Fortitude Gold - Q1 2024

Transcript

Operator (participant)

Good morning, everyone, and welcome to the Fortitude Gold 2024 First Quarter conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, President and CEO, Jason Reid. Sir, the floor is yours.

Jason Reid (President and CEO)

Thank you. Good morning, everyone, and thank you for joining Fortitude Gold Corp's 2024 Q1 conference call. Following my comments and associated presentation for those who joined online, we will have a brief question-and-answer period. And joining me on the call today for the Q&A portion will be Mr. John Labate, our Chief Financial Officer. Let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties, as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments.

Forward-looking statements in the earnings release that we issued yesterday, along with the comments on this call, are made only as of today, May 8, 2024, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of non-GAAP financial measures referred to in our remarks in our Form 10-K filed with the SEC for the year ended December 31st, 2023. The first quarter of 2024 was successful on numerous fronts, despite the ongoing permit delays and approval to mine the high-grade gold deeper in the Isabella Pearl pit.

We had $8.2 million net sales, 3,983 gold ounces produced, $2.9 million paid to shareholders in cash dividends, $4.2 million mine gross profit, $661 total cash cost, $777 all-in sustaining cash cost, $3.6 million exploration expenditures, and a strong cash balance of $41.9 million. We continue to work with the permit agencies on numerous permits, with a focus on the Isabella Pearl deep permit and County Line permit to begin construction. We have permit submittals ready to turn in once others are received, like the Isabella Pearl mine plan boundary expansion to encompass the Scarlet target, which looks to be growing toward a potential second open pit mine on the Isabella Pearl trend.

We plan to submit that expansion permit as soon as we receive the IP deep approval. The agencies continue to be understaffed and overworked, but we are seeing positive movement, albeit slower than we would have liked. During the quarter, we aggressively explored our properties and had as many as six drills operating, focused on our County Line project, the Isabella Pearl Scarlet target, and East Camp Douglas. We intercepted from surface 90 ft grading 1.49 grams per ton at East Camp Douglas North veins, as well as five feet grading over one ounce per ton at the same target area. Our southern lithocap target at East Camp Douglas returned 40 ft, grading 2.9 grams per ton gold, where we believe we may have discovered our first feeder zone into the lithocap.

We also released successful drill results from our Isabella Pearl Scarlet North target, where we drilled 70 ft of 1.14 grams per ton gold from surface. The Scarlet North target, just 700 meters away from the processing facility, has great potential to become an additional open pit on the larger Isabella Pearl property. Subsequent to quarter end, we also released exciting drill results from the County Line property, including 16.76 meters, grading 2.19 grams per ton gold, 7.62 meters, grading 1.28 grams per ton gold, and 6.1 meters, grading 1.49 grams per ton gold. We see strong potential to continue to add gold ounces to County Line's mineral resource.

Overall, we feel very fortunate to have acquired this exceptional land portfolio of eight gold properties we own 100% in Nevada, now encompassing over 40,000 acres. Early in 2024, we announced the acquisition of two additional gold properties along the Walker Lane Mineral Belt, the Dauntless and the Intrepid properties. Our initial drill programs have made a gold discovery at Intrepid, and we are excited to share those results in a press release soon. We have also recently commenced our first drill program at our Dauntless property. Before we turn the call over to any potential questions, I would like to thank John Labate for his service the past three years as Fortitude Gold's Chief Financial Officer. John's last day with the company will be June 1st, after which he will be focusing on retirement.

I had the pleasure of working with John at a prior company and felt very fortunate to pull him out of retirement to join us at Fortitude Gold. John has done an incredible job over these past years and has been a positive asset to this company. We wish him all the best in retirement. I would also like to congratulate Janet Turner on her promotion to Chief Financial Officer of Fortitude Gold. I've also had the pleasure of working with Janet for several years, and I look forward to working with her in her new role as Fortitude Gold's CFO. With that, I would like to thank everyone for their time today on this conference call. And operator, if you can please open up the lines for a possible Q&A, and after you announce how they do that, I do have some written Q&A I will get to.

Operator (participant)

Certainly. Everyone at this time, we'll be conducting a question-and-answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone, to provide optimum sound quality. Once again, if you have any questions or comments, please press star one on your phone.

