Aya Gold & Silver Inc.

Good morning, ladies and gentlemen, and welcome to the IA Gold and Silver's first quarter 2023 results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, May 12, 2023. I would now like to turn the conference over to Ruth Hanna. Ms. Hanna, you may begin your conference.

Thank you, operator. Good morning, everyone, and welcome to AYA's first quarter 2023 results conference call. My name is Ruth Hanna, and I'm the Investor Relations and Communications Manager, dialing in with some of the AYA team from sunny Montreal and Morocco this morning. On the call today, we have Benoit Lassalle, President and Chief Executive Officer, Hugo Landry-Tolchuk, Chief Financial Officer, Raphael Boudoin, Vice President Operations, and David Lalande, Head of Exploration. We will finish today's event with a Q&A session with the team. Please contact our investor relations team directly with any follow-up questions that are not addressed during the call. Before we begin, I'd like to remind listeners that today's event will contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ material from those in the forward-looking statements. Details of the forward-looking statements are contained in our May 12th news release, as well as on CDAR and at www.ayagoldsilver.com. With that, I would like to turn the conference over to AYA's President and CEO, Benoit Lassalle. Benoit, please go ahead.

Thank you, Ruth. Good morning, everyone. Thank you for being there today for the first conference call. I would ask you to go to page three of the PowerPoint, which is on our site. on the site for the conference call. If you go to page three, we have the key highlights of our first quarter. The first highlight is our production at 474,813 ounces of silver, second highest quarterly production. You recall that our highest quarterly production was in Q4 of 2022, which was an exceptional quarter due to a very high grade zone. The total cash cost for Q1 is $14.56 per ounce sold, which is aligned as well with our guidance. And as you know, Q1 is always for AYA the more difficult quarter due to the weather and hence at $4.56 per ounce in Q1 of 2023. We're completely aligned with our guidance. Another highlight is we generated $10.4 million of revenue and $4.1 million in operating cash flow for the quarter. Also in the quarter, we closed an oversubscribed equity bond deal for $92 million, and we exited the quarter with $91 million in cash and cash equivalent. We are fully funded for the task ahead, for the plant expansion, for the exploration program and hence this is why in Q1 of 2023 we did this financing to have a fully funded company for the years to come. The overall construction progress is assessed at 32% and we'll come back to that later on in some of the slides. One of the highlights was in exploration, the extension of the Boumadine open-ended strike to 3.4 kilometers. You recall, originally, we were at around below one kilometer. And now, with the last result that we presented, the strike is at 3.4 kilometers. And also, it was the discovery of the new stockwork mineralization. David Lalonde is on the call, and he will be there to answer some of your questions. Going to slide number four, a very interesting slide because we have the guidance for all of the KPIs, and we have the Q1 results. So the guidance on silver production, our guidance was 1.7 to 1.9 million ounces per year, and we are at 474,000 ounces for Q1. So you see that we are, you know, on guidance. and especially that Q1 is always a more difficult quarter. The cash cost at 1456 is aligned with that guidance at 1440. I'll come back to the cash cost for a minute. Let's not forget that we're running the company today, not on minimizing cash costs and maximizing profits, but in being ready for the plan expansion of next year. So if we ran the company today knowing that there's no plan expansion, Of course, we would have probably less people and we'd be not managing it the same way. But our goal is for next year to grow our production with the new plant starting. And hence, we're building the team and organizing the site so that we have a very smooth commissioning next year. The average grade is for the quarter, 235 gram per ton. The guidance is at 264. And I'll come back to that in the next slide. But due to the nature of this deposit, you know, we do have a small and sometimes large fluctuation in the grade. The meal recovery was very good at 87.1%. Our guidance was at 86%. And the ton process, very strong quarter at 72,737. The guidance for the year was 245, so we're way here ahead of guidance. So going to slide five, you have some charts that are quite interesting. The first one on the left-hand side is showing the production, and you see that at 474, 474,000 for Q1, it compares extremely well to Q1 of last year. Of course, besides Q4, it's a little bit lower, but you recall that you see it on the chart below on the grade. The grade at 235 is aligned with what we saw in Q3 of last year. Q4 was an exceptional year. But this is the nature of this deposit, is at times we're going to be in 235, 240, and at times we're going to be at 300 and more mining, you know, higher grade parts of the deposit. What's important for us is to mine this deposit in its logical sequence and really to maximize the number of ounces that we will take over the mine life. So for the quarter, we were at 235, which is a bit lower than the guidance for the year. On the right-hand side, the average recovery at 87.1% is totally aligned with where we want this company to be. We had almost 90% in Q4, but it was