Wallbridge Mining Company Limited (WM.TO) Earnings Call Transcript & Summary

Welcome to the webcast. Thank you for joining us to discuss the positive results of the preliminary economic assessment of our Fenelon project. Today with me from the senior management team of Wallbridge, we have Brian Penny, our CFO; Attila Pentek, our VP, Exploration; [indiscernible], Manager of Technical Studies; Sean Stokes, our Corporate Secretary; and Victoria Vargas, our Capital Markets Advisor. We're close to the presentation, and we'll then open the Q&A session. [Operator Instructions] Sean will read out your topical questions, and we'll address it. Before we proceed, I will be making forward-looking statements, and I encourage you to read the disclaimers in the PEA news release and this presentation on our website. In particular, the PEA mine plan and economic model includes numerous assumptions and the use of inferred mineral resources. Inferred mineral resources are considered to be too speculative to be used in an economic analysis, except as allowed for by the NI 43-101 in the PEA studies. There's no guarantee that inferred mineral resources can be converted to indicated or measured mineral resources. And as such, there is no guarantee that project economics described herein will be achieved. This PEA demonstrates the economic potential of the Fenelon deposit as a stand-alone operation based on the mineral resource estimate of January 2023. The deposit is only driven to about 1,000 meters, and there's potential for future growth within and in the vicinity of the current Fenelon footprint and also growth potential from other nearby deposits such as Martiniere, which could improve the economics project in the future. Let's watch a short video explaining the Fenelon deposit and the approach we've taken in demonstrating its mining and processing potential. [Presentation]

