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spk01: Good day, everyone, and welcome to the Fortitude Gold 2022 year-end conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Jason Reed. Sir, the floor is yours.
spk02: Thank you. Good morning, everyone, and thank you for joining Fortitude Gold Corp's 2022 year-end conference call. Following my comments in the associated 11-page presentation for those who joined us 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, March 1, 2023, and we undertake no obligation to publicly update any of those 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, 2022. Portitude Gold has a long list of strengths, including being one of the lowest cost gold producers in the space with high margins, an ultra-tight capital structure, no long-term debt, a strong treasury, and with excellent exploration potential on our significant Nevada property portfolio. An attractive investment thesis on these merits alone as a gold equity. But Fortitude was specifically designed and engineered to create shareholder value by transcending being just a gold equity by having a second valuation metric of an attractive dividend yield. Fortitude's substantial dividend currently at 48 cents annually and paid monthly is providing an attractive 7.5% yield to shareholders. This is the same slide for those joining in the presentation that we presented after Fortitude began publicly trading, and we have worked to increase the dividend up to 48 cents as this goal. We could increase the dividend today, but we want to make sure we have enough capital to build the next mines we target building. This dividend approach separates Fortitude as a junior gold producer promotes all other gold equity peers by tapping into a pool of investment capital that is larger than the gold space itself. That pool of investment capital chases dividends and yield. This unique business model translated to Fortitude Gold regularly outperforming our peers, as was the case again in 2022 and thus far in 2023. The last 12 months have been difficult for the mining industry. Over that timeframe, our peers in the GDXJ, or Junior Gold Miners Index, were down over 21%. The majors in the GDX Gold Miner Index were down over 20%. Physical gold, noted here on the slide as GLD ETF, as a proxy for the physical gold price, was down 3.6%. Fortitude Gold beat our peers who were down double digits, as well as physical gold, with just a small 1.2% decrease. Fortitude Gold's unique business model outperformed our peers in 2022 and continues to do so in 2023. Production results for the quarter were not only in line with our 2022 production outlook range, but our year-end production total exceeded our high-end 2022 target by 3%, with 41,231 gold ounces produced. 2022 highlights and financial results include net income of $14.7 million, or 61 cents per share, 74.4 million net sales, 11.5 million paid to shareholders in cash dividends, 35.4 million mine gross profit, a very low 725 all-in sustaining cash cost, and we paid 3.3 million in income tax and mining taxes. We have also deployed and invested over $10 million to date toward the CapEx for Golden Mile. We deployed $11.6 million toward exploration, which resulted in terrific drill results, intercepting high-grade surface and near-surface gold on every property we drilled in 2022. We achieved all this while growing our cash balance by $5 million to $45.1 million. 2022 was another great year. During the 2022 production year, we mined an average gold grade of 3.71 grams per ton from the Isabella Pearl Mine. Operationally, we blended this high-grade gold with low-grade stockpiles as part of the overall mine plan. Our 2022 production of 41,231 gold ounces exceeded our high-end 2022 production outlook. We again target a range of 36,000 to 40,000 gold ounces in 2023. We also estimate approximately 52,000 recoverable ounces were on the heap leach pad at year end. This, coupled with approximately 50,000 gold ounces to be mined in 2023, pushes the Isabella Pearl production profile out into 2025. In addition, at the end of 2022, we had a small window of time from which to drill deeper in the Isabella Pearl pit at elevations below the permitted pit bottom. We intercepted additional mineral blocks of oxide and transitional oxide mineral amicable to cyanide leaching. Oxide intercepts included 3.05 meters grading 15.15 grams per ton gold within 21.34 meters grading 7.21 grams per ton gold and 18.29 meters grading 3.72 grams per ton gold. While a small amount of this mineral made it into the resource, the ultimate recoverable gold ounces