Galiano Gold Inc.

Good morning. My name is Ludi and I will be your conference operator today. At this time, I would like to welcome everyone to the Galeano Gold Inc. 3rd Quarter 2024 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press the star followed by the number two. Thank you. Mr. Matt Badalak, President and CEO of Galliano Gold, you may begin your conference.

Thank you, Operator, and good morning, everyone. We appreciate you taking time to join us on the call today to review our third quarter 2024 Galliano results we released last night. We will be making forward-looking statements and referring to non-IFRS measures during the call. Please refer to the cautionary notes and risk disclosures in our most recent MD&A as well as this slide of the webcast presentation. Yesterday's release details our third quarter 2024 financial and operating results. They should be read in conjunction with our third quarter financial statements and MD&A available on our website and filed on CEDAR Plus and EDGAR. Also, please bear in mind that all dollar amounts mentioned in the conference call today are in US dollars unless otherwise noted. On slide four, with me on the call today, I have Matt Freeman, our Chief Financial Officer, and Michael Cardinals, our recently appointed Chief Operating Officer. For this presentation, I'll initially go through the highlights. Michael will give an operations update, and Matt will discuss the financials. I'll then provide some closing remarks and open the call for Q&A. Here on slide five, please note that I'm discussing Galliano's results on a 100% basis. I'm pleased to report that as mining at Abora advanced, gold production rose by 13% this quarter, reaching nearly 30,000 ounces. Mine productivity continued to ramp up and we saw a 32% increase in total tons mined, moving 10.4 million tonnes of material over the quarter. On the financial side, despite investing close to $40 million in stripping activities at Abore this year, Galliano's liquidity remains robust. We are in a strong position with approximately $121 million of cash on hand and continue to be debt free. During the quarter, the team made significant progress on the work related to the life of mine optimisation, the updated mineral reserves and resources, and the planning to restart the NCRAN pit. At NCRAN, we advanced discussions with a preferred mining contractor, and mining rates and costs are now clearly defined. This information will inform our life of mine plan, which we anticipate completing and releasing to the markets in early Q1 2025. On the exploration front, while results were quieter this quarter, we continue to advance the AGM exploration pipeline, with drilling focused on the Sky Gold B and Abore North targets. Drilling at Sky Gold B began in August with approximately 5,200 metres of air core, RC and diamond drilling aimed at testing the highest priority targets. We expect to complete drilling and receive all assays in Q4. We should then be in a position to share results from this first phase. The follow-up drilling program at the Coma target has been defined and is scheduled to commence in Q4. Now, turning it over to Michael and a discussion on our progress in operations during the quarter. Slide six, please.

Thank you, Matt, and good morning, everyone.

As Matt mentioned during the introduction, I joined Galeano recently on September 3rd, and I spent my first three weeks with the company on site, which enabled me to take a good look at the operations, and I'm encouraged by what I saw. Starting with safety, we had one recordable injury and no lost-time injuries this quarter, resulting in 12-month LTI and TRI frequency rates of 0 and 0.3, respectively. Health and safety remain our top priority. particularly in operational areas where activity is ramped up due to the resumption of mining activities and the progression of projects within the plant. Looking at our mining performance during the quarter, despite challenging conditions with backfill material, we saw improved mining production performance from the Abore pit, with a 32% increase in total material movement compared to Q2. Average daily tonnage rose to 113,000 tonnes per day, with a 43% increase in ore mined compared to the previous quarter. Lasting frequency increased as we advanced through the transition zone into fresh material in parts of the pit, yielding good results from our operational improvements. On processing performance, crushing limitations impacted mill throughput during the quarter as we processed more arbor a ore. resulting in a 13% decrease in total tons process compared to Q2. However, higher feed grades and improved metallurgical recoveries, which increased from 82% to 91% in the quarter, helped offset the reduced throughput, resulting in higher gold production. We produced 29,784 ounces of gold during the quarter, which was 13% higher than Q2. This performance keeps us on track for the lower end of our annual guidance of between 120 and 130,000 ounces of gold. On to slide seven, please. Here I would like to highlight the progress we have made at the site, specifically with the ramp up of mining operations at Abore. As previously communicated, we've expanded the abore reserves by 45%, which required a pit expansion to fully leverage this increase. This move has allowed us to implement improved mining practices, including adjustments to the mine planning, drill and blast procedures to enhance oil recovery and minimize our loss and dilution. Changes to pattern design and explosive powder factors are also improving fragmentation, which will aid mill throughput as we continue to face crusher constraints. We are making good headway through the backfill material and expect to have it mined to completion by the end of November. Clearing this material will open up more of the pit, allowing for better utilization of all the available equipment. Our mining contractor has fully mobilized all equipment, positioning us well to achieve our planned production rates. They also set up a mobile crusher at the Abore rum pad at the end of October, which will improve our hauling efficiency and further support mill throughput. Despite some heavy rains in September, overall precipitation was lower this quarter than in Q2. Our increased pumping capacity combined with the expanded operational area have strengthened our ability to manage production levels through the wet and dry seasons. As we continue to expose larger areas of the ore body in the pit, grade control activities have also ramped up. I'm happy to report that our state-of-the-art photon assay lab is running extremely well, enabling rapid turnaround of the grade control samples.

