Galiano Gold Inc. (GAU) Earnings Call Transcript & Summary

Good morning. My name is Ludy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Galiano Gold Inc., 2025 Guidance, MRMR Update and Five-Year Outlook Conference Call. [Operator Instructions] Thank you. Mr. Matt Badylak, President and CEO of Galiano Gold, you may begin your conference.

Thank you, operator, and good morning, everyone. We appreciate you taking time to join us on the call today to review our 2025 guidance, updated mineral reserve and resources and 5-year outlook for the Shanta Gold Mine that we released last night. Here on Slide 2, we'll be making forward-looking statements and referring to non-IFRS measures during the call. Please refer to the cautionary notes and risk disclosures in our most recent MD&A as well as this slide of the webcast presentation. Yesterday's release details our 2025 guidance and 5-year outlook, which should be read in conjunction with our 2022 technical report for the Asanko Gold Mine available on our website and filed on SEDAR+ and EDGAR. Also, please bear in mind that all dollar amounts mentioned on the conference call are in U.S. dollars unless otherwise stated. Please note that I'm discussing Galiano's outlook for the Asanko Gold Mine on a 100% basis. Moving to Slide 4. With me on the call today, I have Michael Cardinaels, our Chief Operating Officer; and Chris Pettman, our Vice President, Exploration. I also have Matt Freeman, our Chief Financial Officer, available for the Q&A portion of the call. For this presentation, I will initially go through a few introductory slides. Michael will review the operational guidance. Chris will discuss the exploration program for 2025, and I will provide some closing remarks and open the call for Q&A. Here on Slide 5, this is not to remind you that we are located in Ghana, but rather to highlight that the country recently went through its democratic election process. His excellency, President, John Mahama, took office in early January in another peaceful transition of power and is currently in the process of making his ministerial appointments. At its core, Mahama's mining policy emphasizes responsible resource management, community engagement and protection of ecosystems. We are confident that Ghana will continue to remain a leading pro-mining and premier investment country in West Africa, and our team looks forward to continuing our partnership in supporting Ghana's mining sector. Here on Slide 6, I'd like to remind you that we have a fully established and fully permitted operating mine. The Asanko Gold Mine has been in operation since 2016, and all infrastructure is in place to deliver on our plans. The news release last night provides clarity on how we view our mining sequence, ramp-up of production and corresponding reduction in all-in sustaining cash costs over the next 5 years. It includes the commencement of the strip at Nkran scheduled to begin midyear. As you know, Nkran is a key component of our life of mine and multiple options were considered on how best to schedule and mine this deposit. Following his appointment in September, Michael was intimately involved in this process, and I will now allow him to walk you through this in the coming slides. Over to you, Michael.

Thank you, Matt, and good morning, everyone. I'd like to provide some information around our updated optimized mine plan. After significant review and work, the team has developed a plan that will allow us to mine 3 pits, Abore, Esaase and Nkran over the next 5 years, providing stability to the operation. Our mining contract in place for Abore also includes Esaase mining rates and will enable us to move fleet from Abore to Esaase and begin the next phase of mining for that pit with relative ease. Esaase is one of our lowest strip ratio pits and the cutback will allow us to access ore quickly. Operating across Abore and Esaase gives us flexibility with our ore supply for the mill and the softer Esaase ore will provide increased throughput performance, especially in the first half of the year until the secondary crusher is commissioned. The pit design for Nkran has been developed to mitigate geotechnical and operational risks while maximizing the recovery of the resource. The schedule has been timed to fit in the LOM such that we generate cash, gives us stability, flexibility and ties in with the strategy around stockpile generation, ore supply management and satellite deposit development. The current strong gold price means that we generate sufficient free cash flow to support the Nkran strip, which we envisage will be started by midyear 2025 as we're in the final stages of discussions with the preferred contractor, and we expect the contract to be executed in the near future. On Slide 8, 2025 guidance and 5-year outlook for the AGM. As previously mentioned, the secondary crusher is due for commissioning in Q3 this year. And while we are crusher constrained, we are looking at ways to increase our throughput to maximize our production, including optimizing the feed blend between the Abore and Esaase materials. As mining progresses in both pits, we see slightly higher grades at depth towards the end of the year. We are providing guidance for 2025 production ounces between 130,000 and 150,000 ounces. Once throughput increases to an annual rate of 5.8 million tonnes per annum, production will increase to north of 200,000 ounces per year starting from 2026. Processing costs averaged $11.30 per tonne milled over the 5-year period. As higher-grade ore becomes available from Nkran towards the 5-year mark, we see another increase in annual production to between 230,000 ounces and 260,000 ounces. Sustaining capital for 2025 is approximately $15 million, the bulk of this spend is attributed to the TSF Stage 8 construction slated to begin in 2025 as we have access to significant waste material in close proximity to the TSF to support the build coming from the Nkran pit. Mining costs averaged over the 5-year period equate to $3.34 a tonne mined with an average ore haulage cost of $4.44 a tonne hauled. All-in-sustaining costs for 2025 will be in the range of $1,750 to $1,950. As we increase production over the next 5 years, we expect to see a significant reduction in the AISC on the back of the additional ounces. Development capital for 2025 is approximately $60 million to $65 million, which includes the half year of Nkran stripping and then subsequently increases from 2026 as Nkran mining ramps up and is in production for the full year. Now I'll pass over to Chris to discuss the exploration plan. Chris?

