Galiano Gold Inc. (GAU) Q1 2025 Earnings Report, Transcript and Summary

Good morning. My name is Ina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Galiano Gold Inc. First Quarter 2025 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] Mr. Matt Badylak, President and CEO of Galiano Gold, you may begin your conference.

Thank you, operator, and good morning, everyone. We appreciate you taking time to join us on the call today to review our first quarter 2025 Galiano Gold results that we released last night. On Slide 2, we'll be making forward-looking statements and referring to non-IFRS measures during the call. Please refer to the cautionary notes and risk disclosures in our most recent MD&A as well as this slide of the webcast presentation. Yesterday's release details our first quarter 2025 financial and operating results. That should be read in conjunction with our first quarter financial statements and MD&A available on our website and filed on SEDAR and EDGAR. Also, please bear in mind that all dollar amounts mentioned in the conference call today are in U.S. dollars, unless otherwise noted. On Slide 4, with me on the call today I have Matt Freeman, our Chief Financial Officer; Michael Cardinaels, our Chief Operating Officer; and Chris Pettman, our Vice President of Exploration. For this presentation, I will initially provide a brief overview of the quarter. Michael will give an operations update. Matt will discuss the financials, and Chris will review the recent exploration success his team has had at Abore. I'll then provide some closing remarks and open the call for Q&A. Here on Slide 5. Please note that we are discussing the AGM results on a 100% basis. Starting with safety, we had 2 LTIs and 3 TRIs during the quarter. This equates to a rolling 12-month LTI frequency rate of 0.43 and 1 total recordable injury per million man house worked. This falls short of our zero harm commitment. And during the quarter, we focused on specific actions to address these incidents and strengthen our safety culture. From a mill throughput and grade perspective, the quarter proceeded largely in line with Q4. That said, an unscheduled 2-week mill shutdown due to SAG mill repairs, reduced production below initial budget projections impacting gold recovered in the period by approximately 5,000 ounces for the quarter. Mining operations recommenced at Sasa during the quarter with initial lower-grade oxide or supplementing material mine from a boat to feed the mill. On an absolute basis, costs remained in-line with expectations. So ultimately distributed across fewer ounces produced. We have made excellent progress on strategic initiatives commencing the ingrown waste stripping campaign in February ahead of schedule. Our financial position remains robust with $106 million of cash at quarter end and 0 debt. Our exploration team achieved significant success at Abore, identifying a promising high-grade zone beneath the main pit. Additional infill drilling out of ore has strengthened our confidence in the resource model. I'll allow Chris to speak about this in more detail later. During the quarter, we also published a 5-year outlook, which projects a 75% increase in production from 2024 levels over the next 18 months. I'd like to reiterate that Q1 production figures don't fully represent our expected run rate for the balance of the year. However, the impact of the mill shutdown will result in production moving towards the lower end of guidance in 2025. Now turning it over to Michael and a discussion on our progress in operations during the quarter.

