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spk00: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Superior Gold's third quarter 2021 results conference call. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press star, then the number two. If you do have any difficulties hearing the conference, please press star then zero for the operator assistance at any time. And 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 Jordan, President and Chief Executive Officer. Please go ahead, Mr. Jordan.
spk05: Thank you very much. Good day, everyone, and thank you for joining us to discuss Superior Gold's third quarter 2021 results. I hope that you and your families are all safe and well and looking forward to the coming festive season. As a reminder, please refer to slide two of our presentation, which is posted on our website, to view our cautionary language regarding forward-looking statements. In addition, please note that all amounts discussed are in US dollars unless otherwise noted. Moving over to the next slide, joining me today in today's call are Paul Olmsted, our CFO, and Russell Cole, our Vice President of Operations. Looking at the investment highlights, as a reminder, we believe the key investment highlights of Superior Gold are that Plutonic is situated in Western Australia, one of the top mining jurisdictions in the world, according to the Fraser Institute. It's a world-class operating mine with related infrastructure. The business has a clear and concise optimization and expansion plan and is endowed with a significant mineral resource base with exploration upside. Finally, One of the most compelling attributes is the re-rate opportunity we represent compared to our peers. In order to achieve a re-rate, our strategy is to deliver on three main goals. Firstly, to deliver a safe, stable, and predictable operation at a consistent 70,000 to 85,000 ounces per annum of gold. An operation of scaling, stepping up to 100,000 ounces and ultimately 150,000 ounces per annum. To make sure it's establishing a business of scale, we expect to see a reduction in cost, and, of course, strengthening our cash flow as a consequence. Smart investment exploration of known high-potential targeted areas is our third goal. I will now explain in more detail how we're going about delivering these goals. We have a well-defined growth strategy, and it's based on what I originally said, achieving three goals. We'll achieve these goals by focusing on four phases. In order to deliver the first goal, which is a safe, stable, and predictable operation, in phase one, we are working to reestablish steady-state production from the underground mine to annualized rates of between 800,000 and 900,000 tons per annum in the short term. We have made significant strides in achieving this goal in 2021, and I encourage the sea to return to a state of improving positive cash flow in the first three quarters of 2021. The near-mine resource extension drilling and mineral exploration currently underway are expected to provide future mining fronts delivering competent high-grade and or for stable cost-effective feed to the mill. Secondly, to establish an operational scale, our second goal, phases two and three are designed to increase production firstly to 100,000 ounces and then subsequently 150,000 ounces. To achieve this, we are building on phase one to increase production from the underground and augmenting feed to the mill by adding open-pit production from a number of near-mill, past-producing open-pit projects, which includes the Tonic East, which commenced on schedule in May of this year, is now complete, and Perch was commissioned in September of this year, with optionality into Hermes and Hermes South. A review of these opportunities are currently underway, targeted at maximizing the potential from these pits. In addition, we are considering early entry low-cost targets into the main pit as a precursor to the larger main pit pushback project. The pits on our properties are targeted to feed a 1.8 million ton per annum milling circle. Continuing our growth strategy towards 150,000 ounces is recommissioning our second mill that is currently on care and maintenance. New sources of feed would be required and may come from exploration on our existing properties or from several other sources along the platonic miramai gold belt we are actively exploring these opportunities phase four focus to deliver on exploration of known high potential targeted areas there is the potential for a new discovery as we invest in exploration at platonic we have certainly been very encouraged by our drilling results in the last few months now that we have a third drill rig in the property on the property dedicated to opening new mining fronts and one may expect regular updates on exploration. Moving to the safety of our people, which is our top priority. Above everything, the health and safety of our people remains first and foremost in our minds. We continue to successfully operate through the COVID-19 pandemic and to adhere to the strict measures that we put in place to mitigate this threat. To date, we're very pleased to report that we have had no incidents of infection from COVID-19 at our operations for a seventh consecutive quarter. In order to comply to recent legislation, all employees and contractors are expected to be fully vaccinated by the 1st of January 2022. We're also putting a lot of effort into introducing a safety culture that is committed to a workplace free of accidents. A people safety and risk transformation program commenced in October and will focus on safety leadership, critical control management, that is on-the-job safety, process safety, and material risks.
