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spk00: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Superior Gold's second quarter 2022 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 that time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star two. If you have any difficulties hearing the conference, you may press star zero at any time for operator assistance. As a reminder, this conference call is being broadcast live on the internet and recorded. I would now like to turn the call over to Mr. Chris Jordan, President and Chief Executive Officer. Please go ahead, sir.
spk09: Thank you and good morning to everyone. Thank you for joining us to discuss Superior Gold second quarter for 2022 results. As a reminder, 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. Now today, I'm joined by Paul Olmsted, our CFO, Russell Cole, our VP for Operations, as well as General Manager for Protonic, Andrew Beek, our VP for Business Development and Long-Term Planning, and Mike McAllister, our VP Investor Relations. They will all participate in presenting specific parts of the presentation today. A few highlights of the second quarter of 2022 include the following. Firstly, as per our previous updates, we are developing our life and business plan following our December 2021 resource and resource statement release in May and subsequent lodgement of the NI43-101 on the 6th of July. As a reminder, the highlights are also further. Proven and probable mineral reserves increased by 66 percent. ounces going to 630,000 ounces. Sorry, I just had a technical problem here. And it contained gold of 3.5 grams per ton, demonstrating significant increase in the life of mine.
spk04: Measured and indicated mineral resources, because of the mineral reserves, is up 2% to $1.92 million.
spk09: ounces of contained gold at 3.5 grams per tonne. This plan, insofar as the life of business plan, will include a base plan, underground expansion and other improvements. The increased resources and reserves have enabled comprehensive life of mine plan.
spk04: We look forward to sharing those outcomes later in this year.
spk09: I'd like to hand over to Russell Cole of EP Operations to elaborate on the operational highlights, and I'd just like to call out there's an issue with the narrative insofar as that slide is concerned, and we'll revert back. So at this point, I'd like to hand over to Russell.
spk06: Thanks, Chris. As we mentioned, the platonic gold operations produced 15,196 ounces of gold in the second quarter. as compared to 19,356 ounces of gold in the same period in 2021. The decrease is largely the result of processing lower grade ore and the shift in mining activity from plutonic east and perch open pits to the development of the main pit deeps project, which was impacted heavily by rainfall during the quarter. Operationally, we achieved a stope grade of 2.5 grams, which was slightly below our targeted grade of 3 grams, due to a shortage of development underground, which was in part due to higher than expected COVID-19 absenteeism rates. Our mill grades in the second quarter of 2022 was lower than the comparable period in 2021. We expect our mill grade to improve as we progress through 2022, reflecting the impact of both higher underground grades and replacing lower grade legacy stockpile material with higher grade open pit mill feed. Gold recoveries remained strong during the second quarter of 2022 at 85%. Finally, the total ore milled in the second quarter was 13% higher than the same period in 2021, which reflects the successful mill shutdowns in Q1 and Q2, and the mill is now running at 5,000 tonnes per day, which will support a higher production of gold in the future.
spk04: I'll now hand over to Chris to recap the production and financial positions. Yes, thank you very much, Russell.
spk09: I'd just like to circle back to the previous slides and highlight specific elements here. Firstly, our safety performance improved during the quarter with a 24% reduction in total injury frequency rate achieved during that period. We produced 15,196 ounces of gold and sold 16,726 ounces of gold at a realized price of $1,877 per ounce. Total cash costs resulted in $1,748 per ounce and all in sustaining costs of $1,929 for the quarter. Cash flow from operations of $8.8 million despite the challenges that we incurred during the quarter was achieved. We ended off the quarter at a solid cash position of $18.2 billion. I now would like to recap just on the imperial performance of the business and operational financial plans since 2020. While the first half of 2022 was softer due to the plan will shut down, unprecedented rainfall and very high absenteeism due to COVID-19 were experienced during this period. And we continue to invest in our business to deliver the company strategy to fully optimize the underground operation and when combined with the addition of new sources of open feed, expected to positively contribute to the company's overall profitability. We continue to target production right towards 100,000 ounces towards the latter part of this year. Our cash position has remained strong, as I said before, at $8.2 million, representing a 4% improvement from the end of the second quarter in 2021, reflecting improved operational performance and the repayment in full of our gold loan towards the second quarter of 2021. I will now turn over to our Chief Financial Officer Paul Olmsted to discuss our financial results for the quarter.
