TRX Gold Corporation (TRX) Earnings Call Transcript & Summary

Higher with this slide. TRX, what does this stand for? We're a team of experienced leaders. You see that's us on the line, that we continue to deliver on various milestones and are rapidly growing the Buckreef project in conjunction with our management team at the Buckreef Gold mine site. We've had rapid production growth over the last year. We've had 2 plant expansions that come online on time, on budget and are operating very, very successfully. We'll get into that as we get through the presentation. And the Buckreef property special mining license has significant exploration upside. There are lots of targets on this property. And we've displayed this over the last year or so, particularly with Anfield, Eastern Porphyry, even the extensions to our Buckreef main zone.  So just a brief overview of the Buckreef Gold property. It's a 2 million ounce-plus gold deposit in the measured and indicated categories, another 600,000 ounces in inferred categories located in Tanzania, what we like about the deposit, it comes to surface. It's flat. It has great width of 20 meters or approximately 20 meters broad. It has consistent gold mineralization throughout the deposits along a 1.5, 2-kilometer strike and about 3 main zone. We're fully permitted, which means we can continue to grow this asset and production profile without getting the major overarching permits in place. The current special mining license good up 2032 is an extendable to -- for a 10-year period to the end of life of mine of deposit. Our processing plant is consistently beating on production guidance. It's also straightforward metallurgy, in a grind across CIL. We have minimal environmental footprint. We recycle all water, have good tailings management program, we're on the national grid. And as I mentioned, we have significant exploration potential, which always brings a smile to my face and Andrew will get into that in a few minutes.  So with regards to the Q2 2023 highlights, Again, our 1,000 tonne per day mill is operating great. We declared commercial production on that mill in November 2022. In the last quarter, produced over 5,600 ounces of gold, which is a 164% increase over the last  similar quarter in 2022. Records at Buckreef, we recorded positive operating cash flow again, which is funding our exploration and operational growth. We're going to advance a third mill expansion. That mill has been ordered. That will increase throughput capacity between 75% to 100% by fiscal 2024. We continue to advance the much larger project. So we have geotech work ongoing, metallurgical work ongoing, tailings, planning ongoing and other things. And Andrew will get into that in a few minutes and further on down in the presentation. But this is to get a much larger project at Buckreef, which we believe the potential is there. We've continued drilling in the last quarter, particularly around the Eastern Porphyry and the Anfield zones, and Andrew will give a highlight of that in a few minutes. And most importantly, everybody safe on site, 0 lost time injuries, no reportable environment or community-related incidents in the quarter. We did have a release that we had over 1 million hours with no lost time incidents. That continues to be the case, which we're very lucky for, and I'm going to knock on wood on that because I like that to continue. So without further ado, I'd like to hand the presentation over to our Chief Financial Officer, Mike, and he will go through our Q2 2023 results.

