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.
spk02: Greetings and welcome to the Fortitude Gold 2024 second quarter conference call. At this time all participants are on a listen only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Jason Reid, Chief Executive Officer and President of Fortitude Gold. Sir, the floor is yours.
spk01: Great, thank you. Good morning, everyone, and thank you for joining Fortitude Gold Corp's 2024 Second 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 is our CFO, Ms. Janet Turner. 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 Fordham 10K 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 this earning release that we issued yesterday along with the comments on this call are made only as of today, July 31st, 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 31st, 2023. The second quarter of 2024 was successful on numerous fronts, despite the ongoing permit delays regarding approval to mine the high-grade gold deeper in the Isabella Pearl Pit. We had 9.2 million net sales, 32.9 million cash balance, 4,150 gold ounces produced, 4.8 million mine gross profit, 4.2 million exploration expenditures, 782 total cash cost, 1,013 all-in sustaining cash cost, and 2.9 million dividends paid. We continue to work with the permitting agencies on numerous permits with the immediate focus on Isabella parole deed permit and county line permit to begin mine construction. We plan to submit a modification request to expand the existing Isabella Pearl mine plan boundary 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 the Scarlet expansion modification as soon as we receive the IP deep or Isabella Pearl deep approvals. With a caveat that the regulators do not change course on what they are currently asking for to mine deeper in the pit, we remain optimistic our ability to mine the Pearl Pit is getting closer and may be in the third quarter. The agencies continue to be understaffed and overworked, but we are beginning to see positive movement, albeit slower than we would like. Regarding the bigger picture on permits and the environment that mining companies in the U.S. must operate in under the current Biden-Harris administration, we sent out an email to our Newsflow opt-in list a few weeks ago regarding this administration's appointed BLM head being called to Congress. Anyone who took the time to view those links could see that many states in the country are very frustrated with the direction this federal administration has chosen to take. from not issuing resource permits to forcing some states to house hundreds of wind turbines for electricity to be sent to other states to no benefit to the state being forced to house the turbines. This next federal election will dictate the direction and environment that will be imposed on mining companies for the foreseeable future. A vote for the status quo is a vote against your investment in the mining and resource companies and against your investment and fortitude. During the quarter, we aggressively explored our properties as we await permits. County Line, the Isabella Pearl Scarlet Target, East Camp Douglas, and Intrepid are among the properties drilled during the quarter with great success. We will most likely reduce our investment and exploration the back half of 2024 as we look to manage our capital while adjusting to these excessive permit delays and approvals. On April 4th, we announced drill results at County Line including 16.7 meters grading 2.19 grams per ton gold. On April 22nd, we announced additional County Line results, results including 4.57 meters grading 4.77 grams gold within 24.38 meters grading 1.7 grams per ton gold. at a feeder vein. On May 22nd, we announced 6.1 meters grading 3.47 grams per ton gold within 9 grams per ton gold grading 9 grams per ton gold grading 2.45 grams per ton at East Camp North. On July 4th, we announced additional drill results from East Camp Douglas North reporting 1.5 meters grading 2.4 grams per ton gold within 18 meters grading 1 gram per ton gold. And on June 27th, we announced 1.2 grams per ton gold over 27.43 meters at Intrepid. And on Tuesday of this week, we announced additional Scarlet North drill intercepts, including 9.14 meters grading 2.33 grams per ton within 16 meters grading 1.5 grams per ton. In addition, our exploration team identified numerous high-grade surface samples at Scarlet North. opening up a huge area for potential expansion to the northeast. Being optimistic, we are close to a new federal administration and the ability to receive permits in a timely manner to build our targeted new mines. I look forward to our future given the projects we have in the queue to build today and all the high-grade gold we are drilling on numerous properties for future potential production. With that, I would like to thank everyone for their time today on this call. And operator, if you could please open up the lines for the Q&A.
spk02: Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation will indicate. Sorry, sir.
spk01: Go ahead. I apologize.
spk02: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions.
