Aya Gold & Silver Inc.

My name is Sintu and I will be your conference operator today. At this time, I would like to welcome everyone to the IR Gold and Silver's third quarter 2023 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star, then the number one on your telephone keypad. If you would like to withdraw your question, please press the star, then the number two. Thank you. Ms. Hanna, you may begin your conference.

Thank you, operator. Good morning, everyone, and welcome to AYA's third quarter 2023 results conference call. My name is Ruth Hanna, and I'm the AYA communication manager, dialing in with almost all of the AYA team from Montreal this morning. On the call today, we have Benoit Lassalle, President and CEO, Hugo Landré-Tolcuc, Chief Financial Officer, Raphael Boudoin, Vice President Operations, David Lalande, Head of Exploration, and Mustafa Elassi, President and Managing Director of Morocco. We'll finish today's event with a Q&A session with the team. Please contact our IR 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 materially from those in the forward-looking statements. Details of the forward-looking statements are contained in our November 14th news release, as well as on CDAR and on iagoldsilver.com. With that, I would like to turn the conference over to IA's President and CEO, Bunwa Lata. Bunwa, please go ahead.

Thank you, Ruth. Good morning, everybody. Just one little item. I know that the call is one day later than when we published our financial statement, and the reason is we had a strategic board meeting in Montreal where all the board members were in. and all the management team was in Montreal. Hence, yesterday was a very busy day for the board, and this is the reason why the call is one day later. I know some of you were wondering and called me about this. So let's review the performance of the quarter. Q3 2023, we have slide number three. We had an excellent quarter. All of our KPIs were green. We're very pleased with the quarter. We produced 519,000 ounces of silver, which is plus 15% when we compare to the previous year. We generated $11 million in revenue and a record operating cash flow of $7.7 million for the quarter. Our cash cost was at $10.73, and our ASIC was even below $11, just below $11. So it was a very good quarter for cost, and I know some of you called us about this and how we were able to do this. And then this is just the performance of the quarter and the cost of operation in Morocco. The net profit for the quarter is 1.2 million. It's a 79% increase year over year. And we closed the quarter with 71 million in cash and cash equivalent and a very strong balance sheet. The continued performance is on track with what we expected. The Zgunder's expansion is 60% completed. The drilling was increased last quarter by 73% to 119,000 meters for the company as a whole, which is, as we all know right now in our industry, it's exceptional. The Boumadine also was extended, the strike length was extended to 4.2 km. That was published in the quarter. We've announced our high-grade open pitable goal at Tijeris in one of our press releases. We've also announced that we draw down 35 million on our construction facility for the secondaire expansion. And we've expanded our land position, and that's something we're very keen is to increase our land position that we increased it by 17% at Gunda and 50% at Boumadine. When we took over three years ago, we had a little bit over 60 square kilometers. As we are right now in Aya, we have over 600 square kilometer of prospective ground. Just a couple of items on page four of the PowerPoint. the solar production, the cash costs. The average grade, as you know, the grade is something that can be a little bit hard to manage at Gunda because of the nature of the deposit. So our guidance was 264. So far, we're at 254. So we're not far. And Q3 was at 261. Mill recovery is excellent at 86%. And mill availability is above 90%. So those KPIs, we're doing extremely well. And in the ton process, we process 70,000 ton in Q3 and 215 so far. So when you see on slide four, the guidance to where we are after three quarters, you can see that we're really well aligned to be on guidance or even better than guidance. A couple of slides just to see. You see that the production at 500,000 ounces has been pretty steady for the last five quarters. You remember that Q4 is an anomaly and not to be repeated because the grade was extremely high in Q4 and now that we have stockpile, that would not happen again. But to see 500,000 is clearly been a trend for the past five quarters. The grade is also holding in well, as you can see at the bottom. So when we say 250, 254, that's also been steady for the past five quarters. The average recovery is really around 85, 86%. We touched 87 in the previous quarter, so it's very, very steady. And the ore process at 70,000 ton What's interesting is our capacity, nameplate capacity is the 700 ton a day, and we're really running now at a little bit above 800 ton a day or around 800 ton a day, so we are exceeding our nameplate capacity. The cash flow for the quarter, you see this on page six, very strong cash flow this quarter at 7.7 million, and obviously we're extremely pleased with that result. The gross margin is higher as well because the cost was lower, the cash cost