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Welcome to the GCM Mining Corp. Q4 2021 Results Webcast. My name is John, I will be your operator for today's call. [Operator Instructions] And I will now turn the call over to Mike Davies.
Great. Thanks, John. And thank you for joining us this morning for the GCM Mining Q4 and year-end results webcast. Joining me this morning from Guyana is our CEO, Lombardo Paredes. I'll first go through our prepared remarks, and then Lombardo will be available through the Q&A session. First, let me direct you to our disclaimer regarding forward-looking statements that will be made by us during the webcast this morning. 2021 was a successful year for GCM Mining. We accomplished what we set out to do. We completed 97,000 meters of drilling at Segovia, our biggest year yet, numerous high-grade intercepts led to successful increases in resources and reserves. It was our sixth year of meeting guidance. We returned $17 million to shareholders, $11.5 million through our monthly dividends and $5.5 million through our normal-course issuer bids. We continue to make ESG a part of how we operate, and we have since the beginning of the company in 2010. We reported strong financial results and continue to strengthen our balance sheet. And one of our milestone assets last year joining the company was the Gold X-Toroparu Project. Completed that acquisition in June, raised $300 million in the summer to fund it. And then at the end of December, published an updated mineral resource and validated the economics and a positive PEA. Last night, we released our fourth quarter and annual operating and financial results. Although it was another year of coping with the COVID-19 pandemic, we generated solid results. Our net income for 2021 was $180 million or $2.25 a share. Adjusting for various nonoperating gains and losses, our adjusted net income was $71.6 million or $0.87 per share. And over the next few slides, I'll take you through the details behind many of our metrics reported last night. We currently have 97.9 million shares issued and outstanding, and at yesterday's close, that translates to a market cap of $572 million, up 73% from 1 year ago. Our fully diluted share count is now 131.7 million. And we have an ongoing normal-course issuer bid, under which we purchased 1.3 million shares last year at a cost of about $5.5 million. Over the last 2 years, we've purchased approximately 2.5 million shares at a total cost of $10.6 million. Our current NCIB expires in October, and we'll continue to use it as required to support our stock. Last year was our first full year under our dividend program that we started in late 2020. We paid a total of $11.5 million in dividends through our monthly program. We continue to be one of the top 10 mining dividend stocks based on return and the only one paying on a monthly basis. We'll continue our 2022 program at the same dividend rate of CAD 0.015 per share per month. From the analyst perspective, Canaccord recently raised their target to $9.75 a share, and Red Cloud and Fundamental Research have maintained their targets. Both Canaccord and Red Cloud have viewed the recent news about the increase in Segovia's reserves and resources as positive catalyst, something we're pleased to see being acknowledged in the analyst community. We achieved our production guidance, as I said, for the sixth consecutive year in 2021 with just over 206,000 ounces of gold produced at Segovia, driven by the Maria Dama plant expansion that will be completed by mid-2022. We've raised our 2022 annual guidance to a range of 210,000 to 225,000 ounces of gold. Taking a more granular look at Segovia's production, there are a couple of points I'd like to make. Back in 2017, Segovia produced 148,000 ounces of gold. El Silencio, even though it's been producing for more than 100 years, is still delivering the same level of production in 2021 that it did back in 2017 when we were getting going in our turnaround. Providencia has grown by about 50% since 2017. But if you look back at our 2017 PFS, Providencia should have come to an end by now. Sandra K produced 4,000 ounces back in 2017, and our development has seen it grow to more than 5x what it was producing in that year with 22,000 ounces of gold produced in 2021. The small miners have also tripled in production since 2017 as we've added more groups with a contract mining model, and grades have increased from about 6 grams to 11.5 grams in 2021. All this to say that Segovia is a district rich in gold and our exploration and development investment continues to pay dividends in our ongoing production from the Segovia operations. With a 5% increase in the volume of gold produced and sold in 2021 and a 3% increase in realized gold prices to $1,794 an ounce, Segovia set a new annual revenue record in 2021 at $377 million. And our AISC margin in 2021 remained strong, about 33% of revenue. Our AISC in 2021 was about $1,200 an ounce with cash costs comprising about $824 an ounce of the total. We spent $45 million on sustaining CapEx at Segovia last year, including our expanded exploration of mine geology drilling at the 4 operating mines, which represented another $217 an ounce. Our social programs and contributions represented about $57 an ounce, and the remaining $100 or so an ounce comprised G&A, the free trade arbitration legal costs and environmental fees. For 2022, we see our annual AISC being much the same as this year, albeit subject to the price of gold, which does have some impact on our cost. Our adjusted EBITDA continued to be solid as a cash flow engine for Gran Colombia in 2021, reaching a total of $172 million, about 45% of revenue and keeping our leverage ratio at about 1.8x. Cash flow metrics continue to be positive in 2021 with operating cash flow of $80.6 million and free cash flow of $26.2 million. In 2021, we paid $73 million of income taxes, about $24 million more than 2020, and our cash flow was