spk01: Thanks, Chris. During the second quarter, total revenue was $31.5 million from the sale of 16,726 ounces of gold, a decrease of $2.9 million from $34.4 million from the sale of 19,099 ounces of gold in the second quarter of 2021. Gold revenues were slightly lower as a result of 2,373 fewer ounces being sold, offset in part by an increase in the realized gold price to 1,877 from 1,801 in the prior period. Cost of sales were $31.5 million for the second quarter of 2022, an increase of $2 million from $29.5 million for the second quarter of 2021. The increase in cost of sales in the current period versus the same period in 2021 was primarily due to the variance in the change in inventory category. Change in inventory reflected decreases in the golden circuit in the second quarter of 2022 resulting from the timing of sales versus production, the buildup of stockpile inventory due to the planned 15-mil shutdown in the first quarter, and the timing of production, which occurred during the first quarter of 2022. Adjusted net loss for the quarter of 2022 decreased by $3.7 million to a loss of $2 million or $0.02 per share compared to an adjusted net income of $0.01. $1.7 million or $0.01 per share in the three months into June 30, 2021. And that's primarily from operating losses of $2.5 million and net finance cost of $422,000. And that was offset by a tax recovery of $990,000. During the three months into June 30, 30, 2022, our cash used in operating activities before working capital changes was $156,000, a $2.7 million decrease over cash from operating activities before working capital of $2.6 for the three months ended June 30, 2021. Decrease in cash generated from operating activities was predominantly a result of $5.3 million of lower operating earnings in the three months ended June 2022, in comparison to the three months into June 30, 2021. Cash flow from operations after working capital was $8.8 million for the quarter, an increase in $4.1 million from the same period in 2021 before the repayment of the gold loan. As at the quarter end, the company had a strong cash balance of $18.2 million. And I will now turn the call back to Chris to discuss our revised production and cost guidance.
spk09: Thank you very much, Paul. We continue to carefully monitor and review operations for further potential disruptions from COVID-19 and other causes, which could adversely affect our production and cost. Therefore, after a thorough operational review, taking into consideration everything that we've learned in the first half, we believe it's prudent to adjust our production guidance to a rate of 69,000 to 75,000 ounces for 2022 and increase only sustaining costs between $1,800 and $1,900 per ounce. We've taken a measured approach in this case on guidance, incorporating the learnings from the year to date. In particular, operating in a COVID-19 environment and its impact on absenteeism, as well as responding to the operational challenges from unprecedented rainfall as the open pit was being re-established. We are targeting a run rate of close to 100,000 ounces per year towards the latter part of this year in Q4, and we would expect a conventional drop in cash costs and all in sustaining costs for the quarter. So in essence, what we're saying is that the initial plan has been delayed due to the factors that we've already identified. Our exploration expenditures range has increased year on year as we ramp up our exploration efforts on new open fit targets as well as continue with our underground programs. Moving on to the announcement of December 20, 21 Mineral Resources and Research. I'd like to hand over to Andrew Peake, Vice President for Business Development and Long Term Planning.
