Fortitude Gold Corp

Thank you. Good morning, everyone, and thank you for joining Fortitude Gold Corp.' 's 2024 Q1 conference call.

Following my comments and associated presentation for those who joined online, we will have a brief question and answer period. And 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, May 8, 2024, 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 31, 2023. The first quarter of 2024 was successful on numerous fronts despite the ongoing permit delays and approval to mine the high-grade gold deeper in the Isabella Pearl pit. We had 8.2 million net sales, 983 gold bounces produced, 2.9 million paid to shareholders in cash dividends, 4.2 million mine gross profit, 661 total cash costs, 777 all-in sustaining cash costs, 3.6 million exploration expenditures, and a strong cash balance of 41.9 million. We continue to work with the permit agencies on numerous permits with a focus on the Isabella Pearl deep permit and county line permit to begin construction. We have permit submittals ready to turn in once others are received like the Isabella Pearl mine plan boundary expansion to encompass the scarlet target which looks to be growing toward a potential second open pit mine on the Isabella Pearl trend. We plan to submit that expansion permit as soon as we receive the IP deep approval. The agencies continue to be understaffed and overworked, but we are seeing positive movement, albeit slower than we would have liked. During the quarter, we aggressively explored our properties and had as many as six drills operating focused on our County Line project, the Isabella Pearl Scarlet Target, and East Camp Douglas. We intercepted from surface 90 feet grading 1.49 grams per ton at East Camp Douglas North veins as well as 5 feet grading over 1 ounce per ton at the same target area. Our southern lithocap target at East Camp Douglas returned 40 feet grading 2.9 grams per ton gold where we believe we may have discovered our first feeder zone into the lithocap. We also released successful drill results from our Isabella Pearl Scarlet North target where we drilled 70 feet of 1.14 grams per ton gold from surface. The Scarlet North Target, just 700 meters away from the processing facility, has great potential to become an additional open pit on the larger Isabella Pearl property. Subsequent to quarter end, we also released exciting drill results from the County Line property, including 16.76 meters grading 2.19 grams per ton gold. 7.62 meters, grading 1.28 grams per ton gold, and 6.1 meters, grading 1.49 grams per ton gold. We see strong potential to continue to add gold ounces to County Line's mineral resource. Overall, we feel very fortunate to have acquired this exceptional land portfolio of eight gold properties we own 100% in Nevada, now encompassing over 40,000 acres. Early in 2024, we announced the acquisition of two additional gold properties along the Walker Lane mineral belt, the Dauntless and the Intrepid properties. Our initial drill programs have made a gold discovery at Intrepid, and we are excited to share those results in a press release soon. We have also recently commenced our first drill program at our Dauntless property. Before we turn the call over to any potential questions, I would like to thank John Labade for his service the past three years as Fortitude Gold's Chief Financial Officer. John's last day with the company will be June 1st, after which he will be focusing on retirement. I had the pleasure of working with John at a prior company and felt very fortunate to pull him out of retirement to join us at Fortitude Gold. John has done an incredible job over these past years and has been a positive asset to this company. We wish him all the best in retirement. I would also like to congratulate Janet Turner on her promotion to Chief Financial Officer of 42 Gold. I've also had the pleasure of working with Janet for several years, and I look forward to working with her in her new role as 42 Gold's CFO. With that, I would like to thank everyone for their time today on this conference call. And operator, if you can please open up the lines for a possible Q&A. And after you announce how they do that, I do have some written Q&A I will get to.

Certainly. Everyone at this time will 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.