spk04: Now moving forward to the third quarter highlights.
spk05: Production ended up at 19,379 ounces of gold with sales of 19,282 ounces of gold at a realized price of $1,772 per ounce. Total cash costs were $1,341 per ounce Sold and all in sustaining costs were $1,453 per ounce sold. That is down 5% and 4% respectively on the second quarter of 2021, which is a testament to improved efficiencies and related cost benefits being implemented. For a third straight quarter, we generated significant cash flow from operations and exited the quarter with a robust cash position of $20.5 million US dollars. Operationally, we continue to achieve our targeted stove growth of about three grams per tonne, with our nine-month year-to-date 2021 stove grade at 3.2 grams per tonne, an improvement of 14% relative to the nine-month period in 2020. Our mill grade for the third quarter in 2021 increased by 7% over the comparable period last year. Year-to-date, our mill grade increased by 15% over the comparable period in 2020, reflecting the impact of both higher underground grades and replacing low-grade legacy stock coal material with higher-grade open-pit feed. The higher grade also led to improved recoveries in 2021, with the year-to-date recoveries of 87% versus 82% for the same period in 2020. An improved understanding of the geology and mineralization at Platonic has led to establishing two new mining fronts, as demonstrated by the exiting exciting new draw results at the Baltic Gas Deeps Mining Front and at the Western Mining Front.
spk04: Both of these are in close proximity to existing developments and infrastructure. A bit more on the production results.
spk05: As we mentioned, our production for the quarter ended up at 19,379 ounces compared to the third quarter last year of 15,699 ounces in 2020. The increase is largely a result of the increase in the contribution of high-grade soap material that reduced the proportion of lower-grade legacy materials being milled. One of the key highlights for the third quarter is the 7% increase in total material milled to 405,000 ounces for the quarter compared to the same period in 2020. Throughput rates were increased as there was an increase in the availability of high-grade surface material for milling from the platonic east and perch open pits. Moving on to the next slide, we have seen a steady improvement in results following the operational improvements we've implemented here at Plutonic, which is illustrated in the slide. Overall quarterly production has increased by 28% from a low in the second quarter of 2020, highlighting the importance of targeting the higher mine scope grades and its impact on our overall cash generation ability. In addition, our net cash position has improved by $3.1 million in the third quarter to $20.5 million, a significant improvement from the end of the second quarter of 2020, reflecting improved operating performance and, of course, the repayments in full of our gold loan at the end of the second quarter of 2021. I will now turn the call over to our Chief Financial Officer, Paul Olmsted, to discuss our financial results. Over to you, Paul.
spk01: Thanks, Chris. During the third quarter, revenue totaled $34.2 million from the sale of 19,282 ounces of gold, an increase of $7 million from $27.2 million from the sale of 15,492 ounces of gold in the third quarter of 2020. Gold revenues were higher as a result of the 3,790 more ounces being sold and a marginal increase in the realized gold price to 1,772 per ounce. from 1,756 grams. Cost of sales were $28.3 million for the third quarter of 2021, an increase of $2.7 million from $25.6 million for the third quarter of 2020. This was due mainly to the Australian dollar, the impact of which resulted in $0.8 million increase, an increase in surface mining costs of $0.9 million from the mining of open pits at Plutonic East and Perch, and site bonuses due to improved performance relative to 2020. Adjusted net income for the third quarter of 2021 amounted to $1.8 million or $0.01 per share compared to adjusted net loss of $1.3 million or $0.01 per share in the third quarter of 2020. That's primarily due to higher operating earnings in the current period. During the third quarter, Cash from operating activities before working capital changes was $5.1 million, a $6 million increase over cash from operating activities for the second quarter of 2020. The increase in cash generated from operating activities was predominantly a result of stronger operating earnings in the second quarter, third quarter of 2021, in comparison to the third quarter of 2020 and the repayment of the gold loan at the end of the second quarter of 2021. The chart on the right highlights that in the third quarter, cash flow from operations before working capital changes and before the repayment of the gold loan increased significantly by $4 million compared to the same period in 2020. As at the quarter end, the company had a strong cash and cash equivalent position of $20.5 million. Of particular note is the fact that the gold loan was fully repaid at the end of the second quarter of 2021, and the company currently has zero term debt outstanding. As a result of the repayment of the goal loan and improved performance year to date in 2021, our working capital position has increased to $7.5 million over the December 2020 year-end position, a significant improvement. I will now turn the call back to Chris to continue with the rest of the presentation.