spk01: Operator, while we poll for questions, I'm going to read a few emailed questions that have come in. One email from Steve, he says, some shareholders have stated concerns that permit delays could stop your production. Thanks for the question, Steve. We're going to be in production for quite some time. It's just a matter of how much we produce every quarter and that's a function of how much more so the cat we have and the residual leach. But, you know, these permit delays that we're living through now haven't stopped production and nor will they for this foreseeable future. We fully expect to have permits in hand and be layering additional ore onto our heat pad and we have no intent on stopping production. But I guess in worst case scenario, if this current administration gets in again and they drag out these permits, things could get a little tight down the road, but we'll just have to see. But again, another plug and emphasis to anybody listening on this call, your vote matters. And if you're going to vote for this administration, you're voting against the company. And that's important, I think, for everybody to hear. The second email is from Ben Mikesell. Here's a number of questions, I'll try to get to them. Let's see, the first one, could you comment on the rationale behind what appeared to be coordinated selling by company leaders starting last summer to the end of the year? We do not comment on employees trading shares. Every shareholder, including insiders, has their own reason for buying or selling, Ben. I will tell you that my personal share position changed as a function of a divorce. That's my comment on that. Number two, do you or other company officers have plans to start rebuying shares at some point? I would say possibly. You know, all management, we're buying hand over fist when we did the spin out. And I don't hear anybody talking about that. But yet, you know, management makes a couple shares, sales, and everybody is up in arms. The way I view it is I stay out of all management's, selling, and they should sell if they need to. You know, a shareholder wants to go buy a new car, they sell. Hawaii Wooden Management, you know, wouldn't have their own reasons, too. So, well, could they start buying? Sure, we have in the past. Second, third question, it seems like the stock could take a significant drop if the dividend is suspended. Have you considered suspending exploratory drilling or other costs in favor of extending the life of the dividend? I agree with you that if the dividend is cut or suspended, we would take a hit. It is the dividend that has allowed us, in my opinion, to outrun our peers for many years. Until we hit the snag of the permit delays with this administration, we were outrunning almost all our peers. So, yeah, if we have to cut or suspend the dividend, that will impact us. But as far as suspending exploratory drilling, you heard me say in the opening comments that we have already planned We front-loaded a lot of our drilling for the first half, and we're cutting back as we speak on drilling for the second. We will continue to drill. We have too many exciting properties to not keep drilling. We do have the money to drill, but we will be cutting back. And the fourth question, how will you retain and keep employees busy if you have no more ground to mine? We're mining Civic Cat right now, and Civic Cat, you know, we hit some intercepts that aren't even in the model over there. So We're unsure how long we'll be mining there, but we continue to mine there. And I expect to have our permits to go deeper before that's over with. And then after that, having counting lines. So I don't intend or expect to have to deal with retraining. You're asking, can some mine operators be trained for in-house drilling, for example? I don't expect to have to do that. Now, this is an unforeseen snag as a function of this federal administration in large part. for their delays, and again, anybody who doubts me on this, go look at our opt-in and watch the BLM answer questions in front of Congress. This is a countrywide issue with a anti-mining BLM head. So, you know, if that's gonna continue and this administration gets in again, yeah, that'll be the fight we fight, but hopefully we have a new administration. As far as other questions, Let's see. I have a question from Ray Lieb. Does leach pad inventory increased 16,000 this quarter? I think you probably meant 16 million. Is that primarily due to increased material or the increase in gold value? And what is economically recoverable? I'm going to have Janet answer that question.
spk00: Good morning. I believe you're talking about the long-term leachpad inventory on the face of the balance sheet, which did increase $16 million. But overall, leachpad inventory has actually only increased $8 million. What you see on the face of the balance sheet is a function of current versus long-term. And the increase of inventory is really leachpad is probably an increase of cost as well. just due to the fact that we're mining lower-grade ore, which is a lower cost per ounce, than placing that on the pad, which is increasing your cost per ounce.
