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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.
Welcome to the Aris Mining Fourth Quarter 2022 Results and Exploration Update Call. [Operator Instructions] And the conference is being recorded. The presentation associated with this call is available on the company's website and may be referred to during the discussion. We note that the slides are not automated and you have control of the deck. I will now turn the call over to Neil Woodyer, Chief Executive Officer.
Thank you, operator, and thanks to everybody for joining us today. On the call with me is our Chief Financial Officer, Doug Bowlby; our Chief Operating Officer, Richard Thomas; as well as Pamela De Mark, Senior Vice President for Technical Services; Tyron Breytenbach, Senior Vice President, Capital Markets; and Robert Head of Finance.
I expect many of you on the call are familiar with the company. But for those who aren't Aris is a growing gold producer focused on Latin America. And following our business combination with GCM Mining last year, we have graduated to be an intermediate gold with a strong growth profile. As shown on Slide 3, we have 2 producing mines in Colombia, and we had 2 advanced stage assets, 1 located in Colombia and the other in Guyana. Last year, our 2 mines with combined guidance and produced over 235,000 ounces of gold. Looking ahead for this year, we expect to produce between 230,000 and 270,000 ounces as an all-in sustaining cost at $1,050 to $1,150.
As you can see, we already have a substantial gold resource base, 15.5 million ounces on a measured and indicated basis, plus 7.8 million ounces of inferred resources, give you some exceptional leverage to gold prices. Moving to Slide 4. I just want to highlight our key achievements in the year. Aris Mining has grown quickly since our current team who created Aris Gold in 2020, assumed management of Aris Mining in September last year. We're looking forward to building a Latin American producer at a time when sector consolidation is limiting the number of growth-focused companies. Aris Mining combines the operating strength of the Segovia mine with exceptional growth of Aris Gold.
Segovia continues to provide strong free cash flow to support our growth, most notably our Marmato lower mine, where we start construction as soon as we receive the updates of environmental terms. During Q4, we delivered a pre-feasibility study for the Marmato expansion and increased reserves by 57%. This project is the cornerstone of our near-term growth and result in the company's combined production of over 350,000 ounces by 2026.
Post-merger, we started to review the Toroparu Project in Guyana, and have just advanced an updated resource of 5.4 million ounces, and we are continuing to evaluate our development plans. Early in the year, we became joint venture partners Mubadala on the large-scale Soto Norte Project in Colombia. We carry in 20% of the projects with the option to go to 50%. We are the operators, and we are now taking the project to the permitting stage.
Over the last quarters, I've been spending a lot of time in Colombia and I am extremely enthusiastic about the potential to build a profitable mid-tier Colombian gold [ economy ]. Our recently launched sustainability web page shows a number of engaging videos. We are a modern and social mining company that knows our success must be accompanied by the most respect for the environment and social commitments.
Mining is a historic important pillar of the Colombian economy. Our artisanal and small miners account for the vast majority of the country's gold production. Aris is building a company that is creating value-based partnerships with artisanal and small miners. This is evidenced by the success of our ASM programs. Today, we have grown to over 66 partnerships many in Segovia and we are now accelerating this and applying them Marmato and Soto Norte. These agreements are aligned with the Colombian government focus on formalizing small miners and are the key to building and maintaining our social license in Colombia.
Our ASM partners preserve their rights and conditions within protected legal frameworks and together, we are to value -- protect the environment and improve the economics of our local communities. We truly believe in partnerships that combine mining companies infrastructure, technical abilities, access to capital with small miner's local knowledge and small mining expertise. We believe these are the key to future profitable sustainable mining in Colombia.
However, the ASM program is just one of the ways Aris is performing on its share value commitment. We also have other social investment programs, including road and maintenance for urban rural connectivity. Local procurement programs to promote local economic clusters, strengthening local educational processes, including the La Salle school, tailings recovery programs by transforming tailings storage areas into community parks and gender diversity and inclusion programs.
