TRX Gold Corporation (TRX) Q1 2023 Earnings Report, Transcript and Summary

Welcome to the TRX Gold Corporation First Quarter 2023 Financial Results Presentation. [Operator Instructions] and the meeting is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the meeting over to Stephen Mullowney, CEO. Please go ahead.

Yes. Thank you, and welcome, everybody, to the Q1 2023 results call. On your screen, you'll see an updated picture of our Buckreef Main Zone pit. The ore from this pit is what has provided us with the Q1 financial results and the good progress that we've made at site. It is also providing us with an exploration program that is funding the drilling program that is ongoing by Andrew, who is currently at site and the team at Buckreef in the immense blue sky potential that we've discovered over the last year at Buckreef. So Q1 2023 is really a turning point in the company's history. It's the first quarter where we could start to see the real profitability potential Buckreef. The company has now been stabilized and has a great growth platform going forward. So we're very excited to get into what we've done, what the results were and now where we're going. So first, a cautionary note. You'll find this in our corporate presentation. We will be -- from a legal perspective, we have to say this. We will be talking about forward-looking information and such forth. Please have a read as a cautionary note. Thank you. On the call today with myself, we have Andrew Cheatle, our COO, Andrew. So Andrew actually just arrived 10 minutes ago at site, I believe, Andrew.

That's a pretty accurate address, yes.

And they've served you a delicious fillet of tilapia.

That is correct. And I think the analysts that have been here will appreciate that indeed.

Yes. Also on the call as well is Mike Leonard, our CFO.

Good morning, everyone.

And also our VP, Investor Relations, Christina Lalli.

Good morning, everyone.

Excellent. Thank you, guys. So we'll get into some of the things that we got into in the past. And as I mentioned to a lot of people, as I give presentations now, this story is getting a lot easier to tell. And it's also getting a lot easier to portray the growth potential that is in front of us from a production perspective, from a resource expansion perspective or from a value perspective. So TRX, we're led by a team of experienced leaders. I think we're a little bit different in regard that some people would say we're not promotional enough, but I do believe we are -- we stand behind what we're going to do and we say what we're going to do as well. So I think that is underlying the philosophy of the management team. We've experienced rapid growth from a production perspective. And from just a site perspective and everything that we're doing, there's now well over 400 people on the Buckreef Gold site across all facets of putting our employees and contractors. So they're doing mining, geology, metallurgy, processing right across the board. And well, that's exploration. So since I've joined just over 2 years ago now, we always knew that the Buckreef Main Zone, we said this before, had great potential. We've extended that by 500 meters, the mineralization. But the more you dig underneath the surface at Buckreef and just the mining package that is available here, there's a lot more potential, and it's not only the Buckreef Main Zone. We keep on talking about the Anfield, Eastern Porphyry. But there's other things around us as well. Andrew will get into that in a few minutes as we get through the presentation. So the foundation for future growth. And this is really setting the stage, it is already a great resource here. That can grow significantly. There's 2 million ounces of gold in the measured and indicated category. The great thing is come to surface. You see the pit in my background here. It comes to surface, we're mining it, we're processing it very cheaply. The key is wide too. It's 20-meters [indiscernible] wide of mineralization, which helps us out with our cash costs. Recoveries are great at 90%, and we've been experiencing that for a while now and straightforward metallurgy and grind crush DIL. Fully permitted [ SML ], processing plant is working great, as I mentioned. It is achieving throughput capacity and above through capacity at times. It's also getting those great recovery rates. We have a minimal environmental from an ESG perspective, we're on the electrical grid in Tanzania. We recycle all water. It's currently the rainy season, so there's no shortage of water at this point in time. And it's just a really good property from that perspective. And we have financial exploration potential changer we'll get to in a second. So with regards to Q1 2023 highlights, we completed the 1,000 tonne per day plant. It's up and running. We declared commercial production on that. That's led to good gold production of over 5,500 ounces, which led to great quarterly gross sales, gross profit, net income, operating cash flow and adjusted EBITDA, real company statistics that are all really good and growing. That positive operating cash flow has funded the business, including the exploration program. We've done over 4,600 meters of drilling in Q1 on the Buckreef Main Zone as well as Anfield and Eastern Porphyry, and those results are pending. And importantly, we've done it all safely. We've had 0 lost time injuries, no confirmed COVID cases and we've achieved 1 million operating hours with no LTIs or long-term incidents -- injuries, sorry. And so it's all been done really safely, really quickly and we're really proud of that. Andrew, you just want to mention something on the safety record that we have at site because it's something that we're all really proud of.

Yes, that's right, Stephen. The team here, well, there's some brief safety every day in terms of from toolbox meetings through to job analyses, through to a culture where people can stop somebody and say, "Hey, let's just stop the work here that doesn't look safe". We've got a new safety leader at site who's come across from North [ Mara Barrick ]. And just a remarkable achievement for those that have been in mining for a long time to achieve a million hours LTI free. It's quite something and it doesn't happen every day. Of course, we needed to do it again, and we need to get to 2 million now.

