Calibre Mining Corp.

Good day, and thank you for standing by. Welcome to the Caliber Mining 2022 Q4 and Full Year Financial Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a 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, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ryan King, Senior Vice President. Please go ahead.

Well, thank you, operator. Good morning, everyone, and thank you for taking the time to join the call this morning. Before we get started, I'd like to direct everyone to the forward-looking statements on slide two. Our remarks and answers to your questions today may contain forward-looking information about the company's future performance. Although management believes that our forward-looking statements are based on fair and reasonable assumptions, actual results may turn out to be different from these forward-looking statements. For a complete discussion of the risks, uncertainties and factors which may lead to actual operating and financial results being different from the estimates contained in our forward-looking statements, please refer to our 2022 annual MD&A, available on our website as well as on CDAR. And finally, all figures are in US dollars unless otherwise stated. Present today with me on the call are Darren Hall, President and Chief Executive Officer, David Splett, Senior Vice President and Chief Financial Officer, and Tom Gallo, Senior Vice President of Growth. We'll be providing comments on our fourth quarter and full year 2022 results and our outlook for 2023, after which we'll be happy to take questions. The slide deck we'll be referencing is available on our website at calibremining.com under the events section. You can also click on the webcast to join the live presentation. And with that, I'll turn the call over to Derek.

Thanks, Brian. Moving to slide three, good morning and thank you for taking the time to join us today. I would like to start by thanking all Calibre employees and business partners for their continued focus, which resulted in another record-setting year. Pleasingly, these records were led by an additional 50% reduction in our lost time injury frequency rate. I'm proud of what the team have accomplished in 2022, which included integrating the Nevada assets, delivering record gold production of 222,000 ounces at 20% increase over 2021, meeting expectations on total cash costs of $11.29 per ounce, despite significant industry-wide inflationary pressures, and obtaining Kavon Central and Eastern Borussia permits. for funding construction activities, which positions us well in 2023 for an additional 22% grade-driven increase in gold production. Additionally, our commitment to reinvest continues to pay dividends, growing reserves to 1.35 million ounces, a 370% increase after production since becoming a producer in Q4 2019. In 2022, our Nicaraguan exploration focus morphed to include new targets and district-scale discovery opportunities. During the year, we discovered our highest prey deposit, Pantheon North, and outlined multiple kilometres of potential at the Limon Complex along the Pantheon-Vitem Geophysical Gold Corridor. Pantheon North added 244,000 ounces to reserves. at 9.45 grams per tonne, increasing the consolidated Nicaraguan reserve to 5.37, the highest grade ever. After owning the Nevada assets for less than 12 months, we increased mineral reserves 23% and announced the discovery of a new zone, proximal to Pan, demonstrating the geologic potential of the area. I would like to highlight that the company's reinvestment and exploration and development since 2019 have and will continue to present a compelling investment opportunity. I'll now turn the call over to David to discuss our financial results.

Thanks, Darren. Moving to slide four, Calibre was not immune to significant industry-wide inflation. However, our focus on cost control and fixing key commodity prices resulted in a muted impact. Calibre finished the year within guidance with cash costs of $1,129 per ounce and an ASIC of $1,259 per ounce. 2022 growth capital advanced key assets, including the Pavon Central, Eastern Borussia and La Tigra mines, and these will help drive a significant increase in 2023 operating cash flow as they're sequenced into full production during the first half of this year. Additionally, 2023 will see an approximate 30% reduction in growth capital expenditures compared to 2022. And that combined with, as Darren mentioned, the 22% grade driven production growth will drive 2023 cash generation, which will become most evident during the second half of the year. Finally, We expect total cash costs and all-in sustaining costs to decrease as production increases over the course of this year. I'll now turn it over to Tom to discuss our exploration programs.

