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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
So hello, everyone, and welcome to the Victoria Gold video and conference call to discuss the company's third quarter 2022 financial results. Sorry, there's more people joining, so just a moment. Okay. So listeners are encouraged to read the Victoria's third quarter audited financial results report and the MD&A both available on the company's website and on SEDAR.
Joining us on the call today are John McConnell, President and CEO; Marty Rendall, Chief Financial Officer; and Mark Ayranto, Chief Operating Officer. [Operator Instructions] Also note that this video call will be recorded and available on replay back on the company's website.
We will be making forward-looking statements on this call and encourage every -- all participants to see our disclosure documents including our corporate presentation, AIF and MD&A and the cautionary notes therein, which can be found on SEDAR and the company's website.
I will now turn the meeting over to John McConnell. Director, President and CEO.
Thanks, Lenora. Good morning, afternoon or evening, everyone. I'll provide a brief summary of the quarter, then pass the call to Marty and Mark to provide more details.
First and foremost, the Eagle Mine continued its strong safety record with no lost time injuries again this quarter. At September 30, our team had worked 2.7 million hours lost time incident free. Operationally, the third quarter of 2022 was a challenging one for the Eagle operation due to a combination of factors, including an unplanned shutdown for localized forest fires in Yukon early in the quarter and higher-than-expected unplanned maintenance downtime of our crusher and conveying circuit due to both supply chain and labor challenges. We stacked less tonnes on the leach pad than we had planned in the quarter.
Despite the lower stacking rates in the third quarter, our gold production was within our expectations at approximately 50,000 ounces. This production level is attributable to strong heap leach performance in the quarter as recoveries continue to trend in line with our expectations.
As previously announced, in late September, the overland conveyor that delivers ore from the crushing plant to the heap leach facility at Eagle experienced a failure. This belt was replaced within our initially estimated time frame and stacking operations resumed in the third week of October. As a result of the conveyor belt failure and subsequent repairs, we withdrew our production guidance for 2022. Clearly, not meeting our production guidance is disappointing to us and our investors. We will update the market on final 2022 production results in January. We also look forward to releasing an updated mining plan and technical report for Eagle in the first quarter of 2023.
On the exploration front, we achieved a major milestone in the quarter, releasing a maiden resource for the Raven discovery at the Dublin Gulch project. We were pleased to report an initial 1.1 million ounce resource at an average grade of 1.7 grams per tonne on only 3 field seasons and 18,000 meters of drilling. This discovery is located approximately 15 kilometers east of Eagle. We plan to update the maiden resource in the first half of 2023 and look forward to sharing with you the results of our 2022 exploration drilling at Raven in the coming months.
I will now turn the call over to Marty Rendall, our Chief Financial Officer.
Hi, everyone. I will briefly discuss our financials, before passing it over to Mark to discuss operations. Currency will be in CAD unless specifically mentioned otherwise.
During the quarter, we produced about 50,000 ounces of gold and sold about 45,000 ounces, resulting in revenue of approximately CAD 100 million. That is about 16% lower than the CAD 120 million in revenue generated during the third quarter of 2021. The revenue difference is the result of reduced ounces sold. The gold price during the quarter in USD was also lower than the previous year. However, this was predominantly offset by a more favorable CAD-USD exchange rate. So in CAD, the gold price was similar to the previous year.
Cost of goods sold was CAD 65 million during the quarter, compared to CAD 48 million in the third quarter of the previous year. The increase is due to inflation and working capital changes in inventory, specifically gold inventory. The lower gold sales and revenue combined higher costs year-over-year certainly reduced profit margins. However, both gross profit at CAD 16 million and operating earnings at CAD 12 million remained positive. The strengthening USD resulted in a foreign exchange loss on our U.S. denominated debt of CAD 15 million for the quarter, contributing to a net loss of CAD 9 million or CAD 0.13 per share.
At the end of September 2022, the company held cash and equivalents of CAD 36 million compared to CAD 31 million at the end of December 2021. I'd like to remind listeners that we use our revolving credit facility to manage our treasury, therefore, our cash balance generally stays fairly consistent while debt will fluctuate to match the liquidity needs.
