Thor Explorations Ltd. (THX) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Thor Explorations Limited Investor presentation. [Operator Instructions]. Before we begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. I would now like to hand you over to CEO, Segun Lawson. Segun, good afternoon, sir.

Good afternoon, Jake. So good afternoon all in attendance. I'm pleased to be here to be talking through our Q3 operational update, which is largely focused around the performance at our Segilola mine in Nigeria. There will be forward-looking statements in this presentation, and there's a disclaimer here, which will also be available on our website for further details. So I will start off by giving a brief introduction and overview of Thor, like I always do, we're a West Africa-focused gold producer and explorer. We have operations and activities in 3 countries, which has just changed in the last quarter. Our flagship project is a Segilola Gold Mine, which is being -- which is producing gold in its third calendar year and is producing based on the DFS reserve of just over 0.5 million ounces grading at just over 4 grammes per tonne. After production last year of 85,000 ounces, we, earlier this year, revised our guidance to a production target this year of 85,000 ounces. We're also advancing our Douta project in Senegal, which has a global resource of about 1.78 million ounces. That's divided approximately 50-50 between an indicated and an inferred resource. We are -- we have been working through the course of this year, carrying out drilling exploration activities and advancing that project towards a preliminary feasibility study as our next milestone here. Our most recent operational advance into a new jurisdiction was into Cote d'Ivoire, which also happened this year, where we have acquired and signed a binding agreement of the Guitry project from Endeavour Mining. We've also carried out options to pick up additional prospective ground on the Birimian Greenstone belts there, and I'll be going into more details. Outside gold, we have assembled a portfolio of prospective early-stage lithium ground, which we continue to advance after an initial drilling program that was carried out last year. So before I go into our actual operations update, I would like to quickly speak on the developments, which most people are aware of in Nigeria, where we have had various tax allegations carried out by Osun State in Nigeria -- Osun State government against the company. Further to the allegations made by the state government, there has been a response by the federal government who do have the jurisdiction and preside over mining activities in the country. That resulted in the commissioning of a fact-finding committee to investigate these allegations. We provided all the information we were requested to provide, including all evidence of our tax payments, withholding tax, [indiscernible] tax to the fact-finding committee. Further to this, the allegations were investigated by the state as well, and they requested an additional extension to which to provide their evidence to substantiate their claims. We understand that this final report was submitted last week, Friday. And now we are awaiting the review of the report by the Minister of Mines in Nigeria and a statement to be made by him in the near future. I will stress that we are very confident in our position, and we believe we have complied with all tax rules and obligations that we are required to in Nigeria. So moving to our operational highlights. Operationally, this was a challenging quarter for us, and that resulted us in pouring and selling less gold than we did in the previous quarter, which had been a record for us. To talk about some of those challenges, initially, right at the beginning of the quarter, we had a fly-rock incident, which resulted in the management at site stopping further blasting and investigating how best to manage our blasting. This resulted in about a week of inability to access the desired high-grade gold, and we knew that would have an impact on the quarter's performance and subsequently, the annual performance. Later on in that quarter, our operations were -- the impact on our operations was further compounded when we -- out of our control, we were subject to the late delivery of a liner. This meant that a 3-week period in September, we were using a less than efficient liner for our mills. And that resulted in a lower recovery for the period. And again, resulting in a lower production of gold. And thirdly, a later and heavier rainy season this year in most of West Africa and also in Osun State where we operate, resulting in rainfall in our pit that was above our pumping capacity, again, affecting access to the high-grade area of the pit for several days. We have, as a result, reduced our guidance to 85,000 ounces for the year. And halfway through Q4, as I'm speaking to you now, we maintain that guidance. What I can say about Q3 that has just passed, despite these operational challenges, we're very pleased to say that it was a very profitable quarter for us, generating revenues of just over $40 million, an EBITDA of over $27 million and a net profit for the period of $17.5 million. We further deleveraged our balance sheet with now just one remaining debt payment to our senior lender, the Africa Finance Corporation. And we continue to make positive progress on our balance sheet in terms of reducing our accounts payable. I think very importantly and notably for the quarter, we transitioned from a net debt position to a net cash position. Our net debt position at the end of June was $2.7 million, and our net cash position at the end of September was a positive $2.7 million. And then if you look at that versus the end of the year last year where we had a net debt position of $15 million to a net cash position of $2.7 million. We're very pleased with the progress we made and the direction of the strengthening of the balance sheet. So where this is going to leave us is going to be in a position at the end of this quarter where we're