Aris Mining Corporation (ARIS) Earnings Call Transcript & Summary

Welcome to the Annual General and Special Meeting of Shareholders of Gran Columbia Gold. My name is Robert Metcalfe, and I'm the lead Independent Director of the Board of Directors of the corporation. In accordance with the corporation's articles, I will be acting as the Chairman of the meeting, so many thanks. As noted in the notice of meeting and accompanying management information circular, due to the current COVID-19 pandemic and as part of the corporation's social responsibility and preparedness plans in response to COVID-19, this year's Annual General and Special Meeting is available online using the Lumi meeting platform, which allows registered shareholders to vote in real time as well as submit questions and comments to be read and addressed at the meeting. If you have a question or comment, please submit it through the Lumi meeting platform by clicking on the Message icon. Questions that relate to a specific motion must indicate which portion they relate to, so that they can be addressed at the appropriate time. General questions will also be addressed after the formal business of the meeting has concluded. I would direct you to the management information circular for more information regarding the Lumi meeting platform. With me attending virtually, we have Lombardo Paredes, our Chief Executive Officer; Mike Davies, our Chief Financial Officer; and Amanda Fullerton, our Vice President of Legal and Corporate Secretary; as well as Jaime Perez Branger; De Lyle Bloomquist; Miguel dela Campa; Hernan Martinez; and Serafino Iacono from the Board of Directors. We will deal with the formal business of the meeting before answering any shareholder questions and providing a brief presentation of the corporation's business. I have appointed Amanda Fullerton, our Vice President, to act as Secretary for the meeting and would now ask Amanda to provide certain details of the meeting.

Thank you, Robert. The meeting of shareholders is called pursuant to the notice of meeting dated April 16, 2021. Unless there is an objection, I will dispense with the notice of meeting. I confirm that the notice calling this meeting, the accompanying management information circular, the form of proxy, the notice and access notice and request for financial statements, and the Lumi virtual meeting guide as applicable in accordance with notice and access requirements were mailed on April 26, 2021, to shareholders of record as at the close of business on April 12, 2021. I have tabled these documents prior to the meeting. The affidavit of mailing in connection with the mailing of these documents is also available for inspection and will be annexed to the minutes of the meeting. The Chairman has appointed TSX Trust Company as Scrutineer for the meeting, represented today by Oliver Keung. The Scrutineer's report on attendance has been completed and indicates that a quorum is present virtually or represented by proxy.

Notice have been -- properly being given and a quorum being present, I declare the meeting to be regularly called and properly constituted for the transaction of business as set out in the notice of meeting. I direct that the Scrutineer's report on attendance and other matters be annexed to the minutes of this meeting accordingly. The meeting will now come to order.

We will conduct a vote for each resolution by way of ballot cast on the Lumi meeting platform. I understand that the Scrutineer has tabulated all the votes received prior to voting cutoff. If you have previously voted, you do not need to vote again when prompted. By voting again, you will revoke any previous vote made prior to voting cutoff. We will now open the voting for all of the resolutions, and voting will remain open until shortly after the last resolution is presented. Once voting has closed, we will then announce the results for each resolution presented. Particulars of the votes cast on all of the matters may be obtained after the meeting. The polls are now open. The first item of business is the presentation of the audited consolidated financial statements of the corporation for the fiscal year ended December 31, 2020, together with the report of the auditor thereon, which are available on the Lumi dashboard page. With the consent of the meeting, I will dispense with the reading of the auditor's report. The next item of business is to fix the number of Directors of the corporation at 6 for the ensuing year.

I move to approve such a resolution. May I have a seconder for the motion?

Mr. Chairman, I'll second the motion.

Thank you. Is there any discussion? I hear none.

