This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Good day ladies and gentlemen and welcome to the Fortitude Gold third quarter 2022 conference call. At this time all participants have been placed on a listen-only mode and we will open up the floor for questions and comments after the presentation. If you would like to ask a question through the webcast you may do so at any time by clicking on the ask question box on the left side of your screen, type in your question and hit submit. It is now my pleasure to turn the floor over to your host Jason Reed, CEO of Fortitude Gold. Sir, the floor is yours.
spk04: Thank you. Good morning, everyone, and thank you for joining Fortitude Gold Corp's 2022 Third Quarter Conference Call. Following my comments and associated presentation for those who joined online, we will have a brief question and answer period. Joining me on the call today for the Q&A portion will be Mr. John LaBate, our Chief Financial Officer. Let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued yesterday, along with the comments on this call, are made only as of today, November 2, 2022, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of non-GAAP financial measures referred to in our remarks in our Form 10-K filed with the SEC for the year ended December 31st, 2021.
spk06: Production results for the quarter are in line with our 2022 production outlook range.
spk04: Financial results included net income of $1.7 million, all-in sustaining cost of just $687 per ounce gold, 2.9 million in dividends to shareholders, 3.7 million deployed to exploration, all while increasing our cash balance to 42.2 million. During the quarter, we mined an average gold grade of 5.69 grams per ton. Operationally, we blended this high-grade with lower grade stockpiles as part of the overall mine life plan. And to add to our cash balance during the quarter in spite of the lower metal prices, continuing strong dividends, and exciting increase to our exploration spending speaks volumes to the financial success of this operation. Contextually, the gold price has pulled back year-to-date approximately 10.5%. Most all mining equities have pulled back substantially more than that year-to-date. The industry majors represented by the GDX have pulled back 24%, while our peers in the GDXJ have pulled back 30%. Fortitude has pulled back only 14% by comparison. I believe we continue to execute on our strategic business plan, which has resulted in Fortitude outperforming our industry peers on year-to-date valuations during this strong market pullback in the metals and mining equities. Again, we invested over $3.7 million in exploration during the quarter, which is a record amount for Fortitude compared to any prior quarter. Exploration drilling included continued exciting drill results from Golden Mile, and exciting first drill results from County Line. A significant number of surface samples from our Ripper property generated drill targets for a possible 2023 drill program. Our exploration team continues to be exceptionally busy during the fourth quarter with drill programs planned along the Isabella Pearl trend, Golden Mile, County Line, and East Camp Douglas. We are pleased to remain profitable are pleased to remain a profitable gold producer in the Walker Lane mineral belt with a stellar portfolio of 100% owned properties, and believe we are moving closer to building a second mine in Nevada, USA, arguably the world's premier mining jurisdiction. To conclude, Fortitude delivered another strong quarter on numerous fronts. We are on track to meet our annual production outlook, and our Isabelle Pearl mine continues to deliver strong cash flow. We continue to move our Golden Mile project forward, toward a development decision and want to include recent drill results into the Maiden Reserve. And County Line continues to return high-grade gold drill results, which we look forward to sharing once they are all compiled. With that, I would like to thank everyone for their time today on this conference call. And operator, if you'll please open up the lines for the Q&A. And before we go to live Q&A, I do have one question coming in from Tim Paul. Do you see evidence that diesel fuel supplies are or will be challenging to secure? Reports indicate supplies are dwindling. Thanks. Tim, thanks for the question. At this point, we don't, but I'm probably reading similar articles to you that you are, and there is a possibility it could get tight. So we'll just have to wait and see, but... Yeah, that's something we're all watching, but I don't have any additional clarity. I have two more questions in the queue here. Do you see the mine waste tonnage continuing to decrease? That was from Mark Smith. The answer to that is yes. I think you're seeing that reflected in our costs coming down dramatically, and that trend should continue because we have moved the bulk of the overburden to access the high grade. The next question is from a private investor, Harvey Bolin. When will you make a second mine decision and what goes into that decision? We are pushing our Golden Mile project forward toward that decision. What we want to do is include these additional drill results that we've had success drilling around Golden Mile and try to get as much of that mineral into an initial resource so that we can define the first starter pit, if you will. So that's what we're doing right now, and we're pushing that forward as hard as we can. I can't give you an exact timing on when we'll make that decision, but we're committed. We've purchased most all the long lead time equipment, and we're moving the permitting phase forward. We're doing everything we can to reach that threshold to making a production decision. With that, operator, if you can open up the lines and if we have any live questions, we'll take them.