spk04: Thank you very much, Paul.
spk05: Moving on to the next slide, as far as guidance are concerned, our production guidance for 2021 remains unchanged. However, we glide towards the upper end of guidance production of 75,000 ounces of gold for the full year 2021. I'd also like to note that the year-to-date all-in sustaining cost is accumulated at $1,494 per ounce, which is below the lower end of our cost guidance. Now, moving on to the underground optimization, We currently focus on unlocking the value in the underground through production growth, margin optimization, and systematic exploration. First, we focus on optimizing our grade from the underground at an average stove grade of better than three grams per ton, which we've been very successful in achieving. In mining operations, we've revitalized the underground fleet, recapitalizing two new trucks and two new loaders. At the mill, which operates very well, the recommissioning of the gravity circuit earlier this year has had a positive impact on recoveries and continues to do so. Finally, the addition of a third underground drill rig that is dedicated to expanding into new mining fronts has resulted in some very promising results recently, and I will discuss that in a little bit more detail shortly. During the second quarter of 2021, open-fit mining commenced at Plutonic East, as said before. In the third quarter, mining at Plutonic East was completed, and the company initiated mining successfully in the perch open pit. Production from these open pits, as previously mentioned, the potential for early entry into the main pit as a precursor to the larger main pit pushback project, along with operational improvements from the undergrounds, expected to increase production and improve electronic gold's free cash flow generation capability. Moving on to historic step-out drilling and a few highlights there. This slide is a reminder that there are significant intercepts in close proximity to existing infrastructure as well as all-grade intercepts located one kilometre outside the mineralised MAPIC. It should be clear that the limits of the mineralisation have yet to be found and a continued investment into the exploration of Teutonic is warranted and considered.
spk04: In the near term, our focus on the underground is on exploring and developing into new mining funds.
spk05: We believe that the two new mining fronts, that being the Western Mining Front and the Baltic Gap, will be key in improving the profitability of this operation in the near term, in so early as FY22. We have recently announced drilling results on three main areas, being Baltic West, Indian Axis, and Baltic Gap, which is highlighted in those presentations.
spk04: Talking about the extension into the Baltic Gap, on August 17th,
spk05: we provided an exploration update in the third quarter with drill results from the Western Mining Front. The results were highlighted by drill hole 24141, which intersected 42.2 grams per tonne gold over 5.6 metres, and 24376, which intersected 17.7 grams per tonne gold over a 6.4 metre length. This new mining front now extends an estimated 1,600 meters by 60 meters outside the current mineral resource envelope. As a reminder, the Western Mining Front is directly adjacent to existing underground infrastructure, thus requiring minimal capital to develop into this area. The expansion of existing mineral resources are key components of our current strategy to expand into new mining fronts and improve our mining grades, productivity and therefore reduce our reliance on remnant mining, which we expect to start in FY22. Looking forward to a few upcoming catalysts. We have a number of them I'd like to highlight. Firstly, going forward, we expect to provide more regular underground exploration updates now that we have the third drill rig operating and dedicated to exploration. The next update is expected within November 2021. In the near year, we expect surface drilling results to flow forward as well. We expect more opportunities for improvement as we complete the full potential assessment to unlock the latent capacity in the operations. We also expect to be commencing and announcing results of heritage surveys, which will hopefully have some positive impacts on the MAPO pushback project and make clearer the timing of the Hermes South project. And over the next 12 months, we have a healthy pipeline of development and exploration catalysts to look forward to. Moving forward to the capital structure, In this slide, a quick summary of the analysts currently covering the stock, our key shareholders, and of course the capital structure. We are 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 on the top right, the table on the top