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spk00: Good morning ladies and gentlemen. Thank you for standing by. Welcome to Superior Gold's second 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, then the number one on your telephone keypad. If you would like to withdraw your question, press star, then the number two. If you have any difficulties hearing the conference, please press star then zero for 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 Chris Jourdan, President and Chief Executive Officer. Please go ahead, Mr. Jourdan.
spk07: Thank you, Michelle. Good morning, everyone, and thank you for joining us. to discuss Superior Gold's second quarter 2021 results. I hope you and your families are well and safe. I would like to start by acknowledging the contributions of our outgoing interim CEO, Tamara Brown. The value Tamara brought to the company over the past year is clearly evident in our latest results, and I want to thank her for stepping in, articulating our growth strategy and working with the team to start the turnaround at our operations. We will continue to build on this platform Tamara put in place to deliver our growth strategy. As a reminder, please refer to slide two of our presentation, which is posted on our website to view our portion of the language regarding forward-looking statements. In addition, please note that all amounts discussed are in US dollars unless noted otherwise. As you are aware, I recently stepped into the President and CEO role. For those of you who don't know me, I have 30 years of international processing and mining experience. Most recently, I was with Newcrest Mining, Australia's largest gold miner. As Program Director for Transformation of the P&G Operations and previously the General Manager of Leho Gold Mine, one of the world's largest gold mines, and Chief Performance Officer. Prior to that, I was the CEO of International Federal Metals Limited, an LSE-listed integrated chrome mining and smelting company. I'm excited to be leading the Superior Gold team, working closely with the board as we continue with the transformation at the Platonic Gold operations towards its full potential. Together, we will be focused on achieving the company's strategic goals of sustainably growing our gold production from both underground and open-fit operations, combined with the opportunity for belt consolidation in one of the world's most prolific gold mining campuses. located in the Yalgong Goldfields of WA. Joining me on today's call are Paul Olmsted, our CFO, and Keith Boyle, our COO. As a reminder, we believe the key investment highlights for Superior Gold are that our operations are located in Western Australia, which is one of the top mining jurisdictions in the world, according to the Fraser Institute. We own a world-class operating mine with significant established infrastructure. We have a clear and concise optimization and expansion plan, which I will discuss in more detail in the next slide. We have a significant mineral resource base, plus additional exploration upside, given our very large and underexplored mineralized system. And finally, one of the most compelling attributes is the re-rate opportunity we represent compared to our peers. First, we are working to reestablish steady-state production from the underground mine, and we encourage to see it return to a steady state of improving positive cash flow in both the first and the second quarter of this year. The near-mining resource extension drilling and mineral exploration currently underway seeks to provide future mining fronts with stable, cost-effective feed to the mill. To supplement this underground feed, we are adding open-fit production from a number of near-mill, past-producing open-pit projects, including Plutonic East, which commenced on schedule during the second quarter, then perched with optionality into Salmon, Hermes, and Hermes South. The opportunity review currently underway will explore and develop opportunities to maximize the potential from these pits. The timeframe and capex to put these smaller pits into production is relatively short and relatively low. And with the announcement of the platonic mainfoot pushback project at the end of 2020, we now have a potentially longer-term steady supply of open-foot feed. The third pillar of our growth strategy is recommissioning our second mill that is currently on care and maintenance. New sources of feed may come from exploration in our existing properties or from several other sources along the platonic Miramere Gold Belt. This provides the opportunity to increase production at Plutonic to well above current levels with a minimal capital expenditures because of the significant infrastructure that's already in place. Finally, there is the potential for a new discovery as we invest in exploration of Plutonic. We have certainly been very encouraged by our recent drilling results now that we have a third drill rig on the property dedicated to opening new mining fronts.
spk05: We are providing inspiration updates later in August 2021.
spk07: We continue to successfully operate through the COVID-19 pandemic and to adhere to the strict measures that we have put in place to mitigate this threat. Today, we are pleased to report that we have had no incidents of infection of COVID-19 at either our operations or corporate offices for six consecutive quarter. We are also introducing a safety culture that's committed to a workplace free of accidents. We continue to conduct regular safety workshops as well as place an emphasis on the SLAM hazard identification cards and self-leadership programs, all of which is having a positive impact, ensuring that our people know that they are our most important priorities. Highlights of the second quarter in 2021 include firstly the production of 19,356 ounces of gold, with sales of 19,099 ounces of gold at a realized price of $1,801 per ounce. Total cash costs were $1,412 per ounce and sold, and all interstating costs were $1,519 per ounce sold. Our used dollar denominated all interstating costs continue to be impacted by a strong Australian US dollar exchange rate that's currency trading near a five-year high. During the quarter, we completed the early full repayment of our Oromet gold loan, which will provide close to $10 million annualized additional cash flow beginning in the third quarter of 2021. For a second straight quarter, we generated significant cash flow from our operations and exited the quarter with a robust cash position of $17.4 million. Operationally, we also improved our mining stock grade by 35% relative to the second quarter in 2020. Our mill grade increased for the fourth consecutive quarter, and mill recovery has improved from 86% to 88%. An improved understanding of the geology and mineralization at Plutonic has led to establishing two new mining fronts, as demonstrated by the exciting annual results at the Baltic Gap Mining Front and the Western Mining Front. I will now turn to our Chief Operating Officer, Keith Boyle, to discuss our operating results for the quarter. Over to you, Keith.
