Resolute Mining Limited

Thank you for standing by and welcome to the Resolute Mining Limited December 2022 quarterly results and 2023 guidance UK conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr Terry Houlihan, Managing Director and CEO. Please go ahead.

Thanks, Melanie. And good morning, everybody. And thanks for taking the time to join us on this call today. This is a quarterly activities report, which I presume you've all had a look at. I will initially go through the highlights. There's quite a few there. And then take you through the ops and exploration. Then I'll hand over to Doug to give us a bit of color on the finances and the corporate side. And I'll finish off with guidance, and then we'll hand over to Q&A. If we look at the highlights, obviously the most important one at the top of the list, the accident and incident frequency rate, we again showed some improvements over that over the last quarter. We're now at record lows on our operations of 0.41. What is very interesting and exciting for us is that we are less than a week away from four years lost time incident free at SIAMA, which I think is a fantastic record. A lot of focus going into this, and given that we did that major shot in Q1 last year, we think it's a great result. If we look at the physicals, the gold, we're excited about the gold ounces. We thought we'd squeeze a bit more out, but we had a few hiccups right at the end, but we did the 91.777. And this represents, in terms of physicals, our fifth consecutive quarter of improved numbers. And we, therefore, ended the year on 353. We maintained the gains that we saw in the early part of the year. And eventually, in the last quarter now, as we expected, the grades started coming up in our oxides, which has set us in a nice place going forward for this year. So we exceeded our guidance, which was 345. We didn't change that guidance for this last year, which I think is a big step for us as a company. And then the all-in costs up 5%. This is our major area of focus. Never happy with these sort of numbers, but we think we're turning the corner there. We're starting to see improvements coming through, but this is a major focus for 2023. And we think if we can put the effort into costs that we have into production, we'll see some benefits over this next year. Gold sales, the important thing is, as you know, we've got a hedge book covering at least 30% of our production going forward and going forward this year. We gained an extra $89 an ounce over the quarter, which is good for us. And we beat, if you look at the net debt position, we came down to 31.6, beating most expectations by about $10 million. And at the end of the quarter, we had cash and bullion of $94 million. Major event in Q4 last year was the equity raise. We are very pleased with the Canaccord's efforts there. Oversubscribed, large take-up from the retail investors. And we brought in some long-term T1 institutional investors who are in for the long-term, as I mentioned, and excited with the prospects of the future of this company. Revolving credit facility, subsequent to year M, we've managed to get that down to zero, and the term of that, RCF, carries through to Q124. So what it means with cash pooling, et cetera, we have over $200 million now as available liquidity, which is a complete turnaround from where we were last year. We did conclude the final tranches, Bibiani sale, and on the ESG side, as we said we would do, we've achieved $14,000. and 45,000 certification status. To get those awards, people have to come and visit your site, spend time and do full audits on that, and we're very excited with the results of that. I will go through the guidance a little bit later, as I mentioned. We're looking at a very, very similar year this year, year of consolidation, 350,000 ounces, and with an all-in cost of 1480, and that's something we will spend a lot of time on trying to reduce that over this year. And that does not contain any material coming from the Siama North at this stage. That brings me into the Siama North. We did announce it, very excited about this. This is almost a standalone mine that we found now. 3.18 million ounces of material, good grade, close to mine, slightly softer than the underground material, slightly higher recoveries we're seeing in the labs. And we've got 1.86 million ounces of measured and indicated It's also confirmed we have a large block of material in A21. This on our drilling of down to 150 metres. We're still finishing off the 150 metre drill lines. It is a six kilometre stretch. There's a lot of drilling to do to get it down to 50-50 spacings. But we're also going to start looking deeper at that A21 because of the volumes we're seeing. We should be able to mine open pit a little bit deeper than that. If we go to overall operations, I think the key thing is it's all about tonnage and grade for us at the moment. We're starting to break records on tonnage and holding grades. That's the key thing. If you look at the ore mined, we're on a run rate of the last quarter of about 7 million tons per annum. Ore processed, around about 6 million tons per annum. These are the numbers that we wanted to get to, and obviously our focus is is on the de-bottlenecking of the process plants, which is an ongoing exercise and will be for the next 18 months as we continually tinker with those to improve the throughputs and the recoveries. On the ESG, I mentioned the ISO certification or part of our program. We have mentioned to you that we are, as a