Wallbridge purchased a small 1,000-hectare property from Balmoral Resources called Fenelon in October of 2016 which included a small mineral resource of about 40,000 ounces now referred to as the GAAP results. We continue the exploration in 2017 and 2018, in the same zone and while testing one of the exploration targets in the late 2018, early 2019, we discovered the Tabasco-Cayenne zones and subsequently the Area of 51 zones, which earned us the Discovery of the Year by AEMQ in 2020. Our successful exploration results following those discoveries allowed us to acquire Balmoral Resources, which not only owned the rest of Fenelon property, but also owned the majority of the land along the Detour-Fenelon Gold Trend stretching 97 kilometers from the Ontario border, where the Detour Lake mine is operating. The total land package owned and control by [ Wall, ] which is now over 800 square kilometers. Through successive and successful exploration campaigns since the discovery and acquisition, we now have two significant mineral resources at both, Fenelon and Martiniere. We proceeded to advance the Fenelon deposit to a preliminary economic assessment with the results just announced yesterday. The PEA, as reported in our June 26 news release is based on the mineral resources that published in January of 2023, with 2.37 million ounces in the indicated category and 1.72 million ounces in the inferred category. The mineral resource estimate is primarily envisioned as an underground deposit. This PEA is based on the development of Fenelon as a stand-alone underground operation with a mining and processing capacity of 7,000 tonnes per day. Fenelon currently has underground infrastructure down to the depth of about 200 meters, which was completed at various times in the past, including the development completed in 2018 and 2021 by Wallbridge. All existing underground infrastructure such as ventilation raises and the exploration ramp to Area 51 are integrated in the PEA Mine plan. In the initial 2 years of pre-production, we will continue to advance the main Tabasco ramp, which is sized at 5.7 meters wide by 5.5 meters high to deeper extent. The ramp system starts in the Tabasco-Cayenne zones, and then there will be internal ramps to access Area 51 zones. The levels in the Tabasco-Cayenne zones are planned to be 40 meters floor-to-floor, and 30 meters in Area 51 based on the mineralized zone geometry and rock mass classification. The underground infrastructure, including vent raises will be developed during the 2 pre-production years. All underground infrastructure during pre-production year 1 will be developed by mining contractors. In pre-production year 2, owner equipments and personnel are planned for lateral development with up to 5 development teams. All ventilation raises will be developed by mining contracts. We plan to start production from stopes in the year 2 of pre-production. Mineralized material from these stopes and development will be trucked to surface via the ramp and will be stockpiled within the existing [ open pit. ] During these 2 pre-production years, all required underground infrastructure to support production will be put in place including the [indiscernible] to distribution network. At the same time, all surface facilities, including the mine site, the processing plant, the paste plant, tailings management facility, water management and treatment facilities and main ventilation installations will have been completed. Our mineralized material and waste from the upper areas of the deposit will be trucked to surface using 63-ton trucks. Starting in the second quarter of production year 1, [indiscernible] preparation and hoist at surface construction will start. Shaft sinking and construction of associated underground infrastructure such as ore passes and underground crushing system will start in year 2 of production and will be completed within approximately 36 months. The production shaft is designed to a depth of 1,400 meters. Starting in the last quarter of production year 4, all underground material will be transported via the production shaft using the double drum hoist with 18-tonne skips to surface for processing. The average size of the stopes from all zones is approximately 15,000 tonnes, with about 150 stopes mined out annually. The mining method would be long or longitudinal method, the stopes of 5 to 8 meters in width. This corresponds to about 40% of the stopes tonnage. Transverse method will be used for stopes with 8 meters to plus-15 meters in width. This corresponds to about 60% of the total of stope tonnage. Mineralized material from development will generate about 10% of the total production. The plant will process at an average constant rate of about 7,000 tonnes per day, starting in production year 1, and we will produce an average of about 212,000 ounces of gold annually. The underground system of ramp, accesses, ore passes, ventilation, pumping and paste distribution system continue to be expanded to extract the rest of the deposit during the 12.3 years of Mine Life. This PEA only captures the deposit down to 1,040 meters. The deposit is open in all directions, and we see great opportunities to include additional ore tonnage, not only from below the lowest level but also from additional parts of the deposit that are currently not included in the 2023 mineral resource estimate. The consulting group that we assembled to conduct this study has strong experience in mining, metallurgy and infrastructure, both in design and cost estimation and in practical experience. And they're quite familiar with the deposits in Abitibi as well. We approached this PEA by incorporating real current costs, receiving estimates from contractors and suppliers. And we use current labor and consumable rates to be as current in the entire continent as possible. We also compared our final estimates with current similar operations to ensure validity as best as possible. As seen here, we have attempted to have the most efficient capital allocation. It takes 2 full years of pre-production and construction to develop the surface and undergoing infrastructure to allow us to reach full production in year 1. In midyear 1, we started preparing the shafts collar volume for production from the ramp. And the shaft construction will start in production year 2 and would be fully operational by the end of production year 4. From there on, all materials will be hoisted via the shaft until the final year of the operation. In terms of surface infrastructure, we will resurface the existing 24-kilometer access road coming from the provisional Highway 810 to the mine site and the camp site. We also plan to construct a 25-kilometer hydro-electric power line from Quebec-Hydro network just off the Highway 810 into the site. The camp site will include a facility to accommodate up to 340 people at any time during the operation. Additional temporary facilities are also designed for doing the construction. The footprint of the money side build-out around the existing facilities is very compact. It includes a phased tailing management facility, processing plants, water treatment facility, a maintenance shop, paste and cement plants or waste