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

Good morning, and welcome to the West African Resources Investor Webinar and Conference Call. [Operator Instructions] I'll now hand over to West African Executive Chairman and CEO, Richard Hyde. Thank you, Richard.

Thank you, Nathan. Thanks for joining us for WAF's annual resource reserve and 10-year production plan update. I mean WAF, HQ and Perth at the moment. Joining me on the call here is Lyndon Hopkins, our Executive Director and Chief Operating Officer. Also, I've got Padraig O'Donoghue, who is our CFO and also Company Secretary and also I've got Todd Giltay, who is our General Manager of Finance. So, as you can see in today's report, WAF is set to produce more than 4 million ounces of gold from our Burkina Faso operations over the next decade. 82% of the mine plan is based on ore reserves. And today's report is a 72-page document, which is full of detail for keen followers of the company. And I don't think it's another listed company our size on the ASX, whether operators are in Africa or Australia provides the same level of disclosure or can produce a 10-year mine plan. I'd like to thank our technical team and our confident persons for their hard work and diligence putting this together over the last few months. I'll run through the highlights of the report, and then I'll open the call up to questions. I hope there's some good ones out there. As I mentioned, we're about to produce 4 million ounces of gold from 2024 to 2033. And this forecast is a 415,000 ounce increase over the previous plan, and our group annual production will now peak at 473,000 ounces in 2029 with annual production building steadily between now and then. Our updated Life of Mine flares now extend to 2034 at Sanbrado and to 2042 at Kiaka, and this is based on a conservative gold price of $1,400 U.S. gold. We've kept the gold price at 1,400 U.S. gold for our reserves because we have long life assets, and we've developed those assets through a sound exploration while we picked up new projects like Kiaka through smart acquisitions. Our mineral resources have increased by just over 200,000 ounces to 12.8 million ounces gold. So, we've updated our gold price used for constraining resources this year. We've increased that from last year's USD 1,850 per ounce for petrol's reporting resources and this year, we've increased that to USD 1,000 an ounce. So, we've seen an increase in resources, net of mining depletion from 2023. Now, ore reserves have decreased by about 275,000 ounces to 6.1 million assets of gold, and that's net of 2323 mining depletion. But 2024s focus will be back on replacing our reserves through some underground drilling, both at M1 South and we planned some drilling at 5 underground as well. The production for 2024, we've already guided 190,000 to 210,000 ounces of gold at less than USD 1,300 per ounce all-in sustaining costs. And that's all-in sustaining costs as guided by the World Gold Council as some of our peers don't report to the same standards that we do. Our production number for this year is 196,000 ounces. You can see that on Table 5. So, our budget production number last year was 196,000 ounces. So, we've guided the same number for 2024 for the last 2 years. The main change in this year's production plan is that we are minimizing CapEx. So, we still have Toega starting in the second half of 2025. We're not opening up any new pits in 2024. We're very focused on keeping a healthy cash buffer in the company all the way through to first gold at Kiaka. So, what we're doing this year is, we're pushing the underground at in one south, and we're going to pull out over 500,000 tonnes, which will pay slightly more than last year. I think we did about 450,000 tonnes last year. We've got a budget grade of 7.6%, but if you've been following us for a few years, I think that grade is going to be conservative. So, that will see us with over 120,000 ounces coming out of the underground this year. And the rest of the mine plan will be made up from mostly M5 open pit. The M5 South open pit is coming to an end shortly. We'll have some good wire-cuts, which we should win some nice trade-off as we retreat out of the Baseline M5 and then focus shifts to the middle and the northern parts of that open pit, which is still very shallow, and we're still putting some oxide material out there. We've pushed production moving on to Kiaka for 2025 per quarter. So, that says we guided previously around 400,000 ounces for 2025, but we pulled that back to 338,000 ounces given that we've had a few challenges in 2022 in countries geopolitically. We got our debt in place by the end of last year. And we're leaving ourselves some room in the schedule. We might be able to bring that forward. But at this stage, we've been conservative by pushing that production out to July 1, 2025. So, instead of guiding a range or mid or second half of 2025, we're guiding to the 1st of July now with the schedule quite firming up quite well, given that we've made good progress at the start of this year. We've also put away a lot of the long lead items for obviously a start of construction or for construction during the end of 2022 and also through 2023. The big change in the production plan really has been the Sanbrado underground, aiding for underground coming into Sanbrado. And that season production profile increased by over 15%. Previously, it was averaging less than 200,000 ounces, I think around 185,000 ounces through the back of the schedule. And now, we're back up averaging 211,000 ounces from 2024 to 2033 with the underground coming in the mine plan for M5. And that will see Sanbrado peaking at over 250,000 ounces in 2030 when we've got ore coming in from both M5 underground and also from Toega, which is about 12 kilometers away. We previously mentioned that we fully funded it for the construction of Kiaka. We've now drawn down USD 100 million on the debt facility from Sprott and Coris Bank. So, that's a USD 165 million facility. We expect to be drawing a further USD 50 million in the early weeks of March. And that will allow us to really push the schedule and try and accelerate the build. Obviously, we know from previous build at Sanbrado the faster we build, the cheaper B with our fixed cost over a shorter period. The construction costs at Kiaka are tracking to budget. We find that our August 2022 feasibility study is still quite accurate. We've seen very little change in CapEx since we released our report in 2022. We're on schedule for July 1 first gold and on growth. So, 2024 is going to see is putting a lot of effort into underground drilling, both at M1 South and M5. We've got some figures through the report, which you can see where we're focusing on drilling beneath reserves at M1 South, converting the inferred resources indicated in some parts, converting those indicated resources to ore reserves. We also expect to drive out about 800 meters from M1 South towards M5, and we're going to drill off the rest of them M5 from underground, and that will allow us to not only convert the indicated inferred resources to ore reserves beneath the M5 South open pit, but also we can have a crack on the exploration target that we put together beneath resources, which I think is really an area where we can add a lot of reserves or resources and reserves to Sanbrado. Currently, we've only got about 3.5 to 4 years of Sanbrado underground in the mine plan. And clearly, all of the deposits that we've got at Sanbrado have got very strong continuity in the vertical direction. We've seen it in one South where we've drilled it from surface down to 1 kilometer. We've only drilled M5 down to about 500 vertical meters. But with this new drilling program, we should be able to take it down to 700 or 800 vertical meters, and I expect that to add a lot of potential to operators at Sanbrado. With Kiaka, we've already guided that we're spending around USD 250 million this year. That will see us largely spent on the project this year with a lot of work finishing off early in 2025. And the earlier we can finish that build the cheaper it will be, as I mentioned previously. All right. Well, I think that kind of covers the plans for this year. It's a very detailed document. I know it hasn't been out in the market very long, but I'm sure there will be some questions. So, Nathan, I'll just hand back for questions now.