And we did that during construction, which is always -- it's always risky business, but construction is always more risky than normal operations.

That's right. But again, it's just wonderful as I did my own work, to see people doing proper job observations, especially with working at heights, which is where a lot of the accidents occur. So people were properly tied off from 5-point safety systems, for example. But thanks for highlighting this, Stephen. The team here is very, very proud of this achievement.

Yes. Thank you, Andrew. And now I'm going to hand the presentation over to our CFO, Mike Leonard, who will go through the Q1 2023 financial results. Mike?

Well, thanks, Stephen, and good morning, again, everyone. On the financial side for the quarter, Q1 was another milestone quarter for the company. Stephen touched on it, but during the quarter, we declared commercial production on the 1,000-plus tonne per day plant at the end of October after achieving nameplate throughput levels. And despite only 1 full month of operating at that full nameplate capacity, 1,000 tonnes per day, the company did achieve record results, record production, record sales, gross profit, net income, operating cash flow, adjusted EBITDA, all of which Stephen touched on. During the quarter, we sold over 5,700 ounces at an average realized price of almost $1,690 an ounce, and that drove quarterly revenues of almost $10 million. And this was all achieved at low cash costs, as Stephen touched on of $732 an ounce. That was below guidance. So a really, really efficient and effective quarter in that regard. Gross margins were again quite significant. We're operating at low cost. So consequently, the gross profit margins were quite high at 55%, driving some of those net income record numbers that we spoke of. On the balance sheet, it continues to be very, very strong. We've got cash balance of almost $9 million at quarter end and growing. Our working capital was almost $5 million after adjusting for liabilities that will settle with equity. And again, adjusted EBITDA was a record as well at over $4.5 million, which is really a good proxy for cash flow. And all of this really demonstrates the strong liquidity that the company does have to fund the organic growth around value-accretive activities like exploration that again, Stephen touched on earlier. Importantly, as we continue to grow and see a full quarter of operating results at 1,000 tonnes per day, we're endeavoring to improve on all these metrics over the course of the year now that the plant is running at full capacity. Next slide, please, Stephen. So in terms of the fiscal 2023 outlook, during the quarter, you would have seen in our MD&A that we reconfirmed our full year production guidance of between 20,000 and 25,000 ounces. We do continue to expect the second half of the year's production to be higher than the first half. Again, we did declare commercial production on the plants at the end of October, early November. So certainly expect H2 to be higher than H1 in that regard. But reconfirm that full year guidance that we're tracking to very, very closely. We do continue to expect cash costs to be between $750 and $850 an ounce. As mentioned, we did come in just below that number at $732 an ounce for the quarter, but reconfirm that full year guidance accordingly. In terms of future growth, we do continue to advance a project that we touched on at year-end, which is aimed at increasing plant throughput of between 75% and 100% through the addition of a new ball mill. We're expecting to finalize the plans to purchase that new ball mill really in the coming days, this week, I believe, and hope to commence construction on an expanded facility in Q3, Q4 of this year. So importantly, that guidance, the guidance figures that we spoke of, the 20,000 to 25,000 ounces does not consider the impact of the potential benefit of this upcoming expansion. So stay tuned, and we'll update the market accordingly when that project comes online. In terms of the sulfide portion of the deposit, we are continuing with ongoing network to assess whether the process plant and flow sheet can efficiently process the sulfide portion of the deposit and importantly, potentially be expanded to accommodate much, much, much larger production levels, and Stephen will touch on that, but that's really how we're referring to this deposit now. It's not so much an oxide/sulfide deposit, but what we're looking at is a much, much, much larger mine. So we are looking at it very, very closely. And as we work through the oxide layer into the transitional and sulfide material, looking at using our current plant and flow sheet to hopefully accommodate that portion of the rock. And in the interim, we've commenced some geotech work and studies to analyze a deeper pit design. We are continuing to mine. You saw the picture on the opening slide, you can see an aerial view of the starter pit in December to your right. And as we continue to go deeper or looking at geotechnically how to go about doing that. So with that, I think I'll pause there and hand it over to Andrew, who will take us through the exploration results. Andrew?

Yes. Just before we hand it over to Andrew, Mike, a couple of other items of note on the larger project development. We've done an exploration program or an infill drill program as well to solidify some of those new reserves and convert some of the resources to reserves, as well as the geotech work, we're really looking at and just give the audience a sense of what we're doing there is, in any open pit mining assets, you have pit folks. So the steeper you can put your pits folks to lower your strip ratio. So we need to confirm what our pits folk design is going to be, and that incorporates what our mine plan looks like as well. Andrew, anything else to add with the work that we're doing around this because it's quite extensive everything that's going on.