Jason Reid (President and CEO)

So as we wait for any call-in, have several write-in email questions. So the first one is from Ray Lieb. Are other companies getting permits approved in Nevada? What is the recent average wait time? Ray, I don't know that there's an average wait time, but I do know that we are not alone in our trials and tribulations on waiting for permits. I will tell you that someone, an associate, sent me an email this morning pointing out that a company, after three years, has finally gotten their EA for exploration permit, which is a lengthy time to get an exploration permit. But, I guess the long and short of it, Ray, is I don't have any average wait times.

I think what the industry is feeling with these long delays, if you will, with permitting, is a function that, as I speak to you today, both the Bureau of Land Management and the Nevada Department of Environmental Protection are both operating at about 50% staff levels. And so even if they were at 100% staff levels, the permitting process can sometimes be long and arduous, but at 50% staff levels, I think we're seeing the ramifications of that. Quite frustrating when I watch this administration send billions of dollars overseas, yet won't focus on our own country in this regard. The second part of your question, Ray, is, will there be a new resource estimate for Golden Mile and when? Possibly.

Ray, what we've been doing at Golden Mile is we always knew there were these vertical mineralized structures, but then we realized that there's also some horizontal structures. So we've been working really hard to understand the structures. So it is possible that we do an update, but that's been our primary focus, is just trying to understand the structural controls of that deposit. Another question you have, Ray, is East Camp Douglas a candidate for trucking concentrate to IP plant? As far as trucking anything out of East Camp Douglas, it is possible to potentially truck ore, or we could potentially truck gold-infused carbon. What we're seeing, and we're doing a battery of tests right now, we don't have all the results back, but we're seeing a lot of East Camp Douglas have oxide material.

There is some sulfide, and there's some transitional. So I guess on the oxide piece or portions, we could potentially truck, you know, depending on the grade, truck the ore down the mountain to Isabella Pearl processing facility, or we could build a facility at East Camp and then take and process gold to infuse carbon and truck the carbon like we plan to do at Golden Mile. So we're unsure yet, but I think it's very positive that we have oxide, high-grade oxide up there. Okay, and then you have an additional question by Ray Lieb. How much gold remains on the IP heap leach? It's probably close to what we announced earlier. We added some, we subtracted some. I think it's around 48,000-49,000 ounces.

John will correct me if I'm wrong on that, but that's more or less where we stand today. Another question by Phil Dinsmore. At what point, assuming no new permits until late 2024, maybe 2025, do you change dividend rate? Yeah, Phil, that's a great question. We're just gonna have to wait and see. I don't have a crystal ball on all the, what the future is gonna hold. But at this point in time, with our strong cash balance, we fully intend to, to continue the dividend throughout the year. If we get to the end of the year and it's looking like the permits are a long way off, yeah, we'll have to address that.

You know, what I'm hoping, Phil, is that we get to the end of the year, and we see a brighter future with a new president, and one that is gonna be more open to business here in this country. If that's the case, I think permits will start dropping in like they used to, under the previous administration, much faster and like they were before. Yeah, then we'll continue on. But if this administration gets in another four years and we delay, you know, they delay our permits for four years, yeah, the dividend will change. But I don't have a crystal ball. Another question from Steve Banker.

Frustrated by the share price, as I am sure you are, is this a permitting problem, or has the market miscalculated the underlying earnings power of the enterprise? Steve, thanks for the question. In my opinion, this is completely a permit issue. Had we received the permits in a timely manner, like we had previously, under the previous administration for several years, we would be building County Line as we speak. We would be mining deeper at our Isabella Pearl high grade as we speak. This administration's dragging their feet on permits for miners has caused the delays, and I think that ultimately has led to the share price being weighed, being weighed on. So, again, if those permits had dropped in, we would be executing on our business plan.

You know, we can only focus on what we can control, right? And so we've shown with this company, when we've received the permits in a timely manner, we execute on our business plan. And I would say we would continue to do that as long as we get our permits in a timely manner. So as far as miscalculating or calculating the underlying earnings power of this enterprise, our business plan of producing high-grade, low-cost ounces with a tight capital structure to pay a substantial dividend for three years running, outran our peers. So I think we have earnings power that's tremendous, as long as we have the ability to build mines.

So, no, I don't think it has anything to do with the market miscalculating anything other than the market is scratching their head, as we are, wondering why these permits are taking so long. Operator, do we have any call-in questions?

Operator (participant)

There are no questions in the queue at this time. Once again, everyone, if you have any questions or comments, please press star, then one on your phone.