and overbuilding stockpile areas. The final metallurgy is quite straightforward. A great percentage of the gold is captured through gravity, plus the addition of gravity silicon within our flow sheet. And the flow sheet includes a carbon in leach or CIL circuit, and the overall gold recovery of 96% has been used in the PEA based on metallurgical test work done to date and the process plant design. The final tailings will go through a flotation circuit after detox to separate the sulfides from the tailings. Tailings will be deposited on surface or used as paste backfill. The sulfide concentrate would be sent to the paste plant for use as paste backfill. At 7,000 tonnes a day and diluted grades ranging from 2.4 to over 3 grams per tonne during the 12.3 years of my life, the project will have an average gold production of 212,000 ounces annually. As mentioned before, we've worked on efficient allocation of capital. The initial capital expenditure is estimated at about $645 million, and this includes the production of stopes during the preproduction years. Most of the estimates already included in -- with some contingencies, but the applied contingencies of about $98 million. The sustaining capital is higher than typical projects due to the fact that the shaft construction starts [indiscernible] in full production. The total cash cost is about $82 per tonne milled and -- or USD 749 per payable ounces. All-in sustaining costs are estimated at about USD 924 per ounce payable. We have requested an accounting firm with expertise in Quebec mining taxes to also provide us with the tax estimations for the project. And the overall taxes payable are estimated at about $792 million. Based on the project parameters under the base case of USD 1,750 per ounce of gold and the exchange rate of CAD 1.3 to USD 1, the project will generate about $1.4 billion in after-tax cumulative cash flow for an average of about CAD 157 million of free cash flow annually during the life of mine. The project is more sensitive to gold price. It generates a solid NPV as well as IRR at various gold prices. It also is sensitive to operating costs as can be seen here. Similar deposits in Abitibi include two current operations at Alamos' Young-Davidson and Agnico's Goldex. Additionally, we see Wasamac of Agnico as another dialogue in terms of either deposit type or production profile. The operating deposits have similar production tonnage profiles, albeit at lower grades of Fenelon PEA with a diluted grade of about 2.73 grams per tonne. These bulk mineable operations have attractive cash costs and all-in sustaining costs, and we see Fenelon's PEA to demonstrate a higher better cost per ounce of gold payable, mainly due to the higher grade nature of the Fenelon deposits as -- and also better gold recoveries. Now in Northern Quebec, all mining developments must follow the environmental assessment and review procedures under the regulations, respecting the environmental and social impact assessment and review procedure applicable to the territory of James Bay and Northern Quebec. Additionally, with the plant production capacity of 7,000 tonnes a day, the Fenelon project exceeds the 5,000 tonne a day threshold for the Fenelon environmental assessment procedures. Therefore, any environmental assessment in compliance with the requirements of the new impact Assessment Act will be required. The acquisition of baseline environmental knowledge on the Fenelon property began several years ago and is still ongoing today. To date, the preliminary environmental characterization of the physical and biological environment have been carried out and are ongoing. The confirmation of the regulatory context made it possible to identify the scope of environmental studies required to obtain environmental authorizations, and inventory work is currently underway to fill these gaps. The project site is located on lands that are part of the traditional territories claimed by the Cree people of Waskaganish and Washaw Sibi and by the [indiscernible] people of Abitibiwinni, the Pikogan. The project is located also in the Washaw Sibi track line. Wallbridge has always prioritized First Nation stakeholders and implementing consultation plan. We've so far had over 130 communication activities conducted since the acquisition, including meetings, site visits and workshops. The First Nation communities of Washaw Sibi, Waskaganish and Abitibiwinni have been extensively consulted, concerns raised, including employment, entrepreneurial opportunities, training, land use and disturbance, water quality, impacts to wildlife and the cumulative effect of all the projects in the area have been discussed. To date, Wallbridge has taken action to address these concerns and promote local benefits, including implementing a hiring and contracting policy and constructing a cultural center. Furthermore, we also signed a predevelopment agreement with the Cree Nation of Waskaganish and Washaw Sibi and the Cree Nation Government in 2022, and we're committed to continuing consultation with First Nations, local communities and stakeholders. There are a number of opportunities to improve the economics of the project through additional studies and exploration. One important factor is that the deposit is still open in all directions. While the PEA captures the non-resource counts of other 1,000 meters, it's important to remember that we drilled a hole down to 1,500 meters and still intersect with similar geology and mineralization with an infrastructure of 4 meters of 17 grams per tonne. So our most recent press release at Fenelon identified also extensions of Area 51 zones around the current mineral resource envelope, both to the East, Northwest and South [indiscernible]. Notwithstanding the Fenelon growth potential, the Martiniere deposits located a mere 30 kilometers away from Fenelon, and we believe Martiniere to be our next multimillion ounce deposit. In any production scenario, Martiniere would not need its own stand-alone processing infrastructure as its material can be transported to Fenelon for processing to further improve the overall economics of the project. Now projects such as Fenelon with the projected annual production profile of more than 200,000 ounces located in a mine friendly -- mining-friendly jurisdiction with established infrastructure, substantial exploration potential and access to clean hydroelectric energy is highly desirable, yet exceedingly rare in the mining industry. This PEA is a great start and is a platform for growth. So we'll take the required time to review various options to advance Fenelon in order to maximize its value for our shareholders. But while doing so, we'll continue to test new areas of mineralization at Fenelon, and we also have a great near-term opportunity to incorporate satellite deposits, such as Martiniere into future studies, giving us the potential for substantial standard synergies on a district scale. Our 2023 exploration programs will further delineate the size and scale of Fenelon and Martiniere deposits, while also targeting new greenfield discoveries on our vast land package. So I now open the Q&A session and ask Sean Stokes to see if there are any questions.