It is, and I can confirm, Stephen, that the samples are packed and ready to be shipped. We're just doing a little bit of local administrative work to get those out of country and way too much detail. But however, Terrain is shipping their geotechnical gear from Canada tomorrow. So that brings everybody right up to speed on that. I would also comment that just on the visual observation, the footwall and hanging wall or the waste rock for the pit. The coal looks very good. We're getting very good recoveries. And we are expecting to have positive results. But of course, Terrain and SGS do have to do their work. But it -- visually, it looks very good.

Yes. So -- and I was going to mention and we are allowed to say who's getting the network, but I think you just mentioned who's getting the network.

I didn't mention the name, no. We put out a separate press release with that. Yes.

Excellent. So when we confirm that up, but the samples are getting ready to ship. Excellent. So Andrew....

It's a global name obviously, yes.

Yes, it's a global name, yes, and a global lab.

That's correct.

Without further a due, look, everybody is always interested in upside, the blue sky potential. So it always puts a smile on my face as well because we haven't had any bad news or anything negative coming out of what we're finding, it's always still positive. So why don't you take the group and our investors and analysts through what you're seeing?

Yes. Thanks, Stephen, and greetings, everybody, from Buckreef. I'm actually in Tanzania at the moment, and looking forward to getting out and going through a lot of this with the team over the next few days. And Stephen, we look forward to your arrival at the end of the month. And so just to refresh those that have looked at this before, the image on the right is a composite from our drone footages. The SML is outlined in red. And each of the black squares is 2x2 kilometers and the entire property is just over 16 square kilometers. The Main Zone is very evident by the number of drill holes, all the sort of reds and yellows that you see, a drill hole is projected to surface. And I'll touch on that a little bit in a moment. The white is the ongoing work from our geologists that have continued to put the boots on the ground. And again, you'll see more and more white dots appearing. And these are the historical ASM pits that we've looked at, and are specifically focusing on a couple of those. But let's get back to the Main Zone. The results that came out in the last quarter from the South. I think the South had previously thought -- been thought of as being at its limit. But when you get results, for example, over 35 meters at 1.3 grams a tonne, including 10 at, say, 3 grams per tonne internally in that and other intersections that are in that press release, you realize that we're still on the trend. And Stephen, if you could just put your cursor where the south extension is. It's a little bit further up, it will be good. And you see a few -- the red lines that I've got, it's another nearly 1.2 kilometers to another series of artisanal workings which I've been on 2 and they're very strong. They are historical. They're not being worked at the moment. And what we've realized is to the South, we're still wide open. We know that we're still right open to the north. Stephen, I think you mentioned earlier that we've extended now by about 500 meters in total, not the resources, but the understanding of the share zone and the deposit continues at. We will obviously do infill drilling following up on the white spaces of exploration work. So that in itself is over a 30% increase, and it's a classic same, but this deposit, the Main Zone still remains open on strike to the south and to the north and at depth. And on the depth side of things, if you do go back to the press release on the south, you'll see that some of the results are from underneath the pit, the south pit. And they're very strong results indeed. So that's the Main Zone. So it's still open, still to play for on that. Let's just focus in now on the Eastern Porphyry and the Anfield zone. And I'm going to get into a little bit more detail than I have before. But those are the key I see that there's actually 3 parallel trends of white artisanal workings. The 30-gram per tonne samples that we had before from the western part. We've drawn those. We are rating assays. But as we've continued to understand the controls and gold mineralization, so we've continued to understand the growing importance of the Eastern Porphyry that will give us, as shareholders like to say, some sizzle. We have redrilled an RC or a chip hole that came back at 30 grams a tonne over 3 meters. We've been able to identify the share zone in some white space drilling. And there is very much a trend here that's got an awful lot of work ahead of it but we're off to a really good start. And then finally, to the audience just in terms of targets. If you look down to the sort of -- Stephen, if you could just sort of go down by [ Tembo ], please. There's sort of 2 trends -- a little bit there. These 2 trends that go from -- these 2 trends. Again, I've been on the ground there. These are strong workings and over the course of the year, we're continuing to put a few holes into those. But again, you see all this sort of looking at underlining in that sort of classic Northeast Southwest trend for us. So what we're going to be doing is updating the mineral resource over the next few months, internally to start off with. We'll continue to sort of expand on this. We have to move the draw rig now to some grade control drilling. The road is about to be relocated around the edge of the property. That opens up now the main zones. We've got to get the grade control drilling in that. And then some sterilization drilling, we do have to obviously test the ground where we're going to get some [ tailings]dumps and waste dumps. And then throughout the end of the year, we'll continue to look at Buckreef West, Eastern porphyry and the Anfield. So it's all self-funded. Stephen I think if I had 3x as much money, I think we're going to spend it wisely and spend it well, but...

Yes. I'm not too sure people would like the share count at that point. But we'll do what we...

We're doing it going it, it's step by step, and it's happening, and we continue to put out good results.