spk02: Andrew Peake Thank you very much, Chris. Effectively, what we're going to discuss on this slide is how increased reserves and resources has really enabled us and set us up to do a comprehensive life of mine plan. As you would note, we did release our resource and reserve statement at the end of May, and then we had a subsequent lodgement of our NI43-101 in early July. Just a quick reminder, looking at the bottom right hand of the slide there on the chart, our reserves were up 66% at an average grade of 3.5 grams per tonne. Our measured and indicated mineral resources were up 2% at an average grade of 3.5 grams per tonne. And our inferred mineral resources were increased by 29%, an average grade of 3.8 grams per tonne. And effectively, that's really set up a great platform for us to develop a comprehensive life of mine plan. Now, I am pleased to report that the life of mine plan is on track. And the life of mine plan has a clear purpose to deliver the best value plan for Superior Gold. The plan will include scenarios for value optimisation, including a base plan, underground expansion, internal and external open pit feed options, including the main pit pushback, homey south, central bore and other prospective targets externally and also internally, and then a large open pit development and substantial infrastructure upgrade. We will look at all the scenarios and choose a preferred plan which offers the best value for Superior Gold. As I mentioned before, increased reserves and resources has enabled us to embark on a comprehensive life of mine plan and we look forward to sharing the outcomes at a later date this financial year i'll now hand over to mike a vice president investor relations to present on the capital structure and market end of the business thanks andrew slide 10 is just a quick summary of the analysts currently covering the stock our key shareholders and our capital structure
spk07: We're very encouraged by the support of our significant shareholders and long-term gold funds who have continued to support the stock and our story. Our average trading volume remains at levels over 200,000 shares a day across all markets. We also maintain a tight share structure with just over 123 million shares outstanding. I would also like to point out that there's just one small typo on the slide that the cash position as of June 30th, 2022 is 18.2 million. And with that, I will now turn the presentation back to Chris to recap.
spk09: Thank you very much, Mike. We have a number of upcoming headlines worth noting here. Firstly, as we've done previously and we'll continue to do so, we'll provide the microgrid regular underground exploration updates and now also in addition to that our surface exploration results. We announced the positive results of the updated resource and reserve as Andrew has referred to previously. We expect more opportunities for improvement as we continue the full potential assessment to unlock latent capacity in the operations with a specific focus on the life of mine optimization now with the completion towards the end of this year in 2022. We also expect to be commencing and announcing the results of heritage surveys, which will have further positive impacts on the maintenance pushback project and make clearer the timing of the Hermes South project. And over the next 12 months, we have a pipeline of development and exploration catalysts to look forward to. Now, augmenting this is the team Andrew will lead as we intensify our focus on growth opportunities, both brownfield and external to our business. So we are focused on repositioning Plutonic for long-term success and unlocking shareholder value, and we encourage you to take another look at the opportunities. Thank you. With that, I'd like to conclude the presentation portion of the call. Operator, you can now open the line for questions.
spk00: Thank you, sir. Ladies and gentlemen, we will now conduct the question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two.
spk05: Your first question comes from Phil Kerr of PI Financial.
spk03: Good morning, everyone. Thanks for hosting the call today. Just two questions. First, I wanted to start off with the main pit, well, layback. Since delivering the PEA, it's been fairly quiet on that front. Could you give us an update of what advancements, if any, are taking place there?
spk09: Yeah, thank you very much. um we knew that the maker pushback is going to take some time to pull that together um you know more specifically in so far as getting the heritage surveys done so we can allow for appropriate rule program to augment um the results from the pa um as you know you know more than 80 of the reserves within the pa is only an inferred so we need to really um improve on that categorization in so far as the project is concerned we We very well organized now and structured to give this project appropriate attention. I think at this stage, I'd like to hand over to Andrew to give you further insight as to the progress on the main cut pushback project, which we believe will be a key mainstay supply for the current mill.
spk04: Andrew Knighton Yeah, thank you, Chris.
spk02: Like Chris mentioned, we have reorganized, so we've onboarded a very experienced studies who will lead not only this study but the collection of studies that come with our life of mine plan. We are progressing the heritage study conversation. We expect to have that completed sometime in the near future. In the interim, we're obviously looking at various options for the main pit pushback. There are a number of different scenarios that can play out there. We will be looking to optimise, I guess, the resource extraction through the life of mine And that'll give us guidance as we lead into, you know, further on the PEA as to what are the options we would like to explore in the future. So part of the main pit pushback, one end is a small cutback, another end is, on the extreme end, is a very large open pit, which I referenced on my previous slide. So there's a bit of a continuum in between those options. Phil? Okay.