Thank you, Matt, and good morning, everyone. As Matt highlighted, during the first quarter, we unfortunately had two LTIs resulting in a 12-month rolling LTI frequency rate of 0.43. While this reflects an increase from the prior quarter, a number of safety initiatives were implemented to strengthen our performance moving forward. A mine-wide campaign on hand safety was launched, emphasizing awareness and prevention of hand related injuries. Refresher training on hazard identification and timely action closure was delivered to supervisors and managers, while our revised energy isolation procedure was introduced across the AGM. Emergency response capabilities were also reinforced through targeted training and a cyanide management simulation. Looking at our mining performance during the quarter, reestablishing the Esaase pit commenced in January and ramped up steadily in Q1, with the mining fleet now split between Abore and Esaase pits. We saw a 4% increase in material movement for the 2 pits compared to the fourth quarter of 2024. The commencement of Nkran stripping in February ahead of schedule, resulted in an overall increase of 12% total material movement compared to Q4 2024. Abore continues to expand now that we have completely mined through the historical resolute pit and backfill material opening up the pit to allow for more efficient mining practices. This, combined with establishing mining at Esaase allowed for significantly more ore production, increasing 144% compared to Q4 2024. On to Slide 7, please. On the processing performance, as Matt mentioned, the 2-week mill shutdown impacted material process for the quarter. However, we were able to blend or successfully from Esaase and Abore, allowing for better throughput on a tonnes per hour basis than planned. Crushing limitations will continue to restrict mill throughput until the secondary crusher is commissioned in Q3. However, our blend strategy is helping to mitigate some of the impact. The crusher project is progressing well, and the majority of the critical components have been received on-site or import awaiting customs clearance, including the crusher itself. More ore is expected to be available from Abore and Esaase pit in the coming quarters, reducing the reliance on historical stockpiles and providing a higher grade feed source to the mill. We produced just under 21,000 ounces for the quarter, primarily impacted by the extended mill shutdown. But with the increasing availability of ore and higher grades from Abore and Esaase in the second half of the year and the expectation of the secondary crusher being online in Q3, we are maintaining our production guidance of between 130,000 and 150,000 ounces. On to Slide 8, please. Unit costs for mining at Abore and Esaase are in line with our expectations and have come down to $3.31 per ton from $3.41 per tonne in Q4 2024 -- compared with $4.75 a tonne in Q4 of 2024, with a larger percentage of material now being trucked from Abore compared to Esaase, which has the higher unit rate being further from the [Abore] (ph). On the back of the mill downtime, the lower tonnes milled resulted in higher-than-planned unit cost for the processing plant at $14.37 per ton, although down 9% compared with the previous quarter Q4 2024, attributable in part to feeding some historical stockpile material in Q1, which is softer than the Abore ore. We saw approximately $3.3 million spent on development capital in the quarter. And at Nkran, we spent another $3.2 million as the waste stripping campaign commenced ahead of schedule. Site G&A for the quarter was $5.78 per ton milled, an improvement over Q4 is $6.28 per tonne milled. Overall, costs being well managed, and we should see better alignment as the year progresses and the plant processes more tonnes, and we produce more ounces. So with that, I would like to turn it over to Matt Freeman to discuss the company's financial results on Slide 9, please.

Thanks, Mick. Good morning, everyone. On this slide, we've outlined on the key financial metrics for the quarter. We generated revenues of $77 million in the first quarter at a realized price of $2,833 per ounce being able to sell gold at market prices, having terminated the offtake agreement back in Q4. We generated positive income from mine operations of $15.4 million, but net earnings were negatively affected by the fair value adjustments to our hedge book following the historic run-up in gold prices such that we recorded a net loss of $29 million. However, adjusting for the unrecognized portion of the hedge loss, adjusted income was $3 million. of EBITDA was approximately $26 million. We generated $26 million in cash flows from operations and ended the period flat with respect to cash despite the ongoing stripping of at Abore recommencing mining at Esaase and beginning the waste strip at Nkran. We continue to focus on the cost structure of the mine and are pleased operating costs in aggregate remained consistent with recent quarters. Given production was on the low end this quarter, that does translate into higher ASIC at $2,500 per ounce, but we are confident that as production increases in line with the 2025 plan that ASIC will start to fall commensurately. At this point, it is worth noting that historically high gold price, although obviously a positive for the business overall, does create some uncontrollable pressure on ASIC by increasing royalty costs. Our guidance had assumed royalties would be based on $2,500 per ounce or approximately $125 per ounce of royalty. Secondly, for our business, in March, the Ghanan government increased the growth of sustainability levy by 2%, which is directly applied to revenues. The impact of both higher gold prices and the higher levy could impact ASIC by as much as $55 per ounce based upon current spot gold prices. Mining costs, as Mick noted, were below $3.50 per tonne mined. This is a key component of the cost structure, which should help sustain margins in this high price environment. We also remain disciplined with capital deployment only spending on critical and with clear line of sight to value creation. Our largest ongoing capital project is the installation of the second by crushing circuit, which is critical to maintaining at or above nameplate levels, even in processing harder material from Nkran and Abore. This remains on track for completion in Q3 2025. Additionally, our capital program for the year includes the next list of the tailings facility, Stage I, which is expected to commence later this year. Slide 10, please. As we've mentioned, we continue to maintain a very strong balance sheet even during this period of high stripping, ending the period with $106 million in cash and still no debt. We remain in a very strong position to continue to develop Nkran, invest in the exploration and continue to execute on the Asanko mine plan. And with that, I'll turn it over to Chris Patman will, in part, discuss the positive drilling results we recently published.

