TRX Gold Corporation

Thank you for standing by. This is the conference operator. Welcome to the TRX Gold Corporation 2022 year-end financial results conference call and webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Stephen Maloney, CEO. Please go ahead.

Yeah, thank you, and welcome, everyone, to our fourth quarter and year-end 2022 results call. Thank you for joining this morning. Joining me this morning is Andrew Cheadle, or C-O-L, Mike Leonard, our CFO, and Christina Lawley, our VP, Investor Relations. We always start out all our presentations with the front slide showing our pit. Now, this picture is a little bit out of date. If we were to look at this today, and we'll get a more recent image as we get our drones up in the air, the road would be beyond this pit, and the pit would be a little bit more extended. We're going to get into a few things of why we like this pit and the Mining Assets Foundation that is here at Buckbury. But before we do, let's move our slide deck to the next slide. Obviously, this is a public call, so there is a cautionary note and a forward-looking statement. We are going to be talking about forward-looking information, and we must do this from a legal perspective. Thank you. And as I mentioned, joining me today is Andrew, Mike, and Christina. In the presentation today, we're going to talk about a couple of things. We're going to talk about the foundational asset that is Buck Reef, what we've experienced, particularly over the last year, and why we think it's a great asset and has a lot of growth. We're going to give you an overview of what our accomplishments have been in the last year. Anybody following our story will realize that a lot of things have been accomplished and things are moving very, very rapidly around the Buck Reef asset. Mike will give an overview of the financial results that were achieved in 2022, which have been great, particularly around cash costs and the production profile from our plant. We are then going to give a 2023 outlook of where we see things going over the next year. And then Andrew is going to give us a really good overview of the blue sky and exploration potential around the asset. This is always my favorite part and everybody always sees me smile around this part. And then we're going to have Q&A at the end as well as closing remarks from myself. So TRX. So with regards to our company, we have a team of experienced leaders that continue to deliver on milestones. I think People who follow this story are starting to get a really good sense that we are going to deliver on what we say we're going to deliver upon. We've made a focus of doing that over the last two years since I've joined, and that will continually be the case. You have seen a rapid production growth from Buck Reef over that year, particularly over the last year, and the plant's been doing really well in achieving high gross margins, positive operating cash flow. The expiration upsides. We knew that there was a lot of exploration outside when joining, but I think we're just really starting to scratch the surface and understand really the potential around this asset. We're finding out more and more every day, and that's to the positive side, not the negative side. So I'm really excited to get through that with Andrew, and we're really going to be focused in the next year on continually growing the business, both from a production profile and a resource profile through the exploration drill bit. So when I mention that Buck Reef is a foundational asset, we're still really getting to know the deposit in the region, and we're liking what we're seeing. So with regards to being a foundational asset, there's 2 million ounces here in the measured and indicated category, another 600,000 in the inferred category from the last resource study. What's good about this is the grade profile is good at around 1.88 grams a ton in the measured and indicated category. The resource comes to surface, and that is great. That enables us to get into mining very quickly. It's a flat surface, so it's easy to move around and to put in place mine plans. Also, the resource is very wide at around 20 meters, and it's consistent. So what that means is there's a good continuity of mineral resource along strike. And the strike in the Buck Reef main zones, is now around 2 kilometers with the northeast extension. So that means it's a very mineable asset. And then when you have an asset that's mineable, you want to make sure that you're able to process that ore as well on a very, hopefully, easy flow sheet, which is the case here at Buck Reef. We have a straight grind crush CIL, and we've consistently achieved over 90% recoveries over the last 18 months. From a licensing and permitting perspective, we're also lucky. So we're able to do all this sort of stuff with the overarching permit in place. And we got an extension this year to 2032. This special mining license is good till the end of the mine life. The renewal period comes up every 10 years. Our processing plant, which we were able to put up very cheaply over the last year for around $6.5 million between phase one and phase two to get to 1,000 tons per day has been consistently beating the production guidance and our expectations. And it's operating extremely well. We also have a minimal environmental footprint. We are responsible citizens. We recycle water. We have good tailings management. We're connected to the power grids that are predominantly hydro facilities. And we take care of the local communities. And what I just discussed relates to the main zone. The main zone is only one zone here. So the exploration potential of this property, we're believing, is getting larger and larger. We've released results to the northeast to extend that main zone. We've drilled in the south. We have pending assays on that. We announced Buck Reef West last year as well, which is adjacent main zone. We've indicated that this deposit is well open at depth. But then we also announced Anfield, and we started to drill out Anfield, as well as looking at the east of Porphyry. And there's other target areas around the property as well, which Andrew will get into. But we believe we may be just scratching the surface with regards to exploration. But you've got to do the work. You've got to put the drill bits in the ground, and hopefully you get the assays that you come to expect. But it's a very, very prospective property. With regards to some of our 2022 full year highlights. So first and foremost, we start off, we completed two mill expansions on time and on budget and they're operating great. So we did this for approximately six and a half million dollars on the processing plants for a thousand tons per hour. I would challenge anybody to find anywhere that has been done this quickly and for this cost effectively. We're aware of other size plants that take well over years to construct, as well as costing upwards to $50 to $60 million. We did this for $6.5 million and just in under 18 months between Phase I and Phase II. Those plants have operated and exceeded expectations. Mike will get into the numbers in a few minutes, but we've had Great gross profit margins, low cash costs, operating cash flow, and positive adjusted EBITDA as well. So now with the foundation these plants put into operation, we get to focus the growth on expanding those plants again, which we're evaluating, as well as expanding the drill bit program, which will ultimately lead to a much larger asset, hopefully, through the drill bit. So in 2022, this is an underreported number from us, and I'd like to focus on it. We did do 22,000 meters in 2022. That's not a small program. It's not as large as some of the ones you would see in Canada, but it's by no means a small program either. And let's just focus on discovery expansion definition, and Andrew will get into what the results of those are and what's pending as well in a few minutes. We did do an infill drill program in those 22,000 meters in the main zone. We did do the northeast extension, as mentioned. We did go south of the south pit into a south zone. When we do have that drill bit in the anfield, we also did grade control programs and a MET program. And so the drill bit in 2022 extended the main zone by 30% of 300 meters to 2 kilometers. And we've done everything, plant builds, operations as well as exploration um very safely with over a million hours reported last month with no lost time incidents so i'm very very pleased and proud of the management team as well as particularly the buck reef team and everybody on site for all the achievements in the last year so now i'd like to hand over to mike and he'll go through our financial highlights for 2022.

