Aris Mining Corporation (ARIS) Earnings Call Transcript & Summary

[Audio Gap] Thank you very much for [indiscernible] for the Annual meeting of GCM there is a few preliminary comments there will be a presentation by our CEO Lombardo Pardes-Arenas as well with Mike Davies Look, what I'd like to do is go through the script that I have with me that our Vice President, Amanda Fullerton has supplied me with. And so once I get finished that, there'll be ample room and time for any questions the shareholders may have. So we won't forget your questions and we'll definitely answer them. But if you get [ hold ] off until we get through the script, I'd appreciate. So once again, welcome to the Annual and Special Meeting of Shareholders of GCM Mining Corp. My name is Robert Metcalfe, and I am the Lead Independent Director of the Board of Directors of the corporation. So in accordance with the corporation's articles, I will act as Chair of the meeting with your consent, of course. As noticed in the notice of meeting and accompanying management information circular, due to the ongoing uncertainty related to public health impact of COVID-19, this year, the corporation, as well as last year, we encouraged all shareholders to submit their votes ahead of time and to view the meeting virtually rather than in attendance in person Virtual meeting, which allows registered shareholders and proxy holders to attend virtually but not vote virtually. Only shareholders who voted ahead of time or who are present at the meeting in person may participate in the meeting. If you are viewing the meeting over Zoom, you are welcome to submit questions through the chat function, which we will answer at the end of the meeting. When asking a question, please indicate your name and which entity you represent, if any. With me at the head table, we have Lombardo Paredes here, our Corporation Chief Executive Officer; Mike Davies, our Chief Financial Officer; and Amanda Fullerton, our Vice President and Legal Secretary. Also here today from the Board of Directors is Belinda Labatte. We also have various directors of the company who are on line here on the Zoom, and it's great to have them there with us. We will deal with the formal business of the meeting before providing a brief presentation, as I indicated, of the corporation's business. I have appointed Amanda Fullerton to act as secretary of the meeting and would now ask the secretary to provide certain details of the meeting.

Thank you, Bob. This meeting of shareholders is called pursuant to the notice of meeting dated May 3, 2022. Unless there's an objection, I will dispense with the reading of the notice. I confirm that the notice calling this meeting, the accompanying management information circular, financial statements and MD&A for the year ended December 31, 2021, and the form of proxy were mailed on May 13, 2022 to shareholders of record at the close of business on April 26, 2022. I've tabled these documents prior to the meeting. The affidavit of mailing in connection with the mailing of these documents is also available for inspection. The Chairman has appointed a representative of TSX Trust Company as scrutineer for the meeting. The scrutineers' report has been completed and indicates that a quorum is present in person or by proxy.

Notice having properly been 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. Accordingly, the meeting will now come to order.

The first item of business is the presentation of the audited consolidated financial statements of the corporation for the fiscal year ended December 31, 2021, together with the report of the auditor thereon. 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 7 for the ensuing year.

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

Yes, I'll second the motion.

Is there any discussion? [indiscernible] the scrutineers advised that a majority of the votes cast by shareholders present in person or represented by proxy have been voted in favor of the resolution. I declare the resolution to set the number of directors at 7 is approved, effective immediately.

Next item of business is 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 de la Campa, De Lyle Bloomquist, Hernan Martinez, Robert Metcalfe, Jaime Perez Branger and Belinda Labatte.

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

I'll second the motion.

Thank you, Mike. Is there any discussion? The scrutineers advised that a majority of votes cast by shareholders present in person or represented by proxy have been voted in favor of this resolution, I declare the directors elected effective immediately.

The next item of business is the reappointment and compensation of auditors for the ensuing year. KPMG LLP has been proposed for reappointment as auditor for the corporation for 2022 or until a successor is appointed at a 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?

Yes, I'll second the motion.

Thank you, Mike. Is there any discussion? Okay. The scrutineers advised that a majority of votes cast by shareholders present in person or represented by proxy have been voted in favor of the resolution. I declare the reappointment of KPMG LLP as the corporation's auditors to take effect immediately.

The final item of business is to consider, and if deemed advisable, approve and reconfirm the corporation's shareholder rights plan dated as of January 2, 2019, between the corporation and TSX Trust Company as rights agent, as more particularly described in the accompanying management information circular. Unless there's an objection, I will dispense with reading of the resolution aloud. I now ask for a motion that the resolution approving and reconfirming a shareholder rights plan, the full text of which is set out on Page 22 of the management information circular, be approved.

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

l'll second the motion.

Thank you. Is there any discussion? The scrutineers advised that a majority of votes cast by shareholders present in person or represented by proxy have been voted in favor of this resolution. I declare the resolution effective immediately. So that concludes the formal business brought before the meeting as set out in the notice of meeting. Is there any other formal business that anyone present wishes to bring to the attention of the meeting? If there is no further business to be brought before the meeting, I would ask for a motion that the formal portion of the meeting be terminated.