spk01: Thank you. The second part of that question is how much ore remains recoverable in Civic Cat. I think I commented on that, Ray, as far as, you know, we don't know. There was a small amount in the resource, but we drilled around it and found additional ounces. So we'll just keep mining it, and at some point it'll be depleted, but we've got a ways to go. The next question, I guess, is again from Ray Lieb. Do you anticipate cutting back the exploration or dividend? I think myself and everybody, the last thing we want to cut is the dividend. There's a balance there. We are cutting back on exploration, but we still sit in a really strong cash position. And we absolutely have been very aggressive the first half of this year. And you can see that in our exploration expenditures as to all the drilling. But we did it purposefully to front load it. so then we can work on digesting that and putting it into a resource the back half of this year. So we will be cutting back. We have been cutting back on exploration, but we still will continue to drill with probably at least two drills. Let's see. The next question is Terry Rose. Where's the bottleneck in the mining approval process? OK, well, unfortunately, it's not a real simple answer. But if this is the first time listening in on the call, Terry, the BLM, the Bureau of Land Management, which is federal, is operating at about half staff, and they tell us this. And then there's quite a few new people in, and some of them perhaps have a little less experience than some of the ones who retired recently. So, for instance, here's one of the issues or bottlenecks we've been up against just to mine deeper in the Isabella Pro Pit. When we submitted the modification plan to mine deeper, we're not making the mine, the open pit boundary any bigger. We're not going below the water table. All these things point to a minor modification. So we submitted it as a minor modification. Obviously, of them running half staff, it took quite a while to get back to us. They eventually said, we're going to push this to a major modification. I pushed back hard saying, why is this a major modification? But it's like bumping your head against a wall. So we go through six months of thinking it's going to be a major modification. They came back to us recently and said it's going to be a minor modification. So that's good, but we wasted six months, in my opinion, doing that process. As we stand now, and that's why I caveat in my comments, in my prepared comments, and I'll caveat it now, if the BLM does not ask for more information, does not change what they're asking for, it is my impression today as I speak to you that they are effectively done with their review, which is very positive. But I am caveating that over and over again because things can change. So if they don't, then that's a huge hurdle that the BLM has indicated that they're pretty much done with all their comments. So now this gets kicked to the NDEP, which is the Nevada Department of Environmental Protection. They are also understaffed, so speak to the bottleneck issue, but I love the fact it got kicked to the NDEP. That means we're close. So I say all this with caveats because we should have had these permits in 30 to 90 days, and we're now a year out. And this emphasizes what I'll probably say five more times in this call is that under this administration, this is what we have to deal with. And so if you're going to vote for this administration, you are voting against us. And I will have less patience on people who hammer us with questions in regards to permits if you're sitting and voting for this administration. That's the long and short of it. But I hope that answers your question, Terry, as it relates to bottlenecks. But I also hope it gives you some insight in that I believe we're close. If the BLM doesn't change course again, like they've done in the past, and say, hey, we need more information, they're effectively done, which is a huge hurdle. So we're getting very close. The next one, Stephan Banker says, Have any of the Nevada politicians been helpful in obtaining permits? Your project should be viewed as critical to state finances. No, they haven't been. And the state and its politicians know very well how important mining is to Nevada. Mining and gambling are the two big players. But I will direct you, Stephen, to... go review the email links we sent to our opt-in and watch firsthand the stalling and the roadblocks that this administration is putting up for not only Nevada, but all the states in the country. So that plays into it that, you know, even if you have a pro politician that's pushing, you know, there's bigger, bigger players that are stopping the progress of a lot of these permits. Okay, operator, I've talked a lot. I know we have a lot of questions, but are there any call-ins? So let's get to the call-in if there are some.
spk02: Yes, sir. Our first question is coming from John Baer with Ascend Wealth Advisors. Your line is live.
spk04: Thank you. Good morning, Jason and Janet.
spk01: Good morning. How are you?
spk04: I'm doing all right. Two questions kind of been touched on a little bit, but the first one I guess basically is, With the improved outlook on Scarlet North, how much additional detail information and so forth that you would have to provide to the BLM to move a permitting process along for Scarlet North? In other words, do you need to provide additional data on water tables and do an environmental impact assessment and so forth?