Working capital at the end of September 2022, was CAD 103 million compared to CAD 63 million at the end of December 2021. The increase is primarily attributable to higher gold inventory primarily on the heap leach pad.
During the most recent quarter, total capital expenditures were CAD 29 million, while 9 months year-to-date, total capital expenditures were CAD 88 million. This is comprised of sustaining capital, capitalized stripping and growth capital and exploration. A detailed breakdown is shared within our MD&A.
I'll now review our non-IFRS performance measures. Once again, the detailed numerical breakdown, along with commentary on the calculation of the non-IFRS measures can be found within our MD&A. During this section, I will use USD for unit-based numbers to allow for uniform comparison with our peers.
The average realized price per ounce of gold sold during the most recent quarter was USD 1,717. This compares with the third quarter of 2021, where the average realized price was USD 1,806 per ounce. Cash costs per ounce of gold sold during the most recent quarter was USD 1,116 compared to the third quarter of '21, where cash costs were USD 708 per ounce. All-in sustaining costs per ounce of gold sold during the most recent quarter were USD 1,489. This compares to the third quarter of '21, where all-in sustaining costs were USD 961 per ounce.
Free cash flow during the most recent quarter was negative CAD 9 million. This compares to the third quarter of '21, where free cash flow was positive CAD 32 million. EBITDA or earnings before interest, taxes and depreciation and amortization during the most recent quarter was positive CAD 21 million. This compares to the third quarter of '21, where EBITDA was positive CAD 68 million.
I'll now turn the call over to Mark Ayranto, our Chief Operating Officer.
Thanks, Marty, and good morning or afternoon, everybody. Starting off, to emphasize John's point on safety. We're proud of the workforce and the strong safety culture and record that we enjoy at the Eagle Gold Mine. As John mentioned, 2.7 million lost time incident hours free and that extends over 2 years. That, combined with our total recordable injury frequency, which has consistently trended down since the commencement of production at Eagle and currently stands an industry [indiscernible] 1.1 year-to-date.
The third quarter this year saw us working through some operational challenges. Most notably in the quarter, we stacked 2.1 million tonnes of ore onto the heap leach pad. This stacking rate was below our plan due to higher-than-expected unplanned maintenance as well as the shutdown in July for local forest fire activities. That said, we continue to optimize our maintenance schedules, supply chain, inventory and labor force and we expect to see our crushing and conveying assets show higher availability as these improvements are implemented.
Despite these challenges, there were some significant highlights in the third quarter. We mined 5.1 million tonnes of ore and waste in the quarter, and that's an increase of approximately 18% quarter-over-quarter. The improvement was largely due to a combination of haulage fleet performance and shorter waste calls as we successfully established a new waste dump location late in the third quarter.
Despite lower than planned tonnes stacked, our leaching performance on the heap leach pad was strong in the third quarter. Recoveries are continuing to trend in line with our forecasted levels, and we saw an approximate 7,000 ounce reduction in our in pad inventory in the quarter. Our ore reserve reconciliation continues to be excellent with an average grade stacked in the quarter of 0.88 grams per tonne and an average over the first 9 months of the year of 0.84 grams per tonne. This is in line with our mine plan.
As we've disclosed, following the end of the third quarter, stacking operations were down for approximately 3 weeks to repair our 1.5-kilometer overland conveyor belt that connects the crushing circuit with the heap leach pad. And thankfully, due to having the required belting in inventory and the performance of our on-site maintenance and operations team, this repair was completed without any major issues.
As John highlighted, the initial resource at Raven was a significant achievement for our exploration team. And they've been able to quickly turn our grassroots discovery into a sizable resource with a grade of approximately 2.5x that of the Eagle reserve grade. In addition to the 18,000 meters of drilling that is currently included in the Raven resource, we drilled approximately 25,000 meters at Raven during the 2022 field season, which we concluded in October. These results will be released as they're available and will be included in an updated resource for Raven, which we expect to release in the first half of 2023.