Here I'd like to provide a brief update on several of the key AGM projects currently underway.

We're on track to commission two additional CIL tanks in Q4, which will provide more residence time in our circuit as we see throughput increase. As I've mentioned, crushing capacity remains a challenge, but we're making good progress on the secondary crusher project. Foundation work continued during the quarter, and all major procurement packages have been awarded. We expect project completion and commissioning of the secondary crusher circuit in Q3 next year. The oxygen generation plant expansion is nearly complete, expected in Q4 as well. And the new carbon regeneration kiln has been manufactured and is currently on transit. In addition, the gravity circuit upgrades are progressing well and should be completed by year end. And with that, I would like to turn it over to Matt Freeman to discuss the company's financial results. Slide nine, please.

Thanks, Mick. Good morning, everyone. Here we've outlined some of the key financial metrics for the quarter. We generated revenues of $71 million in the third quarter at a realized gold price of $2,446 per ounce. Mine operating income totaled $26.4 million and culminated in net income of $1.1 million with EBITDA of almost $31 million. This enabled us to generate $24.4 million of cash flows from operations. We continue to focus on the cost structure of the mine and are pleased to report that operating costs in aggregate remain consistent with recent quarters. Mining costs being approximately $3.50 per tonne mined is a key component of the cost structure and has helped us maintain our strong margins in this high gold price environment. We also remain disciplined with capital deployment only to spending when critical and with clear line of sight to value creation. On that front, As Mick mentioned, our largest ongoing capital projects include the construction of two additional CL tanks with the aim of increasing residence time and improving recovery rates across all of our deposits. We're also installing the secondary crushing circuit, which, as we've said, is critical to maintaining throughput at or above nameplate levels, even when processing the harder, fresher material, men, cran and abore. And as a result of some budgetary savings this year and timing, we've also slightly revised downwards our anticipated capital spend for the year. Moving to slide 10. In the third quarter, as expected, we've continued to invest in the borough deposit, as illustrated with high strict ratio. This has led to elevated oil and sustaining costs compared to anticipated life of mine costs, as outlined in our technical report. However, if we exclude the impact of capitalized stripping, which is really an investment in future oil production, the oil and sustaining costs would reduce to approximately $1,500 per ounce sold, offering a much clearer picture of third quarter operational performance. And as noted before, we've been happy with the cost control generally, so we're maintaining oil and sustaining costs per ounce guidance of between 1975 and 2075 per ounce sold. On to slide 11. Here you can see that this close attention to costs, aligned with the strong gold price, has kept our liquidity and balance sheet robust, even while undertaking such a significant stripping campaign to access of bought-rate ore. We've ended the quarter with $121 million of cash and still have no debt. The chart on the slide clearly demonstrates how our cash balance has benefited from the transaction to consolidate the Asanko gold mine and has remained strong ever since. Overall, Galeano still remains in great financial shape to execute on a corporate strategy and to continue to add value to the Asenko gold mine. With that, I'll turn the call back to Matt to wrap up.