completely delevered from our senior debt facility. In terms of production in Q3 as well, I've spoken about the challenges we had, which has -- which meant that we processed at a grade of just around about 2 grammes per tonne. And I think the key point here, you can see our recoveries were down just below 90%, which is lower than we would expect and lower than we have had in the previous 5 quarters. And that was down to the late replacement of the liner or should I say, the inability to replace the liner when we had planned. We have grown our stockpile. There's a significant amount of gold over 40,000 ounces on stockpile, which we can continue to process and blend with our ongoing production, but also it provides us with a significant amount of material to process even after mining activities have stopped. And at these gold prices, that's a very, should I say, healthy stockpile to have. So to see what this looks like on a year-to-date basis, we have poured just over 60,000 ounces and sold just under 60,000 ounces. Our year-to-date EBITDA is $88 million, and our year-to-date net profit is $57 million. We have production guidance of 85,000 ounces. We have been tracking our costs very well through the course of the year, and we believe our all-in sustaining guidance is going to land between $800 and $900 per ounce for the full year. In Q3, we had a big focus on going to the next step of exploration underneath the pit. We have historically delineated a significant amount of gold underneath the pit, over 135,000 ounces. Earlier this year, we carried out a number of studies with various consulting groups and structural studies. And we also compiled and combined all the historic grade control data we've gathered over the last 3 years to define a drilling program. This drilling program has been defined based on a concept of high-grade shoots, which are generally slipping underneath the pit, which we historically have not closed out at depth. It's also worth noting that historically, we carried out our definitive feasibility study and designed this pit at a much lower gold price and the gold price is now trading about $900 to $1,000 above the pit design. So we do see a significant amount of upside potential there. We have kicked off in the period an initial 12-hole drilling program to test this proof of concept. We are certainly going to be expanding this drill program and testing other areas. In the quarter, we press released the initial first -- the first 2 initial holes of the drilling program, as you can see, both beneath the pit at today's gold price, just using a back-of-the-envelope rough calculation, we do think there's certainly scope for the pit to be increased and go deeper prior to transitioning into an underground to mine some of this gold that we are intercepting. We're very pleased with the intersection and the grade of the gold here. If you look at it on a gram-meter basis, in particular, this gold certainly is mineable, and it's the first indication of mine life beyond the definitive feasibility study. We have since completed further holes, and we will be press releasing during the course of this month in November, additional results from this program. Exploration has also been continuing on the satellite deposits, which we have a smaller scout rig operating on. And these are being -- the drilling being carried out here is being used to define a much bigger drilling program. We still have very strong confidence that the gold discoveries we have made within trucking distance can be expanded further and can be incorporated into the Segilola mine plan. This is something we will be looking to update the market on during Q4 this year as well. In Senegal, where we have our Douta project, during the course of this year, we increased the size of our Douta landholding. We acquired the contiguous licenses -- license to the West and an additional license to the south. At Douta, we have a resource where we have a global resource of 1.78 million ounces, where we have been carrying out various work programs. One work program that was completed in Q3 was the drilling activities. These drilling results have now been compiled and being used as inputs into an updated resource. It's important to note that the aim of this drilling program was twofold. Number one was to increase the oxide component of the resource; and number two was to recategorize more of the resource into an indicated category. And we are happy with how that's progressed. This information will be used to advance our preliminary feasibility study, which we believe should provide an indication of the material value that can be delivered to our shareholders from this project, which we don't believe currently is being attributed to any of our, should I say, market capitalization. The exploration drilling program, we've already released these results. We were pleased to press release that these results were not just within the strike length of the main deposit, Makosa or Makosa Tail. However, we are continuing to make different discoveries all around this license. Here are some of the results from Makosa East, which lies parallel to the main Makosa deposit, which we have been drilling over the years. One of the characteristics we were very pleased with was that we are getting significant drill results or intersections in the oxidized layer, which was our target, and they have come back at relatively decent grades as well. So this project continues to be of serious importance to us. We do believe it is a very material project in terms of value, and we look forward to continuing to progress this and update our shareholders with the news from Douta, where our next milestone is a preliminary feasibility study. We announced our entry into Cote d'Ivoire, Ivory Coast, where we have -- strategically, this was a continued increase in our footprint across West Africa. Strategically, there was also a diversification in terms of stage of development of our projects and also diversification in terms of jurisdiction. Cote d'Ivoire has excellent geology with a great