Tanzanian Gold Corp
TSX:TNX
Earnings Call Analysis
Q4-2023 Analysis
Tanzanian Gold Corp
The company has channeled $17-18 million of operating cash flow back into its core operations, underscoring its strategy of reinvestment for growth. They have successfully increased the plant's processing capacity from 360 tonnes a day to 1,000 tonnes a day and are poised to double that capacity to 2,000 tonnes a day, already having the necessary mill procured. This expansion is supported by the enlargement of their tailings storage facility and other infrastructure investments to sustain long-term business escalation.
As the company builds on its projects, it expects a continual improvement in financial metrics throughout the current fiscal year. This buoyant outlook is bolstered by a successful pivot to sulphide ore processing—where they've seen recovery rates in the mid- to high 80s percentage range—critical since 90% of the resources in the Buckreef Main zone are sulphides.
The company anticipates its mill expansion project to be operational in the first half of fiscal 2024, which aims to bring the milling capacity to over 2,000 tonnes per day. This expansion, costing an estimated $6 million, will be financed through existing cash reserves and potential bank financing. The expansion includes upgrading the crushing circuit and other system enhancements. Despite some delays, the company is confident that there won't be issues with the ramp-up, as the existing mining rates can support this year's expansion without increase.
The firm is executing a robust exploration program, drilling just under 7,000 meters, to identify additional resources and ensure a continuous increase in throughput capacity. Plans for multiple pits—Main Zone, South Pit, and in the future, Anfield and Porphyry—coupled with potential underground mining, indicate the possibility of high-grade shoots and point to an extended life of the mine. Such geological prospects have been included in current planning, illustrating the company's forward-looking approach to resource development.
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[Audio Gap] year-end and Fourth Quarter Results Presentation. As a reminder, all participants are in listen-only mode, and the meeting is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would like to now turn the meeting over to Stephen Mullowney, TRX Gold, Chief Executive Officer. Stephen?
Yes. Thank you, Christina. Before we begin the call today, I'd like to recognize that our founder and Chairman passed away during the quarter. And during this year, and all of us here had a good relationship with Mr. Sinclair and he will be greatly missed. So with that, this is our 2023 year-end conference call. Obviously, we'll have an Annual General Meeting conference call in the New Year as part of the Annual General Meeting. And I'm quite excited for what we have in 2023. We had a significant amount of growth. And we're really starting to see what the potential is for the Buckreef Gold project. We had another plant expansion. We have another one underway. We're getting a much better sense for the geological potential of the property and are quite excited for that and where that can go over time, particularly hopefully, increase the resources on our property quite significantly as well as continuing to increase the production profile of the property as well. So 2023 was a great year. We're quite excited for today's call and for where we're going as a company as well. So obviously, there's a cautionary note. We will be talking about forward-looking statements. So I'd ask everyone to go to our website in our corporate presentation to read the cautionary note. Today's speakers obviously are myself, we have Andrew and raise your hand, our COO here in Toronto. We have Mike, our CFO, here with me as well, and Christina is joining us from Montreal. So TRX, A lot of you will hear this in our presentations. We're a very growing company. We have experienced management team that continues to deliver a rapid growth, both on the production side, specifically on the production side, and we have an exciting blue-sky potential on our property and the growth resources over time. So the Buckreef Gold project, just to give everybody a reminder, the Buckreef Gold project. Right now, we have under the 2020 resource statement, 2 million ounces in the measured and indicated category, around 1.8 grams a tonne. As a lot of you know, the deposit does come to surface, and it's relatively flat and it's a vertical shear zone, so it's easily minable. The widths are around 20 meters, easy metallurgy and grind crush CIL in the oxide ore. And as we'll get into this presentation, which is very exciting during the year, is our results around the sulphide ore, which continue now to be moved into the mine plan and processed. We are fully permitted to grow as large as we can. Our permit is -- has been extended to 2032 and it's renewable for the life of the deposit. The processing plant and mine consistently are meeting production guidance. We have a minimal environmental footprint. We recycle all water. We have good tailings management. We're connected to the national power grid. And we adhere to all international standards around environmental standards and a good ESG program as well. And we have exceptional exploration potential, which hopefully will mean that this mine life goes on for a considerable period of time and with a special mining license, we can do that. So with regards to the 2023 highlights, there was a lot of growth. And as I -- as we, as management team have told market participants is our goal now is to predominantly self-fund operation and manage capital, your capital with minimal dilution. And I think we've achieved that in 2023. We generated record revenue, operating cash flow and adjusted EBITDA with a great profit margin. Mike will get into the statistics now in a minute and then predominantly reinvested that right back into the business to continue to grow it. So I think this is the first year that we've been able to execute on that business plan. And with the expansion that is to occur in the next 3 to 6 months, then that's going to enable us to have more cash flow to reinvest back into the business and the business potential, both on a production profile basis as well as the resource expansion basis. So in 2023, we executed on the 1,000 company plant. It came in on time and on budget for $6.4 million. We are now going through another mill expansion, which will increase the throughput capacity by 75% to 100%. The production capacity will be dependent on the grade that will go through that, and we'll give more guidance on that in the future. We're also unlocked the whole deposit, particularly the Buckreef Main zone, because everything we're talking about here right now is Buckreef Main. And so we are not taking away Anfield or Eastern Porphyry or other exploration targets on the property. The sulphide ore has gone through the mill. We did a bulk sample. It continues to go through the mill today. What we're in the process of doing now is -- and this is normal operational sort of things with regards to processing plants is what's the right mix of oxides and sulphides to go through, begin appropriate, more balanced recovery rate over time and over the life of the project. That all has to do with suspensions and things like that and the metallurgies [ they ] really get into. And in 2023, we've extended the known mineralization around our main zone by 500 meters, and we've also had discovery of the Anfield zones and continue to work on -- figuring out where to go next Andrew. And you'll get into that if you look in about 10 to 20 minutes of how you're going to go blocking and tackling a good exploration program, particularly as this new plant comes on board and expand -- and hopefully expand the life of the deposit. So with that, I had plan to hand over to Mike, and he will go through the financial results for 2023.
