GCM Mining Corp.

Good morning and welcome to the GCM Mining Corp first quarter 2022 results webcast. My name is Brandon and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session during which you may dial 01 if you have a question. Please note it is 01.star1. As a reminder, this conference is being recorded. I will now turn the call over to Mike Davies. Mike, you may begin.

Great. Thanks, Brandon. And good morning. And thank you for joining us this morning for our first quarter 2022 results webcast. Joining me on the call this morning is our CEO, Lombardo Paredes. And as is customary, I'll first go through our prepared remarks regarding the first quarter, and then Lombardo will join in through the Q&A session. Before we begin, let me remind you of our cautionary statement regarding forward-looking statements that may be made by us in this morning's webcast. Last night, we released our first quarter results. The financial markets have been very volatile so far in 2022, and this past week has been no exception. At times like this, we find our best course of action is to focus on what we can control, our cash, our costs, and our execution. We are pleased with our first quarter 2022 results, which highlight our commitment to stay focused on what we can control. Production, cost, adjusted EBITDA, earnings and cash flow results all met our expectations in the first quarter of 2022. From a capital structure perspective, we have used our normal course issuer bid over the first four months of 2022 to repurchase and cancel approximately 400,000 shares, keeping us at 98 million shares issued and outstanding at the present time. At current market prices, we expect to be active starting again next week using our normal course issuer bid to purchase additional shares for cancellation once the quarter-end blackout is lifted on Monday. We maintained our dividend policy through the first quarter of 2022, continuing to pay 1.5 cents Canadian per share on a monthly basis. This resulted in total dividends paid of $3.5 million U.S. from our free cash flow in the first quarter. Since we implemented our dividend policy in the second half of 2020, we have paid out total dividends to our shareholders now of $17.5 million U.S., and our next monthly dividend will be paid on Monday. In mid-April, we pre-released our first quarter 2022 production of 50,000 ounces of gold from Segovia. Last night, we announced another solid month in April, in which we processed an average of 1,693 tons per day at a head grade of 12.4 grams per ton, resulting in 18,321 ounces of gold in April. This brings the total gold production for the first four months of 2022 to 68,272 ounces, and for our trailing 12 months to a total of 208,130 ounces, up about 1% over the 2021 calendar year. We remain on track to produce between 210 and 225,000 ounces of gold Segovia this year. Taking a closer look at our first quarter production, we're seeing a trend that has been taking shape for a couple of years now when you look at our annual reserve and resource updates. El Silencio is continuing at a very steady rate and Sandra Kay is continuing to take on a more prominent role in contributing to our production. These were the two mines with the largest year-over-year increases in our recent resource update. Providencia is still making a solid contribution. The grades have come down from about 20 grams per ton in Q1 of 2021 to 15 grams per ton in Q1 of 2022, as certain of the super-rich areas we have been mining have been depleted. Carla is starting to make a greater contribution to our production this year, and the small-scale miners are continuing to perform very well. In the first quarter of 2022, we sold 53,645 ounces of gold, about 3,500 more than we produced in the quarter, which represented the production in December 2021 that remained in our year-end inventory as a result of the normal holiday shutdown period at the refinery. With an average realized gold price of $1,860 per ounce, our first quarter 2022 revenue was $101.3 million, about 5% higher than the first quarter of 2021 after adjusting from our model. Our revenue in the first quarter did not include anything for the zinc and lead from the concentrate production at our new polymetallic plant. We expect that this will start toward the end of the second quarter now that we have selected an off-day customer and expect to commence shipments of the polymetallic concentrates in June. From a cost perspective, our cash cost came in at $817 per ounce in the first quarter, a slight improvement from the first quarter a year ago of $825 an ounce at Segovia. Our all-in sustaining cost came in at $1,187 per ounce sold in the first quarter, including $159 per ounce of sustaining capex at Segovia, largely our ongoing exploration and development at our four producing mines. We had $58 an ounce of ESG expenditures in the first quarter, $82 an ounce of G&A, and $60 an ounce of costs related to our free trade arbitration proceedings with the government of Columbia. The free trade arbitration costs were significantly higher in the first quarter this year as we filed our last major memorial with the tribunal ahead of hearings scheduled to take place later this year. A decision on this matter could be coming next