Orezone Gold Corporation

Thank you for standing by. My name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to our zone Q3 2024 results webcast and 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 star followed by the number one on your telephone keypad. If you would like to withdraw your question, Press star 1 again. Thank you. I would now like to turn the call over to Patrick Toney, President and CEO. Please go ahead.

Thank you and welcome to the Q3 Orzone webcast and conference call. With me today will be Peter Tam, EVP and Chief Financial Officer who will run through most of the financial and operation metrics. Standard disclaimer, so please read this as you go through this presentation or afterwards. Quick summary of where we're at today. Obviously, we built our oxide plant. It was designed for 5.2 currently running at a run rate of 5.9 million tons per annum, expected to run up to around 6 million tons per annum, so running extremely well. We're in the next stage of our expansion, which will bring us up to over 170,000 ounces a year. which is a 2.5 million tonne hard rock plant. The project financing is secured. Our construction has commenced, and I'll update you on that, with first gold expected in late 2025. And very excitingly, we really believe we're on a Tier 1 potential here. It's a very large orogenic system, 14 kilometres strike extent. Drilling has started on a multi-year programme. The first results were extremely robust and we'll walk through that a little later on in the presentation of what next steps are in that regard as we continue to expand this operation. So Q3 highlights, very good quarter in terms of health and safety. Zero LTIs, 1.31 million hours worked during the quarter and 3.68 million hours worked year to date. Again, a testament to the system and the team down there in Bomboré. Our production was 26,851 ounces, a record throughput through the mill of 1.5 million tonnes, which is at a run rate of 6 million tonnes per annum. Even though we had a four-day mill shutdown, including a full-bore mill reline in late September, the All in sustaining costs were affected somewhat by heavy rainfall events, really, this time, which restricted access to the higher grades in the south, which meant that we had to process some lower grade stockpiles during the quarter, and also impacted by the higher royalties due to the higher gold price. Very robust in terms of the balance sheet, $67 million in cash at the end of the quarter, $68 million of senior debt, In that quarter, we also advanced all of our capital projects, including the hard rock expansion, and we'll walk you through what we spent during the quarter later on. We paid down an additional $5 million in senior debt, and we did add significant cash to the balance sheet during the quarter. Our hard rock expansion, as I stated, is well underway. Project financing announced on July the 10th. Our first goal is expected in Q4 of 2025. And that will increase our throughput by approximately 50%. And our exploration program, first two holes were up to 240 meters below the life of mine reserve pit. There were big swings, and we'll walk you through that. But we're very excited about our exploration potential as we continue to expand the reserves and resources on the project. Our three-year production forecast, our full-year guidance remains at 110,000 to 125,000 ounces, slightly revised all-in sustaining costs of 1,400 to 1,475, and then strong production growth into 2025-2026 of 170,000 ounces a year run rate, and then continue beyond that. into stage two. Hopefully, we can bring that forward in the timeline to 225,000 to 250,000 ounces. And our focus will be on delivering the balance sheet, continuing to build a strong treasury, and a renewed focus on exploration. I'll now hand you over to Peter Tam, who will go through the operational financial highlights. All right.

Thanks, Patrick. On financial and operating highlights, gold production in Q3 rose slightly quarter over quarter. to 26,581 ounces as mining progress south into SIGA East and SIGA South. Mining is projected to ramp up in Q4 with more ore from the SIGA pits, which should help drive better fourth quarter gold production, as evidenced by the 12,096 gold ounces produced in October. All unsustaining costs per ounce remain elevated in Q3 at $1,655 per ounce, driven by a higher strip ratio due to mine sequencing and from the drawdown of lower-grade stockpiles in August, as heavy rainfall events and pre-stripping at Siga South temporarily affected the volume of ore mined from the pits. Furthermore, government royalties, which are calculated on a sliding scale, rose in tandem with record gold prices. The company's board officially approved the Bonboré mine's Phase II hard rock expansion in early July, leading to $6.2 million in expansion expenditures in the third quarter, Additional expenditures are expected in the fourth quarter as the company rapidly moves forward with engineering and procurement towards achieving first goal by Q4 of next year. With the help of strong goal prices, the company was able to generate free cash flow of 14.1 million in Q3. The company exited the quarter with a healthy cash balance of 66.9 million, and it's expected to continue to generate free cash flow for the remainder of the year. The phase two expansion, as mentioned earlier, remains fully funded. Next slide. On production and unit costs, notable highlights. Mining, as noted earlier, commenced at both SIGA East and SIGA South in Q3 and began to only contribute meaningful ore volumes in September. The mining contractors struggled to keep up with the mine plan in Q3 due to low equipment availabilities and wet ground conditions from heavy rainfall events, resulting in a mining of only 4.1 million tons for the quarter. Mining rates are expected to jump in Q4 as new heavy-duty excavators and haul trucks are placed in service by the mining contractor at the beginning of November. Mining costs per ore ton process rose in Q3 to $9.58 per ore ton from the higher strip ratio and unit mining costs, both of which are expected to fall in Q4 as the strip ratio normalizes and less drill and blast and higher mining volumes help lower mining costs on a per ton mine basis. For processing, mill throughput is expected to reach another record in Q4 as no major maintenance is planned and grid availability is forecasted to remain stable. Head grades will see an improvement as higher grade ore from the TIGA pits make up a greater percentage of the mill feed in Q4. Processing cost per ton process saw an expected decline in power costs as grid utilization improved significantly in Q3 to 92%. However, processing costs and throughput were impacted and accorded by the mill reline and other maintenance activities. Unit processing costs are expected to be lower in Q4 as well from less estimated plant downtime and maintenance. And with that, I'll hand it back to you, Patrick.