Thank you, Stephen, and good morning, everyone. Thanks for joining us. As Stephen touched on that, it was a record year operationally for us at TRX. We produced almost 21,000 ounces on the year that was in line with our full year guidance of 20,000 to 25,000 ounces, and that was after us having brought the 1,000-ton a plant online back in October of last year. We sold all of what we produced during the year at an average realized price of $1,825 an ounce for the full year. You can see in Q4, gold prices exceeded $1,900 an ounce. And are now trading beyond $2,000 an ounce. In fact, this morning, we were up over 2050. So record levels and certainly suggests record growth going into next year. In terms of financials, the record production drove record financial results as well. As Stephen touched on, we had record revenues of over $38 million. Our cost of sales came in at just over $20 million, which meant a gross profit of over $18 million or almost 50%. So a very cost-effective high-margin operation. We had record net income of $7 million, EBITDA of almost $14 million and importantly, operating cash flow of over $17 million, which got reinvested back into the business. So I'll touch on that. But again, for investors who've been tracking this story. This is a third year of growth since we've come on board, it's been year-over-year-over-year growth and we certainly expect this growth to continue into next year as we expand to 2,000 tonnes a day. On the cash cost side, we recorded cash costs of $904 an ounce for the full year. This was above the high end of our previously guided range of $750 to $850 an ounce. And this was primarily due to higher-than-expected processing costs that we incurred in Q4. There's a couple of reasons for that, that we called out in our MD&A. One of which was higher-than-expected maintenance costs, we ended up with encountering a mill motor failure on one of our ball mills that required some unexpected maintenance. And that was coupled with an overhaul of our crushing circuit. So it was roughly a $30 an ounce [ variance ] for unplanned maintenance that we expect to normalize into next year. And secondly, in Q4, we experienced inconsistent unstable power from the Tanesco power grid. What that meant was we ended up by using a higher-than-expected gensets power, which consumed fuel at a higher rate than what we had previously forecast or budgeted. And that led to about an $18 an ounce impact on full year cash costs.Importantly, we have since been reconnected to a new substation that is substantially closer to Buckreef. This substation is about 60 kilometers away from Buckreef where the previous substation was over 250 kilometers away from Buckreef. We got connected to that grid in November, and we've seen consistent grid power over the last few weeks and consequently expect costs to be lower heading into next year. We'll talk about guidance in a moment, but suggests lower cost year-on-year. And I guess the last bullet I'll touch on, as Stephen mentioned at the outset, our mantra is using organically generated cash flow to reinvest back into the operation around value-accretive activities. We took that $17 million, $18 million of operating cash flow that we generated, put it right back into the business. As we've touched on many times, we expanded the plant from 360 tonnes a day to 1,000 tonnes a day. We're on our way towards 2,000 tonnes a day, having already procured a mill. We've set ourselves up for this growth by expanding our tailings storage facility to accommodate the higher production volumes. And again, you look at additional infrastructure capital assets, we're doing long-term studies, all in an effort to support the long-term growth of this business and doing what we said we would do reinvesting cash flow in value accretive way. Next slide, please.
Excellent. Well, thank you, Michael. That's great. Financial metrics are improving significantly. And we continually expect those financial metrics to improve into this year, which we'll get into guidance again. And these are -- I think it's fair to say projects that you get going and then you're able to expand it much more quickly over time. So it's almost like pushing a snowball off the hill. It gets bigger and bigger and bigger as it goes down that hill. And it gets easier to do. Yes. So we're quite excited for that. And one of those factors is the sulphides. So we were in an extremely wet season last year, it was raining. I think it was once in 100 years or something like that Andrew with regards to the rainfall in the spring. And so when you're into that environment, hard rock is easier to process than oxide rock because hard rock is not as sticky. It doesn't have clay in it and sulphides – sorry, oxides do. So we pivoted a little bit to the sulphide to see how they would work. They worked just fine, the 20 -- I believe, 2019 or 2020 metallurgical study [ might be ] -- 2020 preliminary metallurgical study said that we should get recovery rates in the mid- to high 80s. That's what we experienced when we put the mill feed through our mill. And substantially that will go into the long-term mine planning now and into the current mine planning. So this is significant because 90% of the resources on the Buckreef Main zone are in sulphides. And we are hitting the sulphides. Who is that on top of the -- in the pit area end or on top of the harder rock?
That's [ Pascal ]. That's our senior mining engineer who demarcating the sulphides, which you can see which has come from rock is that kind of great color. And that particular block is actually running at 5.8 grams a tonne.
And so Andrew take a picture on the bottom, can you take the investors through what they're already seeing in the pit because you could see the transition zone, you could see the oxides ones and you can see it started sulphide zones.
That's right. Stephen, thank you very much, and good morning to everybody. So in the photograph on the bottom, obviously, if you look at the pit itself, you see the top part of the -- very top part of the pit you see the brown layer. That is our top soil, and then we go to sort of the ochre orange colors. That is our oxide zone, it's about 25 meters stick. And then if you just look right at the back at the bottom of the page, you see the gray rock, and that is our sulphide. So we've started to expose the sulphide in the very deepest part of our pit, which is what you've been talking about here with the whole example.