spk01: Certainly. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality.
spk00: Please hold while we poll for questions. Your first question for today is coming from John Baer.
spk01: Please announce your affiliation, then pose your question.
spk03: Thank you. Good morning, Jason. John Baer at Ascend Wealth Advisors. couple quick questions you touched on them here just a minute ago but the higher grade of gold per ton is a function of not processing as much of the lower grade stockpile is that correct okay the higher grader reference that we mind is coming out of the open pit and what we're doing is we're blending that with existing stockpiles of lower grade as part of the overall mine plan so
spk04: Does that answer your question?
spk03: Yeah, I mean, it just looks like in the release that there was zero, it was all the high-grade open pit ore that was processed. Am I reading that right?
spk04: Okay, it depends on how you're defining all. I'm trying to find it right now. Yeah, we're mining our high-grade and we also have a low-grade stockpile. And so what we often do, especially when we're into really high grade, we'll often blend that with some lower grade. And what that ultimately does is extend our mine life. It's part of the overall mine life plan. So there is pockets of high grade and low grade in Isabella Pearl. And we have stockpiles of low grade from early on that we continue to blend with the newer mined high grade.
spk03: Yeah, I'm just looking at the release here, and the three months ended September 30th. You've got a column for 2022 and 2021. In 2021, it's showing low-grade stockpile, 8,600 tons, I guess, but nothing in the three months ending September 30th of 2022. So am I reading this wrong? No, I don't think you're reading it wrong.
spk06: Okay, go ahead.
spk03: Yeah, so, I mean, I'm looking at, again, the goal grade per ton, gram per ton in 2021 for that three-month period was 1.42. This period was 5.69. So it would make logical sense to me that you're just pretty much processing the higher grade open pit ore. I'm just trying to make sure I'm understanding that right.
spk04: yeah we are processing higher grade but again we are blending it with lower grade there are pockets in this deposit of high and low grade and so we have different stockpiles but yeah what we mind is not always um you know put on the pad as just that because we're blending it with lower grade right okay and the other question i had and then i'll get it out of here come back in later but
spk03: Do you anticipate the all-in sustaining cost with the byproducts to remain basically flat in the low 600 an ounce range, and your production costs look like they are down nicely? Do you anticipate that to continue in the near term?
spk04: We do. There's a lot that goes into that number, and it can vary. So, you know, I caution anybody from looking on, you know, specific quarter versus last quarter. and look at the overall trend, and I think our overall trend is coming down nicely, and that trend should continue. But again, I caution you that next quarter could be up a little bit, could be down a little bit, could be the same, but the overall trend is those costs are coming down, and in large part, that's a function of the fact that this deposit had a seven to one ratio overburden in the Pearl, and we're through all that. we're, you know, the mine plant has us moving far less waste. So, you know, our costs should be very attractive going forward. But yes.
spk03: Okay, great. I've got a couple other questions, but I'll give somebody else a shot. Thanks.
