Aris Mining Corporation

Good morning, everyone, and welcome to Aries Mining's year-end 2023 operational and financial results conference call. We will begin with an overview from management, followed by a question and answer period. Please note that the company's presentation that management will refer to during the call can be found in the events and presentations section of Aries Mining's website at ariesmining.com. Also, Aries Mining's 2023 Year-end financials have been filed on CDAR Plus and EDGAR and can also be found on their website. As a reminder, all participants are in listen-only mode. The conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Mr. Neil Whittier, Chief Executive Officer. Please go ahead.

Thank you, operator, and good morning, everyone. Before we go through our results, I'd like to draw your attention to the cautionary statements on slide two, as we will be making several forward-looking statements today. Starting on slide three, in 2023, after the merger between GCM Mining and Aris Gold, we restructured the operations team and introduced new operating procedures across the company. The new team achieved consistent quarter-over-quarter increases in goal production, improved cost controls, and significantly enhancing our community and ASM relationships to strengthen our position in 2024 and for the future as we expand the business. With strong goal production results, significant growth in mineral reserves and resources, and two expansion projects now in construction, we are on plan to double our production to reach 500,000 ounces in 2026. At our high-grade Segovia operations, we achieved consistent operational improvements throughout the year. Segovia produced 202,000 ounces of gold at a process grade of 10.4 grams per tonne, with oiling costs per ounce of $1173. It achieved production and cost guidance. In 23, our total operations generated cash flow to support our growth. 159 million in adjusted EBITDA, 75 million in free cash flow. This cash flow funded most of our 84 million of investment in expansion projects. And we ended the year with a strong cash position of £195 million. Doubling our gold production to a target of 500,000 ounces in 2026 will be achieved from two expansion projects. The new lower mine at Bermato was permitted in July, construction started in Q3 and it continues on target. And we're expanding the processing facilities at Segovia. In November 23, we announced significant increases in the high-grade mineral resources and reserves of Segovia. Naturally leading to the conclusion that the plant should be expanded, and that expansion is now underway. On the corporate front, we listed our shares on the New York Stock Exchange American in September. In addition to improving our profile and accessibility for U.S. investors, we also welcomed the increased regulatory standards as we demonstrate ARIS's mining commitment to good corporate governance and good stewardship of our social operating licenses. Now to hear more details of our 2023 performance from Richard Thomas, our Chief Operating Officer.

Thank you, Neil. Moving on to slide four, we achieved our consolidated guidance with a total gold production of just over 226,000 ounces of gold. Segovia finished the year in strong form and produced over 61,000 ounces of gold in quarter four. which was the strongest quarter in 2023. As we built on the momentum, there are steady quarter-over-quarter increases in gold production. For 2023, total production was over 202,000 ounces. Segovia's process plant is regularly achieving its 2,000 tons per day capacity, so now we have a full mill which supports the plan to expand our capacity, as Neil mentioned earlier. 44% of Segovia's operation sales in 2023 were sourced from material mined by our partner-operated miners. This is an important part of our business, where we are able to acquire additional high-grade material for our processing facility. This production was realized at an all-interest planning cost of $1,242 per ounce during 2023. The strong relationships that we have with our partner miners help us grow our coal production while adding social purpose to our business with several benefits to us, the community, and the environment. With that summary of our operational performance in 2023, I will hand over the call to Doug Balby, our EVP at CFO, to discuss our financial results in more detail.