The next item of business is to nominate and approve the election of the following individuals as Directors of the corporation to hold office until the next Annual Meeting of Shareholders or until their respective successors are elected or appointed: Serafino Iacono, Miguel dela Campa, De Lyle Bloomquist, Hernan Martinez, Robert Metcalfe and Jaime Perez Branger. As the corporation adopted an advanced notice policy effective April 9, 2013, any shareholder wishing to nominate additional persons for election to the Board of Directors at this meeting was required to provide notice of such nomination to the Secretary of the corporation no later than April 27, 2021. As no further nominations were presented to the Secretary of the corporation by that date, in accordance with the advanced notice policy, I declare the nominations closed. May I have a motion to elect the persons nominated as Directors of the corporation to serve until the next Annual Meeting of Shareholders or until their respective successors are elected or appointed?

I move to approve such resolution. May I have a seconder for the motion?

Yes, Mr. Chairman, I'll second the motion.

Thank you. Is there any discussion? I hear none at this time.

The next item of business is the reappointment and compensation of the auditors of the corporation for the ensuing year. KPMG LLP has been proposed for reappointment as its auditor of -- for the corporation for the 2021 fiscal year or until a successor is appointed at remuneration to be set by the Board of Directors of the corporation.

I move to approve such resolution. May I have a seconder for the motion?

I'll second that motion.

Thank you, Mike. Is there any discussion at this time? I hear none at this time.

The next item of business is to consider, and if deemed advisable, to pass with or without variation a special resolution, the full text of which is set out in Schedule A to the management information circular, authorizing amendments to the corporation's notice of articles and articles to: one, increase the quorum requirements for future meeting of shareholders of the corporation to 2 persons, representing 25% of the issued shares entitled to vote at the meeting; two, increase the quorum requirements for future meetings of the Directors of the corporation to 50% of the number of Directors; three, establish a limit on the maximum number of preferred shares the corporation is authorized to issue; and four, require shareholder approval by way of special resolution for the creation of any new classes or series of shares, all as more particularly described in the management information circular. Such resolution is referred to hereafter as the alteration resolution. To pass, the alteration resolution must be approved by a special majority consisting of at least 2/3 of the votes cast by shareholders present virtually or represented by proxy. Unless there is an objection, I will dispense with the reading of the alteration resolution allowed. I now ask for a motion that the alteration resolution, the full text of which is set out on Pages A1 to A3 of the management information circular, be approved.

I move to approve the alteration resolution. May I have a seconder for the motion?

Yes, Mr. Chairman, I'll second the motion.

Thank you. Is there any discussion at this time? I hear none at this time.

The final item of business is to consider, and if deemed advisable, to pass with or without variation an ordinary resolution, the full text of which is set out in Schedule A to the management information circular, authorizing and approving the issuance of up to 43,641,774 common shares of the corporation in connection with the proposed acquisition by the corporation of all of the issue -- of all of the outstanding common shares of Goldex Mining Corp. not already owned by the corporation by way of a plan of arrangement under the British Columbia Business Corporations Act, including common shares of the corporation issuable upon the exercise of warrants of Goldex following the effective date of the arrangement, in accordance with the terms and subject to the conditions of the arrangement agreement dated March 14, 2021, between the corporation and Goldex, all is more particularly described in the management information circular. Such resolution is referred to hereafter as the share issuance resolution. To pass, the share issuance resolution must be approved by at least a majority of the votes cast by shareholders present virtually or represented by proxy. Unless there is an objection, I will dispense with the reading of the share issuance resolution allowed. I now ask for a motion that the share issuance resolution, the full text of which is set out on Pages A3 and A4 of the management information circular, be approved.

I move to approve the share issuance resolution. May I have a seconder for the motion?

I'll second the motion.

Thank you. Is there any discussion at this time? I hear none at this time.

As voting has now been enabled for all previous motions, if a shareholder has not voted yet, please do so now. Voting will be closed shortly. [Voting]

Voting has now closed.

