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

Good morning, and welcome to the West African Resources' investor conference call. [Operator Instructions] There will be a page turn of the presentation released this morning, followed by Q&A. [Operator Instructions] I will now hand over to West African Resources' Executive Chairman and CEO, Richard Hyde. Over to you, Rich.

Thanks, Nathan, and thanks, everyone, for dialing in this morning. Before we get under way, I just like to say thank you to our team from sites and all the way to -- back to the office here in Perth for the effort they put in to get this together. There's a fair bit of work that's gone into it. And as you can see, it's a huge improvement on where we were at a few years ago with the feasibility study and the amount of work that's gone in since. So without that, I'll -- with that sort of out the way, I'll just kind of work through the presentation. Just on Page 2, some forward-looking statements. So this is on our website also. It's on the ASX this morning. Moving to Slide 3. So this is just a snapshot of where we're at now with West Africa's newest gold producer in the region. And you can see the photo there of our lovely newly minted plant at Sanbrado. So guidance this year is set at 250,000 to 280,000 ounces at $720 to $800 per ounce all-in sustaining costs in U.S. dollars. With this update, we've managed to bring the global resources of the company over 5.1 million ounces. With depletion, our reserves have dropped down to about 1.5 million ounces but expect that to step back up again by late this year once we've done some further work on Toega and some more infill drilling at M1 South underground. Combining reserves and inferred resources in the schedule, we've got a production target of 2.8 million ounces now, and that's gold production past year 2030. Again, we've still got a lot of exploration around Burkina, and we have started doing work on exploration there again for this year. And at the moment, our market cap is around about AUD 665 million with about USD 175 million of senior debt to Taurus. So one of the slides I put back in because I think it's important is that a lot of the companies talk about Tier 1 assets and Tier 1 jurisdictions, but what we're really looking for here is assets that actually generate free cash flow. And you can see the slide here that we put together. The bottom right-hand corner shows that our -- we're already through the ramp-up period. WAF is generating sector-leading margins. And also, you can see some other companies in our acreage has been doing very well as well. So what you're finding in projects in West Africa is they do generate a lot of cash flow. And you can see that some major companies have invested in the region, which are highlighted here. The region is very significant for global discoveries, and there's been significant growth in production over the last 10 years, over 80 million ounces discovered. And it is the lowest cost an ounce region for discoveries globally. Moving on to Slide 5, the capital structure. Not many changes here really since last time, but to point out that we have made an early repayment to Taurus, USD 25 million. And cash at the end of December was USD 73 million and gold -- unsold gold just over $10 million. So by the end of last year, we already generated significant margin and made an early repayment to Taurus. Moving on to the next slide. Just talking -- today, we're just talking about the Sanbrado project in the central eastern part of Burkina Faso. And hopefully, later on this year, we're going to talk about Comoe, which is in the west of Burkina. So we've got some teams out in Comoe at the moment doing some -- all the work, some mapping and going around sampling some artisanal sites. Sliding on to Page 7. This is just a snapshot of the project. So the project's in South Central Burkina Faso. It's owned 90% by WAF and 10% by the government in equity interest. We've got conventional contract open-pit and underground mining using Perenti for open pits and Byrnecut for underground. Resources now are at 81 million tonnes at 2 grams per tonne for 5.1 million ounces of gold. Reserves, 20 million tonnes at 2.3 grams per tonne for 1.5 million ounces gold. And the reserves plus inventory, 31 million tonnes at 2.7 grams for 2.8 million tonne -- ounces of gold. So they're the key highlights from -- the key stats for the projects. And with the inclusion of inferred resources in the production schedule now, it brings the mine life out to 13 years with very high production for about 10 of those years -- 10 or 11 years, sorry. We'll skip through the rest of them. So moving on to Slide 8. Throughout 2020, there was a lot of drilling going on. So -- and we pulled back from reporting on a lot of grade control because now there is so much of it that's done these days, so open pits and underground grade control. So included in those nearly 4,500 holes and 120,000-meter drilling. We did some targeted drilling beneath M1 South, and we got some excellent results. And that's one of the key areas where we've seen an increase in resource growth, so a 65% increase in resources across the project. Obviously, the addition of Toega and converting that resource to JORC as well as a huge increase at M1 South with 4.6 million tonnes now at 11.6 grams for 1.7 million ounces of gold. So you can see the resource growth over the last 6 or 7 years, and we're stepping back into doing drilling again this year so we expect that to continue. With -- moving on Slide 9, reserve growth. So obviously, we have depleted reserves for mining in 2020. So depletion of 146,000 ounces, so 108,000 ounces from the open pits and about 38,000 ounces from the underground. Now moving on to Slide 10. So this is where we've managed to incorporate the addition of Toega into the mine schedule and also extensions in M1 South. Again, stating our guidance on the first slide, 250,000 to 280,000 ounces at $720 to $800 per ounce all-in sustaining costs. The first 3 years of the schedule based 100% on reserves. And with Toega coming to the schedule in 2024, that's the current plan. We've got work programs underway there at the moment aiming to upgrade inferred resources to indicated status. So then, by the end of this year, we should be able to run some more optimizations and include Toega into the reserve category. Annual average production for 2021 to 2030 is 216,000 ounces. And I just mentioned Toega coming in 2024 and M1 South coming in, in mid-2025. So M1 South Deeps. We've got programs to infill both Toega and M1 South, and we'll probably wait until we've got a good drill position certainly for M1 South Deeps. So we'll wait for that decline to get pushed down towards end of this year, early next year, so it will give us an optimal position to do a lot of the infill drilling from underground. So M1 South, on Slide 11, punching above its weight because it really does. It's only small tonnage but quite high grade, makes a big difference to our production profile. I won't read all the numbers out. You guys can do that. But the key part of 2020 is also -- sorry, 2021 is advance the decline, to develop the new levels. We'll be ramping up to full production in the underground by the end of this year, so it's a kind of incremental improvement each quarter into Q4. We should have the second lift opened up by midyear, which will give us a lot more levels and give us more flexibility for the underground. But already you've seen from Q3 to Q4 last year, yes, we've been increasing tonnes steadily. M5 open pit on the next slide, fill the mill, which is what it does. It provides about 10 years' worth of mill feed to the project. It's a very simple 2-kilometer-long open pit, low strip ratio, high recoveries. And there's also potential beneath the southern end of the deposit for underground mineralization, which we'll start looking at this year as well. Moving on to the next slide, Toega. So Toega lifts production in the [ midterm time frame ] '24 to '31. Again, very simple open pit, modest strip ratio of just under 5:1. Currently, we've got recovery at 87%. That was the test -- from a test [ B2Gold ] has done, but we think there's some improvements there as well. Moving on to Slide 14, getting back to exploration. So we've talked about this last year, and we are busy doing exploration work around Sanbrado. We've begun at Toega at the moment. The V3 permit, which is just to the west of Sanbrado, we acquired that permit last year, and that's got some really interesting looking geochem [ around the lease end ], artisanal -- historic artisanal mining on there as well. So we'll get drilling there as well before the wet season this year with a $12.5 million budget. Just sliding on to Page 15. Just talking about E&S commitments. You can't do all this good work in Burkina without the support of your stakeholders, and we've been very active since working in the region. We've got a lot of programs -- community programs underway at the moment with local people. We've put in a lot of water wells around the area during the relocation. We've tested all the water, and some of it was very high in arsenic. So these people may have been drinking water with [ arsenic acid ] for many years, decades probably. And all of the new water wells that we're putting in -- in areas where there's high-acidity water, we put in extraction units to make that water safe to drink. That's just one of the programs we've been doing. We've built schools, hospitals and community centers. So there's a really strong bond now between WAF and our local stakeholders. We also are an active employer of women. So about 20% of the workforce at Sanbrado is female now, which is something to be proud of. And we've also got a very high percentage of local workers. So Burkinabé work is at 90%, with about 10% expatriate. Just moving on to the last slide. Why should you invest in West African Resources? Well, clearly, we've improved our production profile since the 2019 feasibility study. We've set guidance this year to 250,000 to 280,000 ounces of gold, and we have now the 10-year mine life at over 200,000 ounces of gold. And we're still unhedged. We have a quality Board and team, and we're aligned with shareholders. So the majority of our employees and directors are shareholders in the company. As I just mentioned before, we're working with our local stakeholders, and we've got a social license to operate through community programs and partnerships. And we're implementing our ESMS to be aligned with international standards. Lastly, growth. We've got over 1,200 square kilometers of permits in Burkina, covering very prospective areas. We're ramping up to full production, and you can expect further ore reserve growth throughout this year, through the conversion of M1 South Deeps and Toega, and we'll be drilling aggressively throughout the year. Look, with that -- there's a few slides that have got more detail following that. But with that, I'll turn it back over to Nathan for any questions.

