Allied Gold - Earnings Call - Q1 2025

Transcript

Operator (participant)

Thank you all for joining us this morning. Before I turn the call over, I need to advise that certain statements made during this call today may contain forward-looking information, and actual results could differ from the conclusions or projections in that forward-looking information, which include but are not limited to statements with respect to the estimation of mineral reserve and resources, the timing and amount of estimated future production, cost of production, capital expenditures, future metal prices, and the cost and timing of the development of new projects. For a complete discussion of the risks, uncertainties, and factors which may lead to actual financial results and performance being different from the estimates contained in the forward-looking statements, please refer to Allied Gold's press release issued yesterday evening announcing Q1 2025 operating and financial results.

I would like to remind everyone that this conference call is being recorded and will be available for replay later on today. Replay information and the presentation slides accompanying this conference call and webcast are available on Allied Gold's website at Alliedgold.com. I will now turn the call over to Daniel Racine, President of Allied Gold. Please go ahead.

Daniel Racine (President)

Good morning, everyone, and thank you for joining us. I wanted to take this opportunity to provide an update on operational improvements, project progress, sustainability initiatives, and business in our business in general. Peter, Jason, and the rest of our senior management teams are here, and they'll be available during the Q&A at the end of the presentation. Before we start, let me remind everyone that we will have our shareholders' annual general and special meetings at 11:00 A.M. today, available online or in person at the Conservatory Lounge at 150 King Street West on the 16th floor. It will also be available for replay, and the details are available on our website. Peter will be officiating that meeting. I'll start by highlighting our strong start for 2025, building on a strong finish in 2024, and the operational improvements we have been working on.

Production for the quarter came in slightly above what we planned, at over 84,000 oz at an all-in sustaining cost of $1,811 per oz sold. We are executing on our growth strategy. We continue to improve and optimize our operation, and we are advancing our transformative project at Kurmuk and Sadiola on schedule and on budget. Our balance sheet remains strong, ending the quarter with a cash balance of $232 million, which was further improved with Allied Gold's equity offering. We have improved our sustainability framework and performance with slightly better health and safety metrics in Q1 compared to the same period last year. We've made strategic leadership changes, including completing the transition of our Chief Exploration Officer role, and we continue to enhance our technical and management capability at the site.

Progress continues toward our New York Stock Exchange listing, for which we're aiming for mid-June, which should enhance trading liquidity and index eligibility. At Sadiola, we are advancing strategic arrangements, including power supply alternative and partnership, while we are also in discussion with the local authorities to pursue potential new opportunities. Finally, as this happens subsequent to the quarter end, we've recently extended our gold price protection program with a net zero cost collar. The program ensures a minimum price of $3,048 per oz and a full upside to $4,000 per oz on gold production. It is approximately 1,500 ounces per month from June 2025 through the end of March 2026, equaling a total of 155,000 oz. This represents approximately 75% of the total production in that period.

Putting this in place is consistent with advice we've received from our shareholders, and it ensures robust margin and cash flows as we complete the development of Kurmuk. Financially, we delivered strong results with revenue of over $346 million and operating cash flow of nearly $145 million. Adjusted net earnings were $0.14 per share, up significantly from last year. As I noted before, our cash balance at the end of the first quarter stood at $232 million, which was augmented with an equity offer in April for approximately $65 million in gross proceeds. In summary, a strong start of the year and making good progress in all areas. I will now hand the call over to Johannes to discuss our operating performance.

Johannes Stoltz (COO)

Thank you, Daniel, and good morning, everybody. Indeed, we have a good start to the year, and I feel very proud of the team's performance and achievements, in particular the improved safety metrics and leading indicators compared to last year. We remain committed to improve our safety and our sustainability performance. At Sadiola, production was nearly 45,200 oz, with higher grades as planned and underpinned by our contribution from Korali. We have also upgraded the plant instrumentation and improved automation capabilities to reduce cost and improve our plant performance. On cost, we achieved AISC of near $1,800 per oz, in line with our expectations despite higher gold price and related higher royalties. A note in our disclosure: during the quarter, we have priority to Korali maximize cash flow given its higher grade and higher recoveries.