So as we wait for any call-in, we have several write-in email questions. So the first one is from Ray Lieb. Are other companies getting permits approved in Nevada? What is the recent average wait time? Ray, I don't know that there's an average wait time, but I do know that we are not alone in our trials and tribulations on waiting for permits. I will tell you that someone, an associate, sent me an email this morning pointing out that a company after three years has finally gotten their EA for exploration permit, which is a lengthy time to get an exploration permit, but I guess the long and short of it, Ray, is I don't have any average wait times. I think what the industry is feeling with these long delays, if you will, with permitting is a function that, as I speak to you today, both the Bureau of Land Management and the Nevada Department of Environmental Protection are both operating at about 50% staff levels. And so even if they were at 100% staff levels, the permitting process can sometimes be long and arduous, but at 50% staff levels, I think we're seeing the ramifications of that. Quite frustrating when I watch this administration send billions of dollars overseas, yet won't focus on our own country in this regard. The second part of your question, Ray, is will there be a new resource estimate for Golden Mile and when? Possibly. Ray, what we've been doing at Golden Mile is we always knew there were these vertical mineralized structures, but then we realized that there's also some horizontal structures. We've been working really hard to understand the structures. It is possible that we do an update, but that's been our primary focus is just trying to understand the structural controls of that deposit. Another question you have, Ray, is, is East Camp Douglas a candidate for trucking concentrate to IP plant? As far as trucking anything out of East Camp Douglas, it is possible to potentially truck ore or we could potentially truck gold-infused carbon. What we're seeing, and we're doing a battery of tests right now, we don't have all the results back, but we're seeing a lot of East Camp Douglas have oxide material. There is some sulfide and there's some transitional. I guess on the oxide piece or portions, we could potentially truck, depending on the grade, truck the ore down the mountain to develop those processing facility or we could build a facility at East Camp and then take a process gold to infuse carbon and truck the carbon like we plan to do it, build a mouth. We're unsure yet, but I think it's very positive that we have oxide, high-grade oxide up there. Okay, and then you have an additional question by Ray Lieb. How much gold remains on the IPE bleach? It's probably close to what we announced earlier. We added some. We subtracted some. I think it's around 48,000, 49,000 ounces. John will correct me if I'm wrong on that, but that's more or less where we stand today. Another question by Phil Dinsmore. At what point, assuming no new permits until late 2024, maybe 2025, do you change dividend rate? Yeah, Phil, that's a great question. We're just going to have to wait and see. I don't have a crystal ball on what the future is going to hold. But at this point in time, with our strong cash balance, we fully intend to continue the dividend throughout the year. If we get to the end of the year and it's looking like the permits are a long way off, yeah, we'll have to address that. And, you know, what I'm hoping, Phil, is that we get to the end of the year and we see a brighter future with a new president and one that is going to be more open to business here in this country and if that's the case i think permits will start dropping in like they used to under the previous administration much faster and like they were before and yeah then we'll continue on but if this administration gets in another four years and we delay you know they delay our permits for four years yeah the dividend will change but i don't have a crystal ball Another question from Steve Banker. Frustrated by the share price, as I am sure you are, is this a permitting problem or has the market miscalculated the underlying earnings power of the enterprise? Steve, thanks for the question. In my opinion, this is completely a permit issue. Had we received the permits in a timely manner like we had previously, under the previous administration for several years, we would be building county line as we speak. We would be mining deeper at our Isabella Pearl high grade as we speak. This administration's dragging their feet on permits for miners has caused the delays, and I think that ultimately has led to the share price being weighed on. Again, if those permits had dropped in, we would be executing on our business plan. And, you know, we can only do what we can, we can only focus on what we can control, right? And so we've shown with this company, when we've received the permits in a timely manner, we execute it on the business plan. And I would say we would continue to do that as long as we get our permits in a timely manner. So as far as miscalculating or calculating the underlying earnings power of this enterprise, Our business plan of producing high-grade, low-cost ounces with a tight capital structure to pay a substantial dividend for three years running outran our peers. So I think we have earnings power that's tremendous as long as we have the ability to build mines. So, no, I don't think it has anything to do with the market miscalculating anything other than the market is scratching their head as we are wondering why these permits are taking so long. Operator, do we have any call-in questions?

There are no questions in the queue at this time. Once again, everyone, if you have any questions or comments, please press star then 1 on your phone.

Okay, we had a couple more write-in questions here. Ariel Dickens, what is going on with the recoverable gold that is on the margins of the heap leach? I remember hearing that there was a significant unleached gold still residing there. Or am I wrong? Ariel, no, you are right. You are correct. We have put a couple cells of the margins of the heap under leach. We have a long way to go before we leach even a quarter of them or half of them or all of them for that matter. But right now we continue to mine from, say, the CAT, and we're continuing to leach from gold that's on the heap, and we are also starting and have been doing for a bit, starting to leach those sides of the heap leach pad. So that is going on as we speak. Another question, or a question from Henry. I apologize if I pronounced your last name incorrectly. Is there anything that shareholders can do with respect to their elected officials to facilitate the processing of permits? Wow, Henry, he queued that one up for me. If you're voting for this administration, you're shooting your investment in the foot. I've said that before. I'll say it now, and I'll say it in the future. I just do not see any rational way in which somebody can justify voting for this administration and then putting their money in... resource companies when they struggle to get permits under this administration. So, yeah, anything you can do, pay attention to how you vote because it really does matter. I think, let's see, another question came in from Ray Lee. Has the majority of the overburden been removed from CivicCat? We're mining through CivicCat and there was a small resource in the initial resource over there, Ray, but We also intercepted some mineral outside of that resource. So we're looking to see if it's economic to chase. But no, we're still mining at the Civic Cat. So my answer to that is the overburden hasn't been completely removed because we're mining overburden or we're mining waste and ore over there as we speak. Okay, I'm not seeing any additional questions. And if we don't have any phone questions, operator, let's...

