Aya Gold & Silver Inc.

Hello, and thank you for standing by. Welcome to AYA Gold and Silver's third quarter 2024 results conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. I would now like to hand the conference over to Ruth Hanna. You may begin.

Thank you, operator. Good morning, everyone, and welcome to AYA's third quarter 2024 results earnings call. Today on the call, we have Benoit Lassalle, President and CEO, Hugo Landré-Tolzuc, CFO, Raphael Boudoin, Vice President Operations, and David Lalande, Vice President Exploration, all calling in from Marrakesh. We will finish today's event with a Q&A session with the team. As always, please contact our IR team directly with any follow-up questions that are not addressed during the call. Before we begin, I would 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 CDOT Plus and on www.ayagoldsilver.com. With that, I would like to turn the conference over to AYA's President and CEO, Benoit La Salle. Benoit, please go ahead.

Thank you, Ruth. Good morning, everybody. Thank you for being with us this morning. Q3 2024 is a transitional quarter, but with key strategic accomplishments. We continue advancing the Zugunder mine, and it is on budget. And as we had indicated, we were a couple of weeks late from the original plan, but we've made up some of that time, and we are commissioning on a going basis. We're targeting commercial production in late Q4 2024. And for that, we have a stockpile as of the end of this quarter of 347,000 ton of ore, which is ready for commissioning of the new plant. The expansion is 99 point something completed. You saw the video last week. You saw the press release. So we're almost there and we will be seeing more development in the very, very short term. It is a transitional quarter on production. We've produced 355,927 ounces. And the reason we're below our budget and below expectation is we were developing new stoves, but those were not ready for this quarter. They are ready for the Q4 quarter. So the delay in reaching the new stoves and the fact that we have a very disciplined mining method now, we stayed in stoves that had lower grade and less tonnage, hence the reason for a lower production. We already see this being corrected in the month of October. We generated in the quarter 11 million of revenue at an average realized selling price of $27 per ounce, which is very good considering the general market of the past few months. The net loss for the period is not significant. It's $300,000. And the adjusted cash cost is $19.93. As you can see, we're also reporting a total cash cost of $23.47. However, you know, we have to tell you that this cash cost includes non-recurring expenses. The development of the six stoves that are now ready were not capitalized and were passed through as an expense in Q3. hence increasing the cash cost by almost $3.50. So this is non-recurring expenses. It was a contract given outside to a contractor to develop the six stoves. And obviously, when you use a contractor, it's a lot more expensive than our own team. But we wanted to do this because we are getting ready for the plant to be up and running by Q4 2024. And as you know, by that time, we will be mining underground 1,600 tons per day. So when we talk about commissioning, very often people think of commissioning of a plant. But there's also ramp-up and commissioning of the underground mine where you have a lot of equipment, a lot of new people. And, you know, let's recall that it used to be a 700-ton-a-day mine, and now it will be a 2,700-ton-a-day mine. So there is ramp-up at the plant, but there's also ramp-up at the mine, mainly the underground mine. The open pit is going very smoothly. We are mining 500 ton a day, and we will be going to 1,000 ton a day. So just for you to understand the cost, in Q3, we processed 42,000 ton, and the underground cost of mining was $85, which included the development of the six stoves. Our stockpile has a cost of $35 of mining. So you can see that it is really a very unusual quarter with non-recurring expenses. As I indicated, we already see big changes coming through in Q4. Due to the fact that we were a couple of weeks late and the fact that the commissioning is now starting more in Q4 and then in Q3, we will revise the guidance for this year to 1.6 up to 1.8 million ounces for the year 2024. As well in the quarter, we've done a spin-out. So we have created the spin-out to better value our gold assets. So we signed a term sheet with MX2, a brand-new company for the MSMEs and the Tijerit asset. So the spin-out has been a very good success. They started the new team with a financing of 7.5 million, and they ended with a financing of 15 million. So it has been a very good success, and it's all being put together as we speak. On the exploration program, as you know, AYA is a very, very interesting exploration story. So we've confirmed high-grade mineralization at depth and on lateral extension at Zgounder, and we'll review some of those drill results. We grew Boumadzine main trend from, you know, up to 5.4 kilometer. You recall last year we