spk01: Yeah, great question, John. Yeah, we would have to do rock characteristics, hydrology reports, environmental studies, background biological studies. We've done, because it's so close to the Isabella Pearl Mine, we've done most all of this. So we will be working on some rock characteristics. and some of those specifics for Scarlet North and that's what we're doing now. But we've gone back and are dotting our I's crossing our T's to make sure that the radiuses of the biological studies have encompassed the Scarlet North. But the Scarlet North being just 700 meters away from the Isabella Pearl, we can leverage not only the process so we're effectively just mining it as an aggregate and hauling a short distance for process so we don't have to re-permit anything as far as a process. All we're permitting is another open pit. But what goes along with that is all the environmental studies and stuff, which we have most all of them already done. We are working on the few that we don't, and I would turn that in today if the BLM was fully staffed. But we have actually had comments back from them that we turn in too many permit requests. I think that's just a function of they're overwhelmed. So we have chosen not to submit this yet because we're trying to keep them, you know, very focused on whatever time they allocate to our company to review our stuff, to focus on what's most important, and that is our ability to finish mining the high-grade deeper in Isabella Pearl and County Line. And so we don't want to distract them by submitting it, but probably, you know, shortly after we get The ability to mine deeper will turn this in if we believe we're not overwhelming them. But again, this speaks to the fact when you have a half, you know, they're running on half staff, and this federal administration chooses to send billions of dollars overseas for wars that arguably we shouldn't be fighting or participating in, yet they will not staff the Federal Bureau of the BLM, that's a problem. That's a problem for this industry. And what we need is a federal administration that will come in and staff them fully. And we saw that with the previous administration, where they were actually pushing for expedited permitting, et cetera. So a stark contrast between the previous administration and this one. And yeah, but we're in the position to shortly turn in... you know, a permit application. We're just choosing not to because we don't want to overwhelm them. But having said that, it's so close, it's so close in proximity, and we're not building anything new. It's just additional open pit that I would hope, given a new administration, that this would go through much more quickly.
spk04: Okay, yes, and I will say I looked at those links, and they're pretty appalling. But I guess, is there any use by date, so to speak, on some of these past environmental impacts and so forth? In other words, I guess I'll just boil it down to this. It's taken so long for you to get permit to just deepen an existing active open pit mine. It's pretty hard to be very optimistic that permit approval for something like Scarlet North would be moved along any quicker. In other words, you probably are looking at another year or something like that from that. I'm not trying to be Debbie Downer here or Donnie Downer or whatever, but that's the purpose of my question. I'm trying to wrap my head around, okay, you've got some pretty favorable results and expansion And very close by. But, you know, with the troubles that you've had with deepening Isabel Pearl, you know, that's the purpose of the question there.
spk01: No, John, it's a great question. But, again, it just speaks to the overtone of this call. If you walk away from this call not knowing my opinion on this administration, you haven't been listening.
spk04: Well, I know your opinion.
spk01: If we have to deal with the same administration, we're going to have to deal with these delays. That's the long and short of it. I believe we'll eventually get them, but the delays hurt. There's no two ways about it. I'm not going to throw names under the bus.
spk04: The irony is it hurts the efforts to – the electrification effort that they are promoting because there's an awful lot of additional resources, non-precious metals that need to be developed domestically.
spk01: Yeah, yeah. Right, and again, we're not in isolation by any means. We talk to industry peers, one of which is a major company, and they are Their environmental guys live in three years on a minor mod for them, and they're a big company. So, yeah, I'm optimistic, though, that we will not be dealing with this same federal administration, and we can go back to the days of the prior administration where things moved far quicker, and they were pushing to expedite things. If we're in that environment, you know, we have – a couple mines to build, and with Scarlet, possibly a third mine to build, so to speak. So, you know, we have mines to build. We have resources to build on. We have probably the best land position in the Walker Lane. I mean, everything we're drilling, we're hitting. I mean, we have a lot of exciting... aspects of this company in our future our big hurdle right now is just these permitting and like i mentioned i brought you guys into the weeds we went from uh hey this should be a minor mod 30 to 90 days and they kicked it to a major and wasted six months and now they kicked it back because they know it's not a major i mean come on i mean what's happening there is that coming from above i don't know but uh my gut tells me there's a little of all but um Yeah. I mean, again, we're getting close. So like you also heard me say, with the caveat again, as long as the BLM doesn't change their tune again, they're effectively done, which is huge. So now it goes to the NDP, so now it's more, I'm happy about that. So now the light is at the end of the tunnel, as long as the BLM doesn't change their tune again. But we'll see. All right. Very good.
