal course issuer bid purchases. Our trailing 12-month free cash flow improved to $34 million from $26 million in calendar 2021.
Our balance sheet and financial liquidity remained strong in the first quarter. We finished the quarter with $315 million of cash, this after paying $14 million of tax installments in Colombia and making the first $10 million semiannual interest payment on the senior notes.
Our VAT receivable in Colombia did increase as expected in the first quarter, but we anticipate receipt before the end of the second quarter of the $28 million of refunds from last year's VAT claims, and this will cover the income tax installments that we have coming due in the second quarter of this year.
On this slide, just a reminder of our annual reserve and resource update we announced for Segovia in late March. We had a very successful drilling campaign last year, and we have continued the similar emphasis in the first quarter of 2022 with over 8,700 meters drilled by our exploration team principally at El Silencio and Sandra K, and another 6,500 meters in our brownfield program focused on Cristales, Marmajito, Manzanillo and Vera. Our mine geology team has also continued to be active with underground drilling programs at El Silencio and Sandra K, and we expect to have results updating on these drilling programs later this quarter.
We have 3 important infrastructure projects on the go at Segovia. Our expansion at the Maria Dama plant to 2,000 tonnes per day is progressing well and should be completed in the second quarter as expected. We're continuing with the construction activities in our El Chocho tailings storage facility where we use filter press systems and geo tubes to dry stack our material in accordance with international best practices.
And we're completing some of the upgrades of equipment and systems at the new polymetallic plant to automate certain processes and add warehousing space, as we increase our treatment rates towards the 200 tonne per day capacity level in the second half this year. Lots of exciting investment activity that is truly remarkable in the way it is expanding and upgrading our Segovia operations.
Turning to our Toroparu Project in Guyana. Our team is working very diligent to prepare this project to go into formal construction mode once we complete the PFS in the third quarter and finalizing the mining license midyear. Drilling has continued to infill the resources required for the PFS. And Lombardo and the team are conducting several key processes to select the mine contractor, the power plant contractor and the main civil works contractor, while preconstruction activities related to the project site, camp and Southern Access Route are carrying on.
We spent $6.7 million in the first quarter of 2022 on these various activities, which was funded by the net proceeds from our senior notes issuance. Lombardo will no doubt provide further details on the Toroparu Project when we get into the Q&A portion of this webcast.
And in this last slide before we get into the Q&A session, I wanted to highlight a couple of things related to our equity investments. At Aris last night, they announced positive results from their performance optimization initiatives at the Marmato upper mine, and construction activities are underway related to the lower mine expansion.
Equally important, they have taken steps to step into the operator role at their latest acquisition, the Soto Norte Project in Colombia, one of the world's largest undeveloped gold projects with Tier 1 scale and economics. Exciting times for Aris Gold as it moves forward with its expansion strategy.
At Denarius, drilling at the Lomero Project continues to confirm the historic polymetallic resource, and the company is advancing towards an updated mineral resource estimate and a PEA by the third quarter of this year. We continue to see both of these investments as key value drivers for shareholders of GCM mining.
And with that, Brandon, we can now proceed with the Q&A session.
[Operator Instructions] On the line, we have Carey MacRury.
Maybe first, do you see any potential impact from the upcoming election in Colombia on the mining industry?
All right. Okay. So let me answer that. Well, so far, as you know, the election in Colombia is a tight race between the central right and the left. The -- we are going to have 2 rounds, the third round. Probably, Petro is going to be the winner in the second round. We strongly believe that Federico Gutierrez is going to win, probably with a margin of -- no more than 1 million votes. So far, the -- what Petro, the leftist say is that he will forbid exploration and -- in the oil industry. So the attack has been addressed against the oil industry. And he is thinking that we can replace the revenues coming from the oil industry with the revenues coming from tourists. And to that, he is planning to bring 50 million people per year coming into Colombia for that. In the mining industry so far, he had not been strong -- announcing strong measure or that kind of thing. On top of that, remember that our title in Colombia is not a concession. It's a property. We own the land and the underground on perpetuity.