Well, thank you Stephen, and good morning, everyone. Thank you for joining us. Stephen touched on. Q2 was another strong quarter for the company, and we continue to see the benefits through the financial results. Again, it was the first full quarter of our new 1,000 tonne per day mill operating at capacity. And as a result, on the operational last slide, we produced a record 5,636 ounces in the quarter, and we sold just over 5,500 of those ounces at a realized price of $18.45 per ounce, benefiting from the rise in gold prices, which, of course, touched north of $2,000 an ounce very, very recently. In the quarter, we recognized revenues of over $10 million and operating cash flow of almost $5 million, which we substantially reinvested back into the business. And amongst other things, have expanded our tailings storage facility, for example, which will accommodate our much, much larger production that Stephen touched on earlier. We've relocated a road, which will allow us life-of-mine access through the main zone. We continue to drill. We did over 1,400 meters that Andrew will touch on shortly of exploration drilling as well as grade control drilling. And we've also purchased pieces of capital equipment, things like gensets, generators, which effectively will replace equipment that we have rented previously and over time, bring down cost for us. So in summary, we continue to use that organically generated cash flow that the operation is generating to help grow the business.  On the cash cost side, we recorded cash cost per ounce at $888 an ounce, which was above what we recorded in Q1, but in line with our expectations and our mine plan. The mine sequence for Q2 had us undertaking a stripping campaign, which was meant to unlock high-grade ore blocks, which we expect to see the benefit in Q3 and Q4 in the second half of the year and certainly expect to see higher production as a result. We did experience some lower head grade in part due to the wet season, had some inventory adjustments and slightly lower ounces produced in the quarter compared to Q1, which in part gave rise to that higher cash cost per ounce number. But on a full year basis, again, expect Q3 and Q4 to be our strongest quarters of the year and continue to expect our full year guidance to be between $750 and $850 an ounce on the cash cost side. So gross margin goes, continue to be very, very strong at around 50% for both the 3- and the 6-month periods to date, and again, demonstrate that the plant, the new plant is operating very, very efficiently and very, very profitably as Stephen touched on.  On a year-to-date basis, we produced and sold over 11,000 ounces, generating revenues of almost $20 million, operating cash flow of over $11 million. We did it at cash costs at around $88 an ounce in line with our full year guidance. And again, again, very, very strong gross profit margins of around 50%. And again, we continue to use that cash flow that we generate to make value-accretive investments right back into the business. And again, Stephen touched on it earlier, but another good example is a down payment on a much, much larger ball mill, which is expected to double throughput later this year. On the balance sheet side, it continues to be strong. We had a cash balance at the end of the quarter of around $9.5 million. We had working capital of about $5.5 million and EBITDA of around $4 million, which again, is a good proxy for cash flow. All of this really demonstrates strong liquidity to, again, fund that organic growth that we discussed a little bit earlier. And again, importantly, we expect Q3 and Q4 to be our strongest quarters of the year. We're working to improve on all the operational and financial metrics as we grow this business. And now that the plant is up and running, fully expect that to be the case. So I'll maybe pause there and hand the presentation back to Stephen. Stephen?

Yes, Mike, thank you. And just to give the investors and the group a sense to all the activity that's ongoing at Buckreef. There's a new road we've put in place around the SML. We also have works around tailings facilities, new generator sets going in. There's a lot of activity happening on the Buckreef site currently. And there will be that activity, I don't see it slowing down. I actually see it ramping up as we continually expand the asset at Buckreef. On that front, Andrew is joining us today from Cardiff in the U.K. He's actually right now at SRK's offices there, and I'll switch over to the next slide, and he will tell us about some of the things that are ongoing for a much larger, larger project that's in -- that's currently being planned. But in order to plan that out, we got to do the proper work, and we got to derisk it properly, and that's what the team has been doing and a lot of that has been through our Chief Operating Officer, Andrew Cheatle. Andrew, over to you.

Yes. Thank you very much, Stephen, and greetings to everybody from Cardiff, Wales in the U.K. So we have been extremely busy with a lot of the preparatory work for work on building out the bigger mine. Take you through the list here. We have completed our infill drilling program where we've been focusing on inferred mineral resources. They're looking to upgrade those to indicated, and we've been drilling both to the north and the south of the historical or mineral resource. And we've also done some infill work from the Eastern Porphyry, which I'll get into in a minute. I'm pleased to say that the metallurgical samples from 18 holes of 19 drills have gone out to South Africa. They have been received by SGS who are recognized global experts in this field. They undertook the first set of work we did some 2 years ago. So we benefit from continuity on that. The geotechnical study has been ongoing. We've completed now the drilling and the field work. This is again with SGS Terrain, again, Terrain being global experts in that field and had already been a 2-site in terms of looking at some of the underground and early-stage open pit work. So that is now back in Canada with rock samples now going to laboratories for their testing of rock strength.  In terms of the long-term planning as well, this continues to also be ongoing. We've completed conceptual work with Asanko in terms of mine layout and the plant expansions for the 2,000 tonnes a day. And also, very importantly, where do we place the life of mine TSF, and we have a number of locations, of which 2 have become very evident to us as the wants to go for, and we're now planning in terms of design geotechnical work for those 2 locations. Stephen, you mentioned the mineral resource update. We now have substantive information to do that update. And are working very closely with SRK, again global experts in resource evaluation. And I'm here with that team as the company's QP working with the SRK QP to make sure this all goes smoothly. And then in terms of the economic study for Buckreef, a part of my work here as well is working with SRK management to define that work. So we have all of this going ahead. And the objective for us is to obviously expand the scope of the 2018 PFS. The numbers were at from the right. This work has turned at a $1,300 an ounce coal price. Mike, as you mentioned, we have been seeing $2,000 an ounce. We're hopeful and expect to see improvements in all of these metrics that you see here. And I think with some of the results we're seeing, we were hopeful to be able to show that this property also has underground potential. Carry on, Stephen.