Jason Reid (President and CEO)

Okay, we had a couple more write-in questions here. Ariel Dickens, what is going on with the recoverable gold that is on the margins of the heap leach? I remember hearing that there was a significant unleached gold still residing there, or am I wrong? Ariel, no, you are right. You are correct. We have put a couple cells of the margins of the heap under leach. We have a long way to go before we leach even a quarter of them, or half of them, or all of them, for that matter. But, right now, we continue to mine from Civit Cat, and we're continuing to leach from gold that's on the heap, and we are also starting and have been doing for a bit, starting to leach those sides of the heap leach pad.

So that is going on as we speak. Another question from Henry Sieradzki. I apologize if I pronounced your last name incorrectly. Is there anything that shareholders can do with respect to their elected officials to facilitate the processing of permits? Wow, Henry, you cued that one up for me. If you're voting for this administration, you're shooting your investment in the foot. I've said that before, I say it now, and I'll say it in the future. I just do not see any rational way, and somebody can justify voting for this administration and then putting their money in resource companies when they struggle to get permits under this administration. So, yeah, anything you can do, pay attention to how you vote, because it really does matter.

I think, let's see, another question came in from Ray Lieb. Has the majority of the overburden been removed from Civit Cat? We're mining through Civit Cat, and there was a small resource in the initial resource over there, Ray, but we also intercepted some mineral outside of that resource. So we're looking to see if it's economic to chase, but no, we're still mining at the Civit Cat. So my answer to that is, the overburden hasn't been completely removed because we're mining overburden, or we're mining waste and ore over there as we speak. Okay, I'm not seeing any additional questions. And if we don't have any phone questions, operator, let's confirm that.

Operator (participant)

Absolutely. Your, your first question's coming from Steven Moken. Your line is live.

Jason Reid (President and CEO)

Okay.

Speaker 2

Jason, tell me, if theoretically, you started mining without the permit, what could possibly happen to the company?

Jason Reid (President and CEO)

Oh, we would get shut down in a heartbeat, and we would never do that.

Speaker 2

Wouldn't you be able to litigate that in the court system and tie it up for many years?

Jason Reid (President and CEO)

We would be tied up for many years, but they would shut us down in a heartbeat. I would never do that. Everything I would ever wanna do is to be legal and on sides with the permitting agencies.

Speaker 2

No, no, I-

Jason Reid (President and CEO)

I think-

Speaker 2

I understand all that, but, you know, they're jeopardizing your business. It, it's like they're shutting you down, in other words, for no reason at all, and, not getting the staffing in there that they need or speeding up the process. I mean, you know, all you have is what's in the leach pad, and that's not gonna last long.

Jason Reid (President and CEO)

Yeah. Well, again, what we are focused on is what we can control. So what we do have is the ability to drill on several of our properties, and we've been doing that and getting excellent results. And so whether it's adding ounces over at County Line, whether it's this new discovery we just hit over at Intrepid, whether it's continuing to hit gold over Golden Mile and, or excuse me, East Camp Douglas, excuse me. All that is exciting for our future. They, the regulators are not giving us any indication that we're not going to get the permits, even.

So it's not a situation where they're, they're, I believe, you know, saying, "Hey," we haven't heard anything saying, "You're not gonna get them." They are so understaffed, and I have to imagine we're kind of a smaller fish when you look at the Newmont and Barrick and the bigger companies that operate in Nevada. I have to imagine they get more attention than we do, but even, you know, other large companies we've heard of are struggling to get permits. We're gonna get them, at this point, it's just a matter of when, so we'll just weather through this. I cannot imagine they're gonna stonewall everybody into oblivion, Steven. They might, but, you know, we're, you know, I just, I don't think that's gonna happen.

Speaker 2

Yeah, but here's my [crosstalk]

Jason Reid (President and CEO)

Yeah, go ahead.

Speaker 2

Excuse me. Here's my concern, however. You'd had mentioned more or less that, you know, one of your associates had called, and you spoke with him, and he said that he finally got, in other words, some sort of permit after three years. That's my, in other words, fear, in other words, that going forward, could you wait three years, a year, or a year and a half for permits?

Jason Reid (President and CEO)

Well, Steven, that's what's weighing on our stock is, you know, our business plan had always relied on permits dropping in a relatively ordinary fashion. And under the previous administration, they did, and we executed, and we all, as shareholders, enjoyed the outcome of that. Under this administration, everything has changed, and permits are a struggle, and they don't wanna staff the BLM. That is by design, I truly believe. You know, why not take one of these billions that they're just throwing overseas and put it to this country? Fully staff, and then we'd be off and running. They could choose to do that. They're not. So this is by design, but that's what's weighing on the stock.