spk04: Okay. Hey, thanks. Thanks, John. Good to talk to you. Okay, I have four other online questions, then we'll come back into the live. How long will the 40,000 ounce per year continue without Golden Mile going forward? That's from Gary Simmons. We're looking at mid 2025 more or less at that 40,000 ounce run rate. That's when Golden Mile and or County Line we hope would come online. County Line has kind of been a dark horse here where it's just 14 miles up the road and we've hit some excellent material there, some mineral there. And with our strategy of just hauling rock, hauling over 14 miles, that actually could, I see there's a strong possibility that actually could possibly be our next mine while we're still working and pushing Golden Mile forward. But both of those two, both of those ultimately we hope are mines. But yeah, about 2025 at that run rate. Next question is, Robert Miller, do you have a cutoff date for drill assays at Golden Mile? Is the electricity in at IP yet? You know, the cutoff date, I'm not getting too bent out of shape about a hard and fast cutoff date because, you know, when we hit good results, we're trying to pull as much as we can into the resource, the initial resource. And in previous conference calls, We did show an image that shows that there's high-grade higher up and then high-grade deep, and we're trying to connect those two. And so, you know, the more we can do of that and bring the mineralization up, if you will, the better. So, you know, the cutoff date, no. You know, if we keep hitting mineral and it makes sense to hold off, a cutoff date will do that. I think that's the best in the overall scheme of things to bring in the best possible initial starter pit on this and then move forward with a second phase of a pit, similar to how we did at Isabella Pearl. If we took the normal approach of mining companies, we'd drill this for five more years until we knew it 100%. And we're not going to do that, nor do we have the luxury of waiting around five more years. So hopefully that answers your question. And then is the electricity at IP yet? No. That has been a challenge. We're right on the border between two different jurisdictions in the Nevada Energy's electrical system. And so we're finally thinking we're making some headway. We're having good productive meetings with both Nevada Energy and the BLM, and we're pushing as hard as we can. But we really thought we would be connected to the power grid already. But, you know, there's often bureaucracy and we're in the thick of that. So we're still working forward to getting that electrical power grid up and running as soon as possible. The next question is East Camp drilling. How deep is that drilling going to be? What is the general approach to that porphyry? This is from Mark Smith. Yeah, the drilling is going to be varied depending on, you know, the specific structure and targets that we're going after. These aren't going to be really, really deep holes. We're still trying to just really understand structure and chase the initial mineralization that we found. Keep in mind at East Camp, this is a very large area with numerous targets. And so what I would caution any shareholder is, and we talk about internally, is that not to get discouraged if our, you know, first five targets don't come out what we think. This is a really big area, and it's going to take a lot of drilling. That doesn't mean we can't get lucky early on and find something in one of our initial drill programs. We did that in the first one in that we were just looking for structure, and we hit mineral already. But again, just I caution everybody that, you know, East Camp's a beast, and that's that home run potential, and it's going to take a while to really test it. Um, the next question from Robert Miller, any advanced M&A activity or just looking at stuff as usual? Um, yeah, obviously if there was advanced M&A activity, I really couldn't speak to that, but, uh, we always look, I mean, we, we always look and, uh, it's an interesting time in the space and yeah, we're looking at opportunities, but they absolutely have to fit our model and they have to be a creative, but, um, The shareholders have watched us pick up Ripper, and we picked that up for a very reasonable amount, only 100%. And just out of a few surface samples, we went in with a more detailed plan that we press released during the quarter. Phenomenal number of high-grade surface samples. So already that M&A, that acquisition is very exciting in that it warrants a drill program. And so we're going to try to get it in the queue next year. But yeah, we always look. We would be remiss not to. And then another question online from Tim Paul. You show significant inventory of gold via inventory. Do you feel you are on track with the mine plan or believe your IP mine life could overshoot latest projections extending mine life some? This may be important as we wait for Golden Mile. Yeah, at this point, we believe... You know, we're sticking with our original targets and projections. And is there possibility that there could be more leachable ore deep? Yes. Do we know that at this point? No. But why do I say yes? We've done some drilling in the bottom of the pit to help us continue with the mining. And the water level was much lower. than it was previously or that it was projected to be. Why is that important? It can translate into not mining below the water table, which the regulators do not want us to do under the current permit. But if that water table is deeper, we could potentially get another bench or two. So is there potential? Yes. But I would again caution shareholders from getting too optimistic there until we get down there and see, because it's tough to drill in an open pit in an operating mine enough to really get our handle around that, get our head around that, really understand it. But we're doing metallurgical testing on it. Some of it's coming back as heap leachable. So yeah, it's possible. But at this point, we're really focused on pushing gold a mile forward. We're really pushing now with County Line. I really do foresee they're going to both be on a track and whatever comes online first, great. And the other one will come online after. So, yeah. Okay. And operator, are there any other live questions?
spk01: Your next question for today is coming from Laurence Danny. Please announce your affiliation and then pose your question.