The Scrutineer has advised that the requisite majority of votes cast by shareholders virtually, present or represented by proxy, have been voted in favor of all the resolutions put forward today. I declare: one, the resolution to set the number of Directors at 6 is approved; two, the nominees for Directors of the corporation are elected; the resolution to reappoint KPMG LLP as the corporation's auditors. Their remuneration to be set by the Board of Directors of the corporation is approved; number four, the alteration resolution approved; and finally, the share issuance resolution is approved effective immediately. That concludes the formal business of the meeting as set out in the notice of meeting. Is there any other business that any person wish to bring to the attention of the meeting? Hearing none at this time, I declare that this Annual General and Special Meeting of Shareholders of the corporation is now concluded. Lombardo Paredes, our CEO, will now provide a brief presentation of the corporation's business. Following the presentation, he and Mike Davies, our Chief Financial Officer, will be available to answer any questions that may be from shareholders. So I wish to thank everybody very much. Thank you very much for attending. That concludes the meeting.

Okay. Well, I'm going to present the -- some remarks of our performance and accomplishment during the year 2020 and what we are doing in the year 2021 and we are planning to do. In that slide, you see our disclaimer, the full disclaimer that we present in all our presentations. Next, please. 2020 -- year 2020 was a challenged year because of pandemic. We were able to say and successfully carry out our mining operation during the COVID pandemic, and we also support our communities. It was a big exercise, big difficult times dealing with the logistics that the pandemic has implied. We achieved our annual production guidance for the fifth consecutive year in 2020. And Segovia continued to rank as 1 of the top 5 highest-grade underground global gold markets. In fact, the annual result, where the revenue was $390 million, 20% over the previous year. The adjusted EBITDA was also very good, as the net income, operating cash flow and free cash flow. We were above the targets in the -- during the 2020 year. We also carry out a drilling in Segovia, and with the drilling, we replaced the mineral resources that we mined in Segovia in the year 2020. We strengthened our balance sheet and reduced debt ahead of the schedule. We had spun out on financing the Marmato mining asset. This is a mining reservoir located in Colombia in the location in the community -- close to the community named Marmato, in the Department of Caldas, Colombia. That spun out lead to a 44% interest in Aris Gold, with a market value above CAD 150 million. Our ESG initiative continue to focus in education, health, community and the environment. We also added an ESG Subcommittee of the Board to steer the strategy and reporting of the ESG. We also protest and canceled and hold another 90,000 shares on the normal -- our normal calls issue bid at a cost of USD 4 million and we have started paying a monthly dividend with 3% -- above 3% annually. Next, please. In the year 2021 is, again, the situation has been challenged because the third wave for the pandemic, it has been very difficult in Colombia. And of course, our COVID-19 protocol remain in place, continuing to -- and we are continuing to support the communities. In fact, our relation with the community has been -- have been wonderful and have been part of our success to maintain the operation during 2020 and 2021. We expect to produce between 200,000 and 220,000 ounces of gold for Segovia in 2021. So far, in the first quarter, we produced around 49,000 ounces of gold. We will publish our first ESG Sustainability Report. That report will be published mid-June. We acquired -- a part of our diversification portfolio, we acquired 27% of equity position in Denarius Silver. And as part of that 27% equity position, we also gained a portion of polymetallic project in Spain in the Sevilla area, which is a tremendous potential. We believe that the Lomero-Poyatos, this is the name of the polymetallic project, is going to be a great success, plus the -- plus also with participation in the Antigua and Zancudo Projects in Colombia. We also produced an early redemption of $10 million of gold notes in May, so we have only $19.75 million remain outstanding. We are expanding our processing facility to 2,000 tonnes per day, and also we are building a new polymetallic recovery plant, both in Segovia. Those 2 projects are proceeding well and are scheduled for a start-up in the second half of 2021. This is as important because the plants of Maria Dama 2,000 tonnes per day will be ready for new addition of mineral resources, which are going to be product of our exploration program. And the polymetallic recovery plant will be from the environmental point of view is going to be very good because we will retire zinc, lead from our tailings, which is a very good thing from the environmental point of view. We are also -- we will continue with our drilling program. We are planning to have 60,000 meters in Segovia in 2021. 40,000 meters, it will be at the 4 operating mines with 6 drilling rigs and 20,000 meters of brownfield drilling with 4 drilling rigs. We expect to announce preliminary results early year. So far, the results have been quite good. We also purchased and canceled another 700,000 shares under our normal course issue bid at the cost of $3.2 million in 2021. And of course, we are continuing with our monthly dividend of CAD 0.015 per share. Really, we believe that this year, 2021 is going to be another very good year for Gran Colombia Gold, and we're working toward that. In Colombia, we are having some social unrest and other kind of problems as consequence of the pandemic result because the pandemic result has been very tough in Colombia, like in other countries underdeveloped. I think like, for example, in Brazil and Argentina and Peru, and the government is dealing with that. So far, they are making a lot of effort to deal with that because the results are a little bit tough. Contraction of the pit, increasing of the fiscal deficit, that kind of things wish if you -- if the country does not manage properly can create social unrest. Well, the next, please. Another good -- another move -- another diversification of our portfolio that we are implementing this year is the acquisition of Goldex. Goldex is a company, which mainly operates in Guyana -- British Guyana, which is a country, which is very friendly with mining operations. So with that acquisition, we intend to create a mid-tier Latin American gold producer. We believe that it will be significant results growth and exploration potential. The result is -- the mining resource of the project are above 7.5 million ounces of gold. It's an open pit type of mine, but we knew with the result of the last 20,000 drilling, the possibility to have a high-grade mine are quite attractive. So that possibility also will provide opportunity for reduce the size of the plant and reduce the size of investment and that we are going to make for the development of that project. Gran Colombia will acquire all of the issues and outstanding common shares it does not own, but Gran Colombia Gold because Gran Colombia Gold already own 18% of the Goldex shares outstanding. The total -- it will be a project with a total consideration of CAD 315 million, 100% and fully diluted in the money basis. We strongly believe that this -- the execution of this project is going to be very, very good for Gran Colombia Gold and will put us in a position to be one of the main Latin American operating mines in the gold and silver. Well, with this remark, I would like to finish that short presentation, and if you have some question and answer, Mike Davies, our Chief Financial Officer, and myself are ready to clarify any questions that you can have. Thank you very much.