were at 4.2 kilometer. And we've also shown potential for new mineralization style in one of the drill hole where we obtained close to 2% copper and 2,000 gram per ton silver. We are also in the quarter, you know, we are preparing ourselves for new drilling, which has started now in Q4, and to the west. We have new anomalies to the east and to the south. We're currently drilling the new anomalies to the west. So quickly, a very Quick review of the spinout. MX2 is a private company for the time being. It's North Africa and West Africa because it has an asset in Mauritania. AMISMIS is a mining permit in Morocco. It has a resource that's not 43-101 that goes back many years of over 300,000 ounces at 13 gram per ton. And right now underway, there's a 2,400-meter drill program to look at the extension and to start the understanding of the geology. The new team in MX2 is on site as we speak with our team, the AYA team, and the drill program is underway. There's also the Tijerit asset, which you know we've done a feasibility study on. It has a resource of a little bit above 500,000 ounces. It's between 2 gram per ton and 1.6 gram per ton, depending on the deposit. MX-2 have an option. to buy this from AYA over the next three years. They will be looking at fast-tracking this into development or more drilling and development and construction hopefully in the very near future. Our positioning in MX2 after the financing will be 42% ownership for AYA. The company will have $15 million in cash. And AYA will have two board members sitting in a board of about seven individuals. So going to slide number five on the presentation, again, this is just a quick summary of where we are at the end of Q3. So you see the silver production is a little bit lower than what we wanted, but again, due to stoves not being ready. Because the other thing as well, as I say, we are very disciplined, is historically they would open stoves, never close them, and go to the next one and then maybe come back later. We don't do that anymore. We finish the stoves. We backfill them. We have a cement backfill plant. So we backfill them so that we can come and take, you know, the stoves that are between two stoves that are mineralized. So we have a very disciplined approach. And hence, sometimes it forces us to continue into some stoves where we have lower grade material. But globally, for the company as a whole and for the project, it's the way to go to be disciplined, to, you know, take all the ore that's available, do the cement backfill, and then move to the next phase. So you have on page five, you have the production compared to the rest of the year. You have the grade. Again, due to the fact that we stayed in some older stoves, we were getting an average grade of about 161 gram per ton, which is absolutely, you know, too low for this deposit, but the reality is we don't want to leave it there and not take it. So, currently in October, we're already back to 190, and we expect this to continue to go back up. Veal recovery is always between 82 and 85. Again, continuing smoothly. But the real important chart here is the quarterly ton process. We are at 83,000, which is a 19% increase year over year. And the two plants that we have function extremely well, and they are older, but they will keep running even once we have the third plant up and running. The on page six, you have a few financial Tableau, in French, charts, a few financial charts. You have your cash flow from operating activity, which is negative six million this quarter due to the fact that we've invested heavily into the development of the six stoves. You have the gross profit, which is, again, a little bit lower due to the fact that the grade was lower, and profit and cost of goods sold go hand in hand. And with a little bit less production for the quarter and a little bit lower grade, you have a higher cash cost, which we saw at $23, which we have on the next slide. Therefore, with that, you have a quarter where at the end, when you look at the financial statement, we are breakeven, which I find not that bad in a transition quarter where we are ramping up the plant, ramping up the mine. And we did hit this week 1,600 tons per day from the underground mine. So, we are there. We are where we want to be for this project to really get going. So, you have on the construction front, you have that on slide number eight, the Zgounder expansion, plus you saw the video last week, which is telling. but we are 99% done at the processing plant. The underground and the open pit are both operating very well. Tailings, water management, very good news on water management. We are at the beginning of the rain season and all of our water reservoirs are full. That is, again, very unique. It's the time of the year. We've had very good rainfall. And our water management system and the way we capture the water is working extremely well. So I'm pleased to say that on the waterfront, we're doing extremely well. Electricity infrastructure, well, that's built. You saw some of the pictures. We have green energy coming to site. We have, as you