We've expected contributions for Korali to reduce by the third quarter as other oxide sources are put into the production line, like Sekekoto West and Tambali. Further, in the fourth quarter, we expect to have the first expansion phase in production, which would allow us to produce higher grade fresh rock and establish a platform of production between 200,000 and 230,000 oz per year. Bonikro produced near 19,700 oz, in line with plan and driven by a strong mill throughput. Cost performance was in line with expectations, with AISC of $1,582 per oz. We continue to advance the stripping activities, which will expose higher grades in the latter part of the year, which we expect to drive strong production in the fourth quarter and underpin the performance in the following years.

Akbal delivered nearly 19,100 oz, benefiting from higher grades in some of the areas and improved plant throughput. Our team continues to enhance productivity, grade control, and sequencing, aiming to increase grades in the future quarters. Across the portfolio, we are executing well and on track towards guidance. If I can step over to slide five and the progress at Kurmuk. Moving to Kurmuk, the project is progressing well with construction on schedule and budget. Safety is also a priority in the project, and we are very proud to share that we accomplished 1 million man-hours during the quarter without lost time in the project. Mining activities started in the first quarter ahead of schedule, using our pioneer fleet and established access to Dish Mountain and progress in Ashashire.

We have our team in place, and we are building our team in anticipation of the main fleet arrival, which is en route and shown at the top left picture. As you can see on the right slide, we are busy advancing concrete activities in the plant area with the CIL circuit, crushing, and ball mill foundations completed in the quarter and the SAG mill foundation poured recently. Steel fabrication in progress is progressing well, and main equipment transportation to site is also ongoing and progressing according to plan. The main water dam was almost complete, as you can see at the bottom left image, and other infrastructure works are advancing well. We spent nearly $54 million in the quarter, and we expect to see a ramp-up of capital expenditure quarter over quarter as construction activities continue to ramp up.

We remain on track for substantial mechanical completion in late 2025 and the first gold in mid-2026. If we step over to slide six and the guidance, I do not propose to go over all the figures on this slide as it has been disclosed before, but I will focus on key messages. We are well positioned to meet our annual production guidance of 375,000 to 400,000 oz. At AISC, between $1,619 and $1,790 per oz. As we discussed, we expect a 45%-55% split from the production first to the last quarter and the first half of the year to the last half of the year. Q4 will be our strongest quarter, mostly driven by Sadiola expansion and the increased grade from Bonikro. As noted before, we are on track to well achieve our targets and deploy capital in the growth projects.

To explain how the tracking against the exploration plan, I'd like to pass over to Don.

Don Dudek (Chief Exploration Officer)

Thanks, Johannes. Good morning, everybody. As an explorationist, I'm quite pleased that at Allied, exploration is central to our growth. To that end, exploration has been active at all three of our project areas with approximately 56,000 m of drilling, and we have extended mineralized zones in all three project areas. At Sadiola in Mali, we are focusing on low-cost ounces to boost near-term cash flow. In the first quarter and continuing likely for the rest of the year, we are continuing to test a specific 10-km-long geological trend that we are already setting up to mine at the southern end at the Sekekoto Oxide Deposit. Further north, we are getting encouraging results from a 2.2 km part of the trend that is just south of the past-producing FE2 gold deposit. We are also testing the 1.75-km-long fresh rock Tambali deposit with good results.

In Côte d’Ivoire, we completed an infill and expansion drill program at our new Umay Discovery. We’re adding new oxide gold resources on the Hiré Mine site and continuing to detail the down-dip portions of the Agbaou Deposit Group. In addition, we are chasing specific exploration targets outside of the mine compensation areas that we hope will lead to new discoveries in the future. In Ethiopia, exploration in the first quarter focused on the Dish Deposit area, where we worked to upgrade inferred mineral resources and test extensions to the mineralized zones that could result in changes to the pit envelopes. Drill testing and trenching was also carried out at the south end of the 7 km long Sengae target, and initial results at the southern end look quite promising.

