This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Superior Gold's first quarter 2021 results 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 and the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. If you have any difficulties hearing the conference, please press star then zero for an operator assistance at any time. As a reminder, this conference call is being broadcast live on the internet and recorded. I would now like to turn the conference call over to Tamara Brown, Interim Chief Executive Officer. Please go ahead, Ms. Brown.
spk00: Thanks, Samantha, and good morning, everyone. Thanks for joining us today to discuss Superior Gold's first quarter 2021 results. I hope that you and your families are all safe and well. As a reminder, please refer to slide two of our presentation. It's posted on the website to review our cautionary language regarding forward-looking statements and note that all amounts discussed today are in US dollars unless otherwise indicated. Joining me this morning are Paul Olmsted, our CFO, and Keith Boyle, our COO. So just as a reminder, we believe the key investment highlights of Superior Gold are that we have our operations located in Western Australia, which is one of the top mining jurisdictions in the world. We own a world-class operating gold mine with significant established infrastructure. We've got a clear and concise optimisation and expansion plan, which I'll discuss in more detail on the next slide. We have significant mineral resource base plus additional exploration upside, given our very large and underexplored mineralised system. And finally, probably the most compelling attribute is the re-rate opportunity that we represent compared to our peers. Taking a look at our growth strategy, first we're working to reestablish steady state production from the underground mine, and we're encouraged to see it return to a state of free cash flow during this quarter. To supplement this underground feed, we're adding open pit production from a number of near mill path producing open pits, including Platonic East, which is scheduled to commence mining shortly, then Perch, Salmon, Hermes South and Hermes. The timeframe and capex to put these smaller pits into production is relatively short, relatively low and with the announcement of the platonic main pushback project at the end of 2020 we now have a potentially much longer steady supply of open pit feed here at platonic the third pillar of growth is recommissioning our second mill it's currently on care and maintenance sources of feed for this mill could come from exploration on our existing property or from several other sources along the platonic miramar gold belt This provides the opportunity to increase production at Platonic to well above the current levels with minimal capex because of the significant infrastructure that's already in place. And finally, there's a potential for a new discovery as we invest in exploration at Platonic. We have certainly had some encouraging exploration drill results so far this year, and we look forward to releasing new results going forward. Turning to safety, above everything else, the health and safety of our people is our top priority. We continue to successfully operate through COVID, and to adhere to the strict measures that we put in place a year ago to mitigate this threat. To date, happy to report we have no incidences of COVID at our operation or corporate offices for a fifth consecutive quarter. We're also putting a lot of effort into introducing a safety culture here at Petonic that's committed to a workplace free of accidents. So as part of this, we continue to conduct regular safety workshops, as well as put emphasis on SLAM, hazard identification cards, and our Sculpt Leadership Program. All of this is having a positive impact, and obviously we're trying to ensure that our people know they are the most important priority for us. Taking a quick look at the first quarter, highlights include that we increased production by 11% quarter over quarter to 17,603 ounces of gold, with sales of 17,538 ounces, all at a realized gold price of $17.77, which is a record. Total cash costs were $13.86 an ounce, and all-in sustaining costs came down noticeably to $15.10 per ounce sold. The all-in sustaining cost drop is about 10% relative to the previous quarter. However, I do note that the US dollar denominated all-in sustaining costs continue to be impacted by that strengthening of the Australian US dollar exchange, which is currently sitting around five-year highs. We significantly improved our cash flow from operations this quarter to $4.9 million. That's before changes in working capital and the gold loan repayment. And we generated free cash flow, which resulted in an improved cash position at the quarter end of $17.9 million. We also improved our stoke grade by a further 13% to 3.5 grams per tonne, representing an improvement over the third quarter and a big jump over the second quarter of 2020. An improved understanding of geology and mineralisation at Potomac has led to establishing two new mining fronts, And we've demonstrated some exciting draw results coming out of the Baltic Gap and the Western Mining Front. So now I'm going to turn it over to Keith, who will discuss their operating results for the quarter.
spk01: Thanks, Tamara. As we mentioned, Platonic produced 17,603 ounces of gold in the first quarter, as compared to 16,351 ounces of gold in the same period of 2020. The increase is large as a result of an increase in the contribution of higher-grade stope material that reduced the proportion of the lower-grade legacy stockpile being milled. Total material milled during the first quarter decreased by 3% to 356,000 tons compared to the same period in 2030, partially as a result of processing fewer tons from the low-grade stockpile. legacy stockpiles in the first quarter. As the legacy stockpiles processed included oxide ore, which required the mill to operate at a slightly reduced throughput rate. Recoveries were 86% for the first quarter, representing a continued improvement following the finalization of our gravity circuit, recommissioning of our gravity circuit during the quarter. The highlight of the quarter was the underground stope grade mined at three and a half grams per ton, which represents a 13% increase over the fourth quarter of 2020. Operationally, we continue to focus on improving productivities, which has benefited from the recent arrival of the new mobile mining equipment aimed at improving both equipment availability and lowering our maintenance costs. In addition, An enhanced understanding of the geology and mineralization at Plutonic has improved our ability to predict the areas of higher-grade mineralization at the underground operation. We've seen a steady improvement in the results following the operational improvements we've implemented at Plutonic, as illustrated on slide 9. The underground mine stope grade of 3.5 grams in the first quarter represents an increase of almost 50% over the second quarter of 2020. We'll continue to target the mine stope grades above 3 grams on average. As a result, the average head grade has increased by 25% since the second quarter of 2020, and overall quarterly production has increased by 16%. highlighting the importance of mine slope rate to our overall profitability at Plutonic. I'll now turn the call over to Paul Olmstead, Chief Financial Officer, to discuss our financial results for the quarter.