know, 20-year PPA. It's operating extremely well, and we're pleased with that. On the secondaire expansion, you saw that we started the commissioning. You saw the ball mill. The lubrication system that created a few weeks delay is now all back and operational. The issue that we had, it's all been fixed. We've done all the tests. The oil is pure. The ball mill can turn. And you saw the conveyor. So it's all working very well. We've also completed our lab. So we have our, you know, a very big lab at Gundaes where we can do all of our samples and our preparation. So that's also been completed. Taking you to the exploration aspect of our business, as you know, we are one of the largest drill program in Africa. We are drilling this year 160,000 meters. And we have, you know, some three main zones, the Zgounder mine, the Boumedzin project, and the Zgounder regional. So at Zgounder, the mine, At the end of Q3, we had 25,000 meters done on a program of 30,000 meters. As I always tell David, David, if you need more drilling because you keep finding and you keep finding extension, just come back to us. And, you know, has no limitation on the drilling that we want to do there because it's at site. It's truckable. It's something that's extremely important. has 69, almost 70,000 meters done of the 120,000 meter program. We should get to the end of the year to close to 120. We are now running at 11 rigs and one RC, and we will probably bring a second RC for the deeper holes so that we don't go core all the way. It will be less expensive and faster. But we are running 11 rigs right now. So the first 60,000 meters was done on the expansion, on the main zone, and it expanded the main zone to 5.4 kilometer strike. The other 60,000 meters are being done on targets. And as I indicated at the beginning, we are currently drilling the west target, which is a very strong geophysical anomaly. At Gundea Regional, we're almost done. We had 10,000 meters in the program. We are at the end of the quarter at 9,800. We are finding mineralization. We need to find a pocket where it's accumulated, and we can mine it. The area, as you know, is very large. We've done all the geological work, spectral imaging, satellite, geochem. We've done stream sediment, and we're looking at many targets, and we are doing, you know, we are drilling all the targets that we see. And at the same time, we have the Tirzit asset that we bought last year. So we've completed the geophysics program because Tirzit has also a copper component to the gold and silver. And we are analyzing that as we speak. which used to be part of us directly, now it's part of us indirectly through MX2. Well, this year we did mapping and we did a bit of geology, but drilling, as I indicated to you, has started being managed by the MX2 team and by ARTI. On page 11 of the presentation, we keep hitting some beautiful mineralization zones. To date, you know, we've drilled 8,000 meters in Q3 of a 30,000-meter program. Look at some of the results again, 1,000 gram per ton over 13 meters, 322 over 17, 2,800 over 8 meters. So, it is, as we expected, a very nice loaf of bread, 1.4 kilometer long, 20 meters thick. all the way down to the granite, which is between 600 and 700 meters. When we get down to the granite, as we had expected, there's kind of an enrichment of silver at the bottom, and we're seeing that. So, this is ongoing. It's a 30,000-meter program. We did 8,000 this quarter, and as I indicated, this is, you know, we will drill this as we keep finding extension at depth and to the east as well. On page 12, you have the original geophysics of Boumadine. So Boumadine is our main exploration asset because it's got so much potential. And last year, with 94,000 meters of drilling, it gave us globally in all categories over 300 million ounces of silver equivalent at very good grade or 4.1 million ounces of gold equivalent at five gram per ton. So it's a beautiful project. As indicated, we've drilled in the quarter 27,000 meters. So you can see it's very, very busy. We've drilled so far 69,000 meters. You see results continuously and you're going to keep seeing more as we have 11 drills turning and this is continuing. Throughout the year, we've added 18 new permits, which is because we're seeing the structures at surface, because we did the geophysics for the whole region. We did 13,000 line kilometers of mobile empty geophysics, but we've done the complete district, and we have many, many geophysics anomalies. and that those are being looked at we do the geochem we walk the ground we do some sampling and when we're ready we will we drill them so currently we are as i indicated to you we are drilling the west which is an important system so on page 13 just a few results of the quarter uh coming from bumadin a thousand gram over 13.5 meters, 322 grams over 17.6. So, you can see we have, you know, continuous results on this 5.4 kilometer slab, which we do see over 6 kilometer in geophysics. It's continuous. It's there. We have drilled 60,000 meters into it, and we will do a resource update for Q1 of next year. But the highlight