spk09: So our first action was, the early entry into the main pit deeps, which is in fact mining a section of main pit pushback. It's just a much easier accessible area. And what we're seeing now is that the main pit deeps would provide all towards beyond Q1 of next year, which gives us a little bit more breathing space in Augmenting that would be recognizing that there's a sequence of open fits that will come online as we continue with the study on the main fit pushback. And that'll be Hermes, South, Central, Ball, et cetera, as we progress further. So there's a clear recognition that we need to fill the gap between now and the main fit pushback through other options as well.
spk03: Okay, that's great, Keller. I appreciate that. Just building on the exploration kind of discussion here, just in terms of a lot of the high-grade intercepts you've put out from the western and eastern mining fronts, where are you at with... the geologic model and having enough confidence to start to wrap those new high-grade zones into a mine plan and how much capital would be required. I guess given the fact that some of those zones are fairly close to current infrastructure, but just thinking above and beyond where the mine plan could be going here.
spk09: Yeah, excellent. I think that's a fantastic question. Andrew is a lot closer to this, and that's also one of the reasons why we brought Andrew in, is to run with our long-term planning, and specifically the life of mine, the life of business plan falls within his remit. So I'm going to hand over to Andrew to give you a more succinct answer to your question, mate.
spk02: Yeah, thanks. Thanks, Chris, and great question. We're actually actively doing that work right now. So In our previous update, we spoke about our approach to applying our geological all-body knowledge. That is giving us up-to-date feed, which we're updating our models on. So we're actually just in the midst of doing mine design for Indian Access. So for your question, we've got enough information there to actually build some reserves in there and start a detailed mine design process. That is part of our active life of mine study at the moment. In terms of further exploration or the geological piece, what we have developed is we've got a clear study of what areas are more than economic, what areas in the mine are marginal, and what areas of the mine currently don't have ounces to go and pursue. Given the work that we've done now, we'll have a clear plan of where we're going to direct our exploration and in-mine exploration activities. given prospectivity and how many additional ounces we need in the respective areas. So we've got a very sort of formalized, logical, and business returns approach to the way we're treating the life of mine plant.
spk03: Okay. So, you know, I guess on a timing basis, you know, is there the potential to start to you know, work these new zones or, you know, a couple of these new zones into the mine plan next year and, you know, into that underground sequencing?
spk02: Yeah, absolutely there is. There is even potential to pull one or two of the easier access areas into the plan this year. However, like I said, we're literally going through the optimization process at the moment. So that'll give us a clear signal of does it make sense to go in there right now or does it make sense to go in there after we've completed a bit more development in the areas and set it up a little bit more?
spk03: Understood. Okay, thank you. Good question. Thanks, Phil.
spk05: Ladies and gentlemen, once again, if you would like to ask a question, please press star 1 now. Mr. Jordan, there are no further questions on the phone lines.
spk00: Oh, pardon me. We do have a question from Ryan Hanley of Laurentian Bank. Please go ahead.
spk08: Just before the buzzer there. Good morning, and thanks for taking my questions. Just wondering, just on your CapEx for the quarter here, it looks like it came in at about $7.7 million all in, if I take sustaining and non-sustaining. Just wondering, given the heavy rainfall and maybe some limited access to the pit, do you end up having to take on extra waste stripping that might have been above what you had initially expected at the beginning of the year?
spk09: Yeah, I think that's a very pertinent question. I'm going to hand over to Paul to field that question for us. There's certainly been impacts as far as weather is concerned. He'll give you a little bit more insight as to what that impact is. Paul, over to you.
spk01: Sure. So just a quick update on, so of the capital that we spent in the quarter, just a little less than half was attributable to the main pit deeps project. And so you're right that the strip ratio was higher, not necessarily because of the rain, but just because of the original setup. The rain effectively delayed everything. from what our original anticipated entry into the main pit deeps was. But in our summary of operating results for the second quarter, all of the open pit mining was attributable to the main pit deeps. So you can see that the strip ratio was certainly higher for that quarter. And as I mentioned, we capitalized the main pit cost during that quarter. and we should be seeing commercial production later in August or early September from the main pit deeps when we call that.