right. We also maintain a tight share structure with just 123 million shares outstanding as shown in the table on the bottom right. remind everyone of our very well defined simple and succinct growth strategy and i'd like to just remind us on a few elements there firstly we're focusing on three main goals the one uh first one being to deliver a safe stable operation uh between 70 and 85 000 ounces and that is by unlocking the potential in our underground Then secondly, moving the business to a level of scale of 100 and then 150,000 ounces by not only unlocking and increasing throughput from the underground, but also augmenting that feed into the open pits, which we've already started. And in addition to that, looking for alternative feed for our oxide mill, the 1.2 million tons per annum mill, which is currently in care and maintenance, which will see the operation move to 150,000 ounces per annum. Phase four focused to deliver on exploration of known high potential target areas. Now there's potential for a new discovery, as I said before, and we continue to be encouraged by the results we've received from previous and current draw results. We are absolutely focused on repositioning Plutonic for the long-term success and unlocking shareholder value. Thank you. So with that, I conclude the presentation portion of the call. Operator, you may now open the line for questions. Thank you very much.
spk00: Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you would like to ask a question, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star, and then the number two. One moment, please, for your first question. Your first question does come from Anif Merlar from Eastland Partners. Please go ahead.
spk03: Hi there, it's Hanif Murali on behalf of Steve Lisiak from S1C. Unfortunately, he couldn't be here for the call, but I have a few questions that he wanted to ask you guys. Of the four new mining areas being opened for 2022, is the grade better than the average underground seed grade from Q2 and Q3?
spk05: So I just want to make sure that I get your question correctly. You mentioned four mining areas.
spk03: Yeah, there's four new mining areas being opened up, right, for 2022 for underground?
spk05: So it's extension of current mining areas. As I said, we did drill extensions in those areas, which is Baltic, Area 134, Timor, and Indian. Those areas we expect at the current forecast, to be at similar grades. What we are doing is, we referred into previous presentations, the form interpolants technical work that we're currently doing. That work is still currently underway, and that will inform us in a more granular fashion as to what we might expect for next year. But we're currently forecasting that we'll be on the same ballpark as mentioned before.
spk03: Okay, and then the idea, obviously, is these zones will allow for increased underground ore supply for the mills, right?
spk05: Yeah, absolutely. Look, the high grade, there's no doubt the high grade comes from the underground. You know, at those grades, the open pits is probably just north of 1 to about 1.5 grams per ton on a stretch in some of them. Others, about 6.7 grams per ton. So there's no doubt the underground is the mainstay of supply for the 1.8 million tons per annum mill.
spk03: Okay. And then with regards to the study about the early limited mining from the open pits, concludes. How does it look so far? I know it's not done yet, but is there any kind of early findings you could share with us?
spk05: Yeah, I have to say, I think at this stage it shows promise. Just to give you a bit of background, we initially targeted three areas. Two of them have been delimited. We're focusing on one very specific area in the main pit, which is the bottom of the main pit. The main issues that we need to resolve there is about the interaction of the open pit with the underground workings and in addition to that, the taking care or making sure that we're fully aware of what mining has happened in the underground in that area to have proper forecasts. Okay. That's all for me. Maybe one more thing that I'd like to add is we're working fervently in closing our approach on that specific early entry because We believe that could form potentially part of our budget for next year.
spk04: Okay. Great. Thank you. Thank you.
spk00: Thank you. And Mr. Jordan, there are no further questions on the phone lines at this time. You may please continue.
spk04: Thank you, Operator. We'll now check the webcast for any questions.
spk02: The first question is, is what areas of the underground mine will see the opening of the new mining fronts in 2022 mine plan?
spk04: Sorry, Sandy, could you just repeat that question? Which areas in the underground?
