Lundin Gold Inc. (LUG) Earnings Call Transcript & Summary

As there are no questions, I will now ask shareholders and proxy holders who have not already done so to vote via the electronic ballot. [Voting]

The results of today's voting will be announced at the end of the meeting. It is now in order to proceed with the election of directors for the coming year. The information circular, which was mailed to shareholders contains the names of and information about management's nominees to the Board of Directors. I now declare the meeting open for nominations for directors.

I nominate: Carmel Daniele, Gillian Davidson, Ian Gibbs, Ashley Heppenstall, Ron Hochstein, Craig Jones, Jack Lundin, Angelina Mehta and Jill Terry, all to be directors of the company to hold office until the next Annual Meeting of Shareholders or until their successors are elected, subject to the provisions of the company's bylaws. According to the company's bylaws, the company must receive advanced notice of nominations of directors by shareholders. The company did not receive notice of any director nominations in connection with this year's meeting within the time periods prescribed by the bylaws. Accordingly, the only persons eligible to be nominated for election to the Board are the nominees named in the information circular.

Thank you, Sheila. And I ask for a motion that the proposed nominees be elected as directors of the company.

So moved.

The vote on the election for directors is to be conducted by way of ballot. I would now ask those shareholders and proxy holders who have not already done so to vote via the electronic ballot. [Voting]

As noted earlier, voting results for all resolutions will be summarized at the end of the meeting. The next item of business is to consider, and if thought fit, approve a nonbinding advisory resolution approving the company's approach to executive compensation. The company's compensation discussion and analysis is set out on Pages 51 through 76 of the information circular. The full text of the resolution is set out on Page 14 of the information circular. I'll now ask for a motion to approve the nonbinding advisory resolution approving the company's approach to executive compensation.

So moved.

Are there any questions? You have a few seconds to submit your question via the Message Link, starting now.

No questions have been received.

As there are no questions, I would now ask those shareholders and proxy holders who have not already done so to vote via electronic ballot. [Voting]

As noted earlier, voting results for all resolutions will be summarized at the end of the meeting. That concludes the items of business set out in the notice of meeting. The polls are still open and if you are a registered shareholder or proxy holder and have not submitted your vote by ballot or proxy, please do so now by selecting the appropriate -- by selecting the applicable voting option on the voting panel. We will pause for a period to permit voting before closing the polls on all items of business. [Voting]

Voting on all motions has now closed. I have been advised by the scrutineer that the proxies deposited for the meeting have been voted in favor of all resolutions and that the requisite majorities have been obtained for the election of the nominated directors and the appointment of auditors. In addition, the shareholders have voted For on a nonbinding advisory basis the company's approach to executive compensation as set out in the management information circular. Rather than hold up the business of the meeting for the final tabulation of the votes cast, I direct that the results of the polls taken be included with the minutes of this meeting and be posted on the company's SEDAR profile at www.sedar.com after this meeting. The formal terms, items of business for this meeting have now been dealt with. And is there any further business? If so, if you would like to raise any further business at the meeting, you can do so using the message link. You have a few moments to submit any further business using the message link.

No further business has been received.

