TRX Gold - Earnings Call - Q3 2025

Transcript

Speaker 0

Welcome to the TRX Gold Corporation's third quarter 2025 results presentation. As a reminder, all participants are in a listen-only mode, and the meeting is being recorded. After the presentation, there will be an opportunity to ask questions. If you wish to ask a question, please click the Q&A icon on the left-hand side of your screen. You will see the option to raise your hand to join the queue and ask your question verbally, or write a question to submit your question in writing. When you are introduced, you may see a prompt on screen asking you to click Continue. You will be live in the call. As soon as you do, analysts who have dialed into the conference call may press Star and 1 on your telephone keypad to join the question queue. I would now like to turn the meeting over to Mr.

Stephen Mullowney, Chief Executive Officer. Please go ahead, sir.

Speaker 4

Good morning and thank you and welcome shareholders to our Q3 2025 corporate presentation and investor call. We have quite a few people on the call today, that's really good to see. Joining me on the call today is Michael Leonard, our CFO, and also in the attendee boardroom, we have Richard Boffey. Raise your hand, guys. How's the weather down in the River Road?

Speaker 2

It's a nice, sunny 71 degrees.

Speaker 4

As always, nice and sunny and warm. We're here in Toronto today as well. I think we had a 32-degree day. With no further ado, I will get into the presentation, and the presentation today will be led by myself with Michael Leonard and Richard Boffey all chiming in in the appropriate section. Let's get into it. Today what I'll do is just give a high-level overview of TRX Gold Corporation as I always do, and then we're going to jump into where we're going in the short to medium term, as well as what our Q3 financial results look like. A high-level summary of the Preliminary Economic Assessment roadmap and how we see that being played out, as well as just finishing it off with the key investment highlights of the call. TRX Gold Corporation, obviously we're in Tanzania. Everybody on the line realizes that.

In fiscal 2024, we did over $40 million in revenue and $15 million in EBITDA. We expect those numbers to be higher this year as we continue on and as the scope campaign winds down and we get into the higher grade portions of the ore bodies. We'll get into the results of those operations in a second. One of the major catalysts that we put out in Q3 was our Preliminary Economic Assessment. As we mentioned on our last call, that Preliminary Economic Assessment has a $1.2 billion net present value at around $3,000 gold. It's around $750 million after tax on the Buckreef Gold Project. It has 62,000 ounces average production grade per year and 3,000 tons per day of processing capacity. We are currently at 2,000 tons per day processing capacity.

Our goal will be to improve those metrics over time and hopefully have a larger project than what was envisioned there, both from the existing Buckreef Main Zone, as well as the other additional resources that can be found over time with drill pit. The cash costs in that study are quite low at $1,000 an ounce, and the AISC was around $1,200 an ounce, which is comparable for the same grade profile of what we currently experience. As you would have seen in Q3, the cash costs are a little bit higher as a result of the grade profile that was going through the mill. As the grade profile normalizes, cash costs will come down. In the study, we reset the resources because we focused on economics. In our last resource statement, it was focused on sheer number of resources versus economic resources.

The resources haven't gone away from the last statement. They're just not included in the economics at this point in time. In the study, it was 900,000 ounces, in the M&I category at around 2.6 grams a ton. And in the inferred category, there were 725,000 ounces at 5 grams a ton. What we did was increase the cutoff rate, and the grade profile going through the mill. We'll pause right there. On the next slide, we do have a straightforward value-enhancing business plan. The next slide will get into more of the shorter-term business plan. In Tanzania, we have the special mining license. We have a straightforward flow sheet and metallurgy. Richard will get into that. That's going to occur to come to some questions about recovery rates, and he will answer those and how they're going to improve. Let's execute a local infrastructure through the road and power.

We have significant blue sky potential. As we mentioned, continue to mention, we do need to get back to that drill pit and start drilling at our landfills and potential big zones. We have good human capital availability in concert with constant upgrade of that quality. We've done three successful expansions to 2,000 tons a day. We'll do another expansion, in between 3,000 and 4,000 tons a day. The PEA constitutes 3,000 tons a day. We'll do that over time. We're in planning stages of that now. That will be done over time. The business plan around the PEA is quite straightforward. Expand the plant, take the cash flow, develop the others online, and go to the same time exploration. We've had successful ramp-up of our operations. We are a high-margin, low-cost, operating profile. Costs have come down.

Michael will get into that in a second, particularly on a first-time services. Obviously, weight impacts for our costs. We still see significant opportunities to continually reduce costs for mining and processing, and the PEA has a roadmap for that. You have a very experienced management team on, at site, as well as in corporate that has done this all before, and we're very excited for, you know, the significant value potential and value increase potential over time. I'm going to pause there. Anything to add, Richard, and collapsed?

Speaker 1

No, I think that was well said, Stephen. Nothing further from me.