Yes. Thank you, Andrew. There's a lot of work going on, and this work needs to be done by the right people. It's being done by the right people and the right firms. Obviously, our goal here is to make significant improvements on that 2018 PFS capital numbers for what we're experiencing are way under given how we're building this out. Certainly, geotech work needs to be done to get proper strip ratios and things like that. We're hopeful that there will be steeper pit stops in the 52 degrees that were in this study. And so a lot of this work is ongoing, and we're cautiously optimistic of where it's going to go.

That's right. I mean certainly, as we've done this work, Stephen, and we've taken a fresh look at the mint resource. We're seeing certainly some sections here with just fantastic continuity in grades, but we've got to put the whole thing together. And we're hopeful to have some answers in the very near future.

Yes. So on that front, Andrew, one of the things is, is that the work that's being done is on what's now today. And so the next slide is what's unknown and what we're doing on the exploration side. And these sort of models and updates keep on getting refined as more and more resources come into them and are found on the Buckreef property. So let's get into that on the exploration side of what we're doing. A lot of the investors have heard this before, but bring them up to speed on what we're actually doing now.

Yes. Yes. Thank you very much, Stephen. That's a great segue. We have been drilling some more holes in Q2. These have been centered on the Eastern Porphyry and a few of them on the Anfield zone. Assay results have been returned and we're putting those results together and the plans and the maps together, and we're expected to publish those results in a few weeks. Eastern Porphyry, I think presents an opportunity for us to have a second mining front at Buckreef. And so it's receiving very close attention from the draw bit and also our estimation process. As you mentioned, we also continue to do a road deviation around the northern part of the pit. And Stephen, if you have the course there, if you could just maybe just highlight where the road comes through the pit. Just...

Right about here.

Just about there. You got it. yes. So where the road comes through the existing road comes through the pit. It actually comes to a very nice high-width, high-grade area. So once we open up the new road around the mine, around the SML, we'll have unfettered access now to the existing deposits, which is good news from the mining point of view. The other thing is that the deposit does remain open on strike, particularly to the Southwest and to the Northeast on the main zone. But I think from an exploration point of view and for those doing the exploration, to reiterate the point that between the Eastern Porphyry and an operating Chinese mine just to the south of us, there's over 3 kilometers of defined mineralization by virtue of the artisanal pits, all of which have been abandoned, none of them are active that we have to go and drill. And so far, we like what we see and some of the longer-term shareholders will remember that we've previously extracted grab samples from some of the artisanal pits which are running at 20 grams a tonne. But there's an awful lot of work to be done there. In terms of an exploration play. We have no deposits to the North East, an active mine to the Southwest and the evidence of Gold mineralization in between. So we have to put the drill bit in.

Thank you Andrew for that. And now with regards to guidance, I'll hand it back to Mike, who will reiterate our guidance that we provided in our Q2 MD&A.

Yes. Thanks Steve. I touched on a little bit of this earlier. But as mentioned, the new mill, the 1,000 tonne per day mill is operating at full capacity. Q2 was the first full quarter of the mill operating at capacity. It's operating really well, really efficiently, as Stephen touched on. We've done over 11,000 ounces of production to date at the half year. It's certainly well on track to achieve our full year production guidance targeted between 20,000 and 25,000 ounces of gold. So we are reiterating that figure. I touched on it earlier, but after a fairly comprehensive stripping campaign, in Q2, we've unlocked some higher-grade ore blocks that, again, expect Q3 and Q4 as production to be even higher than we've experienced to date. On the cash cost side, again, at the half year, we're running at about $88 an ounce. We expect as the -- we entered the higher-grade zones in Q3 and Q4, that cost profile continues to improve as well as the ounce figure, the denominator in the cash cost per ounce calculation. So again, have restated our original guidance of between $750 and $850 an ounce on the cash cost side, we touched on one of our growth platforms, which was looking at the third mill expansion. I'm pleased to say that we've made a down payment on that larger mill, that mill, I believe is on the water and on the way to Dar es Salaam. We expect to, once we integrate that mill and expand the plants that throughput could increase by between 75% and 100%. And over time, certainly expand production. Importantly, the guidance figures that we've summarized here today do not include the potential benefit that may come with this expansion, but certainly expect that construction to commence shortly and hopefully towards the calendar end of this year, expect to benefit future production. So I'll leave it at that around guidance. And back to you Stephen, please.

