Aris Mining Corporation (ARIS) Q4 2024 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to the Aris Mining Full Year 2024 Results Call. We will begin with an overview from management followed by a question and answer period. [Operator Instructions] As a reminder, all participants are in listen-only-mode and the conference is being recorded. [Operator Instructions] Please note that the accompanying presentation the management will refer to during today's call can be found in the Events and Presentations section of Aris Mining's website at arismining.com. Aris Mining has filed financial reports for the fourth quarter and full year 2024 on SEDAR+ and EDGAR. These reports can also be found on the Aris Mining website. I would now like to turn the conference over to Mr. Neil Woodyer, Chief Executive Officer. Please go ahead.

Thank you, operator, and welcome, everyone. Thank you for joining us for our full year '24 earnings call. Today, I'm joined by members of the management team, including Richard Thomas, Richard Orazietti and Oliver Dachsel. We look forward to addressing your questions at the end of this call. But before we dive into the results, please note the cautionary statements on Slide 2 as we will be making several forward-looking statements today. Starting on Slide 3, I'm pleased to report that Q4 was a strong quarter, delivering our highest production for the year of 57,364 ounces. We generated $22 million of net income and $67 million of EBITDA in the fourth quarter. At Segovia, we reduced all-in sustaining costs to $1,485 and achieved an all-in sustaining margin of $58 million, which is a 32% increase over Q3. We remain on track to commission the expanding processing facility at Segovia in the second quarter of this year. Following that, a gradual ramp-up from 2,000 tonnes per day to 3,000 tonnes a day throughout the remainder of the year. This year, Segovia is targeting annual production of 210,000 to 250,000 ounces and in the range of 300,000 ounces from 2026 onwards. We've also been exploring opportunities to scale up Marmato's current expansion into a high-capacity operation by way of upgrading the carbon-in-pulp processing facility by 25% to 5,000 tonnes per day. We're also looking at expanding our CMP business model at the Upper Mine flotation processing facility. Together, these upgrades and expansions are expected to increase Marmato's annual production potential to more than 200,000 ounces. Richard Thomas will be giving more information on that later on in the presentation. Growing cash flow generation and refinancing of our senior notes in October last year contributed to a year-end cash balance of $253 million. We're well positioned and funded to deliver on our growth strategy. We expect to achieve an annual gold production rate of more than 500,000 ounces once our expansions and operations are fully ramped up to nameplate capacities. With that, I'll now hand you over to Richard, our COO.

Thank you, Neil. Moving on to Slide 4. For the full year, we produced 211,000 ounces from our mines, with 188,000 ounces of gold from Segovia and 23,000 ounces of gold from the Marmato Upper Mine. As Neil mentioned, quarter 4 was our standout quarter, delivering our highest gold production of the year at 57,364 ounces. At Segovia, a modest increase in throughput in quarter 4, combined with a 7% rise in the average gold grade processed at Segovia at 9.484 grams a tonne, resulting in gold production of 51,477 ounces, an 8% increase compared to the quarter 3 results. Despite an 8% higher realized gold cost, all-in sustaining costs reduced by 4% to $1,485 per ounce compared to quarter 3. Owner Mining all-in sustaining costs improved to $1,386 per ounce in quarter 4 from the $1,451 per ounce in quarter 3, while Contract Mining Partners segment generated the highest quarterly all-in sustaining cost sales margin of 39%. With that, I'll pass on to Richard Orazietti to cover our financial results and then provide an update on our growth projects.