One of the things -- just to give the audience a sense that like you and even myself and others on the phone really understand geology. But when you say the 3 trends in the Anfield Eastern Porphyry zone, do you want to give just the investors and others just a simple explanation of how deposits are formed with hanging wall and footwall and main zones.

Yes. Sure. I can do that.

Because that lines up to the 3 trends.

It does. And it looks like we do have a series of -- you can sort of see where the Eastern Porphyry, the red line that goes through Eastern Porphyry to say that was the Main Zone. You can see that we've got a hanging wall zone to the West and some all zones to the East. So again, quite classic to sort of see the displays and multiple zones coming in on the share zone hosted deposit.

Yes. And this is exactly similar to what the Main Zone is because the Main Zone has 1 line here. But in reality, you have a 20-meter main zone, and then you'll have, on 1 side, what is our hanging wall at 3 to 5 meters. And on the other side, you have a another 3- to 5-meter mineralization.

Yes, that's right. We're finding a number of zones hanging on a foot wall. Sometimes they're not as continuous as the Main Zone, but they're there. And again, that's very evident in the Northeast extension. Again, if people want to get into the details. If you look on the western side of the main zone, you'll see there's a couple of sections with some very, very strong results in the foot wall.

Yes, exactly. And this is normal for this type of deposit.

Totally normal, and I certainly would invite anybody in the audience if they wanted to go into a deeper geology lesson and discuss retail share zones, et cetera, et cetera, with me. We'll have a good session, but it's not for today.

You're starting to lose me now.

Yes. What I would say, Stephen, again, for our audience is that this kind of mineralization is well understood. It's very similar to Canada, very similar to the [indiscernible] and Australia. And geologists to understand this kind of gold mineralization very well.

So turning our attention to the next slide, Andrew, and on the Main Zone. Let's discuss the extension because we had 200 meters to the -- 300 meters to the northeast extension last year. We have another 200 meters to the south which is overall 30% more of a strike length drilled out for a mineralization perspective, give the audience a sense of what that means.

Yes. I mean -- well, first of all, you can sort of see it if you put the cursor again on the very last hole there, Stephen. We can sort of see that we've got some good grades, some good widths in there. We've got some good grades under the pits as well, like, for example, under the pits 34 meters at 1.3 grams a tonne, including 10 or 3, these are very minable widths. Whilst we're using the old historical south pit at the moment as a water storage. I mean we'll drain that eventually. But what it means to us all is that we will continue to find and add ounces to resources and reserves in these areas.

And one thing that I didn't notice when I was about to say last time is and it's the first time that we did this is and roll it over to Anfield is on this slide, which is right here. And we've always stated Anfield to being about 500 meters from the main zone, but I walked it and it didn't take me any time. So it's certainly closer to 500 meters.

That's right, Stephen. I mean when we talked about 500 meters, we're referring to the sort of the main trend on Anfield and the artisanal workings. But you're quite correct. This hanging wall zone here is about 200 meters away from the Main Zone. You can see the draw pad just right at the very end of that. And that is the location of the samples that came out from some of artisanal working of 28 grams a tonne, 36 grams a tonne. There were grab samples. But nonetheless, they're very exciting grab samples from Fresh Rock. And I think that's an important point for our audiences. Fresh rock, and it looked exactly like our Main Zone.

Excellent Thank you, Andrew. That's a great update.

Great enough. Thank you, everybody.

So now with regards to an ESG perspective, what I would like to take away from this slide here is the land compensation process. So the land compensation process in order to buy the land from landowners what was a long process, a very detailed-oriented process as well. That has now predominantly been completed. I don't think there's very many left to be compensated. We went through the final process over the last couple of weeks and made final payments. And that program costs around $2.6 million. It was funded over a couple of year process as the land evaluators went in, they evaluated the land and made the appropriate payments to those landowners. So now the 16 square kilometers of most of that property is now owned by the Buckreef Gold Company. Andrew, you want to just mention a few other points around that process because it was a long [indiscernible] process and quite a successful one, actually.

It has been very successful. Again, we're very proud to say that the government of Tanzania now references Buckreef and the work that TRX has been doing with Buckreef as the example for others to follow. It's been a very meticulous, very patient process. But at the same time, we've had a lot of buy-in. And as evidenced, Stephen, when you're sort of just driving into site tonight, the amount of new buildings that have gone up around the property and new roofs that have gone on and the locals that are [indiscernible] compensated because it's mainly farmland and agricultural land, very grateful. And I'm just very pleased to see that kind of response in the community.

Yes. It's not only that, Andrew. I think there's -- the mine is starting to have a secondary impact on the economy in the local region. And when you stand aside gates and there's taxis, shift changes, a lot of our employees and the contractor employees are from the local area. So we're now starting to see the spin-off effects of the mine generating income and growing.