We're also new member in United Nation's Compact and we'll start our communications on progress reporting in 2023. We look forward to continuing our growth strategy. But at this point, I'll hand over to our CFO, Doug Bowlby, to discuss the operating results in more detail.
Thanks, Neil. We're now looking at Slide 5 for a key summary of the results of the year and the comparison to 2021. Gold sold 220,000 ounces shows a modest increase over 2021, demonstrating that Segovia is a stable operation. Costs in terms of both cash cost per ounce and all-in sustained cost per ounce were also in line with 2021, which is a good result considering the cost pressures we're experiencing in the industry. Overall, we generated income from mining operations of $160 million during 2022.
Earnings needs a bit of an explanation. In 2022, we experienced some onetime expenditures related to the combination of GCM Mining and Aris Gold. So we direct your attention to the adjusted earnings of $50.3 million or $0.46 per share. Adjusted earnings is where we add back several onetime expenditures. Please see the notes in our MD&A, and these adjustments are clearly set out. It's also worth noting that the 2021 earnings includes a lot of noise related to the transformation of Caldas Gold into Aris Gold, which occurred in February of 2021, and this generated noncash earnings of about $57 million with another $50 million of noncash earnings related to the revaluation of GCM's warrants.
So again, we encourage you to compare adjusted earnings on a year-over-year basis. As of December 31, 2022, we had a significant cash balance of approximately $300 million. Turning to Slide 6, we take a closer look at our cash flow generation in 2022. We generated $144 million of margin after our all-in sustaining costs, which represents about a 37% margin relative to revenue.
For 2023, we're focusing on G&A cost reductions with several initiatives underway related to workforce optimizations, new procurement processes and new procedures for authorizing expenditures. And as Neil previously mentioned, we've closed the GCM office in Toronto. During 2022, we contributed $12 million towards social programs in Colombia and we've made significant royalty and income tax payments to the government as well.
As these numbers show, mining is a pillar of the Colombian economy. After adjustments for G&A, working capital and tax payments, our free cash flow generation was approximately $51 million, which substantially funded approximately $73 million in long-term growth projects in the year. We are well funded for our future projects with the lower mine Marmato construction expected to start in 2023.
The lower mine capital estimate net $102 million of streaming financing from Wheaton Precious Metals is well covered by our $300 million of cash and our strong free cash flow generation from Segovia. It's also worth noting that we have an additional $138 million of streaming finance available for Toroparu when we restart construction. I'll now hand over to Richard Thomas, our COO, to talk further a better operations.
Thanks, Doug. Good morning, everyone. I'd like to refer you to Slide 7 to begin our asset review Segovia. As Neil mentioned, we hit our production guidance in this asset, and this continues to be our most important mine from a cash flow perspective. For Quarter 3, we completed the expansion of the Maria Dama process plant, and we've upgraded there from 1,500 tonnes a day to 2,000 tonnes per day.
Additionally, we shipped our first batch of concentrate from the polymetallic plant and this contributed approximately $2.2 million in byproduct revenue in 2022, which is expected to grow over to over $10 million in 2023. The Segovia operations generated in total $88.6 million in free cash flow from operations over the full year period, a 65% increase over the $52.8 million in 2021.
Moving to Slide 8 at Marmato upper mine. We continue to stabilize and optimize the operations and years of underfunding of sustaining capital expenditure. Infrastructure has been systematically upgraded, we are to continue our efforts to improve productivity and more importantly, safety. We also experienced some impact to short-term production whilst we invested in the more refurbishment as this factors pays for the lower mine expansion. Marmato upper mine produced 25,216 ounces for the year, roughly flat over the prior year. We will continue to implement our optimization efforts in 2023, concentrating on reducing dilution, improving productivity and the reliability of the processing plant.