And finally, I'd like to welcome to our management team, [ Tim Fish ], who joined us as Vice President and General Manager of the Eagle Gold Mine in October. Tim is a metallurgist with over 40 years of experience, and we're very pleased to have him on board on an on-site management capacity.
John, I'll turn it back to you for concluding remarks.
Thanks, Mark and Marty. In summary, the third quarter presented us with a number of challenges. But we also saw many indications that the Eagle Gold operation is in a strong position to improve its performance. We continue to work to deliver those results and the production levels that we know the mine is capable of.
Thank you all for listening. And we'll now open the call to Q&A.
Sorry, I was muted. Okay. [Operator Instructions] And John to get started. We have a question from Chris Thompson.
And he says, please provide a sense of unit costs per tonne for mining, processing and G&A realized in Q3. Are you seeing any cost relief?
I'll turn that over to Marty.
Yes. Just a moment, John, Mark, do you have those numbers at hand? Or just take me a minute to find them.
Actually, Chris' got his hands up. So Chris, if you'd like to unmute.
I'm here. Can you hear me?
Yes.
Yes. Look, I just need a sense, I guess, of unit costs per tonne. Obviously, looking at, I guess, the ounces sold and the ounces produced on a quarterly basis, I think they were the highest quarterly ever. So it somewhat muddies the picture there. But I was way out on my cost expectations. I just need you to sort of clarify what those costs -- unit costs are and what we can anticipate on a forward-looking basis? And I totally understand inflationary concerns and what have you. Maybe just speak and just clarify that, please.
Did you get that up, Marty? Let's speak to that?
No, Chris, It's a little bit different because when we do our unit costs, our mining cost, processing and G&A per tonne we include a number of capital items such as capitalized stripping. And so the numbers aren't going to match to the financials, where you're looking at cash costs and operating costs that are not capitalized.
What I can say is answer the second part of your question, and I can get back to you on the tonnage later and try to break out those capitalized numbers. But you did ask about the differential between ounces produced and ounces sold. And what I can tell you is, generally, what you'll see is our sales ounces are 5% below our production ounces. And that's due to the royalty which we pay in kind or in metal to a Osisko royalty. So that 5% will always be a difference.
Any difference above or below that 5% is purely due to timing of shipments, and we ship every couple of weeks. So -- you'll see this quarter, we're about 7% or 8% to below production, whereas last quarter, we might have been a little bit less than 5%. So 5% is normal, other than that is timing.
I can't talk about the cost a little bit. When you look at our unit costs, we're really being hit on both sides. So the numerator, obviously, is cost. And as you mentioned, Chris, that is up significantly due to inflation and the denominator is due to ounces and compared to a year ago, we did produce 10% less ounces, and we sold about 14% less ounces. So that's why you're seeing a very significant increase in our unit costs.
And just to touch on the inflation subject a little bit, it deserves some attention. If you look at a year ago, just for example, look at fuel, which is one of our larger cost drivers, a year ago, we were paying approximately CAD 1 per liter of fuel delivered to site. During Q3, it hit a high of CAD 2, so 100% increase. Now that was the highest we've seen at CAD 2 and it's since settled back down. And most recently, we're paying CAD 1.70 to CAD 1.80 per ounce delivered to site. So it's just a massive inflationary hit and it does get our direct cost of fuel. But as you can imagine, those fuel costs indirectly hit everything from travel and supply delivery to our consumables. So it's across the board.
So our current costs are reflecting that CAD 1.80 per ounce delivered to site. And if it goes up, our costs will go up a little bit. And we do hope that there's some more relaxation coming over the next little bit, and we'll experience some savings.
Just one more quick question, if you would. Maybe just update us on plans for Project 250. Is it off the table now? Or is it something that we can see sort of maybe commencing next year?
Yes. It's John. Chris, we've got to learn to walk before we run. Right now, our goal is to get to 200,000 ounces per year in 2023. We still think something plus 200,000 is achievable. But we want to get to a steady-state 200,000 and then we'll worry about going to plus 200,000.