Now, having said all that, we have, fortunately, a lot of ounces on the heap leach pad, and, you know, we're, we're gonna be producing for years, even if we didn't mine for a couple years. So-

Speaker 2

Yeah, but the thing is [crosstalk].

You're not gonna be producing much. What are you gonna get? 4,000-5,000 ounces a year, if, if that? I mean, you know, it's not-

Jason Reid (President and CEO)

Okay, so, no, good question, Steven or good point, Steven, but look what we did last quarter. We didn't, we did just shy of 4,000, and yet the mine made $4 million. So, you know, that's not an ideal situation, but look, look what we did. And in doing that, we had six drills turning, and we had tremendous exploration. So as the year goes by, we'll cut back on our exploration as far as costly drilling to manage our cash better. But look, Steven, I fully expect, we fully expect to weather this storm. And, you know, I keep my fingers crossed that we'll be dealing with a different administration, which, you know, the previous administration, they were looking to streamline. They were trying to move towards streamlining, truly streamlining the permitting process.

So while I understand and hear your frustration, Steven, we're gonna be around for several years, and if all we can produce is 4,000 or 5,000 a month, like we've been doing, look what we just did. It's not the worst case in the world to weather this storm. If this current administration gets in for another 4 years, it's gonna be a much tougher, tougher go of it. But I hear you. But coming back to what you originally said, we would never go just mine it. That would be the quickest way they would come shut us down, and then we wouldn't wanna get in a suit with no production. And, you know, suing the government, that, to me, is never a good path forward. So while, again, Steven, I share your frustration.

Speaker 2

Just, you know, my thinking process is more or less, you say, you know, yeah, about, in other words, not being able to mine without the permit. I understand that you wanna do everything in a legitimate, legal way, but what do they have? Scouts that they send out to your Isabella Pearl mine and see if you're digging deeper than what you're supposed to dig up? How do they find that out? How does anybody ever find that out, if a miner-

Jason Reid (President and CEO)

Oh, they make site visits on a regular basis. Well, there's so many regulators that make site visits, different factions, you know, whether it's MSHA, whether it's the BLM, NDEP, they would know, and-

Speaker 2

So they have resources to send out scouts, but they don't have enough resources to give you your permits. It just makes no sense.

Jason Reid (President and CEO)

Well, it makes sense under this administration, Steven. This administration is very anti-mining and has been from day one. The day that this president got in office, that very day, he put a stop on all permits, whether it's in wood, oil, gas, mining, whatever, for 90 days, saying nobody getting their permits. That was a shot across the bow. So again, anybody who fills in the little dot under the ballot for this administration is voting against this company and any other resource company for that matter. So that's what you can do. Yeah, get the word out to associates who may be considering to voting for this administration, and if they do that, it's gonna hurt our- It's gonna make my life tougher. I believe we'll still weather the storm, but it's just gonna be much tougher.

Speaker 2

There's absolutely no idea on your part when these permits could drop. You have not even a clue. You don't have an insider that you could talk to over there at the BLM and then get-

Jason Reid (President and CEO)

Well, we talk to them, yeah, we talk to them all the time. For instance, to mine deeper in the pit should have taken 90 days.

Speaker 2

Mm-hmm.

Jason Reid (President and CEO)

It's not a major modification. The pit boundary didn't get wider. We're only going deeper. We're not getting into any water. So it really was a routine expansion, if you will. Whether it's turnover in staff, that the new lead needs to get up to speed, and then they leave, and then the new lead needs to get up to speed, or them changing course and saying, "Okay, now we wanna do this or add it to this permit." I mean, there's always something. So we just continue to work with them. We offer to help. We offer to actually hire, at our cost, somebody to work in their office, and the red tape around that is astounding. It just shows me how inefficient governments are. We are asking to help staff them, and they still.

It, it's unbelievable, really. I'd be jumping at that, right? But, they haven't taken us up on it yet. So we're doing everything we can. Yep, go ahead. Do you have a question?

Speaker 2

Yeah. Basically, in other words, what you just told me, in other words, to me, if I, you know, spoke to an individual and gave them the information you just gave them, it's a five-minute decision process. It's not rocket science.

