Brookmount Explorations Inc. (BMXI) Earnings Call Transcript & Summary

I would like to welcome everyone to the call today. We are joined by the CEO, Nils Ollquist. Before we begin, I'll go over the formality of reading the forward-looking statement, and then I'll turn it over to Nils. Except for historical information contained in this presentation, certain of the matters discussed in the communication contribute forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Words such as may, might, will, should, could, anticipate, estimate, expect, predict, project, future potential, intend, seek, plan, assume, believe, target, forecast, goal, objective will continue or negative of such terms or other variations thereof and words in terms of similar substance used in connection with any discussion of future plans, actions or events identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding the benefits of the proposed license, expected synergies, anticipated future financial and operating performance results, including estimates and growth. There are a number of risks and uncertainties that can cause actual results to differ materially from forward-looking statements included in these communications. For example, the expected timing and likely completion of the pending of transactions, including the timing, receipt and terms and conditions of any required governmental regulatory approvals of pending transactions could reduce anticipated benefits and cause party to abandon certain transactions. All such factors are difficult to predict and are beyond or out of the control. We disclaim and do not undertake any obligation to update or revise any forward-looking statements except as required by applicable laws and regulations. With that, I'll turn it over to Nils for an introductory statement.

Thank you very much, Kevin. Good morning, everyone, ladies and gentlemen, happy that you could join us for the call this morning. I know a lot of you, it's been a difficult time for shareholders in general. Basically, in fact, that's why I wanted to address a couple of things of those issues before we'll start with the questions. First one is dilution. I know it's been driving a lot of uncertainty among investors about the number of shares that we've issued in the last few months, in particular. That has been driven by two factors, one of which since very recently been [indiscernible] and that was the issue of convertible note dilution of issuance of stock. As you may have noticed since tweet was released yesterday and it confirmed that we have now executed an agreement with our principal lender in which we have agreed in terms of the payment of cash outstanding, which has commenced yesterday and we'll cease at the end of December 2026. In the meantime, I mean further conversions or share issuances pursuant to that -- to the notes. So that will be taking considerable pressure off the stock. And the other issue that has been played in the system has been a need to raise capital to, one, to position ourselves to -- noted to raise capital generally to continue expanding the business [indiscernible] $500,000, a lot of which has been retained for capital investments, and there is no further plan to issue additional notes in the short-term or the medium-term [indiscernible]. I think that we're part of the [ things ] where we're concerned about maintaining where we are. I think where it is stable region, look at building, rebuilding stock price to a value that reflects the inherent value of the [indiscernible]. So you've all been very patient, and I appreciate that. Coming along on this journey [indiscernible] but geologists do believe [indiscernible] denied, one is going back to Canada. It's been 2.5 weeks there. And I think safely say that we have a very positive outcome in terms of production and so on, and I'll address that within the questions that we're now going to turning up. So Jeff and I'll sort of turn it over to questions, and then we can do a summary maybe at the end.

Yes. If I could get you to get a little closer to phone or speak up, it's a little hard to hear you. So over the course of the last few days, we received a number of questions from people. And so I'll make sure we go into a high-level detail on these questions. Nils, what level of production are you expecting to reach by the end of this year?

I'll tell you where we are at the moment and where we'll build from. And this comes, as I said, hot off the press because we just completed a burn in fact, today. What we're tracking at the moment is approximately 24 ounces per package and around 4 packages per week, which would be $3750 an ounce would equate to around $360,000 of revenue per week or $1.45 million per month, which would be tracking some measure over where we were at the last quarter. So this is current as far as I'm concerned, current performance. And what we're doing is the strategy that we're adopting [indiscernible] basically I suppose, drill will be the way to put it, but we have 2 shafts which are active at the moment with drilling 2 more. The 2 shafts which are active, we have 2 horizontal shafts, building off one of them. And then the second shaft, we're building down to about 65 meters at the moment. The whole purpose of the exercise is to have as many operating shafts as possible to be bringing out as much ore as possible because we're finding, and the geologists was able to run some tests when he was here -- when he was there, I am sorry, and finding that the ore grades are consistent and around 0.7 to 1.2 grams per bag, which is around 20 to 30 grams per sort of tonne of ore. So basically, high ore grades. And what we want to do is exploit that as quickly as possible. One of the reasons why we wanted to raise the capital is to complete the construction of the second processing facility, which is almost finished, 24 ball mills and 6 processing tanks adjacent to the area that we're building 2 shafts. The land was acquired about 5 months ago by our partner, and we've identified high-grade areas on that land where we're exploiting as quickly as we can. We're bringing in workers on a regular basis. We have another 20 arriving from Java next week. We'll probably be up to 100 workers by the end of November and hopefully by 200 workers by the end of the year. So it's all a question of [indiscernible] at the moment. And I think we can -- by the end of this year, we can realistically look at matching what we were doing prior to taking over privatizing the joint venture over the last couple of years before November 2024. So that's where we are at the moment, and it's a case of just moving as quickly as we can on the production side because gold, obviously, there's no question on the price. Not even [indiscernible] because the price goes up, we go straight to our bottom line. So it's an easy calculation. And we're very confident that we'll be doing better by the first quarter of next year [indiscernible] than before.