Thank you, Lombardo. We do have one question for you and Mike in the queue right now. It says regarding free cash flow, has there been consideration for significant increase in share buybacks? With the stock price at great value, debt levels already paid down and a dividend in place, buybacks would be a very tax effective way to reward shareholders. Thank you.

Mike?

Yes. No, we've -- we -- as Lombardo had mentioned, we have bought back some shares earlier this year. During the second quarter of this year, we have not completed any buybacks, and the largest reason for that is that we do have to manage our working capital as we go through the year. We've made a decision for the moment that reducing the debt ahead of schedule is a priority for us as we continue to have higher gold prices, which raise the cost of the gold notes. And at the same time, we feel that our best avenue returning value to shareholders is through the monthly dividend. And with the Goldex transaction, the cost of that dividend on an annual basis will go up, but our commitment is to maintain the level of the dividend rate per share. So at this point, we feel that with the investments that we have ahead of us, best to keep our cash on hand, go into the market if we really need to support the stock in any particular period of time. But no, our first priority will be reducing the debt and paying the dividend to shareholders.

Great. Thank you, Mike. That's the only question we had today. So thank you, Mike and Lombardo. I appreciate your comments. And if there's nothing else, I'll turn it back over to Bob to formally close the meeting, I think.

Okay. It's Robert Metcalfe here. That formally concludes the business of the meeting today, so I would consider the meeting terminated at this point. So thank you very much, everyone, for attending and your input. Thank you so much. We'll see you at the next meeting. Bye for now.

Ladies and gentlemen, thank you for attending the meeting. You may now disconnect.