Aris Mining Corporation

Good morning, everyone, and welcome to ARIS Mining Q3 2024 Operational and Financial Results Call. We will begin with an overview for management, followed by a question and answer period. To join the question queue, you may press star then one on your telephone keypad. As a reminder, all participants are in listen-only mode, and the conference is being recorded. If you need assistance during the conference call, you may signal an operator by pressing star then zero. Please note that the accompanying presentation that management will refer to during today's call can be found in the events and presentation section of ARIS Mining website at aris-mining.com. Also, ARIS Mining's second quarter 2024 financials have been filed on Cedar Plus and EDGAR and can also be found on their website. I would now like to turn the conference over to Mr. Neil Woodyer, Chief Executive Officer. Please go ahead.

Thank you operator and hello everybody and thank you for joining our Q3 earnings call. Before we begin, please note the caution statements on slide 3 regarding forward-looking statements. On slide 3, I'll give an overview of our operational and financial highlights, after which Richard Thomas, our COO, will discuss our performance and our growth projects at Segovia and Marmarthen. And then Richard Orozetti, our CFO, will review the financial results. And Oliver will then update you on the funding and growth strategy. So looking at slide three, I'm pleased to report a strong third quarter. In Q3, we produced 53,600 ounces of gold, which is up 9% over Q2. Higher gold prices, increased production, and cost controls helped us achieve a 37% increase in all its sustaining margin in Segovia, reaching £44 million compared with £32 in Q2. For the 12 months ended September 30th, we generated an adjusted EBITDA of £147 million and adjusted net income of £43 million. In August, we announced Segovia high-grade exploration results, increasing our resources, and in October, we announced the replacement of our reserves. Segovia is operating at its 2,000 tonne per day design capacity, with expansion underway to 3,000 tonnes. Phase 1 of the expansion is completed and contract mining partners are now delivering to the facility. Phase 2 is on schedule to be finished later Q1 next year. At Mamato construction the load mine is on track and by the end of September the project had reached its 25% spend level milestone And on the 6th of November, we received $40 million cash installment from Wheaton for the project. Last month, we strengthened our cash position by refinancing our $300 million notes with a new five-year $450 million at 8% notes, extending the debt maturity to October 2029. We're well-funded to execute our growth strategy and to continue to target and annual gold production rate of approximately 500,000 ounces by the second half of 2026. And lastly, before I hand over, I just encourage you to read our 23 Sustainability Report, which was published in August and is available on our website. And now over to you, Richard. Thank you, Neil. Moving on to slide four. In the first nine months of this year, our mines produced 152,591 ounces of gold. Segalia contributed 106 ounces of gold, while Mamonte-Appermann produced 17,495 ounces of gold. At Segalia, we present 7% more material in the QG than we compared in Q2, with a flat integrity rate. For the full year 2024, Segalia produced on-track to produce between 185,000 and 195,000 ounces. If you go to slide five, please, I'd like to draw your attention to the graph on the top of the page. Our realized gold price increased by 6% in the quarter to $2,457 per ounce, while our early spending cost declined 2% to $1,530 per ounce, resulting in an early spending cost margin of $918 per ounce. Now, focusing on the lower half of the page, as I mentioned, the combination of higher gold prices, increased production, and effective cost control It's in all the same cross-margin active area, reaching $44.1 million, which is an increase compared to quarter two. It's also worth noting that despite the purchase, and that is because the high rate of north-east delivery to the off-target T&V resulted in an increase of from $1,790 in quarter two to $1,854 in quarter three due to the higher gold prices. This segment of our business maintains a strong sales margin of $4.9 million in Q3, up from $2.8 million in Q2. This could be used to start SIX. With the idea of processing plants, extension has to be as well a schedule and phase one is now complete, with a newly expanded recruiting area for our C&P fully commissioned and hand-released operations, and the new facility will be embedded in the material in October. Phase 2, which involves installing a second wall wall in the former contractor's receiving area, is underway and is scheduled for completion by Q1 next year. Following a length of period, we expect to reach approximately 2,000 tons per day in the second half of 2025. The total cost of the expansion is still estimated at $15 million, with $8 million being spent over 30% of this year. Concluding my remarks on slide 7, I was allowed to update you on the construction progress of my market lower mine. We commenced construction of the new Marmassa low-mine with two systems of geese, following this environmental service in July of this year. The low-mine was active right across the mineralisation and the low-beer mine, with both mines estimated to combine 152,000 ounces of gold per year over 20 years of mine life. As you can see from the picture on the slide, this is the slide to access the area and the portal site was completed in Q2 and the contractor commenced the deep sand development on October 8th. Both the SAGMO and the BOMO fabrication are progressing on schedule for completion of the furthering of this year. At the end of September, the estimated cost to complete the lower mine construction is $255 million, of which $132 million will be funded by the 15 student funders in this year. We received the first $40 million to finance the project, and on November 6th, further payments of $40 million and $42 million are expected to come receiving 50% and 75% of the construction, respectively, and this is expected to happen in 2021. With that, I'd like to hand over the call to our CFO, Richard Oriel-Yuki.