Do you have any forecast for gold production in 2026 for the Indonesian mine?

I would say that by the end of 2026, we would be well over double what we're doing at the moment, well over. Now whether I can estimate whether it's 3x as high or twice or between the 2, I don't know. But it's -- we're just pushing -- throwing as much into building and production capacity as possible. And the results, you will see quarter-by-quarter as we go through the year.

What is your current time line for beginning gold production in North America? And do you have any forecast for that production?

Errin will be, when he's back in Canada, he'll be looking at our Luzon operation, which is where to have the tailings, around 30,000 tonnes of tailings. That's really, as I've mentioned before, the low-hanging fruit for North America. We -- right now, we're putting capital, all of our capital we can into the Indonesian operation because that's where the revenue is at the moment. However, and part of this process of the spin-off of North American Gold, which we'll talk about and we'll discuss a little bit later, is to focus on 2 production streams from North America and one from Indonesia. So we will be talking about getting capital into Canada probably in the first quarter to process those tailings and to be able to create production probably by the end of the quarter. We can shift equipment in there during the first couple of months. That will obviously require maybe $500,000 to do that. And as we move, we'll come back to the market as necessary to raise funds. Well, definitely at a higher price in $0.02 when we require the money to do that. We did have a debt facility, which we were negotiating. We've been out with an announcement on that. It was disappointing because they came back to us with a secured note facility for [ $5 ] million, which was onerous, extremely onerous on terms, and we just didn't -- we didn't want to do it. And we were more interested in basically working with what we've got in terms of doing the rate pay, which is now at the $0.02 level be completed and that we would file -- if we do want to raise more equity capital, we file for an amendment to increase the price and do it at a higher price. But there will be capital needs coming out of Canada, and we'll be addressing that as we move forward into 2026.

Are you converting all the gold that is produced into cash immediately or holding some [indiscernible] expectation of rising gold prices?

No, we have in the past, particularly when our partner is running the gold operation in Indonesia, we had in the past occasionally held back from selling and stockpiled some gold. But at the moment, no, we're basically -- because as the price moves, we sell. And the price at the minute is doing exactly what we wanted it to. So as we produce, we sell and we use the cash to do what's required. And as the cash is becoming -- as the cash surplus increases, our flexibility will also increase, obviously, in terms of the cash available for both for expansion and for share buybacks and whatever to further -- the equity value of the stock.

And I think we're still having a little problem hearing you. Can you try and...

Sorry. All right. I was just holding the phone close, yes, go ahead.

As cash from operations flows in, how will you prioritize how it's spent?

Well, firstly and foremost, for production because we have been at the stage where production is everything, and it will drive our financial stability model going forward. As we generate more surplus cash as we will be doing, we'll be putting it aside for -- as a reserve to cover share buybacks as required. And obviously, at some point in the future, we'll be looking at paying dividends. But right now, we're in a situation where we're -- we're plowing most of our surplus cash back into building production because that's the key to our success over the next 18 months.

Given the fact that you announced a $10 million share buyback when it was not nearly as -- when there were not nearly the same number of shares outstanding, do you anticipate this being the total amount of the buyback? Or will it be expanded?

I think as we're increasing our revenue flow and surplus cash, then we'll be looking at executing that buyback as soon as we can, because I do remember that was something that we've indicated we would do, and we intend to follow through with that. I would hope that by -- certainly by the first quarter, we would be in a position to at least fulfill that $10 million share buyback that we talked about and hopefully more.

I think you hit on this, but it's a question we're getting from everyone. Can you give us an idea when the share dilution will come to an end? And do you anticipate the current levels of shares outstanding to be close to the maximum share count investors will see?

Yes. I think that the -- we've been through the difficult phase, which is really the building phase. And I think that's why it was -- it wasn't -- it was certainly impacted very heavily by the conversion issue. And that's why I wanted to nail that issue, which we have now done. So I think without that conversion pressure, we will be -- I think shareholders will be able to rest a little bit easier. And as far as raising capital is concerned, the pressure is off that as well. We've been able to bank enough money to get us through this fairly vigorous expansion exercise, which we've been in the process of. And further expansion will be measured and won't require the sort of capital that we have needed to get to this stage. Once we get the shafts constructed, the matter of building horizontal tunnels is fairly straightforward, and we'll be able to build our production through less capital intensive or capital-intensive measures.

