TRX Gold Corporation

as participants make their way in from the lobby. It's now my pleasure to introduce Christina Lally, Vice President, Investor Relations with TRX Gold. Christina, the floor is yours.

Thank you, Darlene. Welcome, everyone, to TRX Gold Corporation's first quarter 2024 results presentation. As a reminder, all participants are currently in listen-only mode, and the meeting is being recorded. After the presentation, there will be an opportunity to ask questions. If you wish to ask a question, please click the Q&A icon on the left-hand side of the screen. You'll see the option to raise your hand to join the queue and ask your question verbally, or please feel free to write in your question via the messaging. When you are introduced, you'll see a prompt that will appear on screen and just click continue to confirm that you are ready for your line to be opened. Analysts who have dialed into the conference call may press 1 on their telephone keypad to join with you. Of course, we welcome everyone's questions and we'll do our best to answer all. And for anyone who may like to ask a question privately, of course, you may always reach out to us directly to myself or the gentleman here. And we'd be pleased to answer your questions aside from this call. Stephen, I'll hand the conference over to you.

Thank you, Christina. You're welcome. We've had a little bit of technical difficulties this morning. So you're hearing us from actually Mike's iPhone. So you'll see me move the iPhone across the table as different people speak. And I hope everybody can hear us just fine this morning. So thank you for joining us for our first quarter. 2024 results webcast. We're at a very interesting point because right now we can, you know, both Andrew and Mike are on the line with me. You start to smell the new plant and when it's going to come online. So we're really getting through the crushing circuit. That is now I think around 60% to 65% built or so. We're having a lot of rain, so we're hopeful that it will come online between the end of January, early to mid-February, and it's all dependent on the weather. It's rained a lot more than anticipated this year in East Africa, particularly in Tanzania. So that is exciting. And then at the same time, the ball mill components and stuff like that are underway. It's starting to get installed as well. So We're really excited for that because that enables us to really put on the drill bit towards the back half of the calendar year, given that the increase in cash flow should be coming through as that plant gets online. So we're really, really excited. It's a really exciting period. So without further ado, obviously, as a public company i have to refer people to the cautionary note and reference the fact that there will be forward-looking statements in this presentation and so i would ask investors and any other people to go to our website to view the cautionary note so on the line today we have myself the chief executive officer andrew is joining us from tanzania you can see he's in an orange shirt. We like to keep them in Tanzania as much as possible. And then we have Mike here who's next to me and Christina who is next to me as well. So just starting off with some similar points that we make in all presentations, particularly for anybody who's new on this call, we are TRX Gold. We're a team of experienced leaders developing and rapidly developing a gold project in Tanzania. We have an operating plant that's been achieving high margin positive cash flow. We'll get into that in a few minutes. And we have a special mining license that has significant blue sky potential for new gold discoveries. An overview of our property. The 2020 resource statement had 2 million ounces in the measured and indicated category. The deposit comes to surface, which enables us to do all of this. It's 20 meters wide. We have straightforward metallurgy and grind crush CIL. We're fully permitted under a special mining license. Our current license goes to 2032, and it's completely renewable until the end of the life of the deposit. We have a processing plant that's been online for just over a year at 1,000 tons per day that is consistently meeting production guidance. We have a minimal environmental footprint. We recycle water. We have good tailings management connected to the national power grid. And as I mentioned before, and always brings a great smile to my face, is the exploration potential around this property. Our business plan that has been communicated is to grow production, to increase cash flow, to eventually increase exploration. So one of the things that we've been very proud of and is starting to really show in the numbers and is starting to really grow is growth. We haven't done a capital raise in, I believe, in over two years now, Mike. Correct. Yeah. So when we originally got into the business, as a lot of historic investors are aware, we had to recapitalize the business to do all the things that we're doing. So in that, when we look at, you know, the net equity cash that was raised over two years ago in around $23.5 million, and then we look at what we've invested into the property since then, both by from those raises as well as free cash flow that's been generated by the asset, the multiplier on equity now that was raised is around 1.7 times and growing. So this is starting to prove out that the business model