Speaker 4

Okay. Thank you. With regards to why TRX Gold Corporation is where we are today, as Q3 indicates, revenues are growing. Prior to that is the gold price. Ounces will start to grow now as well as we get into a higher grade profile. We're self-funding this growth, and we continue to self-fund the growth. The Preliminary Economic Assessment (PEA) lays out a straightforward business plan, or a roadmap that we can move along to create value to Boffey's Main Zone. I went through some of the statistics earlier. The plan is very scalable. We've done that before, as I mentioned, and we'll continually move along that roadmap. I really, like always, the blue sky potential. The way that the roadmap can improve is both increasing the tank capacity as well as finding more higher grade ounces in and out of the Great Hand Field and elsewhere on our property.

We're quite comfortable with that. We do need to get back to this roadmap, and that will be in our budget plan for fiscal 2026. With that, I'm going to hand it over now to get into the nitty-gritty details. I went through the PEA, high level. Michael will just start to get into the financial profile and the rest of these slides here, Mike, and I'll hand it over to you for the next two or three slides, please.

Speaker 1

Yeah, no problem, Stephen. Good morning, everybody. Thanks for joining us. You've touched on the PEA, which is really our focus over the next, you know, 12, 18 months is focusing on that expansion to really unlock that billion-dollar valuation that we put out into the market on that study. In the meantime, as we talked a little bit about over the last couple of quarters, we have embarked upon a stage one stripping campaign over the first half of the year to really remove a lot of the overburdening waste that would provide access to higher grade ore blocks as we've got deeper into the pit. Richard and his team have been managing that very, very closely. The good news is we're successfully through the lion's share of that strip and have begun to access some of those higher grade blocks.

Consequently, what we're seeing is an increase in both the production and sales. Coupled with the leverage that we have set to gold price, we're seeing increased financial metrics both quarter on quarter and year on year. I'll talk about some of the details here in a minute. Why don't we flip to the next slide, Stephen, and we can just touch on some of the specifics. Here's a snapshot on the next slide of a financial overview of the results. Again, as mentioned, it was a strong quarter for the company's financial results. We do see increases in both quarter on quarter relative to Q2 and year on year in really almost all financial categories from revenue to gross profits to net income, operating cash flow, and adjusted EBITDA. We produced just under 4,700 ounces in the quarter, which is substantially more than what we did in Q2.

We continue to benefit from these record gold prices that we're seeing. Yet again, we realized over $3,100 an ounce. I sold gold this morning at over $3,300. We will continue to sort of take advantage of these lofty gold price levels. Again, those numbers drove revenues of over $0.5 million, gross profit of almost $4.5 million or 35% in the quarter, and adjusted EBITDA of $4 million. Again, all improved relative to the prior periods demonstrating our leverage to gold price. Stephen touched on it a little bit earlier, but gross profits continue to benefit from an improving cost per ton profile. This is really based on a lot of work we did during the part of the year setting the foundation for some of these benefits that we're seeing. Illustratively, processing cost per ton were below $15.

That's substantially improved, as you can see, compared to the prior year period. A big part of the reason for that is the economies of scale that we're realizing from the expanded plant. When we grew from 1,000 ton a day last year to 2,000, we had to explain to folks that it was a scalable plant. Again, you're seeing the benefits in that cost per ton, that metric. Similarly, mining cost per ton has come well down, both relative to the last quarter and last year, significantly improved. It takes heart, due to the fact that we're now using our own fleet that we had procured in the early part of the year to help support our contract mining fleet.

Illustratively, and again, Richard can maybe talk a little bit about this later in the presentation, but we used our fleet to move about 300,000 tons of material, or at least during the quarter. We did it at about $1.80 a ton, $1.80 to $1.90 a ton, which is well below international contract rates. It's certainly a very, very cost-effective way for us to mine both ore and waste, as well as provide support for projects like our TRX expansion. Richard, do you want to just provide a couple of sound bites on how our fleet's operating and why we're seeing that benefit there, please? I think we may have a comms issue in Tanzania, but that's okay. Why don't I just continue, and if we get a chance to hear from you later, Richard, we'll have you chime in then.

In the meantime, what I'd maybe like to add, which folks might have seen in our press release in MDNA, is that during the quarter, we had entered into negotiations with the Bank of Tanzania to sell a minimum of 20% of our local gold production to the central bank. That was in line with the newly enacted mining law in Tanzania that's applicable to all mining companies in the country. As part of that agreement, the company would benefit from a reduced royalty rate of about 4% on revenue for domestic sales compared to a 7.3% royalty rate for exported sales. The way it works is the company's paid in Tanzanian shilling debt at market rates, which we can then use to go and fund the operating costs that we incurred in local currency.

Part of the reason I bring it up here in the context of the Q3 results is that while these discussions were ongoing over the course of Q3, we were required to set aside a portion of our production in the inventory. We set aside almost 650 ounces during Q3 for future sales to the Bank of Tanzania, and therefore, what you would have seen in our results is a bit of a gap between ounces produced and sold. The good news is that we ended up signing that agreement with the Bank of Tanzania in early June, and we're able to sell this inventory to the Bank of Tanzania, which is really benefiting now what we're seeing in Q4 around things like revenue and cash flow and EBITDA, and of course, these apples for the last quarter of the year.