spk04: Thanks for taking the time. Well, I was going to ask one. You kind of touched on it about reducing the number of active drilling rigs out there. If I heard it right, you've got two going right now. But if we move on, say, into the fourth quarter, calendar quarter, it might be down to one or two.
spk01: actually stop yeah we had four to five at a high uh previously so we had tremendous drilling but also look at all the great drill results we had i mean it's very exciting this is what you want um but we're now looking at it out of the ground if you can't get it out of the ground though that's
spk04: You can have all the great drill holes and results you want. I'm just thinking about preservation of cash and cash flow and that kind of thing.
spk01: I say it again, we have and we will continue to cut back on exploration as it relates to drilling. We'll use the team we have to do a lot of mapping and stuff, which is very beneficial because that actually generates new drill targets. So it's actually not a bad thing. I've lived it before several times in cycles with previous company where sometimes when you actually constrict your exploration budget, you get better results. because you're actually focused on your priorities and you're hitting gold in almost every hole and you're going down that road, which isn't a bad road to go. So, you know, we have two drills right now and we'll probably keep those all quarter and continue to drill some exciting targets and expand on known mineralization. Not so much, we'll do probably little to no, you know, brownfield exploration. We'll just focus on where the mineral is, so. No, good questions, John.
spk04: Very good. All right. Thanks, Jason. Take care.
spk01: Thank you. You too.
spk02: Thank you. We have a question from Peter Pio, who is a private investor. Your line is live.
spk03: Yes, sir. Jason, thank you for taking my call and my questions. I have a couple. First one is you had mentioned on a previous call offering to hire an employee that would help either at the state or federal level. I was wondering if there was any progress made in a consortium of miners that go together to put into almost like a trust that would then allow the employee to be completely independent from mining companies.
spk01: Great question, and you definitely follow us, Peter. This is something that's done in other offices around Nevada, especially up by the Carlin Shrine and such. We are attempting to do that here in the Carson City office, and at first they're very receptive to it, and now they're just dragging their feet. So that offer stands. We would and will, if they'll agree, allow us to hire employees for them. We pay them, but they work under them and their direction. I don't think it should be a surprise that they're not taking us up on it. Why? I'll come back to this administration. So you would think if this administration chooses to send billions of dollars to fight wars overseas and not fully staff their BLM, that they would jump at the chance for public companies, not federal investment, to come in and support their employees. But they're not. sounds ridiculous Peter I know and I don't know what to tell you on that but that offer stands it and we've pushed them on it and they don't seem interested so that's how backwards things are right now but that offers on the table from us and they're just not taking us up on it okay second question would it help having a shareholder
spk03: influence blitz or a call marathon similar to what happens in uh to senators offices in dc where they will have uh their constituents call and they take logs of the number of calls that were pro or uh against an issue would that be something that would be worth doing uh calling the nevada blm office or um yeah i i wouldn't imagine it would be beyond the nevada blm office
spk01: Yeah, probably not. It just put us in some crosshairs and get us sideways. We had several shareholders over the past couple conference calls. I found out after the fact they hung up and started busting the chops of the BLM office, which is just blowback on us. So, you know, I'm not going to tell anybody what they can and can't do. I understand our shareholders are frustrated just like I am, but I don't think it considered an effort to hammer them because the long and short of it is you could hammer them all day long. They're not fully staffed. And so when you're not fully staffed, I mean, it's kind of an arduous process when you are fully staffed, but they're not. So until that changes, I think we're just in this situation. I mean, you've got to staff your federal agencies. I don't know what else to say. But if you're anti-mining, it's real easy to slow down mining if you don't staff the BLM. That's a real easy way. So I wouldn't recommend a blitz like that. Plenty of shareholders have called in and, yeah, I don't know that that would help Peter. I think the biggest thing, Peter, is if you're a shareholder in this company and pay attention, now you vote. I mean, on the bigger picture, that's the best thing that can happen is to get this administration out. We get them out, things will change immediately. I'm confident. And it'll go back to what we lived previously. And that's not speculation. We actually lived it. And that's how we got our Isabella Pearl permit. Went through in total reasonable time under the past administration. This one, we try to go deeper in an existing operation, and we're getting jerked around back and forth. So, yeah, I think that's the best thing is just, yeah. Pay attention how you vote if you want to invest in resources.