So the majority of the thing that we can apply on a rental [ case ] to the mining industry, we will apply to company. We have concession. We don't have concession. We have property. We have private property on our type. Yes, I think that can reflect the situation in Colombia now with the election.
Okay. Then just moving on to Toroparu, and I know we talked a little bit on the last call around capital. Obviously, we're seeing capital and inflation there. Any update on the PFS, either in terms of capital or operating costs or any other sort of moving parts?
Yes. The PFS remain to be delivered in July, and that will allow us to have a much better estimate. But I would like to talk a little bit more about that. Our cost estimate for the Toroparu Project based on the PEA is $355 million.
But remember that our PEA is not a typical PEA. A typical PEA is a document, which, according with the American Association of Cost Engineer, it's a Class 3, Class 4 estimate, so with 90% probability to be between -- to be with plus or minus 30%. Our case, the PEA, because that project has been on the table since, well, 2001, 2002, that project has a lot of information, much more information than a typical PEA. So our estimate is not a Class 3 estimate. It's more than that. It's close to a Class 2 estimate. Class 2 estimate is an estimate, which is with 90% probably to be within plus or minus 30%.
One strategy that we use in our project is to, for example, in the PEA estimate, we are supposed to do our own mining. We are supposed to generate our own electricity. We are going -- we are supposed to store and distribute the fuel with our own resources. We decided to use a mining contractor, and we decided to use -- to have a BOO and operate our plant. And we decided to use a BOO, build, own and operate, a fuel plant, which we will store it and distribute the fuel. And in those process, for example, with the mining contractor, we are in the final stage to award the contract. We have -- now we are deciding with 2 contenders. Out of the 4, the initial bid was 5, reduced to 4 and then reduced to 2. And the BOO, we already have a winner in the contract. With that information in hand, that will -- that information will deduct, and that information is quite good because coming from the contractors, that information will deduct from the estimate, from the $355 million amount of money, which is between $66 million and $75 million.
So -- and also to gain time, we are not waiting to have the contractor for the engineering, procurement, construction manager for the power plant, for the processing plant and [indiscernible] facility. We are advancing on that. We prepared all the specification for the long lead items.
And now we are out in the market for -- to get quotation from -- for the long lead items. We have bidders, bidder from China, Europe and the States, We will see. And then with that information in hand, we will know the delivery time, [indiscernible] and the cost and if that is going to have some impact on the project or not. The -- for example, the contractor for the front-end loaded engineering for the processing plant is in place. [indiscernible] is an American company doing that. Also we are expecting proposals from [indiscernible] to do the engineering and procurement for that part of the project.
So at the moment when we are going to produce the PFS, we are going to have a lot of information, which are close to a Class 1 estimate. So we are confident that we are going to maintain the amount of money that we have in the budget. I'm not going to say that the disruption in supply change or the inflation is not going to take -- to have an impact on the project, yes, but it is going to be minor. But I can say for certain that, probably, the cost of the project, in no case, will be over $370 million, for example. Okay. That is more or less a resume of what we are doing there in Toroparu.
[Operator Instructions] And from Marathon, we have [ Chris Dicario ].
Just wondering also on Toroparu, it says -- you said the finalization of the formal mining license was in process, completion expected by mid-2022. What are the risks around that and around maybe that getting delayed or, for some reason, not receiving it at all? .
Okay. Yes, we submitted all the documentation with the government to get the final mining permit, and we are in the process to -- and we are working on that, on the bureaucratic procedures and that kind of things. And we are expecting that we will have that for July. . But the advantage in our mining permit is that we will not meet that until we are in the pre-stripping phase of the project, which will start in the first quarter 2023. That is the moment when we are going to need the final mining permit. So we have some spare time in case that we have some unexpected delays.
Because for the roads, camp construction, internal growth, starting the civil war related with the tailing facility, we will not need the mining permit, according with the general legislation. So I don't see any risk that we are not going to have our mining permit on time to start the real mining work in the upside.
And we have a follow-up from Carey MacRury.