Thanks, David. Moving to slide five. As Darren mentioned earlier, we had significant exploration success in 2022 and continue to see excellent opportunities across all assets. Firstly, I would like to welcome John Jory, VP Geology, Nevada to the team. John brings an extensive background in both exploration and operations and has spent considerable time in Nevada throughout his career. I'm looking forward to what he will bring to the team and have no doubt he will unlock new value for the company. At our pan mine in Nevada, drill results led to a 23% increase in mineral reserves, net of production depletion, as well as to a new discovery called Coyote. This target is located three kilometers south of the main pan resource, with initial drill results including 1.36 grams per ton over 13.7 meters. Our 2023 pan drill program is largely focused in that area, as shown on the map, looking for new potential deposits and targeting future resource growth. The Gold Rock project, located 13 kilometers from the existing Pan Mine, also demonstrated strong drill results with the identification of new higher-grade gold mineralization. Given these results, our focus is now to test for additional high-grade depth potential looking for feeder structures primarily north and west of the known gold mineralization. At our Golden Eagle project in Washington, the first phase drill program confirmed consistent gold mineralization over broad width including 4.3 grams per tonne gold over 92 metres, reinforcing the potential this project has to unlock future value to shareholders. Golden Eagle is a meaningful contributor to the company's overall mineral resource base, with 2 million ounces in the measured and indicated categories, and we will continue to review opportunities to advance this large-scale U.S. project. Turning to slide 6, the discovery made at Pantheon North in early 2022 continues to deliver on all fronts, from Bonanza-grade gold intercepts to the new high-grade mineral reserves Darren mentioned previously. Step-out drilling along the Wheat Town geophysical corridor up to 2.5 kilometers north of Pantheon North has given indication of another new high-grade gold zone. The VTEM survey has proven to be an excellent tool for new target identification, outlining a further 3.5 kilometers of untested strike length along the high-level resistivity contact. Discovery drilling is underway along this corridor with four diamond drill rigs. Calibre has an initial 60-kilometer drill program planned in Nicaragua, prioritizing the VTEM Gold Corridor and a number of other exciting targets at Libertad, Eastern Barosi, and several new concessions. I'll now turn the call back over to Darren to discuss the company's growth trajectory and to conclude today's presentation.

Thanks, Tom. Moving to slide seven. Since acquiring our Nicaraguan assets, we've delivered year-on-year grade-driven production growth. For 2023, we have guided an additional 22% production growth as grades continue to trend towards the reserve average of 5.4 grams per tonne. We currently utilize approximately 1.7 of our 2.7 million tons of installed processing capacity. Given our 2.8 million ounce resource base, exciting exploration opportunities, favorable mining legislation, and demonstrated ability to go from permit to plant in less than 18 months, I'm confident we will continue to add additional oil sources, leveraging the 1 million tons of surplus capacity to profitably grow production. Turning to slide eight, 2023 is expected to be another record year with grade-driven production growth, lower unit cost and a reduced demand for developing capital. I believe Calibre presents a compelling investment opportunity as we deliver on our commitments year over year, make new and exciting discoveries, self-fund our organic growth through the Americas and deliver positive and sustainable value to all stakeholders. With that, we're happy to take questions. Back to you, operator.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again. Please stand by while we compile the Q&A roster.

Our first question comes from Justin Stevens with PI.

Justin, your line is open.

Hey, guys. Congrats on a pretty solid quarter. This has been a good end of the year there. A few questions on my end. First, just if you can give some idea of what we can expect in terms of the full-on control feed in terms of Q1. I know obviously you guys are getting things going there.

um but when can we sort of expect that this actually started hitting the mill yeah morning justin maybe we'll answer each question as they come up so don't forget what you asked so and broke up a little bit there but i believe you asked about the von central and the timing for that come on um yeah exactly okay cool but we commenced deliveries in january and And through yesterday, we've averaged a little over 800 tons per day delivered to Libertad from Pavon Central at around six grams per ton. So it's living up to great expectations and the startup's been good. We fully anticipate reaching commercial production here in Q1.

Perfect. That's great to hear. That's going to be a nice kicker, I'm sure.

Absolutely.

Yeah, so just the next one for me, obviously the Ziprotaz elution vessel there, any updates on that? Is that on site yet, or how is the elution side of things for that metal going?

Yeah, no, Justin, the replacement vessel was installed in Q4, and it's all business as usual. We've got the two vessels running. We've got plenty of surplus capacity. So we're actually in better shape than what we were prior to the event. So there's no restrictions and no issues associated with that part of the circuit.