Thanks, Matt. This brings us to our last slide looking at how we're investing in our future. We continue to maintain a strong balance sheet with no debt. I dare say one of the strongest balance sheet in our peer group. We're executing on our organic growth profile, positioning us to become one of the largest single-mine producers operating a cash-generating, ounce-producing asset in Ghana, West Africa. As we advance operations at Abore and fully transition away from low-grade stockpiles, we expect our all-in sustaining cash costs to trend downwards. Adding to the reduction in all-in sustaining cash costs, We are progressing through a heavy stripping phase at Abore, which will lead to lower capital costs and stronger production profile overall. Over the past 18 months, we've invested a significant amount of time and resources in near mine exploration, with an update to global mineral reserves and resources expected in early 2025. This mineral reserve and resource update is being developed alongside an optimised life of mine plan. And just a reminder, the 2022 Life of Mine Plan was delivered under a different set of circumstances. At the time, we were in a joint venture with Goldfields and only owned half the asset and didn't have access to the balance sheet we have now. Gold prices are now at all-time highs of nearly $2,700 an ounce, and our team continues to work diligently on re-sequencing our picks to accelerate cash flows. We expect to release these reports in early Q1 2025. Galliano's value propositions remains compelling, and we are confident in our vision for long-term value creation and growth as a company. With that, I'd like to turn it back to the operator and open it up for any questions. Thank you.

Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, simply press the star followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press the star followed by the number two. Once again, please press the star one to join the queue. And your first question comes from the line of Heiko Ille with HC Wainwright.

Please go ahead.

Sorry about that. I had you on mute. Good morning. Thanks for taking my questions.

Morning, Tycho, how are you?

Not too bad. Hey, just thinking out loud here conceptually a bit, at what point in the gold price, I mean, you know, it just keeps rallying here somehow. At what point in the gold price does something that's currently considered waste suddenly become ore? And building on all of that, do you have the capacity to, you know, take advantage if gold were to keep rising, which we all hope it does?

Yeah, thanks for your question, Heiko. I think it's a very good question, obviously one that we and all mining companies consider on an ongoing basis. I think from our perspective, we're in the fortunate position that, as you mentioned, gold prices are running to all-time highs and we're at the point in time where we're also updating our life and mine plan concurrently. So we're in a position to be able to look at that now in real time and we will be taking a look at that as we're updating a life of mine plan over the coming months. And as we mentioned on the call, that will be released in early Q1 next year. So I don't have specific numbers for you in terms of what it does to cut off grades, et cetera, and potential improvements to mineral reserves and resources. But suffice to say the team's looking very, very closely at that at this point in time.

Fair enough. And then you have a very different issue, or rather it's not even an issue, it's a real benefit for most of your peers. Your transportation costs have decreased quite a bit, and it's taking down quarter by quarter. And then in the release, you state that the mobile crushing unit that was installed at the bore pit is expected to increase fragmentation, and you expect it to increase haul truck load volumes. Now, building on all of that, what should we be modeling out, both for Q4, and then I know you probably don't want to go into 2025 too much, but maybe just provide what we should be looking at with our models for next year as well.

Sure. In terms of throughput specifically, Heiko, is that what you're referring to?

Transportation costs.

Okay, Matt, do you want to? Hi, hi, it's Matt here, the other Matt. I think I wouldn't expect any step changes next year. I think that one of the reasons that the all transportation costs have been a bit lower in the last quarter or so is the higher percentage of aboring material. In the past, when we captured in all transportation costs, the transportation from Isasi that's basically doubled the distance from the Boreas, so therefore those costs per tonne are much higher. As we move through, obviously we'll be providing better insight, as Matt said, when the life and mine plan comes out, but ostensibly we'll be most likely largely relying on a Borea material through the next 12 months, so therefore I would imagine that you could imagine that those all transportation costs should be pretty similar to what we're seeing at the moment. There might be some marginal gains, hopefully, from the work that Mick and the team are doing, putting that new crushing circuit in an aboy. Probably not dramatically material to this, but hopefully we'll see some marginal gains on that. The main aim for that is to get the throughput up, which is clearly absolutely pivotal to us to keep delivering the ounces in this gold price environment. Got it.

Perfect. That's it for me. I'll get back in queue. Thanks for taking my questions. Excellent. Thank you, Heiko.

And your next question comes from the line of Rajfei with BMO Capital Markets. Please go ahead.