Work in Q2 and for the rest of the year, we'll continue to focus on Sengae and further drilling at our Ashashire Deposit, where approximately half of the Kurmuk reserves lie. We have quite a few high-priority targets that need testing and validation at all three project areas and anticipate a busy next three quarters. I'll now pass the baton back to Daniel.

Daniel Racine (President)

Thank you, Don. We have several major milestones in 2025 and Q1 next year. We expect to be listed in the New York Stock Exchange by mid-June, which we expect will increase trading facility, liquidity, investor access, index inclusion, and ultimately better alignment between our market value and the inherent value we see in the company. We will provide an update on Kurmuk and Umay in Q3 and late 2025, respectively. In terms of the project, we will start production from Sadiola phase one in the fourth quarter of this year, and the first gold pour at Kurmuk is expected by mid-year 2026, which is a little over a year from now. I think it's clear to see that we have a lot of positive things happening as we are executing on our strategy, and we are very excited about our progress across the company.

With that, I'll hand things to Peter, our Chairman and CEO, before the Q&A.

Peter Marrone (Chairman and CEO)

Thank you very much to all the members of management and ladies and gentlemen. Just to recap, a fortified balance sheet, strong cash balances, strong EBITDA and cash flow, taking actions to protect our margins, including the gold price protection program of this company, and we have manageable CapEx for the balance of the year and into next year as we complete our growth phase. We have improvements in management and enhancements in leadership. This is a people business as much as it is about assets, and this has been an important issue for us and for me personally to professionalize our management and especially at an operations level as much as at an executive level. We are seeing improvements to operations. We have established strengthened in-country relationships, including with governmental persons. This is true in all jurisdictions in Mali, Côte d’Ivoire, and in Ethiopia.

We are well advanced with our growth projects. Sadiola's expansion is expected to be completed by the end of this year. We expect mechanical completion, as Daniel mentioned, at Kurmuk by the end of the year, and gold production, which is now just about one year from now, so literally just around the corner. As Johannes mentioned, we have begun mining for the global stockpile and pits that are opened by about this time next year. We've established strong strategic alliances and relationships with potential partners. We've demonstrated value in our assets both in market and with those strategic partners and alliances. We've improved our liquidity. Daniel, thank you for reminding everyone that we expect to be listed on a senior exchange, the New York Stock Exchange, before the middle of June. We've advanced that very well.

At our annual shareholder meeting that I will be officiating in a couple of hours, I encourage attendance. There will be a brief presentation. It will give us a chance to tie together what Q1 means to the bigger picture and what the bigger picture looks like. I think shareholders will be pleased with what we have to say. We look forward to seeing you there, and if not in person, attending on our webcast. Ladies and gentlemen, let's open it up to questions, please.

Operator (participant)

Thank you. We will now take questions from the telephone lines. Please press star one at this time if you have a question. You may cancel your question at any time by pressing star two. Again, please press star one at this time if you have a question. There will be a brief pause while the participants register. We thank you for your patience. The first question is from Carey MacRury from Canaccord Genuity. Please go ahead. Your line is open.

Carey MacRury (Equity Research Analyst)

Hey, good morning, Peter and team. Just a question on Sadiola. It sounds like you're continuing your discussions with Ambrosia on the 50% sale of Sadiola, but you mentioned an alternative proposal. Just wondering if you can give a bit of color of where those discussions land or stand and also what the alternative proposal potentially looks like.

Peter Marrone (Chairman and CEO)

We remain committed to the Ambrosia deal for the reasons that we have given. We are continuing to advance those discussions. As we said in our disclosure, Carey, we are now individually and collectively discussing with the Malian authorities the things that we need from them for the purposes of approvals that we need for the purposes of transfers and the like. It is the most advanced of the transactions that we have, but as we have been saying consistently, this has—I am not going to refer to it as a competitive process, but it is a process where there have been several interested parties. We felt obliged, as our Board of Directors was presented with a proposal, we felt obliged to say that there is a proposal that has been presented. I will not go into the detail because at this point, it is nowhere near as advanced as Ambrosia.