spk08: Thanks, Chris. As we mentioned, the plutonic gold operations produced 19,356 ounces of gold in the second quarter, as compared to 15,177 ounces of gold in the same period in 2020. The increase is largely as a result of increase in the contribution of higher-grade stoke material that reduced the proportion of lower-grade legacy stockpiles being milled. Total material milled during the second quarter decreased by 9% to 359,000 tons compared to the same period in 2020, partially as a result of processing fewer tons from low-grade legacy stockpiles in the second quarter of 2021, as the legacy stockpile process included oxide ore material, which required the mill to operate at a slightly reduced throughput rate. Recoveries were 88% for the second quarter, representing a continued improvement as a result of the higher head grades due to the contribution of Teutonic East open pit ore. The highlight of the quarter was the underground stope grade mine of 3.26 grams per ton, which represents an increase of 35% over the second quarter of 2020. Operationally, we continue to focus on improving productivities, which has benefited from the arrival of new mobile equipment aimed at improving equipment availability and lowering 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 results following the operational improvements we've implemented at Plutonic, as illustrated in slide 9. The underground mine stope grade of 3.3 in the second quarter represents an increase of 35% over the second quarter of 2020. As a result, the average head grade has increased by 34% since the second quarter of 2020, and overall quarterly production has increased by 28%, highlighting the importance of mind and scope grade to overall profitability at Plutonic. I'll now turn the call over to Paul Lomsted, our Chief Financial Officer, to discuss the financial reports.
spk02: Thanks, Keith. During the second quarter, revenue totaled $34.4 million from the sale of 19,099 ounces of gold, an increase of $9.4 million from the $25 million from the sale of 15,536 ounces of gold in the second quarter of 2020. Gold revenues were higher as a result of 3,563 more ounces being sold and an increase in the realized gold price to $1,801 per ounce from $1,608 per ounce. Cost of sales were $29.5 million for the second quarter of 2021, an increase of $5.4 million from $24.2 million for the second quarter of 2020. This was due to the stronger Australian dollar. The impact of which resulted in a $4.3 million increase, despite an Australian dollar decrease in processing depreciation and site services categories. In addition, mining costs were higher by $1.7 million with the addition of the Plutonic East open pit mining. Adjusted net income for the second quarter of 2021 amounted to $1.7 million or $0.01 per share. compared to adjusted net loss of $0.6 million or one cent per share in the second quarter of 2020. And that's primarily due to the higher operating earnings in the current period. During the second quarter, cash from operating activities before working capital changes was $2.6 million, a $2 million increase over cash from operating activities of $0.6 million for the second quarter of 2020. The increase in cash generated from operating activities was predominantly a result of the stronger operating earnings in the second quarter of 2021 in comparison to the second quarter of 2020. The chart on the right highlights that in the second quarter, cash flow from operations before working capital changes and before the repayment of the gold loan increased significantly by $2.3 million compared to the same period in 2020. As at quarter end, the company had $17.4 million in cash and cash equivalents. We also exited the second quarter with zero term debt after early full repayment of the Ormet Gold Loan. I will now turn the call back to Chris to continue with the rest of the presentation.
spk05: Thank you, Paul.