Okay. And [ Marcus Giannini ] has a question.
This is Marcus calling in for [ Heiko ]. Can you guys hear me all right?
Yes.
Okay, great. Regarding the downtime on the crushing and conveying circuit, can you provide an estimate for the indirect expenses from this downtime? And can you give us an estimate as to the direct cash costs involved in fixing it back up? Just trying to get a sense of terms, nothing exactly needed.
Yes. In the direct costs, we're probably in the order of CAD 1 million. That's the cost of the conveyor plus the cost of a contractor to come to site to assist us with installation of the new conveyor.
Marty, have you got an estimate on the cost of the lost or delayed ounces?
If we're specifically chatting about the delayed ounces due to the conveyor, which was, as you'll recall, approximately a 3-week down, that equates to about 15,000 ounces and 15,000 ounces in CAD is approximately $33 million, which is going to be deferred.
Okay. Got you. And then just following up on the conveyor expenses. In the prior release, you talked about using the downtime to take care of some other maintenance needs. What exactly was done during the quarter? And should we budget some higher expenditures in our cash flow model for the quarter given maintenance that was essentially pulled forward?
Mark, can you summarize the work that was done in addition to the conveyor?
Yes, Marcus, I think in general, you really don't need to be putting in any extra cost items. It would have been -- we just brought some of that work forward opportunistically. We rebuilt one of the crusher heads. We did some skirt liners. We did a bit of work on our grasshoppers in a little bit of shoot work on the liner. So really nothing -- nothing that's outside of normal course.
And [ Dominique Doucet ] has a question. Dominique -- she put it in her chart -- there she is. Just a minute.
Okay. [indiscernible] will be where you are on a quick [indiscernible] that before we see production and [indiscernible] study and I think we are expecting a rate of grade [indiscernible] are you expecting a decrease [indiscernible] or in the future, in the next coming years for the base should be a design and were higher than we previously expected growing and [indiscernible]?
Yes, Dominique, it's John McConnell. I don't think your microphone is working very well, but I can read your question in the chat. And I think what you're asking is if we anticipate the grade will come down from the 0.88 to closer to 0.7 in future years, as per the mine plan. And that is correct. Life of mine is lower grade. So we do expect these grades plus 0.8 continue for the next 2 years, and then you will see the grade drop closer to 0.7.
Mark, do you have anything to add to that if I didn't hear the question completely?
No, I think it's -- I think you nailed it well, John.
Anything further, Dominique?
[indiscernible].
And Mohamed has a question.
John, Marty and Mark. Can you guys hear me?
Yes.
So just to maybe dive in a little bit more on the cost pressures that you're seeing. So I know that you talked about the cost pressures faced on the fuel side. Have you experienced anything on the labor side during this quarter?
No, we didn't make any adjustments to salaries or wages during the quarter. One thing I would say, though, is that we are still below ideal employment levels. In other words, we're operating with less people than we really need. And we make up for that by using some contractors. And generally, the contractors are a little more expensive than your own employees. So I don't have an exact number for you, but we do see higher costs around labor and lower productivity.
Sounds good. That's pretty helpful. And I think just my second question on the updated mine plan and technical report that's coming in the first half of next year. What could we expect from this? I know that you had some positive exploration results, would there be any update to the reserve and resource there? Would this mainly be to reset production and cost expectations given the mine plan had a slightly lower cost for next year compared to what you've been seeing for the last 3 quarters?
Mark, do you want to address that?
Sure. Yes. Mohamed, there's really 2 technical reports. One will be for Raven. You recall, we just -- as we just talked about, we just released that. We will incorporate the 25,000 meters of drilling that occurred this year. That's the technical report with its associated resource estimate that we expect to be in the first half of the year. So probably the -- it always takes a bit of time to get those results in. So I would expect some time in Q2.