Thanks. Yes, we do have some questions. First one would be an 8.4% contingency for our initial CapEx seems low at a PEA level, which major elements were constant vendor quotes versus benchmarks at factors?

So good question. First of all, most of the estimates that we've received from the consultants already had some contingencies included in there. More importantly, the equipment that we received calls from the equipment suppliers, which would be Sandvik, McLane and Caterpillar already happy as -- at today. So therefore, there was no contingency allowed for the -- for those equipments. And in addition to what the consultants have provided, those are the reasons why we have a total of $98 million of contingencies added to the already estimated cost based on current rates.

Next question is asking if we can expand on the $140 million in sustaining CapEx through mining equipment versus the $18 million in initial CapEx.

Yes. So as mentioned, in the first year of pre-production, we actually are having contractors, and we included their costs of developments during the first year. And the number of the equipment that we're getting from the manufacturers really starts in the in the second year of pre-production and then continuously added based on the production profile that we have started in year 1, so that's why the $18 million is in the CapEx. And the way we have done it is actually through a lease agreement with the equipment suppliers based on a full year tariff, included already in those is the interest of those equipment costs added to the project. So that's separate from what we actually calculate in the DCF.

Okay. And what are the initial thoughts on how Martiniere could be incorporated into a future mine plan?

So obviously, Martiniere is still a couple of years away from where Fenelon is in terms of its stage. We see great potential for us to be able to bring Martiniere to potentially a multimillion-ounce deposits. And by the time the Fenelon is probably at the feasibility stage, we believe we'd be able to -- based on the exploration efforts that we could do at Martiniere, be able to include that in the future economic studies of Fenelon. Now Martiniere is only 30 kilometers away. We certainly know that transportation costs can be added to the cutoff grade of Martiniere and be able to bring that project without the stand-alone infrastructure at Martiniere, and process all of that at the hub, which would be Fenelon. And this also goes for any other potential deposits that may be discovered along the entire mile plan.

And there's a question on the rationale for using contractors to operate the service pressure in the initial stage of production before the shaft is in operation?

Well, the rationale for that is obviously in order to be able to continue the ramp-up of your staffing, your equipment and everything else, you typically would start with the contractors doing the work and then gradually be able to convert to your owned equipment and on the labor.

Next one is that the head grade profile looks very steady, is there an opportunity to pull forward higher-grade areas in the mine plan and just intentionally just [indiscernible] mill limits?

There has been a lot of work on the iteration process with respect to the mine plan. And -- First of all, the production profile is pretty steady, partly because you're actually in the pre-production years. The 2 years of pre-production, you actually have closed about 300,000 tonnes of stockpile already built. And the first quarter of the production year 1 still at about 6,000 tonnes a day and really start to steady at that 7,000 tonne a day starting about second quarter of year one of production. So that's why, number one, it's sort of steady from about the half of year 1. But more importantly, there's always opportunities based on additional drilling, additional growth of the deposit in the upper areas to be able to take advantage of some of the higher grade areas to improve the economics of the project. And that's exactly why the opportunity section that I mentioned, additional exploration, either infill drilling or expansion drilling would potentially add to the economics of the project.

I have a couple of questions here on permitting timelines and requirements. Just what are the requirements, and if we can get a sense of what the timelines are remaining.

Obviously, it's still very early. My experience in Quebec is that the timeline for permitting is typically more expedited than other provinces in Canada. It could be anywhere between 18 months to 3 years for normal operations. When it comes to the federal assessment, typically, you could add an additional 12 months to that timeline. So it could be anywhere between 2 to 4 years on the permitting costs. But again, it all depends on the project specifics. But what's really good about this project is because the footprint at the site is quite compact, there really isn't an open pit. The current open pit is essentially what the size of the pit would be. And the pit itself was only -- would only generate about 10,000 ounces in the last year of operation. And we are using the existing pits, and we are adding a bit of an other [indiscernible] and we move up to be able to use that as an area for stockpile up or in the initial 2 years of pre-production.

We have addressed this to a degree. But just a question on synergies amongst Martiniere and Fenelon potentially in terms of processing. Maybe you could just add a little more color on that.

Depending on the size of Martiniere, I mean, if Martiniere as we believe, could be a next multimillion ounce deposit, there's opportunities for us to actually look at this project with perhaps a higher production profile from a milling point of view. So you still have the 7,000 tonne a day at Fenelon and whatever the additional production profile for Martiniere would be. Or it could be an expansion of the life of Fenelon, but those will all be reviewed and decided once Martiniere is at a stage where it can be included into our economic study.

There's a question here whether there's any thought being given to a bulk sample to raise funding.

My experience is that typically the bulk samples don't generate revenue for you to carry out with the cash flows to be able to start production. I personally believe that bulk samples are really a derisking tool. And depending on the future economic studies and additional exploration that we're doing will evaluate the need for a bulk sample at Fenelon. But obviously, it's always been as a derisking element.