Thanks, Richard. We're now looking at slide five. The operational improvements at Segovia resulted in strong revenues of $434 million for the year, and we managed to consistently maintain all unsustaining cost margins in the mid-30% range. We generated cash flow from operations of $75 million which largely funded $84 million invested in expansion projects at Marmato and Segovia and holding costs and some studies at our Torre Porro project in Guyana. Note the actual spend at Torre Porro was reduced to only $1.7 million in Q4 as we focused on our expansion projects at Marmato and Segovia. We reduced our deposition by $57.4 million during 2023 And we finished the year with a cash balance of close to $195 million. Now moving to our financial results highlights on slide six. Our vision when we created Aris Mining in 2022 was to establish a high-grade, profitable gold business that would be able to fund growth through investments in exploration, expansion, and new projects. In 2023, our first full year, we generated $141 million of income from mining operations. We generated $112 million of EBITDA, and we generated $159 million of adjusted EBITDA when we adjust for items that are not part of our core business or that are non-cash expenses. We generated $11 million of earnings, equivalent to $0.08 per share on a non-adjusted basis, and $52 million of earnings on an adjusted basis, equivalent to $0.38 per share. Now moving to slide seven. During 2020, In 2024, we plan to spend between $140 and $150 million on the Lower Mine Expansion Project. Construction started in Q3 of 2023, and our activity level has ramped up in 2024. This major expansion project will be funded from our current cash balances, operating cash flow from Segovia, and installments from the $122 million stream financing we have with Wheaton Precious Metals. The $122 million is divided into three installments, $40 million when 25% complete, $40 million when 50% complete, and $42 million when 75% complete. We hosted the Wheaton team at Marmato in late 2023, so they are close to our project and up to date on our progress. At Segovia, we plan to spend $11 million on the processing plant expansion to 3,000 tons per day, which Richard will discuss in more detail later. This expansion project will be completed by the end of this year or early 2025. Other uses of cash in 2024 include further debt repayments. We have a Canadian $18 million convertible note that matures in April of 2024, and we're prepared to cash settle that if needed. We also expect to receive some proceeds from the exercise of in-the-money warrants that are expiring in the near term. Our Category B listed warrants expire in April of 2024 and have an exercise price of Canadian $2.21 per share, so we're expecting to bring in proceeds of approximately U.S. $15 million. I'll now pass it back to Richard to discuss our 2024 guidance figures and to update you more on our two expansion projects.

Thank you, Doug. On slide eight, we'll see our 2024 guidance figures announced in January. In 2024, we expect to produce between 200,000 and 320,000 ounces at an all-in sustaining cost of between $1,122 to $1,325 per ounce at Segovia and between 20,000 and 25,000 gold ounces at Mamonto. We expect consolidated production of between 220,000 to 240,000 ounces in 2024. We plan to invest $19 million and $2 million in exploration activities at Segovia and Mamato respectively, following our successful exploration program in 2023. We will resume providing all inter-standing cost guidance for Mamato when the new Mamato lower mine achieves commercial production. Moving on to slide number nine. In 2023, the Mahmata Upper Mine produced 23,000 ounces from small-scale and narrow-band workings, as well as the mechanized transition zone operations. Since Q2 2023, artisanal and small-scale partners have delivered approximately 3,000 tons of material at an average grade of 6 grams per ton. Inclusion of this experienced workforce is expected to enhance the overall production of the Upper Mine, whilst expanding our commitment to building responsible and profitable partnerships with artisanal and small-scale miners in Columbia. Meanwhile, we continue to advance the Mamata Lower Mine, which will provide access to a wider, large-scale visothermal mineralization below the upper mine, which will allow for more efficient bulk mining methods in the lower mine. We received final permits for the lower mine construction in July 2023 and began construction the next quarter in Q3. Work advanced as planned in Q4 with the advancements of the access road and the awarding of long-lead items and the finalization of the design of the new 4,000-ton-a-day plant processing facility. The picture in this slide was taken last week and shows how the access road has progressed. Moving on to slide 10, what you see here is our timeline for the first gold production at the Lower Mine. As Doug mentioned, this year we plan to spend between $140 and $150 million at the Lower Mine, and work is focused on construction of the new portals and subsequent development of the decon, advancement of significant components of the new processing plant. The project is on track for first gold pour in late 2025, and ramp-up will continue in late 2025 and continue into early 2026. Moving on to the Segovia processing facility expansion on slide 11. Last November, we announced the expansion of the Segovia operations processing plant from 2,000 tons per day to 3,000 tons per day. This low-capx project consists of the installation of a new warmall and construction of new receding facilities for more feed provided by our AAS department. We expect this project to increase production capacity at Segovia from approximately 200,000 gold ounces per year to approximately 300,000 ounces per year. The expansion is on schedule for completion in early 2025. The additional 1,000 tons per day of processing capacity will be utilized by ramping up owner-operated mining rates and providing additional processing solutions to artisanal and small-scale mining projects. Now, on to Neil for an update and closing remarks.

