Transcripts
Calibre Mining Corp. (CXBMF) Q1 2023 Earnings Call Transcript
Operator
Good morning, and thank you for standing by. Welcome to the Calibre Mining Corp 2023 Q1 Financial Earnings Results and Conference Call. At this time all participants are in a listen-only mode. After the speaker’s presentation there will a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Ryan King, Senior Vice President of Corporate Development and IR. Please go ahead.
Ryan King
Thank you, operator. Good morning, everyone and thank you for taking the time to join the call this morning. Before we get started, I’d like to direct everyone to our forward-looking statements on Slide 2. Our remarks and answers to your questions today may contain forward-looking information about the company’s future performance. Although management believes that our forward-looking statements are based on fair and reasonable assumptions, actual results may turn out to be different from these forward-looking statements.
For a complete discussion of the risks, uncertainties and factors, which may lead to actual operating and financial results being different from the estimates contained in our forward-looking statements, please refer to the Q1 2023 MD&A and consolidated financial statements available on our website as well as on SEDAR. And finally, all figures are in U.S. dollars unless otherwise stated. Present today with me on the call are Darren Hall, President and Chief Executive Officer; David Splett, Senior Vice President and Chief Financial Officer; and Tom Gallo, Senior Vice President, Growth. We will be providing comments on our first quarter 2023 results, after which we’ll be happy to take questions. The slide deck we will be referencing is available on our website at calibremining.com under the Events section. You can also click on the webcast to join the live presentation. And with that, I’ll turn the call over to Darren.
Darren Hall
Thanks, Ryan. Moving to Slide 3. Good morning, and thank you for taking the time to join us today. I would like to start by thanking all of Calibre’s employees and business partners for their continued support, which resulted in a record-breaking quarter, pleasingly led by a 50% reduction in the company’s total recordable injury frequency rate. I’m very pleased with our first quarter performance, responsibly delivering a record 65,750 ounces at a total cash cost of $1,164 per ounce and an all-in sustaining cost of $1,302 per ounce. Our first quarter production costs are in line with budget, and our balance sheet remains strong with $61 million in cash.
During the quarter, we continued to strengthen our position as a growing mid-tier producer, expanding our hub-and-spoke operations to include the high-grade Pavon Central open pit, which commenced ore delivery to the Libertad mill ahead of schedule. Additionally, we have commenced mining operations at the Guapinol open pit, located at Eastern Borosi, successfully transforming the exploration district to a production center. Ore deliveries to Libertad is scheduled to commence later this month. Given our Q1 performance, progress at both the Pavon and Eastern Borosi districts, we are well positioned to reaffirm our 2023 guidance of 250,000 to 275,000 ounces [Technical Difficulty].
Looking to the future, I remain confident in our ability to grow the business, given our portfolio of quality assets. As a 2 million-ounce Golden Eagle deposit in Washington, recent drilling has confirmed broad widths of gold mineralization, and we’ve recently commenced a comprehensive metallurgical program. At Pan Mine in Nevada, the 2022 drill program led to a 23% increase in reserves net of production depletion and the new discovery. We have recently commenced a 25-kilometer drill program, largely focused on resource growth.
At Gold Rock in Nevada, our 2023 drilling program is focused on following up on higher-grade sulfide-gold mineralization discovered in 2022 and pursuing near surface oxide expansion opportunities. Concurrently, we are progressing state permitting and advancing technical studies to determine the optimal strategy for our Nevada operations. Given our exploration success and demonstrated ability to convert discovery to production, the company is well positioned to create additional shareholder value by leveraging the 1 million tons of surplus mill capacity available at La Libertad.
Turning to Slide 4. This year’s Nicaraguan exploration program is focused on discovery resource expansion opportunities at Eastern Borosi, Libertad and the VTEM Gold Corridor and Talavera’s targets at Limon. I’m particularly excited about the potential of the VTEM Gold Corridor, given the discovery made of Panteon North, a year ago, and the 9.4 gram 244,000 ounces major reserve announced at the end of 2022. First pass step-out drilling along the VTEM Gold Corridor reveals another high-grade gold zone, 1.5 kilometers to the north, of which drilling is currently underway.
Moving to Slide 5. Given our track record over the last three years to responsibly self-fund discovery and expansion of resources, gold production, build reserves, whilst concurrently building cash, we believe that Calibre continues to present a compelling investment opportunity. With that, we are happy to take questions. Back to you, operator.
Question-and-Answer Session
Operator
[Operator Instructions]. Our first question comes from the line for Farooq Hamed with Raymond James. Your line is now open.