Let's confirm that. Absolutely. Your first question is coming from Stephen Moken. Your line is live. Okay.

Jason, tell me, if theoretically you started mining without the permit, what could possibly happen to the company?

We would get shut down in a heartbeat, and we would never do that.

Wouldn't you be able to litigate that in the court system and tie it up for many years?

No. We would be tied up for many years, but they would shut us down in a heartbeat. I would never do that. Everything I would ever want to do is to be legal and on sides with the permitting agencies.

I understand all that, but they're jeopardizing your business. It's like they're shutting you down, in other words, for no reason at all and not getting the staffing in there that they need or speeding up the process. All you have is what's in the leech pad, and that's not going to last long.

yeah well again what we are focused on is what we can control so what we do have is the ability to drill on several of our properties and we've been doing that and getting excellent results and so whether it's adding ounces over at county line whether it's discovering this new discovery we just hit over at intrepid whether it's continuing to hit gold over golden mile and or excuse uh east camp douglas excuse me All that is exciting for our future. The regulators are not giving us any indication that we're not going to get the permits, Steven. So it's not a situation where they're, I believe, saying, hey, we haven't heard anything saying you're not going to get them. They are so understaffed. And I have to imagine we're kind of a smaller fish when you look at the New Monson Barracks and the bigger companies that operate in Nevada. I have to imagine they get more attention than we do. But even, you know, other large companies we've heard of are struggling to get permits. We're going to get them at this point. It's just a matter of when. So we'll just weather through this. I cannot imagine they're going to stonewall everybody into oblivion, Stephen. They might, but, you know, I just don't think that's going to happen.

Yeah, but here's my answer. Jay, here's my concern. You had mentioned more or less that one of your associates had called and you spoke with him and he said they finally got some sort of permit after three years. That's my fear, in other words, that going forward, could you wait three years, a year, a year and a half for permits?

Well, Stephen, that's what's weighing on our stock. is our business plan had always relied on permits dropping in in a relatively ordinary fashion. And under the previous administration, they did, and we executed, and we all as shareholders enjoyed the outcome of that. Under this administration, everything has changed, and permits are a struggle, and they don't want to staff. the BLM. That is by design, I truly believe. Why not take one of these billions that they're just throwing overseas and put it to this country, fully staffed, and then we'd be off and running? They could choose to do that. They're not. So this is by design, but that's what's weighing on the stock. Now, having said all that, we have, fortunately, a lot of ounces on the heap leach pad, and we're we're going to be producing for years, even if we didn't mine for a couple of years.

So it was not going to be producing much. What are you going to get? A 4,000, 5,000 ounces a year. If that, I mean, you know, it's okay.

So no, a good question, Steve, or a good point, Stephen, but look what we did last quarter. We didn't, we did just shy of 4,000 and yet the mine made 4 million. So it's, That's not an ideal situation, but look what we did. In doing that, we had six drills turning and we had tremendous exploration. As the year goes by, we'll cut back on our exploration as far as costly drilling to manage our cash better. Look, Stephen, we fully expect to weather this storm. I keep my fingers crossed that we'll be dealing with a different administration, which you know, the previous administration, they were looking to streamline. They were trying to move towards streamlining, truly streamlining the permitting process. So while I understand and hear your frustration, Stephen, we're going to be around for several years, and if all we can produce is $4,000 or $5,000 a month like we've been doing, look what we just did. It's not the worst case in the world to weather this storm. If this current administration gets in for another four years, it's going to be a much tougher goal of it, but I hear you. But coming back to what you originally said, we would never go just mine it. That would be the quickest way they would come shut us down. And then we wouldn't want to get in a suit with no production. And, you know, assuming the government, that to me is never a good path forward. So, well, again, Stephen, I share your frustration.

My thinking process is different. More or less, you say about, in other words, not being able to mine without the permit. I understand that you want to do everything in a legitimate legal way, but what do they have, scouts that they send out to your Isabella Pearl mine and see if you're digging deeper than what you're supposed to do? How do they find that out? How does anybody ever find that out?

Oh, they make site visits on a regular basis. There's so many regulators that make site visits, different factions, different, you know, whether it's MSHA, whether it's the BLM NDP, they wouldn't know.

So they have resources to send out scouts, but they don't have enough resources to give you your permits. It makes no sense.

Well, it makes sense under this administration, Stephen. This administration is very anti-mining and has been from day one. The day that this president got in office that very day, he put a stop on all permits, whether it was in wood, oil, gas, mining, whatever for 90 days saying nobody getting their permits. That was a shot across the bow. So again, anybody who fills in the little dot under the ballot for this administration is voting against this company and any other resource company for that matter. So that's what you can do. Um, Yeah. Get the word out to two associates who may be considering voting for this administration. And if they do that, it's going to hurt our it's going to make my life tougher. I believe we'll still weather the storm, but it's just going to be much tougher.