Yes, exactly. So on to the next slide, a 2,000 tonne per day mill expansion. So as I've explained to lots of investors over time, we are on a pay-as-you-go program. And what does a pay-as-you-go program mean? It means that as the business generates cash, it will be reinvested into the business to grow it. So that essentially means that time lines can move up and time lines can move backwards depending on hitting targets. So as Mike mentioned, in Q4, we ran into power issues, which have subsequently been resolved. And we also had a more go down, which was really related to power issues from a bus. So we didn't hit the production profile, although we hit year-end guidance, we were a little bit behind on we're ideally hopeful to get to. So that is delayed in the pay-as-you-go program, the mill expansion a little bit, but not a lot. And so we expect this project to come on or in the first half of fiscal 2024. And the mill is on site. The other long lead items have been ordered. We are going to expand, and this is a little bit of a switch from what I explained previously, the crushing circuit will be expanded first to over 2,000 tonnes a day now will enable us to put in place an expanded crush star pile, which will give us more consistent mill feed. And I'm hopeful on I'll be pushing the team to get over 1,000 tonnes a day while they -- well, we have that crushing system up and running. We have budgeted for that, but that's the goal. And then subsequently to that, the rest of the system will come online, including electrical works, the plinth will be poured soon. That's a long lead item on the ball mill and all the other parts and things of that metal come in thereafter. So capital cost of the mill expansion is around $6 million. That's going to be funded through existing cash resources. Obviously, we've got a big ore stockpile and go forward sales at bank financing, which we're always in conversations around. And we're going to build this in the 100% [ Tanzanian way ] just as we built the previous mill expansions and expect it to -- you know come in and work just as well as the existing plants have worked. We don't anticipate any problems in the ramp up of this plant because we're producing 1,000 tonnes a day, really doubling it. Ironically, this year, the mining rates don't need to increase to accommodate this in this year's budget. So we're good on that angle on the tailings facility, as you can see down in the bottom, is constructed, there need to be a couple of lifts but that's straightforward. And you can see the procurement and fabrication on site of various other components around the mill expansion. And I expect investors here, well, I'll call a few questions on that as we get to the end of the presentation. But now on to the excitement, that's expansion. But I know everybody wants to understand how are we going to take this physical assets in processing capacity. And we're -- obviously, we're going to continue to grow it after we get to 2,000 tonnes a day. But how are we going to feed it? And where are all our resources going to come so we can have a long, long, long mine life here. Andrew, over to you.
Thank you, Stephen. Thank you, Mike. And as you know I was particularly like this, the slide. We're going to be here for a few minutes, folks and do bear with me. As you can see, we did have a program that is just under 7,000 meters of drilling, including infill sterilization and pure exploration. As Stephen you already mentioned that we've been able to extend normalization to the north, a little bit deeper to the south is right underneath south pit, about 500 meters there to the Northeast and Southwestern at depth. And we've also been able to get some exploration results through the drill bit now on the Anfield and Eastern Porphyry, which has confirmed that multiple zones of strong realization there's subparallel and a close proximity to the Buckreef Main zone. And this is a very, very important opportunity for future in our resources. Why do I say that?The way to sort of secure continuous increases in the throughput, it's probably to have several pits available to us. So we have the main pit, we have the south pit in time. We will also be going underground and I think it's the first time you've heard me talking about this deposit brought to underground. Through our geological work, we have been able to delineate and define 2 to 3 high-grade shoots. And so I'm very confident to say this deposit will go around. And that also talks to a much longer life of mine. But multiple pits, Main Zone, South pit and then Anfield and Porphyry. That gives us optionality and continuity of our mining.
I'm just going to pause you there, Andrew, for a second before I get into that. So why don't you explain to the investors when you determine how you switch from open pit to underground and the importance of strip ratio in that just so the investors can understand how you make that economic decision?
Yes. It's a really good question, Stephen. And it's also a very, very important part in the mine planning and scenarios that we're currently in the middle of doing. So what's the strip ratio gets, say, high, maybe 6, 7 to 1 or that kind of number, it becomes more economical to go underground.And we have to find those high-grade shoots. And when we go underground, we also will be mining at a higher grade over those 20 to 30 meters. Those risks we have made a very economical mining and underground environments and the stripping that we'll be doing. So it will be a cost trade-off between strip ratio. So all turns plus the widths we have to mine versus the development that we have to put in place to go mine steps underground.
So given we have a vertical deposit.
Perfect.
As you go out and you go deeper, you have to strip out and you have to get your valves angled properly. So given that we are vertical and 20 meters wide, this deposit is very susceptible and good rock continuity. It's very susceptible to underground mining. And it probably will be cheaper over time, the underground mining of the pit.
It will be and also the quality of the rock underground. We've seen already from preliminary reports, it's very good. And I can also talk from my background as an underground miner, but the rock is very, very good for underground mining.
So we won't need to see as we were talking about this morning, all kinds of underground steel supports that add up to the cost because we got very [ common ] of rock where you put [ bolts and mesh in ].
That's right we won't. This is just as a quick comment, we are mining through some very, very small amounts of old stopes from the old days that's in the reports. And that -- those stops and that development has stayed open for the last 40 years. No. It's still there.
Yes, I picture of that at the of the day, that's an important point. How the old stopes have been there for 40 years. They've been flooded, not dried up, we've pumped them out, and they're still very intact.
That's correct. It's been very good. So perhaps very quickly one of the highlights – of course you would expect me just to choose 2 of my favorites and I have. On the Eastern Porphyry, what have we seen here, our best result here was 14 meters great width at 3.5 grams a tonne, including 3 meters at just under 11. And do note that, that is from 27 meters below surface, it's very, very close to surface. In addition to that, we've got the Anfield Zone, so it's about another 1.5 kilometer away. We intersect at 2.9 meters at 13.7 grams a tonne. And again, quite shallow from 43 meters. And some of the investors that have been with us for a couple of years, you might -- I think it is the end of the presentation though, Christina, you still have the picture of a guy holding a rock, and that is from the Anfield Zone. So we drew all that position. And here we are just under 3 meters to nearly 14 grams a tonne. A great result very early in the program. I still remain very, very bullish on that overall trend. And then under the South pit, we've been very pleasantly surprised by getting wide zones of mineralization at between 1 to 2 grams a tonne rate similar to our main deposit. And we're actually currently doing water in the sell-it plan to get that back into the mine plan later this year.
Excellent.
Thank you, Stephen.
So with regards to guidance for the year, obviously, as -- everyone knows and hearing the TRX story. We're able to build mills and capacity relative to the market extremely cheaply, Mike. I don't see anybody able to put up a 2,000 tonne per day plant. If you look at all the cost of that, including our expansions, it's less than $20 million. It's more around $60 million, $70 million. We challenge people to go and see where else that has been done for because I haven't seen anything less than $50 million, $60 million, $70 million for a similar type of asset and other parts of the world.
And I think we had studies suggesting this, so this has been very capital efficient to your point.
