Aris Mining Corp (ARMN) 2024 Q4 法說會逐字稿

Good morning, everyone, and welcome to the Aris Mining full-year 2024 results call. We will begin with an overview from management followed by a question-and-answer period. (Operator Instructions) And the conference is being recorded. (Operator Instructions)

Please note that the accompanying presentation the management will refer to during today's call can be found in the Events and Presentation section of Aris Mining's website at arismining.com. Aris Mining has filed financial reports for the fourth-quarter and full-year 2024 on SEDAR+ and EDGAR. These reports can also be found on the Aris Mining website.

I would now like to turn the conference over to Mr. Neil Woodyer, Chief Executive Officer. Please go ahead.

Thank you, operator, and welcome, everyone. Thank you for joining us for our full year '24 earnings call. Today, I'm joined by members of the management team including Richard Thomas, Richard Orazietti, and Oliver Dachsel. We look forward to addressing your questions at the end of this call.

But before we dive into the results, please note the cautions statements on slide 2, as we'll be making several forward-looking statements today. Starting on slide 3, I'm pleased to report that Q4 is a strong quarter, delivering our highest production for the year of 57,364 ounces.

We generated $22 million of net income and $67 million of EBITDA in the fourth quarter. At Segovia, reduced all-in sustaining costs to $1,485 and achieved an all-in sustaining margin of $58 million, which is a 32% increase over Q3.

We remain on track to commission the expanding processing facility at Segovia in the second quarter of this year. Following that, a gradual ramp-up from 2000 tons per day to 3,000 tons a day throughout the remainder of the year. This year, Segovia is targeting annual production of 210,000 to 250,000 ounces. And in the range of 300,000 ounces from 2026 onwards.

We've also been exploring opportunities to scale up Marmato's current expansion into a higher capacity operation by way of upgrading the carbon impulse processing facility by 25% to 5,000 tons per day. We're also looking at expanding our CMP business model at the Upper Mine flotation processing facility.

Together, these upgrades and expansions are expected to increase Marmato's annual production potential to more than 200,000 ounces. Richard Thomas will be giving more information about later on in the presentation.

Growing cash flow generation and refinancing of our senior notes in October last year contributed to a year-end cash balance of $253 million. We're well positioned and funded to deliver on our growth strategy. We expect to achieve an annual gold production rate of more than 500,000 ounces once our expansions and operations are fully wrapped up to nameplate capacities.

With that, I'll now hand you over to Richard, our COO.

Thank you, Neil. Moving on to slide 4, for the full year we produced 211,000 ounces from our mines. 188,000 ounces of gold from Segovia, and [22,000] ounces of gold from the Marmato mine. As Neil mentioned, quarter four was our standout quarter, delivering our highest gold production of the year at 57,364 ounces.

At Segovia, a modest increase in through put in quarter four, combined with a 7% rise in average gold rate processed at Segovia at 9.84 grams a ton, resulting in the gold production of 51,477 ounces, an 80% increase compared to the quarter three results. Despite an 8% high-rise gold price, all-in standing costs reduced by 4% to $1,485 per ounce compared to quarter three.

Owner Mining all-in standing costs improved to $1,386 per ounce on quarter four from the $1,451 per ounce in quarter three. While Contract Mining Partner segment generated the highest quarterly all-in standing cost sales margin of 59%.

With that, I'll pass on to Richard Orazietti to cover our financial results and then provide an update on our growth projects.

Thank you, Richard. Turning to slide 5, as Neil said at the onset, we had a very strong quarter, especially when compared to the third quarter of 2024. Full revenue of $148 million was up 13% compared to the third quarter, driven by higher realized gold price of $2,642 per ounce, and higher quarter-over-quarter sales volumes resulting from higher production.

Altered by the revenue growth and a strong focus on cost control, income from mining operations increased 42% quarter-over-quarter to $54 million. Net earnings for the fourth quarter were $21.7 million compared to a net loss of $2.1 million. This was primarily due to the increase in income from mining operations, as well as a gain of $6.6 million on financial instruments and a $5.1 million FX being recognized in the quarter.

Adjusted earnings in the fourth quarter were $24.7 million or $0.14 per share compared to $13.1 million or $0.08 per share in the third quarter. Adjusted EBITDA was $55.6 million in the fourth quarter, a 29% increase quarter-over-quarter, reflecting the increase in adjusted net earnings. For the full-year 2024, we generated adjusted EBITDA $163.1 million and adjusted earnings of $55.9 million or $0.35 per share.

We're now looking at slide 6. I'd like to draw your attention to the graph. As mentioned earlier, the increasing realized gold price, higher production, and our continued focus on cost control supported a meaningful expansion in AISC margin in the fourth quarter out of Segovia operations. A quarterly AISC margin reached a three-year high of $58 million, up 32% from $44 million in the prior quarter.

For the full year of 2024, the Segovia operations generated an AISC margin of $163 million. While we enjoyed a strong low-price environment, we remain focused on operational efficiencies and keeping costs low.

Now moving on to slide 7. I'd like to discuss some key items on our cash flow. For the full-year 2024, our gold revenue totaled $499 million, and we generated a AISC margin of $154 million. The adjusted sustaining margin after tax, G&A, together with working capital changes amounted to $66 million, supporting the funding of $157 million of our growth projects, including $83 million at Marmato, mainly for the Lower Mine Marmato project. And $65 million at Segovia operations, primarily for the processing plant and underground development and exploration.

