i-80 Gold - Earnings Call - Q4 2024

Transcript

Speaker 3

Hello, and thank you for joining us for i-80 Gold's 2024 Fourth Quarter Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remark, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, then the number two. Thank you. Before we begin, please note that some of today's comments may contain forward-looking statements which involve risks and uncertainties. Actual results could differ materially. I ask everyone to view Slide 2 of the slide presentation, which is available on i-80 Gold's website, to view the cautionary notes regarding forward-looking statements made on this call and the risk factors related to these statements.

Today's speakers include Richard Young, Chief Executive Officer of i-80 Gold, and Matt Gilli, President and Chief Operating Officer, and Ryan Snow, Chief Financial Officer. Following today's formal presentation, we will open the call to your questions. Now, over to Richard.

Speaker 1

Thank you, Operator, and good morning, everyone. Moving to Slide 4. During the fourth quarter, we announced a new development plan for our portfolio of three underground and two open-pit gold projects. In February and early March, we released summarized key operating and financial terms for each of our five projects. We have now filed the preliminary economic assessments for those five gold projects. However, you will not see on our website five PEAs. Under both Canadian and U.S. regulation, you can only have one preliminary economic assessment per property. We have combined both the open-pit and underground at Granite Creek into one technical report, Ruby Hill, which includes Archimedes, and Mineral Point is a second.

The third is Cove, and the fourth technical report covers off Lone Tree, which includes our large gold resource, which is currently not in our development plan, and then the process facilities, including the autoclave, which are. Because we're now a U.S. registrant, we have to file these technical reports under both U.S. and Canadian regulations. Over the past 12 hours, we have filed four SK 1300s as required under United States regulations, as well as four NI 43-101 reports as required under Canadian regulations. The U.S. reports are available on EDGAR, and the Canadian reports are available under CEDAR Plus. Now, the key operating and financial terms are identical across both regulatory frameworks. The forms of the reports are largely similar, apart from a few minor changes or differences. Updating the PEAs was a positive step in three respects.

First, improving our disclosure and clarity around our development plan. Second, highlight the potential value of the portfolio. Third, it's pivotal as we put together our recapitalization plan. I want to congratulate the technical team for completing the work in such a short period of time. The new life and mine plans for each project have allowed us to define an executable strategy with a clear path towards producing 500,000 ounces of gold by the early 2030s. It's clarified the capital requirements and demonstrated the significant value that's embedded across our gold portfolio. At our March 6th Investor Day, the team also underscored the extensive untapped value across that portfolio. In summary, we have a pipeline of new projects to permit and bring online over the next five or six years. We're confident the activities can be staggered and are manageable.

We believe the cash flow models that have been presented in these initial studies are achievable and expect them to further improve with the work the team will complete in between now and the anticipated release of the feasibility studies later this year and early next year. Moving to Slide 5. Life of mine valuations based on the recent published PEAs for all projects are shown at both our reported gold price assumption of $2,175 per ounce, as well as at $2,900 per ounce. Combined, these projects indicate a combined net present value of $1.6 billion at $2,175 per ounce and $4.5 billion based on $2,900 per ounce. As we discussed our Investor Day, these studies represent the base case scenario, with expect we expect to increase the value of these projects through additional drill programs aimed at extending the mine lives.

A strategic change to our development plan was the addition of the autoclave refurbishment, driven by changes to our existing coal milling agreements, the long-term potential value of our Granite Creek underground project, and the simple economics of the autoclave. The anticipated capital spend for the refurbishment is now included in the recapitalization plan. Turn to Slide 6. As discussed on our Investor Day, the decision to include the autoclave refurbishment in the development plan changed the recapitalization timeline to shift until the refurbishment study is complete in the second half of this year.

Management is advancing its recapitalization plan to support the company's development plan on several fronts, and we are in active discussions with several parties regarding a number of financing options, including a senior debt facility, royalty sales, non-core asset sales such as our FAD property, a working capital facility, as well as terming out the 2025 quarterly Gold prepays. Our CFO, Ryan Snow, will expand on our new National Bank agreement regarding the March 2025 prepays and the new working capital facility we're currently finalizing. In order to execute and put in place a senior debt facility, feasibility studies will be required for three of our five Gold projects, as well as the Class 3 engineering study for the autoclave refurbishment. Further, certain additional work may be requested by a potential lending syndicate on the two Gold projects not yet advanced to the feasibility stage to further de-risk these projects.

Lending parties intend to review the technical studies that we filed over the last 12 hours. Any additional work required to complete the technical due diligence could increase costs or push out completion of the feasibility studies. However, we do not expect a material increase in costs or time. The goal is to have a new senior financing in place for the second quarter of 2026. With that, I'll now pass it over to Matt for an operations update. Matt.

Speaker 0

Thank you, Richard. Hello, everyone. As we do with all our operations meetings, I will begin with our number one priority here on Slide 7, which is safety. We finished the year with a lost-time injury frequency rate of 1.27. Our safety performance improved dramatically during the course of the year, and I'm proud of the team's absolute focus on ensuring everyone working at our properties returns home safe and healthy every day. Regarding environmental compliance, we maintained our clean record by ending our fourth consecutive year without any environmental violation notices from our regulators. To emphasize this point, i-80 Gold has never received an environmental notice since the company's 2021 inception.