Yes. Thank you, Mike. Greatly appreciate it. Now one thing I wanted to get into in this call is we've gotten a lot of comments back on ESG. And I wanted to make sure that investors understand our philosophy around ESG. ESG to us is something that is kind of ingrained and you just do it in business operations. But it also has to be something that benefits the shareholders and the corporation in general. And part of that is social license and part of that is actually managing costs. So a lot of our ESG initiatives are focused on prioritizing local content. And when you prioritize local content, you create jobs in the region, you also help to reduce cost and manage supply chain issues that have occurred in the economies around the world over the last couple of years as a result of COVID. So on the ESG front around corporate cost, obviously, we want to be on hydro grid. It's a lot cheaper than being on diesel. We want to utilize local suppliers as much as possible. As I said, we want to bring supply chain closer. Also, labor rates in Tanzania are lower than elsewhere. And then we also do not get import taxes, for instance. We want to have training of local employees as well. Again, we want them to be as local as possible if they live in the communities, they don't live on site. And we do normal things like recycling water and things of that nature that are just good practices. This ultimately leads to a lot lower social risk, as Andrew mentioned before, there are artisans in this area. So we work and engage with the local partitional small-scale community.  We've actually hired some resources at times from this local community to work on site and to help us advance the project. Our employees are predominantly local, so they live in the area. And if they live in the area, we want our children to be going to decent schools, having decent medical facilities, those sort of things that people remember the mining industry of 40, 50 years ago, even in Canada, it used to be communities built around mines. That's not dissimilar to here. And we work with our joint venture partner with regards to drilling. They do a great job on it. The international rates are actually very competitive and are doing a great job. So the whole goal of the ESG program is to integrate with the community, be doing the right things, to increase our productivity and the governance of our boards and things of that nature, it's all been put in place. But it's really integrated into operations. And it's not a charity by any means, but it's good practices. Andrew, you're very close to a lot of these initiatives, got anything to add?

Yes, Stephen, Actually, that was very, very well put. Thank you very much. Let me just illustrate by an example, perhaps, many mining operations build massive concrete walls with reservoir on top to try and keep communities out. Because we have very, very good relationships with our local community in many respects, they are in partnership with us as it were. We don't need and we don't have the security risk to build those kind of barriers between ourselves and community, which includes artisanal mines. They know that they're not allowed to come on to our ground and they don't. So there's obviously cost benefits from that, but there's also less friction in our environment as a result of that. I think some of you might have also heard me talk about the fact that our CIL tanks, the big tanks you see in the picture here, the carbon and niche tanks, have all been built locally in a city called Mwanza about 3.5 hours away from where we're working by a shipbuilding community, that build big ships that would be used to sort of seeing whether it's in the Caribbean Sea or across in the Baltic sea, things like that, 400, 500 people size ferries. They can build ships. They have all the equipment, laser cutters, plasma welders, they can bend steel which they do. And once we've sent them the engineering drones, which we work with Asanko in terms of all the engineering specifications, we did not have to drill one extra hole or bend on extra piece of steel. It all worked.  That gives us a huge amount of credibility in terms of our community, in terms of our local and federal government. So that's been very, very successful. But it's also from a business point of view and from a shareholders' point of view, it's a lot less cost. And instead of bringing in from Turkey or from China or from South Africa, we substantially derisked operation by working with people who are only 3.5 hours away.