This is useful as an enterprise as a company for a number of reasons, one of which is that we incur a lot of local costs and local currency that we can use the shilling for. We benefit from the royalty rate, but this agreement helps drive things like local content and local benefitation, which has been a key area of focus for the government to, amongst other things, help improve their foreign exchange reserves. A good initiative all around.

Speaker 4

Actually, I'm going to stop you for a second. One of the things you will notice is we have financed this company through short-term liquidity lines with Danbeck, with an RMAC facility, as well as working with our suppliers around the sample. That is all short-term liquidity lines that are funding a long-term asset. What that has done in our financial statements is showing a profile. We're comfortable with the way we financed this thing. At quarter end, you would still see negative working capital. One of the things that is front and center in our press release, as well as in our operations going forward in these real short-term, is right-sizing that working capital ratio, making sure that it gets above one. It's above one today, and it's continuing to improve.

We think it's one of the things that holds us back in the market from a financial metrics perspective, vis-à-vis the other costs. I'll get into that in a second. That was predominantly through the strip campaign and into the higher grades. Right-sizing working capital is a short-term goal of ours.

Speaker 1

Yeah, I think you said it well, Stephen. I mean, that's really a lot of two points. We've seen the benefit from it in Q4. Production increased, you know, roughly about 75 ounces a day, which is substantially up from both Q2 and Q3. In six short weeks, we've been able to recapitalize that working capital deficit that we've incurred through that strip campaign. As you mentioned, we reduced things like accounts payable by almost $6 million. We paid our short-term borrowing to get full access to our liquidity lines. The focus over the rest of Q4 is to strengthen that liquidity and set us up for execution of the PEA you touched on earlier.

Speaker 4

Yeah, we have no long-term liabilities besides a couple of leases on long-term equipment. I believe our trucks are paid for now as well, right? That lease for our trucks is coming off, as well, so we're just left with the excavator long-term leases.

Speaker 1

Yes. Why don't we turn to the next slide, if we can, please, where we've talked about this, I think, over the last few quarters, but for folks new to the story, you know, as Stephen touched on earlier, we have expanded three times in three years successfully. We are operating at 2,000 tons a day at full capacity. We did just under 1,500 tons a day of throughput in Q3 after some scheduled maintenance and downtime. With that larger plant, that's around the economies of scale. You're seeing some through the processing cost per ton. That throughput there is really what's driving the increasing production. It is a bit of a lower grade profile based on where we are in the pit.

I'm sure if we see today, but really clearly see the benefit now in Q4 now that we're getting out of those higher grade ore blocks and doing about 75,000 ounces a day that we expect to continue through the end of the year.

Speaker 4

Yeah, Mike, one of the things is, is Richard now available? I know you're in the same room.

Speaker 2

I hear you. Stephen?

Speaker 4

Okay, we hear you just fine. One of the things Mike touched on is three mill expansions in the three years. I know I'm going to have some questions. One of the questions that is bound to come is how we're going to deal with the plant expansion going forward, vis-à-vis the PEA or what I'll call what we're currently seeing is 555. Around the initial plant upgrades that you're going to be making in the next four to six months, as well as how we envision filling up the tank. You want to just give the shareholders just a quick high-level summary of that?

Speaker 2

Sure, absolutely. Our plant has been upgraded multiple times, and it's now at a target of 2,000 tons per day. There are many opportunities to optimize the plant as it is at the moment. When we see some of the results, we'll notice that there is room for improvement. In the next three or four months, we're focusing on just optimizing the current 2,000 ton per day plant and adding enhancements that are part of the longer-term expansion by modifying the flow sheets in incremental ways. One of the flow sheet modifications is the addition of a pre-leach thickener that is planned for the expanded plant and getting that in early. That will enable us to have a lot better control of our leaching process. It'll allow us to feed higher grades through the mill as well, and we believe we'll improve our overall recovery through that process.

The next aspect that we're trying to do in this next five or six months is put a new Absorption, Desorption, and Regeneration (ADR) circuit into the process. That will have the ability to make considerable enhancements to our carbon management process. Our current process is quite manual. We get a lot of breakage, a lot of fines, and a lot of gold loss through that damage to carbon. This new plant will enable us to minimize and eradicate a lot of that and probably give us another 3 or 4% improvement in recovery in that way. Other improvements are through optimizing our mills. We believe we've just embarked on a program of optimizing the power draw. We've noticed we're not drawing enough power through our mills, and we can improve that through an improved throughput.

It gives us the opportunity to put more charge into the mills and therefore get a finer grind and more throughput. Some small, easy additions to the plant and then some larger items that are part of still a 2,000 ton per day operation will improve recovery substantially from where they are now up to a much higher level. The expansion work requires another flow sheet change, which involves a flotation circuit and fine grinding of the sulfide concentrates that you get from that flotation plant. Secondly, a far more simplified comminution or crushing and grinding circuit that is all rated to 3,000 or more tons per day. These are the various steps that we'll be taking over the next 6, 12, and 18 months to get better results.