I move that the meeting now be terminated. May I have a seconder for the motion?

I'll second the motion.

Thank you. All in favor? Aye? [Voting]

Opposed, if any? [Voting]

I declare the motion carried. This Annual and Special Meeting of Shareholders of the corporation has now concluded. Lombardo will now provide a brief presentation of the corporation's business, along with the assistance of Mike Davies. Following that, management will be available to answer any questions there may be before the shareholders. [Operator Instructions] So thank you very much for attending. So Lombardo, if you could [indiscernible] for our shareholders?

All right. I will present some brief discussion on the [indiscernible] business. mainly, which is our main producer of money and also very beneficial how our trading with [ Maria ] is going. In Segovia, we are having a good start this year. In May, we have a strong month also, about 30,000 [indiscernible] the expansion of Maria Dama plant to produce or to handle 2,000 tonnes per day is underway and it will be finished in July. There we have [indiscernible] sector plans in order that look for the possibility to expand to make another expansion in Maria Dama. Remember, the Maria Dama at the beginning was sourcing around 800,000, 800,000 tonnes per day, now is 2,000 tonnes per day. We have a plan to expand that to 3,000 tonnes per day. EBITDA probably towards a year[indiscernible] , it will depend on how the exploration program is progressing. And certain projects that we are implementing in Segovia like the communication on the ground, a providencia mine and [ Segovia ] mine which will allow the utilization of the mining infrastructure of providencia and will help a lot. That project will allow us to improve the production capacity. The exploration program is proceeding. Results are promising. This year, again, we are going to expense sourcing around $9 million a year in exploration brownfield and greenfield. The expectation is to be in capacity to have another mine, a [ third ] mine going [ a couple of year ] to the year. It will depend on the final result of the exploration campaign. Segovia, in general terms, is we can say that this -- we are going to have a good year in 2022. We are going to be very, very likely above the guidance. So Segovia continue to be a good business. In Toroparu, we are progressing the project on a fast track basis. So far, we are awarded the contract for the renewal of our plant. We are awarded a contract or we are going to sign the contract from June to May for the mining contractor. The winner was a [indiscernible] company. We have the developing for the processing plant under the facilities advanced by segment. Segment also will take care of the engineering and procurement of the processing plant. The loan we are progressing on that with [indiscernible] because the [indiscernible] is a critical factor to finish the project on time because the disruption in the supply chains, the times, certain items is a bit -- it can be a little bit longer than expected. The difficult equipment is the mill, which delivery time is around [ 30 ] months. The potential ports [indiscernible] for the [indicernible] are lll Chinese port and [indiscernible] To bring that equipment from that port to [insicernible] and Toroparu maybe will take 2.5 months, potentially could introduce a delay of 2 months in the schedule of the project. In other words, now we are planning to have the first [indiscernible] in March 2024. If we cannot deal with the [indiscernible] bank of the [ SAG mill ], then the first [ rebar ] will be ready at 2 months later. We that we can deal with the delivery time. The 2 critical factors in the projects are the road which go from a site called [indiscernible] to the mine site. That from table because all the equipment will arrive in town, it will become supported by barge to [indiscernible] and to the mine site by road. It's a 200-kilometer road. We are revamping the road , the good bridges by still bridges. We are repairing the crossing -- the river crossing of the river, in which probably we are going to put a bridge or a steel bridge, 100 meters long. But that part, it will depend how with the government, what concession you can say that we get from the government because our intention is that if we have made the revamping of the road, we are seeing the government can impose on tolls in the road and also can put some control elements in that road because if they do not that, the maintenance of the road is going to be very, very expensive because the miners, the local miners and the loggers [indiscernible] with destroy the road very very [indiscernible] Those are the factors we also see another contract which is underway, is a contract for we are not going to provide the fuel to the contractors operating in the mine. We are doing a BOO with a bid in 2 companies. And that the company we get, which will get the will provide fuel, storage fuel, distribute the fuel and manage the fuel. So it is an activity which we will subtract on our capital project. And it will always be best for everybody. We are not expert in managing fuel. We are not expert in mining open pits so that's the reason because we look for a company to do that. We are not expert in power generation. So we look for a company that can do that. That will review the capital expenses of GCM in that project. So far, it's going well. We already innovated the offices of in [indiscernible] town. The people moved to the new offices this week. The are accommodated in conference of apartment that we rented. We are transporting the people by plane from town to the main -- we need to revamp the airfield. We are looking to do that in the most economic way. So more or less, this is a description of the project. We are doing the project on fast track means that we do not waiting for the PFS to start controls. Now that we have the real costy [indiscernible] line cost is ready in we can transport the -- all the elements to start building the in the next couple of months. It's a camp which will allow to have their 500 people. Okay. This is, more or less, the situation in with the Toroparu project. If you have any questions, please, don't hesitate.

That's excellent, Lombardo. You certainly know your business well.

Thank you.

Okay. Are there any questions or comments for Lombardo?