impacted by a change in timing to receive our VAT refunds in Colombia. In 2020 and prior years, the Colombian government processed our VAT refunds on a bimonthly basis. But in 2021, this changed to an annual basis, meaning that $26.5 million of VAT that we have owing to us for 2021 will now be received in 2022. While the change affects our 2021 cash flow compared with previous years, it does not affect our working capital, and we expect to receive these refunds in advance of making our income tax payments in the second quarter of 2022. As many of you probably know, one of Gran Colombia's success stories over the last 5 years has been the work we've done to strengthen our balance sheet. This has been very important in setting us up to take on a project like Toroparu. In August last year, we raised $300 million through our senior notes offering. And together with the $138 million of funding to come from the Wheaton stream facility, our Toroparu Project is fully funded to carry forward with the planned expansion and getting into operations by 2024. A key component of our 2021 action plans was our drilling program at Segovia. We completed 97,000 meters of drilling, with 81,000 meters at our 4 operating mines and another 16,000 meters that are high-priority brownfield targets. For 2022, we plan to carry out another 91,000 meters of drilling, with 67,000 meters at our mines and 24,000 meters following up on the high-priority brownfield targets. Through the 2021 in-mine and near-mine drilling program, we generated numerous high-grade intercepts across all of our mines as reported through several press releases over the last year. You can see from these key intercepts the reason that Segovia continues to rank as one of the top 5 highest-grade, underground global gold mines. And the other exciting data from last year's drill program are the key intercepts from our inaugural brownfield program. These are areas of known vein mineralization that not only have documented prior production, but they also are the site of current small-scale mining operations, giving us real-time data on these areas, and they form a key part of our growth plan as we look forward with the next 10 years of operations. The payoff for last year's drilling campaign was reflected in our reserve and resource update announced a week ago. Our reserves increased by 18% to 745,000 ounces, our M&A resources increased by 14% to 1.6 million ounces, and our inferred resources grew by 41% to 1.7 million ounces. Key to the increases were additional resources that were added at both El Silencio and Sandra K. This is why we are confident that Segovia has many more years of life ahead to operate. And to support our future mining operations, we have 2 infrastructure projects on the go. The first is the expansion of the Maria Dama processing plant from 1,500 tonnes a day to 2,000 tonnes a day expected to be complete by mid-2022. In the second half of 2022, we expect to use about 85% to 95% of the plant capacity in our production operations. The second project is the construction of Phase 2 of the El Chocho tailings storage facility, which will receive material after being treated in our filter presses and then dry stacked and eventually rehabilitated. And in 2021, we also completed construction of our new polymetallic plant in Segovia to treat material from the plant tailings to recover commercial quantities of zinc, lead and silver and to neutralize the material being sent to the El Chocho tailings storage facility. The plant has been operating since mid-October, treating about 100 tonnes a day of tailings and producing about 80 to 100 tonnes of zinc concentrate and 80 to 90 tonnes of lead concentrate on a monthly basis. We expect to increase production rates as we proceed through Q2, and we're currently in discussion with several buyers to finalize an offtake contract for these in-demand concentrates. I mentioned at the outset that one of our major accomplishments in 2021 was the major step forward that we made in our strategy to grow through diversification. With the acquisition of the Toroparu Project in June, and then we successfully closed the financing soon thereafter, we've now added a second cornerstone asset to Gran Colombia's profile. In December, we announced an updated mineral resource estimate for Toroparu that showed a 15% increase in measured and indicated resources to 8.4 million ounces of gold. What is important to note is that the resource update is comprised of fewer tonnes and higher grade than the last resource completed by Gold X in 2018. This is a result of an updated understanding of the geologic model as a result of drilling carried out by Gold X in 2020 and early 2021, which has added an underground resource element to the existing open-pit resource. And in December, we also announced a positive PEA for this new resource, one that foresees a 24-year mine life starting up in 2024 and pays back its initial $355 million estimated capital cost in 2 years. The PEA envisions 5.4 million ounces of gold and 141 million pounds of copper being produced over the life of mine with an average AISC of $916 an ounce. We've already started preconstruction activities on the camp, airstrip, access road, and we're carrying out additional infill drilling as we take the project now to the next step with a PFS expected in early Q3, about the same time as we expect to have the final mining license. We are also modifying our approach in the PFS to incorporate contract mining with our selection process narrowing down to a few experienced firms. We expect production will start in early 2024 with a 7,000 tonne a day gold leach plant and open-pit mining. And by year 6, we'll add a 7,000 tonne a day copper concentrator. Underground operations will start in year 10. And all in all, Toroparu is turning out to be everything we imagined it would be and then some. And with that, John -- and now I think we can open things up for the Q&A session.