spk07: Our production guidance for 2021 remains unchanged as we continue to guide towards production of between 65 and 75,000 ounces gold for the full year 2021. As you are all aware, we are currently focused on unlocking value in the underground through production growth, margin optimization, and systematic exploration. First, we are focused on optimizing our grades from the underground. Stove grade continues to be the most important factor in determining our profitability. As such, we are fully engaged in driving towards an average stove grade of better than three grams per tonne. We are pleased to report that we have further advanced our geological understanding of the platonic ore body, including the northwest trailing faults that control the location and concentration of high-grade gold mineralisation. This has led to a number of strategically significant exploration results as well as the identification of high-grade stoves on the operational front. In mining operations, we have revitalized our underground fleet with the addition of two new trucks and two loaders. This has already improved our equipment availability and reduced our maintenance costs. We are also focused on minimizing equipment movement underground with more strategic mine planning. At the mill, which operates very well, the recommissioning of the gravity circuit has had a positive impact on our recoveries. We are also completing an opportunity review whereby we are analyzing the full potential of the operations and crafting a strategy to work towards it. Finally, the addition of a third underground door rig that is dedicated to expanding into new mining fronts has resulted in some very promising results recently, which I will discuss in more detail shortly. As I mentioned, we are working on adding several smaller open fits to propel production to approximately 100,000 ounces per year from past producing pits, including Platonic East, Birch, Salmon, and on the Platonic mine property, and Hermes, Hermes South, that's located to the southwest. During the second quarter, we commenced open pit mining at Platonic East on schedule. We plan to utilize the production from these open pits, plus longer term, the main pit pushback, along with operational improvements from the underground, to increase production and return platonic oil operations to a state of significant free cash flow generation. Now moving to the exploration front, we recently announced promising drill results from our new underground diamond ore program, which commenced in December 2020. Slide 14 is a reminder that there are significant intercepts in close proximity to the existing infrastructure, as well as all great intercepts located one kilometer outside of the mineralized MESIC. It should be clear that the limits of the mineralisation have yet to be found and a continued investment into exploration of platonic is warranted. In the near term, our focus in the underground is on exploring and developing into new mining funds so that there is lesser reliance on remnant mining. We believe that the two new mining funds, being Western Mining and the Baltic Gap Funds, will be key in improving the profitability of this operation in the near term. On June 23, we provided an exploration update in the second quarter with all results from the bulk gap. The results were highlighted by drill hole UDD 24342, which intersected 40.8 grams per tonne gold over 13.4 metres. This new mining front now extends approximately 350 metres by 200 meters outside of the current mineral resource estimate and remaining open along strike and at depth. As a reminder, the new Baltic Gap Mining Front is also directly adjacent to existing underground infrastructure, thus requiring minimal capital to develop the area. The extent of existing mineral resources are key components of our current strategy to expand into new mining fronts and improve our mining grades and productivity. We have a number of upcoming catalysts worth noting. Going forward, we expect to provide more regular underground exploration updates now that we have the third drill rig operating and dedicated to exploration. We're continuing optimization and final engineering efforts. We also expect to be commencing and announcing results of heritage surveys, which will hopefully have some positive impacts on the main plate pushback project and make clearer the timing of the Hermit South project. And over the next 12 months, we have a healthy pipeline of development and exploration catalysts to look forward to.
spk05: In closing, I would like to highlight, apologies.
spk07: Slide 18 is a quick summary of the analysts currently covering the stock, our key shareholders, and capital structure. We were very encouraged by the support of some significant long-term gold funds and note the analysts see a significant upside to our current share price. We also maintain a tight share structure with just 122 million shares outstanding. In closing, I would like to highlight the significant re-rate opportunity that exists with Superior Gold as presented on this slide. By continuing to deliver on our commitments, we believe the company will revalue with a significant upside that exists between our current rating and that of the current consensus estimates for us. We are focused on repositioning Plutonic for the long-term success and I'm looking to share all the value and we encourage you to take another look at this opportunity. With that, we conclude the presentation portion of the call. Operator, you can now open the line for questions.
spk00: 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 1 on your telephone keypad. If you would like to withdraw your question, press star, then the number 2. There will be a brief pause while we compile the Q&A roster.
spk01: Your first question comes from Phil Kerr, private investor.
spk00: Please go ahead.
spk03: Yeah, it's actually from PI Financial here. First question on what's related to cash costs here. So I'm looking at gold sales, about 2,000 ounces higher over Q1, yet your cash costs were roughly about $100 an ounce. Could you just speak to the potential unit costs that are maybe impacting those metrics?
spk05: Paul, can I hand that over to you if you can comment on the cost, please? Sure.
spk02: Just on the cost, a lot of the increases with the increase in the open pit. mining costs with the addition of plutonic yeast for the quarter. As we get further into later in the year with the potential of addition of perch, we certainly see some benefits with grade and reduced cost with respect to that addition.
spk03: Fair enough. I guess on a per ton basis, I would imagine that the the open pit mining activity was substantially lower as a contribution factor to the overall tons mined and milled. Could you give us some sort of ratio or breakdown of the open pit tons, the underground tons, and maybe where you see that shifting over time as the open pit ramps up?
