Trekor Metals Limited Common Shares

Good morning and welcome everyone to TASECO's 2022 year-end earnings conference call. All lights have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Instructions will be provided at that time. I would like to turn the conference over to Mr. Bercot. You may begin your conference.

Thank you, Sergio. Welcome everyone and thank you for joining TASECO's fourth quarter and full year 2022 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 Teseco's President and CEO, Stuart MacDonald, Teseco'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 fourth quarter MP&A and the related news release, as well as the risk factors particular to our company. I would also like to point out 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 opening remarks, we'll open the phone lines to analysts and investors for questions. I'll now turn the call over to Stuart. Okay, thank you, Brian, and good morning, everyone.

Thanks for joining our fourth quarter earnings call. I'll start with some high-level comments about the quarter and a project update, and then I'll turn it over to Bryce for some specifics on our recent financials. In the fourth quarter, we continued to benefit from a strong copper price environment, the price averaging about $3.65 per pound, modestly higher than the average price for Q3, but the trend was upwards, ending the year at $3.80 and today sitting right around $4. The molybdenum prices have also risen dramatically over the last six months and today are sitting at around $37 a pound. That's double the price of a year ago. and Molly continues to represent an important byproduct credit at Gibraltar, about 40 cents a pound in Q4. We generated adjusted EBITDA of 35 million in the fourth quarter, and for the full year, 110 million. The fourth quarter was a slight improvement over the third quarter, and the majority of our EBITDA for the year was generated in the second half, as head grade and production in the first half of the year were unusually low. Operating cash flows for the year were 82 million, and Bryce will provide some further details on the cash flows and earnings in a minute. In terms of Gibraltar operations, we had a strong start to the quarter, but were hit with mill availability issues in December. The main issue resulted from a site-wide power outage that we press released in January. This was caused by extreme weather conditions, and although the actual power outage only lasted 24 hours, temperatures at minus 35 Celsius caused frozen lines in the mill and nearly a week of downtimes. The impact of that and mining dilution resulted in fourth quarter copper production of 27 million pounds, which was lower than we expected. For the year, Gibraltar's production was 97 million pounds on a 100% basis. In terms of production, it was definitely a tough year from start to finish. But I do think in terms of the mine plan, we're in a much better position today than we were last year at this time. Mining operations have advanced deeper into the Gibraltar pit and we're now well situated in the ore body, which is the sole source of ore for 2023. We've made recent progress on addressing the higher than normal mining dilution. A number of operating initiatives have been identified and we're in the process of implementing and expect improvements to increase mill head grades going forward. As we've spoken about previously, as we mine deeper into the Gibraltar pit, this issue naturally improves. with the larger and more continuous ore zones. So we expect higher grades in 2023. We've already seen the benefits of the softer ore in Gibraltar Pit. Prior to December, we ran for five months at about 89,000 tons per day, and that level should be achievable going forward. Also in Q4, we saw improved copper recoveries over 83%, which was a bright spot for the quarter and continues to be a focus for further improvement going forward. So for the year ahead, we're expecting to benefit from higher grades and milling opportunities. One offset will be a two week shutdown of mill number one in the third quarter when the input crusher is relocated. That needs to happen to allow stripping activity to advance in the connector pit. But taking that into account, we expect 2023 copper production to improve to 115 million pounds plus or minus 5%. On the cost side, our C1 costs in 2022 were impacted by a number of factors, including low copper production, lower capital strip allocation, and higher diesel costs and TCRCs. Bryce will provide more details on that in a minute. But as production improves in 2023, we should naturally see a significant reduction in unit operating costs per pound. In addition to the expected production improvements at the mine level this year, we're also going to get immediate production growth from our acquisition of a further 12.5% interest in the mine. This week we signed an agreement with SOGIS to acquire their 50% interest in Caribou Copper, which is a holding company that owns 25% of the joint venture interest in Gibraltar. This is a great deal for Tesico. It's immediately accretive, and the deferred payment structure allows us to protect our cash balance. Consideration is a minimum amount of $60 million Canadian, payable over five years. We're bullish on copper prices over that period and expect there will be additional contingent amounts paid but those should be covered by cash flows from the acquired 12.5% interest, and the total cost is capped at $117 million Canadian. Shifting over to Florence now to highlight another important transaction that we announced in December, we entered into a strategic partnership with Mitsui for that project, and under the terms of the deal, they will provide an initial $50 million U.S. investment to fund construction of the commercial facility They also have the option to invest an additional $50 million for a total of $100 million, which would convert into a 10% JV interest in Florence. Mitsui is a global leader in technology innovation with a focus on sustainability and the energy transition, and their existing U.S. cathode trading business is another reason why the partnership is a great fit for this project. The deal implies a future valuation for Florence of $1 billion U.S., which shows the potential opportunity for shareholders as we continue to advance the project towards production. Most of the major components for the SXEW plant have been acquired and are now on site. Detailed engineering is complete and discussions with construction and drilling contractors are well advanced. We're planning to file an updated technical report and capital cost estimate later in March, and we'll be ready to go when the final underground injection control permit is issued. Based on our discussions with the EPA, we know they are actively moving their process forward. We're not aware of any new issues arising and expect the thorough process to conclude in the next few months. On the financing front, in addition to the Mitsui news, we also announced a $25 million equipment lease commitment from Bank of America and an extension of our corporate revolver that now includes an accordion for potential upsize to $80 million U.S. Teseco currently has 190 million Canadian of available liquidity, and we're in a strong position to fund the development of Florence. We remain optimistic on copper prices going forward, but we'll continue to protect the downside, and our price protection strategy is a key piece of the Florence funding plan. We have a floor price of $3.75 in place for most of Gibraltar production through the end of this year. Before I hand the call over to Bryce, I want to make a few quick comments about our longer-term development pipeline. We spend most of our time on these calls talking about Gibraltar and Florence, but I really think what makes our company unique is that we also have longer-dated growth options in our portfolio, almost 15 billion pounds of copper in reserves. That's more than any of our peers in the mid-cap copper space and all of it located in North America. At Yellowhead, we're advancing into an EA process this year and focused on community engagement. At New Prosperity, the facilitated dialogue has made progress over the last 12 months but isn't completed. The standstill agreement with the Chilcotin National Government has been extended again and we see a future opportunity to resolve that conflict with a positive outcome. And at our Alley Niobium project, we've initiated a study to look at niobium oxide production which could supply the fast-growing market for niobium-based battery materials. So there's a lot happening in the background in those projects. It takes time to develop them, but each of them has the potential to create significant value for shareholders in the future. And with that, I'll turn the call over to Bryce.