Perfect. No, that's good to hear. So, yeah, you've got, like you said, I think about a million tons or so of excess capacity right now. Obviously, EBP is going to be a nice sort of potential spoke as well, but is there any other sort of plans that you see in terms of near-term sources that you're going to be looking at, or are you going to be focused on optimizing sort of with the spokes that you currently have through this year, and then look at any potential sort of expansion in 2024 or later?

Yeah, no, a good question, I guess, is that, you know, our focus has been in, if we look at the last couple of years, was in 2020, we were bringing Limon to Libertad. And then in 2021 was Pavon to Libertad. In 2023, it's Eastern Borossi into Libertad. So, you know, we're ensuring we do that responsibly, safely and sustainably, given it's key to our growth profile as we go forth. we'll continue to look for opportunities to increase rates of delivery from those three sources. And as we get through this development stage of Provence Centrale in Q1 and then Eastern Borussia in Q2, we'll now then start to look at what other potential sources of ore we could start to bring into the feed here over the next 18 months, two years.

That makes sense. Obviously been a nice steady trend in the right direction here, so good to see that. And just remind me, on the ore trucking side of things, you pay a contractor, right? What sort of exposure do you have in terms of the energy prices?

Yeah, no. From a price perspective, generally speaking, it's a little different on a haul-by-haul basis. But roughly speaking, about 25% to 30% of the cost of haulage is associated with diesel consumption. So, you know, again, you can do the math. If you saw a 25% increase on 25%, it would be, you know, relatively de minimis cost on a cost per ton basis. So exposure to fuel, which is the diesel price, is relatively de minimis there on those forks.

Got it. Yeah, and with the grids that you're seeing, obviously, at Pavon, even just the existing previous production from Pavon and obviously now Pavon Central, I think that, yeah, that material is... Extremely high margin, no matter how you cut it, which is good to see.

Yeah, absolutely. Leveraging off that installed capacity at Libertad, you know, you're trading that mill capacity for the incremental haul. And, you know, the haulage option is still cheaper than building a new facility in Talesham and everything that goes across with it. So I guess that's what we're highlighting there on slide seven. When you look at the green bars that sit on top of those columns, the opportunity that exists to incrementally utilize that million tons, even if it's 50% of that at a lower grade of three, four grams per ton, the talk there from a free cash flow perspective will be significant.

Right, exactly. Especially because the unit cost that you'd see from that incremental throughput is not particularly high compared to the existing cost that you'll be seeing even just running at that base case.

Correct. A little bit of energy and the ubiquitous consumables, lime, cyanide, those sorts of things. But, you know, people and all the fixed costs associated with running the plants are basically sunk at that point. Yeah. So it's absolutely a very accretive implement of production.

Got it. And last one for me, just any sort of on the CapEx side of things, any sort of big ticket items we should be looking at throughout the year or is the spend going to be relatively steady?

Generally speaking, as Dave alluded to, there's a little more waiting in the first half of the year as we complete the growth-related expenditures at Provence Central and Eastern Borossi. But if we look on year on year, if we look at our total non-sustaining capital spend 2023 over 2022, we're talking about a $44 million reduction year on year as we reap the benefits of that investment we had in 2022. So are there big ticket items to watch for? No, not really. It's more front-end weighted just to get these operations up and running and into the production stream. Great. That's it from me. Thanks again. Thanks, Justin. Take care.

One moment for our next question. Our next question comes from Brock Hand with Raymond James. Your line is open.

Hi, good morning, everyone. Thanks for the call this morning. Darren, my question really for you is just related to capital allocation and your strategy there. So from the sound of it, you're going to start generating, assuming gold prices hold up, you're going to start generating some significant free cash in the second half of this year as production picks up costs, you know, kind of come off and your capex starts to roll lower in the second half. So I'm just wondering, as you start building your cash position, what are your capital allocation strategies or what's your hierarchy here in terms of other projects where you can start spending capital or growth capital, potentially in Nevada or return of capital to shareholders, kind of where do you and the board sit on that thought process right now?