[Operator Instructions] Our first question is from Carey MacRury.
Mike, just given the cost inflation pressures out there, just wondering what you're expecting for cash costs at Segovia for 2022.
Thanks, Carey. I think in 2022, we're not seeing significant inflation pressures in Colombia on our cost structure. We're also seeing that the currency movements have been a bit of an offset to some of the cost inflation that's happened locally in the country. But I think for 2022, we'll see our cash cost pretty much in the range of what we've seen this year in the low $800 an ounce levels.
Okay. And then maybe related -- and obviously, you're -- yes, go ahead.
I was going to say in our all-in sustaining costs, as I said in my comments, I think we'll be in that sort of $1,180 to $1,250 sort of range. Gold price is obviously a factor as it's been bouncing around of late. Our -- we do have some costs that are tied to the price of gold. So that will be a bit of a factor. Mix of material between the company operations and contract operations has a little bit of a variation in terms of where our cash cost lands for month-to-month. Spending on the CapEx program is probably the biggest cost outside operating costs that we'll spend, and we've guided $50 million to $55 million this year on sustaining CapEx, which is about $5 million to $10 million more than last year. But with the additional production, that will still keep us around sort of somewhere in the $220 to $230 an ounce level of sustaining CapEx next year. So I think our cost structure right now is gravitating to be something around a $1,200 an ounce or so all-in sustaining cost at this time.
Okay. And then maybe related on Toroparu. Obviously, you're looking to finalize the PFS. Any sense on potential increases on CapEx? Just given again [indiscernible].
I'll let -- yes. Lombardo, do you want to comment on your [indiscernible]?
Yes. Let me comment on that. Yes. The basic -- the initial budget in the PEA for the Toroparu Project is at 300 -- around $350 million. And as you know, we got financing around $300 million plus we have silver at Wheaton. Wheaton for the streaming, which is $140 million more. In Toroparu, we are -- we have paid the PFS by July. At that moment, we expect to have a cost estimate with plus or minus 10% with 90% probabilities. We do not -- we are not expecting an increase in cost more than 15%, 16%, 17%, in that range. There are 2 -- the 2 main factors which can affect the cost of the Toroparu Project is the disruption in the supply chain. You know that the cost of the long-lead item probably are going to increase and also the delivery time is also going to increase. And all those things mean -- can -- could increase the cost of the project. We are taking advantage of that in the sense that we are moving very quickly. For example, next week, we expect that we are going to sign the EPCM contract for the processing plant and the related facility. Also next week, we expect to receive the bids, 5 contenders' bids for the -- to be the mining contractor at the mine. And also in a couple of weeks, we are going to send all the specification for the long-lead item to 8 potential suppliers. We are going to put the purchase orders, and then we will pass the management of the process to the EPCM contractor. Also in the [indiscernible] part of -- seeing the impact of project, which is very important because the remote location of the mine, we just -- we have in place a joint venture from the 2 main companies in Suriname, companies which are working now with IAMGOLD, Newmont, BHP Billiton, et cetera. Those companies are going to build the revamp, the access road. They are going to revamp the airstrip. They are going to build the main camp, and they are going to do all the civil work related with water management and tailings. They are already mobilized. So the only way to avoid increasing project is to move quickly, to move quickly and take advantage of the -- of that in order to avoid inflationary pressures and delivery time increases. So I'm confident that we are going to have a satisfactory project in the sense -- related with project and schedule. And all the project management team is in place. The offices in Guyana are under -- we are hiring office space, and we are going to have ready a complete office in end of April. So in summary, I do not expect -- taking as a base the PEA cost estimate, which is, as you know, maybe 40% with -- it's more or less -- normally, it's more or less within plus or minus 40% with 70% probability of that. So I do not expect to have an increase over that $350 million more than probably around $380 million, $400 million, no more than that. Do you have -- do you need more information on that?