spk02: Which areas of the underground mine will see the opening of new mining fronts in the 2022 mine plan?
spk05: We're busy finalizing exactly what that mine plan looks like, but it will be towards the Baltic Gap and western mining fronts.
spk02: The next question is, how many tons or quarters of production are scheduled from the open pit mining of Perch and Hermes?
spk05: Perch is currently in operation. We're looking at about six months' worth of production coming from there. We have not finalized yet what the next open pit target would be. As I mentioned, we have options into Hermes, Hermes South, as well as early entry into the main pit. That work is currently underway.
spk02: The next question is, in what quarter do you anticipate achieving 25,000 plus gold ounces a quarter? And thereby, in what year do you anticipate reaching the production? of 100,000 gold ounces a year?
spk05: I think that is a question we're all working very hard to answer as quickly as we can. As I mentioned earlier, we're in the process now of finalizing our budget. As I also mentioned in our strategy, a key enabler to unlock an annualized rate of 100,000 ounces per annum would be access to consistent supply from our open fits. that work and the sequencing of the open fits are still currently underway. And not before that is done, we would have a clear line of sight and exactly we'll hit the 100,000 ounces per annum. That answer, I don't think it's far off. We certainly want to get a very clear view in the next few weeks as we finish our budget and propose it to the board as to how we see that going forward. I think also what's also very important to note here is that the reconsideration of the block model, the resource and reserve statement, as well as the license mine, based on the technical work that's currently underway, will only be complete in Q1 of next year, which will give us much more granularity as to what we can expect in the next few years for the operation.
spk02: The next question is, what are the plans or outlook for the main pit in 2022? And can we expect a fairly large capital requirement in the coming year for the pit layback?
spk05: No, I don't think. We do not expect a major capital outlay for the main pit pushback. What we do expect is having an answer on early entry into the main pit. And at this stage, we're very encouraged with the results that we've seen. Clearly, there's some more technical work planning and scheduling that needs to happen. before we make the final call of whether we're going to access the main fit as an early entry option.
spk02: The next question, are you now looking for more properties in Canada for cash flow?
spk04: Well, I think at the end of the day, the business is very clear in its strategy.
spk05: The strategy ultimately is supposed to develop this business more organically. And what I mean by that is demonstrating to the market that we can safely, sustainably and reliably deliver with the assets that we have. And the first step is taking the operation to 100,000 ounces. The next one is taking it up to 150 by unlocking the second mill. And that will put us in a very strong position for much more improved cash flow generation. I think that will be our key focus in the near term to get that done and dusted first.
spk02: The next question is, will the second mill be used in 2023?
spk04: We are looking at options of potential feed for the mill.
spk05: That depends on when that all will be available. We do not expect that all feed will come from our properties, it will come from external properties. Exactly when that's going to happen, that is currently in development and depends on the conversations and discussions that are currently underway. What I can say is that we are actively looking at opportunities near term, hopefully potential shovel-ready opportunities for open-fit oxide feed for the mill. What I also would like to add is that remember that process plant has been shut down for a number of years in care maintenance. It is going to take some capital to get back up and going. Current indication is between 20 and 25 million Australian dollars. In addition to that, there's probably about 9 to 12 months of work to get that mill ready To get up and going, of course, we will try and optimize that, but it's not something that's going to happen overnight. It's going to take some time to get that mill up and going. The key here and the critical part would be getting access to ore rather than getting the mill ready for operation.
spk02: The next question is, what is the total cost per meter of drilling?
spk05: On a year-to-date basis, we're just concerned. I've just been speaking to Russell Cole here. On a year-to-date basis, $171. It might seem $171 bounce. It might seem high, but that is due to the nature of the drilling and the extent to which we've been doing drilling, where it tends to become more expensive. Russell, I don't know whether you'd like to add some more colouring to that.
spk06: During the last quarter in particular, we've been doing some extension drilling, trying to define the boundaries of some of these areas, and that's probably where our costs have risen recently. Prior to that, I think at the end of Q2, I think we were at 141. Thank you, Sandy.
