TRX Gold Corporation (TRX) Earnings Call Transcript & Summary

Hello, everyone, and welcome to today's webinar with investor TV. I am Moneer Barazi as your host. Thank you for joining us. Gold has been in focus for investors this year with prices reaching record levels before making a correction. In that setting, TRX Gold listed on the TSX and the New York Stock Exchange American under the symbol TRX has reported record average realized gold prices during its 2026 fiscal year. TRX is a gold producer operating the Buck Reef gold project in Tanzania, and it sits in an interesting position. It has an operating mine and is now working on and expanding it. Joining us is TRX Gold's Chief Executive Officer, Stephen Maloney. Stephen will walk us through the company's story and what to watch next. A quick disclaimer before we begin. This webinar will contain forward-looking statements from TRX Gold Corporation. Investor TV is not a registered broker dealer or investment adviser and is serving solely as a host of this event. This webinar is disseminated on behalf of TRX Gold. The recording will be made available shortly on the company's channels and hours after this session. If you have any questions, please submit them through the Q&A box, and we will get to as many as we can Stephen. Welcome, and thank you for joining us today.

Yes. Thank you, Monner. It's great to be here. I hope my reception is good for the webinar. I'm currently in Versa in Tanzania. -- actually, had going to make a buck Board meeting to do this. So it's very topical.

So you're on site and where the action happens then?

Well, I'm not at the actual mine site, but in our corporate office are salon today.

Well, good to have you here with us today. I have a lot of questions for you. But first, I would like to put those questions in context. So if you have a presentation and if you could tell us briefly about the company's journey, we'll be glad to hear it.