mining code and has been a real success story over the last 10, 15 years in terms of gold production and gold discoveries. Our portfolio currently consists of the Guitry project, which we signed from Endeavour and also the Boundiali project, which was -- which covers significant Birimian Greenstone ground, which we are advancing early-stage exploration on as well. I will just talk very briefly on the project we acquired from Endeavour, the Guitry project. The project we're very excited about because it is an advanced exploration project with significant blue sky exploration potential. It's a project which we spent many months in the data room and carried out site visits, and we are very impressed by what we saw. There's an 8.5-kilometer by 4-kilometer area of gold anomalism, which has been drilled and has intersected mineralized gold at some very, very exciting intersections, 12 meters grading over 10 grammes, 16 meters round about 8 grammes, 24 meters at 2 grammes and 16 meters at 2 grammes to name a few of them. There are 2 main prospects here. And I think importantly, these exploration targets remain open. So in addition to this, there's significant areas of the license that haven't been tested by drilling or geochemistry. And we have given ourselves an internal target to kick off exploration here at the beginning of next year and have a maiden inferred resource by the end of the year. We've put a very aggressive ambitious target of between 0.5 million and 1 million ounces for the year. So to talk about what are we looking to achieve for the remainder of the year? We've maintained the guidance that we revised 85,000 ounces. We will -- we are very confident that our all-in sustaining guidance will be below $1,000 per ounce. To be more specific, we think we will land in that range of $800 to $900 per ounce. We will be completely deleveraged from our senior debt position by the end of next month. We have drilling programs, which have restarted in Senegal, now the rainy season is over. We have an ongoing drilling program at Segilola, which is the Segilola underground drilling program. That is to be expanded and results to start coming out from this month. We have also scout drilling programs on the Douta West license as well, where we have defined drill targets through the course of the year. And lastly, we do still have our lithium portfolio, and we are advancing low-cost exploration across various targets there. We are -- our next milestones are significant milestones to come up are the Douta PFS and our exploration in both Nigeria and Cote d'Ivoire. So that's everything for me, and I think we will move on to the Q&A. Thank you very much.

Perfect. Segun, that's great. And thank you very much indeed for your presentation this afternoon. [Operator Instructions]. Segun, as you can see there, we have received a number of questions that were both pre-submitted ahead of today's event as well as those that have made their way through throughout your presentation this afternoon as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And Segun, at this point, if I may hand back to you, sir, just to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Thank you.

Thank you, Jake. Okay. All right. I'll read out the questions, I guess, and then I will answer the questions. So the first question is with the senior debt paid off this quarter, cash generation at likely record levels in Q4, are we close to seeing a dividend policy initiated? Will this come early in 2025? Or are buybacks an option if the market valuation is still low? Yes. I think importantly, we are very pleased to completely delever and continue to strengthen our balance sheet. I think I mentioned at the end of our last quarter that the Board is discussing a dividend policy. We haven't finalized that yet. We will certainly be looking to return money to shareholders, whether it's by dividend or a buyback in the first half of next year. I have to say this hasn't been finalized yet, but this is a conversation that we continue to have with the Board. Second question, cost control this year has been very impressive. Are we likely to see all-in sustaining costs remain as low as this through 2025 and 2026 at Segilola? Yes. Look, there are a couple of -- a few key inputs into our costs that have remained low. I would say the diesel price, we've benefited from a lower-than-budgeted diesel price. I would also say that the fact that we continue to use compressed natural gas as a source of power instead of diesel on the plant as opposed to the mining trucks and equipment. That's really helped our all-in sustaining costs and also the grade of the gold we're processing as well. We do expect these levels of costs below $1,000 for the next couple of years, certainly. And the next question -- sorry, before I go on to the next question, there is the function of the diesel price and the ammonium nitrate price, which have also remained reasonable through the course of this year. And I will caveat it by saying any serious spikes in these 2 prices will affect our all-in sustaining cost. Okay. Can you confirm that Thor has a 5-year tax holiday in Nigeria means no corporation tax until 2027. I have seen conflicting information about this many times. So the Mining Act does provide for a tax holiday and so does the Pioneer Act. We do have a tax holiday that has been officially granted for an initial period up until the end of 2026. And then after that, it is extendable by a further 2 years. So we will certainly be hoping that it's extended. Based on the conversations we've had, a key function of this being extended is our ability to extend the mine life as well. The next question. Any major CapEx spending plan for 2025? What is the budget plan for exploration total across all 3 countries? Okay. So our biggest CapEx, we believe, is -- has been sunk already. We've upgraded the plant this year. That's also one of the joys, I would say, of completely deleveraging, and that's also one of the huge benefits of finding additional ounces because the incremental value is significant. We