Thank you, Richard.

We're now looking at slide eight. We had a strong third quarter, especially compared to the second quarter of 2024. Gold revenue of $131.6 million was up 15% quarter over quarter, driven by higher realized gold price of $2,447 per ounce and higher gold sales of approximately 54,000 ounces, up 9%. Income from mining operations of $38 million was up 28% quarter to quarter, which reflects the upside in gold revenue, partially offset by higher cost of mill feet procured from our contracting mining partners and higher social contributions, both due to the gold price appreciation. Despite the strong income from mining operations, we incurred a net loss of $2.2 million, primarily due to a $12.8 million loss on financial instruments. The revaluation of award liability caused by increasing the Paris mining share price from $5.17 Canadian to $6.26 per share during the third quarter resulted in a non-cash expense of $11.4 million. We further incurred a $3.9 million loss on our gold-linked notes due to the impact of gold price appreciation on the gold premium component of the notes. On an adjusted basis to better reflect the underlying performance of our business, adjusted EBITDA of $43 million was up 19% quarter-over-quarter, and adjusted earnings were $12.9 million, reflecting the improved operational performance. Now moving on to slide 9. I'd like to discuss some of the key line items of our cash flow statement. Operating cash flow of $17.2 million was $9.6 million, up quarter over quarter due to higher all the sustaining margin of $40.4 million, bolstered by the increase in gold and byproduct revenue. That receivable and a buildup of inventory, mainly materials or stockpiles, continued to draw on cash flow during the third quarter. Post Q3, Colombian tax authorities have credited us with $29.6 million for the 2023 VAT amounts owed. This was partially offset by $16.2 million of corporate and tax pay for the year. As Neil and Richard Thomas discussed earlier, we're in a significant investment period and we spent $45 million in growth and expansion projects during the quarter, as well as $115 million for the first nine months of this year. Financing cash flows to service our debt were approximately $7 million for the quarter, This was offset by $4.3 million in proceeds from warrant and option exercises during the quarter. For the nine months to date, we received approximately $29 million in proceeds from warrant and option exercises. In summary, that cash flow for the third quarter was $41.4 million, which resulted in a cash balance of $80.3 million at quarter end. Subsequent to the quarter end, we proactively enhance our financial position, liquidity, and ability to fund our growth and sustaining projects to the recent debt offering and financing from Wheaton Precious Metals that Neil alluded to earlier. I would like to turn over the call to my colleague, Oliver Daxel, to walk you through the recent actions to improve our financial position.

Thank you, Richard. On slide 10, we have summarized these financing transactions that have occurred in October and November, as a result of which our performer cash balance has increased from $80 million as of September 30th this year to $266 million. Let me walk you through the adjustments. As Neil had mentioned, we refinanced our existing $300 million notes with a new five-year $450 million notes offering in October. After transaction-related fees and expenses, we added $132 million of net proceeds to our cash position on October 31st upon closing of this financial transaction. And as previously mentioned, we achieved the 25% spend threshold at the Mamatoloa mine, and on November 6th, we received the corresponding $40 million stream funding installment from Wheaton. We also received a VAT refund of $30 million from the Colombian Tax Authority while paying $16 million of income tax for a net inflow of $14 million. Now looking at the waterfall chart in the lower half of the page, summarizing the capital requirements of our expansion projects of Mamato and Segovia. As of September this year, the estimated cost to complete the Mamato Lower Mine was $235 million, of which $82 million will be funded by the two remaining stream funding installments, which we expect to receive next year. This leaves a net construction budget remaining of $153 million. At Segovia, our remaining construction budget is $7 million. In total, for our two expansion projects, only $161 million is remaining to be funded by us. In addition to our strong cash reserves of $266 million, we have additional funding sources. Expected cash flow generation from Segovia and Q4 this year and beyond, together with potential proceeds from warrants of up to $124 million. In short, we are well-positioned and funded to deliver on our growth strategy. with current cash on hand and expected future funding sources well above expected capital expenditure requirements for our expansion project. I now like to hand the call back to Neil to conclude our prepared remarks.