signatory to the World Gold Council, we are following the RGMPs, which we expect to gain 100% certification of that. mid-year this year. At this point in time, we're sitting at 88%, which is an aggressive number. So let's go into the operations in a little bit more detail, the Marley operation. If you remember, I've been talking to you for quite some while about bringing the grade up. We got the grade up to over the resource level of 2.61 in September. And I did say only at that point would we try and push tons and see if we can maintain that grade. I'm very excited to say that we actually did 665, which is an annualized 2.66 million tons coming from underground at a 2.74. So we, again, saw a slight increase in grade, but more importantly, I think if we tried to do that earlier on, we'd have lost that grade. So I'm very excited. The guys are really in control of the underground operation now. Our reconciliations are within 4%, which is always a target. You're always looking to get it less than 5% error. in plus and minuses. So I think we're in a very, very good space now in the underground operation. On the processing side, we annualized at 2.1 million tons. And again, the gradient to the plant, 2.83, gives us an average of 2.68, which are aggressive numbers and the highest numbers we've seen for material coming from underground. And it's slow progress, but we are making progress on recovery. You see the recoveries there on the sulfide slowly ticking up. And that is part of a lot of work that's going in on the metallurgical front on the operation. Costs, as I say, if you look at the sulfide, slowly coming down, 1,400. We've still got a long way to go. We believe we can get a lot less than that over this next year. But in the year, we produced 161,000 ounces. That was with that 35-day shut that we talked about. And if you remember, we got 20,000 ounces ex-inventory. A lot of material concentrates in ponds, a lot of residues. We're certainly not going to see those sorts of numbers coming out this next year, but we still have materials to clean up on site in process water dams. In terms of the underground, all the trucks now have been fixed and refurbished, and we're starting to focus really hard on productivities and therefore costs in the underground. we think we can further improve those. If you look at the thiom oxide grade finally coming up, we've got 1.55. That's not the target number. We're expecting a little bit more, expecting to see that rise over the first quarter this year. But again, tonnages were good in the plant, 430,000 tons and 88% recovery. We're back now at a sort of 17.8. ounces coming out per quarter out of the oxide going forward. And most importantly, in terms of both these two operations at SIAMA, in terms of grade control, we've got development now ahead on the underground of over 12 months and now six months ahead in the open pit, which means we've got a lot more confidence in our predictions going forward on the grade. In terms of MACO, 30,000 ounces We did mine a lot of material. As you can see, 781,000. We've got the new excavator as part of the new contract that kicked in last year. Grades coming down, this is an expected thing. We'll talk about that a little bit more. We've got slightly lower grades coming forward in 23 before this return back to the higher levels, 24 and 25. In the processing plant, we're still making improvements with the mill slice. We've got an extra 7% on tonnage. Even at the lower grade, we still managed to get the recoveries, 92%. Again, a lot of metallurgical work going in there. And in terms of maintenance and costs, we managed to finish off the year with only three downs on the relining of the sag wheel. If you remember, traditionally, we've done four per year, and that is one of the major benefits of the mill slicer that we've put into the Mako and optimized over this last year. In terms of exploration, some really good news there. We announced that a couple of weeks ago. 3.2 million ounces, a lot bigger than we originally thought, but it just explains to us that while people have been operating and exploring on the SIAMA belt for the last 40 years or so, it is vastly underexplored. This is material that's right next to the operation. It's within 4 to 10 kilometers away. We are mining there at the moment on small satellite pits, but there's a large body very close to surface and extending down at the moment to 150 meters. And 1.86 million ounces of that is measured and indicated. That 1.86 will actually underwrite our pre-feasibility study, which is ongoing at the moment. Drilling is continued on Syama. But we're very excited with the larger ore body that we're seeing in Siama North at A21 pit. There's some spectacular results that came out of that over the Christmas period. We managed to get them into the mineral resource that we talked about. And we're in the process at the moment of converting that to ore reserves. That ore reserve number should come out in mid-February. But we're very excited about that. I think the other comment is on, as I mentioned, with the underexplored, we did do the aeromagnetic survey. We're starting to review results now in Q1. We've actually cleaned up all that data. And again, we think there's going to be quite a few more targets coming out there. However, we will be focusing at SIAMA on further delineating this 3.2 million ounces that we've recorded last week. And with that, I'll hand over to Doug and he'll go through our corporate and finances in a bit more detail.