Excellent. So I'm going to share my screen. And so who are we? We are TRX Gold and mine went through the disclaimer, so I won't go through to the disclaimer. As you mentioned, we are operating bucket project in Ante in the data region. It's a region that has a lot of gold mining history. AngloGold as Shanti starters line in the gate of mine complex steroid, which produces over 400,000 ounces. Our goal really is to rapidly advance our project, the Buck Reef Gold project through disciplined high-margin production. We're utilizing that cash flow then to reinvest into the business to grow it even further. So right now, we have a 2,000 tonne per day plant. We're putting in place an additional circuit for 3,500 tonnes a day, bringing capacity to 5,500 tonnes a day. The mine plan will determine throughput rates but it will certainly be a lot larger than our 3,000 tonne a day study that we put into market in April 2025, which had some robust numbers, almost a $2 billion NAV and $4,000 gold. I'll get into that in a second. But underpinning the building to do this is in the last year, we did almost 30,000 ounces, had record revenues and record EBITDA. Our current run rate day is approximately $80 million, you take the Q3 results of $20 million times that by were underpinned by 1.5 million ounces in the MII categories at around 2.5 grams a tonne. Our lab study had around 18-year mine life, 60,000 ounces average production with a cash cost of around $1,000 a house around $1,200. So a very robust project and we're currently expanding it to be much larger than that. So the focus rate for the company is on the underlying valuation metrics. So we know market a companies based off of EBITDA, net asset value and your resource base. which feeds into your EDA as well as your net present value. And so our focus is increasing the plant, which will increase production. We expect it to be over 80,000 ounces once we get the expansion done and our new study into market. That will be, again, a high-margin business. We've expanded 3 times already. So we're quite comfortable that's well underway. TS are reconstructed ball mills have been ordered. The ADR plants are underway. And so we're quite comfortable in our rapid EBITDA growth. So as I mentioned, run rate EBITDA is approximately $80 million today. Once that expansion comes online as per our study, which is at 3,000 tonnes per day in return that day the current gold price would be expected to be over $200 million plus in the next 3 to 4 years. So quite significant growth as a result of that expansion. Obviously, you revised mine plans and you do your exploration program net asset value, our underlying value of the business will increase as well. As I mentioned, the noncoal be larger as the cash flows will be a larger industrial net present value to be larger going forward. And so we're currently executing on putting a new study into the market to update a new business plan essentially, and we should be done that by fourth end of the year early next year that will predominantly completed, and we'll have results of that. What will be contemplated there is a much larger on it. that goes on a much longer time than in the last study, which is around 3 years and then go underground. So the pipe on a little bit longer and defer the underground development, but that doesn't reduce ounces over time. It actually increases ounces over time. At the same time, we are drilling now. We have drill rigs on site on the exploration side and increase the resource profile over time do exploration joint if you ever be assured of you know what you're going to find, but we're quite confident that we'll find a lot more gold on this property over time. Our best as Savor's also been in Stamford Bridge and Anthea, and we'll start to drill in those areas as well as other highly prospective targets. And we're doing this in our self business model. Just going through budgets here right now. And over the next year, we'll spend around $45 million to $50 million expanding the project as we continue to execute that expansion as well as exploration. So as you can see here in the particular side, this is the ramp-up from basically what we had. It was a test plant and 3 means sense to get to 2,000 tonnes per day. Now in a real big step change and adding another 3,500 tonnes per day of capacity to the existing plant circuit. And we're doing that over the next 12 to 18 months, and a lot of that up and running, as I mentioned, TS a airplanes and other upgrades are happening as we speak. That sets the stage for a rapid rise of both production fee revenues and in and you start to see those in the numbers here. A lot of people are asking all you got a lot of sales but over last year. It must be all gold price. Well, no, it's not all gold price. Most of that comes from underlying production increases, and we expect we will level off this year because it's a plant cannot take too much ore throughput. And then we'll have that step change as that expansion comes online in our fiscal 2028 year. And so we've done this from the beginning with an original $20 million capital raise. And then I want to get to first couple of plants expansions, we then utilize the free cash flow continue to expand. We've invested around $90 million of free cash flow so that's currently the business model and continues to be the business model. With regards to the study that I mentioned on going over 2025 to May that complete 3,000 tonnes per day. We're now contemplating a capacity of 5,500 tonnes a day mine plan and determine throughput. This study created a lot of cash flow and pretax NAV of around $1.9 billion, $4,000 on gold a $1.2 billion after tax had 62,000 ounces over 8-year mine life. As I mentioned, we expect production to be higher and thus, all of underlying numbers to be just gold or better than what we see on the slide. Here, we took that mine plan that was in that 2025 study and put it into production and revenue in EBITDA terms, as you mentioned earlier, we have a large focus on cash flow. And I think the cash flow is following pain these fetuses. And as you can see here, EBITDA is quite healthy in years 4, 5, year 3 essentially and gets to well over $200 million over that particular period under a reduced throughbook scenario and we're going to have an increase through the scenario going forward. We rate where we are. We're in the catering to mention. And what I'd like to do Tanzania currently here today is just a lot of mining activity and the ability to get things done on the ground. We've done this with a lot of local contractors. Erica hotel government now this asset for. We have well over 1,000 people on site when I joined just under 5 years ago, it was probably around 15 employees. So it's grown quite rapidly, and we'll continue that growth over time. There's a lot of those well-established miners in the region prices is investing $0.5 billion in Alanzaga. Datas 1 of its largest mines here, and can Datamine, Barrick has large complex here, other minor sub Santa around the gold side. So very good drop down from the building mining operation and service sector is around to support that and to work with global content to grow the business. On the exploration side, this is comes especially as we're starting to really turn our attention to this as well as the expansion we did really the first in debt geophysics study in our property over the last year. That many 10 irospective targets, which we're going to start to drill out some of those targets are in Stanford, Rich and Anfield Chatteris resorts value. on a grand to meter basis. We haven't drilled to find them a little bit better. We're financing good stop the Easter as you can see a dot there. The box remains on itself, and that's when I talk about expansions in EBITDA, et cetera. has some good targets around it. It goes down to 750 meters since our last roles. So it's open along strike and depth. So there's probably an out role be found in there as well. We only report mine gold at this point in time under the new rules us as our mine pads expand on these on has come in as a result of that, but also as a result of colder going down, structures are intact to be very deep in the onstream. I mentioned Stay for Bridge or some great drill or alter to grant to meters for this type of deposit rate. This is a bridge between our Mainland and Eastern Patras discovered originally by seeing the shares don't go through the to go through the main pit and then drop it in it and turn up. There was some good intercepts there. So we're going to be really focusing on this over the next 12 to 18 months to drive us out as well now that we have an increase in drill rigs on our site. With our stakeholder engagement and communication have growth, local relationships. We invest a lot and see as our projects. We've developed schools and clinics and things of that nature. We're going to put an increasing focus on vocational sales. supporting local industry needs such as the subsystem farming industry and others. We've done a comprehensive study with community leaders in order to determine where CSR paying can go and how come and increased standard of living in our quality lines in that region, and we're finding a few new things as well as beyond community schools and panic which we'll start to focus on. We are in front of the government engaging with them around a joint venture agreement and moving towards our framework agreement, that's taken some time, but that's normal government procedure. Currently, we have a 55%, 45% relationship with the [ 45% ] is dilute on the government side their framework agreement has a 16% nonviable interest. And so we're consent discussions with them to try to agreement methodology and the 50-50 economic share with the government side account for taxes and royalties and things like that in that 50-50 economic share. So we have a good visible, highly communicative constructive relationship with the government, local scope communities. With regards to valuation, I now say under value or value as you heard from me, there's a large focus on underlying valuation metrics. So saying your underlying valuation multiples remain the same. If you grow EBITDA, you should have a higher valuation. And you also say Same with Same with us. If you grow an underlying metrics, you should get a better value. And hopefully, you can grow both the underlying valuation multiples with the metrics at the same time to create value. So certainly, that is the focus of our company. I get essence about where we fit and more concern would actually growing the underlying metrics of the company so we can move on that curve. So see the New York Stock Exchange and TSX, volume has been quite healthy. We are predominantly retail health stock, a lot of U.S. stock. We trade well over 2 million shares a day in New York, around 300,000 in Canada, very liquid stock. We also -- our debt rate put approximately $30 million of cash in the balance sheet. The only debt that we have are leases on Yellow Steel and us, we pushed the company very well and execute on its CapEx plans as a result and we're covered by 4 annual with AGP many Roth and Zach small cap redoing midmarket U.S. banks. So our key investment highlights is business as usual, growing the business organically, focusing on the valuation metrics of EBITDA, P&M and resources. We have improved operational track record of doing this. We're doing it again. We have a root study in the market, which we're updating, which values that underpins a good business plan to grow this company. We are very comfortable operating in Tantan I believe we can grow this asset well beyond where it currently is. And as I mentioned, we have an experienced management team that has put out this fulfill. So thank you very much. Back to you, Mani. Would you have me to stop shares? Or would you...