and the ASIC was lower. So, of course, we have a good gross margin, cost of sale the same, and the cash cost, well, you know, at 1073. I would remind you that in our new plan, in the feasibility study, the cash cost is planned to be at 750 and the ASIC at 950. So we are aligned to go towards this with the new plan, but currently at 1073, I mean, that's an extremely good cash cost for the current two operations. A quick picture of the construction, but I would also recommend that you go on our website and you see the video that we do every month. It's very well done. I have to say to Ruth, it's very well done, and the team in Morocco that do this with the drones are doing a great job. So please take a look. There'll be another one ready in a couple of weeks for the end of November, and it will be available in early December. The expansion, and Rafael is with us, so some of you have questions on the expansion. As we indicated, it's coming very well on budget and on time. We still have five months of construction, so obviously, know we're following this closely but you see the percentage of completion for the processing plant for the underground development for tailings water management electrical infrastructure and on-site infrastructure and by watching the video you'll be able to see this and now it's going to change considerably in the coming months as steel is now being erected. And now you have started to see the tanks go up and you'll see a lot more in the coming weeks and in the coming months. On the underground development, because I know you remember that when you were asking us what was the risk of this project, the number one risk was always the underground development. at the mining rate and all of that, and Rafael will be able to tell you that we're doing extremely well with the underground development, the horizontal and vertical, and we are 76% done on the lateral development and 65% on the vertical development. As well, for the construction, you will see that the tailings storage facility is extremely advanced. The power line is being built. The Meryl Crow is on site and the Silver Room is being built. The electrical substation you see is also being built. As we say, we're on time and we're on budget. And, again, you know that, but in our industry, only 2% of the projects get done on time and on budget. A quick picture or two pictures. One of the tailings storage facilities, very impressive, and it was a big work, civil work, done by the local Moroccan company, and it's extremely well done. And then you see the leach tanks coming up. And it's, of course, more advanced as we speak, but it's coming very, very quickly. It's being done very quickly, and it's, again, with local construction companies. On the exploration front, and we're extremely lucky, David is with us in Montreal today, so you can ask all of your questions. But as I indicated, we have a massive drill program ongoing at the mine. It's 29,000 meters of drilling. We're 9,000 done. We are a little bit slower than we wanted, but because priority was given to the development for the mine, the mining, the speed of the mining and enhance. So on the drilling, we know that this is, if there's one point where a little bit later is the drilling at the main Zgunder deposit, but that's fine because we have years of mine life. So we know that, but David is working very hard to catch up for in the coming few months. At Boumadine, we have a 76,000-meter budget, extremely large budget. We are 52,000 meters done at quarter end, and that is moving and is going extremely well. On the regional as well, we have 14,000 meters in the budget. We've done 8,600. When we started that a year and a half ago, it was, you know, grassroots exploration. We've discovered many targets. We are drilling. seeing new zones, so it's quite interesting. The secondaire exploration is moving, but we have to recall that we started, it was Greenfield a year and a half ago. Tirzit, these are the permits we acquired six months ago. We're starting to work on them, and Tijerit, we've completed 25,000 meters of drilling, and we're completing the feasibility on this smaller project that we own in Mauritania. So this is the main zone on page 11. You're very familiar with this slide. That's where we're drilling all the way down to the granite. It's where we're mining for the coming years. It's a very well mineralized sponge of 1.4 kilometer long. going down all the way to the granite, sometimes down 600 meters. This is the source of the ore for the coming years. That's what we're going to drill all the way down, and that's where we're going to be drilling 29,000 meters. So this is ongoing. We have many drills working, and this is, at the moment, is a top priority, and we have a couple of months of work yet to complete the drilling on this structure. What's very interesting is the team, the geological team, have identified, because that's what we've been looking for. We've been looking for a similar Zgulder lookalike structure. We looked to the west. We found some, you know, there was some smells of silver, but we have not discovered the structure. But then we realized that going to the east, we had continuity in the open pit and at depth. And then the team realized that there could be a continuation of the main zone in a dip, and that's what