Speaker 4

Perfect, Richard. Thank you for that. I think that's a good overview, and it gives the investor some comfort that it's being well handled. We do need to focus on, you know, efficiency. What some of the things that will happen as a result of what Richard just described is higher head grade, as you guys hear, means lower cash cost per ton, lower processing cost per ounce, sorry. It enables us to, you know, the power draw will probably enable us to push more time through the plant, which means lower cost per ton, lower cost per ounce. Those are some of the sort of metrics that are going to improve as we improve the plant here in the next five to six months. Thank you, Richard. Mike, back to you. Okay, why don't we touch on the next slide briefly here, Stephen?

Speaker 1

This slide just kind of reinforces the approach that I've done earlier to how we're running and operating this business. We continue to use organically generated operating cash flow to fund growth. We did reinvest another $5 million of cash flow into the business this quarter. Today, you can see on the far right box that we've put in over $50 million, following an early capital raise in 2021, coupled with almost $40 million of operating cash flow that's been reinvested in this business. The goal would be to continue to use cash flow to help fund some of the enhancements and growth that Richard just touched on. What you can see is it is driving increases in things like revenue and EBITDA. We continue to do it very, very effectively.

We've got a very, very lean management team and continue to keep a keen focus on things like G&A to make sure our overhead costs are in check. Our approach is being very, very prudent with capital, to very higher profitability.

Speaker 4

Yeah, Mike, I was just going to add on G&A there for a second because I do get quite a few questions on the non-controlling interest number in the financial statements based on CAB. As everyone's aware, we have a joint venture with Suneco, 55, 45 in. One of the things is G&A cost, particularly corporate cost, comes down below Boffey. That's one of the reasons why we are very sensitive to make sure we maintain G&A at a very prudent G&A cost in order to, in the future, hopefully drive higher net profit per share and other financial metrics that the market will look at and that people will be screened from. Okay, next slide. We don't have Richard, so obviously, we have a comms issue in Tanzania.

I presented this slide in the last presentation, and a lot of people liked it, so it was fairly easy to understand. A couple of things in this slide that are relevant. One is we like purple. We particularly like to use purple in this slide. Here he is back. Boffey's get better grades as we get deeper. What this slide is showing here now is where the mining has occurred up till May 30 current, and where mining is going to occur the rest of the year. Richard just provides us with a, it gives the investors a quick sense of where you're going to mine the rest of the year, how that's going to improve the grade profile going to the mill.

Also, one of the things that we did mention in our press release is the significant increase in the RAM had both from a ton perspective, ounce perspective, and grade perspective, and how that will change over time.

Speaker 2

Are you going?

Speaker 4

Yes.

Speaker 2

Thanks, Stephen. If we just follow the colors, the warmer colors represent the higher grades. In the beginning of FY2025, we focused on the right-hand side of that page to much lower grades. Over the last two quarters, as we signaled in these meetings, we pushed the strategy to get back to the central and southern part of the main pit, and we've succeeded in doing that last quarter. We've now accessed these high grades. We've got not only higher grades, but slender floor that we're now accessing. We've received the benefits of that strip. The other benefit of that is we've got a much lower strip ratio now going forward for a little while.

That enables us to really grow our stockpiles ahead of the processing plants to the point now where I would suggest we've got about two months' supply already now of high grade and feed grade ore that's ready to go for processing. That'll continue. We'll be in a very healthy position now, until we finish phase one of the pit, which is another six or seven months away. We've built ourselves into a good strong position with good feed for the plant. We've also now started the second stage of stripping for stage two of the pit. We've built up a nice healthy stockpile that feeds through a gap of all mine ore that'll fit us in about seven or eight months.

Speaker 4

Excellent. Thank you, Richard. Getting on to the next slide, just a brief overview of the PEA. As Richard just described, the grade profile is improving. There's healthy stockpiles. We're moving through the pit in a very good sequence, which is part of the PEA. In that PEA, that sequence continues for three to four years of open pit mining in various states. I think there's three stages, Richard, for the open pit?

Speaker 2

Look, two stages in this pit now. We've reduced it from a three-stage pit to a two-stage pit. The third stage is really underground. Yeah.

Speaker 4

Yeah. We're moving through that sequence. Why that's important is because that sequence and the way that it's engineered goes through the plant expansion, goes through the mining of the higher grade ore blocks in the open pit part, creates cash flow for the underground expansion, and the underground workings in about three to four years' time. I won't go through the metrics again of the PEA here on the slide here. They're quite obvious. Obviously, it was quite healthy. The key to in talking to investors over the last couple of months since we released this study is one of the things in mining is everybody asks, "What's your upfront cash asset?

How much do you need to fund in order to execute your business plan?" Our comment has always been, "We got a little cute in the IRR." We probably should have stepped back a little bit because we could ask that question. "So what's your IRR?" We say, "Well, given that the way the study was put together and it was so predominantly self-funding, you don't have an initial CapEx upfront, so you don't have an IRR. You're infinite to a certain degree." Everybody asks, "So what are you going to spend over the next three to four years?" The reality is that spend is around $90 million. The first two years of the study is predominantly the plant expansions that Richard just went through with you on how that would operate.