in elevations below the permitted pit bottom won't be fully known until it's actually mined and the transitional ore blocks are pH tested for heap leach amicability and inclusion. We are working to modify our existing open pit permit depth to mine deeper by several more benches so we can pull this mineral into production, further extending the Isabella Pearl mine life. We deployed 11.5 million in exploration during 2022, which is 115% more spend year over year. Our exploration efforts paid off with numerous exciting drill results on several of our properties. Excellent county line drill results launched the property into a race with Golden Mile for pole position for our next operating mine. County line drilling delivered a maiden resource of approximately 37,000 gold ounces indicated and even more inferred mineralization on top of that. While the grade is excellent at close to one gram per ton, Low grades in portions of the block model brought down higher grade zones that were in excess of two grams per ton gold. We believe there's an opportunity to not only add ounces, but possibly improve grade with further drilling of this mineral that remains open on both strike and depth. We are currently drilling the main open pit area at County Line, looking for possible mineral extensions and additional gold ounces. Equally as exciting, we identified public information from a past operator at County Line on the east zone open pit, east of the main county line pit. References were made to leaving half the mineral in the ground when they walked away due to timing business issues and low metal prices at that time in history. We sampled blasted rock in the bottom of the east zone pit at two grams per ton gold. We are now planning a drill program at the east pit as well to quantify the potential of this opportunity. We look to not only add to the property's gold resource, but pull as much gold as possible into an initial mine plan and are moving forward with permit preparations. Due to County Line's proximity to our Isabella Pearl processing facility, County Line is being approached as an aggregate mining operation followed by transporting crushed material to Isabella Pearl for processing and DORE production. This should keep mine build costs to a minimum and expedite permit timing. Because of these and other factors, County Line is likely to become a mine sooner than Golden Mile. At Golden Mile, we are keeping our foot on the gas and are finalizing remaining permit requirements and targeting an updated Phase I EA permit submission by the end of Q1 or early Q2. We continue to intercept very high-grade gold at Golden Mile with recently released intercepts including three meters of over 30 grams per ton gold within 24 meters of over six grams per ton gold. As we noted in the most recent Golden Mile press release, drilling to date has shed light on an expanded geologic model whereby the mineralization may situate in more horizontal strata as opposed to only vertical vein and fault structures. While we believe we have enough mineral blocks defined for a phase one starter pit, we need additional drilling programs to test the open spaces and extensions of the new geologic model with the goal to pull more ore blocks into subsequent open pit phases. Most all equipment and materials have been purchased or committed for Golden Mile, totaling more than now 10 million spent to date. We are currently in the process of drilling monitoring wells for a phase one open pit as we move this property forward. Equipment and materials purchased to date includes a modular processing plant that takes gold to the carbon phase, crushing and stacking equipment, modular offices, heap leach pad liner, operational rolling stock like loader and dozer, among other equipment and materials that have been purchased. Much of it has been or is expected to be delivered soon. Exploration drilling at East Camp Douglas delivered numerous gold intercepts within our huge litho cap target. It is such a large area and target, had we not hit any mineral in our first several drill campaigns, I would not have been deterred, but we have been fortunate to have hit mineral in both our first and second drill campaigns while we were primarily just looking to understand the geologic structures in this unique target. Intercepts include 4.5 meters grading 5.24 grams per ton gold within 15.2 meters grading 1.87 grams per ton gold. Like County Line and Golden Mile, we plan to continue to drill East Camp lithotarget hard in 2023. In addition to the exciting lithocap target, we also have high-grade gold veins at