spk02: Sure. Just in terms of the split, I don't have the number offhand. because we are ramping up Teutonic East, I do think that our underground costs remain pretty well consistent with what they've been in the past. The Australian dollar certainly has impacted on our costs. As you can see, we're looking at around a $200 increase in costs relative to the prior year, just on FX impacts. You know, in the recent, since the end of the quarter, certainly the Australian dollar has come off somewhat. So, you know, we do expect to see some benefit of that for the remainder of the year if it continues where it is.
spk07: Okay. On the right shell of open fit to underground, we're currently running about a 54% underground right shell to open fit. We expect that to align the same. In the near term, but with search coming on stream, we expect better results to come through.
spk03: Okay, fair enough. That's good clarity there. Then just on the exploration side of things, obviously some good results coming from Indian and the Western mining front and so forth. Where are you at with sort of pushing that a little bit more aggressively and working that into the mine plan, albeit maybe tighter drill spacing and getting that that sort of resource bumped up into reserves. What sort of time frame are we expecting here?
spk08: Well, so the announcement that we made on the Baltic Gap results, a lot of it was infill drilling in order to have the indicated resources. So the geos are in fact right now compiling those resources, which take a few months to get that done. We are doing some preliminary mine planning. It'll be part of our resource reserve statement, which we would expect early next year.
spk05: Okay, great. That's it for me. Thank you.
spk07: I think it's also worth noting that in addition to that, we're also extending our exploration activities on surface as well with specific targets that we've identified.
spk00: Your next question comes from Pierre Valencourt of Haywood. Please go ahead.
spk04: Yeah, hi, guys. Just to follow on the previous question there, could you actually give me what the unit cost per ton was underground and how that compares to last quarter, previous quarters, and where that's headed? And I recognize, Paula, you're talking about the FX factor. Just maybe give it to me in Australian dollars so that I at least get a kind of a benchmark from where you're moving to.
spk05: So, Paul, do you want to answer that question, please?
spk02: Yeah, I'm just looking for the information right now. Generally, we run at around $100 Australian a ton on mining costs. And those have been relatively consistent from quarter to quarter at the underground. So, I mean, we don't see any significant changes from that at this point. Keith, do you have anything more on unit cost basis for that?
spk08: No. The underground runs between $90 and $100 a year. Okay. Thanks, Keith.
spk04: Yes. But Keith, you know, and Chris as well, is there room for improvement there? Or are you, you know, with the changes that have been brought about over the last year or so, is this where we should expect it to stay?
spk08: So at a higher level, Pierre, right now, probably for the rest of the year, it'll stay about the same. The new mining fronts will give us the opportunity to get more efficient as opposed to the remnant mining. And so we see that opportunity in particular for, for example, the development costs helping us in that respect because we do a lot of bypasses right now to do the remnants, you know, where they had left. And so on a ton per meter or ounce per meter basis, We see an improvement just in developing new mining systems.
spk07: I think back to that as well. With the technical work that we're currently doing on the spatial positioning of the old body, and we're seeing some promising results, they will put us in a position to better plan and come forward with more economical steps henceforth. It's a slow process, but we are really seeing some of the benefits flowing through.
spk04: Okay, thanks. One last thing, when it comes to the new areas of Baltic Gap, maybe Keith, could you elaborate a bit on when that could come into the mine plan? Because presumably that would be a significant contributor in terms of productivity and cost and just margins in general.
spk08: So, you know, without the Maybe without giving you a date. From now to the end of the year, Pierre, we started getting the infrastructure ready to start development, and it's fairly close. I would say within a few months.
spk04: Great. Okay. I guess it will be a real factor in 2022. That's what we should aim for. Correct.
spk08: That's exactly right. We're looking at a couple of those areas, and as Chris said, we're getting a better understanding of the goal distribution, and so it's allowing us to plan longer term, and we're finding that by doing that, we're able to get these areas set up and developed efficiently.
spk05: Right. Okay. Thanks, Keith.
spk01: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one at this time.
spk00: Mr. Jourdan, there are no further questions on the phone lines at this time. Please continue.
spk07: Thank you very much. Since there are no further questions, I would like to thank everyone for joining us today. We're extremely pleased with the robust second quarter results that shows the company has returned to a state of significant cash flow generation. We also continue to advance the strategic projects necessary to reposition Plutonic for sustainable longer-term success. This includes fully optimizing the underground operation and incorporating new sources of open-pit feed, as I said before, to increase our production levels, while further advancing our understanding of the extensions of the mineralization at Plutonic We expect that these improvements will drive the continued improvement in our financial performance over the course of 2021 and beyond. Thank you again for joining on the call today.
spk05: Have a great day.
spk01: Ladies and gentlemen, this concludes the conference call for today.
spk00: Thank you for participating and please disconnect your lines.
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