Thank you, Albert. Good morning, Matt and team. I have a couple of questions, one following up on the throughput. You did mention in the MD&A that you expect throughput to improve into Q4. Can you give us some guidance as to, with the mobile crushers, what what the level of throughput do you have good confidence on? You said you probably won't be able to get to 5.8 without the secondary pressure in place. And secondly, with respect to the fact that the next 12 months you're mining a bore predominantly, is it safe from a modeling perspective to use the, or close to the bore reserve grade in terms of modeling out the next 12 months?

and on that i know it's still early days how's the reconciliation going so far with your reserve model thank you yes i appreciate it um so i think there was uh there were three questions in that um regarding throughput uh the first one i think this quarter might probably a low point in throughput with regards to what we're expecting on a quarter-by-quarter basis. As you would have read in the news release, and Mick spoke about that already, we are looking to make some optimizations around the entire site, starting with fragmentation and blasting practices. Then that follows on with an additional crusher, obviously, at Abore, which wasn't in place in Q3. And then we do feel that there's, you know, still some work to be done in the existing and ageing mobile crushing circuit that we currently have. So I think you'll see slight improvements in Q4, but, you know, we need to give ourselves and the team some time to get to a place we're comfortable there. I would guide that, you know, you're probably certainly on a quarter-by-quarter basis, you sub in Q4, you sub 1.4, you're probably going to be slightly more than 1.2. So, you know, That's the kind of range for Q4 that I'd suggest in terms of tons. And then looking... forward to 2025. Again, I'd be looking to the lower end of the 5 million tonnes per annum mark. But again, Raj, listen, we're going to have these answers for you all fully baked and ready in January next year. So you'll have access to them relatively early in the year and after the team's looked at that. And then the last question, Oh, reconciliation, yes. So reconciliation at the moment, we're pretty comfortable with where we are, knowing full well that we're going to be further and further more reliant on diamond drill holes, which we tend to feel are more accurate with regards to the assays that we see from them, and more and more reliant with regards to governing resource models as we mine deeper into that pit. So that should certainly give us even better reconciliation into 2025 and 2026. And then I think you also asked me a question about whether or not you should be modeling an average grade for a bore rate into 2025. The answer to that is no, it will be biased low in 2025. And the main reason behind that is if you recall, when we published our mineral reserve and resource, sorry, our mineral reserve update, for Abore, we intercepted some really high grades at the base of that deposit, some of the highest grades that we've encountered across the entire tenements historically. And so you're going to see a bias higher grade in 2026 coming out of Abore compared to 2025. So I think I've captured everything you've asked me there.

Matt, yeah, that's great. Thank you very much. That's from me. Thank you, Raj.

And once again, if you would like to ask a question, seem to press the star followed by the number one on your telephone keypad. Your next question comes from the line of Matthew Baker with RBC. Please go ahead.

Good morning. Matthew Baker from RBC Demand and Securities. I was just looking if you guys could elaborate a little bit about the unrealized losses on the gold hedge instruments and if all of that has been unwound. Really just answering how exposed is Galliano to future gold prices?

Hi, Matthew. It's Matt here. The other Matt. There's lots of Matt on the call this morning. So, yeah, with respect to the hedging, we've included some details in the MD&A of what we did, and we've spoken about this over the last year. We put a program in through out to the end of 2026. a modest amount of ounces hedged just as a risk management exercise in this period of high capital strip. And obviously we put those collars in at the beginning of this year when spot was just over $2,100 an ounce. So obviously things have run up a lot since then. So we have this big, big unrealized liability. What we're seeing is that the longer range calls that we've got in in 26 are all north of $3,000 an ounce. So clearly out of the money at the moment. Yet from a financial derivative standpoint, they have, I think they've got like a $13 million fair value on those. So at the moment, those are completely out of the money. So when you look at the numbers, our total exposure, if you look at spot now around 2,700 is no more than about $10 million. And the rest would fall off if gold stays where it is. So that's roughly what we're looking at. So it's a little bit of a misleading number, just the way we have to value these things. And we'd see that sort of unwind over the next 12 to 18 months if gold stays where it is. But ultimately, we're super happy that gold's at $2,700 an ounce. It's a net benefit to the company, so it works out well.

All right. Thank you very much.

Thank you. And there are no further questions at this time. I would like to turn it back to Mr. Matt Badalak for closing remarks.

Thank you, Operator. Once again, I'd like to thank everyone for dialing in and participating on the call today. We certainly look forward to continuing to provide updates throughout the quarter and to catch up again following our full year results in early 2025. Thanks a lot.

Thank you. And this concludes today's conference call. Thank you all for participating. You may now disconnect.