Thanks, Peter. So just into 2024 production and cost guidance, our gold production guidance remains unchanged. We expect to be around the middle to just above the middle of that guidance for the year. All in-sustaining costs have been revised to 1,400 to 1,475, a slight revision there. That's mainly attributable to the higher power costs we experienced in the first half of the year due to low grid availability, which was experienced throughout the region and affected several mining operations in the region. We have seen significantly better availability, and in fact, most recently, we've been around 95% to 100% availability on the grid. It was also affected by higher government royalties due to the better realized gold price currently calculated at around $40 an ounce. So really mostly the guidance is affected by outside of the operations itself. Sustaining capital remains unchanged at $14 to $15 million for the year. Growth capital excluding the phase two expansion remains unchanged at $16 to $17. And the growth capital, which no guidance was provided, we weren't really into it before the start of the year. The early works, approximately 3.6, which are now complete. And the growth capital of between 15 to 18 million, which I'll walk through later on in the presentation, that will be for the year, we're guiding for the year based on current activities on the project. Into the hard rock expansion and our exploration update. On our 2.5 million ton per annum hard rock expansion, I'm extremely pleased with progress to date. Estimated capex of 85 million, which is fully financed. The early works is complete. 100% of the process equipment has now been procured, so we know all of their costs therein. The concrete contract was awarded and mobilization has commenced three months ahead of schedule. Our tank plate work has been awarded. We expect to award the structural mechanical piping contract later this quarter. We've received first delivery of the hard rock mining fleet, which is being used currently on the oxide. And as Peter said, it's giving us better availability, which will continue on through Q4 into 2025. And the major works on the project will commence in Q4 of 2024, with first gold expected in Q4 2025. Just a quick pictorial, and we will do monthly video updates here as we go forward, as we did on the oxide. As you can see, the oxide plant on the left-hand side. The CIL tank platform is now complete. The lay-down area for the contractors is in place to the top end of that photograph with the contractors for the concrete in place. The batch plant's there, so we expect to start pouring concrete this quarter. And the rest of the earthworks are complete for commencement of works in Q4 and into 2025. So very pleased with progress to date on the hard rock expansion. As you know, this is a 14 kilometer strike extent. We really have not drilled a lot to any depth on this project. We've got a 2.4 million ounce reserve delineated along that strike. average pit depth of 40 meters, and essentially 0.1% or less than 0.1% of being between 250 to 300 meters of the holes drilled on this project. So really totally underexplored, even at medium depth. So our exploration is really focusing on expanding that. The first two holes, which we'll show you along sections BB and AA here, which is the first pits to the north, It's really not our highest priority target, but we're starting in the north and working our way down, and they were extremely successful. We took big swings here on an orogenic system. Normally you would take 40 to 50 meter type of swings. We took 200 meter swings down at depth, and very successful. We really wanted to prove the robustness of the system. So looking southeast along section BB of that previous slide, You can see we're down now 240 meters below the reserve pits. Thicker, very good grade ore. We're moving to the north and south of that right now. We should have results from there later this month. As I said, this is our first target. We believe it's not even our best target, so we're very excited about this. On the next side, section A, the long section. You can see where we are there below those reserves and resource pit. The dark blue is the reserve. The light blue is the resource. So you can see where this really would expand this down to 320 meters. And we have now drilled to the north and to the south of that, which would really take a 600 to 700 meter strike extent along that first section. And we will release those hopefully in the next couple of weeks here. to really show the robustness of this project and where it can go. Obviously, if this continues to provide the results that we expect, we do not expect it to be mining at 2.5 million tons for the next 40 to 50 years. We would like to make this a very large, robust project in the 5 to 7 million ton per annum range, which will be our goal here in the coming months and years. And that concludes our Q3 presentation, and I'll now hand it back to the operator.