Yes, exactly.
So we're going to be doing that in a third mill expansion. The production guidance for the year is going to be 25,000 to 30,000 ounces. That's not the broad rate of the 2,000 tonne per day plant. That's 1,000 tonne per day plant operating for over the majority of the year and then the 2,000 tonne per day plant coming online. So the 2,000 tonne per day plant is higher than that guidance. Cash costs will come in at $800 to $900 an ounce as of next year. And again, we expect that to probably be a little bit lower when the full plant comes online as a run rate. Well, I might just make a couple of comments on that, Stephen. I mean we talked about Power and be connected to grid substation that's substantially closer to sites. So expect some benefit that way. But importantly, we expect to receive significant economies of scale from a larger plant. We've been telling investors this for quite some time. We don't need to expand the workforce substantially to grow from 1,000 to 2,000 tonnes a day. So inevitably, things like your processing cost per ton and your cash cost per ounce come down because they're able to use the existing workforce to produce twice the output.
Yes, exactly. So the numbers that we're presenting here are blended numbers between 1,000 tons and 2,000 a day.
And I might just make one final comment. You touched on our mantra, our pay as you go mantra. And we explained how to the extent there had been unexpected variances to the downside, like mill motor breakdowns or power connectivity issues. I can go the other way as well. If the team is able to exceed some of the targets and guidance figures that we've put on the slide here, we'll move up some of that capital expenditure and try and bring that plant online ahead of time.
Yes, because when we look at the models, it makes sense to do that.
Yes. 100%.
100%, so it really makes sense to do that. So again, our business plan is pretty simple: produce gold, pay for exploration to drilling, pay for additional capital programs and enhance our social license as we do that over time. That's the goal that we have in 2023 we're able to do with. And I'm hopeful that in 2024, we're able to do it again and thereafter.So mindful ESG. When I see ESG, we are good corporate citizens. I've always said this that a mine has a lot of inputs in mining, construction and capital costs and things of that nature. Thus, as you can see in our operating cost plus capital would be over 50% of revenue because you've got to put in capital expenditures in there, too. And the biggest beneficiaries of that should be local people. We're able to do that. and we're 100% Tanzanian on-site, and we procure as much as we can in Tanzania, and they are great workers and have done a good job in building out our assets. That helps to reduce local social risk. We also have our traditional miners in this area around Buckreef. That is not abnormal for Tanzania or Africa, and we work with them and we reinvest into schools and into health facilities. We have STAMICO a joint venture partner. And overall goal is to have a much more clean, smooth and efficient operation as a result of utilizing as much local content as possible and adhering to the highest corporate governance. So as possible as well.
Stephen, if I may, I mean, it substantially reduces our supply chain risk as well.
Yes. Yes, it does. Yes, and inflation risk. As well, what you're seeing in the Western world. So with regards to news flow upcoming, the mill expansion is underway. We will have an updated study or release modeling of the Buckreef Gold Main Zone. So everything we've been talking about around production is Main Zone only. We have metallurgical and geotechnical studies underway currently that will feed into that. And then we need to give the market a much better sense of where this means on could go and what our business plan is around increasing resources to have a much longer life project here at Buckreef. With regards to share price over the last year or so, our share price relative to market participants, I believe, has held up decently well. We're in a cash position of $7.6 million as of August 31, 2023. As of today, we're a little bit above that. So we've been maintaining our liquidity profile in this environment. And we're covered by 3 brokerages out of the United States. I believe some of them are on this call, and we'll be asking questions. So all in all, I'd like to see a higher share price. Everybody always likes to see a higher share price. Tough market conditions, I think we're waiting to store fairly well. But ultimately, we do want to make sure that we get to a higher share price over time. We believe that we can do that by driving the current business plan. May take time because we're on a pay-as-you-go program, it could move up or could move back a little bit. And now I'd like to hand it back to Christina and the operator for any questions. As you can see from our slide and a lot of participants that have seen this slide, always a lot of activity at the Buckreef.
Thank you, Stephen.
Thank you. [Operator Instructions] Our first question is from Heiko Ihle with H.C. Wainwright. Please go ahead. Mr. Ihle, your line is open.
Okay. In your press release, you stated "lower cash costs are expected in the second half of next year once the ramp-up is complete and the processing plant achieved a steady state. Can you maybe quantify the lower cash costs that you think we might see? I assume there is some sort of modeling you've done? And then also, just conceptually, would it be fair to take the first half of the year at the higher end, the $900 mark of your range and then assume the second half will be closer to the lower end of the range? Or is the delta even bigger in a way that the first half is over the $900 and the second half below the $800.
Mike.
Yes. I think we've obviously not guided to that level of detail quite yet, Heiko. But inevitably, as I mentioned, we expect to realize economies of scale as we move towards 2,000 tonnes a day. So I certainly expect Q4 to be amongst the lowest cost quarter once the 2,000-tonne a day plant it's steady-state capacity. But I think the way you're thinking about it is right. The front end of the year will be towards the higher end of the range and the back end of the year towards the lower end and sort of the average in over the course of the year.
Okay. In your internal model, the 2018 processing pen, when planned -- when do you think that will become cash flow positive on a monthly basis? Is there any sort of modeling that's been done?
Q4.
But monthly?
When you say monthly, Heiko, you mean is it cash flow positive on a monthly basis...
Which month is more money coming out and going in?
I'd say the start of Q4 is the expectation if it comes online in Q3. So in our case, that's probably June.
So Heiko, the way this is working and it's always operating cash flow positive, significantly operating cash flow positive. It's just that the operating cash flow is being reinvested into CapEx to build it out. And so it will -- once the new plant comes online, obviously, we're using all operating cash flow to bring this plant on as quickly as possible. Or predominantly most of...
So it will be -- based on the current schedule will be built and commissioned and sort of ramping up over the course of Q3 and then fully operational towards the start of Q4, at which point starts generating excess cash. Yes.
I'll get back in queue. Thanks for your time.
The next question is from Jake Sekelsky with Alliance Global Partners.