To summarize what we have discussed today, in 2023 was a transition year for Aris Mining following the Aris Gold and GMC merger combination and the ensuing restructuring of the operations team. We demonstrated consistent operational improvement at Segovia, achieving both production and cost guidance. We also announced substantial growth in the new reserves and resources at Segovia and finished the year with a strong financial position to execute our growth plans in 24 and 25. With the new production from Amato lower mine and the expansion of Segovia processing facilities, we're targeting annual production of 500,000 ounces in 2026, which is more than double our current guidance. Few operating gold producers have the financial strength and growth file that Aris Mining offers today. And we look forward to providing the market with further updates as we work towards achieving our ambitious goals. With that, I'll ask the operator to open the Q&A session.

Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. you will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Kerry Smith with Haywood Securities. Please go ahead.

Thanks, operator. Good morning, Neil and the rest of the crew there. And congratulations on the P24 at Segovia. So I had a couple of questions. What is your strategy as it relates to refinancing of the senior notes that are due August of 2026?

Doug, can you take that? Sure, Terry. Well, when we think out to 2026, by that point we will be a 500,000 ounce per year producer is our expectation. So we'll be in a very strong position to look at different ways to finance the notes. Whether that's a syndicate of banks or whether it's staying in the exchange-traded note market, that'll be something we'll look at the environment at the time. But we do expect to have a number of options available to us. In terms of how much we would refinance, that'll, again, depend on how quickly we ramp up during 2025 and use the additional capacity at Segovia and the cash flow generation. It's somewhat unknown as to what our needs will be, but we do think we'll be in a very strong position when we get there.

Okay. I guess where I was going, Doug, was probably the timing of the refinancing because, as you know, the market gets pretty jittery on these kinds of notes when they're kind of approaching 18 months to maturity. So I'm kind of feeling like it would need to be dealt with in early 2025 rather than late 2025 or early 2026.

Well, they mature in August of 2026. So, you know, that's something we'd be looking at in, as you say, maybe late 2025, early 2026 to give ourselves lots of time.

Okay, okay. I'd suggest trying to do the good early if you could, to be honest, just given what I've seen with other guys that have gone through this. Okay, that's good for that. And then the second question I had was on the 300,000-ounce-a-year target at Segovia once you get the mill expanded at the end of the year to 3,000 tons a day, How long do you think it will take for that transition from, say, the 220,000 ounces to get to 300,000 ounces? Is that a couple of years to get the small miners going, or could it be shorter than that, or would it take longer than that?

Okay, Neil, I'll take that one. At the moment, we're busy working on where we're going to get the extra 1,000 tons a day, of course. We have enlarged the reserves. The restriction on Segovia is from our own production, of course, of our infrastructure coming through the shop. So we're busy doing projects at the moment to upgrade that infrastructure to then be able to hoist more material out, both waste and ore. We figured that we could do an extra 600 to 700 tons per day from our own infrastructure. And remember, we've got four mines. We've got Elfinter, Providencia, Clara, and Candricay. And then we could source additional material to 400 tons from our mining partners and we're busy engaging with them at the moment and seeing what their collection capacities are and also assisting them to get the additional ore tons. So we're looking at, we're working through this right now, so I expect by first or second quarter in next year we should be up to the few thousand tons a day. The grade will probably be a bit lower towards the end of the year, we should be having an average of 10 grand a ton. Yeah, the whole of 2025 initially to ramp up and then to get the grade up by the end, by the second or third quarter.