Great. Thanks, Matt. While it was another busy quarter for us in exploration with 2 active drill programs at Abore and Akoma, as well as various ongoing generative activities. At Akoma, our drilling targeted Northeastern extensions of the mineralized shear zones along strike of the positive results we achieved in 2024 with drilling now complete and results expected in Q2. Our regional generative activities have continued, including the startup of the Sky Gold B ground IP survey, which was designed to assist an additional drill targeting following the 2024 drilling that identified multiple large gold-bearing shear zones at the Sky gold prospect area. Drilling activities also continued to say targeting activities also continued at Akoma-target area, which is located along strike to the Southwest of Nkran. Obviously, results from drilling in the Abore were the highlight of the quarter for us, which I'll discuss in detail. The current program was primarily focused on infill drilling in and around the known South high-grade zone in order to increase our confidence in the mineral resource model as we advance mining at the south pit as well as testing for continuity of mineralization below the reserve pit in certain prioritized areas. Results were excellent with all of the holes returning intercepts that were either in line with or exceeding expectations of the mineral resource model and with these infill holes, we have now expanded the strike length of the South high-grade zone from approximately 90 meters to 180 meters. As you will have seen from our press release last week, we reported numerous tick high-grade intervals throughout this zone including [4315] (ph) which was [34 meters at 12 grams] (ph) a tonne gold from 192 meters and 11 meters at 7.2 grams a tonne from 239 meters as well as whole 325, which was 38 meters at 6.7 grams a tonne from 195 meters. These holes are representative of the quality of mineralization we see throughout this zone. A particular note this quarter is the discovery of a new high-grade zone below the reserve pit and outside of the mineral resource at the south end of the Abore main pit. Hole 346 intercepted 50 meters at 3.1 grams a tonne from 100 meters, which places at the top of the zone immediately below the reserve pit. This is obviously an exciting result for us as it further highlights the fact the Abore mineralizing system may indeed be much larger than we currently understand. Based on these results, we have identified several high priority structural drill targets at depth as mineralization remains open across the entire 1,800-meter deposit strike length. The next few slides I'll show some of the highlights of Abore results. Next slide, please. This image shows the location of the 2025 drilling in plan view, along with the position of some of the best intercepts. As you can see, we focused on the south pit, but it put several holes into the northern pit area, which also returned excellent intercepts, including 23 meters at 3.1 grams a tonne in hole 329. Next slide. These 2 cross sections, I think, are helpful to demonstrate the growth potential of Abore. The image on the right shows the position of the new high-grade discovery at Abore, immediately below the reserve and outside of the resource. This zone is open down dip and along strike and is a priority target for follow-up. The image on the left shows the new northern extent of the South high-grade zone. These 2 wide high-grade intercepts both lie below the reserve pit at grades that were better than expected in the mineral resource model and contributed to extending the strike length of the zone, which we now know to be approximately 180 meters. Next slide. This is a long section through the bore deposit from north to south and shows the location of the newly discovered zone as well as the South high-grade zone discovered in 2023. And 2025 drilling is shown here in teal with previous drilling shown in purple. In addition to increasing confidence in the mineral resource model, the latest round of drilling has confirmed that mineralization continues a depth and has provided valuable new structural insights to the team. There are several structural corridors that may be controlling these high-grade ore shoots as highlighted here in this image, along with several high-priority targets that remain untested. The next phase of drilling will test these multiple corridors for further extensions of this high-value ore. And we believe there is significant upside for further resource growth in Abore either for future surface mining expansions or an eventual transition to underground operations given the high grades and significant width we're seeing as we continue to test the deposit. The exploration team is busy planning for our next round drilling, and we're certainly excited to see what Abore has in store for us. With that, I'll give it back to you, Matt.

Thank you, Chris. Moving on to Slide 15. With our asset highly leveraged to gold and metal prices well above $3,000 an ounce, Galiano is uniquely positioned to deliver exceptional value for our shareholders. We project a 75% increase in gold production by 2026. Our investment in developing cut through at Nkran is off to a solid start and a strategic focus of our technical team is to develop a maiden underground resource at the AGM by year-end. We continue to operate from a position of financial strength with over $100 million in cash and zero debt. Gagliano's competing value proposition based on strong organic growth over the next 2 years and potential expansion of mineral resources through effective exploration as we have seen at Abore, make us an attractive investment opportunity in today's market. With that, I'd like to turn it back to the operator and open up for any questions. Thank you.

Thank you. [Operator Instructions] Your first question comes from the line of Heiko Ihle from HC Wainwright. Please go ahead.

Hi there. Thanks, and team thanks for taking my questions. Team can you hear me -- appreciate it. Sorry. I just heard Silos there for a second. Going through a presentation here that he was giving during this call, Page 12, Obviously, almost all the drilling was in the south pit. Just walk me through your intermediate and longer-term expectations. I mean, 2025, I assume there will be at least a little bit of drilling elsewhere. Walk us through your longer-term expectations and then also walk us through with maybe what you saw in drilling versus what you expected to see?