Well, thank you, Stephen, and good morning, everyone. On the financial side, 2022 was really a banner year for the company. Stephen touched on some of it, but it was really a year where the company achieved a number of record results, record revenues, gross profit that Stephen touched on, operating cash flow, adjusted EBITDA. That was all off the back of record production and ounces sold. As Stephen mentioned, we successfully expanded our mill to 360 tons per day during the year. And on the production side, produced almost 8,900 ounces and had record quarterly production in Q4 of over 3,600 ounces. And importantly, the 360 ton per day mill only came online at the back end of Q2 and hit steady state throughput in Q3 at nameplate capacity. So really, the numbers that you're seeing here today really only reflect two quarters operating at 360 tons per day. The 1,000 ton per day plant expansion that Stephen touched on came online after our year end which was August 31. And I'll speak a little bit about our 2023 outlook in a moment and some of the numbers that we expect for next year. On the sales side, we sold most of what we produced during the year with the exception of some in-circuit material and finished goods that built up and was sold in early September, so we'll benefit 2023. And that was really just due to the timing of our gold sales program. But during the year, we did recognize revenues of over $15 million and generated a realized price of $1,756 an ounce, or in Q4, almost $1,800 an ounce. Now cash costs, which include direct mining costs, processing costs, site administration, royalties, and depreciation, came in at a very, very low $665 an ounce, or in Q4, less than $600 an ounce. That was well below our published guidance ranges. And given the robust revenues and strong cash cost figures we reported, we achieved a very, very healthy gross profit margin of over 60%. And consequently, the company was operating cash flow positive during the year. And that was the first in company history. So a major, major milestone for us in that regard. The balance sheet continues to be very, very strong. We had a cash balance, a reported cash balance at year end of $8.5 million. We reported working capital of $5.5 million. And that's after adjusting for certain liabilities, which will only be settled with equity of the company. And Stephen touched on adjusted EBITDA of $3.5 million, which is really a proxy for cash flow. But all these statistics demonstrate very strong liquidity to help us fund that organic growth that Stephen touched on a little bit earlier. And very importantly, we're endeavoring to improve on all of these metrics in 2023, now that the 1,000-ton-per-day processing plant is running at full capacity. Next slide, please, Stephen. So in terms of our fiscal 2023 outlook, Now that the 1,000 ton per day plant is running at capacity, we expect production to be in the range of between 20 and 25,000 ounces. And that's three times the production levels that we achieved in 2022. Now, the 1,000 ton per day mill ramped up in early Q1 and has been operating at nameplate capacity since the end of October when we declared commercial production. And consequently, we expect production in the second half of the year to be slightly higher than the first half following that ramp-up period. Cash costs are expected to be between $750 and $850 an ounce. That's slightly higher than what we realized in 2022. That's mainly due to an increase in depreciation following the commercial production declaration in November. In terms of CapEx, sustaining capital includes certain expenditures related to road realignment that will enable full life of mine access to the main zone. We're also spending money on construction of a significantly expanded tailing storage facility that will accommodate future growth as well as purchase of certain pieces of capital equipment things like loaders and gen sets and cranes and grizzlies all really to support the expanded production. We're currently renting much of this equipment so expect to benefit in the future on depreciation of some of this equipment following purchase rather than what we're currently expensing following rental. In terms of growth capital, we've initiated a project aimed at increasing throughput over and above levels that we've just spoken about by up to 75 to 100 percent through the addition of a new ball mill. Detailed engineering in this project is underway. We're advancing on it and we aim to further benefit production in the second half of the year. We'll update the market accordingly as we continue to update and progress on this initiative, but importantly, Any incremental production from this expansion has not been considered in the production guidance figures above. As far as exploration, Stephen touched on it, and Andrew will get into it in a bit more detail, but we are continuing the program that we started this past year with brownfield drilling to the northeast and southwest at the Buck Reef Main Zone. We'll continue to drill at Buck Reef West. We'll drill at the eastern porphyry. We're doing greenfield work at Anfield, as well as sterilization drilling at site expansion facilities. And finally, in terms of outlook, we continue to advance the sulfide development portion of the project with metallurgical testing. We're looking at geotechnical studies for a deeper pit over time and continue to assess what a much larger sulfide processing facility would look like. And again, we'll update the market accordingly as we continue to progress on that initiative. So with that, I'll hand it over to Andrew to take us through exploration.