Thank you, Richard. Turning to Slide 5. As Neil said at the outset, we had a very strong quarter, especially when compared to the third quarter of 2024. Gold revenue of $148 million was up 13% compared to the third quarter, driven by higher realized gold price of $2642 per ounce and higher quarter-over-quarter sales volumes resulting from higher production. Bolstered by the revenue growth and a strong focus on cost control, income from mining operations increased 42% quarter-over-quarter to $54 million. Net earnings for the fourth quarter were $21.7 million compared to a net loss of $2.1 million. This was primarily due to the increase in income from mining operations, as well as a gain of $6.6 million on financial instruments and a $5.1 million FX gain recognized in the quarter. Adjusted earnings in the fourth quarter were $24.7 million or $0.14 per share compared to $13.1 million or $0.08 per share in the third quarter. Adjusted EBITDA was $55.6 million in the fourth quarter, a 29% increase quarter-over-quarter, reflecting the increase in adjusted net earnings. For the full year 2024, we generated adjusted EBITDA of $163.1 million and adjusted earnings of $55.9 million or $0.35 per share. Now looking at Slide 6. I'd like to draw your attention to the graph. As mentioned earlier, the increase in realized gold price, higher production and our continued focus on cost control supported a meaningful expansion in AISC margin in the fourth quarter at our Segovia operations. Our quarterly AISC margin reached a 3-year high of $58 million, up 32% from $44 million in the prior quarter. For the full year 2024, the Segovia operations generated an AISC margin of $163 million. While we enjoyed the strong gold price environment, we remain focused on operational efficiencies and keeping costs low. Now moving on to Slide 7. I'd like to discuss some key items on our cash flow statement. For the full year 2024, our gold revenue totaled $499 million, and we generated an ASIC margin of $154 million. The adjusted sustaining margin after-tax, G&A, together with working capital changes amounted to $66 million, supporting the funding of $157 million of our growth projects, including $83 million at Marmato, mainly for the Lower Marmato project and $65 million at Segovia operations, primarily for the processing plant and underground development and exploration. In the fourth quarter, our after-tax adjusted sustaining margin of $49 million more than covered our expansion and growth capital of $42 million. In addition, financing activities in the fourth quarter generated a cash inflow of $164 million, including $136 million in net proceeds from refinancing the 2026 bonds with a new issue of 5-year 2029 bonds and a $40 million inflow from Wheat [ph] precious metals stream pertaining to the Marmato Lower Mine project. We ended the year with a cash balance of $253 million, up from $195 million at the end of 2023. I will now pass it back to Richard Thomas, and he'll provide an update on the expansion of the Segovia processing plant and the construction of the Marmato.

Thank you, Richard. Now moving on to Slide 8. Segovia process plant expansion has progressed as scheduled. And as previously disclosed, Phase 1 of the Segovia expansion is complete, the new extended receiving area for our CMP is fully commissioned and handed over to operations and working well. The new facility began processing materials in October 2024. Phase 2, which involves installation of ball mill in the formal contractor receiving area is underway with commissioning expected in quarter 2 this year as scheduled. Following the ramp-up period, we expect to reach production rate of about 300 tonnes per day by the end of '25, enabling Segovia to produce 210,000 and 250,000 ounces of gold in 2025 and in the range of 300,000 ounces of gold from 2026 onwards as per our guidance released earlier in January. The total cost of Segova's processing plant expansion project is still installation at $15 million. And at the end of the year last year, we had spent $8.5 million. If we could move on to Slide 9, please. I'd like to provide an update on the construction progress at the Marmato Lower Mine. As you can see from the photographs on this slide, the construction of Lower Mine continues to advance with, firstly, the access roads to the Lower Marmato process facility and the accommodation camp now 100% completed. Secondly, the decline development underway with 200 meters completed by the end of February 2025 and the processing plant foundation earthwork 12% ahead of schedule as of the end of February 2025. At the beginning of this year, we initiated an engineering assessments to evaluate whether we could expand the plant - the current CIP plant currently under construction. As a result of the studies, we have decided to expand the CIP processing facilities at the Lower Mine from 4,000 tonnes per day to an expanded 5,000 tonnes per day, whilst also expanding our CMP business model, increasing the feed and average grade of the existing Upper Mine flotation plant, thereby further increasing the gold production. With the completion of these expansions, we expect Marmato to be able to produce in the range of 200,000 ounces of gold per year, which compares to the previous life of mine average of only 162,000 ounces per year. If you could move to Slide 10, please. As you can see from the drawing on this slide, the key enhancements required to take the throughput from 4,000 tonnes per day to 5,000 tonnes per day are straightforward as the upgraded 5,000 tonnes per day design will use major components from the current 4,000 tonnes per day design, while also integrating some high-capacity components, installing the secondary crushing unit, adding an extra leach tank to support the increased throughput and accelerating certain project components into the initial capital phase. We expect this ramp-up to begin at H2 2026. Moving on to Slide 11. As of February 2025, we have spent $75 million on construction. The estimated cost to complete the revised construction, taking the throughput from 4,000 to 5,000 tonnes per day is $290 million, bringing the total upfront cost to $365 million, $85 million over the previous construction plan. The 25% bigger plant requires bringing forward the tailings facility construction and the backfill plant into the upfront capital, and this is estimated at $50 million. We have also opted to build a $20 million power - grid power line instead of relying on a third-party power purchase agreement. The process plant enhancement that I mentioned earlier, namely integrating some high-capacity components, a secondary crushing circuit and adding an extra leach tank to support the increased throughput are expected to cost around about $10 million. Importantly, the net construction cost to Aris is $208 million, considering the remaining stream funding of $82 million. In our view, this is a very attractive investment proposition, being able to meaningfully increase production of a long-life asset with minimal, limited incremental capital, against the backdrop of record high gold prices. Looking ahead with the new Marmato and the expansion of Segovia, Aris is targeting an annual production rate of more than 500,000 ounces of gold. With that, I'd like to hand over the call to Oliver.

