Torex Gold Resources Inc.

Thank you for standing by. This is the conference operator. Welcome to the TORX Gold Resource Sync second quarter 2022 results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the questions queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Dan Rollins, Senior Vice President, Corporate Development and Investor Relations. Please go ahead, Mr. Rollins.

Thank you, Operator, and good morning, everyone. On behalf of the Torex team, welcome to our Q2 2022 conference call. Before we begin, I wish to inform listeners that a presentation accompanying today's conference call can be found under the Investor section of our website at www.torexgold.com. I'd also like to note that certain statements to be made today by the management team may contain forward-looking information. As such, please refer to the detailed cautionary notes on page two of today's presentation, as well as those included in the Q2 2022 MD&A. On the call today, we have Jody Kazenko, President and CEO, Andrew Snowden, CFO, as well as Dave Stefanuto, Executive Vice President, Technical Services and Capital Projects. Following the presentation, Jody, Andrew, and Dave will be available for the question and answer period. This conference call is being webcast and will be available for replay on our website. Last night's press release and the accompanying financial statements and MD&A are posted on our website and have been filed on CDAR. Also, note that all amounts mentioned in this call are U.S. dollars unless otherwise stated. I'll now turn the call over to Jody.

Thank you, Dan, and good morning to all on the line. Welcome to the Torex Gold Q2 results call. I'll open my remarks this morning by saying we had a very strong second quarter, which sets us up nicely to deliver on guidance for the fourth year running. From an operational perspective, production came in slightly ahead of plan due to higher grades in the open pit and record underground mining rates within ELG underground. And the team at ELG continues to do an excellent job in keeping control on costs despite the challenging inflationary environment. On Beti Aluna, Tunnel drives are progressing well with the team delivering a record advance rate in June. We are also heavy into the procurement phase for long lead items and expect project activities to ramp up through the remainder of 2022. New this morning, we have a new executive team member joining us on the call. Given that the project is now into the execution phase, Dave Stefanuto, our Executive Vice President of Technical Services and Capital Projects, We'll be joining us today and going forward to provide the update on Medialuna and answer all questions related to the project, particularly the hard ones. And in terms of the agenda, nothing new there. I'll provide a brief reminder of the strategic pillars, which we continue to execute on. Then I'll step you through the key business and operational highlights specific to the second quarter. Then over to Andrew Snowden for some detail on the financials. And after that, Dave will provide a progress update on both Medialuna and exploration. To the extent that we're making any forward-looking statements, we're relying on the safe harbor language contained in that slide. Starting on slide four, I wanted to refresh everyone on our strategic pillars, which reflect really the long-term vision of TOREX. And I'll focus my comments on the three across the top. On optimize and extend ELG, we are continuing to work at evaluating additional options to modestly extend the life of the open pits, but really the focused effort is being taken at ELG underground. Recall, we have reserved life in that asset out to 2027 at 1,200 tons a day. This quarter, you're seeing some of the first results on optimizing that mining rate. And in the coming quarters, you will see some exploration results that speak to extending the asset life beyond current reserves. On advance and de-risk medialuna, early days yet, but we're tracking the plan with project activity expected to ratchet up over the coming quarters. And on grow reserves and resources, Drill programs are progressing well. We recently released results from exploration drilling at Medialuna and EPO, and expect to publish several more releases prior to year end. Turning now to slide five. We produced over 123,000 ounces of gold in the quarter, which was driven by nice grade in the open pit, higher than planned tons from high-grade ELG underground, and slightly higher recoveries than we saw in quarter one, as we transition out of a pocket of lower recovery ore in the Wahez Pit. The underground really here was the standout of the quarter, with record average mining rates of 1,580 tons per day. We're targeting to maintain this rate through the back half of the year. We delivered adjusted EBITDA of over $137 million, and this accounts for the Q2 annual payment we make for profit sharing in Mexico. This year, it stood at $22 million. The cash generating capability of this asset continues to show itself, with free cash flow generation standing at $74 million. We closed the quarter with $311 million in cash, over $460 million in available liquidity. We're well advanced in our discussions with the banks on increasing and extending our current credit facility, and Andrew will touch up on that in his commentary. As expected, Medialuna is ramping up following board approval at the end of the prior quarter. Now over to slide six. You can see there that we're well positioned to deliver on full year guidance. Three key areas of note on this slide. We're tracking towards the upper end of full year production guidance and expect second half output to be similar to first half. Our team is doing a great job containing costs within a challenging inflationary environment. And as a result, we're targeting to achieve midpoint on ASIC guidance for the year. The one area of change to our guidance is at Medialuna, where non-sustaining CapEx is now guided at 170 to 210 million versus original guidance at 220 to 270. And I want to take some time to explain this change. Post completion of the technical report, we conducted a thorough review of project cost flows, particularly around 2022. What we found is that we had prorated spending on freight, import taxes, and contingency to track with direct expenditures, when in reality, these indirect costs are likely to occur later in the project build. So we have pushed out $50 million of forecast expenditures into 23 and 24. I want to be clear here that overall, there is no read-through to the project schedule or budget based on this change. Development of Medelluna is on schedule and there's no change to the total project spent. Turning to slide seven, our strong safety performance continued. The company closed the quarter with a lost time injury frequency of zero over the last 12 months, and notably, we also hit the milestone of 10 million hours worked lost time injury free, all employees and contractors. As I've often said, the only thing harder than getting to zero is staying at zero, and the streak came to an end in July, when a contractor suffered a laceration to his finger while hanging pipe underground. You'll note on this slide that our control programs to minimize the impact of COVID remain in place and on governance. We're welcoming a new director to our board, Rodrigo Sandoval, brings with him significant experience from Mexico's mining industry. And with his appointment, not only do we further strengthen and culturally diversify our board, Our refresh that we started two years ago is now complete. Slide 9 sets out quarterly details on key operational metrics. Two highlights here, really. One, you can see the consistency quarter over quarter, a testament to our strong systems culture and operating discipline that delivers reliable results. And two, in the bottom right-hand quadrant, you can see that uptick of mining rates. in the underground to almost 1,600 tons per day out of our optimization efforts. We've maximized equipment availability, face time, and have now opened up more than 20 headings underground, and you can expect this second quarter performance to be sustained in the second half. Slide 10 on unit cost sets out our performance through the first half of 2022 versus the blue bar at the bottom, which is full year of 2021. You can see there Initiatives to hold the line on costs is helping offset natural inflationary pressures in the market. Overall, our team is doing a good job at pulling levers to deliver with higher-priced consumables, energy consumption, and labor. Mining costs are running higher than last year, driven by additional re-handle during the rainy season and re-handle to support optimal blending to maintain MET control in the plants. We also saw in the second quarter some lower utilization fleet rates within the open pit mining fleet. Underground mining costs are holding strong, partially driven by increased mining rates providing some economies of scale. Processing costs are lower, driven by reduced cyanide consumption, which has averaged around 2.5 kilograms per ton through the first half versus 4.7 kilograms per ton in 2021. Profit sharing is higher through H1 than last year. Recall, during quarter one, we accrued $2.6 million of additional profit sharing payments related to 2021, given the updated legal clarifications from the Mexican government around PTU. I'll now pass the call over to Andrew to review the quarterly financial results.