is on page 14. It's the high-conductivity anomaly. So what you see at the top, on top of the two potatoes or cherries, is the surface. You can see the drill results on page 14. We've drilled Bumazin, which is the one on the right-hand side. You see on the left-hand side is a similar anomaly. And the top is mineralized, so we know the top of Boumediene is mineralized because we already have discovered 352 million ounces of silver equivalent. But what's very interesting right now, and you see it on the bottom picture, is we are drilling that long hole that is going right into the eye of the anomaly. So as of now, we are just touching the green. So we're about 900 meters into that drill hole, and we're just beginning to enter what we hope to see, the mineralized zone, which has the same signature as what we have at surface. But you know, this is geophysical, so is it exactly there? It's the beginning of a program. Now, why we're drilling this, because we want to understand if this is a pore-free system, if this is mineralization at depth, because if you look at the surface and how small it looks from where we are now, and we know that this is 5.4 kilometer long and more than 350, because 352 million ounces was on strike of 4.2 kilometer, and now we're 5.4, and look at the system underneath. So, this We will be entering the zone, I would say, in about a week to 10 days. Of course, and, you know, we are watching, and the GOs are giving us feedback of what kind of rock they're seeing and where we are going. So this is Boumadzine. You've got the lateral extension to the west, to the east, to the south. It's still open to the north, and you have this ad-depth structure that looks very, very interesting. On the ESG side, to complete this presentation on page 15, look, we are very, very serious about health and safety. We only had three lost time injuries in the quarter, and they were not very, very grave. It was just some small injuries. We've, you know, given 5,000 hours of training in the quarter, which is a 90% increase year over year. And we take this seriously. If you are with us on LinkedIn, you do see a lot of pictures of some of our employees who put up pictures of the training, which is health and safety. It can be education. It can be emergency. All of that you can see. I'm also very pleased to say that we received the ISO 9001 certification. It was a team effort at the mine site. So from geology all the way to health and safety production, we've received the ISO 9001 certification. We've also submitted all of our data for the carbon disclosure project. You know that our ESG loan with the EBRD is an ESG-driven facility. We have received all of the money in 2024 because we've met all of our ESG requirements. So that is something that we take very, very seriously. With the communities, it's also going very well. I'm pleased to say that our program in first school showed 68% increase year over year in the percentage of students opting for science projects or science streams. So this is really very, very interesting, and we are now taking our program to second middle school. So primary school, high school, and in Morocco, they call this first school and second school, middle school. But we are very much involved with education, online education, health and safety health for the communities. We are now starting a mobile clinic, pediatrics. You remember last year, we added for the eyes, we had diabetes. We've had many, many clinics. and livelihood with the saffron project, with agriculture. We have water pumps, and we are really very much involved. We've added some signal at the saffron and vegetable farms, which is just for health and safety. So globally, it's been a very, very good quarter for some of the milestones. It's been a little bit low on the production, and we agree, but we're building the future. We're not just trying to maximize one quarter, and if we have to, and we don't want to compromise the mine, so when we need to stay in one phase and finish it so that we can, you know, backfill it with cement, we do it, and knowing that it's just better times ahead. So, the takeaway is, again, as you imagine, 120,000 meters of drilling, ongoing interpretation, major, major exploration program on the west and at depth, which is very interesting, while the major strike, the main strike, continues to expand. At Gounder, 40,000 meters of drilling. You recall 10,000 regional, 30,000 at the mine, ongoing, and again, on track. Probably we will exceed the 40,000 meters. And the Gounder silver mine expansion, well, as indicated, it is on track. It is on budget, a budget that was prepared in 2022 that saw some inflation in transport. And today, we are within 1%, not even less than 1% on budget. We reviewed that this week, and we can still say today we are on budget. We cannot say we're on time because we had that short delay with the plumbing of the lubrification system. But within three to four weeks, we're close to on time, but we are on budget. So thank you very much for your time, and I will turn it over to the operator for the question period.