The third and fourth year are predominantly the development of underground development to feed the plants for the remainder of the mine life. This is all within the Boffeys' main zone. It does not include Anfield, where I mentioned before that drill hole results are, as well as, sorry, Stanford Bridge, as well as Anfield, which also has really good drill hole results. This is a CapEx profile that's split down between the plant expansion first and then to the underground workings thereafter. Everybody asks, "So how theoretically, when you're operating this business, how much do you need to raise?" Everybody's asking us, "Okay, when are you going to raise money to do this?" The answer that we have is right now, we're self-funding. As Mike mentioned, we've invested a lot of money into self-funding. Right now, it's contemplated to continue to be self-funding.

If you look at the projected operating cash flow as well, projected EBITDA, and the multiples on the CapEx in the first four years, it says that we should be able to do this predominantly being self-funded going forward. I just wanted to make sure that people understand that and the way that the study was laid out. Mike, anything to add to that? We get a lot of questions around this. You're on mute. No, not off yet.

Speaker 1

Tom's issues in Canada as well. Apologies. No, I think that was well said. I think that clarifies a lot of the questions we've been getting from folks over the last few weeks since we published the PEA. Thanks for that.

Speaker 4

With regards to we put in the comparable company analysis. One of the things that I mentioned earlier I'm focusing on is if you look at people who've moved up on this curve, they've executed both on ounces expansions, and importantly, they have what I'll call normalized working capital ratio. The short-term, medium-term focus for us is to make sure that we're not discounted because of our working capital ratio. We will be continually working on paying down some of our payables and capitalizing the business appropriately to make sure that our working capital ratios are in line with market comps that have performed. Also, when I look at others who've moved up on this curve as well, I'm making sure we have the capital discipline in executing our expansion plan, as well as continually growing that business, which is also extremely important to move up on this curve.

The focus, although we're behind today, hopefully, we can start to catch up when we recapitalize through the increases in production and cost management, as well as our expansionary plan. With regards to the capital structure, we did not issue any capital raises in the last quarter or the last couple of years. The stock is still oscillating. As I mentioned, I think a large part of that is, you've got a billion-dollar study in the market. America wants to see you get there. It gets there. It wants to make sure that you have the proper capital to get there. When we recapitalize the next couple of quarters, I think we should see, hopefully, start to see some movement on the share price.

We also have picked up our marketing campaigns now that the PEA is out, through various parties and ourselves, and we are having a lot more, particularly institutional meetings, I would say, Mike, over the last two to three months than we normally have. We started to see some institutions come into the stock and 12Fs. That's been encouraging as well. Although small, it does start. This does take a little bit of time to execute, but certainly a team focus for us. I really, really, really the key investment highlights before we get into the Q&A. We're seeing strong growth and sustained profitability and other ways to cut costs, and keep both costs down. We do have a proven operational track record. We have a robust business plan, and the PEA is front of everyone. We are in a good mining jurisdiction.

We are getting along quite well with the Tanzanians, as I mentioned on earlier calls. We are in front of the government negotiating team and others with regards to the attempts to revise the joint venture agreement. That should happen. Politics go and there's an election in October, so we'll see if we can do anything before then, but more than likely into the new year next year. We have the technical experience both on the ground and in corporate to execute our business plan. I'm going to pause there and turn it over to the moderator for Q&A.

Speaker 0

Thank you, Stephen. If you wish to ask a question, please click the Q&A icon on the left-hand side of your screen. You will see the option to raise your hand to join the queue and ask your question verbally, or write a question to submit your question in writing. When you are introduced, you will see a prompt on screen asking you to click Continue. You will be live in the call as soon as you do so. Analysts who have dialed into the conference call, please press star then one on your telephone keypad to join the question queue. We'll pause for a moment as participants join the queue. Our first question will come from Jake Sykowski with Alliance Global Partners. Please go ahead.

Hey, Stephen, Michael, and team, thanks for taking my question.

Speaker 4

Morning, Jake.

Just starting with throughput during the quarter, we saw a 25% upside, 75% sulfide mix. Any visibility on how you expect this to trend in the coming quarters?

Yeah, so I'm going to answer that, and I'm going to ask Richard to finish my answer. When he said there will be a pre-leach thickener, that is to get to 100% sulfide in order to have a better hedge grade. Currently, what's happening is the oxides are lower grade, but they're needed in order to float carbon appropriately in order to get gold recovery. This is one of the items that is high on Richard's list. Richard, you're much more technical than I am. You wanted to continue to answer that question.

Speaker 2

I think the answer that I charged is in terms of timing, we're looking to get the thickener installed by the end of this calendar year. We're looking at we'll probably not see oxides much at all or at such a high percentage, going from calendar year 2026 onwards. That will probably raise our head grade by about 0.3 of a gram, 0.4 of a gram.

Speaker 4

Really, when you look at the way this is being executed, we have predominantly an oxide plan right now that is being upgraded to a 12F. That's part of strip carb and that's part of the flotation and redesigned circuit changes that Richard has been explaining.