Jason Reid (President and CEO)

Well, we've turned in. There's a routine that happens about every three years or five years, a routine permit update you have to do, you have to go through. We turned that in, and they didn't look at it for a whole year. I mean, that's the kind of delays that's happening. Again, they're understaffed. I'm not taking shots at the individuals, at these organizations, either of these. They're hard-working people, arguably overworked and probably underpaid. But, you know, it's pretty tough when you're working at 50% staff levels. So, yeah, if we have administration that actually, instead of gave away so much of our money and deployed it to this country, we could staff, and we would be off and running.

But yeah, Steven, I, you know, I appreciate your comments, but we will never do anything that wouldn't be on-site with the regulators. It's just not something we would ever do.

Speaker 2

No, no, I said, listen, don't get me wrong. I wouldn't want you to. I just said, hypothetically, the-

Jason Reid (President and CEO)

Yeah

Speaker 2

Theoretically, in other words, what would happen?

Jason Reid (President and CEO)

Yeah.

Speaker 2

I'm just trying to understand that whole process and understand why it's taking so long. I mean, I was on your last conference call, and it sounded like within a, you know, a couple of weeks, you were gonna have those permits dropped, and-

Jason Reid (President and CEO)

Sometimes they say things that let us, let us believe that, and then they'll change course. And so you're not hearing me say that in this call. You're not hearing me say that anymore.

Speaker 2

Yeah, I know.

Jason Reid (President and CEO)

I'm not pontificating on any timeframe. I've been led to believe it's gonna drop any day, and then it doesn't.

Speaker 2

Mm-hmm.

Jason Reid (President and CEO)

So, we're just gonna dial back our optimism. It's gonna—they're gonna drop in. I just don't know the timing, and that's where we land. But I cannot emphasize enough what has changed. The previous administration, we got our permits in a timely manner. We executed on our business plan. We have mines to build. We have the ability to build them. We have the team and the money. What has changed? This administration, that's what's changed. It's simple, Steven. That's simple.

Speaker 2

I mean, I have to wait for Trump to get in, in other words, for everything to start moving along on your end. Another question. In other words, I know you have $41 million in cash. You're gonna reduce, in other words, your exploration going forward. What level would that cash need to drop to before you do something with the dividend?

Jason Reid (President and CEO)

Yeah, you know, I don't know, Steven. You know, it really depends, trying to look out in front and, you know, we get to the end of the year, and if we don't have permits, it's gonna be, it's gonna be decision time-

Speaker 2

Mm

Jason Reid (President and CEO)

On what we can do and where we stand, and you will see us over time throughout the year. The longer this takes, the more we'll dial back our exploration, which is unfortunate. And as much as we're, you know, Al and his team are knocking it out of the park. I mean, we're hitting gold almost everywhere he's drilling, so, you know, it'd be great to continue that on, but, you know, under these permit delays, we're gonna have to dial that back. So we'll just have to wait and see, but we're in a very strong position. And again, while it's not ideal cash flow, you know, we produced just shy of 4,000 ounces, and the mine made $4 million. So, that, you know. We will be producing gold for quite some time.

We have a lot of gold on the heap, and we'll keep doing this. But we'll just be managing cash, and we'll make those decisions when we get down to it. But let's hope we're not waiting to the end of the year for permits to drop in.

Speaker 2

I hope so. I hope that, you know, things change, for the company and always going forward because it's, you know, very annoying, in other words, you know, as a shareholder, in other words, to, you know, sit and wait, in other words, for something like that, in other words, to happen when it seems like it's such a simple, easy, you know, process to.

Jason Reid (President and CEO)

It is. Steven, it is. Again, it matters how you vote. It's as simple as that. And yeah, I don't know what else to say about that. You know, I, we lived it with a different administration that was pro-mining, and now we live under one that's anti. So it matters how you vote.

Speaker 2

Well, I voted for Trump when he got into office, going back a number of years ago, and I'll vote for him again. So that's one vote.

Jason Reid (President and CEO)

Okay, well, thanks, Steven. I appreciate the-

Speaker 2

All right

Jason Reid (President and CEO)

The call.

Speaker 2

Thank you, too, Jason. Have a good day.

Jason Reid (President and CEO)

Hey, you too.

Operator (participant)

Thank you. There are no further questions in the queue.

Jason Reid (President and CEO)

Perfect. All right, Matthew, thank you for helping us on our conference call today, and thank you, everybody, for listening. We appreciate it. We look forward to updating you next quarter. Thanks for joining the conference call.

Operator (participant)

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.