This isn't a question, but we did get congratulations on an impressive PEA. There's a couple of questions here. We've noted that 4% royalty at GRY shows a 2% royalty on Fenelon, who controls the remaining to 2%?

So the Fenelon Prime, as it is currently in the mineral resource estimate has a 4% royalty, 2% is with Gold royalties. There is an additional 1% with Franco-Nevada and an additional 1% owned by [indiscernible]. None of those royalties have been given or entered into by Wallbridge. Those are all historic royalties. The 1% royalty that [indiscernible] owns, I believe, was purchased from Balmoral. And that was when we purchased the Fenelon property from Balmoral that was there. Outside of the current mineral resource estimate, the royalty is reduced down to about 1% or less than 4%. And that's in our annual information and all of our disclosures.

And I have one more question here. What percentage of the projected CapEx is some costs? And what percentage range of sensitivity analysis have you completed?

So none of the current capital is some costs. These are all estimated as future costs that would be incorporated into the project, except for the existing development, but those costs have not been included at all into the PEA. And what was the second part of the question, Sean?

It was percentage range of sensitivity analysis that's been completed.

So the sensitivity analysis is already in the press release, and I think in the presentation as well. We have looked at the sensitivity analysis for various gold prices. And those will also be probably expanded in the technical report that will be due within less than 45 days.

Okay. Now more to the potential and upside. Can you expand a bit on the potential of the Tabasco and Cayenne zones?

I mean over the past few months, we've delivered some of the exploration results from our drilling this year. Now remember, this 2023 exploration program that we have designed, it's about 50,000 meters, 25,000 meters is at Martiniere and the other 25,000 is at Fenelon and other potential targets. Now the exploration dealing we're doing these days is not an incremental growth to the deposit, but more importantly trying to get the ultimate -- hopefully, the ultimate size potential of both, Fenelon and Martiniere and other discoveries that we can find. So at Fenelon, these 200- or 300-meter step-outs continue to demonstrate the expansion potential of the Fenelon deposit. And the recent press release at Martiniere, with 200, 300 meters step-outs again, demonstrates its growth potential. So these deposits are really only constrained by the amount of drilling and not by geology. And we'll continue to -- once we get back, obviously, everyone knows as a result of the current fire situation in Quebec, we're still restricted from going to the site. But once we can get back, we'll continue the drilling and executing the 2023 program. And in the meantime, for whatever we have drilled up to the end of May, prior to evacuation due to the fire, will be receiving the results of those drilling, and we'll continue to disclose those as they arrive.

Another question here. Have you considered engaging the First Nations to finance and build the transmission line for Fenelon similar to what Cisco Windfall did for the Association [indiscernible] on the transferring CapEx into sustaining?

No, there hasn't been any discussion yet because, obviously, the first step was for us to really get this PEA out certainly does an opportunity -- that certainly reduces the CapEx. However, as we all know, it reduces the CapEx, but certainly could increase and will increase the operating costs, because it's -- someone has to pay for that capital. But all those discussions will be had in the future as we advance the project.

Thanks, Marz, one more. Why doesn't the PEA include open pit lines of the 3 indicated [indiscernible]?

So there are total of 4 small open pits in the mineral resource aspect. And when we looked at the deposit, especially the [ 3-8 pits ] that are in the Area 51, the economics of mining those and still leaving a crown pillar below the overburden -- below about 20, 25 meters of overburden was more attractive than taking those as an open pit. So therefore, there really isn't an open pit in Area 51. And the Gabbro already, there is an existing open pit that at the end of the project, it's brought in, whatever the number of ounces that are in that gap or within that pit that will be taken out. It's all based on the economics trade-offs.

One more came in here. The mineral resource estimate shows approximately 2 years of production can be issued by open pit mining at Martiniere. Why wasn't this incorporated into the PEA?

As I mentioned, Martiniere, currently is still far away from being able to be looked at from an economic point of view. It still requires to really understand the size potential of Martiniere. Therefore, Martiniere has not been included into this economic study.

Perfect. Thanks, Marz. That's all the questions.

Thank you, all. Well, I'd like to thank everybody for joining us. And as you know, there is contact information. If you have further questions, please send your questions to Victoria Vargas and/or myself. And we'll definitely answer the topic of questions with respect to this PEA. Thanks again for attending.