Yes. So I'm just going to finalize this Andrew, is look, what we do has worked. I don't know of any mining company has done these type of expansions as quickly and for this cost. And then for it to actually be breaking the expectations that we have put in place on the production side of things has been great. So our strategy is working and has benefited the shareholders to date in the development of Buckreef project.

Stephen, I'd like to just add a bit of quantity to those numbers. Typically, at 1,000 tonnes per day, we have been receiving EPCM quotes in the order of about GBP 40 million. We've built 1,000 tonnes a day, should we say for just -- I think about $6.4 million. So that's been a huge benefit to the shareholders and the speed at which we've been able to do this has also been very good in terms of bringing revenue forward to allow us to continue to grow and drill the operation.

So with regards to what's upcoming. So obviously, we got a lot of work ongoing. The shareholders will continually see exploration and infill drill program results coming into the market. There will be continued news on our third mill expansion over the next 6 to 9 months. We have a lot of studies ongoing and a lot of work being done there on the MET study, geotech study, resource model updates, tailing facilities, a lot of work ongoing. So a lot of news fall from that. And then the planning and execution of a much larger gold, much larger scale gold operation is coming. And the work is being done, it's being put together. It's very methodical. So it does take some time to get it right.  But it is certainly in the plans. And Andrew has been and myself have been meeting with suppliers around this, as well as our General Manager, even with regards to a much larger mill for the property over time. So a lot of milestones upcoming and continue, hopefully, good news to come in the future over the next year or so. So with regards to where we are right now, share price has been going up with regards to gold price going up as well as we start to get into a positive operating cash flow. Hopefully, that continues. And certainly, that is our expectation as we continue to successfully execute the growth at Buckreef Gold project. So on the last slide, I'm going to leave it on this slide as we get into Q&A. As I mentioned on a previous slide, a lot of work ongoing, a lot of things happening and very rapid progress continues at Buckreef, and we're hopeful that it's going to continue to happen. So without further ado, Christina, let's hand it over to the Q&A.

Galin, after you?

[Operator Instructions]

So Galin, perhaps I'll get into -- do you want me to get into the Q&A that are in the queue?

I could announce that the analysts in the -- that are in audio queue, if you like.

Yes. Why don't you do that and then we can get into the written Q&A.

Sure. Okay. So the first caller on the line with the question is Jake Sekelsky with Alliance Global Partners.

Congrats on a strong quarter.

Thanks, Jake.

Growth is obviously is a big focus right now and just looking at the additional ball mill that's on its way to site. Can you remind us of the total cost of the mill and maybe some color on the installation cost there?

Mike, do you want to give just an overview of the cost of the mill and then I think there's a question in the Q&A queue as well that gets into how we're going to fund this.

Yes. I can touch on it. I don't know that we'd explicitly guided to a full capital cost Jake, but I think you've got a sense for what the first 1,000 tonne-a-day mill cost us. We expect to improve upon that cost. I think is probably the best way to put it. It's effectively layering in the much larger mill with some supplementary tanks. So I'd expect to conservatively something slightly less than what the first 1,000-ton-a-day mill cost.

Yes. And Mike, also we need to upgrade the transformer as well for the larger operations. So, and the generators that have been brought on the site will accommodate the larger expansion and they're being installed as we speak. So we haven't given full guidance. But for instance, there are 7 tanks right now on site, there needs to be an additional 2 tanks on to that--additional 3 tanks. So I don't expect this -- to be quite honest, it won't be as expensive as the first 1,000 tonne.

And I think the only thing just to mention to add the shopping list, Mike, is just some adjustments to the front end with our crushing circuit.

Yes. Does that answer your question, Jake?

Yes. No, that's helpful. And so that will be another low-cost mill expansion for you guys. And I'm assuming it's not to last. Maybe just share even just at a high level, any thoughts for future additional expansions and what that might look like down the road even if it's over the next few years?

Yes. So what I would classify this answer is more aspirational. Is Andrew and team are updating resource models. We're doing all these MET studies and things of that nature. We want to make this into a large-scale mining operation. And thus, we envision this being a 3 million, 4 million tonne per annum mine at some point in time. And we're now starting to work to lay that out in the groundwork to lay that out in a shareholder accretive fashion. And part to that is going and evaluating what mills are available worldwide. We've been doing that. We've been talking to various parties around that, have a sense of what that major capital cost may be. And ultimately, we want to get this to be 100,000, 150,000 an ounce type of property or even larger than that over time. So that -- you're right, there will be future mill expansions, how they're going to look and how quickly they are to come online. That's part market, and that's part with the work that we're doing now and what the outcome of that work is.

