Trekor Metals Limited Common Shares

Good morning, ladies and gentlemen. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to TSECO's third quarter earnings 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, then the number one on your telephone keypad. If you would like to withdraw your question, please press star 2. I would now like to turn the conference over to Mr. Brian Burgot. Please go ahead, sir.

Thank you, operator. Welcome, everyone, and thank you for joining Teseco's third quarter conference call. The news release and regulatory filing announcing our financial and operational results was issued yesterday after market close and is available on our website at tesecomines.com and on CDAR. I am joined today in Vancouver by TSECO's President and CEO, Stuart MacDonald, TSECO's Chief Financial Officer, Bryce Hamming, and our Senior VP Operations, Richard Tremblay. As usual, before we get into opening remarks by management, I would like to remind our listeners that our comments and answers to your questions will contain forward-looking information. This information by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our third quarter MD&A and the related news release, as well as the risk factors particular to our company. I would also like to point out that we will use various non-GAAP measures during the call. You can find explanations and reconciliations regarding these measures in the related news release. Following open remarks, we will open the phone lines to analysts and investors for a question and answer session. I'll now turn the call over to Stuart for his remarks. Thank you, Brian.

And good morning, everyone, and thanks to all today to seek those third quarter operational and financial results. But before we get into those details, let's start with an update on our Florence copper project, as there were a number of positive developments this quarter. In mid-August, the US EPA issued the draft underground injection control permit. This is the final key permit required for the commercial production facility. Although the timing was several months later than we would have liked, the permit wording was as expected. No surprises. The public comment period ended in late September, and the feedback from local residents, community leaders, and statewide organizations was overwhelmingly positive. 98% of the written comments were supportive, and there was no negative commentary at the public hearing. The positive response we've received through both the state and EPA processes is a direct result of the prudent approach that we've taken in developing the project. the efforts we've made to inform the Florence community, and, of course, the low-impact nature of the mining operation. For next steps, it's back to the EPA now to respond to the public comments received. We've reviewed all the comments and have had initial discussions with the EPA, and based on that, we're confident they'll be able to address all the comments before issuing the final UIC permit in the coming months, and we'll be ready to begin construction at that time. Switching to Gibraltar now, and the improved copper production in Q3 drove a significant rebound in financial performance. 34 million of adjusted EBITDA and 19 million of earnings from mining operation, both much stronger than the last quarter. Copper production at Gibraltar increased to 28 million pounds, which is nearly a 40% increase over Q2, mainly a result of higher copper grades, but also from an increase in mill throughput. In fact, the two mills averaged over 89,000 tons a day for the period. That's 5% above design capacity and our best quarter yet in terms of throughput. We're definitely benefiting from the softer Gibraltar pit ore as we expected. Head grade, on the other hand, while it did improve over Q2, was lower than where we expected it to be, and that also impacted recoveries. We're seeing higher than normal mining dilution in the Gibraltar pit, and we have a number of operational initiatives underway to reduce that going forward. But it's a work in progress, although we do see an improving trend and we're now into larger, more consistent ore zones. Production in the fourth quarter is forecast to be roughly 10% higher than Q3 and will continue at those higher rates for the next few quarters. Gibraltar pit will be the primary source of ore now through the end of 2023, Waste stripping of the new connector pit has begun and will continue through next year. In order to get full access to that new war zone, we need to move an in-pit crusher. That capital project started this summer and is well advanced. We're planning to complete the crusher move in the third quarter next year. Operating costs in the quarter declined quite dramatically, but we're still being impacted by the same inflationary pressures that the rest of the industry is facing. Diesel costs were up. about 55% higher than the same period last year, and that added $0.26 per pound of copper to our cost structure. We have some diesel hedging in place now to protect against further price escalation. Capitalized stripping was also unusually low this quarter, which drove up our unit operating costs. In the present environment, we're obviously very focused on cost control and managing copper price risk. We have a long-standing strategy to opportunistically acquire downside copper price protection through both copper puts and callers. And that approach again paid large dividends this quarter. We realized cash proceeds of just under $19 million from copper put options, and we have price protection in place at $3.75 per pound until the middle of next year. On top of that, we have a pricing strategy where we fixed prices at around the time of shipment. So it's notable we have very low provisional price adjustments this quarter, whereas many of our peers have larger losses. We're well positioned for when copper prices rebound, which they inevitably will do. And as we see with markets today, when prices move up, it happens quickly. Global inventories are low and physical demand fundamentals are strong. So we remain optimistic about our copper business long term. We have a great portfolio of assets here in North America and focused on copper. But in the meantime, with the global economic uncertainty, we are managing CapEx carefully. At Florence this quarter, we spent a further $27 million mainly related to procurement of major components for the SXEW plant and a few other long lead time items. Those items were ordered earlier this year and are now being delivered to site We won't be making any more significant capital commitments now until we have a clear view on permit timing. We've been successful in locking down pricing on long lead items, but we are seeing inflationary pressures on other project costs, including drilling contractors and construction labor. Arizona, in particular, has been a hot market. But it's also a very volatile market, and we'll wait until we have a firm review of the construction schedule before updating our CAPEX estimate. The balance sheet remains in a strong position with available liquidity of $210 million. That includes the undrawn revolver. We have a solid hedge position in place and improving production from Gibraltar. We're also seeing a lot of interest from royalty providers, which is a potential additional source of funds for Florence. And on that note, I'll pass things over to Bryce for a financial update.