spk02: The next question is, do you expect negative impact by the vaccine mandate?
spk05: No, we have a contingency plan already in place. The operations responded proactively in identifying the number of people and people that might impact the operations insofar as vaccines are concerned. Currently, we're on almost 80%. Sorry, first vaccination, which needs to be done by the 1st of December. And fully vaccinated, we're on about 72, 75%. So it's trading very well. And that's a good indication of the overall population on site. This includes contractors as well as our own employees. So no, we do not expect any material impact. from the requirements or due to the requirements of vaccines.
spk02: Great. And the next question, any plans to hedge gold sales going forward?
spk04: Oh, sorry. Any plans?
spk02: To hedge gold sales going forward.
spk01: Paul, do you want to answer that if you don't mind, Mike? Yeah, sure. Obviously, you know, At this point, the hedges that we currently have in place that were tied to the ORMAP Gold Loan will be running out at the end of December. Any decision on hedging going forward, obviously, would be a discussion that we would have with the board, whether it's necessary to benefit a specific project. So at this point, we don't have any plans, but certainly always a discussion that we have at the board.
spk02: Thank you. The next question, are you currently drilling on surface?
spk04: Sorry, Sandy, you broke up there a little. Just repeat it, are we?
spk02: Currently drilling on surface.
spk04: Yes.
spk02: And the next question, do you need to raise external capital to realize the current budget?
spk04: No. We do not expect and do not foresee any capital required to achieve what we currently have in our base case budget.
spk02: The next question, have there been any discussions with other companies to obtain ore for the second mill?
spk04: Yes, we are in conversations.
spk02: And the next question, how about the reprocessing of the old tailings?
spk04: That's a very interesting challenge and opportunity.
spk05: In fact, some of the drilling that we're currently doing on surface is in and around that area. Depending on what we find in the ground below the TSS will give us indication what the potential strategy might be with the TSS and whether retreatment makes sense. At this stage, indications are from an economic basis that it'll probably be more amenable in treating the TSS if we want to access the ground underneath the TSS as opposed to just treating the TSS as a standalone project.
spk02: Thank you. The next question is, have there been any supply chain issues?
spk04: I'll ask Russell to answer that.
spk06: No, we've had no supply chain issues to speak of.
spk04: There's been good supply through FWA at the moment.
spk02: Great. Another question. What do you expect to happen with the $14 million North Star Warrens on February 3rd, 2020?
spk04: Paul, I think that's in your court, please, Mike.
spk01: Yeah, sure. The exercise price on those warrants is $1.52 U.S., so that's approximately $2 Canadian. So, I mean, there is still some value left on those warrants, but it has a long way to go before there's any consideration if they were exercised or not.
spk02: Thank you, Paul. The next question, could the main early entry feed ideally be start the new mill.
spk04: Sorry, Sandy.
spk05: I heard you say something about the early entry into the main pit and then it went all muddled.
spk02: Yes. The question is, could the main pit early entry fee actually be used to start the new mill?
spk04: Start the second mill?
spk02: Correct.
spk04: No, no.
spk05: clear about it that the main open pit, and if you look at the ore that we'll be getting out of the main open pit, will be directed to the current operating mill of 1.8 million tons per annum.
spk02: Great. Thank you. All of the questions from the webcast have been answered.
spk05: Thank you very much, and thank you very much for the questions. Very insightful, and really appreciate the time taken out. Since there are no further questions, I'd like to thank everyone for joining us today. We're extremely pleased with the robot third quarter results that show the company has returned to a state of significant cash flow generation. Look forward to further improvements. We'd like to continue to advance the strategic projects necessary to reposition Platonic for sustainable long-term success. Now, this includes fully optimizing the underground operation and incorporating new sources of open-pit feed as I spoke earlier, to increase our production levels while further advancing our understanding of the expansion of the mineralization of the tonic. We expect that these improvements will drive a continued improvement in our financial performance over the course of 2021 and 2022 and beyond.
spk04: Once again, thank you for joining us on our call today, and I wish you really well. Thank you.
spk00: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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