As there is no further business, and unless there's any objection from those in attendance of this meeting, I shall now declare the formal meeting terminated. As there are no objections, the meeting is now terminated. I would like now to give you a presentation on the company. Again, thank you, everyone, for attending today. And I would like to give you a brief update on the activities of the company this past year and some very exciting activities going forward. I will be making some forward-looking statements. So when you have appropriate time, I would encourage you to read our cautionary note regarding forward-looking information and statements available on our website. Lundin Gold is focused on creating shareholder value, and we do this through 3 main pillars underlying by a foundation of strong ESG: operational excellence, our first pillar. Through operational excellence, we continue to drive increased throughput, reduced operating costs, which as a result, is generating significant cash flow. And our -- through that cash flow, we have started to return capital to shareholders and also have really focused on cleaning up the balance sheet of the company. In addition, with such significant cash flow, we are pursuing several growth initiatives. And I'll speak a little about the bar about those in a little -- in a few minutes. And again, as I stated, none of this would be possible without a very strong ESG platform. Last year was a great year for Lundin Gold. In 2022, we beat our gold production and all-in sustaining costs or AISC guidance. For this year, we're guiding for increased throughput of 4,400 tonnes per day based on the work that we did through 2022. We generated just under $270 million in free cash flow, paid our inaugural dividend. We completed finally the [ self-ventilation ] rate, which now has opened up the entire mine for mining. And we did significant drilling on our conversion program which resulted in a significant replacement of reserves, which I'll speak about shortly. We published our inaugural climate change report. And in terms of cleaning up the balance sheet, we exercised our right to repay the gold prepay facility effective January 5 of this year. In the first quarter of this year, the team at site continued to do a great job. We did have higher grade material than anticipated, but this enabled us to produce just over 140,000 ounces in the quarter well on our way for our guidance of 425,000 to 475,000 ounces for the year. We did this also at an industry-leading all-in sustaining costs of $728 per ounce. This puts us in a very low decile in the company overall. The graph you see here is the -- what's called the gold cost curve of all operations in the world producing gold. The only operations that are below us also produce copper. So they have a large copper byproduct credit. As you can see, we're well on our way in terms of meeting our guidance of $870 to $940 per ounce. I've stated what our goals are for 2023 in terms of production and all-in sustaining. And you can see the next 2 years are also increasing production and resulting in further costs as we continue to focus on operational excellence. This past year, it really shows the cash flow that Fruta del Norte can generate. We started the year with just over $360 million on the balance sheet in terms of cash, generated $144 million in operating cash flows in the first quarter, paid down the gold prepay $208 million, further debt payments on the stream of $21 million and on senior debt of an additional $42 million, and dividends of $23 million. So we started the year at $363 million. And even with all of that focus on the balance sheet and paying dividends, we still ended the quarter at $210 million in the bank. The debt focus, you can see here with cash flow, organic growth, which I'll speak about shortly, debt payment and dividends, again, focusing on shareholder value. You can see at the end of the fourth quarter, our balance sheet showed long-term debt of -- sorry, this should be first quarter of '23, first long-term debt of $434 million. Just a typo at the top there of the slide. So again, shareholders, this is the first quarter of 2023, significant reduction in our debt from the start of the year. Currently, we have 2 forms of debt, the stream credit facility and the senior debt facility. The senior debt has only $135 million remaining. The stream at $269 million still has some time, but we do have an option in June of next year to pay down -- a buyback, sorry, 50% of the stream for $150 million. That is definitely something that some company is considering. At current gold prices and looking under our current production, we couldn't even have the senior debt repay back in full by the end of this year. Now let's talk about growth. First of all, exploration. This is organic growth, and we have 3 programs under underway: conversion drilling, which is focusing on upgrading our inferred resources to bring more in from resources into reserves. Our near-mine program, which is drilling right around Fruta del Norte and its target is to add reserves. And finally, the regional program, which is further a little further away, we're still only talking about 10 to 15 kilometers away from Fruta del Norte is to find a new Fruta del Norte. If you think about these programs in time and impact for you as shareholders, the conversion drilling is near term. The near mine is midterm, and regional is a little longer term. On the conversion drilling, we started drilling back in 2021 and well into 2022. Results of that drilling, you can see on this graphic here. Our technical report, which was actually done before the mine even started construction, we had 4.82 million ounces. We have mined 1.38 million ounces, but through the conversion program, we've added 1.58 million ounces. So we've replaced everything we've mined plus a little bit more. But with that said, we still have 3.5 million ounces in resources that can be moved into reserves, and that's what our current conversion drilling program is focusing on. In this graphic here, you can see the various areas within the resource model where we're drilling. These areas are not in the current reserve, and that's where we really want to focus on, in particular, the areas in green and then followed up by later this year and early next year, the areas in purple. Now let's talk about the near-mine program. In this graphic, you can see Fruta del Norte tuck between 2 falls, the East and the West fall. Where we're drilling in the near mine is from underground, targeting areas, very prospective areas to the East and the West fall and then surface drilling as we move further South. This program only started in Q3 of last year and has already resulted in some very significant new discoveries. On this graphic, these are some results that we just recently announced within the last couple of weeks. FDN South is just at the southern end of the current FDN resources. Bonza Sur, which is a little bit further South, is drilling a large gold anomaly that was surface anomaly that was identified by Kinross, but never had a drill hole in it. We've now popped to into there with some very interesting results and Castillo is kind of tucked in between. You can see a very prospective trend in just now essentially 9 months of drilling is really starting to come to fruition. Now on the regional program, this is a little bit more. I wouldn't say grassroots, but it's a little bit more, we're working just off the surface anomalies and everything, and we've had some very exciting drill holes here. No gold mineralization yet, but certainly drill holes that show the signs of epithermal gold systems. We're continuing to focus on particularly Quebrada La Negra, and generate new prospects further down, a little bit further South of Puma. You can see from this graphic, which shows the exploration drill meters carried out each year since the original claims were put together by the company Aurelian. The biggest share was 2007. That was following the discovery of Fruta del Norte in 2006. And you can see now in 2021 and 2022, we've really started to ramp up drilling. And in fact, we made that -- we announced this last week that we've increased the near-mine program by about 7,000 meters to now plan on drilling a total of just over 35,000 in the near mine and regional programs, an additional 7,000 meters in the conversion program. This will be the third highest, most drilling ever carried out of these packages, getting close to the most drilling done back in 2007. The key to exploration is have a pipeline of projects, and this graphic shows it well. We all know that you need a lot of prospects at the bottom of that triangle and the odds are, then you need those more and more prospects in order to get to that ultimately, the pinnacle of that triangle. FDN South is a very prospective area along with Bonza Sur, Castillo and we're generating more at the basis of the triangle. Sustainability strategy is one thing that is so key to all of our success. In 2021, we prepared a 5-year sustainability strategy -- [indiscernible] based upon these 8 pillars: climate change, community infrastructure, community well-being, environmental stewardship, health and safety, human rights, lasting economic opportunities, and responsible resource governance. We focus on every one of these climate change, we are one of the lower emitters based on our 2021 results, and we will be issuing a new TCFD report within the next couple of weeks. On health and safety, our team at site just recently surpassed the milestone of working 4 million hours without either a lost time or medical incident, really outstanding. And this is in a country that very little large-scale mining has taken place before. The team at site are doing an amazing job. With regards to lasting economic opportunities, community well-being, et cetera, community infrastructure, we just recently completed a survey and within the communities the acceptance of mining is higher around in the local communities than you would see in countries like Chile, Peru, et cetera. In closing, we focus on creating value for you as shareholders by focusing on operational excellence, Fruta del Norte is an amazing deposit, but that doesn't mean we can rest on our laurels. We have to continue to reduce our costs and produce more. By doing that, we're generating significant cash flow, which we move to clean up our balance sheet, return capital to our shareholders and use capital for growth. primarily exploration, but also looking at M&A opportunities. And again, we can't not lose the focus on ESG as it is so key. With that, I'd like to thank you for attending Lundin Gold's 2023 AGM, and I look forward to speaking in the future on more developments with the company. Thank you very much.