What I would say is that they do provide a logistics solution. They are interested in a purchase of the mine. It would be a smaller purchase, but on comparable valuation. Again, as I said, the starting point here is, while we feel obliged to say that this is a process for us, while we feel obliged to say that there is the potential for others. As I said a few moments ago, there is recognition that there is value in our assets, that there is something that others see as opportunity, and hopefully our shareholders will see as opportunity and new investors will see as opportunity. We are continuing to advance the Ambrosia transaction.

Carey MacRury (Equity Research Analyst)

Thanks, Peter. The dividend in kind of 8,000, roughly 8,000 oz to the government, is that something you expect to occur in the future, or is that sort of a one-time event?

Peter Marrone (Chairman and CEO)

No, we see that as a one-time event. Carey, it was something that was in discussion as part of the process last year when we were looking at the large-scale mining permitting process relating to Korali-Sud. So we see this as a one-time occurrence, not something that would recur going forward.

Carey MacRury (Equity Research Analyst)

Okay, great. Maybe just one last one. Reuters was reporting yesterday a security incident at Mali regarding your mining contractor. Just wondering if you can provide any color on that.

Peter Marrone (Chairman and CEO)

Starting point is we don't know if it was regarding our mining contractor. We presume so, but I don't know that. We don't know that this relates to Sadiola and equipment coming to Sadiola. We believe that it could be. Look, we've discussed with our mine contractor an upgrade to equipment and bringing in new equipment. We're troubled with several things, though, that don't relate to the company or to our mine contractor. We've got these big bright yellow trucks, and they're on roads, being driven on roads, not on flatbeds. It's sort of like painting a big bullseye. We don't know what the security situation was. We don't know if it was a criminal element. We don't know if it was something else. What we do know is that the security forces, so the government forces, reacted very, very quickly.

Clearly, there was an element of protection that was involved. We are looking at this from the point of view of, while Sadiola was mentioned, it really does not affect their operations. It was hundreds of kilometers away, and we are still struggling to understand why it is that the Caterpillar supplier was providing these trucks on roads that are not meant to be roadworthy rather than the way that they usually should be delivered, which is on flatbeds and with a little bit more obscurity and a little bit less notoriety.

Carey MacRury (Equity Research Analyst)

All right. Thanks, Peter. That's helpful. Cheers.

Operator (participant)

Thank you. Once again, please press star one if you have a question. The next question is from Mohamed Sidibé from National Bank. Please go ahead. Your line is open.

Mohamed Sidibé (Equity Research Analyst)

Hi, David and Peter and team. Thanks for taking my question. Just to follow up on the alternative proposal, one of the main benefits you had highlighted with the Ambrosia deal was the potential strengthening of the relationship with the Malian authorities given the UAE's presence in the country. How do you weigh that compared to the alternative proposal as you're looking at both options and advancing discussions in Ambrosia?

Peter Marrone (Chairman and CEO)

Yeah. The line was a bit difficult for us to hear, Mohamed, but I think we caught your question. Lots has changed, and I would say somewhat positively. All the proposals that we have considered, all the parties with whom we have engaged, would be geopolitically supportive of what we already have in the country. I want to make sure that that's clear because that was an important part of our consideration to this, which is, do we get some geopolitical support coming from a partner that can supplement the things that we are already doing and we think doing reasonably well in the country? In the context of this alternative proposal, yes, that would be true in that case as well. That is why our Board of Directors felt that it was important to consider it and to engage in those discussions.

Something else is important, and I want to make sure that it's clear. We did say it in our disclosure. There are changes taking place, and those changes taking place in the country provide some encouragement. The country is looking for investment. They're looking for private investment. That's been made very clear to us generally, but to me specifically. I was there a few weeks ago in Bamako, and that was a very clear message. They're not looking for aid. Sorry, that message is not coming only from governmental parties, but it's coming from other countries, ambassadors of other countries. They're not looking for aid. They're looking for investment. They're looking for private investment. In the context of that, they're also looking at what are the power solutions that can fortify and improve the grid.