Sure. Maybe I'll take that one, Heiko. Yes, I guess I'll start with first what we expected to see versus what we did see. And you're right in that we focus in the south pit primarily because Heiko initially, we wanted to understand and it makes certain that the high-grade zone was those robust as the model was predicting it was. And in all of the holes we drilled, we saw, as I mentioned on the call here, either as good grades and intercepts as we thought we were going to or better. So typically speaking, they were wider and higher grade than we thought they were going to be in our current resource model, which is obviously one of the things that was exciting for us, particularly with the expansion of the zone, right? Before we started that drilling, it was 90 meters in strike length. And now with the infill, we've expanded that, and we know it's 180 meters of significantly high-grade material. So I think, hopefully, that answers that question about what we saw versus expectations. Obviously, the new discovery that was out of the blue in terms of the resource model. The model there had little to no mineralization. We suspect that there might have been a structure there that we were going to chase. And obviously, we were happy with those results with a very chunky bit of high-grade mineralization of 50 meters. And importantly, it looks very similar to the high-grade zone in South pit in terms of its morphology. In terms of the next phases here, we are currently drilling some deeper targets all along the strike length of the ore body. I mean, we're still at shallow depths here, right? I mean we've only drilled to about 150 meters below the surface. And so we have a pretty comprehensive plan to test these targets further. We're currently designing the plans now for follow-up. We'll be testing the down dip extensions of these zones, both the south pit and the new high-grade discovery as well as some -- say, some of these structural targets that we've identified now that are pretty exciting for us. Whether that means that we're at depth that could be amenable to underground mining or whether that could be future expansions of the open pit or looking at both scenarios. Does that answer your question, Heiko?

I think that's a very good answer to the question. I think that's helpful for us to analyze the longer term here as well. You're maintaining your guidance here today, but I got to ask, I mean, with the secondary crusher commissioning in Q3, you state that the majority of equipment has been received as awaiting custom clearance, which at least means it's on land. What happened with the cost of all the equipment when it was also done versus your expectations? How much has actually been paid thus far? And is there any balance still owned old -- and then also just changing course a bit, what sort of downtime should we expect for the install? Thank you.

Hi, Heiko, it’s Matt Freeman. I’ll take the cost piece of that. And so the secondary crusher project remains on budget. As you'd expect, we've -- as we said, we're expecting to finish that in Q3. So we've only spent a portion of the amount, a lot of the capital equipment we paid installments and partial upfront payments. We spent a couple of million bucks this quarter, and I think the overall budget was around $5 million. So we've still got some more to spend. And -- but it's on budget. We're happy with where it's tracking. And importantly, as you say, the equipment in country and is moving towards site, if it's not there already. With respect to downtime, I'll maybe flip that around back to Mick, if you can give a bit more details on that.

Yes. Thanks, Matt. In terms of downtime, we should only need a number of days to tie in, in the circuit once everything is being commissioned. We're luckily, able to do most of the preworks while the plant is still running. And even then once we go to tie in the secondary crusher and the new conveyor systems themselves, we can isolate the feed conveyor from our primary crusher and still run the feeder that comes from our coarse ore stockpile to maintain some mill production, while we are tying into the rest of the circuit. So we only expect it to be down for a couple of days, and we'll tie in some other maintenance work along with that crusher shut and time. So we'll do mill reline and such to take advantage of that crusher time shut down, I guess?

So do you expect to even feel the impact? Because I mean I assume there's preventative maintenance going on just about every quarter. Should we even model any sort of impact from this?

We don't really expect a significant impact from the shut to actually tie the crusher in itself. And we have contingencies in place with our mobile crushers and everything. There is some additional work for shortening some of the conveyors, which will no longer be necessary once the secondary crusher is installed, but we'll push those out to a shutdown later in the year to maintain that flexibility should we have any issues with the commissioning. So we expect --.

Yes. So maybe I'll just add something to that as well. I mean the production forecast that we're estimating for this year do include all of that downtime as well, right? So that's being captured in the production numbers and our projections for the year. So nothing additional to what's already been captured there.

That’s helpful. I'll get back in queue and stop hogging up the question line here. Thanks for the answers.

Okay, thank you.

[Operator Instructions] Thank you. That ends your question-and-answer session. And this concludes today's call. Thank you for participating. You may all disconnect.