we're showing on the next slide. And that's something that we're going to attend to and see if this is there. And if it is, that would be a major discovery because it's very close, obviously, you can see to the current mine and the current operations. As well, on the right-hand side, on the same slide, there's the pinkish oval. That's also a new concept of an additional or a same geological setting, but further south from the Zgounder mine. And the team will also look into this as they believe that there could be a similar structure as what we have at Zgounder. So Scoundre, Scoundre Regional keep being our number one priority because it's right at the mine site and anything we find will allow us to, you know, to just feed the current plant and to increase the mine life and even at one point if we wanted to, to increase the throughput at the mine. Our next project called Boumadine, you're very familiar with that one. That is a discovery that was made like 400 years ago, but after doing the geophysics, we understood better the structures and the mineralization, and we started drilling this last year. We did about 18,000 meters, and then we had an original budget in 2023 of 36,000, which would then increase to 76,000 meters. The reason is because the structure that we've discovered, originally we saw it in geophysics on 6 km, but now we have it drilled on 4.2 km with very good results. There'll be more results coming soon as we keep drilling and we keep working on our interpretation. So during the quarter, we had one press release on Boumadine. It gave us some very good results. There'll be another one in this quarter as well. And it's a project that we believe will become the number one project of our company going forward. But of course, we're at the beginning of exploration and at the beginning of understanding the geology. We did some work in metallurgy because it's a project that was known to many as metallurgically complex, which is fine. So Raphael and his team, they've done the work. They've looked at different methods and we put a pressure release out just to show that there is a solution. So we did put a pressure release out showing 89% recovery for silver, 85% for gold, 85% for lead and 72% for zinc. And hence, to show that, yes, there is a solution. Of course, it comes with CAPEX and it will come with OPEX and all of that. But for us, it was an important press release because it told us that the project is doable, it's economic, it's now a matter of us understanding how big it is. What's the tonnage? What's the ultimate grade? And how do we attack this? So Boumadine is a project that is continuing at top speed, and it will continue like that for years to come. On the ESG front, extremely, extremely important, and we're pleased to say that our health and safety, we're doing quite well on our LTIs. We've reduced this considerably. We also have a lot of hours in training, 2,000 hours this quarter. We're approaching 8,000 hours for the year, and it's something that we're doing we're very proud of. Please follow us on LinkedIn and on Twitter. We do put out. pictures and often the programs that we have and that we do, it is something that is extremely important. And you know that it's also part of our EBRD loan that we have, whereby we need to have certain programs that are in place. And that's what we have, as I would say, the second item on the slide is the EBRD milestones advancing on the TCFD The task force on climate-related financial disclosure were about 80% done, and on the environmental and social action plan were 79% done. And that is very, very important. So on top, we have our CSR program, the medical program is in place. We have health program, water access program, and also, of course, the creation of of of businesses and assistance with the local saffron producer that's something that we do and that we're very proud of we also participated in the relief effort after the earthquake you know that we were not affected Because of our location, the earthquake was not far from the mine, but the main effect went north and not south, and we are south of the fault. So we were not affected. Of course, we felt it, but we had no damage. But we did participate in the efforts for rebuilding of villages and helping with blankets and everything that's needed during an earthquake. So we were part of that, and we're continuing to be part of it. Just to conclude, and after our third quarter, our silver production and cost guidance were on track. That's coming along extremely well. The 2,700 ton per day expansion also on track and coming along. We're not done, but it's coming along. We've received a ball mill. We finished a new water storage basin. You can see them on our website and on the videos, and the civil work has been done, and it's quite impressive. The TSF, we just saw a picture that's on track. The drilling, both at Secondaire and at Boumadine, is continuing. Tijerit is completed, and the fuel work at Tilsit is starting. and we're following our ESG milestone, and that is continuing. So this completes the presentation on our Q3 results. You have the team in Montreal, so I would welcome questions, and please just tell us who you're addressing the question to, and you have the complete team here to answer any of your questions. So I turn it over to you.