Okay. Okay. So if I understand what you're saying, it'll take maybe to the second half of 2025 then to hit that 300,000 on to run rate. Is that what you're saying? Yep. Okay. Okay. That's helpful. Thank you. And maybe while I've got you, just on the The capex for Marmato, for the lower mine, the $280 million, that was based on the June 2022 PFS. We've had higher inflation there. The Colombian peso has strengthened. Are you still feeling pretty confident in that $280 million number?

We continue to update the number as we went through that period. And as we brought the team together, we also were in a situation where we could start looking at some of the long-term supply contracts with the big items. So, yeah, I think we're pretty comfortable with that number, that it's still a very valid number to go forward with. As I say, it has been updated since the original studies.

And when was that update done, Neil? Just remind me.

At the tail end of, well, middle of last year. Yeah, about the middle of last year.

Okay. Okay. Okay. Okay.

And just as we kicked off at the end of Q3, we were pretty much up to date at that stage.

Right. Gotcha. Gotcha. Okay. And the detailed engineering to support the lower mine expansion, what percentage completion are you at today on that detailed engineering? Roughly. I think it's progressing pretty well. We're definitely more than 50% at the moment. More than 50%. Okay. Because it looks like from the chart you have in the back here that you'll have all that done by Q2. It looks like the detailed engineering.

Yeah. The big outcome is all the detailed engineering is going well. We have a button down the pieces. We put them all together in our 2D model. That 3D model is now 60% complete. Okay.

Okay. Okay. And then maybe one last comment, maybe just give me an update on how you're progressing at Sotonote. I mean, you're trying to juggle a bunch of balls there, but just wondering how that process is going.

Yeah. We've done an awful lot of work over the last 12 months to get the EIA ready for resubmission. And we're pretty much there. We're doing the final checks on it. At the same time, We've done a lot of work in the social area to make sure there's much more community and small-minor support for the project, and that's been extremely positive as we've gone through the year in doing that. The other thing we're doing now is we're just looking at it to make sure that, you know, the technical side is right and is updated properly, that we are doing the right mine plan, that we are doing the right construction schedule. So over the next few weeks, I think we'll be in a situation to be able to say exactly how we're going forward with that. But it's important to update it.

Okay. And when would you expect to submit the amended EIA for that project, then, if you've been working on that document for a while now?

We could virtually submit the environmental side now, but we're just making sure that we fully optimize the production plan within it. So, you know, a couple of months at the most. I would hope a bit sooner.

Okay. So by mid-year, then, I guess, would be a reasonable expectation.

Yeah, yeah. If we haven't done it by mid-year, we've kind of screwed up.

Right, gotcha. Okay.

I don't anticipate.

Okay, great. Thank you, Neil, and everybody else. I appreciate your comments.

And thanks very much, Kerry. Appreciate it, too.

The next question comes from Don DeMarco with National Bank Financial. Please go ahead.

Thank you, Operator, and good morning, Neil and team. First off, congratulations on 2023 and your plan to expand production to 500,000 ounces by 26, all through brownfield expansion. Maybe continuing on, one quick question on Soto Norte. Is it too early to provide some potential production trajectory beyond 2026 if Soto Norte is added? So in other words, how much and when, if all goes well based on what you know at this point?

I'd feel much more comfortable in doing that in two months' time than I do today. I think we really just need to finish off the work we're doing. And as I say, a large part of the environmental side is effectively finished and sitting on the shelf. We're just making sure that from a production and operational point of view, we're putting in the right thing. We're double-checking. So once that's complete, yes, absolutely.

Okay, fair enough. Then another option you have in your pipeline is Toro Paru. And there's a potential to draw a stream on that. Could you just give a quick update on Toro Par and whether you have any attention at this point to draw the stream at some point in the future?