Thank you, Oliver. Now looking at slide 11, and before we open the Q&A, I'd like to emphasize the key takeaways we've reported in this third quarter. 9% production increase over Q2. and Segovia operating at main plate capacity. Segovia generated an all-in-sustaining margin of 44 million, which is 37% improvement over Q2. On the last 12-month basis, we generated adjusted EBITDA of 147 million and adjusted net income of 42. And we have a strong pro forma cash position of 266 million. We're going through a transformational expansion project, targeting annual production rate of approximately 500,000 ounces in the second half of 2026. And with that, I'd like to ask the operator to open the Q&A session.

Thank you. To join the question queue, you may press star then 1 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. We'll pause for a moment as callers join the queue. And today's first question comes from Kerry Smith at Haywood Securities. Please go ahead.

Thanks, Operator. Good morning, everybody. Neil, I have a couple of questions Firstly, on your mill expansion at Segovia from 2,000 to 3,000 tons a day, how are you making out with the expansion of the CMP program to be able to pull in more tonnage from those small miners to help deliver the extra 1,000 tons a day?

Okay, so already, come quarter one, 2005, we'll be ready to receive extra tonnage. The extra advantage is coming from both an increase in production from aerosite as well as our TMP mining. We have many contacts, currently 46 of them, and we have 41 waiting to be approved. So we've got a pipeline of small miners waiting to have their contacts approved, which we will do from now until the end of quarter one. And this will help us to increase our TMP mining production.

Okay, Richard. And how many... How many tons a day are you planning to pull in from the CMPs once you get to 3,000?

We are planning to do 1,800 for ARIS and the rest will come from the CMPs.

Okay, okay. And then, sorry, can you just remind me at 2,000 tons a day what that split is between the CMPs and your own production?

It's 1,200 from us and the rest from CMPs.

Okay, so you're looking for 400 tons more a day from the CMPs then? Okay. Period.

Okay, great. As we ramp up and extend operations in Segovia, our lines on the CMPs will reduce over time.

Okay, and if I heard you correctly, you have, I think you said 48 CMP contracts today that you have in place, and you have another 41 that are waiting to be ratified, if that's the correct word. Is that? Did I get that correctly?

Correct. Waiting for approval, yes.

And that approval has to come from who? From the federal government or the provincial government?

Those approvals are done by Allent.

Oh, by you. In conjunction with the, yeah. OK, gotcha. OK, so it's just a question of you picking the ones that you would like to work with then.

Correct. OK. After a .

Yeah, gotcha. Okay, great. That's helpful. Thanks. And then just on Socho Norte, maybe Neil can just give me an update on how all of the discussions are going with all of the stakeholders in terms of trying to get a social license there to be able to push that project along.

There's a lot for Socho Norte. So currently, good morning. My name is Alejandro Jimenez, country manager. Currently, we have been engaging with the local communities and the additional educational managers in the area, as well as the six mayors in the province of Santo Norte and the governor of Santander. All of them seem very well aligned with the vision that the company has regarding the new smaller scale project in Santo Norte. We're continuing to develop our technical and environmental studies. They're going into Q2 2035. And during this period, we'll continue to strengthen our bonds with these different stakeholders, which at this point has proven to be clear advocates of a project to be developed by us in the area.

Okay. Okay. That's great. Thank you very much.

Thank you. And as a reminder, if you'd like to ask a question, please press star then 1. We'll pause for just a moment to assemble our roster. And this concludes the question and answer session. I'd like to turn the conference back over to Mr. Whittier for any closing remarks.

Thank you very much, Dr. Whittier. In particular, thank you all of you for joining us. We appreciate your interest. And please don't hesitate to reach out to all of them if you have any further questions. Thank you very much, everybody.

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