Very similar to Ethiopia, where they've developed the idea of building up the infrastructure, including the power infrastructure, to support investment and to support commerce. I think that the Malians are coming to a similar conclusion. What we've done is we've begun a discussion with the Malian authorities on, can we help provide a solution? We are familiar with third-party providers of power. Can we be a sponsor of bringing one of these companies into the country where we would be a minority participant? We would be a broker in putting a deal together, given our familiarity with the parties in the country and with the players in the industry, and where we would also then take an offtake. We would have a power purchase agreement that would underpin the engagement in the country of these power suppliers. These are the things that we're continuing to advance.

Again, I want to give a caution that these are all positive things, encouraging things, but there are still challenges in front of us that we need to deal with and that the country needs to deal with. We are encouraged with some of these developments in our discussions relating to those developments.

Mohamed Sidibé (Equity Research Analyst)

Thanks a lot for that, Peter. Sorry about my line. Hopefully, I can come in a little bit better now. Just to follow up on that, when do you expect to give our Canadian update on the advancement or the conclusion of either Ambrosia or the alternative proposal? Thank you.

Peter Marrone (Chairman and CEO)

We're now, as I said, individually and collectively, now in discussions with the Malian authorities on several things that will have to occur in the country. It's difficult for me to say how long these things take. It could take several days and several weeks, and it could take a little bit longer than that. I would anticipate that we're near the, well, close, I guess, to the middle of the month. My hope is that by this time in June, we're in a position to be able to say, this is the course that we are taking, and this is how we've advanced things. Relating to Ambrosia, we've completed the arrangements and concluded the deal.

Mohamed Sidibé (Equity Research Analyst)

Great. Thank you, Peter. Just one final question on the operations of Sadiola. Given the fact that you mined a little bit more ounces from Korali-Sud in Q1, how do we expect that to impact grade into Q2? Could that be lower? Just prior to the phase one expansion, should we expect to slightly increase quarter over quarter at Sadiola or maybe any color on that? That is my final question. Thank you so much.

Don Dudek (Chief Exploration Officer)

Mohamed, thank you very much. There's no impact on quarter on quarter. Although we mined a little bit more ounces from Korali-Sud, it's consistent with our guidance and our budget. Your second question regarding the expansion of Sadiola, we have alternatives on the table that could potentially slightly increase production, but that's highly dependent on several aspects on logistics. So far, we're in line with production and for the budget and on guidance.

Peter Marrone (Chairman and CEO)

Mohamed, let me add to that. The Korali was always intended as a bridge to the expansions at Sadiola. The full load of the 2023 mining code on Korali and the ownership construct of 65%, 35% versus Sadiola proper, which is 80/20 and the derogations that we have on royalties, means that the cost load, the royalty load is heavier on Korali. It is better grade.

We took advantage of maximizing margins by producing more ounces in Q4 and Q1 coming from Korali. Our objective is to find other bridges as well. As Don mentioned, we have several of those. We think that there are significant opportunities within the main tenements. We have talked about Sekekota West as 12, several of the others that are shown in the illustration in our presentation. These are oxide ounces. Those oxide ounces will make a meaningful difference to the production of Sadiola, both during this period as we complete the phase one expansion and then with the phase one expansion. Remembering that the phase one expansion, until we get to phase two in a couple of years, the phase one expansion still requires 40% of the feed coming from oxide sources.

The more of that oxide source we find, that's a hot knife through butter. That's exactly the type of ounces that we want to put through the plant.

Mohamed Sidibé (Equity Research Analyst)

Thanks for that call, Don and Peter.

Operator (participant)

Thank you. There are no further questions registered at this time. I will turn the call back to Peter Marrone.

Peter Marrone (Chairman and CEO)

Ladies and gentlemen, thanks to management first for an excellent first quarter and for the presentation. Thank you to the participants on this call. Thank you in advance to our shareholders. We encourage you to attend our shareholder meeting either in person or on the webcast. That webcast will be available for replay as well for those who cannot attend. We look forward to seeing you there at 11:00. Thank you.

Operator (participant)

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you.