spk02: Thanks, Keith. During the first quarter, our revenue totaled $31.2 million from sales of 17,538 ounces of gold, an increase of $4.7 million from $26.5 million, from the sale of 16,850 ounces of gold in the first quarter of 2020. Gold revenues were higher as a result of 688 more ounces being sold, as well as an increase in the realized gold price to 1,777 per ounce from 1,570 per ounce. Cost of sales were 26.9 million for the first quarter of 2021, an increase of 3.2 million from $23.7 million for the first quarter of 2020. This was due to the stronger Australian dollar, the impact of which resulted in a $4 million increase, despite an Australian dollar decrease in all cost of sale categories with the exception of depreciation and amortization. Also, to facilitate more effective site reporting, there was a reallocation of certain camp costs from mining and processing to site services in the first quarter of 2021, versus the first quarter of 2020. Adjusted net income for the first quarter of 2021 amounted to $1.8 million or one cent per share compared to adjusted net loss of $100,000 or zero cents per share in the first quarter of 2020, primarily due to the higher operating earnings in the current period. During the first quarter, cash from operating activities before working capital changes was 2.7 million, a 1.5 million increase over cash from operating activities of 1.2 million for the first quarter of 2020. The increase in cash generated from operating activities was predominantly a result of stronger operating earnings in the first quarter of 2021 in comparison to the first quarter of 2020. The chart on the right highlights that in the first quarter, cash flow from operations before working capital changes and before the repayment of the gold loan increased significantly by $4.7 million compared to the same period in 2020. And at the end of the quarter, the company had $17.9 million in cash and cash equivalents. We expect to fully repay our gold loan by the end of June, and as a result, expect increased cash flow from operations moving forward. I'll now turn the call back to Tamara to continue with the rest of the presentation.
spk00: Thanks, Paul, and thanks, Keith. So on the next slide, our production guidance for 2021 remains unchanged, and so happy to reiterate that we continue to expect production of between 65,000 and 75,000 ounces of gold for the full year. Looking at the underground optimization, as you're all aware, we're currently focused on unlocking the value in the underground. with production growth, margin optimisation and systematic exploration. So first, we're focused on optimising that grade that we mined from the stoats in the underground. It's an important factor in determining our profitability here. As such, we're fully engaged in driving towards an average stoat grade of better than three grams, as Keith said. We're pleased to report we've further advanced our geological understanding of the botanical body including those Northwest trending faults that control the location and concentration of the higher grade gold mineralization here. This has led to a number of strategically significant exploration results, as well as the identification of higher grade stoats on the operational front. We also continue with improving our frontline planning and scheduling and our reconciliation program, which is providing invaluable information to inform our block models. In mining operations, we've revitalised the underground mining fleet with the addition of two new trucks and two new loaders, which are all now on site. This has already improved our equipment availability and reduced our maintenance costs as we focus on minimising equipment movement around the mine with more strategic mine planning. And at the mill, which operates very well, as Keith noted, we've recently recommissioned that gravity circuit, which is having a positive impact on our recovery. We're also completing a number of economic studies, whereby we're looking at opportunities to further increase our production rate to well beyond the current levels with low cost expansion opportunities as we'll be utilizing the existing infrastructure on site. And finally, the addition of that third drill rig has been very exciting as it's completely dedicated to exploration and it's allowing us to have a steady flow of exploration results. Turning to the next slide and looking at the open pit, as I mentioned, we're working on adding several smaller open pits to propel production up to the 100,000 ounce level. This is all from past producing pits, including Platonic East, Perch Salmon, the Platonic property, and then the Hermes South and Hermes projects located to the southwest. As planned, we expect to begin mining at Platonic East open pit in mid 2021, so very soon. And all of our grade control drilling and other work has been completed there. We plan to utilize the production from these open pits plus the main pit along with the operational improvements from the underground to increase production at Photonic and improve to a steady state of significant free cash flow generation. Taking a look at exploration, we recently announced promising results during the first quarter. Our drill rig started the program in December 2020. These slides are a reminder that there are significant intercepts in close proximity to existing infrastructure, as well as all grade intercepts located only a kilometre outside of the mineralised MAFIC. It should be clear that the limits of mineralisation have yet to be found, and with continued investment, exploration at Potonic is very promising. So taking a look at the cross-section, in the near term, our focus in the underground is on exploring and developing into new mining fronts, so that we have a lesser reliance on remnant mining. We believe that the two mining fronts, being the western mining front shown here and the Baltic Gap, will be key to improving the profitability of the operation in the near term. We recently announced drilling results from both these areas. Taking a look on March 