At Marmato lower mine, we continue to advance the [indiscernible] Ventilation with targeted completion in Quarter 3 of this year. We are working closely with our regulator Caldas, to finalize updates to our environmental management plan. This is a key permit required to commence construction of the lower mine project. Recall that our updated prefeasibility study, outlined our capital construction estimate of $280 million to build a mechanized underground operation and processing facility that is expected to deliver, on average, a production of 162,000 ounces per year over a nearly 20-year life of mine at an all in sustaining cost at of around about $1,000 per ounce. We are very excited to deliver this exciting growth to the market. The lower mine construction capital estimates of $280 million net of the $122 million of stream financing of about $158 million, which is 2 years of free cash flow from the Segovia operations.
Moving on to Slide 9. In Guyana, the company is completing a reevaluation of the Toroparu asset and is due for expenditure as we continue to review and rescope the project. We have just announced a new mineral resource estimate based on a new detailed structural analysis and updated geological model, and we are now progressing with additional studies to update, fully define and optimize the development plan.
At this point, we don't know exactly what the Toroparu project will look like, but we are taking a diligent approach and we'll update the market as you refine our view of this large and advanced assets. I'd also like to briefly recap our main exploration achievements in 2022 and provide an overview of our 2022 exploration plan on Slide #10.
We are investing aggressively in exploration at our producing assets. At our largest producer, Segovia, the company has a multiyear history of replacing mine gold with new resources since 2010. We again achieved this goal in 2022. In the year ahead, our focus will be increasing the mineral reserve and the life of mine plan, whist also targeting strategic high impact new mine exploration targets. Our budget at Segovia for the year is $17.1 million, and we expect to drill 85,000 meters for those $17 million.
At Marmato, a highlight for us was the 57% increase in reserves to 3.2 million ounces at 3.2 grams a tonne. This also supports the 20-year life of mine. Our goal for the upcoming years is to optimize the known structures in the near term upper-mine and we have budgeted 7,500 meters at a cost for $1.6 million for this purpose. The deck for today's call includes a detailed disclosure of the summary of our exploration targets, which encourage you all to view following the call.
With that, I'd like to hand back the call to Tyron for some closing remarks.
Thank you, Richard. So as we move into Q&A here, I wanted to leave you with Slide 12 which really outlines our value drivers in the year ahead and as we continue our best-in-class growth, which I think really set us apart from our peer group. Richard has to hop for some immediate travel, but the rest of us are still on the call. So at this point, I will hand it back to the operator for question time.
[Operator Instructions] Your first question comes from Richard Gray with Cormark Securities.
Just a question on Toroparu. So could you give us a bit more detail just on what changed in the geologic model, and what changed in kind of just the whole resource estimation, given the decrease we saw.
So Rich, I think I'm going to hand that question over to Pam. She is our SVP Technical. And obviously, we've taken a rigorous approach. This is an asset that was new to us, and we went back to first principle. So it really started with the review of the block model. So Pam, I don't know if you want to provide some more color there for Rich in this business.
Yes, sure. Richard, nice to see you again. Yes. So at Toroparu, we engaged a structural geologist who went out to site, reviewed all of the structural data, including the data from oriented drill core. He logged key intersections and spent about 2 weeks there looking at the drill core and reviewing the available outcrop and came up with a new structural interpretation based on all of those observations. That structural interpretation was then passed onto Mining Plus. They have a structural geologist who liaised with our field structural geologists, and they created an updated geological interpretation and that geological interpretation was used to constrain the estimate and that resulted in the changes that you see there in our news release.
Okay. And maybe just staying on that, what are the next milestones to expect this year from that asset, if any?
So our next step, at least from a geological point of view and project assessment point of view is to conduct a gap analysis, and that is to just review the available data and to see what data that we have and what level of study is that at? And just to assess whether everything is at a pre-feasibility study level.
Okay. And maybe just 1 more on Marmato. We're kind of mid-March here. How are we looking for receipt of the -- of all the permitting you need by -- is it kind of midyear? Is that where before targeting?
I'm going to hand this one to Neil.