an exceptional quarter. And on the ore process at 72,737 ton, well, that's a record. So this is very, very strong quarter for ton process. And that's what you see on the right-hand side, the bottom chart. Moving to the next one, what's interesting, again, on the left-hand side is the cash flow. And if you look at Q3 2022, Q4, and Q1, we generated like $13 million of operating cash flow in the last three quarters. So the KPIs are all good. We're operating well. It's generating cash. And obviously, we all know that this is coming from the two smaller plants, the leaching plant and the concentration plant. And once the third plant is up and running, all these numbers are going to change in a dramatic way. The gross margin at $2.1 million for the first quarter That's aligned with, it's also a function of our selling price, which was around $22 an ounce. Obviously, historically, we had a better selling price than that, but that's the reality of our industry. The cash cost, the cost of sales at 8.4 is also aligned with our production numbers. And you saw that our cash cost is at 14.5 and our ASIC is 14.9. So we have a very, very good quarter. So the cash costs, as I said, on the right-hand side of 14.56, well, it's aligned with guidance, very similar to what we've had in the previous quarters, obviously, except for Q4, where the grade was 350 gram per ton. So financially, we had a very strong quarter. We have a very strong cash position, and which, as I mentioned, and I'm saying it again, we're fully, fully funded for the years to come. And before we go into geology and operation, I'll just cover sustainability. It's a very, very important part of our values. And we do have, as you know, a $100 million loan with EBRD, which is really an ESG loan, which has all kinds of KPIs. So we have rolled out in Q1 our programs in health and safety. Now, health and safety is an area that did not exist when, you know, or a concept that did not exist when we arrived three years ago. We're pleased to say that in Q1 of this year, it was our best quarter ever, is no accident, no fatalities, no LTI, so no, you know, long-term disability were recorded. We also gave over 1,000 hours of training. So this is a momentum situation where you really have to bring health and safety as part of the values, and it's coming, and we're doing very much better, should I say, than when we arrived, and we're pleased with the results of the first quarter. also on ESG we're advancing the construction of the power line at the 90 kilometer power line and that's important because we are we will be receiving renewable grid power green energy and you know this Gounder mine will once up and running on that power line will be you know one of very few mines in the world running off green power The ongoing water testing and the launch of the air and noise monitoring system, that's also an important element of mining and we're doing this. We're implementing the task force on climate related financial disclosure. We're about 60% completed and we're 31% completed on EBRD's environmental and social action plan. These are very strict KPIs that we have. It's part of our goals. It's part of our values. It's part of our strategies. And it's also all of that is part of our remuneration package. It's part of our KPIs. So the ESG aspect of our business is seriously embedded in everything that we do. And we have the rollout of the community programs. And, you know, we always talk about that. And that's something that we communicate with you on a regular basis. It's something that is extremely, extremely important. And we have it for our medical program that exists there. We support education. We also have implemented a stakeholder engagement plan. So this, again, a very strong Q1 on the ESG front. Now, talking about the construction, and that's taking you to the next slide, very interesting. You saw the video that we put out at the beginning of the week. As of today, the video has been seen 36,500 times. So it's a YouTube success. So the video is showing great progress. You have a picture here that shows the site. It's very interesting. And the construction, as we indicated, is 30% completed. You have that on the next slide, on slide number nine. We have a bit of a detail on the process plant. It's completed at 26%, of course, because the erection of the steel has not yet started. to build the plant, but the underground and the open pit is done at 29%. Tailings and water management is at 41%. Electrical infrastructure is at 18, which is normal because it lags behind other infrastructure. And onsite infrastructure is at 53%. Raphael is on the call. He just came back last night from site. He's in Montreal, and he came back one day ahead of his schedule to participate on this call. So if you have questions on construction, completion, and all of that, Raphael is with us. What's important is the laterite development is we have 5,000 meters done on an 11,000-meter program. Cement is being poured. Engineering is about 80% completed. Earthwork is near completion. The advancement of the new tailings and water facility, you saw that on the video. That's going very, very well. The EPC is progressing with the critical items. That's going well. So today, out of our budget, we're about $119 million contracted across all the capital cost categories. At quarter end, we had incurred about $26 million. Obviously, now it's a bit more. So we say that we are on budget, and we are on budget, and Raphael will be able to comment on this. Going to page 10 of the small PowerPoint, you have a few pictures showing you