1, we announced the results of drill programs completed in the Baltic West region. Extremely pleased to report each drill hole completed to depth intercepted significant gold mineralization, proving that our geologists are improving their understanding of the geology and the mineralisation extension here at Potonic. Significant intercepts included 13.7 grams over 8.8 metres and 52.7 grams over a metre. We see from this image that these intercepts are outside of our existing resources, but still within 50 metres of existing infrastructure, which allows us to infill and bring these results into our reserves and resources and mine plan in a short period of time. So March 29, we provided a second exploration update in the first quarter, which was results from the Baltic Gap. These drill results demonstrated minimisation extends north of the Baltic Zone, opening a new mining front into the Baltic Gap. This area has never been fully drill tested, remains open, down dip and a long strike. Similar to the results released last year, these latest intercepts, which are highlighted by 21.8 grams over 8.3 metres, are outside of existing mineral resources, but are within only 50 metres of our existing underground infrastructure. The extension of our existing mineral resources are key components of our current strategy to expand into new mining fronts and improve our mining grades and productivity here at Platonic. On the next slide, as we mentioned earlier today, we are improving our understanding of the platonic geology. Technological advances have allowed all historic data sets to be incorporated into 3D modelling software to assist in better understanding that platonic ore body. So our geologists are now creating dynamic 3D geological models that incorporate all historical geological data, including available drill holes, all historic face maps, which includes lithological, structural, alteration and mineralisation information, historical pit mapping and regional geological mapping data sets. in order to more accurately and more quickly model the platonic ore body in three dimensions. So we found that these 3D models are better at predicting the location in three dimensions of the mineralization of platonic, and this has obvious implications on the operational front, as we are better able to mine plan and better able to assess our exploration targets. Moving forward, we would expect that these 3D models will be incorporated into our mineral resource block model process. We estimate that that may take up to 12 months in the process, but certainly will be very beneficial to us moving forward. So slide 19, upcoming catalysts. We certainly have a number of noteworthy catalysts moving forward. We continue to expect more regular underground exploration results. with that third drill rig operating and dedicated to exploration. During the second half of the year, we also expect to have a surface drill rig on the property and we'll be excited to be announcing results both for infield drilling for the main pit project and right across the platonic property for surface targets that we're looking at. We also look to be repaying that gold loan in June this year, which we expect will be a turning point for the company as investors recognise the free cash flow being generated by this operation. We also expect to be commencing announcing heritage surveys, which will hopefully have some positive impacts on our main pit project and make it clearer the timing for us of the Hermes South project. And finally, we do expect to begin production very soon from Potonic East. Over the next 12 months, we have a healthy pipeline of development and exploration catalysts we look forward to releasing. Slide 20 is just a quick summary of the analysts which currently cover the stock, our shareholder and the capital structure. We're encouraged by the continued support of the investment community, but we are certainly targeting an improvement in our valuation multiple moving forward, which on the last slide is what I wanna leave you with, is that re-rate opportunity that exists with Superior Gold, So by continuing to deliver on our commitments, we believe the company will revalue with significant upside that exists between our current multiple and that of our peer average. In addition, our current market cap is actually below the main peak PEANPV that we announced in late 2020. So we're focused on repositioning Platonic for long-term success, improving that valuation, unlocking value for shareholders, and we encourage you to take another look at this opportunity. Thank you very much, operator. Now it's in the line for questions.
spk03: Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you would like to ask a question, press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. There will now be a brief pause while we compile the Q&A roster.
spk04: Again, if you would like to ask an audio question, please press star, then the number one on your telephone keypad. Ms. Brown, there are no questions at this time.
spk03: You may please continue.
spk00: Thanks, operator. I guess that's a sign that we've delivered and met expectations for shareholders today. Since there's no further questions, thanks everyone for joining us. We're extremely pleased with our strong first quarter results and obviously it's important to see the company returning to a period of free cash flow generation. We're going to continue to advance these strategic projects necessary to reposition Photonics for long-term sustainable success, which includes optimising that underground operation, incorporating new sources of open pit feed and increasing our production levels while we further advance the understanding of the extensions of the mineralization at Photonics. We expect these improvements combined with upcoming full repayment of that gold loan in June will drive continued improvement in our financial performance over the course of 2021 and beyond. So thanks again for joining us today and stay safe.
spk03: Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.
Disclaimer