Thanks, Terry. As I said, I plan to just add a bit more colour on the costs and step through the cash flow, net debt and hedge book position at year end. So starting with costs, December quarter unit cash costs of $14.73 were 6% higher than September quarter. of 1389. This was largely due to a 19% increase in overburden that was removed to access the higher grade tabacaroni ore at the Syama Oxide Operation. In addition, we had a 25% increase in ore mine from underground at Syama as the ROMPAD stocks were rebuilt following the wet season. And also we had a 45% increase in underground development metres which reflects a degree of catch up during the quarter where we did 1,341 metres against a Q3 of 924 metres. So those items added to the costs in the December quarter. We continue to feel pressure on our input costs. By way of example, Siama diesel prices averaged $1.35 during the quarter, and indeed that was the average for the second half, which represents a significant rise on the Q1 diesel price of $0.76 a litre that we paid prior to the Ukraine conflict. HFO prices, which is the bigger volume at Siama, are still around $0.90, so the increase hasn't been as stark as with diesel, but we were paying $0.72 in Q1. MACO mining costs are also under pressure and by way of example we've seen a almost doubling of ammonium nitrate costs from about $1,100 a tonne to over $2,000 a tonne. That represents about a $7 or $8 million per annum run rate increase, and that's all happened effectively since about March of last year, again coinciding with the Ukraine conflict. So that's the story on cash costs. All in sustaining costs were up similarly, not quite as much, $15.47 for the quarter, up 2% on September for largely the same reasons as the cash costs with some non-cash going the other way relating to a reduction in the GIC that we pulled through. Lower ounces meant lower costs coming through the inventory line there on GIC. Group all-in sustaining for the year of 1498, disappointing to miss the guidance of 1425. We had been flagging that that was under pressure. It was about 5% up on that guidance for 2022. Turning briefly to the cash flow waterfall, I won't go through this in detail, but obviously the big ticket items were the equity raise. In addition to the final amounts of Bibiani, $20 million came in for that, helped pay down the debt that you see there of $105 million or applied to the revolver. As Terry said, that had a very small amount on it at year end and that revolver was paid back down to zero in January. After accounting for... the exploration spend but before the asset sales and debt service and government dividends, the business generated $8 million of free cash flow in the quarter is the other point to note there. Largely as a result of the asset sales and the equity raise of $164 million Aussie during the quarter, we ended the year with net debt of $31.6 million, representing almost a $125 million reduction from September quarter. Briefly on the hedge book, 172,500 ounces hedged as at 31 December 2022, an average price of $1,886 million. So that wraps up my piece and with that I'll hand over to Terry to talk about 2023 guidance and wrap up.