Congrats on the strong year, and thanks for taking my questions. Just building on Heiko's question a bit and the ramp to 2,000 tonnes a day. Are you able to touch on the anticipated grade profile at the higher levels of throughput. I mean is it going to be similar to what we've seen over the last year or so? Any color there would be helpful.
Do you want to comment on what the rate...
Yes. So Jake, as we get to 2,000 tonnes a day, you'll see a little bit of pullback on the grade. There's two reasons for that. Obviously, we are fast tracking the high grade so that we can build a plant. As a result of that, we end up with a medium to lower grade stockpile, which is available for us to process. And of course, we won't incur the mining costs on that because it's already mined. So you expect to see some pullback on the grade in the final quarter.
Okay. That's helpful. And then just looking out over the medium term -- looking at additional expansions beyond the 2000 ton a day plant. Do you expect to continue to scale gradually like you have been? Or do you think you might try and step up to, call it, the 100,000 ounce a year range in a single expansion scenario?
Yes. So that's -- we're prepared to do it both ways as long as it makes valuation sense from a shareholder perspective. So right now, as I mentioned, the cost of us able to build these plants has been very good. We are aware of where to get plants that can get us there quicker. And so it comes down to a financing question around the capital requirements for that versus to pay as you go program and the ability of bringing in external sources of financing such as bank finance, project finance, those sort of things would need to be procured if you were to go a lot quicker. But certainly, I think we're going to look at that, and we're going to go into the most shareholder accretive faster. Our goal is to have the highest NAV per share that we can, the highest EBITDA per share, those type of metrics and doing that evaluation for the expansion project. And we're currently going under that. Looking at some of that analysis now, Jake, it will be done in that fashion. But certainly, that option will be fully on the table if it makes sense for shareholders.
Okay. And then just comment for that. I mean it sounds like you're looking at those options now. Is that something we might see news on in the first quarter or towards the middle of next year?
I would suspect that's going to be more towards the middle of next year and looking at that. And just because we put a particular type of scenario into the America, we always adjust if it makes sense. So it can change over that particular period of time. And we're getting now as we get a good feel of the asset, and it's taken us a while to do that. The -- now that we have a really good feel of the asset, we should be able to get sort of any pivots into the market a lot quicker.
Got it. That's all for me.
The next question is from Mike Niehuser with ROTH MKM.
Can you hear me okay? I just want to congratulate you on your discipline, Stephen, since you've come on and particularly over the last year, how almost the operating cash flow equals your investment, it's pretty clear that you're keeping to putting all the money back into the project and really pushing it out in all the directions that appears. So most of my questions were answered on either your presentation or the other analysts. But if I could just throw out kind of re-asking a general way to get a little bit more comment, I would appreciate it if you don't mind. One thing you mentioned was the gold price and cost in Tanzania. How -- from a U.S. or a U.S. North America perspective, how do you look at the benefit of working in Tanzania on an operating cost basis?
Yes. I would say -- look, we have this debate a lot between well, I guess the market does between what is a Tier 1 jurisdiction. And I look at Tanzania in the case of the social infrastructure is in place. So what does that mean? It means that you can get qualified people to run and operate your business and then have good experience in mining world-class mining operations elsewhere, particularly throughout Africa and come back home. So the educational system is in place, before that. Also, the skilled labor is in place to build tanks and plinths and electrical works and all that. And so that's very important as well in building out an operation. The -- there's a lot of contract miners. Remember, we haven't bought a fleet in the door mining here be 100% contract mining. And then you have the cost profile of just what labor cost in Tanzania versus elsewhere, what electricity cost, obviously, fuel is a world product versus a local product. And so you have to your cost taker on that front. So I would say in our experience, we've had a very positive experience in operating in Tanzania versus some of the risk that you have in the supposed Tier 1 jurisdictions of cost overruns, labor disputes. A lot of assets in North America have been picked over. So you get into operational issues, too, on recovery rates and things of that nature.So with regards to operating in Tanzania, it's been nothing but a positive experience. So a lot of the noise that you do here from a Tanzanian perspective is at the national government level in Dodoma. So I kind of separate what's in the press versus the actual operating experience on the ground a little bit because we manage the Dodoma atmosphere quite well, and that's easier to manage than the operational aspects of things on the ground. So on the ground, it's been very good. At Dodoma level, too. It's been extremely good. Thus far, it's been a good experience. Did I answer?
If I could answer with one of a very good example, Mike. References made to the old power line being somewhat unreliable. We approached the regional commissioner, the Mining Commission, said, hey, like it's just not working for us as well as we'd like. And in no short order, we've put onto another power line which has extended just around a few kilometers. And now as of November, we've been having a substantially better power reliability.
Yes. TANESCO built that line. They built that line. Yes, we didn't pay for that line.
Yes. But again, the ability to work with the governments was very much there.
They want to see us be a big, big producer at the end of the day, lots of royalties, lots of jobs and economic activity around. And that is their goal like ours.
Yes. And Stephen, the other to think of things as we continue to work in Tanzania. So we're consistently de-risking the project.
Well, that's a very complete answer. It made me want to follow up. I think that isn't the -- I was curious with your comment also about going underground, and I'm not familiar with Buzwagi, but I think that was shutting down. And is that an underground mine in an open pit? And could you talk about your timing with going underground and how that's going to impact culture, at least on an operating level?
Yes. So it's a good question, Mike. Look, at the end of the day, we were talking about Buckreef Main Zone right now. So I fully expect my gut feel, and I'm pretty confident and it is, this will be underground Buckreef Main with pits and sound like it's all over powered. And so that will be ultimately where it is. Hopefully forms out. Obviously, to some exploration and drilling to do that because I personally don't like to have people go and dig up the earth where there's no gold and lots of projects do that, so it does need to be drilled. And so ultimately, that is the case. Buckreef Main, as you're familiar, it is a vertical deposit. It is quite wide. So you're not going to take a lot of dilution on mining of that. It will make sense to go underground. I like underground, it reduces your footprint on surface, and it's easier to manage things like security risk when you're underground versus being in an open pit environment. So I -- over time, I think the project gets derisked more by going underground and staying open pit. And tailings too – well, environmental [ factors] as well. It needs backfill, all happens with underground.