East Camp's north end, and we are looking at possibly drilling those vein targets in 2023 as well. Alternating the drill back and forth between the East Camp's lithocap target and the northern vein target could be very beneficial and very exciting. Assuming availability of both drill rigs and the NOI exploration permits, Alternating back and forth between these targets while we receive and digest the prior drill campaign's assay results could speed up the advancement of both these targets. During 2022, our mapping and surface sampling of high-grade gold at a Ripper property was a success and warrants a maiden drill campaign targeted at this point for late 2023. We are also very focused in our prioritizing exploration of our Isabella Pearl trend as NOI exploration permits and rig availability allow. We are excited to begin drilling the next targets along the extensive mineralized corridor northwest from our Isabella Pearl mine. With our stellar portfolio of 100% owned properties and another $10 to $12 million drill budget in the queue for 2023, I expect another year of exciting drill results on our properties. As we look forward into 2023 and beyond, we have a clear vision of our goals to include continued mining at the Isabella Pearl, and permit approval to mine deeper for additional ounces. We are working very hard at potentially bringing online two additional gold mines in the coming years. We also plan to explore our exceptional portfolio of exploration properties with the end goal of being a long-term gold producer in Nevada. A unique gold producer that, in addition to producing gold at a profit, also continues to distribute significant cash dividends to our shareholders. We provide both gold exposure and yield and are financially solid while positioned for continued success. To conclude, 2022 was a great year, and we look to 2023 as being another exceptional year for fellow shareholders of Fortitude Gold Corporation. We thank you for your continued support. With that, I would like to thank everybody for their time today on this call. And before we open up the live Q&A with the operator, I do have several email questions that came in much earlier, and I'll start with those. The first one is from Gary Ride, who asked the question, how much more capex for Golden Mile? We now are approaching about $10 million of spend toward Golden Mile, which is great. Of an estimated approximately 28 million capex spend. So we are well on our way to biting off the capex with our cash flow. So with the cash on hand, and with what we expect to make in 2023. I expect us to generate a lot of cash in 2023. I believe we can build gold a mile with cash and no dilution to shareholders. The same holds true for County Line, and especially since the capex should be very low at County Line. The next question is a write-in question from Bob Schwering. Let's see, he's got a couple of them. The first one is 9 million CapEx spent today. I think I just addressed that. I'll skip that question. Number two, we are waiting on permits. Which ones? For Golden Mile, the big permit you turn in is called the EA, and we're working really hard to finalize that and try to get it in by the end of this quarter or early next quarter. That is the more comprehensive big package of permits that we seek. Now, we are not building an ADR. plant at Golden Mile. And that was the portion of the permitting that took the longest for Isabella Pearl. So we expect that to shorten the permit timing. So I would say, to be very conservative, the building that project should be less than a year, especially since the process is being built modularly, tested offsite modularly, and it'll just be hauled in and ready to go. The largest build for Golden Mile is the heat bleach pad. That'll be the largest. project. But to put all that in perspective, we broke ground at Isabella Pearl and produced gold in 10 months, building an ADR. So we're not building an ADR. So because of that, I think we will, again, to be very conservative, less than a year. But why couldn't we beat our 10-month target? I don't know. Maybe we can. We'll see. Okay. And then one last question from Bob. It's, Is current life of mine oxide still estimated at mid-2025? The answer is yes. And can additional benches extend it? The answer is yes. Okay, operator, if you have any live questions, let's take a few of those.
spk01: Certainly. At this time, we'll be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset, if you're listening on speakerphone, to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Please hold while you poll for questions.