And I think, Stephen though, particularly with that exploration side of it, right, in a very positive scenario, we maybe will have 2 parallel pits.

Correct.

Okay. Thanks for the call there. And then just lastly, in the segues into my last question for Andrew. On exploration, are you seeing or are you targeting any higher-grade areas that you might be able to bring into the larger mine plan for 2024 going forward?

Yes. Jake, we have seen, as we reviewed historical information on the Eastern Porphyry. There are some higher grade zones in that that grab our attention. And we were going to also continue to drill through from Eastern Porphyry to Anfield, where we did have those higher-grade grand samples.

To give you a little bit of a sense, Andrew, of what the type of work that's going on from a mine planning perspective, a new resource model has been updated. SRK and the team have gone through and put all the sections in place. So we have a much better understanding of where the high-grade zones are in this deposit that we have before. And certainly, when you lay out a mine plan, given that it's predominantly based on net present value, then you will target those zones earlier in the mine life, if possible.

Yes. And Stephen, I did mention earlier in the presentation that once the new road is open, which is a matter of weeks now. That enables us to go then through the position of the existing road. And there are some indeed high-grade blocks, very wide, very good grade, sitting immediately to the Northwest, which will now be accessible for mining. And Jake you specifically also asked I think also 2024. I think it's fair to assume that we would continue to extend the pit now northwards into that ground.

And that kind of answers the question how we're going to pay for it all.

Yes. I mean, Stephen, I think you said the deposit -- obviously, it ranges in width, but at its widest point this deposit is 40 meters wide.

The next question is from Heiko Ihle with H.C. Wainwright.

Hey, can you hear me all right?

Okay, Heiko.

You've made a pretty good lead over to my first question. It's impressive what you guys have done there in the last over 2 years. Looking through, you mentioned some equipment earlier that you're buying versus renting, like the gensets on this call. And in fact, that was bolster last comment here a little bit ago. It means you're front-loading some expenses. Can you give us some representative rates of return that you anticipate from buying stuff versus renting it?

Yes. The example that I use is always a loader. So we're going to buy some loaders for the processing plant. They'll cost around $300,000, and we're currently renting 2 loaders, for instance, for $70,000 a month. So you can guess the return on that, is significant. With regards to the genset, the return comes on 2 basis. We no longer rent them. So we'll avoid the rental cost. And then also they're now variable genset. So when the electricity goes down on the line right now, we would need to turn on the gensets 100% for the processing plant. When the voltage goes out on the line going forward, the gensets will only come on to supplement the voltage. So it will burn a lot less diesel going forward. So the return on that is going to be -- it's a matter of months as well. It's probably around 6, 7 months is around that. So if you apply that to a model an IRR, you've got significant returns on those type of investments. And we're doing that right across the whole operation now and that is up and running, going in and finding those cost savings.

Fair enough. Q2 was the first full quarter with the newly extended plant. I mean, this thing is now obviously humming, but is there anything else that might be a bottleneck? I'm also asking this in part with the expanded milling circuit to see maybe there's any lessons that can be learned instead of getting built?

Yes. So we're always open with the improvements we're making and the challenges and challenges are always opportunities. So one thing that we need to do and we're -- and as well under control is expanded tailings facility. So we're working with the authorities now and to get that new tailings facility up and running. That's well advanced and also the borrow pit for that as well advanced as well. So we don't anticipate any issues on that. Longer term, we need to, as Andrew mentioned, have the long-term tailings management under control. We're well advanced on at identifying sites, working with local authorities around land, both on and off the property for that, and we're working with Asanko to design that. And the goal for that is the -- when you're in operations, when you're doing stripping, you can move it over and build your tailings facility over time versus building it all upfront. So it will be a tailings facility that's built for waste front pit essentially over time. So that's one thing that we need to be doing.  Another challenge, too, is there's a step change here going from 1,000 tonnes per day, doubling that capacity, 2,000 tonnes per day and then thereafter. So we need to organize mining rates, mining equipment, employees, all of those sort of things will take time and challenges to bring in appropriately. So this expansion won't be ramped up as quickly as the other one because we had to get all of those sort of logistical issues correct. And it takes some time for that to be planned out properly and to be sure that the proper equipment and human resource skill sets on site to manage.