Yes, yes. Thank you.

Okay. And I'll stop sharing, and it's back to you. There we go. Now we open continue with questions.

Just want to comment that there are a lot of good things to say about TRx Gold. I like the expansion potential on multiple fronts. You're working on upgrading the plan, building the resource base. You have the right team. The jurisdiction is a great place to work in there are so many things. And what really caught my attention is also the consistency. I mean, for negative quarterly production records. That is not -- so what has actually changed at Buck Reef over the past 18 months to make this kind of consistency possible?

Yes. So we always have a focus on our cost metrics and performance, things of that nature. So One of the things that great has helped and optimizing the plant is help as well get those consistency. So I look at -- we can't run this business you can impact rate so much when you run a number ton business. And it only has so much capacity in out we've really focused on recovery rates. Recovery rates have gone up well over last year and now or mid-80s, and we'll continue to do that in the next year, we're going to really focus on some of the cost metrics around processing. So we have used some contractor crushing which now we've upgraded the crushing plant again, and that will bring down some of the costs around crushing volume of $5 a ton or so. We're focused on power as well. So we do get power from the national grid. But it's inconsistent quality is what I could say. So the diesel generators are a little bit more than we would like. So we're putting in place in the next couple of months battery systems because the battery can take any quality of current charges. And then on the other side, it will distribute assistant quality care to the plant and crushing there's less downtime to run the generators and resolve. It's not that we're not getting power, it's a consistency of altepower. So that's going to also turn out chances as well considerably in order to reduce costs, and we're constantly the mining contractor reduce costs there, too. So we're growing, but still have a very keen focus on mining costs and but also costs at the same time. And we keep our GD late, I haven't told anybody that I was 100. So I can say we're not hiring any of our G&A and exploration or in capital assets or stuff like that. What you see is what you get on the income statement and it's pretty low compared to a lot of companies. And that's a key focus. So you always hear that from a medium cost.