Great. Thanks, Michael, and good morning, everyone. So over the next 2 slides, 9 and 10, I'll give some brief highlights of the 2025 exploration plan that's going to build on the successes we saw in 2024 in both the near mine and the regional greenfield spaces. So in 2024, we saw an increase in the mineral reserves at Abore of approximately 151,000 ounces, which is a great outcome for us, but we still see opportunities for further growth at Abore. In 2025, drilling there is designed to test for further open pit resource and reserve growth with a focus primarily on the southern end of the deposit in and around the high-grade zone that we saw discovered in 2023, where we see opportunities for more growth inside that economic shell. So now importantly, Abore remains open at depth along the entirety of its 1.3 kilometers of strike, making it an important target for us from an underground potential perspective. As part of the 2025 drilling program, we'll be testing for continuity of mineralization below the known resource across the entirety of the deposits. So we're very excited to see what comes with that. Along with the Abore drilling, the teams also developed several high-priority drill targets that are located on the immediate Nkran shear that sit between the known deposits that are a high priority for us, and we'll test them this year as well. Now in the greenfield space, we have several really exciting targets that we'll be following up on this year. Firstly, at Sky Gold B, which we've talked a lot in the past, 2024 saw our first pass drilling identify a new regional scale shear zone, which trends in the same orientation as all of those other shear zones that host all of the AGM deposits. So the drilling we did was conducted on wide 400-meter space fences, and we intercepted shear quartz vein hosted gold mineralization across approximately 4 kilometers of strike length. Now given the scale of this target area, we're really encouraged by these first results and a follow-up geophysics program is planned for early 2025 to aid us in the potential next round of drill targeting. On the next slide here on Slide 10, I'd like to highlight our Akoma target. Akoma is located approximately 5 kilometers southeast of the processing facility and sits on the northern end of the Miradani Shear. So in 2024, we also saw our first drill test here, and we got really encouraging results that had the team excited. The drilling has identified a series of gold mineralized shears that sit on the northeast extent of the Miradani Shear, as I said, and it's robust and shows good continuity across the footprint that is currently approximately 200 meters wide and 400 meters long. So mineralization here begins at shallow depths and drill holes, but we can also see it extending to the surface. So the system remains open to the Northeast, and this will be a focus of our early drilling this year. Now on the slide, you can see some of our best intercepts at Akoma. I won't go through them all, but some of the highlights here, you can see there are multiple drill holes with high grades that are very encouraging, but also good widths as seen as hold 8, where we saw 16 meters at almost 4 grams a tonne and another 18 meters at about 1 gram a tonne. This is obviously very encouraging from a first-pass perspective. We also have several other regional targets that have been prioritized for initial drill testing in 2025. We'll be focusing on the area directly along the Fertile Nkran and the Tanos shear zones to the southwest of the processing plant. Now we're lucky to have a healthy budget of approximately $10 million again in 2025, and we're excited to continue to advance our portfolio of exploration targets towards discovery as it remains healthy full. And I say the team on site is extremely excited to get going. All right. Back over to you, Matt.

Thank you, Chris. Here on Slide 11, it is important to reiterate that our strong cash balance, which is shown here, will allow us to move forward and support our mine plan. Throughout 2024, following significant investments into the Abore start-up and the $13 million payment to buy out the Red Kite offtake agreement, we ended the year with an enviable cash position of $105 million and no debt. We are pleased that this cash allows us to invest in our operations and ramp up to over 200,000 ounces of gold annually from 2026. This brings us to our last slide, looking at how we are building our future. Drilling efforts through 2023 and 2024 replaced our depletion, and we remain confident in both our near-mine and greenfield exploration programs going forward. Our production growth is ramping up, and we expect to see a 75% increase in gold ounces produced by 2026 to over 200,000 ounces of gold per year. We have defined a path forward and our investment in Nkran is about to kick off midyear. Gold prices are now running at over $2,700 per ounce, and we continue to maintain a strong balance sheet with no debt and dare I say, one of the strongest balance sheets within our peer group. We are executing on our organic growth profile, positioning us to become one of the largest single mine producers, operating a cash-generating asset in Ghana, West Africa. Galiano's value proposition remains compelling, and we are confident in our vision for long-term value creation and growth as a company. With that, I'd like to turn it back to the operator and open it up for any questions. Thank you.