No, that's great. Maybe just one more question just on the Wheaton stream. Presumably, you guys have been in discussions with them just to finalize the stream. Any update on that front?
Yes. The stream agreement was finalized when we bought the company. I think the only deliverables that we still have to Wheaton to commence the funding process will be delivery of the PFS study this year, which they're waiting for, and sending confirmation of the final mining license that we also expect to have midyear. So no expectations of any hiccups when it comes to the stream process with Wheaton. They're very comfortable with us, having gotten experience with us through the Marmato project and how we operate and seeing how things run in Segovia. So Wheaton is quite excited about the opportunity to work with us in Toroparu. I have one question here from the -- from [ Eduardo ] on the online portal. The total -- how much is the total CapEx on Toroparu that's already been spent? And what's expected for this year? As Lombardo said, we're still working on the PFS. That may modify the timing of some of the spending. But based on the PEA, we had expected to spend about $125 million this year, of which about 40% would be funded by the Wheaton stream. We spent $9 million on Toroparu in the second half of 2021, advancing the preconstruction, the studies and the exploration. So we've been moving ahead, as Lombardo said, pretty aggressively, already get started on the fast track of the project ahead of these last couple of steps with this PFS and the mine life -- mining license, sorry. John, do we have any other questions?
[Operator Instructions]
All right. Well, if there's no further questions, we [indiscernible].
I'm sorry. Mike, we did have another question from Carey.
Okay.
Just one more follow-up, I guess. Just on the polymetallic plant, how is that progressing in Q1? And when do you expect to start selling concentrate?
It's progressing well. It's operating normally. We've got to build some additional warehouse space, which was the plan for the early part of this year, to facilitate the processing of a higher level of tailings. One of the things that we found, we were deep in negotiations for an offtake contract, but as you can see, this -- the way this world is going these days, we got 2 late entrants into the discussion, pretty notable companies looking for concentrates and aggressively bidding. So right now, we're in the process of speaking with 3 parties. Hope to have an offtake contract resolved shortly, but really pleased to see the competition for concentrates.
Mike, I would like to make another comment on the Toroparu Project. In -- out of my experience in bigger projects, well, my -- is one of the key elements in that is the quick decisions. The decision-making process has to be in place and have to be very effective. Based on that, for example, I'm spending a week per month in Toroparu just to see first high with my eyes how the things are progressing, how the things are moving and having day-to-day explanation and -- about all the decisions that we have taken in the project. Well, in my personal experience, my biggest project was a $2.6 billion project, a contraction of a refinery. And I'm trying to apply to Toroparu Project all my experience in projects. And again, the quick decision, the quick analysis of these problems are key in the success of accomplished project, and we are applying that tools into Toroparu.
And I have no further questions in queue at this time.
All right. I've got a couple here coming in through the web portal. A follow-up for [ Eduardo. ] Just to be clear, it was $9 million for 2021 of expenditure on Toroparu. From [ Taylor ] from Red Cloud, following up on the polymetallic plant, we plan to provide guidance on the plants in the future. The answer is yes, we will, through our quarterly reporting, continue to provide updates and guidance on both production as well as the offtake contract once it's in place. And lastly, from [ Alexandra, ] CapEx to be spent on exploration in Segovia this year as well as total CapEx at Segovia and Toroparu. As I said, on Toroparu, still finalizing numbers as we get through the PFS. But the PEA had expected about $125 million this year. With respect to Segovia, we provided guidance that we'll spend about $50 million to $55 million of sustaining CapEx this year. That includes the drilling that we'll be doing on the in-mine, near-mine and mine geology drilling, which will be about $15 million. And then we've got the nonsustaining CapEx, which will be about $10 million of share. About 45% of that is the ongoing brownfield program that we continue to drill in the Segovia title. So hopefully, that's clear for everyone, and that's all the questions we have on the web. John, if there's no more questions, I think we'll say thank you to everybody for joining us this morning. And if you have follow-ups, please feel free to reach out to us, and we'd be happy to give you some additional responses.
Thank you. Thank you, ladies and gentlemen. This concludes today's conference.
All right. Thank you very much.
Great. Thank you.
And thank you for participating, and you may now disconnect.