thank you ladies and gentlemen we will now begin the question and answer session should you have a question please press the star followed by the one on your touchstone phone our first question comes from justin shan from scp resource finance please go ahead your line is open hi guys uh first of all congratulations on a great quarter um i guess my first one just to kick it off

Probably everyone's wondering this. You're way above your guidance rate. Well, at least you're above the top end for production and way below in cash costs. So with that said, what do you expect for Q4? Are there any mitigating factors while you maintain guidance or just being conservative, knowing that you're well above it? I guess, what are your expectations for that?

Hi Justin, this is Raphael. So yeah, it's been a great quarter and a good year today. We always plan our biggest shutdown of the year around November and December. We want to make sure that we start on a strong foot. So, yeah, I can see your analysis. We are on track to be guided. However, we've been quite aggressive on HeadGrain all year round, and we do have a major shutdown coming in, and we also plan We also plan to test the open pit ore, which hasn't been done so far. So essentially, we wanted to have a strong three-quarter in order to clean things up on the last quarter, to do our shutdown, to do some test work on the open pit. So I do expect us to be on the higher end of the guidance, but we're not changing our guidance since we have work to do in December, and we expect December to be a bit of a slower month to make sure to start the year on a strong foot.

Gotcha. Thanks. That's really helpful. And then on development, I see that there was a shift from lateral development to vertical development. In the quarter, is that how you, I guess, should we expect that to be representative of the other quarters in the next, let's say, three quarters before the new plant comes online? Is it more vertical development from now on, or was that more just a feature of Q3? Okay.

Okay, so we are starting to slow down the lateral development, which is a good thing. It means that we are essentially, we're getting towards the end of the lateral development that we had to do for the expansion of the ramp up. That being said, for the vertical development, We have three chimneys, three ranges that are done out of four, which were the three main ones. We do have a secondary ventilation rate to start early next year. Typically, over the last two years, our lateral development rate has been around 400 meters per month. We will bring this down to more of a sustainable capital development, more around like 200 or 300 meters a month instead of the 400. So we are slowly ramping down the development since we are getting ready for production.

Gotcha. Thanks. That's really helpful. And then just the last one for me, and I'll free up the line. Maybe one more for David, but on your upcoming resources, you've got an update at in Q1. I guess also at , could I ask what your thoughts on timing for that updated resources? And then the feasibility study at , what are your thoughts there on timing?

Okay, for BoomAgen, we're on track. We're expecting a resource statement sometime in February, most likely. The drilling is on track. Beno mentioned 50-something meters. We are now a little bit above 62,000 as we speak now. So everything's on track. The results are good. So there should be no bad surprise. It's a bit late from the underground because of the development, but we're catching up. We're having five rigs right now underground, and we'll update you later. We're compiling right now.

We have to make a decision if we're going to publish before the first quarter of next year for the simple reason that it's It's regulatory. If we want to publish under our banner, we have to be a reporting issuer, which only happens if you've got three years of $40 million of revenue. And so we may, like we're publishing to the government at the end of December, and we may have to hold off for regulatory reasons here to the end of the first quarter to be a reporting issuer. But things are progressing well, and we're preparing that for the government right now.

Gotcha. Thanks. That's really helpful. Well, congratulations on a great quarter, and the site looks amazing. So congrats, Raf and Benoit and the whole team on that. Can't wait to be back, hopefully soon. Thanks, guys. Thanks, Justin.

Thank you. Our next question comes from Steven Suk from Stifel. Please go ahead. Your line is open.

Hey, Benoit and team, congrats on a really strong quarter. Great to see everything clicking there. Just two for me. The first one is on the development of the 2,000 ton per day expansion. I guess more on the surface works. What's kind of critical path items or front and center here as you're coming into the colder months? I know you mentioned steel work, but is there anything else that we should look for as kind of critical milestones for de-risking over the next two to three months?

Right now, we're getting the crunch of construction. Every day at site, there are truckloads of steel that arrives. Most equipment already arrives on site. The underground development is going well. I guess where the crunch is coming is we have all these different construction lots that are open. We have warehouse getting built. We have a workshop getting built. We have the plant. And it's a lot of logistics. It's a lot of logistics coming in. So essentially, it's weekly meetings and make sure that we can coordinate everything. So I'm not too sure how else to answer your question. The next four or five months are essentially the core of the erection of the plant. And we need to keep it up.

Okay, maybe just another way. I guess what's on the critical path between now and turning the plant on and, you know, kind of wet commissioning?

I would say it's electrical work, pipe fitting, electrical work. Again, we did a very good job at making sure all of the equipment would be on site on time, which they all are, essentially. And then it will be the speed at which we can do an erection.