Good, thanks Doug. Okay, so guidance we're seeing as I mentioned a similar year at 350,000 ounces, 1480, same sort of numbers as this last year. However, that's the focus of most of our effort now, getting those costs down to numbers that i've talked about previously and i think that could be achievable this next year the mix is a little bit different um the sulfide 160 000 hours just on 161 remember 20 that came from stocks as we had to plant down it's now coming from tons and grade we think we've really got the physicals right there and we've got that 12 months development in place so we understand where the metal is the oxides they um Again, grade control giving us far better clarity on numbers. This year, 73,000 ounces, so that's up. And then Mako, from its 129 that it's performed at the last couple of years, with the lower grades that we're going through, we're going to do a lower grade patch for 23. We're looking at 117. That's going to put it under quite a bit of cost pressure there. And coming back to the 350 at around about $14.80 per ounce. So in summary, sulfides, yes. That's Seama, very similar. A little bit of material in the ponds, but not big numbers this year. Seama oxide, it's all about grade, given we've got the grade control in place. And then the PFS study, which will be coming out, will be draft form in March. And then by early Q2, we'll be putting out numbers there showing what we want to do with that on the low capital expansion. which we think was gonna take about 18 months and get generated, sorry, come from generated cash flows. MACO, as I mentioned, 117,000 ounces. We're actually doing quite a lot of stripping there in the stage six, which is lower grade, and we have to get through this to get to the higher grades below that, and that will allow us to have some input dumping of waste in 2024 onwards, which subsequently will lower our costs quite considerably. So if you look at the bottom of the page there, we're saying 2024 in the range of 135 to 145 at a cost of $1,195 to $1,275, and subsequently in 2025 coming down to around about $1,000 an ounce. Subsequent to that, we will be looking at treating stockpiles. that moves me into the exploration. We certainly have not given up, and we are working really hard on the four targets we've got in Senegal. We're still optimistic there. We think we're going to be able to find something to put through that mill in a couple of years' time. So work is continuing there. And then, as I previously mentioned on the exploration, the focus is Siam and North. We did spend $16 million last year. We'll probably spend about the same. The lion's share of that $16 million is going to be roughly going into the Sea Arbor North operation. In terms of capital expenditure, we think there's a reduction in sustaining capital coming down to 34 from 53 this last year. And then non-sustaining capital, that's stepping up or including the 25 million for macro stripping costs. That's been classified as non-sustaining, so we're seeing 54 there. And with that, Melanie, can we open the floor to Q&A?

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Richard Hatch with Barenburg. Please go ahead.

Thanks. Thanks, Ian. Morning, Terry and team. Thanks for the call. Just the first question on costs at SIAMA, particularly mining and processing costs. I mean, they've been kind of hovering around the sort of high fours, well, $35 a ton, something like that. And then processing costs also sort of bouncing around the high $30s a ton. Can you just talk a bit about what you're doing to try and drag those down further? the operation and then obviously the headwinds that are going against you on that inflation um and such like and just perhaps give us a bit of a steer as to um where you'd really like to drag those costs down to that's the first one thanks thanks richard yeah the original feasibility talked about 31 underground mining and you're right we're at 35 at the moment

We are still using Sandvik for maintenance, but we're going to be taking over. That's a small amount, $1 or $2 savings there that we're hoping to see over this year. The other is more largely around productivity. If you remember, we took over 13 underground vehicles at Sandvik. They were operating close to the end of the engine's life. They've all been overhauled this last year, so we've had one or two trucks missing for most of the year. In January now, we've got all 13 of those refurbished. We're actually starting to see improvements now. At the tail end of December, but here in January, we're starting to see improvements. We've got trucks sitting on the floor now on standby. We're filling the trucks a little bit fuller than we have done historically. And it's all mainly about productivity underground there. And it is helping now having the and moving into another area where we've got better access. If you remember, we were mining a combination of transverse and longitudinal mining, but not based on the geology. That has been fixed, and that's why we're now able to access higher tonnages at the correct grades. So it's all really sort of mining 101 to try and get the improvements. And we think that'll start coming through. Well, we are seeing it come through actually over the last quarter a little bit, but that will certainly come through over the next year. In terms of on the processing side, I think there's a lot of work ongoing there focused on costs. We've put a lot of capital in in the last two years. A lot of our chemicals were actually added manually. We've now got control systems in place. We're fine-tuning those. We're looking at making cyanide addition improvements. We're looking at flotation chemical improvements, et cetera. So a lot more focus metallurgically will be on the improvements through that plant there. And the other point is that the plant itself, we are trying to get more units through there. We are working on the tertiary crushers as we speak. They are the bottleneck on the plant. It's not the mills. The mills can do about 2.8 million tons per annum And we certainly got the stocks and the production coming forward to be able to do that. But it's a crushing plant at the moment. It's holding us back a little bit on the tertiary crushes. By the end of, let's say sometime in Q2, we should have that sorted. So we'll be able to get extra throughputs there. And we'll see the tonnage costs coming down on the processing plant. So to me, it's all about now in terms of getting more units through the operation and focusing on productivities on the shop floor, both on mining,