Okay. That's helpful. Building on that a bit, just on recovery, you touched on the finer grind work that's ongoing. Any additional color on what that timeline looks like? You know, are those benefits we might see in the next few quarters, or is that a program that might take a bit longer?

Speaker 2

If anybody else jumps in here on this one, we're working on two aspects of grindability. Our current process requires us to get a P80 of about 75 microns, and we've achieved that, but not in a stable fashion. The more we work on that, we'll see slightly better recovery. The flow pacing cycle with the associated fine grind, whether pig or either mill, will be roughly 12 to 15 months away. The intent for me is to try and get this in and running by financial year 2027. We'll see a big jump in recovery associated with that.

Speaker 4

Yeah, so Richard, I think the time I do six miles with stuff sorted out is for recovery rates into the low 80%, those are kind of where we're going to do what we're doing into the current plan's upgrades with the thickeners and the ADR circuit. That's the goal there. Okay. Then the high 80%, low 90% in profile, that's with the flotation and redesign circuits, as well as the upfront crushing circuit.

Speaker 2

Agreed. We'll see recovery improvements, stepwise recovery improvements by the end of the calendar year, and hopefully some other minor improvements to operational optimizations ahead of that as well.

Okay. It's still targeting us up to low 80s in the next couple of quarters, and then another step to high 80s, low 90s over the next 18 months. That's on there.

Speaker 4

Yeah, and that's modeled out in the PEA as well. What I'll add to that as well, Richard, I think, as we get more and more experience with Boffey, there are different geometric zones that have different recovery rates in them. The lower grade zones that we were in at the beginning of the year have lower recoveries, lower grades, and lower recoveries than the current zone that we're currently in. You want to just give a quick overview and snapshot of that, Richard, because that's important.

Speaker 2

Yeah, sure. Look, we're doing a lot of metallurgical test work. Part of that is on the current ore that we have at the moment, and part of that is the ore that's going to be with us for underground. We're looking at things from a geometrical perspective, from a flotation perspective, from a grindability perspective. All that work's ongoing. We've already found out some very interesting attributes of the ore body, and we've kind of split the ore body into two geometrical domains. We know that we've got to take slightly different approaches to the processing of those two. It's, you know, we have to mine it all. It's all economic. We just have to optimize our plants to affect that quarterly.

Speaker 4

I just want to add, I think, yeah.

Speaker 1

Yeah, I was just going to say, I mean, Richard, maybe you could briefly comment that we've got the results of a geometrical study that has given us a roadmap to follow to deal with some of these more complex geometrical zones. A couple of the comminution studies have given us a roadmap for these three flow sheets, right?

Speaker 2

That's right. As I said, there are small optimizations we can do additional to the flotation circuit. Just running some pure oxygen and some over the surf tank of the CIL case will probably give us another small kick in these sorts of things. It's more picked up on one geometrical domain than the other. There's a lot of fine-tuning that we need to do. It's a small, young plant, and we're finding our way through it to get the best result.

Speaker 4

Excellent. Thanks, Richard.

Speaker 1

Thanks for that. Okay, that's all for me. I'll hop back in the queue.

Speaker 0

Yes, sir. Stephen, your next question will come from Mike Neuhauser with Roth Capital. Please go ahead.

Speaker 4

Hi, good morning. Stephen, can you hear me okay?

Speaker 1

Yeah, I can hear you just fine, Mike. How are you doing this morning?

Speaker 4

Good, thanks. I'm heartened by Richard's comments about optimizing the plant. Really good in several ways. It seems like it's perfectly timed with the transition from oxide to the, toward the sulphides. My question is, it sounds like you're pretty much wheeled up with the pushback of this pit to proceed down the path of the PEA by continuing production, generating cash flow, and completing these steps of being able to do a flotation circuit and get underground. It seems like you're just going to feather right into that. Am I seeing that correctly? Correct?

Speaker 2

Yeah.

Speaker 4

Simple and interest. Correct? That's good. I don't want to rot our show time here. The other question is, you know, there's a lot of surface material around the process to be oxidized. How do you see, is that going to take a back seat to the sulfides in underground, or is there a way to avail yourself of that with the existing plant that could take advantage of the market and such? Yeah. You saw Richard's smile on that when you asked that question. Look, we're constantly assessing oxides around the property. Part of that is increasing the exploration spend, which I just mentioned, that we will need to put into the fiscal 2026 budget.

Anytime you have more oxides, there's a trade-off between here and the way that we looked at this is if we have below 1 gram a ton oxides and you have 2.5 gram a ton sulfides, once these plant optimizations are done, you're going to hook the 2.5 gram a ton sulfides through, right? There's a trade-off between the two, but certainly, you can get some really good high-grade oxides. You're going to put them through because they're helpful. They'll go through any plant. They'll go through the expanded plant as well, as long as not too much clay in it. The problem with oxide material, and Boffey, is sometimes there's clay in it. Did I get that right, Richard?