Perfect. Thanks for that. Maybe just switching gears a little bit. I know it's early, but for 2024, you mentioned some interesting drill targets here. How are you thinking about the split between allocating drilling, Boumediene, Zagoonder, Zagoonder Regional, maybe earlier stage targets for 2024? And then what sort of magnitude are you thinking of total drill program, obviously, Once the 2,000 ton per day expansion is up and running, we'll have significant cash flow to help kind of fund that and expand that. So where's your head at from that aspect?

Yeah, I think David has a long, long wish list of things he wants to do, and we're just going through the budgeting process now. So I'd be surprised if we slow down compared to this year. Further than that, we're in the budgeting process now, so we have to kind of see what we're going to do. So in Q1, we'll be able to speak more to that, I think.

Okay, 10-4. Yeah, I guess we'll keep an ear out for that and look forward to another great year as the plant comes online and things take a step up here. Congrats again, guys. I'll open the line for anyone else.

Thank you, Vincent.

Thank you.

Thank you. As a reminder, to register for a question, please press the star followed by the one on your touch-tone phone. The next question comes from Elena Matsinsky from SCP Resource Finance. Please go ahead. Your line is open. Can everyone hear me okay?

Yes.

Okay, wonderful. Congratulations to all of you on a great quarter. I just had a question about the open pit mining that took place, I guess. So it sounds like, I assume the press release said you were able to get up to 409 tons per day in terms of our rate. Just curious on what kind of stockpile you guys have right now and in terms of this coming, or this quarter, kind of processing that, what you're planning to do for kind of testing things out, because it sounds like none of it actually went through the plant last quarter.

Okay, so, hi, Laura. Happy to comment on this. So, So the open pit rate target on the medium term, I should say, for next year or so, is about 500 tons per day, which we are reaching. I mean, we have two, three months ramped up. We're taking our time. And there are very high-grade, rich pockets that we're getting at in the open pit. We haven't gotten them yet. And in 2023, at Goomba, we have essentially doubled our mining rate overall between open pit and underground. And that gives us the luxury of choice, if you want, of what tons do we process, what tons do we not process. And by respecting the sequence of the open pit, We have a stockpile of around, as we speak today, close to 160,000 tons. And the grade is lower, of course, because we process a higher grade to the mill and we stockpile the lower grade for commissioning. So to answer your question, we have around 160,000 tons of ore that is being stockpiled right now, most of which come underground, but about a third of it comes from the open pit.

Okay, great. And in terms of that commissioning, so that'll just be later on, like once everything's kind of up and running, you're going to be putting that through the mill to begin with. And then I guess in the time period, are you going to be separating any other higher grade bits out to put through the process plant with your underground ore? Or is that kind of going to just sit for a little bit until the commissioning period?

We'll do a bit of a test with our existing plants with the offensive ore, as I mentioned a bit earlier in the coming months, to get a feel for it. It's a surface ore. It tends to be a bit more oxidized. We need to learn how to process it. Nothing out of the ordinary. We do keep all the ores separated to make sure to keep this optionality of how we're going to blend it. The open pit of Zimbabwe has always been and remains a stepping stone in order to allow us to have optionality into ramping up our underground mine. So we keep the mining rate at around 500 tons a day. Whenever we want and we choose, we can increase this rate, but there's no need for it right now. So we'd rather focus on grade control and making sure that we mine this pit properly until commissioning. And through commissioning, we will process lower grade, not to waste any good ore. And once the flash reaches full capacity, we will slowly increase the grade. Does that answer it all?

Absolutely. That's perfect. Thank you so much. And again, congrats to everyone. Definitely a lot of hard work that went into getting the project to this point. So good job to all of you and congrats again. Thank you.

Thank you. There appear to be no further questions. I'll return the conference back to you, speakers.

Well, thank you. Thank you, everyone, for participating in our conference call. We will be back next year with the Q4 and full year results. However, I'm going to see most of you next week in London at the one-to-one and then at all the conferences that are in London next week and following that in Zurich at the two conferences in Zurich. So thank you again for participating. Thank you for your comment. All the analysts, thank you for your notes that you send after every press release. We appreciate this greatly. So thank you for following AYA, and we will see you next week. Thank you.

Thank you. This does conclude today's conference call. Thank you all for attending. You may now disconnect your lines.