spk03: Yes, sir. Last question I have for you and the team is other industries have faced the same kinds of regulatory blocks from this administration. I'm thinking of crypto, and they successfully fought the SEC, and we've seen a dramatic turnaround in approval of different funds and the regulations, so almost lawfare. Is there any hope – I know you addressed it on the last conference call that as of right now you had no plans on suing the BLM, but is there – now that we're another quarter in, is there any hope of either individually as a single company or in concert with other companies suing the BLM to force expedited permitting since they can't do it in a reasonable time? But my estimation is it's caused about $85 million to $100 million in lost revenue and lost market cap to Fortitude.
spk01: Yeah, suing a federal agency is for the big dogs, if at that. We won't be doing that. That's tremendous capital. They have an endless supply, and they can just drain you until you're dead. So, no, we're not going to sue the government. That's not in our future. We're just going to do what we can, push where we can, and... Eventually, we'll get these permits. Like I said, we've got some light at the end of the tunnel. Caveat it again that the BLM may be done with questions on the deep, so that means we're getting really close. We'll just keep fighting the fight, but no, we're not going to sue them. I'd be surprised if the company did that alone. It'd be one thing if the entire mining industry did that, but who knows if this administration gets in again and all states are very upset with the BLM. on all fronts, whether you're oil and gas or whatever. Who knows what could happen, but I'd be hesitant to even join that, let alone lead it. So, appreciate the question. Anything else, Peter? Thanks for your time. Okay, we have another write-in, and then I'll probably take this as my last call because we're running pretty long here. And if you're in the queue, I apologize. Feel free to call Greg or I or reach out But yeah, email and we'll get to your questions. But this one's from Robert Miller. Any updates on the county line permitting process? Are they bundling the permits? They're not bundling the permits. That's a separate permit. But we're making a little progress, a little bit, but it's still a bit out. So county line, I'd be surprised if it didn't come in. It's not going to happen this year, I don't think, is my gut. I think it'd be early next year. which is fine. I mean, the biggest thing, my biggest focus is being able to find that super high grade deep in the Pearl. So we get that, that buys us breathing room to then get the county line. And yeah, and as far as that review, again, I scratch my head because that is an aggregate, meaning a gravel pit. And if there's rules and regulations that if it has a gold component, then you have to go through all this that we have to go through. But in the end of the day, when they go to review this, they're not looking at a process. They're not looking at a tailings. There's nothing to review. So I am optimistic that that'll drop in as well. But again, a new administration, a new fresh look at the BLM and how they operate and fully staff them, yeah, I think we'll be off and running for a lot of fun mine builds and a lot of future drilling. But again, a lot will be dictated. That's why my comments have been over and over If you back this company, pay attention to how you vote. That's as simple as that. Well, with that, I appreciate all the questions. Again, I don't think we got to them all, but you can reach out to us directly with them. As always, great talking to everybody. We'll talk to you next quarter. And hey, with any luck, maybe I'm talking to you with at least the permit deep in hand or very close to having it. So anyway, light at the end of the tunnel, I believe. Very good. With that, we'll close the conference call out, and have a good day, everybody.
spk02: Thank you. This concludes today's call, and you may disconnect your lines at this time, and we thank you for your participation.
Disclaimer