The next question is from Mike Niehuser with ROTH MKM.

Guys, you can hear me okay?

Yes, Mike.

Great. I hope you are well. Question for Mike. Can you get you to repeat about the new ball mill, when that's going to be coming online. I think what I heard was maybe toward the end of fiscal 2023. So kind of the first full quarter ramping up would be in the first fiscal quarter of 2024. Is that right?

Yes. I can touch on that. It's towards the back end of the calendar year this year, Mike. So you're right, you'd likely expect to see some benefit in the early part of next fiscal year, correct?

Yes. So we're in a deal with calendar 2023 Mike, as opposed to fiscal 2023.

Okay. And also, you mentioned that the head grade was off in the quarter. I couldn't find that. Do you know what that was approximately?

Yes. I think -- Andrew, I don't know if you have that number handy. I think it was somewhere around just over 2 grams, but a little bit less than what we rolled up in Q1, Mike. And Andrew, maybe you can touch on the impact the wet season has on things like grade.

Yes. Certainly, Mike. The grade has been quite consistent. The variation is a little bit minor. But obviously, when it's a wet season that we're dealing with the upper part of the deposits we're in clays. And so as we've had to go deeper to get the higher grade, we've had to also mine those sort of better clays. It slows down. The equipment is the best way to describe it, guys. But we know this. We have to plan and we have to be strong in all seasons. So what we did is access parts of the stockpile, which is deliberately there, first, to ensure that we have a consistent mill feed of 1,000 tonnes a day. The way I'd like to characterize it for those that fly is that the high grade is always tracked in our mind. And then the medium grade is sort of in the economy class Q. And so we just had to sort of put a bit more of that in for this quarter. Mike, and that's why you're sort of seeing the higher grades coming in now towards the end of this quarter. And Mike, I think you also alluded that the last 2 quarters are stronger quarters in this fiscal year.

Yes. And Mike, to specifically answer your question, the head grade that we rolled up in Q1 was 3.06 grams per tonne, and in Q2 it was 2.07%. So quarter-over-quarter, that was part of the impact on ounces, yes.

The drill program for either calendar or the rest of this fiscal year, can you give us an idea of what your goal is for drilling, either holes or meters?

Yes. So in terms of holes, Mike, what we're going to focus on is grade control drilling and a bit of sterilization. In terms of the diamond drilling on the deposits, we will be focusing in the Eastern Porphyry and the Anfield zone, which is -- the one itself is a fairly early-stage brownfield. Eastern Porphyry would now be an extension.

Do you have an idea of the size of the program?

We're still working our way through that, Mike. Obviously...

To give you a sense of why we're focusing on there is the top part of the main zone is really densely drilled. So we know what those ounces can come into production really quick. And thus, we're focusing on the surface in Anfield and Eastern Porphyry for a reason because we believe that those ounces may be able to come in very quickly, too.

Yes. And provide additional production and flexibility.

Last question. No problem here. You're doing a lot of network and drilling and resource assessment. It almost seems like you're moving closer to your realizing your aspirational concept. And I'm getting the feeling that you're basically moving from the oxide and really understanding the area in between that and the sulfides. And I'm thinking this calendar year is going to be a big year for really coming away with an understanding of the project's potential. Is that close?

Yes. You're 100% right. That's exactly why all this work is being done with regards to getting into what you say, transitional and harder material. That -- some of that material has already gone through mills mixed in with dioxides. And as reported in the quarter, there has been no reduction in recovery rates, which is possible.

Yes. Yes. That's huge. Also just lastly, just to comment. I think the comments you made about working with your buying locally from a timing, from an investor point of view, from quality building relationships is an unrecognized value here, and it doesn't happen overnight. So congratulations on all that.