Okay. We -- in late December, we got from our authority about 300 questions. We've answered all those questions at the end of February. It should be a 3-month process before we get the approval to do it. So sometime midyear, June, July, we would expect to be underway.
Your next question comes from Don DeMarco with National Bank Financial.
The first maybe start with Segovia's costs. Some impressive costs here relative to peers. Can you just talk about some of the factors that support those costs at Segovia? And why they're not up year-over-year, while many are?
I think, Doug and Rob, do you guys want to take control of that seeing that Richard had to run.
We're happy to. I think one of the key benefits we've had is the devaluation of the Colombian peso during the year. So that helped us with our cost structure. And of course, Segovia also really benefits from its very high grade.
Okay. That's helpful. Maybe just another question then on Marmato while permitting that's going on there. Could you just give a little bit of color on the permitting tasks that are in progress right now? And then subsequent to a successful permitting outcome, what the sequence of events would be leading up to construction and first production out of our Marmato lower?
From the point of view of permitting, we've had the PTO approved already. So we're now just on the environmental side. We have submitted during the course of last year, all environmental support. It went through a very rigorous backwards and forwards with Caldas in terms of questions, culminating, as I say -- the whole series of very detailed questions at the end of December. All now answered. So back in their hands to go through review. We would expect over the next 2 or 3 months, we'll be working closely with them. As all those questions are answered, we -- I think it's more a question of process than anything else. So we just have to go through that.
In terms of where we go after this, the first thing we have to do is to get the excess road moving. That we have to wait from [indiscernible] unfortunately. John, who is in charge of the project has established an office in Bogotá for the engineering team. He's done an awful lot of the pre-engineering. He has identified main suppliers. The person we're most likely to be doing EPCM on the plant with. All those contracts are in the process of being designed and prepared and negotiations. He's well recruiting his key team are coming into place so that we should be able to move very quickly once we get that approval.
Okay. That's helpful. So a final question on Toroparu. So we've got the updated Toroparu. I think that the previous resource as at November 2021 was also É but with this update and reinterpretation, would you consider this resource as higher certainty? Or would you characterize this resource as more conservative than the prior one?
Pam, are you going to take that one? You're more qualified than I am on that one.
Yes, I'll take that one. Yes, I would say that this one, we have a higher confidence in this estimation based on the field work and the collaboration that we've had from 2 different structural geologists. And we note that the current interpretation is similar to past interpretations by SRK. So we're feeling pretty comfortable with the geological interpretation.
Okay. And I mean you still got 6.5 million ounces there. So it's still fairly sizable. How close are you to having reserves at Toroparu. I mean when you have higher confidence, how confident are you?
Well, in terms of getting reserves, we would have to complete a prefeasibility study at a minimum. So currently, we're going through the gap analysis just to understand what data is available. And from there, we would need to use the updated resource estimate as a basis for new study that would include a new mine schedule, a cost model, a processing plant, all of the whole production. So that would probably be -- typically would be on the order of about a year.
Okay. Great. And well, that's all for me guys. Congratulations on the cost at Segovia and good luck with the final permitting steps for Marmato.
Your next question comes from Kerry Smith with Haywood Securities.
So perhaps I could just start with Segovia. You had these harsher issues in December, where you were at around 1,400 tonnes a day from your 2,000-tonne a day run rate. Has that problem in structures as of year-end? Or did that issue linger into 2023?
That issue is lingering into 2023. We should be through it by about another month roughly. We've been able to keep our production up over above last year's levels, but we're not where we should be. The fire damage is waiting for some extra spares to come in. So it should be just a few weeks before we're back to where we were -- where we should be 2,000 tonnes.
Okay. And so for Q1, then Neil, what would be the rough average throughput that maybe think about that would be around this 1,400 ton for Q1, and then in Q2, it will be a step change.
I would hope it's slightly higher. I don't know.
Okay. And then for Toroparu, just in 2023, what would be total expenditure likely be on that project for the work that you've got planned, you spent $60 million last year. I'm assuming this year is going to be significantly less than that. But could you give me some rough idea as to how much you might spend this year?