Yes, No, I remember the ratios and the capital expenditure to the -- I believe, the gold production, if I remember correctly. And you showed a couple of ratios that they were very impressive and they do well throughout the years. We have a question from one of our attendees. I believe you've answered it, but maybe you could shed some light on that on it from another angle. You just had a record year of production. What do you think has been the biggest reason for that improvement? And how much more room is there to grow from here?

Yes. So the biggest reason is 1 of the mine plan, so we optimize the mine plan. That's one. The great profile was decent, and they also the recovery rates improved from mid-70s to the mid-80s and then they all contributed to the increase in production. The plant is pretty much to optimize at the 2,000 tonne a day level. What's required now is the expansion. And so there's another 3,500 tonne per day parallel circuit that will go in alongside the 2,000 day circuit, giving a theoretical capacity of 5,500 tonnes. But we have to figure out how much we can reasonably mine in what period of time to optimize what that throughput is going to be, but it's certainly going to be better than 3,000 tonnes per day that we added the study -- 5,500 tonnes model in

Okay. Okay. So I mean, as I said, it's a great model. There's a lot of expansion potential and you already have an impressive track record. But a question is on our attendees mine, mine as well is, why is share price so depressed? What doesn't the market really get still?

Yes. So I think the market has changed over time. And this is a shale market, always has been. -- and nobody believes that we can expand to not go to the market, they issue capital for that expansion, we believe that we actually do it. So I think if you look at our share price, -- it has a step change when we started executing on this particular last expansion and recapitalize our balance sheet from cash flow. And I fully expect it to do the same on the new platforms this is an industry that now investors have been burned in this industry, nobody believes the antitumor.

Yes. And if, again, a question from 1 of our audiences. -- if gold prices remain strong, how does that change the way you think about investing in exploration versus expanding production?

So I think you've invested both if you have in luxury. So most of our free cash flow will be used for expansion this year because that's the best return. If I can increase EBITDA from day or run rate which is around $80 million today to over $200 million for less [ $50 million ] that's a no-brand. And so that is what we're doing today, but the drill is still going to turn because that provides hopefully, cheaper ounces and finds it also, hopefully, will fill up the mill for the expansion and it adds to long-term value. So we do both.

All right. So it's balanced in a way. A question from Chris. I think the presentation stated $59 million in capital costs to complete the current phase of expansion with $27 million in current cash, how is expansion and exploration funded?

Out of free cash flow, as I mentioned, there's $80 million run rate on EBITDA. Obviously, that's not pretty free cash flow to get to your CapEx and taxes and stuff like that, but it gets funded out of free cash flow. So this is -- now that question is directly related to the first question. And most binders can't do this. They don't have a lot. So they have to go to the markets in order to get the capital to expand because we're not profitable enough to make those internal expansion, particularly small to midsized miners us. And so it is different, but that is how we've done it in the past, and that's what we've been due in the future. And that is part of what you mentioned in stock price valuation to be depressed because people don't believe that they always got $50 million of CapEx. You only got $3 million of cash in the balance sheet, but everybody forgets the cash that you generate.

Yes. No. I mean you have organic growth, and it addresses a lot of the concerns about potential dilution on going to market and all of that. So you can focus more on growing production, which brings me to the next question. You've mentioned also recovery rates, you focusing on recovery rates. What is your gold production forecast for 2027?

Yes. So for 2027 on the current year coming up, we're just going through that. I would say it would be slightly higher than what we did last year 2,000 tonne per day plant can only sell month, right? So -- and that's in line with that. And then the expansion will come on into the 2028 year -- fiscal 2028.

And another question under what conditions would TRx consider buying back its stocks?

One, you have to have the cash flow to do it. So Look, I think if the share price were depressed further, then it may be something that's entertained maybe. But as long as we don't need to go to market to issue capital to fund our expansion. I think we get through the ever end of our expansion before we start making that decision where we have significant amounts of cash flow. And certainly, the market is rewarding at that point in time -- that's some that would come on to the table after the expansion of stuff.

And I don't know if you have the exact number, but what is NAV per share?

I don't have that exact number off time. That's a changing number given what we are into the study, so I'm not going to do that. I could do it off the last study, but I would -- has to do that at this point given that's a changing number. In a positive direction.

Okay. But I mean if you can look at the past, how has the net asset value changed throughout the...