So I imagine this year, as you say, you're still 100% focused on mining Buckreef Main. But by the end of the year with you coming on with the additional ball mill in the last quarter, you're probably going to be really leaning heavily into making sure there's enough mine development from either Buckreef Main underground to the south or these other pits to make sure that it's stead and with more growth in mind. I know it's too early to say, but how do you see prioritizing the resource development outside of Buckreef Main?
Yes. We do rank these, Mike, I can quickly answer...
Well, actually, I think the question goes into it. So the priority right now is expansion, taking that cash flow expansion into a robust exploration program, which Andrew has delineated the targets where we believe to be most prospective around the property. Do you get that right?
You got that right. And again, Mike, if you look at the slide that we have, the Anfield Zone is only about 200 to 250 meters to the east of our Main Zone. Very early stages. We've got some spectacular range results I remember, just 3 meters at 14 grams a tonne. That's sitting a much broader zone of mineralization as well. But this – you are asking priorities, you obviously go for the most attractive results to start off with.
I missed the last sentence you said...
You go into the most attractive results, and that's why for a lot there, Mike, is Anfield. The main focus and then South extensions of the main pit.
Excellent. That's very helpful. So really, for the dense analysts like myself, and it will become more apparent as we move through the year that the priorities will naturally emerge. Well, that's pretty much the questions I had. I just wanted to say one more thing about Jim Sinclair to add is that his involvement in Tanzania back to Sutton really was making him not just Mr. Gold, but Mr. Tanzania in terms of bringing exploration to this part of the country. And I'm sure he was very pleased with your activities during the last year and probably do a great bill of pride from it, but I'll stop there. Thanks for taking my question.
The next question is from Craig Sutherland with Conceptual Solutions Limited.
Can you hear me? Okay, very good. Majority of the questions I had have already been answered. But first and foremost, congratulations on the progress. It's really been amazing to see how much you guys have fast tracked this in a way that we were all hoping for. But I guess the question that I had was our focus is on the Buckreef Main, but also now looking out into future possibilities, like you said, with Anfield and the Eastern Porphyry. Are you identifying anything beyond gold in your drilling or what you're looking for such as silver, copper, -- are there any other possibilities that would increase the value of the property or not change the scope but enhance the scope as we go forward due to the geological and the rest?
Yes. So currently, what we're seeing is in our doors, there's only a small portion of silver here because you do pick that up in the processing. And there's a small little amount of copper. We're not seeing anything in the assay results that would indicate that this could be a copper gold project, for instance. It's just not that type of geological formation. Andrew, do you want to get into that just a little bit deeper, please?
Yes. Now we're in an Archaean greenstone system. It's predominantly gold. I am assuming you summarized it, it was a little bit of silver that comes with it, but -- this is a gold play.
It's a gold play. And in the region, it's almost all gold plays as well.
Good. That's it for me. Everything else has been answered. So again, continued success to all of you and very happy with the progress.
The next question is from Stephen [ Riser with Assembly Office ].
A little bit of a technical, let's say, glitches there to work through. Firstly, I do want to congratulate the team on a strong effort for 2023 in terms of the cleaning up the balance sheet, increasing production, the exploration work and of course, the very strong stewardship of shareholder capital and funds. That's clearly evident from the discussion. The question I wanted to ask the team is really centered on market positioning and customer acquisition, a little bit of the softer issues in an environment where there really is tightened liquidity in the gold market industry and many miners that are competing for capital. From an asset manager's standpoint, as you all will readily be aware, there will be some natural weariness to investing in Africa, particularly through U.S. asset manager or hedge fund or family office, when there are miners like, for example, Snowline Gold or Hercules Mining in Vancouver and in Idaho, for example, that have high intrinsic potential ounces and are in regions that might be perceived as easier to work within. So I wanted to understand what the team is doing on one, in addition to the rhetorical discussions in the past on Africa and that it's safe and one can drive the car successfully, what might be going on from a more structural standpoint to see reports or information published even put on the website that cast aside some of these concerns about Africa and Tanzania. And then secondarily and related point, what's being done in terms of acquiring additional investors? I know that 15% institutional slice and the 15% friends, family and officers slice have been fairly steady for a while. But given the intrinsic value of this firm, there is value and very strong programs to acquire additional investors and customers. So again, market positioning and then structural things to overcome perceptions that may exist about Tanzania and Africa and also the active cultivation of really deep pocket investors.
Yes. So with regards to the first risk around that Tanzania, there's been a lot of progress at the government level towards foreign direct investment as you're fully aware of the former President Magufuli passed away just over 2 years. The new President is all about foreign direct investment. We've discussed where the government is going up for a direct investment and where it wants to go and how Tanzania is improving as an investment jurisdiction. You're seeing it in the fund flows. I think we've had that in presentations before around the investments that Barrick is making. There was just recently acquisition of OreCorp by Silvercorp. And we're starting to see a lot more investment in the infrastructure of Tanzania. You are correct. There's not a lot of that on our website. And as we've spoken before, we need to get that on to our website, a lot of the positive verticals around Tanzania. I think in my conversations and the team's conversations with investors that start up through with regards to seeing a reduced risk in the current administration in Tanzania versus the prior administration, and that is starting to resonate a little bit. I think you will see that come out in ratings around such Fraser Institute and other ratings over time. Kind of similar to the role, the analogy that I like to use is Ecuador. 10 years ago, not a lot of investment today kind of put up there with other jurisdictions. With regards to the acquisition of basically what you're asking is new shareholders. When we go through the shareholder registry, I do see a turnover in shareholders and new shareholders. I even see it in just a screen here today and look at the participants that are here on this call versus the participants that would have been on a similar call last year. It's much more broad and it's new priorities as well. And we -- as you're fully aware, I was in Switzerland last week, I didn't meet quite a bit a few shareholders that they didn't even realize were shareholders because they would show up in the OBO list versus a NOBO list. So those communications continue, we continue to have a lot of meetings and reach out to institutional investors and also large retail and family offices. So that continues. I would say that will ramp up significantly to as we start to formulate our more medium- to longer-term business plans. I'm hopeful that once that is more formulated, we become more investable than we are currently today. And that has to do with -- you're seeing the tenement some of that today with regards to talking about underground mining, Buckreef Main Zone, plant expansions. Today, if you were to try to look at what does 4,000 tonnes a day or 60 tonnes a day look like Buckreef Main, you couldn't answer that question and I can answer that question much better, but I don't have all the information on that yet, and that will be more into more known as we go forward here, which will enable people to put evaluation in a traditional mining sense onto the company. Does that kind of answer your question?