Thanks, Richard. [Operator Instructions] Your first question comes from [ Ian Cooper ], who wants to hear more about Meguet and Moktedu. Old data suggests those are low copper, so potential for gold only.

Yes. Look, thanks, Ian. Yes, we are reviewing Meguet and Moktedu. The old data didn't have copper in it. So we started Toega, which was a copper-gold project to the north of that, that we're in the process of re-permitting at the moment. So that does have quite a lot of copper in it. I guess that's taken on new meaning with the increases of the copper price. But we are in the process of reviewing all of the old [ data ] that we IPO-ed on because it's really important that where we've had significant results previously, we put that in context of what it may mean since we've discovered in M1 South, which is well over 1 million ounces of high-grade gold and about 120 meters of strike. So thanks, Ian.

Okay. Your next question is from [ Nick Levy ], and he complemented you on the update. And then he's asked if you could update the company's projection for the gold price and if your -- if the hedging policy will be reevaluated at any point.

Thanks, Nick, and thanks, Nathan. Look, in our outlook for the gold prices, we expected to average USD 1,700 an ounce for 2021. It was just a -- well, we've all got a view on the gold price, but at the moment, it's a bit [ unloved ]. But I don't think the structural issues, problems that you see globally had been fixed, and I don't think the vaccine rollouts is going to do that. So yes, my view is that the gold price should be higher in the longer term with the U.S. government approving $1.9 trillion bailout package again last night. So that's going to take U.S. debt to well over USD 23 trillion. So that's really well north of 100% of GDP. So look, at this stage, we intend to remain unhedged. And you can see our cost profile for the next 5 to 10 years will indicate that we'll be producing it to cost significantly less than the spot price. Thanks, Nick.

Right. Thanks, Richard. There are no further questions at this time. So I'll now hand back to Richard for closing remarks.

All right. Well, thank you, everyone, for dialing in this morning. We look forward to keeping you updated with further news throughout this quarter and the following quarters as the ramp-up at Sanbrado continues and we start getting more exploration results from the drilling programs we're undertaking. Thanks very much for dialing in. And stay tuned. Cheers. Bye-bye.