West African Resources Limited (WAF) Earnings Call Transcript & Summary

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Thanks, Nathan. Good morning, and welcome to the June 2025 quarterly conference call for West African Resources. Thanks for joining us today. Joining me today on the call is Chief Operating Officer and Executive Director, Lyndon Hopkins; Company Secretary and CFO, Padraig O'Donoghue; and Tood Giltay, our GM of Finance. The past quarter has been transformational for the company with our second gold mine, Kiaka coming online, pouring first gold ahead of schedule and under budget. This achievement is a testament to the hard work and dedication of our build team at Kiaka, supported by our teams at Sanbrado and in head office. But they've all performed superbly to get this result, and I'm very grateful for this effort, and I'm sure our shareholders and stakeholders will agree. We now have 2 long-life unhedged gold cost production centers in operation in Burkina Faso. These quality operations underpin our goal of flying to 500,000 ounces per annum gold production by 2030. We poured first gold at Kiaka on June 26 and will now oversee the ramp-up to full production in the September quarter once grid power has been connected, which will allow us to increase our production capacity. Kiaka's production guidance for 2025 remains at between 100,000 and 150,000 ounces of gold. At Sanbrado, we produced 45,611 ounces of gold in the quarter at a site sustaining cost of USD 1,426 per ounce. This brought Sanbrado's half year production to 95,644 ounces of gold at a site sustaining cost of USD 1,311 per ounce. Sanbrado remains on track to achieve 2025 annual guidance of between 190,000 to 210,000 ounces of gold at a site sustaining cost of less than USD 1,350 an ounce. Gold sales for the quarter totaled 49,840 ounces at an average price of USD 3,282 per ounce. West African remains unhedged. Sales in turn helped us deliver quarterly cash flow from operations of AUD 86 million after paying AUD 42 million in income tax payments. Our cash balance at the end of the quarter was a healthy AUD 279 million, plus we held an additional AUD 49 million in gold bullion, equating to 9,713 ounces of unsold gold at Sanbrado. Health and safety remains a priority for the company, and there were no significant health or safety incidents during the second quarter. Our total reportable injury frequency rate, or TRIFR, at the end of the quarter was 1.49. The injury frequency rate for the gold industry in Western Australia was 4.3 for the most recent available reporting period. That result just demonstrates how well we track in terms of managing and implementing a strong adherence to our health and safety initiatives. Our plan to transition from contractor to owner mining at Sanbrado's open pit is also tracking to plan. Contractor African Mining Services demobilized from site at the completion of its contract in April 2025, and we will commence open pit mining in early Q4 using our own fleet of Caterpillar mining equipment and Sandvik drills. Open pit mill feed is being sourced from ore stockpiles during the interim period. In Q2, the open pit at Sanbrado delivered 409,000 tonnes of ore at 0.9 grams per tonne for 11,795 mined ounces of gold. While from the M1 South underground, we mined 1,000 -- sorry, 153,000 tonnes of ore at 6 grams per tonne for 29,320 mined ounces of gold. Underground development of just over 1,000 meters was completed during the quarter, including 161 meters of advancement of the decline. The vertical depth of development increased 23 meters to 645 meters below surface. The Sanbrado process plant continued its reliable performance with 45,611 ounces of gold produced. The closing ROM stockpiles of 98,592 ounces of contained gold at the end of Q2 were 8% lower than previous quarter. To support our operations during the quarter, we finalized resource conversion drilling at M1 South. This has returned some strong results, including 44 meters at 25.8 grams per tonne gold and 44.5 meters at 17.1 grams per tonne gold. These results will be incorporated into WAF's updated resource reserve and 10-year production plan due for release later this quarter. During the quarter, we welcomed Jayde Webb to our Board as a nonexecutive Director. Jayde is an experienced and accomplished mining engineer who currently leads the mining technology development function at South32, focused on identifying opportunities for innovation in mining extraction and strategically applying value-adding technologies. She has worked primarily in Australia and Tanzania and has extensive technical experience across a variety of African countries, ore bodies, mining methods and operating structures. Jayde fills the Board position vacated by Nigel Spicer, who retired at our AGM, and we are looking forward to working with Jayde. I'd now like to hand over to our CFO, Padraig, to discuss our financial performance for the quarter in more detail. Thanks, Padraig.

Thank you, Richard. So WAF has benefited tremendously from being unhedged and generated, as Richard said, $254 million of gold sales revenue in the quarter from an average realized gold sales price of $3,282 per ounce. Also, as Richard mentioned, we generated $86 million of operating cash flow in Q2 and had a healthy cash balance of AUD 279 million at the end of the quarter. Our capital investing activities in Q4 used $126 million cash, which included $90 million for development of Kiaka, and we have approximately $40 million cash remaining to as the final cost up for completion of Kiaka. Financing activities used $12 million cash in Q4, mostly comprised of $10 million of interest paid on borrowings. Overall, site sustaining cost per ounce were up in the quarter due to one-off higher demobilization of AMS from site, as Richard mentioned. Also, there was a shutdown for mill relines, which also affected costs in the quarter. The higher royalty rates and higher gold price also increased the sustaining cost per ounce in the quarter and will continue to affect us for the rest of the year. And I'd now like to hand back to Richard for his closing comments.

Thanks, Padraig. I appreciate your commentary. As we now wrap up the call, I'd once again like to thank all of our teams, including those on-site at Kiaka and Sanbrado for continuing to do such a great job. We're looking forward to ramping up production at Kiaka over this quarter, and we'll keep the market informed on that progress. We also look forward to releasing our resource reserve and 10-year production plan update in the coming weeks. Thanks again for joining us today and for your continued interest in West African Resources. I'll now hand back to Nathan.

[Operator Instructions] So your first question comes from Paul Howard at Canaccord.

Congrats on another good quarterly there. I've got a couple of questions around Kiaka. Firstly, Padraig, I just didn't catch it there. What did you say was the outstanding capital spend there?

On a cash basis, it's about USD 40 million.

USD 40 million, great. And then, Richard, you said guidance for Kiaka for the financial year at the start there, just can you reiterate that? I just noted it's not actually in the quarterly. So I was wondering have you withdrawn it or was it just an omission?

No, no. So we've maintained that between 100,000 and 150,000 ounces of gold produced for Kiaka for the half or since we've started operations. Obviously, that is kind of contingent on how soon we can get grid power connected, which we're working on at the moment with the government. And we've also sourced additional backup power, which will help us increase production. So currently, Kiaka is operating pretty stably at about 20,000 tonnes a day roughly on average. And we look to increase that once we get more power on.

Excellent. And so I think I read there were 6 extra diesel generators. So that sort of double the diesel generation coming to site.

Yes. So in the original plan, we were looking to have -- look, I think it was about 10 megawatts of backup power, then we increased it to 15 and now we're kind of doubling that now. So we've got a plan in place given that we've underrun on budgets during the construction to have full HFO and diesel backup in case the grid is not available. But we are expecting the grid to be available when it comes on. We're just finalizing sort of details with the government. We've completed all the infrastructure required to connect -- to turn the grid on. So this is really just getting final approvals from the government to turn the power on.