Yes. Absolutely, the secondary industry, business, as you rightly say, a lot of motorbikes at to knock off time from work. I think, I just highlight one other thing. We continue to focus on education, Stephen. And we're never going to be here for a long time. So part of the things we have to do is a little bit of CSR work as part of the law on the land. And we've worked with our communities and with our local governments on education. You can see here a group of students in a new science laboratory. Typically, the science laboratory would have all been used to as in our own school days. And it's our ambition that we would hire from the local communities and students that are doing very well in science, technology, engineering and math. So it's a little bit of a longer-term impact as well.

Yes. Thank you. So what I'm going to leave the audience with is there's a lot of rapid progress at Buckreef, we've made great progress. As I mentioned earlier, the company has now been stabilized. It's cash flow positive. It's growing. We're funding the growth of that business. So we have a growth profile, as Mike mentioned, new ball mills should be ordered shortly. We have a larger project to develop over time. And we're doing a lot of activities around that, including evaluating ball mills. I believe Andrew is going to be on a trip in the next couple of weeks doing that. We're going to the MET study, geotech study, a lot of activity around that. And then it's underpinned by a great resource. Already a great resource that has a lot of growth potential. So all in all, this is a straightforward growth story that we've positioned the company for this growth, and we're very excited for what we're seeing. So I'm very proud of everybody at site [ Gaston ], our General Manager, [ Isaac ], our Geology Manager, the work that Andrew is doing, the work that Mike is doing on finance, work that Christina is doing in Investor Relations. All in all, I'm quite pleased with the growth of the company and where we're positioned and where we're positioned for growth. And that's what I would like to leave our investors and our analysts with, and we'll open it up for questions.

[Operator Instructions] The first question is from Jake Sekelsky with Alliance Global Partners.

Congrats on the quarter. So I mean, obviously, growth is a focus right now, and you were just talking about looking at adding an initial ball mill, and it sounds like you might be pretty close to picking one up. Are you able to provide any color on the hopeful time line there? If we assume you guys purchased one this quarter. Do you think we might see some contributions from it in fiscal Q4? Or any color on that time line would be helpful.

Yes. So we've identified it. We know the size of it, and we'll announce that when we actually put the deposit on it. It's coming from China again, it will take about 60 to 90 days to come to Tanzania. And in the meantime, we'll be putting together the program to build some extra tanks and as well as could be figuring out the longer-term tailings strategy, and we're well advanced on all of those fronts. I would expect there is the possibility that you will see some production from it in Q4 of this year, but I would think that this is more of a 2024 story at this point in time. Andrew, anything to add to that?

I think that's a fair comment, Stephen. We would love to squeak it in into Q4, but the 2024 time line is a good comment at the moment.

Yes. And so Jake, just the philosophy around that is we just want to make sure we get it right. There's a lot of activity going on at site, and we got to make sure and they've been really, really busy. So I don't want to strain to human capital aspects of the business either. And we're cash flow positive at these levels as well.

Yes. Stephen, just one final comment that comes to mind, and that centers around the power. And we've been very fortunate in that the local town [ Cator ] of about 40,000 to 50,000 people has come off our power line and gone on to a major cross-country power line and that's freed up about 10 megawatts of power that we now have access to. So that site has gone very, very well.

Which means it can grow a lot bigger with new power lines, yes.

That's correct for substations and so on.

Brings up another good point. I mean, from a permitting standpoint, is there anything that you guys need to bring that ball mill online or all set there?

No, we're all set.

Yes, we'd be greenlighted by the government on that.

Yes. Yes. So to give you a sense of one of the things I would have liked to have sped up a little bit further, but in Tanzania, you have to go through the local procurement process, which means it's really a planning process. It's a little bit what I'll call laborious on the paper side, and we've gotten that approval through the Mining Commission to go ahead and purchase this ball mill. I think we got that approval about a week, 1.5 ago or so.

Last Friday. Yes.

Got it. Okay. That's very helpful. And then just looking out longer term at Buckreef, are you able to provide any updates on how the sulfide development study is going?