Yes, it does. And certainly, we're going to be grateful and look forward for further fact-based insights on the site that dispel some of the perceptions that might exist for particularly Western asset managers about Tanzania and Africa.
Yes. And look, it's helpful too, Steve, that you have acquisitions of mining properties starting to occur in Tanzania as well. That means that there are larger sources of capital that aren't afraid to make investments there. [ The Ocre ] property, the envision CapEx for that is $0.5 billion. So that's going to be a large equity check there written by somebody.
The next question is from John Tumazos with John Tumazos Very Independent Research.
Congratulations on the profit progress.
Thanks, John.
Your press release is probably succinct and may simplify, is the 1,000 tonne a day ball mill installation, all that is necessary for the expansion where excess mine capacity exists and excess capacity exists in other parts of the process plant flotation cells, et cetera, and tailings capacity exists? Or are there other parts of the expansion underway too?
Yes. So there's other parts of the expansion underway as well. So the crushing circuit is being expanded first. And so that equipment should have arrived onshore this month and then be going to Buckreef so as jaw crushers and things of that nature. The plinths need to be built for the ball mill that should be built this month as well. There is electrical components that need to come in as a result of the expansion, and that's going to come online in the new year. The tank capacity does need to be expanded. We have a plan for that as well. That will be locally done. And with regards to tailings, we do need and I told lots of market participants that after about 2 years, we do need a longer-term tailings plan. We are in the process of doing that, putting that together, looking at a lot of dry stack options, whether it's through dry stack tailings. In filter presses, we're also looking at thickeners and all those sort of type of processes as we speak to put that in place over time. But we can also expand our wet tailings facility, if so desired in that period of time as well. So rightfully, your question is right. I think we got all the components to that. On mining, we can maintain current mining rates to achieve our output. We did a lot of mining last year. And in our prior M&A said that opened up the deposit for a medium term, and that is the case.
And just a point of clarity there, John. We don't have a flotation cellular at this time.
In terms of regional exploration, could you talk about what your drilling programs might be in 2025 and 2026 as the cash flow comes in from the production or other uses of funds that may be priorities?
Go ahead, Andrew, tell the regional program, will develop over time, but it certainly is not the goal...
Maybe I could ask us to go back, maybe, Steve, just to the one slide of exploration.
There we go.
John, it's a bit easier with this slide to talk about it. As you can see, the Main zone with the colors there, in the center is very clear. Just to the immediate east of that, all those white dot. So far, we understand there's 3 zones over 3 kilometers anchored in the Northeast with the Eastern Porphyry deposit, which is still open to the northeast and in the south by intermittent mining operation by some locals under the Chinese group. There is so little drilling in that, but there's so much opportunity that we have to test. Outside of that, you can see some additional red arrows, I'll start off with the East. We've identified another trend just off to the east, you can see that red set of arrows. You notice also that it's on the same trend as for the Eastern Porphyry and Anfield and the Main zone. And similarly, if I then take your eye over to the extreme west of the left, again, we've identified through fieldwork and additional 2 trends there. So ‘25, ‘26 there's no shortage of targets to go and drill on that. Broadly in the region, as you would expect and I always like to use the phrase, John, real we keep track of who is who in the zoo around us. And as opportunities arise there, so there may be some further activity.
Yes, a lot of guys have approached us, too. So when I think through this, and as I said, this business plan will develop more fully over time is once the processing plant is up and running, is there a hub and spoke model that can be had here because there's a lot of high-grade, smaller type of pits. And when you think about successful companies have done that, Calibre is one that comes to mind. So that's -- it's a human capital constrained at this point in time. But certainly, that we need to focus on the processing plant. First, what's on our property, second, and then go look to how that all integrates into the region.
Yes, we have new products. We have also been received inbounds which we assess both locally and within Eastern Africa.
I can ask one more. As gold rises above 2,000, probably other projects advance in Tanzania. The graphite industry is also active in East Africa. Are there shortages of skilled labor or any inputs to production?
Yes. So on that -- on the inputs, we've been good thus far. On skilled labor, where I think there is some -- and I think this is a global thing versus just a Tanzanian thing. There is a lack of highly skilled mining engineers, and that's more of a global shortage than it is a Tanzanian shortage and we supplement our mining engineer skill set with professional services firms and individuals and supplement that with site. But with regard to the other disciplines around metallurgists and geologists, we haven't seen a shortage in that skill set or a shortage of skilled labor in Tanzania that execute. I would say there's excess supply of those skills in Tanzania, but the one that is shortage and that's global as mining engineers.
Yes. I think I can say also, John, we have been able to attract key people, and we also have a very modest turnover. Yes. So we've been able to retain very well as we wish to retain.
Yes. And I think when you're in a growing project, it's easier to attract and retain people as well. So as long as we continue to grow and pay people well, then we should be okay in that regard on the HR side.
Thank you, John. See you later this month.
Yes. Sorry, I was just going to hand it over to Stephen, for questions in writing. We don't have any text questions, Mike.
Just take Q&A...
There are. You just need to click on the text column in the Q&A.
Can people see the questions? Or should we read them out?
No. They cannot see them.
Okay. So Stephen, maybe you can read the question.