don't have any massive CapEx requirements over the course of next year. Obviously, as the mining fleet gets older, we will be replacing trucks and so on. However, right now, we believe we've sunk the majority of our CapEx. In terms of exploration, what we would look to do next year, certainly put more money into exploration around Segilola, underneath and around Segilola. And we have smaller exploration budgets in Senegal and Cote d'Ivoire, where we will put about $3.5 million each in each country there. So our total exploration costs for next year outside Nigeria is around about $7 million. In Nigeria, it's more difficult to give a number because that's really based on success. If we suddenly start drilling some very interesting targets very close to the pit or underneath the pit, then we can rapidly scale up but we have an initial budget of around about $5 million, and then we obviously have the ability through our own cash to scale up and increase the size of that budget through the course of the year. Next question. Is Thor looking at expanding beyond West Africa? The short answer is yes, given the gold price environment, given the fact that we are completely deleveraged, if there was an opportunity that fit our capabilities in Africa, we certainly would look there. West Africa, we believe we have expertise, and we are very strong there, and we know how to operate there. However, if there is a project that is attractive and value accretive to our shareholders, we certainly wouldn't rule it out because it's not in West Africa. Next question. What is the worst-case scenario in respect of the Osun State federal legal challenges? I think, look, first and foremost, we have to respect the fact-finding committee that's being initiated and commissioned by the Minister of Mines. So I wouldn't like to comment on this in too much detail until the findings are made public and the minister has made a statement. However, I will just say the numbers that have been generated by the Osun State, the liability they have alleged, we owe is about NGN 3.2 billion, which is just under $2 million. We have noted there are different numbers being banded around the local press in Nigeria that are very large sums, but none of these have been officially presented to us as one of the legal allegations. The number that's been put in front of us is about $1.9 million. Next question. Assuming you want to build a mine in Senegal, how could this be financed debt dilution from cash flow only? It's still early days, but we certainly think it will be a combination of our own cash and project finance. And yes, I think -- I don't think I've missed any questions. One more question. You are doing fantastic, keep going for Nigeria. Can you provide a pessimistic and optimistic estimate of the number of years of mine life, assuming 90,000 ounces per annum produced. Pessimistic, I would say, 3.5 years at 90,000 ounces per annum production. So we still think there's significant upside in terms of valuation versus what we're valued at considering our costs and particularly in that last year, it will just be low-cost mining processing what's already on the stockpile. And that is taking the pessimistic -- the most pessimistic situation that we do not find another ounce of gold, which we know is not going to be the case given the additional inferred underground we've already drilled. Optimistic, look, I certainly think that we are in a situation where we can finally put some more cash towards exploration. We have the targets. We have better understanding. I do not think what we have at Segilola is just there in isolation. So being optimistic, I think without giving a number, I think there's certainly a material number of years. And obviously, that's been optimistic. So I would say, yes, certainly well beyond 3 years. So look, we have drilling results to come. We have the first half of next year drilling additional targets. We're constantly exploring. We've already found discoveries within tracking distance. So I think the mine life -- there's certainly a lot more mine life here. Thank you very much. Yes, back to you, Jake.

Perfect. Segun, that's great. And thank you very much indeed for being so generous of your time then addressing all of those questions that came in from investors this afternoon. [Operator Instructions]. But Segun, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that would be great.

Yes. Okay. Sorry, Jake, a couple of questions have just come in, but I guess we can reply by e-mail because I noticed they're still coming in. So yes, just to wrap up, look, we've had a challenging year operationally. However, we've successfully navigated through this. I think the company is very well positioned now for very good growth. We've had a very profitable year. It will be our most profitable year-to-date. And from the 1st of January next year, there will be no more debt on the balance sheet. At these gold prices, the company will continue to go from strength to strength. Our key focus now is extending this mine life because that delivers significant value to shareholders by increasing the -- for every single ounce of gold we find without the requirement of significant CapEx, which has already been sunk. We are looking forward to hearing a response on the Osun State allegations, and we're very confident with our position there. And outside Nigeria, we do think there's a significant growth of the company where we're maturing as a company and we're developing where we have a second project in our portfolio, which we believe we will build as a company. And we've entered into a new jurisdiction on a project that we are very excited about as well. So I think the company is very well positioned. We're generating cash. We're strengthening our balance sheet, and we're growing through organic exploration as well.

Segun, that's great. And thank you once again for updating investors this afternoon. [Operator Instructions]. On behalf of the management team of Thor Explorations Limited, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.