year. For Q1, our all-in sustaining cost margin was about 36% of our realized gold price, compared with 33% for calendar 2021. Our adjusted EBITDA came in at $45.2 million in the first quarter, reflecting the impact of the free trade arbitration claim costs and quarterly results, but not too different from where we were in the first quarter a year ago at $46 million. Our trailing 12 months adjusted EBITDA stood at $170.5 million, implying a leverage ratio below two times as expected. And in the first quarter of 2022, our cash flow metrics remain solid, with $24 million of operating cash flow, bringing our trailing 12-month operating cash flow to $91 million, up from $81 million in the calendar 2021 year, And our free cash flow after Segovia's CapEx was almost $11 million in the first quarter, more than sufficient to fund our dividends and normal course issuer bid purchases. Our trailing 12-month free cash flow improved to $34 million from $26 million in calendar 2021. Our balance sheet and financial liquidity remained strong in the first quarter. We finished the quarter with $315 million of cash, This after paying $14 million of tax installments in Columbia and making the first $10 million semi-annual interest payment on the senior notes. Our VAT receivable in Columbia did increase as expected in the first quarter, but we anticipate receipt before the end of the second quarter of the $28 million of refunds from last year's VAT claims, and this will cover the income tax installments that we have coming due in the second quarter of this year. James Rattling Leafs, In this slide just a reminder of our annual reserve and resource update we announced for segovia and late March, we had a very successful drilling campaign last year. James Rattling Leafs, And we've continued the similar emphasis in the first quarter of 2022 with over 8700 meters drilled by our exploration team principally del silencio and Sandra K and another 6500 meters in our brownfield program focused on chrysalis marmahito manzanillo and Vera. Our mine geology team has also continued to be active with underground drilling programs at El Silencio and Sandra Cay and we expect to have results updating on these drilling programs later this quarter. We have three important infrastructure projects on the go at Segovia. Our expansion of the Maria Dama plant to 2,000 tons per day is progressing well and should be completed in the second quarter as expected. continuing with the construction activities in our El Chocho tailing storage facility where we use filter press systems and geo tubes to dry stack our material in accordance with international best practices. We're completing some of the upgrades of equipment and systems at the new polymetallic plant to automate certain processes and add warehousing space as we increase our treatment rates towards the 200 ton per day capacity level in the second half this year. Lots of exciting investment activity that is truly remarkable in the way it is expanding and upgrading our Segovia operations. Turning to our Toro Peru project in Guyana, our team is working very diligently to prepare this project to go into formal construction mode once we complete the PFS in the third quarter and finalizing the mining license mid-year. Drilling has continued to infill the resources required for the PFS, And Lombardo and the team are conducting several key processes to select the mine contractor, the power plant contractor, and the main civil works contractor, while pre-construction activities related to the project site, camp, and southern access road are carrying on. We spent $6.7 million in the first quarter of 2022 on these various activities, which was funded by the net proceeds from the senior notes issuance. Lombardo will no doubt provide further details on the Toro Peru project when we get into the Q&A portion of this webcast. And in this last slide, before we get into the Q&A session, I wanted to highlight a couple of things related to our equity investments. At ARIS last night, they announced positive results from their performance optimization initiatives at the Mermado Upper Mine, and construction activities are underway related to the Lower Mine expansion. Equally important, they have taken steps to step into the operator role at their latest acquisition, the Soto Norte project in Colombia, one of the world's largest undeveloped gold projects with tier one scale and economics. Exciting times for Ares Gold as it moves forward with its expansion strategy. At Denarius, drilling at the Lomero project continues to confirm the historic polymetallic resource and the company is advancing towards an updated mineral resource estimate and a PEA by the third quarter of this year. We continue to see both of these investments as key value drivers for shareholders of GCM mining. And with that, Brandon, we can now proceed with the Q&A session.

Thank you. We'll now begin the question and answer session. If you have a question, please dial 01 on your phone keypad. If you'd like to be removed from the queue, please dial 02. If you're on a speakerphone, please pick up your handset first before dialing. Once again, if you have a question, please dial 01 on your phone keypad. And on the line, we have Kerry McCurry. Please go ahead.