Turning to 2024 production results on Slide 8, at Granite Creek Underground, we mined approximately 38,000 ounces of contained gold, or 71% of our internal target, and produced just above 16,000 ounces of gold after applying the appropriate payability factors and including stockpile build-up at the end of this year. However, the high-grade oxide and sulfide production was 60% lower than planned, but partially offset by unbudgeted low-grade oxide material mined and processed at our heap leach facilities at Lone Tree. Mining rates and gold production at Granite Creek were impacted by higher-than-anticipated rates of water ingress into the bottom of our workings, which delayed our progress on the main decline and prevented us from reaching and developing additional mineralization zones as planned. Currently, all components of our dewatering system are permanent, functioning, and in operation.

The amount of contact water removed from the underground workings is gradually declining from an average of 1,400 gallons per minute in January of 2025 to approximately 1,200 gallons per minute over the first half of March 2025, which is in line with our newly implemented predictive model. With these improvements we are seeing in managing water, we are pleased to report that we have recommenced advancing the main decline, and both our decline advance rate and our overall mining rate of the contained ounces are on plan for the first quarter of 2025. Additional dewatering upgrades will be completed in 2025, and production rates are expected to ramp up to a steady state in the second half of this year, 2025.

Production from our two existing heap leach operations exceeded our internal targets for 2024, with approximately 6,200 ounces produced from Lone Tree and 3,700 ounces produced from Ruby Hill. Both historic leach pads are in their final phase of extracting any remaining gold from the material that was placed on them several years ago. Looking ahead, we expect to produce between 30,000 and 40,000 ounces of gold in 2025, whereby Granite Creek Underground is expected to contribute between 20,000-30,000 ounces of gold, and the heap leach operations at Ruby Hill and Lone Tree are expected to contribute approximately 10,000 ounces of gold. Now, for an update on construction at Archimedes Underground on Slide 9. Underground permitting activities continued in the fourth quarter, and we received the record of decision from the Bureau of Land Management to commence the underground portals in the first quarter of 2025.

We expect to have associated state permits in hand in the second quarter of this year. During the fourth quarter of 2024, we initiated construction of the surface facilities, secured the high wall, and have begun service works for installation of utilities and construction of a shop facility to commence portaling activities in the third quarter. We expect to begin underground construction in the third quarter of this year in line with the recently published PEA. Archimedes Underground is expected to be the company's second underground mine and contribute to production at the end of 2026 or in early 2027.

Moving to Slide 10, permitting activities across our remaining properties with a permitting continues across our remaining properties with a 2025 focus on Archimedes Underground, initiating permitting for an Environmental Impact Statement at Cove, and commencing the application process for both the Granite Creek Open Pit and the Mineral Point Open Pit projects. We have a highly experienced permitting team with a proven track record in the Nevada region. Turning our attention to the technical team, a priority for this group through the course of 2025 is to bring the Granite Creek Underground and Open Pit, as well as Cove, to the feasibility stage and to publish a Class 3 engineering study for the Lone Tree Autoclave refurbishment.

With the technical reports recently filed, we believe potential providers of capital now have a clear view of these projects, enabling them to assess these projects in detail and identify areas for improvement as we progress towards the feasibility stage. This will help de-risk the projects from our lender's perspective as we work to complete our recapitalization plan, as Richard mentioned earlier. Additionally, we are considering the possibility of advancing Mineral Point to the preliminary feasibility stage in the first half of 2026 to also assist in de-risking the project from a lending perspective. As Richard also mentioned, we believe i-80 Gold's updated development roadmap towards producing a target of 400,000-500,000 ounces per year by the early 2030s is staggered and manageable, and we expect to see improved economics as we move towards the feasibility stage.

Looking at exploration on Slide 11, in 2024, we drilled over 100,000 feet, mainly at Granite Creek and Cove. Our 2025 drill program is modest and strategically focused to ensure maximum impact. At Granite Creek, we will be finalizing the infill drilling program. We will be finalizing the infill drill program to support advancing the Granite Creek Underground to feasibility and to study the step-out of the South Pacific Zone along strike to the northeast. Drilling was paused in 2024 and is anticipated to resume once the underground exploration drift is completed in 2025. At Cove, the planned infill drilling is now complete, and the results will be used to advance the feasibility study.

Finally, at Ruby Hill, we are completing some infill drilling within the upper zones of the Archimedes Underground in preparation for mining, as well as completing some infill drilling at Mineral Point, both for resource confirmation, geotechnical, geochemical, and metallurgical data to initiate permitting on this project and the PFS. This program is focused on confirming existing work and advancing technical reports. We have deferred true exploration to future years when more discretionary funding is available. That concludes my operations update. I will now hand over to Ryan for a financial review.