[Operator Instructions] Richard, it looks like you've covered everything. There's no further questions. Sorry, we've just had one come in. We'll just go to Richard Knights at Barrenjoey.

Just a question on the ramp-up at Kiaka. I'm just looking at the ounces that are coming through, you were sort of saying July 1, you're expecting first ore through the mill in 2025. Just trying to understand that ramp up there. I think there's quite a small number of ounces coming through there in 2025.

So, Kiaka is currently processing. Well, we're moving 15 million tonnes. And we've got about 5.8 million tonnes of ore going through in the second half of 2025. So, I mean, that's still well above nameplate be a lot of oxalate going through the plant. If we go back to our ramp-up at Sanbrado, we ran for 12 hours at almost nameplate, we shut down checked everything and then from the night the following day. I think we're at 25% above nameplate but that was a very good ramp-up. Everything went well. I wouldn't see a reason why -- I think in the schedule, we've got a 6-week ramp-up. But I think that everything going well. Generally, these things sort of they switch on and they run it at full speed. So, we've got preproduction mining starting in Q1 2025. So, we're going to have a [indiscernible] full of ore. We've done a lot of stripping already. It's a very low strip ratio ore body. So, it's an operation where we want to take off from the pit and put a straight through the plant. We don't want to re-handle if we can help it. But does that answer your question, Richard, because there's nearly 6 million tonnes of ore being processed, but that's significant proportion of that will be oxide.

Your next question comes from Mike Millikan at Euroz Hartleys.

Just a very quick question on CapEx for M5 underground. Is there any sort of indicative or where should you kind of guide us for that underground?

Yes, the number we kind of were using internally right now. Obviously, there's a study underway on that. And we'll declare ore reserves with our annual update next year because obviously, we've got it into a mine plan. So, I think investors can get a fair idea of what to expect. I'm probably guiding between USD 20 million and USD 30 million for preproduction that would include, obviously, development and ventilation. Lyndon, would you have any other comments on that?

No, that's pretty much where we're landing at.