[Operator Instructions] And our first question comes from the line of Heiko Ihle with H.C. Wainwright.

With your 2025 guidance of 130,000 to 150,000 ounces, can you maybe quantify some factors besides the origin of ore that you see yourself and coming in either at the higher or the lower end of this range? And more importantly, can you answer the same question for 2026 or even the lower end of the range is obviously well above the high end of 2025? I guess what I'm saying is, are there any bottlenecks besides mining grades at site?

Yes, Heiko, I think the main bottleneck that we've been quite open speaking about is the crusher throughput, which obviously affects our mill throughput, which has hindered us both in 2024 and will continue to do so for half the year into 2025. So that will be addressed through the commissioning of the secondary crusher, and we expect that to happen midyear in 2025. As Michael mentioned, we are looking at trying to blend some softer material out of Esaase prior to that crusher being commissioned in the first half of 2025, which may help with our throughput. And then subsequently from that, once we have that secondary crusher online, we expect to be producing or milling around the 5.8 million tonne per annum mark, which is going to weight production to the tail end of 2025. That will continue into 2026 with regards to the throughput. And then we do also expect to see the grades slightly increase both at Abore and at Esaase as we mine into the guts of the deposit, so to speak, with deeper areas of the deposits, both in the latter part of '25 and '26.

And then just a quick clarification. Sustaining capital expenditures for 2025, obviously, are including the tailings facility expansion. So that's $9 million right there, another $9 million in '26. That's it, right? There is nothing left in calendar '27. And then just remind me, how many years of capacity does this add, please?

Yes. So in terms of your first question, the TSF, you're correct, that spans the 2 years. So '25 and '26. It doesn't continue into '28. And if you could just repeat the last part of the question, I didn't catch that.

How many years of capacity does that add, capacity expansion?

Just show of an additional 4 years of capacity.

Four years. Okay. So we got to worry about this again then in, call it, 2030?

2030, 2031 approximately. Taking into consideration the current capacity that we have from Stage 7.

Sorry to hog up the question queue like that. And then presumably, it should be a more or less similar number to this, maybe inflation adjusted in 2030, 2031?

Yes. I think, listen, it's a long way out, isn't it Heiko, 2031. I mean, ultimately, it will probably be a similar scale. And obviously, that will be dependent also on exploration success, et cetera, between now and then. So it's probably too early to guide to a 2030 subsequent lift at this stage.

And your next question comes from the line of Alfredo Schmutzer with Equinox Partners.

So very quick one. Just to confirm that the AISC that you provided, that excludes 100% of the development CapEx, right?

Correct. I had not framed here. Yes, that's correct.

And then so the development CapEx between 2025 and 2029, that amounts to, if I take the midpoint, around $400 million. Can you maybe break down that development CapEx? I'm very interested about how much corresponds to Nkran stripping cost.

I think the best thing to do is kind of refer to previous tech report in terms of the disclosures that we have. And you'll see in the reserve statement, you can see the mining rates, strip ratios and the cost of mining associated with Nkran and that should give you a good guide.

Yes, the reason why I ask is because, if I see the technical report, I mean, for Nkran, the total CapEx, let's say, was around $260 million and obviously, the guidance you're providing now is very much in line in terms of mining cost per ton as well as strip ratio. So basically, there is a difference of, let's say, $140 million in development CapEx that I don't know where exactly it comes from. I don't know if that's what I'm saying.

I can help you there as well. So one of the other things, the technical report shows some development capital in 2023 and 2024 that wasn't incurred for some of the site establishment costs. So you can see that what was incurred for our disclosures for those 2 years. So it's just a timing difference that some of those costs will now get incurred during that period. We had about $ 53 million of development costs in 2023 and '24 and the lion's share of those were not incurred. So those will be a timing difference into this period. And a smaller component that we have talked about, I think, over the last year or so was the secondary crusher and the FL tanks. Now those costs were in addition to the technical report that we have. So there's some incremental spend, as Matt talked about, with the secondary crusher this year and finishing up those other plant upgrades. So there's another sort of in the quantum of sort of that sort of sub $10 million number. So it's not as material, but there's an element of that as well.

But stripping cost is more or less in line with the technical report, the stripping cost.