Speaker 2

Thank you, Matt, and good morning, everyone. Starting with Slide 12 to discuss the change in our financial reporting. As of January 1, 2025, we're reporting with the U.S. Securities Exchange Commission as a domestic filer and therefore have transitioned from International Financial Reporting Standards, or IFRS, to U.S. Generally Accepted Accounting Principles, otherwise known as U.S. GAAP. This change was made retrospectively with our 2024 financial statements, and all comparatives were restated accordingly. You can find the 2024 year-end statements and the first three quarters of 2024 with comparative periods filed on EDGAR, SEDAR Plus, and on the company's website. Going forward, certain pre-development costs, which were previously capitalized under IFRS, will be recorded through the income statement as an expense under U.S. GAAP until mineral reserves are declared.

The main transition adjustments include a capitalization reversal of $80 million for underground development work at Granite Creek and Cove, expensed retrospectively between 2022 to 2024. A decrease to reclamation liabilities and assets of approximately $16 million due to the inclusion of third-party markup under U.S. GAAP, more than offset by a higher discount rate. A transition adjustment related to our convertible debentures resulted in a reclass of $13.8 million from the equity section of our balance sheet to the non-current liability section. Lastly, related to the Paycor acquisition, a deferred tax liability of $13.5 million was recorded due to an IFRS exemption not available under U.S. GAAP. This is a result of the purchase price being higher than the tax basis at the time of acquisition. Additionally, the 10-K will serve as i-80 Gold's primary disclosure document moving forward, and the company will no longer file an AIF.

Turning to Slide 13, gold sales totaled approximately 9,050 ounces for the fourth quarter and 21,500 ounces for the year. This reflects the impact of the water issues at Granite Creek that Matt outlined earlier. Total revenue from gold and silver sales was approximately $23 million and $50 million for the fourth quarter and full year period, respectively, and slightly lower than the prior year period due to lower volumes sold, partially offset by a higher average realized gold price. Additionally, gold sales were impacted by working capital timing, as at the end of 2023, the company pre-sold stockpiled material, and during 2024, the company rebuilt that stockpile balance. We concluded both the quarter and the full year period in a net loss position due to the ongoing development of our projects.

The majority of our growth expenditures for both the three and twelve-month periods were allocated toward infill drilling and pre-development activities, and we expect this to be the case for the next several quarters as we continue to advance drilling and technical work. Overall, we've been managing mining costs well during the impacted underground advancement rates at Granite Creek. Moving to Slide 14, to support our development strategy during the fourth quarter and early 2025, we undertook several financing initiatives as we continue to focus on the best way to secure capital to advance our development plans. These steps have allowed us to better manage liquidity, support our near-term development goals, and execute on our refinancing plan. Most recently, we entered into two financial arrangements to enhance near-term liquidity and balance sheet flexibility.

On March 31, the company entered into a new gold and silver purchase agreement with National Bank of Canada, under which National Bank purchased approximately 6,800 ounces of gold and 345,000 ounces of silver from the company for delivery by September 30, 2025, or earlier upon an infusion of capital. The proceeds will be used to satisfy all outstanding gold and silver delivery obligations due to Orion on March 31. The company is also finalizing a working capital facility for up to $12 million with Auramet International maturing in 12 months. We are confident this path will lead to securing senior financing, allowing us to transition away from convertible debt in favor of lower-cost, less dilutive financing. In addition, in the short term, the company plans to meet its liquidity requirements by deferring non-essential costs until such time as additional capital is sourced.

We expect our cash position to be approximately $25 million following the end of the first quarter of 2025. We believe that securing new agreements with National Bank of Canada and Auramet International highlights the growing confidence in the properties, reflecting the positive impact of the preliminary studies completed. Within the studies, we highlight three key areas where we plan to focus our growth expenditures over the next three years to support the company's broader development strategy. These expenditures are discretionary and will depend upon available liquidity, but in terms of priority, they are as follows. First, advancing our permitting activities. This is our top priority. Second, investing in feasibility studies to move projects forward with greater clarity. Third, continuing development work at Archimedes Underground. We expect total growth expenditures in support of these three initiatives to range between $40 million and $50 million in 2025.

With that, I will now turn the call back over to Richard.

Thank you, Ryan. Thank you, Matt. At this time, we'll now turn the call over to the operator for questions.

Speaker 4

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the two. If you are using a speakerphone, please lift the hands up before pressing any keys. One moment, please. Ladies and gentlemen, as a reminder, should you have a question, please press star, one. There are no questions at this time. I will now turn the call over to Richard for closing remarks.

Thank you, Operator. Just a couple of things I want to highlight on. I know that the market is awaiting the recapitalization plan. It is well underway. I think that the National Bank agreement that we've now put in place is a step in that direction along with Auramet, and that's really a testament to the quality of the technical reports that have been filed and the value they see. There's continued work to be done, but the team's got its head down, and we're looking to execute. We are excited about the next chapter in i-80 Gold's future as we progress those PAs towards the feasibility stage, as we strengthen our balance sheet to develop our pipeline of projects. I'd like to thank everyone for their time today, and we are available to answer any questions that you might have offline. Thank you. Have a great day.

Bye now.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.