Yes. So to give you a sense of how we're blocking and tackling that, is we need to get the network done just to confirm the metallurgy and what we're thinking and the processing flow sheet. The first processing flow sheet that we mentioned was a flotation followed by regrind. And then we mentioned when we released the drill hole results from that MET study, the current flow sheet that we're using, which is grind crush CIL, which in the preliminary study had almost identical recovery rates. So what we're learning in current operations and what that preliminary study mentioned to us is it's about grind size. And so if you get 75 microns passing 80 in a CIL tank, you're going to get about 90% recoveries depending on the grade profile. If you do the average grade of the deposit. And so we need to confirm that and so that's one aspect. The next aspect is there needs to be -- a redesign of the pit from the 2018 pit. So we need to get the geotech work in. That pit design had a 52-degree slope. So we're hopeful, but we got to confirm this that we'll be able to be more aggressive on the slopes given the hard rock at the deposit. And what that would mean is a lower strip ratio and a deeper pit over time. Also, the infill drill program that has been done, we'll extend the length of that pit, as Andrew mentioned, there is drill results now under the south pit, which means in the first 2018 pit, that was a very shallow 40-meter pit. So that will now go a lot deeper than what was envisioned. So is angling up to be a much larger overall project than originally in that 2018 PFS. Also, we're working with Asanko on longer-term tailings, so that is the bottleneck at this point in time is longer-term tailings, but that's well advanced on where that would be located, how it will be designed. And ultimately, it will be built more than likely from the waste from the mining activities. So you'll just take your waste from 1 pit and build a berm over another side to put your tailings behind it. Which is unique for a mining project because in most of these mining projects, your tailings facilities built upfront from overburden strip. We're just going to use our waste to build that tailings facility over time has been designed into a longer-term plan. So there's a lot of activity happening and at the same time, Andrew and team are evaluating ball mills now, and we're getting out in front of that for a longer-term solution to that as well. Anything else to add to that Mike?

No, I think that was well said, Stephen, nothing further to add. Thank you.

Yes. Jake, what I would take away from that is, if you think about a feasibility study, you need your cost inputs, well, we're operating, we know those. You need your building cost inputs, while we've built stuff. So we kind of got a good sense of that. And then you need your pit design, well, we're doing the geotech work for that and the resource modeling. So it's -- whatever plan comes out, you may not have a feasibility study level stamp on it, but it has all the feasibility level inputs.

Yes, Stephen, 2 quick points for me, and hello Jake. Can't wait to get you over here at some point. We look forward to that. 2 points. We do have a test plant. So we will also be able to do some bulk sampling. And we're even able to sort of isolate the 360 tonnes per day, the initial circuit for even more extensive sulfide testing when that moment comes. The start-up period in just 1 area is just meters away from intersecting sulfides, and we might be able to skip just a few of those and to do some initial bulk samples to supplement the very relative study that's come from the drill holes. And those that are looking even longer term, in my mind, there's no doubt that this project will go underground as well.

Fair enough it. That's all very helpful.

Yes. So a lot of work going on. Yes.

The next question is from Heiko Ihle with HC Wingright.

This is Marcus Giannini calling in for Heiko. So there is a sentence in the release that sort of caught our attention where you stated that through ongoing drilling, it becomes more evident that Buckreef has the potential for a much larger footprint in project which implies that things seem to be improving sequentially. So we were wondering if you could just provide a bit of color on maybe some of the exploration results in that area that particularly surprised you relative to maybe what you anticipated?

I think I'll let Andrew follow-up on my answer to this question. But as we -- as I stated previously, we were always comfortable with the Buckreef zone -- Main Zone prior to joining this company. What we're seeing now is, there's still a lot of work to do. But as Andrew lined it up, you're seeing a trend from the Eastern Porphyry North, right down south through Anfield and rate on down through. There's 2.5 million ounces of resources in the Buckreef Main Zone. And this other trend has not been drilled out nearly as extensively. So there's that potential. And then there's potential around the rest of the property, particularly around what Andrew was referring to in down south and around [ Tembo ], there's some strong showings there. And [ Tembo ] itself is very good. It's -- there still artisanals working in that area with the -- what did he call the mine superintended government official Andrew there?

The resident engineer.

Yes, a resident engineer. So there's a lot of gold here and it's starting to come to the surface quite literally. Andrew anything do add?

If I could ask you just to go back to the exploration slide. Yes, and thank you for the question. So if I -- the line broke up a little bit, but I think the question was, has anything surprised us. Is that right?

Yes. And my answer, Andrew, was we like the Main Zone, and now we are looking at and then probably another Main Zone.

I think -- yes, this is a very good comment, Stephen. I think what has really surprised me is just how much gold potential there is here. Now if you were to just even take Eastern Porphyry and Anfield and put that anywhere else on the planet, that would make a really great junior mining company exploration play. [indiscernible] sort of for example, we started to delve into the database of the Eastern Porphyry, which hasn't really been worked for over 10 years. So unpackage that how to look at it. And when you start to see some of the historical drilling that was in there, 30 grams a tonne over 3 meters, and the fact that these zones are starting to sort of line up. The surprise factor is like, wow, it actually is really sort of happening in terms of true exploration potential. And then as you said, Stephen, the stuff by [ Tembo ] and then some of you might have spotted over to the east, halfway between the main zone area and [indiscernible] on the far right or the Far East, we've identified just another trend through having our pits on the ground. So I think that's very exciting from that point of view.

Yes. And I would add too, Andrew, the MET hole results from an assay perspective were very good. So as you guys are aware, particularly the analyst community, usually these deposits are built up through drill hole analysis results, assay results over time. And usually, you get some of them are good, some of them are great and some of them are average, and it builds up a deposit over time. Whereas Buckreef never had that sort of evolution. And so as Andrew mentioned, you go back in and dig into the results of the Eastern Porphyry, his eyes popped at some of them. You get those in the Main Zone as well. And so as we start to get really into this, it wasn't built up the same way as other exploration plays were. So it came together as a resource potential. But when you start to look at it, it has some really good zones in both of these deposits.