Just also on the exploration front. Obviously, M1 South underground a bit more drilling going on there. Any sort of expectations for any other kind of loads that are kind of developing there?

Look, we've done some drilling just to the north of one the mine load. And look, we should have some results out in the next few weeks on that. We haven't mined beneath the northern part of the M111 South open pit. But I think if you have a look at some of the figures we put in here, the mine load that M1 South is sort of 100, 120 meters, it's up to 40 meters wide. It's kind of a fat sausage that just drives straight down and we drilled it obviously down a kilometer. The northern part of the pit mineralization separate into 2 loads, and we've put some results out there in today's report. And historically, we've hit mineralization at depth, but it's a bit spotty. But it did start to come together when we did the grade control. And I can just say if you have a look towards the back of the announcement, I think Page 20. Page 20 has got some great control results from the last bench of the open pit, at 6 of 120,4, at 7 of 45 at 34, 6 of 67. So, there's some really nice numbers in there. It's not as consistent as the main load. But I think we've got a good chance of pulling some mounters out there as well. We've done some drilling directly beneath the northern end of the pit. And I think it's shaping up because we've had a pretty full schedule and we really had to get the development into the mine shoot, we haven't focused on it so far. But if you have a look at Figure 16, you can see we've got 2 drivers at punch-across into that area, and we've done some drilling. So, yes, Sanbrado will have some results out in the next 1 or 2 weeks.

Your next question comes from Justin Chan at SCP Resource Finance.

Just looking at your schedule, you've got throughput reverting to normal levels in 2016 at Kiaka. I'm just wondering if you're running so much higher than nameplate, in practice, do you think you'll be through those oxides that allow you to run so far above nameplate by 26? Or is there a potential for uplift there?

No, I think there's potential for uplift. I mean we haven't baked it into the schedule. We've run the schedule at 20% above nameplate, which is utilizing design capacity. If you have a look at what we've done at Sanbrado, I mean, that was supposed to be 1.8 million tonnes per an hard rock and a 2.2 million tonne per annum blend. We're running at 3.2 million tonnes per annum, which is 50% above nameplate. And I'm not saying that we'll do that at Kiaka, but I definitely think that the 20% above nameplate is conservative. We've oversized the crushers and the mills, so, they're not going to be bottlenecks. So, look, yes, oxide in the early part of the schedule, that's why we've got a big sort of first half for the second part of the 2025. But look, I think we've got to push it and maintain that certainly above 8.4%.

So, I guess the update on that won't be driven as much by exploration and oxides and just more once you have data coming from the mill, whether you feel like kind of resetting the assumptions there?

That's correct. And we wait now until we ramp up. But certainly, I think 8.4% is conservative. And partially,, we've gone with the same suppliers. So, we've got metadata providing crushes and mills for Kiaka, the same suppliers for Sanbrado. So, we haven't gone for cheap Chinese mills where we know that these issues with them. We've gone for quality European-built product.

Richard, we've had some questions that have been tied in regarding Burkina Faso. So, this one probably summarizes a selection of them. So, types of political issues that have impacted Burkina in the last several years impacted your ability to access capital equipment for drilling, et cetera.

No. I mean, we've just proven that good companies like West African Resources where a quality team can still access capital. So, it's just drawing down USD 100 million at the end of 2023 for Kiaka. Nothing is easy, but with quality, we haven't had our operations impacted either. So, we've had 3 years of either meeting or beating guidance each quarter. And that's not to say in between quarters, we don't have issues. Every operation, whether it's in Australia or Africa has issued. So, certainly, there's different sorts of challenges working in West Africa. But if you have a look at our peers in Australia, often, we're generating twice the NPAT, but we've got half the market cap. So, investors need to look at our track record and say, well, West Africans built a track record of meeting guidance and producing gold and not missing guidance. So, back the team, back the company. And if you benchmark West African resources against a number of Australia producers, we're significantly discounted. But all we can do is be the drama study is what we're doing. This is up to investors to decide if they want to invest or not.

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

Thanks, Nathan, and thank you for everyone for dialing in. Thanks again to our technical team and our CPs for pulling this report together with me. We'll have some more exploration use, as I mentioned, in the next few weeks. We will have continuous updates on the construction progress at Kiaka as well over this quarter or next. You'll start to see Kiaka really shaping up and looking like a mine site over the next 6 to 8 weeks with lots of concrete going down at the moment and also CIL tanks being erected that we'll be providing some nice video to follow our updates. All right. Well, thanks very much for dialing in, and I wish everyone a good week. Cheers, bye.