Yes, I'll read the question. So we have from private investor, and I think this comes -- I get asked this question all the time, and it's a question from the past. Is there a realistic possibility to get future dividends paid to physical gold? Right now, in the short to medium term, I would say that, that is not something that we are looking at. As you're aware, the Tanzania government does put a royalty on gold, it does track its gold fairly closely, and we have a joint venture partner in the government of Tanzania through STAMICO. So I don't see a dividend in the short to medium term in physical gold. The second question from the individual is based on the grade exploration numbers the Board presented, would you agree with my personal opinion that there's a high possibility TRX Gold has about 5 million to 10 million ounces of gold under the ground. So obviously, we are traded on the public markets. That would be a personal opinion versus a fact-based opinion at that this point in time. We do need to do a lot of work on the exploration potential of this property to drill that out to 5 million to 10 million ounces. Personally, I'm hopeful that, that property will come to that sort of level. Andrew is hopeful that the property will come to that sort of level. But it does need to be proven out through to drill bit.
That's correct, Steve, personal opinion. I would say, again, we've had very positive early results. And there is no shortage of exploration potential on our special mining license.
Exactly. But it does need to be proven out.
There's a lot of drilling to be done, but that's the name of the game.
That's the name of the game, yeah. So the next question is, when do you expect to bring out an updated indicated in the full resources report? How would you describe -- okay, so 2 questions there. So with regards to updated indicated in the full resources report. What we are doing is looking at what is the economic potential of the Buckreef Main Zone. And as part of that, there would be an update on resources that are currently in the Buckreef Main Zone. Did I get that correct, Andrew?
Yes.
So that is expected to come out in the first half of fiscal 2024. Yes. By June. How would you describe...
Calendar...
Calendar, yes. It's not fiscal. Yes, sorry, calendar. Yes. So the next question to that is, how would you describe the current relationship with the Tanzanian government, since there were rumors -- some rumors of the old aggressive Tanzanian president, not being sold friendly to foreign investors. And I think we did -- and Steve Reis' question, we did answer this. The current relationship is good. We have a good relationship with the mining minister and the old mining minister as well who's now the Vice Prime Minister -- we have a good relationship with the [ permitting ] secretary, a good relationship with the Mining Commission and with our joint venture partner. The reality is in countries in Africa, if you put an asset in production, you continue to grow it, you become a good taxpayer, become a good employer, have a good reputation. You generally have a good relationship with the government. They want to see the asset grow just as much as we would. And that's in, what I'll say, aggressive regimes and we're not so aggressive regimes. And you're right, the old President was not as friendly to foreign investors. When we started, and I came on board with the old President in power. And as soon as we start to build the asset, that relationship was fine. So I think that -- I've often said this to people is when you go into foreign countries, and I've been to a lot of them, and I've got business and a lot of them to come in my prior role of managing government relationships, both on the government side and on the investor side. The world is open. And so what does that mean? Everybody has a smartphone. Everybody has an Internet connection. Everybody has access to the same information, which wasn't the case 30 years ago. And so -- and then a lot of the people now are very mobile and are educated in the same educational institutions, particularly in the West. As long as you have a fair, open and transparent relationship, generally, you have a good relationship. An asset approach that we've been taking.
I think you talked about foreign direct investments, Stephen. It's fairly well publicized. But one of the key metrics that the new government has put into place is growing mining as a percentage of GDP.
That's correct.
And they put in some targets and numbers around that. So certainly a new regime and to Stephen's point, we're getting along well. And as long as we continue to execute, I don't expect that to change.
And so the next question is when and how are shareholders going to be rewarded? So markets go up, markets go down, market sometimes are good, markets are sometimes bad. And what's within our control is not so much what the markets are, what the market value company is at. It's what's in control of us is to reach out to as many investors as possible. Put forward the story to as many investors possible, but also come up to a business plan that is investable. And a business plan that could survive those ups and downs from a market perception. I think we've managed to do that. That was one of my -- and I was asked this a lot over the last couple of weeks is, why did you go with the business plan you went with? And a lot of people don't realize, but a large part of my education is in economics. There is a full realization that interest rates could never be at zero forever. They never were in the history of mankind. And when interest rates go up, generally, valuations go down. It's a pretty simple equation. Liquidity usually dries up as well and the ability to access capital usually drives up with it. And so you need to have in place a business plan that will survive those ups and downs. And in the junior explorer, I could tell you, when I joined, the business plan would not have survived this market. Today, the business plan does survive this market. It's predominantly a self-funding operation. We wanted to slow it down and build a liquidity record. We don't see that as being necessary at this point in time. But the business plan can survive this type of market. And over time, as the business rolls out its cash flow profile, it's EBITDA profile and its resource profile than shareholders should ideally get rewarded from that growth. So the next question I have is I hope investors who were part of this from the beginning, could be made whole again. I'm in good shape. I feel those who got into the vision when TRE was trading at the all-time lows and highs, I appreciate the progress that you've made. And I addressed this in almost all presentations, is the management team came on board just over 3 years ago. I believe we've moved the project forward since that point in time. That business plan is much different than the original business plan of being a royalty company and predominantly in exploration [ call ]. It has a different risk profile associated with it. I would say it's probably a little bit net risky today than it was before. And markets. When TRE was at its hide, market on gold, we're extremely bullish. We don't have that same bullishness in the market today. And if that pollutions were to come back, then hopefully, we'll trade a lot higher. And that's ultimately the goal and get out to as many investors as we can. So I hope that answers that question. Operator.
There are no further questions at this time. So I'll hand it back to you for concluding remarks.
Yes. Thank you. So as everyone has heard from us, we are a growth company. We've grown quite well in 2023. We're hopeful that, that growth continues into 2024 and stay tuned for a lot of news to come. I think 2024, we'll have a lot more news than 2023. We have a lot underway. We have the plant expansion. We have the formation of a business plan for Buckreef Main Zone, and we will then start to really turn the drill bit and that will produce a lot of exploration results. And as I said, I like to be flexible. The management team likes to be flexible. What was presented today is the current business plan for 2024. But if a new one and a better one emerges, there won't be a limit. And so we always want to make sure that we keep shareholder value in mind and attempt to minimize dilution as much as possible. And I thank everybody on today's call for being a shareholder and sticking with us. Thank you.
This concludes the meeting. You may disconnect. Thank you for participating, and have a pleasant day.
Thank you.