Yes. And that sort of speaks to the continuity. And again, those on the call understand that. So continuity is critically important to build a mineral resource in it and a mine.

Yes, you have to have continuity because what you can't do is go through 1 great zone and better paid for getting to the next one. That doesn't happen here. It's 20 meters wide and continuous. In the main zone, and we're seeing similar trends on the MPL Eastern Porphyry zones.

Okay. Awesome.

I mean just kind of a highlight probably the...

Yes. No, perfect. And then just trend line in the quarter, we're at essentially $5 million of gross profit, $4.4 million EBITDA. Could you maybe walk us through as much as you're comfortable with in this setting? What you think Buckreef can do in the next several years and what you model out as realistic goals from the cash flow and EBITDA perspective?

Mike, do you want to take a stab at that. I think it's a little early for some of that sort of stuff. We've indicated what we're doing on the larger project perspective, which is where you're really going with that. Mike, do you want to just take a quick stab?

Yes, I think so. I mean, we obviously haven't guided out that far yet, guys. And so a little bit premature, I think, start speculating on cash flow. Again, I mean, I think in the near term, you've heard about what we're doing with our mill that we're looking to purchase, doubling throughput and certainly depending on the grade profile, hopefully coming close to doubling production in the near term. What we're modeling out is how much strip and dirt we need to move to continue to get at the deeper part of the deposit producing at a 50,000-plus ounce production profile over the next couple of few years. And once we have our arms around that, we'll certainly guide the market accordingly. But I think in the near term, again, you've heard when we expect the mill to come online and roughly what we expect the production levels to look like. And -- you can probably extrapolate like I said, the very, very near term, what our current cash flow levels look like on a quarterly basis for the next 4 to 6 quarters, and we'll guide the market early next year on longer-term guidance thereafter.

Yes. I think the best way Mike, to really answer this question, I'll ask Andrew, if you could just give a broad range of the size of ball mills, you would envision for a larger project.

Yes. Well, certainly, the short-term one that we're looking to get on site in Q3. It will be 1,000 tonnes a day, right? So that's the doubling of tonnage. As you alluded to, Mike, we've we got to quite double gold production because of great profiles, but we will get as fast as we can. And then beyond that, we're going to be looking at about 6,000 tonnes a day into the sulfide project. So a mine that will be well in excess of 100,000 ounces a year is what we're looking at. That's the kind of I'm going to be looking at the first week of February.

You might have given a little bit too much information there, Andrew, but thanks.

We give that as a range 4,000 to 8,000, right, tonnes a day.

Fair enough. Fair enough. Thanks for the answer.

It's a good question. Maybe back to Stephen and Mike on this. We built the first 1,000 tonnes a day for, what, 6 million, Mike?

6.5 million.

That's correct.

6.5, right? Are we able to shed any light on the cost of the expansion, the first part of that.

Yes. We haven't certainly quite guided to that yet, but I would certainly use the first 1,000 tonne a day sort of cost profile as a good analog for what we expect the next 1,000 to look like.

It's the same that....

It's going to be a lot cheaper, Mike. We can say it's going to be cheaper than 6.5. So we don't expect it to get that high.

Thanks, Marcus.

The next question is from Mike Niehuser with ROTH Capital Partners.

Great. Okay. I'll keep this quick as we're running short on time. But on Page 9, Andrew, you show a map of the mining concession and when I was out to the project a year ago, I got the feeling that the south zone kind of petered out at surface, and it went deeper in the north. And I guess what I'm seeing here, to everybody's surprise is that it actually seems to be more horizontal than dipping to the north. And when you look at those artisanal workings to the south, it just sticks out in a big way. So really, could this be a much more horizontal than a dipping mineralized body?

Yes. What you're referring to, Mike, and greetings, the high-grade shoots do dip, if you like, well they plunge at approximately say, 20, 30 degrees. It does look like they are flattening to the north. The South has been a very pleasant surprise to me. As you rightly say, if you look at the historical data and the culture that have built up around that particular part of the deposit, I wasn't anticipating as stronger results as long as we got. So very pleasantly surprised with the tenure of those. So there will be definitely, gold mineralization, I think, continue down the trend, but there will be a high grade shoots within that.

Well, it just seems to be very consistent. I mean you used that word earlier in the call, but North, South, it just seems to be -- it seems -- it wouldn't be a surprise to have your expectations met to the south, I guess, that's what I'm saying.

Yes. Yes, there's precious little drilling there. So -- we do see in the Main Zone that we have so far very clearly. Those -- there's continuous mineralization, but then if you like, there's an overlay of just 3 higher-grade shoots that's very evident in the data.