It doesn't look like we have any online questions, online either so I guess that's the meeting everyone. So thank you very much.

Thanks very much.

I have a question about the project kind of stuff, but I have a financial question. Just a question. I couldn't get a straight answer on from anyone, not just GCM. In 2017, you guys did that we were a stock split, 1-for-50. And I was at a meeting back then. I go to very few meetings because I have a full-time job. But I question the wisdom of that because I was afraid of something called naked short selling. I guess, we were victims of naked short selling because after you guys went presumably to get institutional investors because you have to be over $5 to get institutional investors. And then not [indiscernible] after that. Was that a naked short selling situation?

No. If I remember, in 2016, we came out of our debt restructuring in January. At that point in time, on a post-split basis, we would have only had about 1.5 million shares outstanding. And today, we've got about 98 million. In 2016 and '17, the real thing that hurt this company's stock and what we were reacting to was we had the convertible debentures, both the senior and junior outstanding at the time. In particular, the junior, which we're trading well below par in the market, we had are based in Toronto, that was wreaking havoc on the trading of our shares because they had a strategy going on with respect to the junior convertible debt. So what they were doing is buying the junior converts in the market, converting them but they were locking in our share price, roughly around $0.14, $0.15 at the time and capping our stock while everybody else is going up. With so many shares outstanding as that started to play out because they were throwing shares in the market, ending up in weekends in retail, we felt that the consolidation in 2017 was a way to take time out of the business and get us to a spot where we could get stronger shareholders, more institutional and take away the significance of this weak retail base that he was creating. So if you look at our charts from 2016 through now, during that period of time afterwards, we didn't see the share price fall back. We actually saw the share price starting to rise over time as the turnaround that was going on in Segovia was taking shape.

Okay. And 1 other question about the dividend. This is just a curiosity question. You guys pay a big dividend because I'm in a position now where I'm considering the dollar cost averaging to a significant level, and that's why these questions. How odd is it for a company your size to pay a dividend? And what's your kind of thinking behind paying a dividend?

I think when -- for the longest time, we were reticent to do a dividend, obviously, in the turnaround, getting comfort around the strengthening of the balance sheet, reducing debt. But in 2020, as the gold price started to reach new levels and get more comfort, that those new levels were here to stay and our cash flows at Segovia were a lot stronger as a result of the improvements [indiscernible] team have made, we started studying the dividend. Other issuers were starting to put dividends out. And we thought it's -- we're getting a call from certain shareholders to start sharing some of that free cash flow that we were generating. But we looked at it initially to sort of stick our toe in the water, go conservatively. So we initially announced a $0.015 dividend on a quarterly basis. Remember that we were still in the throes of the, I guess, we call it out, the earlier stages of COVID. We wanted to make sure that although we had the operations consistently working at that period of time, that there would be no sort of disruption because of a change in the pandemic situation. So quarterly was the way to start. But as we got more comfort in the next couple of months, we got to what we'd always intended to do, which was to do it on a monthly basis to give that return to shareholders for And we still feel that we are at a decent spot with our dividend, we're paying out about, I guess, CAD 18 million a year, about USD 12 million. The return has gone up as a result of the regression of the price over the last few months has hit all companies. We look at comparators. We are in the top quartile of dividend-paying companies, but there are several our size, Jaguar, that are paying dividends, which are actually more robust than ours, but we plan to keep sort of steady state, although we continue to see a decent cash flow coming at these gold prices, we are building a project. So we're going to continue to allocate capital, some of the dividend. We have defensively been using some for normal course issuer bid, but we want to continue to build the cash on the balance sheet because as Lombardo is building out Toroparu, we want to ensure that we constantly have comfort around fully funding of the project. And so we probably won't see a change in that dividend until 2024 when Toroparu is up and running, doubling our cash flow, doubling our EBITDA and our production, and we can reevaluate the dividend at that time. So we feel...

I'm not concerned about an increasing dividend. I'm concerned about is that going to continue?

Yes, yes. And I think when we said it, obviously, we set that in December 2020 was when we announced to go monthly. We've already been studying the prospect of moving forward with Gold X We knew that we'd be issuing more shares if we did succeed with that transaction. So we set a rate. I think we demonstrated that even on the other side of the Gold X transaction when the share count went up, it didn't dissuade us and caused us to pull back on the rate of the dividend. We set a rate that we were comfortable at. Even if gold goes down, we'll keep that rate because that's our baseline, if you will.

Yes. Because I think it was 3% back in the day?

Yes. So we set a baseline.

Thank you for your questions.

Yes, there's no other questions on the line. So I think this is...

That concludes the meeting, and thank you for everybody attending. Once again, thanks for [indiscernible] for supplying their facilities here [indiscernible] to see people in person.

I didn't realize that there was kind of as shareholders coming in. I was just excited that I had to day off today case of that I can't --

It's not a discouragement or as recognizing [indiscernible] some people just want to come in.

We're back in the office now.

We're all there with you.