spk04: Okay, perfect. Sorry, go ahead. Sorry, I was referring to Russell, whether you'd like to add anything. Not really.
spk06: More just to back up Paul, really. Yeah, the unusual rain event, we probably ended up with about six months of the annual rainfall all in the month of May. And you can imagine when we have those sorts of rain events, it really just slows down the development that we had in there. So it just slowed us right down for what essentially is a little bit of a pre-strip within the pit. Unfortunately, we couldn't predict that rain event.
spk08: Yep, okay, fair enough. And then I guess maybe just jumping back to the overall CapEx. So given there wasn't any change when you did the guidance update, is it safe to assume that the capital, I guess, spending per quarter will just decline over the balance of the year to keep you within that initial range that you had put out back in January?
spk01: Yes, at this point we haven't changed our capital range. guidance for the remainder of the year. So, I think that it still remains that target. So, I think your assumption is in line with what we would expect. Okay, perfect.
spk09: I think that we've really spent a lot of time and effort to appropriately guide what capital we need to spend. So, there might be some capital that we moved out or capital that we canceled to try and stay within those limits.
spk08: Okay, makes sense. Maybe just one last one for me, just kind of switching gears over to the underground side of things. I think the grade that you mined out in the quarter was about two and a half grams. And you'd already outlined the reasons and the challenges in the press release and earlier when you put out the operating results. But I'm just wondering, is that target of trying to get the underground grade or the stope grade, sorry, up to three grams? So that's still the kind of the end goal. And where do you see the timing on being able to hit that number given the delays you encountered in Q2?
spk04: Andrew, would you like to comment on that specifically?
spk09: Because in essence, why I'm asking Andrew to answer this question is it's primarily driven by the life of mine work that we're currently doing. We had a view today as to what the typical average grades in specific areas in the mine is, and it is significantly different in various areas. You know, where Timor is way up in the threes, these areas which are, you know, in the low twos. So it's really important to understand and appreciate the work that's going into the life of mine to get an assessment as to when we will see this great creeping up. But Andrew, could you give us more insight into that, please?
spk02: Yeah, thanks. Thanks, Kristen. Good question, Ryan. Yeah, look, effectively, there's a couple of knock-on effects here that we've seen in the first half. One is... as we have moved and dealt with absentees and development rates did slow down. So we weren't necessarily developing at the pace we wanted to towards some of the states we had identified. We have gone through a detailed review of our F2 forecast and have a plan back on track to lift the overall grade from the underground mine and the life of mine. I mean, the sole purpose of that is to deliver the best value plan and that includes you know, accessing the best value or underground early and bringing cash forward in the business. So we were looking towards the end of half two and definitely into FY23 for that grade to lift.
spk04: Perfect. That's helpful. That's it for me. Thank you for taking all my questions. Thank you.
spk05: Mr. Jordan, there are no further questions on the phone lines at this time, sir. Please proceed.
spk04: Mr. Jordan? Hi. I was on mute. Apologies for that.
spk09: Since there are no further questions, I would like to thank everyone for joining us today. While the second quarter was challenged, 2022 has presented some unexpected challenges and some of them are beyond our control. Certainly from a management perspective, we're trying everything we can to get back on track and to move up on that production growth trajectory that we've explained to the market already. That trajectory remains intact, albeit that it's delayed. um given the challenges that we've had now we will continue to advance the strategic projects necessary to reposition platonic for that long-term success and sustainable success specifically on the back of a quality resource and reserve that we've been able to pull together and the life of mine will give us much more insight as to what that would look like we expect that these improvements will drive a continued improvement in our financial performance over the course of this year and beyond. Once again, thank you everyone for joining us and have a great day.
spk00: Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. You may now disconnect your lines.
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