Well, for instance, we didn't have study in the market says before I get. And thus, now a new study has a $1.9 billion net asset value. So we wouldn't have had a metric that.

Okay. Impressive. And what impact do you expect being part of GDXJ to have on the company and its share price.

Yes. So I expect when other investors go and look for investments, they follow that index, some of them. If our constituents in that index. So I expect to see a larger institutional shareholder ownership over time. As a result, we start to see that particularly over the last 3 to 6 months, a lot more institutional ownership coming into our stock or buying our stock that way. And I expect in combination with getting on other indexes we bought out 4 this year. So for 4 to 1, we would expect to see that institutional ownership continue to tick up.

Okay. This is actually a question here that I received about exactly that. about what progress has TRX made in bringing in new investors, institutional and high net worth over the last year?

Yes. So we have a couple of firms focusing on both retail and institutional investors. So if you look at just following the 12, you'll start to see some real new institutional investors establishing positions there. You do that research on your own. And then on the retail side, -- we do have a very large retail investor share base currently. We are always at a small and microcap conference where we find a lot of high net worth retail investors as well as family offices which some of them I would qualities quasi retail. And so we're constantly according those type of investors. And it's U.S. America to really focus on cash flow.

All right. And how long until we have initial drill results.

I would say they will be in the next couple of months.

And when will the new plant expansion be operational?

On it will be our fiscal 2028. So I would say we're roughly probably by the end of calendar 2027.

I have a few questions from my end now. I think you've addressed many of those points, but it would be good to be more specific as well. I mean your throughput hit 1,830 tonnes per year in the third quarter, up 25% from the same quarter a year ago that is before the new SAG mill rice. So what is driving that improvement? And how much more can we get out of that current plan?

Yes, some maintenance, and it all depends on where it all comes from. So we have some software or you can increase that. We've got harder or it will go down but certainly maintaining it and rebuilding them all the time. So that's part of what we've done there and just increase the throughput and the load factors because we've been constantly doing better maintenance.

And you've covered this in your slides, and I believe still there is a lot of perception risk around the jurisdiction, tons -- so let's talk about that. is saying I hear Tanzania government is increasingly unstable. So what's your comment?

Yes. So there is jurisdiction is 2 ways, and I look at 2 risks. One is your national risk or your federales the next is your operating level risk. So when I look at segregating those, the operating risk is great. We're able to get everything done on the ground and things like that. National risk, that's always constantly changing where everywhere in the world. We have good, constructive dialogue at the national level. It certainly has no impact or relatively minor impact on what I see at the operating level, which is company to me. And so but we're always going to have in countries, a little bit more national is they've been a little more investment been and then it comes across balances and you manage that, but I have no issues with operating in this country. I feel quite comfortable.

And how many drills are planned to be working now and over the next 6 months?

So parents let me go through that one, to Three, we'll have 4 or 5 over the next 6 weeks.

Okay.

And now what we do is actually great control and operational stuff as well as exploration. And they'll have a tender Yes. Yes.

I believe that answers it. Yes. And the gold environment is still favorable. I mean, despite the correct -- your May 2025 preliminary economic assessment was built on $1,900 gold price. Gold is sitting above $4,000 today pro -- so in play in terms of what does that gap mean for how much cash Buck reef is actually generating right now.

Is a lot more, and that's what we're able to do the type of expansion that we're able to do. Look, I think just my general view of the global market in use is interest rates have got up. So gold prices have gone down from their highs resolved. That's what commentary would say. I think the U.S. government and elsewhere, they are still running record deficits that need to be financed, which means inflation, which should be good for coal price, you have a lot of geopolitic oversee there you have movement attempting to try to generate to the U.S. dollar and central banks buying more gold. So I think the underpinnings of gold and they can really create printer there. I haven't been disposed in a long time despite the recent pullback in it. Because just everything fundamentally underlying what usually moves us is there even way. I think we're to see maybe these are elevated prices, possibly, I don't know but certainly, a or business hope run business based on actual and downside risk. So we do stress test these gold prices to make sure we can still execute our business plan.

No, many analysts actually agree with you, and there are rational arguments for why you could be at even more elevated prices than now. I mean not sure, but maybe it was Morgan Stanley predicting $6,000 at some point, $6,000 per ounce. And potentially, we have even higher forecast, but the case is strong.