is much different than we're going to build as we go and increase that investment to increase cash flow. And you're seeing that in both the production numbers as well as the adjusted ABBA and cash flow from operation numbers. So in fiscal year 2023, which was August, we had sales of almost $38 million, over $38 million with cash flow from operations of over $70 million and adjusted EBTA of around $14 million. So we're starting to really see it in the financial results of the company, the business plan working. We've done this while controlling G&A expense at the same time, which is great. So we've grown from, in that period of time, from around, including Buck Reef, 30, 35 employees, to now including contractors at Buck Reef to well over 500 people while keeping our GNA in check. Q1 2024 highlights, and Mike will get into this in a second, so I'm going to phrase this at a very high level. We have positive operating cash flow again in this quarter. which has been reinvested in the growth project. So I think we reinvested almost $4 million. As I mentioned earlier, we continue to have prudent capital management. We're on a third consecutive mill expansion. As of today, we have approximately $3 to $3.5 million to spend on that, which we generated from cash flow from operations of other sources. We continue to have strong gross profit margins. We expect those to rise as the new plant comes online, if gold prices stay at the same level. And we expect the new plant to come online towards the back half of the fiscal year and just prior to the end of the second quarter calendar year. And then thereafter, as that cash flow comes online, we will commence a much more in-depth drilling program, and we're starting to plan that out now. We could have, you know, used part of the capital for drilling, but it would slow down the plant expansion. And it makes much more sense, given the economies of scale, that we should achieve from the new plant to really spend our capital on that plant. So we have a much more robust exploration program at the end of that plant. So that's really why we're doing the things in the sequential order that we're doing it. And we continue to have a great safety record at Buck Reef. We've again, for the second time, achieved a million work hours LCI free. So kudos to everybody at Buck Creek for working safely. So now I'd like to hand the presentation over to Mike. As I said, I'm going to push the phone over so you won't hear too much from me on this, and Mike will go through what the financial results were. Thank you, Stephen, and good morning, everybody. Thank you for joining us for our Q1 call today. Q1 was a fairly steady state quarter relative to what you would have seen over the last three quarters. Production was just under 5,000 ounces. If you look at Q2, Q3, and Q4 of last year, that's consistent with the output we've been achieving from our 1,000 ton-a-day plant operating at or near capacity. Year-over-year, production was down slightly, as Q1 of last year was the first quarter where we were commercially operating. To get it up and running, what we had done was we prioritized a high-grade oxide or 3-gram-plus material to put through that mill to get it up and running for the first quarter. With that said, what you will have seen for T1 of this year, we put through head grade of almost 2.6 grams a ton, which is still well above the average grade of the deposit and very robust for our open pit operations. What you would have also noted operationally is recoveries were partly impacted and had an impact on year-over-year production. We realized recovery rates of, on average, about 81%, which is at the lower end of what we're seeing from our MET studies, based on our current rock composition, which is roughly 50-50 sulfide and oxide ore material that we've been putting through the mill, as well as grind size and retention times that we've been realizing through the plant. But as Stephen touched on, we're very, very excited about the expanded and enhanced crushing circuit that we expect to come online. That's really expected to improve grindability of the rock and the material, and consequently expected to improve recoveries as we head into the latter part of this year. Yeah, so Mike, I'm just going to pause you for a second there and explain that. So in any mining operation, there's a balance between your recovery rate and your two-foot rate. So... what you do is you try to maximize cash flow from operations by balancing that. So we know if our ore sits in the tanks longer or has a higher retention time, we'll get a higher recovery rate. We also know if we grind it a lot finer, we'll get a much higher recovery rate. And so that's lining up into the MET studies that we have. Right now, given the plant is a bottleneck versus the ore that we have available, we balance recovery rate and throughput rates in an attempt to maximize cash flow operations given that we're in a build-out phase. So we have a good handle on recovery rates and how to improve them. When the new crushing circuit comes online, this is one of the reasons why we decided to go with the crushing circuit first versus the milling circuit or the ball mill, is the crushing circuit is the bottleneck in the current system. And in order to free up to be able to mill more, even in the current system, we need to have the crushing circuit up and running first, which