Thank you, Richard. Turning to Slide 12. I'd like to summarize our previously disclosed guidance for 2025. Aris Mining expects consolidated gold production of between 230,000 to 275,000 ounces in 2025, with in progress expansion projects to contribute to production growth in 2025 and beyond. With 2025 gold production expected to range between 210,000 to 250,000 ounces at our Segovia operations, the company anticipates a significant increase in Segovia's all-in sustaining cost margin this year of more than US$230 million, using the midpoint of our 2025 guidance range - guiding ranges at a gold price of $2,600 per ounce. This compares to an all-in sustaining cost margin of US$163 million at Segovia in 2024. In 2025, production from the Segovia operations will be sourced approximately 50% to 55% from Owner Mining and 45% to 50% from mill feed purchased from Contract Mining Partners. For the Owner Mining segment, all-in sustaining cost per ounce sold is expected to range between $1,450 to $1,600 per ounce, and the CMP segment is expected to achieve an all-in sustaining cost sales margin of 35% to 40%. The 2025 cash cost and all-in sustaining cost guidance have been provided separately for the 2 segments, Owner Mining and CMPs, given their distinct primary cost drivers. Owner Mining costs are primarily driven by conventional expenses such as labor, consumables, such as explosives and fuel and power. In contrast, CMP costs are mainly influenced by the cost of purchasing mill feed, which depends on material volume, recoverable gold grade and the spot gold price. Distinguishing between Owner Mining and CMP cost metrics is necessary given the current rise in gold prices and the resulting challenge in forecasting CMP costs. As a result, we believe the CMP segment is best presented on a sales margin basis to provide a clear representation of its financial performance. The Marmato Upper Mine produced 23,000 ounces in 2024 and a similar production level is expected for 2025, while construction of the new large-scale Lower Mine, which will access wider porphyry mineralization c continues. Aris Mining will resume providing cash cost and all-in sustaining cost guidance for the Marmato mine when the Lower Mine achieves commercial production. Now especially for our credit investors on the line, Slide 13 highlights and summarizes the strength of our balance sheet. Strong liquidity of US$253 million, low net leverage of 1.5 times, insignificant near-term debt maturities and a solid equity cushion sitting below our debt as evidenced by our gearing ratio. Importantly, total and net leverage ratios have already started trending down compared to when we issued our 2029 bonds in October last year from 3.1 times and 1.7 times, respectively. I'd now like to hand the call back to Neil to conclude our prepared remarks.

Thank you, Oliver. We now move to Slide 14. But before opening the Q&A session, I'd like to summarize key takeaways that we've reported for this fourth quarter and for the full year. In Q4, we recorded our highest quarterly production at 57,000 ounces. We expect total production in 2025 to range between 230,000 and 275,000 ounces, which is up from 211,000 last year. We're seeing meaningful margin expansion as evidenced by our quarterly all-in sustaining cost margin of $58 million in Q4, increasing by 32% over the prior quarter. We're in a strong financial position with cash balance of $253 million, $82 million still to be funded by Wheaton under the Marmato stream and growing cash generation from Segovia. To close, Aris Mining is on track to more than double annual production to 500,000 ounces, and we have the means and the team to deliver that growth. With that, we look forward to your questions. And I'd like to turn the call back to the operator to open the line for questions.

Thank you. [Operator Instructions] Today's first question comes from Carey MacRury with Canaccord Genuity. Please go ahead.

Hey. Good morning, guys. Just wondering if you could give us some color on how long you've been thinking about this expansion and sort of why now, I guess?

I think we've been thinking about the expansion for well over a year. When we started construction, we were following the plan that had been originally set up by SRK and then going on from there. That plan made sense to us. But as we got to know the Upper Mine more, we realized two things. It would not achieve the performance that had originally been anticipated, but it was a huge potential for the small miners. So we started to reshape our thinking on the basis that our license is limited to 2 million tonnes a year as to whether we could increase the more profitable material from the Lower Mine. So we've been thinking about it for some time and put the analysis strictly into play at the beginning of this year.

Okay. Thanks. And maybe just on the capital, can you give us a sense of how much capital we should expect this year versus next year for the expansion?

I mean we are forecasting roughly this year about $260 million. And so the additional expenditure this year could be another $50 million [ph] depending on the spend. So moving along.

Okay, great. Thank you.

Thank you. [Operator Instructions] And this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Woodyer for any closing remarks.

Thank you, operator, and thank you, everybody, for joining us. And if you need more information, please contact Oliver, who will be more than happy to take you through any more details. Thank you very much, everybody. We appreciate your attendance. Thank you.

Thank you, sir. This brings to a close today's conference call. You may disconnect your lines. And we thank you for participating. Have a pleasant day.