It would be a nice problem to have later in the year to have a very healthy treasury position and we're wondering what to do with it. But again, as we've demonstrated over the last few years, the reinvestment into Nicaragua and the opportunity that presents is definitely our highest priority. It shows great dividend, there's a good future in front of us there, so we'll continue to You know, we've broken the back of a lot of the growth capital, as I mentioned earlier, in 2022 with Le Bon Central and Eastern Virocy. There will be Riscos de Oro come on. We'll start that development probably later this year, which is the underground potential out of Eastern Virocy coming into production in 2024 or thereabouts. There'll be some capital associated with that. You know, I think as we go through the year, spend a little bit of time, sit back and take, okay, where is the best allocation of capital internally and externally? And again, it will be a great opportunity to have for the organisation. But we still see, you know, we still remain absolutely committed to our exploration potential and as Tom continues to find and continue to find more things, you know, we'll be presented with opportunities to be able to bring those into production as well. You know, as we've demonstrated, We can go from basically permanent application to plant in less than 18 months. The last couple of deliveries have been closer to 12. So there's lots of accretive things that we're able to bring in in-country. And we'll continue to look at external opportunities as well as we see fit. But I think that our focus will be on Nicaragua, investing there. We'll continue to develop an understanding there in Nevada, both in and around Pan and at Gold Rock. as Tom discussed on the call there, is to develop a better understanding about what that high-grade, deeper sulfide potential means before we make a commitment to developing Beltrock.

Okay, that's helpful. And then maybe to focus on Nevada, so it's been about a year since the acquisition. Things have maybe moved a little bit slowly there. Are you at a position now to provide some kind of timelines or milestones on what you want to see out of Nevada over the next 12 months that would kind of give you comfort or give the market comfort that there's more value there that you can kind of see on the near to midterm horizon?

Yeah, it's a focus here for the next quarter or two. We've just completed the resource reserve update. with the 23% growth in reserves there at PAN. We just finished those programs. It was a fairly large program last year. Tom's talked about the discovery potential south of PAN there with Coyote. So we're getting our head around what does this mean? What does it look like? But very clearly, what we've identified there is the ability to put more track in front of the PAN train, which is a good place to be. With that, we can also step back a little bit and look at what are the opportunities to be able to lower unit cost there as well and whether that be through investment in secondary storage crushing or those optimisations that can happen around mining rates and sequencing and scheduling. We've got life in front of us to be able to have those discussions and that'll be a focus for the team in Nevada over the next six to 12 months. And see how Gold Rock plays into that as the exploration program continues there. We've got about 40,000 metres of drilling identified for Nevada as it stands at this point. And again, we've been successful with the drilling thus far and we'll be interested to see how that unfolds during the course of the year. you know i think we're developing a better idea but i think it'd be presumptuous for us to say we know exactly what in 2026 and 2027 are going to play out at this point but you know it's we're definitely developing a better understanding and we are seeing good reason to be cautiously optimistic about what's in front of us there in nevada okay no that that's uh that's good to hear and we'll keep watching that and then maybe last one for me is just back to nicaragua

It's been some time now since we had all those kind of sanction headlines and there was concern in your SOC, you've been able to operate throughout. Can you give us any update on, is there any more clarity on what the US Treasury Department was after? Has there been more certainty given to you or assurance given to you that your operations will not be affected going forward? There is no connection at all. and something that we can completely put to bed?

Yeah, I think probably the best way to answer that, Farouk, and I'm going to be a little bit cautious about making political commentary in relationships between Nicaragua and the US, but What we have seen is from an ability to execute perspective, the sanctions and things that have risen over the last three years since we've been in operation there, we've been able to maneuver through and negotiate through those changes. So we haven't seen, from an operating perspective, an impact of any of the sanctions or any of those political issues. And it's been made clear to us from our advisors that it's in everyone's best interest that we continue to be and operator and sustainable in Nicaragua. It's the best thing for Nicaragua and it's the best thing for the US as well. So it's probably the best way I can answer that. I mean, we have seen some suggestion of a change in political wind there recently with some open dialogue between the US and Nicaragua and have related to those about 222 political prisoners. which were repatriated to the US just here in the last month. And the US state have come out and openly made comments in constructive discussion with the foreign minister there in Nicaragua. So all of those things I think are setting us up for a change in political wind and a positive future. So I'm encouraged by those recent activities.