Speaker 2

I think Mike's asking us if we've got plans to maybe punch another 10,000 or 20,000 ounces out by just having a little bit of plant for oxide. Whilst we don't, the potential is definitely there. We've even got old veins that can be economically refrozen at $3,000 an ounce. We've got lots of opportunities. We're focusing very much on the PEA at best, but there are other business improvement opportunities all over this project.

Speaker 4

Those were both actually very good answers, and I appreciate them both. One suggestion is that, with us being in the fourth quarter and the time it takes to publish year-end results, I think the investors would be quite hungry to see ongoing operating results on a one-off basis. I encourage you to do that. I think this is the time to break the pattern a little bit and take a victory lap if you can. That's all I got. Thank you very much.

Speaker 1

You must have signed for our board members, Michael, for that comment.

Speaker 4

No, just stating the obvious, Stephen. Thank you all, guys.

Speaker 1

Thank you.

Speaker 4

All right, bye.

Speaker 0

The next question will come from Heiko Ihle with H.C. Wainwright. Please go ahead.

Speaker 2

Hey, good morning. Thanks for taking my question. Can you hear me okay?

Speaker 4

I can hear you fine. I also got your note as well, Heiko, on your question.

Speaker 2

Excellent. In your PEA, so I guess you got fair warning of what I'm about to ask you. In your PEA, you're calling for annual production of 63,000 ounces of gold per year. Obviously, the current gold price environment is ridiculously strong, and we may actually see some more increases given all the inflation that's going on. Let's assume for a second, you know, money was not really much of a concern. What would be the main bottleneck for gold to figure even more over the next couple of years?

Speaker 4

I'll let Richard answer that question more technical in a second, but I'll give you a sense of the way that we look at this. What we first engaged in into putting together this study is the bottleneck right now is plant capacity in the study is the major bottleneck of 3,000 tons per day, which can go larger. When you do that, you have to go and do all your underground workings and engineer all those sorts of things. You have pony ramps and these sorts of things that go into that. It takes a lot of time to do that sort of work. When we look at the study, we said the same thing you said. 18-year mine life, too long. 62,000 ounces can be higher. Most studies that you see are in the range of 8 to 12 years of mine life. How do we get there?

When we spoke to the engineers around that, it would have taken a couple more months in order to engineer that appropriately. We said these numbers are great anyway. Let's get this into the market to show investors how good just the Boffey's main zone can be. Richard, you can get a little bit more technical in around how why it takes so long to do underground work.

Speaker 2

Oh, I don't need to go into that sort of detail. I mean, the bottleneck is like any good plant with the mill. Our crushing circuit would need a significant upgrade as well just to improve throughput. The new flow sheet calls for a SAG mill. What I would plan to do is make sure that our SAG mill has extra capacity to, you know, realize a higher throughput than 3,000 ton a day. Don't make that the bottleneck or at least maximize that to its maximum capacity and overperform. When we get to underground, getting 3,000 ton a day out of essentially two deep lines is not impossible. Getting our three deep lines, however, is quite easily achievable and upscalable. We are looking at the potential for us to put an extra deep line down. Our studies are based on 50-ton trucks.

We could look at 50-ton trucks, for example. We did a haulage and boosting trade-off study, and they all, you could throw a blanket over them. Even a small shaft could be considered as a viable option. Then you can really start talking about 4,000 ton a day. Plenty of upskirts to tackle there. The optimization studies would be required. As Stephen said, we wanted to get out to the market with a, I guess, a vanilla-flavored technical approach to it. I think it's a good base case.

Speaker 4

Yeah.

Speaker 2

Fair enough. Just a follow-up. Maybe I'm just not grasping something here. I mean, your deal with the Bank of Tanzania, you're going from a 7.3% royalty to a 4% royalty. That changes 3.3% of what you're getting, not a personality, real vehicle. It also creates that you're selling it to the OTF at market rate. If you could scale this, and it sure sounds like you could because these 20% seems to be your worth at minimum, why wouldn't you just go to the maximum of 100%? Is there credit risk? What's the downside from this agreement for you? I'm just, I guess I'm not seeing what you're saying.

Speaker 4

Right. Right. We just got into this agreement, Heiko. I know that Mike did this in the nuance of that. I'll forget there's another question in the queue around this. When we engage on this, we have certain factors. The way the agreement is set up is essentially we're selling as a doorway to the Bank of Tanzania from the gold room and get paid instantaneously. Although we get paid in market exchange rates of shillings, and we have a, you know, our cost basis is predominantly shillings as well. Yeah, no, it is a really good transaction. We worked quite extensively with the Tanzanian government to get it to this point. The Bank of Tanzania, not unlike a lot of central banks in the world, wants to grow their gold reserves. This is a good way for them to do it.

You sell 20%, spirit sells 20%, data sells 20%, and transit sells 20%. I would predict right now the biggest bottleneck is the refining capacity in the country. Mike, you want to get into that a little bit?