You have missed some deadlines in the past. How can investors have renewed confidence that this pattern will be reversed?

I think deadlines, for example, the audits, which -- it goes back many years actually. Shareholders that have been with us for a long time and they will know what happened back in the Indian orderly days and transitioning to the Australian and so on. I think that was probably the key area that we were letting the side down primarily because we anticipated things that didn't come about. And we probably -- we certainly didn't communicate in the way that we should have. That will be rectified. For example, as far as the audit is concerned, we now have a good relationship with Russell Bedford and BDO in Jakarta, BDO not only helped us do the convertible note conversions -- sorry, the pricing for -- including in the 2022, '23 audits, but also working on uploading or helping our finance team in Manado, upload the financials for the recent 2 years, which have been completed to the Xero accounting system. So we have BDO also indicating to us that they would help us with the PCAOB sign-off from Russell Bedford. So the IFRS audit, which will be completed by Russell Bedford shortly would then be signed off on a PCAOB basis by BDO, which would make a complete package and will then be facilitated us to move into the listing process.

That answer kind of flows right into the next question. The SEC compliance and everything else is required for any uplifting. Can you give us an update on the uplisting and what your plans are?

Right. It's all driven by the order, Kevin. So basically, as I've alluded to, we've got the players that we need. The progress of the '23, '24 audit is good. And of course, you know that the August announcement will be coming out in a few weeks, obviously working on that as well. But the listing process is driven by the audit, obviously. And what will also drive it to a certain extent is the spin-off, which we have proposed, which we restructured away from doing a merger with a public vehicle to just creating our own subsidiary in Nevada, which has been done North America Gold. And so that will be hiding off as we've talked before, the North American assets, special dividend to shareholders and so on. That would also be able to come. So the audits on that -- on these 3 properties are very straightforward. Errin has actually has got auditors working -- an auditor working on that at the moment, probably would take 6 to 8 weeks to complete, and then we would have 2 listed vehicles. So we're working diligently to get that process completed as soon as possible.

And with the audit, have there been any significant issues? Or is it just a typical back and forth of providing supportive data for everything the auditor ask?

I think so. I think so because the auditor already completed the site visits. So the site visit is behind us, and it's really only a matter of updating the '23 numbers -- I'm sorry, the '21, '23 numbers in '23, '24. So that is in process right now, as I mentioned before, and we're pushing to get that done as quickly as possible.

So it sounds like a number of milestones are going to be completed here this quarter on a number of fronts. I'll turn it back over to you, Nils, for any summary or closing statements you want to make.

Sorry, yes, I hope you can hear me. I'm sorry that I was fading out. I'm just using an iPhone. But well, firstly, I wanted to indicate to everybody how much I appreciate their support. I know as I said, as I know, it's been a difficult period. And we're trying to -- I mean, there have been some external issues which have influenced our communication, which I'll just allude to briefly. We had 2 directors who were appointed over 12 months ago, in fact, early last year as they are reporting to do Investor Relations, which didn't work out very well. And also, they turned out to be quite hostile directors. They were trying to execute -- they were trying to basically take the company over from us. And so we had a little battle on our hands, but that's been resolved. And we -- in that process, however, the X account and the website and hosting of all these social media assets and such were pretty well locked because of the dispute with these directors. That is gradually being unblocked, as you know. We have a new website, which we just reduced -- we're just looking at the bromides at the moment. And with the help of Chesapeake will be live, I guess, sometime in the next week or 2 weeks at the most. And we have rebooted the X account as BrookmountAu, which you know. And we're basically -- and we're pretty much resolving that issue, which is we've been facing for the past few months. And that is the reason why we haven't been able to update the website because we haven't had the access to it, unfortunately, because of this dispute, but that's now being resolved. So I apologize for the lack of communication, but we will be doing better and more consistently as we add also to our staffing, which we're doing in the next couple of weeks on the Investor Relations side and on the social media side. So our messaging will be consistent and accurate going forward.

So to summarize, your production levels are almost 100 ounces a week now, and you expect that to double here over the next 12 months or so. Earnings will be out in 3 to 4 weeks. We'll do another call in conjunction with the earnings. And on our front, we are looking at a few investor conferences and analysts to begin covering the company. With that, I'd like to thank everybody for being on this call. If there's any additional questions, you're welcome to contact Chesapeake directly and we'll be sure to get you those answers as quickly as possible. Thank you, everyone, for your time today.

Thank you very much.