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Our first question comes from the line of Bryce Adams from CIBC. Please go ahead.

Hi there. Thanks all for the presentation. Since you reported the October production, which looks pretty strong, can you say what the grade profile was in October and should we take that October number and then triple it for Q4 production expectations?

The grade was higher because we're in the south around 0.81, I think. We do expect to be up in that range, maybe not 0.81 throughout the quarter because we will be mining from other areas continuing in the north. But yes, we do expect quite robust production. The other thing that you will expect, Bryce, is we will not have the same strip ratio because we have stripped off that area in the south as well. We actively stripped that during Q1. We could do it during the rainy season. We weren't totally affected by that. And the other thing is we will not be having drill and blast, which also affected the costs in Q1. But yes, I expect a fairly very robust quarter in Q4.

Thanks, Patty. Sounds like a lot of operational momentum into year end. That's all I had. All the best for the phase two expansion.

Yeah, very much so. That was always the case, Bryce. We expected it to be stronger in Q4.

Our next question comes from the line of Jeremy Hoy from Canaccord Genuity. Please go ahead.

Hi, Pat and Peter. Thanks for taking my questions. Appreciate it. First question is on the expansion. In the last update, you guys mentioned some pretty significant savings from purchasing the previously owned mill. Are you guys able to quantify that at all and how that impacts the overall capex of the project?

Well, on the equipment, we're very much in line on budget. maybe a bit below. We really have to see the structural mechanical piping, which will be the main contract. That will really tell us where we're trending. We don't expect, we're not dipping into any contingency even with the contract award, and we expect or award the plate work pretty soon here, so we're pretty happy with that. So we generally do a detailed update at a certain point through the project, which will likely be in January, February, and we'll update everybody at that time.

Jeremy, I will add the figure that we've provided in terms of the Phase 2 expansion did take into consideration that we were buying this pre-owned, used, but really never placed in service mill. So that's been factored into our figure, and we're tracking towards that number.

Yeah, and the other thing is what it does is that mill, will be delivered to site this year. So it'll be sitting on site ready to go, which is a big part of the schedule in terms of getting things moving forward. We're not going to be waiting for the mill to be delivered.

Got it. Okay. No, that's really helpful. Thank you. Another question is on the stage two of the hard rock expansion. What's your latest thinking on when you'll inform the market on a potential decision on additional expansion for the hard rock?

We're looking at that carefully right now, actually, in terms of what we may want to do in 2025 to pull some of that stuff forward. Obviously, well, today maybe not, but 30 robust gold prices out there. We're putting cash on the balance sheet. We're obviously drilling to show that it's bigger and better. So there's no point in waiting two, three years to do an expansion which is sitting in front of us. So if things continue the way they are, we will likely look to bring that forward here. and maybe update the market sometime in 2025 in that regard.

Okay, that's great to know. And I guess the last one I had is on the Genser claim. What is the timing of the potential conclusion of that? And can you remind us what the claim was for, the amount?

Yeah, so Jeremy, we're right in the middle of that, obviously, in terms of the arbitration proceedings. I think it will come to a conclusion sometime within the first half of next year. We obviously are pursuing significant damages against Gensler for the fact that we were not delivered the fixed-price, low-cost rate tariff that we would have been enjoying under the power of purchase agreement that was signed originally with Gensler. So there's that aspect of the claim as well as obviously additional cost to obviously run our power plan on diesel until we got onto the grid. And there is also a slight differential between the grid cost and what we would have otherwise enjoyed under the power purchase agreement. So when you wrap all that in, it's a multi-million dollar damage claim that we are going after, Jen, I won't get into the details obviously in terms of just the fact that we are in the midst of this arbitration. But suffice to say, you know, we're looking for significant damages here.