Speaker 1

Yeah, no, you said it well, and you read it right, Heiko, for sure. I mean, it is a minimum. We've got an opportunity to sell as much over and above that as we deem appropriate. We are paid in shillings, though, to Stephen's point. We do have things like overhead costs and others that are U.S. dollar denominated. There is a bit of U.S. dollar exposure that we would continue to be paid in and require that. There is an opportunity to ship more gold to the local refiner and sell to the Bank of Tanzania and take advantage of that royalty, because they're only now kind of getting up and running as far as what they can refine. There is a capacity constraint, Heiko, that Stephen mentioned.

They are trying to figure out how to refine our gold, Barrick's gold, Anglo's gold, Sassa's gold, and do it efficiently, effectively. Right now I've asked that we perhaps be a little bit patient with them in terms of what we ship them. As they get more efficient in their process, we could certainly look at increasing what we send them and what we sell to them and take advantage of that reduced royalty rate.

Speaker 4

Yeah, so Mike, I'm just going to poke in before Heiko asks another question because it leads into the next question. In phase of claiming, the foreign exchange rate between the Tanzanian shilling and the U.S. dollar for gold as it became seriously screwed with the OT. I want to explain to you how you manage that through OTs in Tanzania.

Speaker 1

Yeah, no, it's a good question. As Heiko, you touched on, and a good question on the FX as well, both the gold price that they quote, as well as the foreign exchange rate that they quote on each transaction, are daily international published rates. The FX is published on a daily basis. It's at about 2,600 to 1, for every $1 US dollar, it's 2,600 shilling. Again, what we validate, both the gold price and FX, are rates that the mining commission quotes with each shipment, are international published rates in London and abroad. All market rates, and again, published on a daily basis on the mining commission website that folks can track. Again, Stephen mentioned the gold in part, but some of this local bifurcation is to help prop up those foreign currency exchange reserves. The currency has depreciated standardly in the last number of years.

This is an opportunity for them to bolster the currency. It improves from about 2,750 to 1 to about 2,600 to 1 currently, which I think is in part due to the project issues here with the global gold deal.

Speaker 4

All right, Heiko, any other questions?

Speaker 2

No, that was it on my end. Thank you so much, and have a great day.

Speaker 4

Thanks, Heiko. I'll get into another question. Operator, is anybody else in the queue?

Speaker 0

No, sir. You're free to take the floor.

Speaker 4

Okay, excellent. The last question is, it's an interesting one. Gentlemen, all fair and good, but how do you investors make a return? We are in the early stages of a gold bull market, and I'm seeing a number of small juniors that are not even in production that have had good price appreciation, yet TRX Gold stock has not appreciated to the same degree. It's okay. I did, so I'll get into what I think is necessary and what the team thinks is necessary. I did get into this in part in the presentation. I think you have a billion-dollar study and a good roadmap. That's great, but you need to get there. As you're hearing on this call, we are getting there. We are making steps to start to realize that.

I think the market's going to need to see us continue down that path as well as become properly capitalized. As I mentioned in the cost chart, more better capitalized companies have had better returns. I've seen that, and we see that in the analysis that we do. What I would do is I would ask the gentlemen to ask that question to look at those juniors that have appreciated and look at their working capital ratios as well as their cash balances. I believe what you will see is ones with higher cash balances have appreciated more than ones with lower cash balances. Ones that don't have debt have appreciated more than ones that have significant debt. I think there's still a working capital element to this market. The second part to that question is the joint venture agreement. I think the market still has some uncertainty.

We have a 55%, 45% joint venture agreement, which isn't as favorable as other jurisdictions or other people, even in country. I think we need to work through that with the Tanzanians and help them understand that what's good for us is also good for them, and move that forward. I think those are the two major things that have impacted the share price appreciation to date. Also, I'll add a third one. When we did come in, and I've explained this a lot of times to people, it was very under-capitalized even when I came in. We only had $2 million of cash. In order to do what we've done, we had to do early capital raises. There weren't a lot of sources of capital at that point in time. We do have a warrant book that's still there that starts to expire in the new year.

I think as we move through that warrant book, and those warrant expiries, we should start to see some share price appreciation. Anybody who understands trading understands what I'm talking about. I'm more than happy to take more questions around that. Hopefully, that answers the question. In the fulfilment of the question, it's certainly something on our mind.

Speaker 0

Operators?

Speaker 1

Yes, sir. We do not have any other audio questions. You're free to take the floor for closing remarks or if you have additional text questions.

Speaker 4

Thank you everyone for joining the call today. Greatly appreciate it. Thank you for the questions. I hope you get a good sense that we are moving forward. This does take a little bit of time, but we do have the proper team to move this asset forward. We've proven that in the past. We are proving that in the future. The short to medium-term focus is going to be on, as I mentioned, thermal times, normalizing the working capital, continuing the plant expansion, continue the mining and then into the underground, the PEA route, get back to the drill bit in the new year, put that into our budget to expand resources, as well as continue negotiating and having great conversations around the joint venture agreement with the government. Going straightforward now. No longer as complicated as it used to be two years ago.

It's a straightforward roadmap to value creation. Thank you.

Speaker 0

This brings a close to today's meeting. We may now disconnect. Thank you for your participation and have a pleasant day.