I just wanted to follow up on the previous question. But obviously, a lot of moving parts in the macro picture. You got interest rates, supply chain challenges, COVID lingering. Is there any scenario where you could potentially delay the project and let things come down on the macro front? Or is it pretty much a go in your mind?
According with the -- with my previous explanation related with the cost, we have enough money to continue with the project because even if the project is going to cost $350 million or something like that, we have enough money to do that. So we do not foresee any problems to go ahead with the project.
And we have no further questions at this time.
All right. I've got a couple here from viewers through the webcast. One is providing a bit more color at our G&A expenses for the quarter and the trajectory going forward. Should we expect it to stay elevated or return closer? As I said in my upfront remarks, Q1 was a very unusual quarter. We have been involved in this free trade arbitration with Colombia the last couple of years. And we've typically had around $4 million a year over the last couple of years of expenses related to this matter, as it was moving along with the tribunal.
However, this first quarter was a very heavy quarter, probably the most heavy quarter we've had so far in effort from the legal and other advisers. As I mentioned, making the final submission ahead of the hearings, this will take place later this year, so the cost was much more elevated in this quarter than any other quarter we've seen. With that, Q2 should be much more sedate. Q3 will probably pick up with a little bit higher level of activity of cost, again, for that matter as we get to the preparation and then the hearings themselves. And then, again, it should die down after that for going forward.
So there will be some volatility in G&A in certainly the first and third quarters this year. I would expect, excluding the free trade arbitration costs, that our quarterly G&A should be about $4 million to $4.5 million based on our structure and run rates that we're seeing in the business outside of the expenses for the free trade arbitration. Another question that's here. Can I confirm guidance for CapEx for 2022? And how much is sustaining and how much we'll spend at Toroparu? As we had outlined in our year-end MD&A, we've got sustaining CapEx guidance for Segovia of $50 million to $55 million this year. We're maintaining that guidance. No change there. We had also guided up to $10 million of nonsustaining CapEx at Segovia.
That did include some expenditures on the solar project, which we just announced where we're going to cancel based on some changes in the project scope and costs that are unacceptable to us. We're going to look for a replacement for that project because we still believe that having a contribution of solar energy in our operations is fundamental to our ESG strategy around climate change. So we'll look for a replacement for that. But at this point, we don't have a full answer on that. As far as Toroparu goes, as I mentioned, we spent about $7 million this quarter. It'll start to ramp up in the second quarter, probably somewhere in the neighborhood of $15 million in the second quarter. And then the second half of the year, Lombardo, how much do you think we'll spend in the second half of the year based on your work you're doing right now?
Yes. In the second half of the year, yes, I think that we will be a little bit above $70 million. .
$70 million, and some of that will be funded by installments from the Wheaton stream, which we are sorting out with Wheaton. And we'll finalize the installment schedule once we deliver the PFS to them in the third quarter. . So as Lombardo said, we're fully funded for Toroparu. We are fully funded certainly through cash flow and cash on hand for Segovia. So we're very comfortable with our CapEx exploration and development plans at both of our major projects this year.
We do have a question on the phone from [ Robert Polo ].
Mike, things look very interesting. I think it's actually a pretty good quarter. And I've most particularly picked up on the operating cash flow before the taxes. I thought that was a really great figure. And does that look like it will be continued with the operations at Segovia into the future? .
Yes. That's always depending on where gold price is. But certainly, the gold prices over $1,800, our cost structure is, I think, fairly predictable. The peso is also a little volatile, but certainly in our favor today at COP 4,100 per U.S. dollar.
But no, I think, as we move forward, the operating cash flow should continue to bode well in the second quarter. As I mentioned, we'll pick up some additional inflow from the VAT, and we'll maybe use that to make further tax installments. But all in all, I think from a cash flow perspective, things should continue to function well for us.
And we have no further questions at the moment.
All right. Well, we would like to thank all of you for taking your time this morning to join us. Obviously, we're available if there's additional questions that come up, and thank you. Sorry, I've got one other -- yes , that's good. Thank you.
Ladies and gentlemen, this concludes today's webcast. Thank you for joining, and you may now disconnect.