We've got a current run rate without studies, $200,000 or $300,000 a month. [ Study ] cost is $5 million to $6 million, $8 million on top of that, depending on how far we go that we need to get down the study route, as Pam said, we're doing the gap analysis now to determine that.
Okay. So less than $10 million in total then, if I understand correct, is that right?
I would hope so. But order of magnitude, not far off, I don't think it's difficult to time to another study level we need to do.
Okay. Okay. And in 2023, would the contribution at Segovia from the small miners in terms of tonnes be roughly similar to what you did in 2022, the 109,000 tonnes, is that kind of the run rate that you're looking at these days?
We're possibly looking at a higher -- we already just signed on a new group of about 250 miners, and we're looking at other groups. So I would say it's going to be at least that and hope it's going to be higher.
Okay. Okay. And the last thing you didn't talk much about Soto Norte, but how are things progressing with your CSR efforts. And I think you were suggesting that you'll submit the EIF in the back half of this year. But maybe if you could just give us an update on how that project is...
Okay. From the actual preparation of the EIF we're doing well. We're on schedule. We will certainly be putting it in the last half of the year sometime. I think it depends on where the policies and when the whole thing is at that stage. But technically, we should have it ready in the third quarter to be submitted. That's going well. That will need some redesign, where we've done some additional planning to do routing and that sort of thing, and we've done additional drilling on the [indiscernible]. All that comes together from the technical side and from the environmental side, it's coming together very well.
The other area where we've been developing very much is on the social communication side, where we've had the university in helping us communicate in the various areas. We're also doing a lot of study work on the water effects to show that we do not the damage the water flow into Bucaramanga and that sort of side is going on very well. We are developing [indiscernible] small miners. We are, again, through that process now. We're doing some additional drilling, some unique startup drilling just to ensure that it sort of grade is where we think it will be.
We would hope to get [indiscernible] started sometime later in this year. And as there's no facility there at the moment, we will take material to Segovia to be treated. That will do a great deal of benefit in the local community and the local miners. And we're looking to see how we can expand the small miner program in that area. So we're doing all those things and pushing ahead with the communications. We've also started a lot of farmers markets from a social point of view. So our social planning is going well. Our social communication is going well. We just have to wait to get the EIF submitted at the right time.
Okay. And just so I'm clear, what were the exact issues with the crusher at Segovia? What was the problem?
They were repairing about with torches and they burnt it, very simple. Hot petrol fell off of it and it caught fire, very bad controlled maintenance.
Okay. And sorry, you just take....
Nothing hard in technical at all.
Right. I know just it's taking time to get replacement components for the fire damage. And is that what's causing the delays?
The real mistake is we didn't have spares. It could have been change out had we had all the replacement parts we needed. So our spare level was down. So that's the real mistake. Accidents happen, shouldn't, but they do, but we should have had the space.
Right, right. And last question for me, Neil. You don't have the hedging in place now at least as of year-end. Do you have any hedging plans for 2023 then, either for base metals or gold and silver or...
No, we don't need to hedge for any financial reason from any lender or anything like that. We do not conceptually believe we need hedging as an ongoing element of our business. We think the shareholders should participate in any price rise there is. We are not concerned about a downturn in the gold price, anything like that. So no, we have no current intention to hedge.
And then, Kerry, just on your mill throughput question, the mill did write it over 1,800 tonnes per day towards the end of that, it looks like it's ticking up.
Sorry, 1,800 tonnes a day at the end of February, you said, Tyron?
Correct.
There are no further questions at this time. I will now turn the call over to Tyron Breytenbach. Please go ahead.
Thank you, operator, and thank you to everyone for dialing in today. We're very excited about the year-end. It looks like we finally have a gold market here, but we put out a lot of information over the last 24 hours. I'm sure there'll be some follow-up questions. So please reach out to the company in the days ahead and thanks again for the time during a busy earning season.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.