spk02: Good morning. Congratulations on a good quarter. I'm a private investor. And my question is, you touched on the 14-mile hauling over to Isabella Pearl. Yep. I believe in the last conference call you said you were going to study that. And would that just be a temporary thing? Would that go on for an extended period of time? And what have you come up with on that?
spk04: Yeah, you're referring to County Line. And County Line is... just up a paved highway and it sits right along the paved highway, 14 miles more or less from the Isabella Pearl. So under that scenario, we believe that there's a strong possibility we could get the permits under an aggregate because we would put no processes, we'd build no processing facilities at County Line. So we would just be permitting to expand an old small existing open pit, expand it both deeper and in width. And we'd obviously need to permit for all the normal cores, get all our background studies and all that done. We're working on that now in preparation for that. And then permit this just to haul for 14 miles down the road crush it at our existing facility, put it on our existing pads, and that would add additional mine life. Your question, though, to how long and whether it'd be temporary, obviously we'd love it to be longer rather than shorter. But we have been drilling county lines very extensively recently to get an initial resource. There is mineral there. We just need to see how much. and we need to do additional follow-up. But, you know, that would be terrific, as I sit here today to talk to you, if we had a year plus. That would be great. Because that would just buy us additional time and take pressure off of us moving Golden Mile forward. So, obviously, we're moving it forward, but it would just buy us more time. Now, if there's a lot more there, then, yeah, it could be extensive. But at this point, We just don't know yet, but those drill results we announced previously, and there's more coming in. We look forward to showing shareholders once we get them all in. It's pretty exciting. And the thought of not really having any capex, substantial capex, to put a mine into production and you leverage the existing infrastructure at Isabella Pearl means the hurdle rate to have an economic mine, so to speak, is very low. So all that... translates into increasing the potential that that could be the next mine, given the fact that permitting would be far shorter. There's no process to review by the regulators. There's existing infrastructure. There's really nothing to build. So all you're really doing is mining, and that's exciting. So it's just optionality, and we live by it with optionality. This is the mining industry. You have plan A. Rarely does that work out. So you always have to have options. we love that optionality County line. So hopefully that answered your question, Lawrence. Thanks. Okay. And, uh, is there another, do we have any more live questions?
spk01: You do have a followup question from coming, coming from John bear, John, your line is live.
spk03: Thank you. Um, it looks as if you are just under 9 million in a, for drilling, exploration drilling so far this year, nine months. And the question then is, what do you anticipate fourth quarter? And going into 2023, would that expense be roughly the same, do you think, or a little bit less? How are you looking at 2023 at this point?
spk04: Yeah, it's a great question. It's a great question. We have plenty of cash, so we'd love to have more drills if we could get them. You've heard me say that over and over and over again. Drills seem to be coming free. There's not quite the pressure on them and the crews, too. They go hand in hand. So we do not have a final internal targeted budget for exploration yet. Having said that, expect a similar expense in exploration next year. we have, in my opinion, the most exciting property portfolio in this part of Nevada. And so, you know, the more drills, the more exploration we can do, I think the more value we can create for shareholders. So it's very exciting to see, you know, one of our largest exploration spins recently. And I would like that to continue. We have the money. We're just hitting things very hard. And that's, I think, where we can create tremendous shareholder value. So I don't have the final approved exploration budget yet. I've seen early drafts. There's a high likelihood it'll be similar to what we spend this year. And to me, that's great. That's where we need to be. We want to be out there exploring these exciting properties and having success. And that's what we've seen thus far. And so why wouldn't we want to keep going and put ourselves in the position to have additional success? So good question, John.
spk03: Right. And I believe in the past calls you'd indicated trying to tie up a third drill rig. Has that come about or has that been deferred? And then along the same lines then, would you anticipate, so if I round up to $9 million in expiration year to date, is $12 million over the course of the year a fair number or do you think it's going to be a little bit less than that?