spk02: While we wait to see if there's any telephone questions, I see a bunch coming in on the portal for those joined online. I'll take a few of those. The first one is from Harvey Bowen, private investor. I noticed that the exploration budget for 2023 is slightly less than that for 2022. Cash flow in 2023 was strong enough to add $5 million to assets. In view of all that, and with production to at least be equal to 2022, what are the prospects for dividend increases? Thanks for your question, Harvey. We could increase the dividend today, no problem. But we also want to take a longer-term view for this company. So we want to make sure we have plenty of cash on hand to build, as you heard, two mines that we're going after. So those mines, in the grand scheme of things in the mining industry, are very low capex. But having said all that, we just want to make sure we strike that balance of returning a nice, sizable dividend to shareholders, but also having enough cash on hand to... to build so again we could increase it today we're not going to today at some point in the future you know we hope to be in a position to increase the dividend but we our dividend compared to our peers outshines everybody so I think we're doing pretty well and we're growing our cash and we're building so I think that's the main approach the next question is from Clyde Sorry if I mispronounced your last name. Is there a chance to receive our dividends in gold? A great question, Clyde. As you guys know, my associate Greg Patterson and I developed that when we were our previous company, we developed our conversion of dividends into gold. We may potentially do that here again. But at this point, we don't have that ability. But is there a chance? Sure, there's a chance. We did it before. We'd like to do it again. We do have a lot on our plate right now, and at some point when we have a little more time, we'll focus on that. But yeah, we've done it in the past, and it'd be fun to do it again. We have another one from Ray Lieb, individual investor. What would it take to recover non-oxide ore from the Isabella Pearl? It really depends on the metallurgy of the non-oxide ore, but from the initial look at this, it's pretty complicated. So it would take a completely different operation. And so Our business plan is to go after the oxides and mine them from our properties with an open pit heap leach. To go after the sulfides is a whole other ballgame. Now, you could take the approach which some are doing, even some of our neighbors are doing. They're on the Walker Lane where they hope to someday mine a bunch of sulfides and then sell them, toll mill them, whatever, to the majors who have large facilities from which to process the sulfide ores. that's one approach, too. I don't particularly care for that approach because you are over a barrel when you don't control your own destiny on what you produce. So, you know, there's optionality for us in the future to look at some of those sulfides and, you know, who knows, maybe someday we potentially sell those sulfides to a major who or somebody else who wants them. I, you know, sure, we could potentially mine it and toll mill it, so to speak, to some major. But again, you open yourself up to a rude awakening when they can't take your material. And I don't know that we're going to put ourselves in that position. But so what would it take? It would take a lot. And it's not our focus. So great question. But that's not going to be for us anytime soon. OK, the next one is Greg Nelson. Great job, guys, managing the business plan. Question, since there is significant metal Currency in the leach pads could you elaborate on typical timing of? Scooping or and delivering to leach pad and also leach pads to finish product ready for market. Thanks great question You know a leach pad is like a living organism. It takes a life of its own I mean even her heart brain can change the chemistry makeup and how it leaches so when we stack different benches and then we divide those into what we call cells and we put solution on each cell and It really depends on how long you leach for, the depths of the cells, how many benches high it is. I mean, it is a very intricate science, if you will. It just takes time. And as everybody who follows leach pads knows, leach pads produce long after they're done being stacked with ore, just as a function of how these operate. So we're living the same world as anybody else who builds a leach pad. So you stack ore. You put cells under leech, maybe you alternate the cells before their time is done and it's all been depleted and you come back and get those later. Operationally, there's actually some really good reasons to take them off leech and put them back on, but I won't delve into that rabbit hole right now. But point being, it just takes a while. So the good news is we believe we have a lot of gold on that pad and we're going to be adding a lot more. So things are going really well. Hopefully that more or less answers your question. Okay, and the next question is Mark Smith. On Scarlet, what is the status? You said, okay, on Scarlet, what is the status? You said we would see a reduction in waste. Thanks for delivering. Okay, Scarlet is just an ancillary area, if you will, from the Isabella Pearl mine, and there's several of them, and we're drilling them all. We found mineral at Scarlet. We're trying to connect it. We're actually looking at other additional targets in that area. So hopefully that answers your question on scarlet. But on the bigger picture, we all know, if you followed us, that there's four past heap leeches along Trend, open pits, across the highway from us. And then you get to our claims going