Farooq Hamed
Hi, good morning everyone. Darren, just a question for you, I guess, just more on strategy. When we were out of sight in March, I think it was fairly evident to see that the hub-and-spoke model is working very well, and you have some capability to potentially expand the haulage that you’re doing to Libertad. The company has net cash, you’re generating free cash flow. The question always that comes up is the reserve life and the amount of reserves in inventory. I’m just wondering, strategically, how do you feel about acquisition targets in Nicaragua that would kind of fit into the hub-and-spoke model, do you see there being a kind of a robust environment of potential acquisition targets in Nicaragua, is that something that you want to focus on given the strong financial position and showing capability of doing — executing the hub-and-spoke model or is it primarily still going to be organic growth focus?
Darren Hall
Yes, good morning Farooq and thanks for the call and participating in the site visit there just a month or two ago. I think as we’ve demonstrated over the last three years, we’re responsibly growing the strategy and now with the introduction of Eastern Borosi into the fold as we commission that property and increase our rates of delivery here over the next quarter or two, I think what we’ve demonstrated is the ability to take material from anywhere in Nicaragua to one of our processing facilities. So our primary objective will be to grow that business organically. We’ve demonstrated exploration success over the last few years with the proven concept there from the hub-and-spoke. We can now look further afield from kind of a grassroots exploration perspective. But clearly, it opens up the opportunity for the inorganic growth as well.
So as we look at creating shareholder value, however best to do that, if there’s things that we can accretively bolt on, then we will look at doing that. But with the demonstrated practice, it really means that anything within Nicaragua is open for consideration.
Farooq Hamed
And maybe, Darren, if I push you a little bit further on that, what’s the environment like in Nicaragua to make potential acquisitions, is it — do you — would you have any regulatory issues, or would it be open for you guys to be able to do that, anything like the antitrust or anything like that, that you’d have to be worried about?
Darren Hall
No. I mean the same complexities exists in Nicaragua doing a deal as in any jurisdiction in terms of ensuring it. It makes sense. And you can actually come to a deal. But from a regulatory external perspective, I mean, we’ve got demonstrated support from the communities. There is a strong demand within the country for us to get involved in things because we have good support and people like the way we operate. So there is very much a push. From a regulatory perspective, there’s nothing that I’m aware of from an antitrust or any perspective. No, we see continued good support throughout the government for what we do and because of how we’re doing it. So yes, in short, no issues there that I’m aware of.
Farooq Hamed
Okay, thanks for that. And then maybe the last one for me, I think in the first quarter, you quoted that you averaged something like 2,400 tons per day of haulage to the Libertad mill, I think somewhere in that ballpark. Can you talk a little bit about what the potential would be given the road infrastructure given you’re expanding the number of satellite sites to which your — from which you’re hauling to Libertad. What would — what do you see as maybe in the next 6 or 12 months as the potential of where you can maybe move your haul tons to Libertad?
Darren Hall
Yes. No. I think as we add on the Eastern Borosi as another mining spoke delivering to the processing facility of Libertad, we’ve consistently demonstrated it was very easy for us to be able to deliver 1,000 foot a day from Limon. We’ve done a 1,000 ton a day from Pavon Central as well during the quarter. So you’ve got 2,000 tons there. The 2,400 ton we talked about in Q1 means that we exceeded both 1,000 tons at on average from those two sources. As you add in Eastern Borosi, it was conceivable that could grow to a 1,000 tons a day for sure, over time. So I think our focus has been on establishing the reliable and responsible delivery from the two sources. We’ll add the third one on. And then what we look at, okay, what opportunity to increase the volume of deliveries on a day-by-day basis. And as you would have seen when you hear, our influence on the road is negligible. We don’t provide congestion. There’s no rate determining step in terms of the amount of traffic we have on the road, it’s really about ensuring that we can do it responsibly and continue to kind of methodically grow the business.
So I think there’s great opportunity to add the additional focus we talked about at Eastern Borosi, and then it increased the volume, which, as we look to the future, will allow us to leverage off the 1 million tons of surplus capacity that still remains at Libertad because our production growth over the last three years has been predominantly through grade as opposed to volumes. So that latent capacity that exists there to create that accretive cash flow still remains. I think we’ve done a reasonable job over the last three years of getting from where we were to where we are. Now as we look forward over the next couple of years, we will continue to look at those opportunities to continue to optimize the incremental growth.
Farooq Hamed
Okay, that is great. Thanks Darren. That’s it for me.
Darren Hall
Thanks Farooq.
Operator
Thank you. One moment please for our next question. Please standby. Our next question comes from the line of Justin Stevens of PI Financial Corp. Your line is now open.