spk04: It may not be that high. We'll just have to see where we come out at. Coming back to your third drill, we have had three drills running at once in the quarter. Okay. Um, we have three different, uh, contractors and we have had three drills, not, uh, you know, for long periods of time, you know, some of the one, one particular drill company, um, You know, they're a major drill company. They come in, they drill 24 hours a day, and they hit it really hard and leave. And so it's like having numerous drills with just that one drill. But they were in and on our site, and I believe actually they're still there, but they're about to finish up that program and leave. I think our baseline for next year is I want a minimum of two drills, if not more. But, yeah, we were fortunate enough to get at various times three drills. And I think that's translated into a lot of our success and press releases with County Line and continued results at Golden Mile and hopefully some early results at East Camp as we're hitting that this quarter. So, yeah, I mean, it's a great question, but we did actually secure a third drill for a while. We're back down to two right now, or about to be two, but, yeah, good question.
spk03: Okay, great. And one last question. It seems like Ripper has gotten a lot of attention here in the last, let's say, six months, activity-wise. Has it moved sort of up the ladder, so to speak, of priorities relative to some of the other project areas outside of County Line and Golden Mile?
spk04: Yeah, John, that's a really good question. All our properties have high-grade surface. gold or near surface gold. And so we, it's a challenge for us to prioritize these. Ripper is one that, you know, it warrants putting a few holes in just so it can help us with additional exploration and mapping, et cetera, and get an understanding for structure. Has it moved up and gotten in front of some others? Possibly, but, you know, We're staying focused. We're Golden Mile and now County Line. Those two are the ones we're pushing the hardest. And we are moving to secure additional drill pads along the trend at Isabella Pearl. That's one of these that, you know, it's always a challenge for us when we look around and see all our exciting properties. We need to also stay focused on Isabella Pearl Trend. If all we had as a company was Isabella Pearl Trend, we'd still be very exciting. Why? Because there's four other old historic mines on this trend. The one right across the highway, if you stand at sight and look across at that past mine, they did 300,000 ounces. Stone throw away is our Isabella Pearl, and that's going to do well north of a couple hundred thousand ounces. So are there going to be additional deposits on trend? There's a high likelihood. So we're doing it in stages because of the time it takes to secure exploration drilling. We're doing these NOIs for five acres at a time. And that's a pretty tough treadmill to be on. We've been on that this whole time. And so we have additional NOIs in the queue to get approved so we can drill and test some of these. But longer term, it's important we have more area to explore on the trend. So we're moving forward for an exploration EA that will open up Far more land. That will take approximately a year. But once we get that in hand, then we'll be far better off to drill numerous targets simultaneously and not have to do the five acre dance along this trend. So we're doing it in two different phases, if you will. But in an ideal world, we find another Isabella Pearl, a stone throw away from Isabella Pearl. And then our haul distance is even shorter than County Line. And we go from there. So, you know, those three are our priority. Obviously East camp is the home run potential. Um, but then ripper comes in and that was a property that was brought into our door because the past owner saw us as a company who actually moved something forward. That doesn't have to be millions of ounces, like a major. So that came through our door. We were able to do a deal. We own it a hundred percent now. And the amount of surface samples with just our first program is phenomenal. And they're all high grade. So here we go. We got another exciting property. So yeah, look, this is a champagne problem to have all these properties and try to prioritize them. But I think we're doing a pretty good job at it. And yeah, it'll be fun to get a few holes into Ripper. But we're not losing sight of East Camp or County Line or Isabella Pearl Trend or Golden Mile, we're not losing sight of those, and those take priority over it.
spk03: Very good, thanks very much.
spk04: Okay, and then is there any more online questions? Or excuse me, operator questions?
spk01: You do have another question coming from Greg Nelson.
spk00: Please announce your affiliation, then pose your question.
spk05: Hi Greg, are you there? Greg, if you're talking, we can't hear you.
spk06: I'm sorry. I don't actually have a question.
spk04: Okay. No problem. Thanks, Greg. Okay. With that, we ran pretty long for the Q&A, and hopefully we got to all of them. I don't see any more in the – we're not hearing any more on the live, and I don't see any more in the queue. So if – You are listening. You didn't get a question answered. You have one. Feel free to reach out to Greg or myself. We're happy to answer questions at any time. Thank you, everybody, for your time today. We look forward to updating you with press releases until we talk again at the next conference call. Thank you.
spk01: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
Disclaimer