And did I hear you correctly that you're going to be coming out with an updated resource in the next couple of months?

We're doing this work internally first, Mike. And then obviously, this kind of work does ultimately have to hit the market. We are going to remain noncommittal on that time line at this point, just really just started our work.

So when you do come up with at some point sooner or later, you will be announcing that to the market, maybe not in the couple of months, but maybe 4 to 6 months or so?

So let me keep it very, very broad and Stephen's laughing I think a little bit. It's been very deliberately broad at Mike. I'd love to get that as soon as I can. But very confident we will get it in this fiscal year. And we have to because we're now mining and we have to update the reserves and we have to update them on resources. So yes.

Also, is there a point where you might be updating us on the metallurgical work, the summary of conclusions, even on a preliminary basis later in the year? Do you have a goal you can share for that?

Yes, the overall work will take about 6 months, but I would agree with you once we have some key metallurgical results, we would feed those into the market as we have done, demonstrated so by releasing the meters and grade of the samples that are going off to be analyzed.

And I guess just lastly about your million hours of lost time without a lost time accident, it's just stunning to me. And it seems to be -- I know the mantras growth, growth, growth, but it's not coming at the cost of safety and I know you guys are careful at the top, in the C-suite, but all the way down to with a guy with a hammer and a thumb. So I just don't want to complement you, it is something that almost should lead all the metrics. But thank you for that. Glad to be included in the call. Thank you.

Yes. Thank you, Mike, and come back anytime.

Yes. Thank you.

The next question is from Robert Paulson with Paulson Strategy Group.

Yes. Robert also texted in his question. So what I could do is read out loud the question and answer it if he's not online. Okay. So that's what I'll do. His question is, congratulations on all the great things you and TRX team are doing to make TRX successful growth opportunity. Gold is at or close to long-term highs and stock prices at or close to all-time lows. What are the thoughts about TRX being a takeover target? How committed are you to the long term. So I'll answer the first part of that question. I've been here for just over 2 years. In that 2 years, there's been gyrations in markets vis-a-vis other junior mining companies, I would say that we've outperformed those particular companies on a year-to-date -- sorry, a last year basis, we're about even. On a 5-year basis, the stock is about even. So it's outperformed the vast majority of junior miners. I think a lot of long time shareholders go way back to 2012. And remember, $3, $5, $7, $9 stock prices. And the company has transitioned and had a lot of change since that period of time. And for myself, I look at our performance over the last 2 years since joining. With regards to being a takeover target, if you become a takeover target, you've done your job successfully, hopefully, particularly if you're not in a distressed situation, we are not in our distressed situation. I don't go out seeking takeover targets. We're committed to the long term. We think this project has a lot of potential. And right now, would we consider ourselves a takeover target? I think we still got some work to do to really display what the long-term potential of this project is. As we continue to execute, I'm hopeful that will get rewarded in the markets for that and shareholders will be rewarded as well. I hope that answers your question Robert.

Yes. Stephen, I'm just going to add also the team that the audience is looking at backed up by the team here at site and in country is really also kicking into gear, and there's also delivering on the results.

Any next question.

Then the next question is a text message question from [ Craig Sutherland ]. We have heard for a long time about dividends. What is the company's plan? Additionally, with the M&A activity picking up? Have we had any discussion on this topic or doing a joint venture with a major?

Yes. So dividends is a topic that has been discussed around this company in the past when it was set up more as a royalty company. And shareholders have heard from myself about growth plans, I believe the company is still better served growing its cash flow, its revenue, its EBITDA and all the valuation metrics that are used by mining investors and analysts, including net present value. So that is the current plan of the company. There is a lot of capital needs. We prefer to generate cash flow to fund those capital needs. That's certainly the mantra in the short to medium term. That will change over time as the company reaches its potential, particularly on a production profile basis. With regards to doing a JV with a major, the company already has a 55%, 45% ownership split between TRX and the state mining company. So it would be very difficult to bring in a major into that sort of joint venture discussions. It would mean dilution on our part and dilution on [indiscernible] part. So what I would say is under the right situation, we might do that. But certainly, it's not in the short term. I prefer to unlock the value of Buckreef first before having any of those discussions.

All right. This concludes the question-and-answer session. If you have any additional questions, please e-mail Christina Lalli, Vice President of Investor Relations. I'd now like to hand the conference back over to Stephen Mullowney for a few closing remarks.

Yes. Thank you. Look, Q1 2023 was a great transition period. We've got the plant up and running. You see the pit in the background to me, we're mining or processing and the drill bits are turning. So I believe and our management team believes and our employees and colleagues believe there is a great potential at the asset, and we continue to grow, and we're all having fun doing it. So I'll leave the audience to that, I think this has been a very in-depth and insightful conference call. Thank you.

This concludes the meeting. You may disconnect. Thank you for participating, and have a pleasant day.