the earthwork, how we're advancing. and the installation of the ore silos has already started, so you see a couple of pictures, but the best of course is from the video that is available on our website. Now, going to exploration, which is a central part of what we do, the exploration programs are going extremely well in Morocco. As you know, we have three large programs. We have Zgounder on the main zone, where our budget is 26,000 meters. We have Zgounder regional, where our budget is 6,700 meters for the year. Then we have Boumadine. where our budget is 36,000 meters. So that's on page 11 of the PowerPoint that you have. So coming to the, going to page 12, that is Goudère, the main zone. So we are at 3,200 meters drilled so far. It is aligned with our expectation. It's because the budget... the 26,000 was not divided 25% per quarter because we needed to complete a lateral development at the bottom of the current mine so that we could start the underground drilling from this new gallery, bring in water, bring in electricity, and start drilling. So you see on that slide, Page 12, all the blue lines, are drilled or potential or expected proposed drill targets and because our intention is to have drilled the full structure for year-end in order to include all of the results into our resource calculation for Zgounder main zone. So that's extremely, extremely important. We are also focusing on their regional where we, you know, we have a budget of 6700 meters. That is, of course, is a little bit different because that's not systematic drilling. It's, it's more exploration drilling. So, David. with the team are looking at targets. We have many, many targets. And there they are doing more exploration drilling to the north on the two permits that we have there. And there's also a permit southeast that has some very, very good targets. The next project, which is of great interest, is Boumadine. Boumadine, in the quarter, we've announced some very good results. The most important one was 192 grams per tonne of silver equivalent over 129 metres. But that was also extending the strike length of the structure to 3.4 km. It was also showing that it was opening up to the south. As you all know now, we're drilling 400 m south again. to go even further 600 meters south or it's called section 5600 and we're looking at this being drilled as we speak obviously to understand at the opening of the stock work that we saw in the in section 6000 So it's a very, very interesting program. We are not all done, but we're more than 20,000 meters done. We will have a complete review of the results over the coming few months, and then we're going to be making some decisions during the summer on what's next. But Boumadine is really looking very, very good. There's some infill drilling as well going on in the central zone and in the north, and that's very important. On slide 14, you have a section which shows the mineralization, which is clearly open at depth. It's open to the north, it's open to the south, but it's also clearly, clearly open at depth. So it shows you the strength of the mineralization. You recall the central zone was well mineralized, giving us silver equivalent grade that were very, very good. And now we have to understand what we have, and that's why we intend to put in many thousands of meters of drilling. The slide on page 15 is showing this last drill hole where you see the five veins, if I can call them like that, that were mineralized historically and to the north. When you had veins in between, there was no mineralization. The stock work was not mineralized. But in this case, at that level, when we've hit these five veins that you see on slide on page 15, is the stock work is also mineralized. Hence, showing the potential to be much closer to the heat source or the beginning of this mineralization. So a very strong quarter. Q1 was great. At the mine, the operation went very well. The financing was very well done. The expiration is going on and it's been very successful. And on the ESG front, it's going very well. So you have it on page 16. You have the takeaways of the first quarter. very good production, good cash cost, aligned with our guidance. We're delivering the key milestones for the 2,700 tons per day Gounder plant expansion, the start of construction of the tailings dam, the water reservoir, it's done. In Q2, complete the detail engineering and the beginning of the open pit operation. Raphael can comment on that. On Q3, delivery of the ball mill, that's today is aligned and it's not confirmed because we can't say confirmed, but, you know, we see that that will happen in Q3, completion of all the water storage basins, and for Q3, all of that will be done. The drilling at Secondaire is going well and will be completed for year end. The drilling at Boumadine will be completed by mid-year, and we'll review then what we will do. And the same for Tijerit. We don't talk about Tijerit a lot, but the drill program is complete. The feasibility will be completed in a couple of months, so it's following its critical path. The ESG milestones for 2023 are extremely important. because they are aligned with the EBRD loan agreement. We're following this closely, and there, as we mentioned, we are again there on the ESG implementation. We are on time, and there's no budget, but we are on time as per our agreement. And we will continue the year focusing on health and safety. It's part of our values, and it is extremely important. So operator, that completes the formal presentation for Q1. I will turn it back to you for question and answers.