Okay, fair enough. That's great, caller. Appreciate it, Pat and Peter. Thanks very much.

Okay, thanks, Jeremy.

Our next question comes from the line of Alex Tarantillo from Ventum Financial. Please go ahead.

Good morning, everyone. Great to see you. Some good operational progress being made that we should see start being delivered in Q4. Two remaining questions for me. First, just on the Corus Bank loan, it was originally signed, I believe, in July. You're guiding towards closing that remaining $58 million available to you this month. Just to double-check, make sure there's Are there any sticking points there that we should be worried about or it's just kind of a procedural item that's taking its time to get through?

Yeah, Alex, you hit the nail on the head there. Really, it's just sort of taking its time. There are inter-creditor consents we've also got to work through. So it's a matter of just sorting through all that. Obviously, with the raise that we did back in August and with the strong cash generation that we've been able to obviously create in Q3, We've been able to fully fund the expansion expenditures without affecting in any way that the schedule or on the expansion. So it's just a matter of really working through the final steps now. And we do expect to get that concluded here before the end of the month here.

Okay, that's good to hear. And then just last one. There's been some talks about resources and the phase two, stage two expansion. But when do you think we could see a resource update on the sulfide? Obviously, you're doing some drilling there. Gold prices are a lot higher. There's simple revisions that could be made just by incorporating higher gold prices. But what do you think we could see timing on that front?

Yeah, great question, Alex. Well, first of all, When we looked at this, we did quite a bit of work, both internally with what we'd seen on our own drilling, looking at a lot of data. Bearing in mind, a lot of our stuff is in oxide, so you can't see structure. We had a structural review done by an independent structural geologist last year. We brought that all into the frame. These holes we drilled. Normally, you would not drill a 240-meter hole. You're going to drill... a 40 or 50 step out and then look beyond that. So we'll put out some more results here. What we want to do now that we're pretty confident about where we're seeing this model and what we're seeing happening here is we'd like to add two to four more rigs on this project in 2025 and really drill it off very, very fast. And we'd like to do an update on the resources and reserve by the end of next year. You're right. Just to state, our reserves were done at $1,500. Our resources were done at $1,700. Obviously, we will update all of that, bearing in mind the gold price environment. But when you're going from 200 meters below reserve pits and still hitting bigger and thicker intervals, you obviously really want to outline what we believe this is, and we firmly believe this is a seven to 10 million ounce deposit, and that will really set the sort of pipeline for how we want to expand this going forward.

Okay, sounds good, thank you.

But the critical factor is we're gonna do more drilling next year, a lot more drilling, and we're gonna do it fast.

Good, good to hear.

Again, if you would like to ask questions, press star one on your telephone keypad and wait for a name to be announced. Our next question comes from the line of Sean Feeler from Equinox Partners. Please go ahead.

Hey, Patty. Hi, Sean. Let's see, your taxes receivable, that's mainly VAT, up at $34 million at the end of the quarter. When and where do you expect that to peak out before it starts declining?

We are in discussions right now with government officials, so there is movement in that regard, Sean. The latest meeting was yesterday, which based on what I saw was quite positive. We do hope to see a start of reduction of that by the end of this year going into next year. So that's essentially what we're hearing. When I get the first check, that's when I know I'm getting it. But this is what we have heard, and the meetings have been fairly productive here going forward in terms of VAT receivables.

So does that – hopefully you get a reduction in it, but is it going to not keep growing? Is that –

it grows a little higher with the with the bat on the expansion so the rate is higher peter maybe you could comment yeah so obviously we are continuing with our phase one oxide operation once we do ramp up spending in country uh on the expansion obviously there will be bad on those expenditures as well so uh for 2025 and really for q4 this year we are probably we'll be paying more VAT than we normally would. So the refunds we are hoping to receive are from earlier months in 2023 and the last quarter of 2022. So it's hard to predict, obviously, the size and the timing of the refund. So in terms of whether our VAT receivable will sort of stabilize or whether it's going to continue to grow, I would say at this point it's hard to predict. We'll probably have more visibility in the next quarter, hopefully as we get our first set of refunds back from the government.

Thanks. I will now turn the call back over to Patrick Toney for closing remarks.

Okay, thank you. Thank you everyone for attending. As we said, we look forward to a strong Q4 in terms of production and costs and into 2025, expanding both our exploration and our phase two expansion. So we will be updating everybody on that on a consistent basis throughout this quarter and through 2025. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.