Okay, thanks, Darren. That is helpful, and I appreciate the sensitivity of having to answer a question like that, but it is helpful. Thanks. That's it for me. Appreciate it. Thanks, Bert.

One moment for our next question. Our next question comes from Jordy Mark with Haywood Securities. Your line is open.

Yeah, good morning. I thought I'd just expand on a few points there. Given the success of exploration, I guess, last year on Pantheon North, would you be able to describe what would be required physically to bring that into production over the next, I'll call it one to two years, and given that success and grow out in the reserves, any thoughts in terms of where your comfort level would be in terms of reserve base to bring out another, you know, multi-year sort of outlook for Nicaraguan operations in particular? Thanks.

Yeah, no, thanks, Gordie. And, you know, with regard to Pantheon North, you know, it's a rapidly evolving situation. Keep in mind that, you know, we had first falls into it in Q2 of last year and we came to reserve here just a month or so ago. So, you know, it's a pretty rapid progression there for that, you know, roughly quarter million ounces at nine and a half grams, is relatively proximal to existing operations. So from a development perspective, it's a new mining zone, but it's not a new mine per se. So it would leverage off the existing infrastructure. We're continuing drilling there, obviously. Yeah, as we've talked about and given the prospect of nature in Pantheon North and then further to the north along the whole V10 corridor. So, you know, I think it's important for us to understand scope and scale there and how best to be able to tackle that. And as you're aware, the Pantheon, Santa Pancha, is a hot mine with water. So, you know, given we've got that volume scale behind us now, we can start to look at, okay, what's the best way to be able to optimise that asset for the longer term? So, you know, I think we'll take a prudent approach to understanding what's happening there. But we want to be able to, you know, that we allow enough time to do the appropriate level of engineering so we can ensure ourselves up for a sustainable future because we anticipate being in that region, a long time beyond there for decades to come. But if I was to suggest a timing on that, I think it would probably take a year or two of work to get into and start actually getting ore from that Pantheon North zone. So kind of in that 2025 timeframe would be the increment there, something like that. But that'll be proven out by how successful we are from the drill bit this year and do extensions too and make sure we do it in a logical way. Hopefully that answered the question on Pantheon. And given that's such a pivotal aspect for us as well and changes the tenure of the grade, it's going to be really important for us to understand what that looks like before we can start to put out a revision to the monthly year. We stand behind the product that we issued in June of last year. I think there's only opportunity to be able to improve that from a margin and a cash flow perspective going forward. And that'll be the focus. It'll be less about whether the number's 275 or 300,000 ounces a year. It'll be what generates the most attractive margin and generates the best value for our shareholders. But, you know, Pantheon will obviously play into that, as will some of the opportunities like Justin asked about earlier in terms of these incremental productions that can come through the mill and we can reap the benefit of relatively modest grades of two, three grams. to consume and utilize some of the incremental 1 million tons capacity of the six that live at that. So, no, I think 2023 is going to be a good year for us. What I expect is to come out with a revised outlook in a quarter or two. I don't think so. I think it's going to take us a couple of quarters to get our head around this and have some more intelligent discussion about what this would look like. But I think we've clearly established a very solid reserve base. We've replaced reserves year on year. A modest increase in Nicaragua last year at a 6% increase in reserves, but a 16% increase in grade. Obviously drives higher margin. We've demonstrated we can replace it. I think we're pretty comfortable with that as a base. Now it's about looking about, you know, what's in front of us from a, you know, how do we keep track in front of the train and where do we go as opposed to necessarily trying to specifically grow the reserve place. So.

All right. No, that makes a lot of sense. Thanks, Mike. That's it for me. Cheers. Cheers. Thank you.

At this time, I would like to turn it back to Darren Hall for closing remarks.

Yeah, thank you, operator. And I'd like to thank all of our shareholders for their continued support during the year and everyone's participation on the call. And for your questions this morning, it's much appreciated. I know you're all busy and have plenty of time to go. And as always, Ryan, I and the entire leadership team are available if you have any further questions. And at that point, I say take care, have a safe and rewarding day, and pass it back to the operator.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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