The streams there are available to us. We meet the usual criteria, so that's nice and safe in there. What we're doing at the moment, we're doing additional studies on the road and some of the environmental issues and looking at the power side. Richard has a few studies going on that. I think when we've got those to the next stage, we'll be able to draw a bit of a circle around this and decide which is the best way to go forward with it. But at the moment, we're in the studying of some of the key elements and making sure we've got those right.

Okay, thank you. And as a final question then, it has to do with M&A. I mean, certainly yourself and others associated with the company have built companies by way of M&A. Could you Maybe share with us what the company's intentions or attitude might be toward M&A at this point, and if there is any preferred jurisdictions or metals that would come to mind.

Okay, let me try and answer that. We build by acquisition, improving the assets, and also by building assets. And that's been our pattern all along. And we've done that now in terms of putting the two operations together, rationalizing the management and the direction of those, increasing all the other things. We've expanded the reserves. We've now got 200 production, all within a couple of years, and we've got the Sote Norte project we're developing. I think what we have to do now is get through the Sote Norte decision to see how that fits in, because I think it was Kerry was talking about financing requirements in the future. We have to make sure we have those properly implemented. We also have to make sure the market really understands, and I think it's not good that we haven't been able to get the story out there as clear as we should do, that we are moving fairly rapidly to 500,000 ounces from a couple of sources. And then I think at that stage we'll be in a much stronger position. to look at M&A opportunities. Where would we look? I think was another question. I think it would definitely be Latin America. I'm not sure I like the country risk in Canada or the US, so it would be Latin America. I think we would stay in gold where gold was involved. I mean, we may bring in some copper or something else, but I think we are primarily a gold company and we will keep to that focus in terms of anything we did down the line. But I do think we have to recognize that We have to make sure we have value for our shareholders. We think we have a lot of value equation coming through the plan that we have now. And we need to be recognized that we're doing those things before we start deletion shareholders. But long term, yes, that's definitely the objective is to grow the company to a million ounce plus. And we're only in the sort of halfway stage or coming up towards the halfway stage now.

Okay. Thank you very much, Neil. That's helpful. And good luck with the rest of Q1.

Thank you. Thanks.

Once again, if you have a question, please press star, then one. The next question comes from Taylor Combalucie with Red Cloud Securities. Please go ahead.

Hi, Neil and team. Congratulations on a good Q4. I was just wondering about the uptick in the G&A expense this quarter and what accounts for that and kind of what level to expect going forward.

Yeah, I had that same question. Doug gave me a very good answer. I can't remember what it was now. So, Doug, over to you.

Yeah, there was a bit of an uptick in Q4. I think the annual amount of $17 million is a good number to use for the year. We did add a few additions to our team in Q4, so that's part of it. But overall, $17 million is probably a good number to look at for the future.

Okay, perfect. Appreciate that. And then my second question, just wondering about kind of the timing for the next set of funds coming from the Wheaton stream for the Marmotto build?

Yeah, if we spend the $150 million we expect in the year, then we would be on plan to have two installments, both the 25% and the 50% milestones occurring during 2024. So that would bring in $80 million. So if we are spending $150 million in 2024, $80 million would come in so that actually the net amount that ARIS is investing is roughly $70 million. And then the final installment of $42 million would come in during 2025. Okay, perfect.

Appreciate that. That's all the questions I have. Thank you, guys. Appreciate it.

Thank you. Thank you.

Since there are no more questions, this concludes the question and answer session. I would like to turn the conference back over to Mr. Wadir for any closing remarks. Please go ahead.

Thank you, Operator, and thank you, everybody, for joining us today. And if you need any more or want any more information, we would be only too pleased to supply it either through Katina Kodara, our VP, Investor Relations, or give me a call, and I will do my best to help you through any questions you may have. Very much appreciate it, and thank you very much, everybody.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.