And there's absolutely no idea on your part when these permits could drop. You have not even a. a clue? You don't have an insider that you could talk to over there at the BLM?

We talk to them all the time. For instance, to mine deeper in the pit should have taken 90 days. It's not a major modification. The pit boundary didn't get wider. We're only going deeper. We're not getting into any water. It really was a routine expansion, if you will. whether it's turnover and staff that the new lead needs to get up to speed and then they leave and then the new lead needs to get up to speed or them changing course and saying, okay, now we want to do this or add it to this permit. I mean, there's always something. And so we just continue to work with them. We offer to help. We offer to actually hire at our costs, somebody to work in their office. And the red tape around that is astounding. It just shows me how inefficient governments are. We are asking to help staff them, and they still – it's unbelievable, really. I'd be jumping at that, right? But they haven't taken us up on it yet. So we're doing everything we can. Yep, go ahead. Do you have a question?

Yeah, basically, in other words, what you just told me. In other words, to me, if I spoke to an individual and gave them the information you just gave them, it's a five-minute decision process. It's not rocket science.

Well, we've turned in – there's a routine. It happens about every three years or five years, a routine permit update you have to do, you have to go through. We turned that in, and they didn't look at it for a whole year. I mean, that's the kind of delays that that's happening again. They're understaffed. I'm not, I'm not taking shots at the individuals at these organizations either. The, their work, hardworking people, arguably overworked and probably underpaid, but, um, you know, it's pretty tough when you're working at 50% staff levels. So, um, yeah, if we have administration that actually. instead of gave away so much of our money and deployed it to this country, we could staff and we, we would be off and running. Um, but yeah, Steven, I, you know, I appreciate your comments, but we will never do anything that wouldn't be onsite with the regulators. Um, it's just not something we would ever do.

Listen, don't get me wrong. I wouldn't want you to, I just said, hypothetically, theoretically, in other words, what would happen and understand that whole process and understand, why it's taking so long. I mean, I was on your last conference call and it sounded like within a couple of weeks you were going to have those permits dropped.

Sometimes they say things that let us believe that and then they'll change course. And so you're not hearing me say that in this call. You're not hearing me say that anymore. I'm not pontificating on any time frame. I've been led to believe it's going to drop in any day and then it doesn't. So we're just going to dial back our optimism. They're going to drop in. I just don't know the timing. And that's where we land. But I cannot emphasize enough what has changed. The previous administration, we got our permits in a timely manner. We executed on our business plan. We have minds to build. We have the ability to build them. We have the team and the money. What has changed? This administration, that's what's changed. It's simple. Steven, that's simple.

I have to wait for Trump to get in. In other words, for everything to start moving along on your end. Another question, in other words, I know you have $41 million in cash. You're going to reduce, in other words, your exploration going forward. What level would that cash need to drop to before you do something with the dividend?

Yeah, I don't know, Steven. It really depends trying to look out in front. we get to the end of the year and if we don't have permits, it's going to be decision time on what we can do and where we stand. You will see us over time throughout the year. The longer this takes, the more we'll dial back our exploration, which is unfortunate. Al and his team are knocking it out of the park. We're hitting gold almost everywhere he's drilling. It would be great to continue that on, but Under these permit delays, we're going to have to dial that back. We'll just have to wait and see, but we're in a very strong position. Again, while it's not ideal cash flow, we produced just shy of 4,000 ounces, and the mine made $4 million. We will be producing gold for quite some time. We have a lot of gold on the heap, and we'll keep doing this. But we'll just be managing cash, and we'll make those decisions when we get down to it. But let's hope we're not waiting to the end of the year for permanency to drop in.

I hope so. I hope that things change for the company in those going forward because it's very annoying, in other words, as a shareholder, in other words, to – to sit and wait, in other words, for something like that, in other words, to happen when it seems like it's such a simple, easy process to... It is.

Stephen, it is. Again, it matters how you vote. It's as simple as that. And, yeah, I don't know what else to say about that. We lived it with a different administration that was pro-mining, and now we live under one that's anti-soap. It matters how you vote.

Well, I voted for Trump when he got in office going back a number of years ago, and I'll vote for him again. So that's one vote.

Okay, well, thanks, Stephen. I appreciate the call.

Thank you, too, Jason. Have a good day.

Hey, you, too. Thank you. There are no further questions in the queue.

Perfect. All right, Matthew, thank you for... helping us on our conference call today. And thank you, everybody, for listening. We appreciate it. We look forward to updating you next quarter. Thanks for joining the conference call.

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.