For Eagle, the technical report for that project we were aiming for Q1. And certainly, we are looking to reset cost mine plan. We did do some drilling that we've announced, that's both laterally and to depth at Eagle. So we're looking to see how much of that drilling will increase or replace reserves. And we'll get that out in Q1. Most interestingly are the ounces laterally. Obviously, they come a bit earlier in the mine plan and a bit better cost. So that's what we're looking to do at Q1 of 2023.
Okay. Perfect. That's helpful. And just a last question for me on, I guess, your cash balance and your current liquidity position. So just noting that you have about CAD 114 -- CAD 115 million outstanding on your loan facility -- your credit facility and about CAD 60 million outstanding in our term facility available and CAD 60 million available in internal facility. Are you comfortable with the level of liquidity that you have given your commitment and CapEx needs over the next 4 quarters?
Marty?
Yes, Mohamed, when we look out into 2023, we feel we're in good shape cash-wise. We're looking at a lot of different scenarios and working through our budgets now as well as lots of sensitivities. So we feel with the room we've got remaining on our revolving credit facility and our cash that we're in good shape. That being said, when we start stressing some of our cases and if there's shocks on the gold price or operations or exchange rates, if inflation goes even higher than we're seeing now, then our cash balance becomes tight. So we're always looking at ways to add to our flexibility.
You'll recall earlier this year, we added to our revolving credit facility as we paid down our term facility. So there's some opportunities to do that same type program this year. That being said, we do think we have enough but it's always nice to have a little more flexibility in what's a little bit of uncertain times surrounding inflation.
[Operator Instructions] Okay, John, unmute yourself.
Thank you. John, I see that we had to raise equity and borrow a little money to finance the company this year. And with the gold price falling, things, I guess, are a little tougher as well as costs having inflationary pressures. What is the game plan next year to maybe repay a little bit of debt and avoid going to raise equity or borrow?
Yes. We did not raise equity this year, John.
But I will let Marty address the liquidity.
Yes. Yes, just to confirm, John and John, we did raise a small amount of equity early in the year, specifically for exploration. So we raised CAD 20 million flow-through at a significant premium to the share price due to tax -- Canadian tax law. So we did raise CAD 20 million that's specifically earmarked for exploration primarily at Raven. Of that CAD 20 million equity we raised earlier in the year, we spent approximately half of it, so CAD 10 million, and we still have CAD 10 million remaining that we can spend next year on Raven.
On the debt side, you're right, we did have a net draw on our debt. We paid down significant debt on our term loan, but we borrowed a little more on our revolver. So certainly, as we head into next year, again, we're finalizing all of our numbers, and it's going to depend on production and gold price and inflation, but we are focused on paying down debt. That's what we're going to do with all of our free cash flow from next year. And we do anticipate being able to completely pay off the term debt next year. Again, dependent on gold prices and production.
Okay. And Mohamed has a question again.
Sorry, guys. Just one last one for me on your growth CapEx guidance of USD 18 million for the year. Just looking at what you had quarter-to-date total spend of about $17 million including your growth exploration of $13 million. So when I'm looking at your total growth CapEx and exploration guidance of $31 million compared to that $17 million, do you expect a spend of $14 million in Q4? Or should we defer that into 2023?
Marty?
You'll ask me a little bit on those numbers, Mohamed, I want to make sure we're not confusing US and Canadian because we do switch around a little bit. So are you looking at just that growth capital?
I'm looking at both growth CapEx and growth exploration to be just tie backing into what your quarter-to-date spend was? Maybe I'm not including everything that I'm seeing. So I just wanted to get maybe a reconciliation of that quarter-to-date.
If we look at our growth capital, exploration is essentially done. Our exploration program that Raven wrapped up in October. There may be some small costs, $1 million or less for assaying and cap cleanup, but it's essentially done growth exploration. We will have a little more growth capital in Q4. Some of it to do with the water treatment plant and pad expansion, a couple of other smaller things. But we do anticipate somewhere between CAD 5 million to CAD 10 million in Q4 in growth exploration and capital.
[Operator Instructions] Okay. Well, thank you, everyone, for your questions. As there's no further questions, we will close with the meeting.
Have a great day.
Thanks, everyone.