Justin Stevens
Hey guys. Only one real question, I think, for me here, and that’s to do with Panteon. Obviously, there’s been hitting some pretty stellar grades there and with the maiden reserve now in place for Panteon North, is the plan or I guess, the conceptual plan at least there to pursue — bring Panteon North in maybe in 2024 and if so, what is sort of needed to do that?
Darren Hall
Yes, good morning Justin. You’ve got the same questions as we have to be honest, that we’re facing pretty outstanding success pretty rapidly there with basically putting first hole into it in May and then progressing it through to a reserve by the end of the year. As the team continues to understand what the scope is, what the scale of that discovery could be along the VTEM Corridor, our logic in terms of evolving it, developing it will evolve. It’s one of those things that there’s a strong desire to get into it sooner. But I think for us, it’s probably making sure that we see a huge potential for — a district within a district, if you will in terms of how that will lay out. If you think about say a bunch you are producing at 1.3 million, 1.5 million ounces, that same potential existing there, we want to make sure that whatever we develop sets us up to accretively grow that production over the next few years. So we’re doing some work now to understand how best we’re doing the trade-off studies. So do we access it from standard Panteon [ph] or do we create its own deep line and where we’re leading to it now because what we see is probably a separate facility that allows us to be able to optimize ventilation, water control, all those sort of things, which will lower our unit cost for a longer time. So we’re in a bit of a discovery mode, pardon the pun, as we continue to drill and expand the resources there. But I would expect that it wouldn’t be unreasonable if we expect that, that would be part of the production contribution that 2025, 2026 period.
Justin Stevens
Got it. Yes, that makes sense. And the special — I mean, if it does sort of look like it really is a continuing trend sort of North, then yes, separate access and separate facility makes make some sense to be able to chase this thing further if it does continue again along that pretty bright pink line there.
Darren Hall
Yes, for sure.
Justin Stevens
And then I guess, on that, I mean, I’m assuming that the thinking is still even for some of this, call it, regional Limon target material. The goal would still be to fill the Libertad mill first and utilize that excess capacity before sort of looking at any other additional incremental expansion in terms of your milling capacity, right?
Darren Hall
Yes. Again, because as I mentioned there with Farooq is that we’ve been able to grow production to the — well, again, consolidated business, 250, 275 from what was 100 and change there in 2020 and that’s been through growth. We’ve still got the latent capacity there at Libertad. Again, when you put it in perspective, the idle capacity we have at Libertad is twice the volume of installed capacity of the mine. So if you think of Limon is a 60,000 to 70,000 ounces a year producer, the installed capacity there for gold production is 140,000, 150,000 ounces. So we’re going to be in a really first real problem when we’re thinking about expansion of Limon mills or adding additional incremental capacity to the North when we’ve got such cheap capacity at Libertad. I look forward to that day, but I don’t see it necessarily as being tension in the next couple of years. So…
Justin Stevens
I mean I’m hoping you guys have the same kind of success pulling up those — more of those grades, but that’s certainly a good problem to have and not having too much high-grade material?
Darren Hall
Yes. Well, and even — again, there’s a bonanza grades are fantastic because grades — grade is a good thing. But even when we start to consider some of the nearer to Libertad resources that we’re currently kind of flushing out around Vulcan, for example, it’s not the bonanza grades. But if we’re looking at 2 to 3 grams and you consider it as a maybe a push to a gram to get into it and develop it and put it through the mill, you’ve got a gram of margin. So at $50, $60 rock going through the mill, an incremental 250 tons a day over a year generates a boatload full of cash. So that’s also we’re looking at it. It’s not just the bonanza grades [indiscernible], but there’s a lot of accretive growth that can come from leveraging off that capacity. And as we’ve talked about the churn in the deck, the incremental metal production you can get from relatively modest grades is still fantastically accretive from a cash flow perspective. And that’s ultimately what we’re about.
Justin Stevens
Sure. And that sounds good. Looking forward to seeing the Eastern Borosi material hit the Q2 production line there, but that’s it for me. Thanks.
Operator
Thank you. [Operator Instructions]. I show no further questions at this time. I would now like to turn the call back to Darren Hall for closing remarks.
Darren Hall
Thank you, operator. I’d like to finish up by thanking all of our shareholders and stakeholders for their continued support and your participation and questions on this morning’s call. As always, Ryan, I and the leadership team are available if you have any further questions. And with that, I think it’s time to end the call. Take care. Have a great day, and I’ll pass it back to you, operator.
Operator
This concludes today’s conference call. Thank you for participating. You may now disconnect.