northwest, and we've locked up a tremendous amount of ground And Isabella Pearl's on the end of that claim, and it goes up to the northwest. I don't believe that this mineral just stops at Isabella Pearl. I think we're going to find many additional deposits along this trend, but it does take time. And not all targets we drill will be the home run and become a deposit, but I believe some of them will. So what I mentioned in the conference call, and I'll reiterate here, we're very focused on the Isabella Pearl trend, because obviously if we find something on that trend, it's a short haul distance to the Isabella Pearl. So hopefully that answers your question on the scarlet. The second part of your question where you say, you said we would see a reduction in waste, thanks for delivering. If you look at our waste, and I may get these numbers a little bit off, but we went from like eight million tons down to one million and change, and going forward we have a couple hundred thousand. Yeah, our wasted Isabella Pearl is, dropping dramatically, which will help our costs, or at least our cash going out on operations. So yeah, we are reducing waste as a function of this Isabella Pearl out of 7 to 1 strip ratio. And we're through all the waste, basically. So I think you're seeing that in the results of the financials. And you'll continue to see it. Thanks for the question, Mark. Another question from Chris Abbott from 1035 Capital Management. Once you get these two new mines online, when do you start to uplist to a major exchange? Great question, Chris. We get this question quite a bit. Our logical and landing spot, when and if we update, uplist, will be the New York Stock Exchange. It won't be the NASDAQ. We know the guys over at New York Stock Exchange. We've been over there. We've had experience with our past company being on there. And there's a lot of good reasons to move up. And it's just a matter of timing. So we just want to time it right. There's some case studies. I won't throw some company names under the bus here. But there's some that have uplisted just to uplist. And it didn't do anything for them. You want a catalyst. So we're looking at that as well. But if and when we uplist, it will be in the New York Stock Exchange as opposed to the NASDAQ. Okay. Another question, HR Gross from Goss Capital, or HR Goss Capital. Status of Scarlet, I think I hit that. I think I touched on that. Another question, Gary Hayes, will FTCO be holding gold as cash reserve? Great question, Gary. Yeah, we may. We did that with our previous company. We had gold in our treasury, and we may do that again. Okay, we've got another question. Thanks for all these questions, guys. There's a lot coming in. Ariel Dickens, did you ever drop power to Isabella Pearl? I don't recall ever hearing. No, great question. There's been some hiccups with getting that power line hooked up, not having anything to do with us, but having everything to do with the bureaucracies and the large organizations trying to – focus on us. We are unfortunately right at the border of two different electric companies' jurisdictions, and we don't feel like we're getting a lot of focus. Having said that, we've been working really hard with them, and we believe we're getting some traction. So we fully expect to connect to the power grid. We're working hard on that. And yeah, I'm hesitant to give another time frame because we don't control that timing. It's kind of like when they can get to you. So we obviously have the money. We've done everything we can on our end, and we're just continuing to push that one forward. Let's see. With that, you know, we've answered a lot of – well, I think – do we have any phone questions, operator? Yes.
spk01: Your next question is coming from Paul Caballa. Your line is live.
spk00: Great leadership, sir. Congratulations. I've got a question for you with regard to county line. Once it's up and running, is your intention to increase the dividend once that's going?
spk02: Yeah, possibly. I don't want to have that be the only catalyst. I mean, the dividend has to do with a bigger picture of, like, the overall trajectory of the company, right? You know, if you were to ask me this question when we first launched, we didn't even have a dividend when we first started trading, and then we slowly started to, you know, create a dividend and increase it. And there were people who never thought we'd get to 48 cents. Now we're at 48 cents, and everybody's saying, hey, when are you going higher? I get it. I love the dividend as a shareholder. You know, the dividend's great. But just because we bring on county line doesn't necessitate or, you know, mean we'll be increasing the dividend because we have another mine to build after that. So... Could it happen? Sure, but I don't think just bringing County Line on will be the reason for it. It'll be a function of as we look down the road, as we sit today, we have two minds to build. So it's just prudent to hang on to our cash. We still pay the nice dividend, but let's get these built and then decide. So yeah, I don't have an answer, Paul. Sorry whether that'll be the catalyst, but I think we've shown and demonstrated but not only history of our past company, but with Fortitude Gold, that we're very committed to the dividend, and we've distributed as large a dividend as we can while balancing the needs of the operation. And we'll continue to do that. So hopefully that answers your question. Yes, thank you. Yep. Okay, I answered a lot of questions there. With that, let's close the conference call.
spk01: Absolutely. Thank you everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
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