provides a much more consistent product to the mill to obtain a much more consistent grind size to increase those recovery rates through the milling process. Well said. Thanks, Stephen. On the financial side, we sold just under 4,900 ounces for the quarter, so effectively all of what we produced. And that gave rise to revenues of over $9 million. Again, you see the realized price in the screen. You know, gold prices are still at lofty and robust levels. We realized 1942 for the quarter, we've been selling well north of $2,000 an ounce this quarter. So lots of upside potential on gold price. Our growth profit was just under $4 million or 40%, as Stephen alluded to. So this continues to be a high margin operation. Just the DIVA data that we talked about as well is almost $3 million. So good proxy for cash flow. In terms of cash costs, we recorded cash costs of just over $1,000 an ounce for the quarter. That's above the full year guided range of between $800 and $900 an ounce. So this is largely in line with expectations as we talked about on our year-end call. As we touched on with our year-end results, Our year-end and Q1 cash costs have been impacted in part by higher fuel costs associated with us having to run generators to keep the mill operating at capacity due to unstable and inconsistent grid power. As we talked about on the year-end call, we've since been reconnected to a substation far closer to site in November that we expect to benefit things like processing costs as we head into the latter part of this year. We're now operating at roughly 80% grid power versus 20% generated power. So we expect that cash cost number to improve over Q2, Q3, and Q4 and get back to that full-year guidance number of between $800 and $900 an ounce. And I guess finally, Stephen touched on it, but we've effectively done what we said we were going to do is be prudent capital managers, use organically generated cash flow to invest in value-accretive activities like growth, We generated operating cash flow that was over $5 million. We put almost $4 million of it back into the operation, in part to advance the expansion that Stephen touched on, as well as grow things like our tailings storage facility to accommodate much larger growth, as well as put pieces of capital equipment in place to allow for that growth profile. We got a strong, robust balance sheet with cash of over $8 million, positive working capital, and I'm well poised to grow the asset from here. Yeah, so, Mike, I'd like to touch on what you mentioned around cash costs for a second. On the mining costs, we're very comfortable where they are, and we think we can put that down a little bit lower. But where those cash costs will start to come down is on the processing costs per ton. And the expanded plant doesn't incur any more fixed costs. or not a lot, very little extra fixed costs. So you're going to have to get a lot more fixed cost absorption through the higher throughput rates. And really, we still have a relatively small plant for the size and scale of what buckwheat can be. And in order to get those costs down, we need to continually expand to have that overhead absorption and other cost absorption in the processing plant. And that's really what's driving the higher... cash costs as opposed to the plant versus mine. No, it's a good point, Stephen. I mean, the plant will have significant economies of scale, exactly to your point. You're doubling your throughput from 1,000 tons a day to 2,000 tons a day without any additional overhead. So, you know, in principle, your processing costs of, say, $26 a ton that we reported in Q1 should roughly be halved as we get that plant expansion online. So lots of efficiencies in economies of scale. Yeah, exactly. So as we move on, the 2,000-ton Verde plant, as I said, I was smiling given the progress that we're making here. You will see some pictures here of the new crushing equipment that's arrived on site. I think you see our general manager by a cone crusher. And then you see a truck near our new jaw crusher. You'll see the expanded tailings facility. There's another lift to go on to that. And then you'll start to see the conveyors being put in place and the concrete works and things like that. You will notice the soil is pretty moist though. As I mentioned earlier, there's been lots of rain in Tanzania, a lot more than normal, but we're managing through it. And the team is continually constructing on site. They're going both on day shifts and night shifts at this point in time, constructing our new plant. So there's only so much labor capital available. And that's one of the reasons we need to do the crushing circuit first, and then we'll move on to the grinding or the ball mill circuit in order to put it all together. But we're pretty excited with what's going on. Our suppliers on the crushers has put in place a – we'll be putting in place a critical spares and critical parts warehouse in Mawanza pretty close to us in order to reduce a lot of the potential on breakdowns and things of that nature. So that looks to be turning out to be a very, very good relationship. And this is expected to drive a lot of cost savings and increased production and increased cash flow, which will hopefully end up, you know, springing the value of this project through the exploration drill bit as well as an increased production profile over time. Anything to add, Andrew?