Yes. Thanks, Mike.

Thank you very much, Mike.

Thanks, Mike.

I'd now like to hand the meeting over to Christina Lalli, Vice President, Investor Relations, who will take us through the questions submitted in writing.

Thanks again, Galin. So gentlemen, I think there are a few questions along the same line of topic here from a few of our shareholders who'd like some more information on our joint venture, the status thereof with Cameco, who obviously is a noncontrolling interest in our financial statements. Can we speak a little bit to that relationship and how basically that works out and how we see that in our financial statements.

Yes. So good question. The noncontrolling interest does show up in the income statement of the financial statements. With regards to the relationship with Cameco and the government relationships, it's very strong. So we have a good working relationship in Tanzania. And we've built up a considerable amount of goodwill over the last 2 years through strong execution on the ground. That's both from the shareholders that are on the call today as well as from all the local stakeholders that are in Tanzania. With regards to how net income is split, look, we don't split net income. It's split for accounting purposes. But from a cash perspective, the operating cash flow is reinvested back into the business to continually expand the business. Also, as part of that agreement, we get capital repatriation back first. So any capital that we spent that Buckreef gets a return to TRX first prior to any dividend split in the future. So right now, most of the income is generated in cash flow is reinvested right back into the asset to grow it.

Great. Thank you. A question from a shareholder, wondering about the third mill expansion, if we are truly serious about the fact that our current cash flow will indeed pay for that third expansion if we expect there to be enough cash basically.

Yes. That's in the forecast. So when we rolled up a budget, there are expenditures for the third mill expansion. As we mentioned, it should come online at the end of calendar 2023. That is the expectation currently to be paid for out of cash flow for the business. There's also other ways, and I think this goes into more shareholder dilution question on paying for the expansion is there's other forms of financing that are available for that, and we can do more on a gold prepay for instance. We can bring on some debt at the asset level, which we haven't done at this point in time. So there's other ways to pay for that expansion, if necessary.

Yes. And I'll just maybe add to that, Stephen. And the way we go about our budgeting is very, very conservative, and we do build in contingency for variances. Mining is a variable business as we all know. So we certainly build in contingency. But in terms of conservatism, we ran our budget at $1,650 an ounce, for example. And we ran our half year forecast to 1,700. So certainly some upside on things like gold price, but do you have contingency for any unforeseen expenditures as they come up.

Great. Thanks, gentlemen. Another question comes to us. On the topic of possible M&A or purchasing of new land or titles can we speak a bit to that subject.

Okay. On M&A, obviously, we have a property right now in Tanzania Buckreef property is a great property, and it requires a lot of our time. Would we look at M&A opportunities that may be accretive and utilize the skill set that we have. We're able to go in, turn around an asset very quickly, build an asset out very cheaply. If there's any complementary types of M&A opportunities out there that could utilize that type of skill set, then obviously, we'll be doing shareholders a deservice of not looking at those type of opportunities that can be turned around and be very shareholder accretive very quickly.  So yes, we would look at M&A opportunities that complement our skill set.

Great. Thanks. And I think lastly, for the moment, I'd like to remind again the callers, the people listening in, if they do have a question to ping us while we're here online. If for any reason you're having technical difficulties, you can indeed reach out to us again after the call to me directly, if you will. For the moment, the last question comes from a longtime shareholder, if we have any thoughts or can foresee in the future paying a dividend.

Yes, I get asked this question in every quarterly call. Right now, the asset is extremely capital intensive as we continue to grow it. There is more benefit in reinvesting in the asset from a shareholder appreciation perspective is the increased metrics like EBITDA per share, net asset value per share, all of those type of metrics. So in the foreseeable future, which is a short to medium term, I do not see the payment of a dividend at this point in time. I know that may be different than what was long time shareholders may have been told, but that is the current business philosophy of growing value for the company.

Wonderful.

After that, once we get into a much larger project, all those options are on the table.

Great. So I don't see any questions remaining in the queue. On behalf of the TRX Gold team, I'd like to thank everybody for joining us today. We are always available to you. So please don't hesitate to reach out to us. And I'd like to wish everybody a great day.

This concludes the meeting. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Thank you.

Thank you.