and on processing okay thanks terry um and then just on siama north i mean it looks very interesting but can you just remind us what the existing um oxide operations have got in terms of their life and then you you kind of talk about um an 18 month period of time i mean are you how should we think about kind of production um from the open pit um portion of the mine um over the next few years

I think we've probably got two to three years of oxides from satellite pits on the books at the moment. And the grades of that material is typically 1.5 to 2 grams a ton. The beauty about the Sayama North, and they range in distance away from the operation, up to 40 kilometers away. Strip ratios averaging about six to one, typically. If you look at Sayama North, It's going to, especially at the A21 side, it's less than eight kilometers away. We are mining there at the moment, so there's not that much strip to be done. But it's sitting in the ground. The oxides are 8% of that 3.2 million ounces. It's not one continuous strip, so that's why we're doing a lot of work on the modeling at the moment. But the grade's there. And especially in the larger blocks, we're expecting lower strip ratios than we're seeing right now coming out of that larger block. Dilution should be less because it's larger, it's higher grade. So I would suggest that if we can bring that material online, we'll be pushing, and it does pass all the tests with the pre-feasibility study, we will be putting that into the operation as quickly as possible. So you're looking around about 200,000 ounces of oxides there, which we haven't yet declared. And we're looking to convert significant numbers of that to ore reserves in the middle of February. So I'm not trying to say too much, but I'm waiting for the numbers to confirm our thinking, because you look at the model and it's looking good if you eyeball it. But let's just wait for the numbers, which are imminent now. But we're quietly excited about it. We think it's a game changer for oxides going forward.

Okay, thanks. And then the last one's just on Mako. I mean, you point out in the exploration commentary that you've got four targets to find further feed for the mill from 2025. What's that looking like and how comfortable are you with that or what's your view on life extension at the moment?

I think it's 50-50 at the moment. I don't think those stats have changed since the last quarterly call and we mentioned it. We have had some delays getting in there to do the work, but we have got into the areas, we have got JVs in place, we've got communities on our side. Those were the big issues to us previously. Because with the COVID, we lost two years on that ground. And we've actually recovered that position. The geologists are on the ground there. We're taking samples. We're getting ready to start drilling. And I think we're going to see some results over this year. The one site, Petawool West, which is right next to the mine, has shown some indications, but nothing exciting at this point in time. We've done a couple of lines there, and as I said, we've had some zeros, which we're not used to. We've had some one or two grams, which are exciting, but it's not hanging together yet. But there's still a lot more work to be done. But we have got drills in place there.

Cool. Thanks, Terry. Have a nice one. Take care. Cheers.

Thanks, Richard.

Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. We will now pause for a moment to allow for any final questions to register. Thank you. We are showing no further questions at this time. I'll now hand back to Mr. Houlihan for closing remarks.

I think if we look at 22, I think it's a story. We've managed to get our tonnages up. We've managed to get our grades up. We managed to get our exploration working, and that is really humming now and exciting going forward. We're starting to see the unit costs start to turn, but that is what our major focus is going to be. It's cost, cost, cost. And as I mentioned, we think we had a good quarter, a good year, mainly on the physicals, but that's put us in a position now for organic growth at SIAMA. We've ticked a lot of the boxes recently, And we're hoping to come back to end of quarter one now and show you the improvements that we're making on the costs. Thank you very much, and have a good day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.