In the fourth quarter, our after-tax adjusted sustaining margin of $49 million more than covered our expansion and growth capital of $42 million. In addition, financing activities in the fourth quarter generated a cash inflow of $164 million, including $136 million in net proceeds from refinancing the 2026 bonds with a new issue of five-year 2029 bonds, and a $40 million inflow for Wheaton Precious Metals stream pertaining to the Marmato Lower Mine project. We ended the year with a cash balance of $253 million, up from $195 million at the end of 2023.

I will now pass it back to Richard Thomas, and he'll provide an update on the expansion of the Segovia Processing Plant and the construction of the Marmato Lower Mine.

Thank you, Richard. Now moving on to slide 8. Segovia Process Plant Expansion has progressed as scheduled and, as previously disclosed, phase one of the Segovia expansion is complete. The new expanded receiving area for our CMPs fully commissioned and handed over to operations and working well. The new facility began processing material in October 2024.

Phase two, which involves installation of a ball and the former contractor receiving area is underway to finishing, expected in quarter two this year, as scheduled. Following the ramp-up period, we expected to reach a production rate of about 300 tons per day by the end of '25 and the mine at Segovia to produce 210,000 and 250,000 ounces of gold in 2025.

And in the range of 300,000 ounces of gold from 2026 onwards, as were our guidance released earlier in January. The total cost of Segovia Processing Plant Expansion project is still estimated at $15 million and at the end of the year, last year, we had to spend $8.5 million.

If we could move on to slide 9, please. I'd like to provide an update on the construction progress at the Marmato Lower Mine. As you can see from the photographs on the slide, the construction of Lower Mine continues to advance with, firstly, the access roads to lower Marmato process facility and the accommodation camp now 100% completed.

Secondly, the decline development under way, with 200 meters completed by the end of February 2025. And the processing plant foundation earthworks 12% ahead of schedule as at the end of February 2025.

At the beginning of this year, we initiated an engineering assessments to evaluate whether we could expand the plant, the current CIP plant, currently under construction. As a result of those studies, we have decided to expand the CIP processing facilities at the Lower Mine from 4,000 tons a day to expanded 5,000 tons per day, whilst also expanding our CMP business model, increasing the feed, and average grade to the existing Upper Mine flotation plant, thereby further increasing the gold production.

With the completion of these expansions, we expecting Marmato to be able to produce in the range of 200,000 ounces of gold per year, which compares to the previous life of mine average of only 162,000 ounces per year.

If we could move to slide 10, please. As you can see from the drawing on this slide, the key enhancements required to take the throughput from 4,000 tons a day to 5,000 tons a day are straightforward. And the upgraded 5,000 tons per day design will use major components from the current 4,000 tons per day design while also integrating some high-capacity components, installing the secondary crushing circuit, adding an extra leach tank to support the increased throughput, and accelerating certain project components into the initial capital phase. We expect this roundup to begin at H2 2026.

Moving on to slide 11. As of February 2025, we have spent $75 million on construction. The estimated cost to complete the revised construction, taking the throughput from 4000 to 5,000 tons per day is $290 million, bringing the total upfront cost to $365 million and $85 million over the previous construction plan. The 25% bigger plant requires bringing forward the tailings facility construction and the backfill plant into the upfront capital and this is estimated at $50 million.

We've also opted to build a $20 million grid power line instead of relying on a third-party power purchase agreement. The process enhancement that I mentioned earlier, namely, integrating some higher-capacity components, secondary crushing circuit, and adding an extra leach tank to support the increased throughput are expected to cost around additional $10 million.

Importantly, the net construction cost to Aris is $208 million, considering the remaining stream funding of $82 million. In our view, this is a very attractive investment proposition, being able to meaningfully increase production of a long life asset for limited community capital, against the backdrop of record of high oil prices.

Looking ahead with the new Marmato and the expansion together, Aris is targeting an annual production rate of more than 500,000 ounces of gold. With that, I'd like to hand over the report to Oliver.

Thank you, Richard. Turning to slide 12, I'd like to summarize our previously disclosed guidance for 2025. Aris Mining expects consolidated gold production of between 230,000 to 275,000 ounces in 2025, within progress expansion projects to contribute to production growth in 2025 and beyond.

With 2025 gold production expected to range between 210,000 to 250,000 ounces at our Segovia operations, the company anticipates a significant increase in Segovia's all-in sustaining cost margin this year of more than $230 million, using the midpoint of our 2025 guiding ranges at a gold price of $2600 per ounce. This compares to an all-in sustaining cost margin of $163 million at Segovia in 2024.

In 2025, production from the Segovia operations will be sourced approximately 50% to 55% from Owner Mining and 45% to 50% from [milk feed] purchased from Contract Mining Partners. For the Owner Mining segment, all-in sustaining cost per ounce sold is expected to range between $1450 to $1600 per ounce, and the CMP segment is expected to achieve an all-in sustaining cost sales margin of 35% to 40%.

The 2025 cash cost and all-in sustaining cost guidance have been provided separately for the two segments, Owner Mining and CMPs, given their distinct primary cost drivers. Owner Mining costs are primarily driven by conventional expenses such as labor; consumables, such as explosives and fuel; and power. In contrast, CMP costs are mainly influenced by the cost of purchasing milk feed, which depends on material volume, recoverable gold grade, and the spot gold price.

Distinguishing between Owner Mining and CMP cost metrics is necessary, given the current rise in gold prices and the resulting challenge in forecasting CMP costs. As a result, we believe the CMP segment is best presented on a sales market basis to provide a clear representation of its financial performance.

The Marmato Upper Mine produced 23,000 ounces in 2024, and a similar production level is expected for 2025, while construction of the new large scale Lower Mine, which will act as wider for thorough mineralization, continues. Aris Mining would resume providing cash costs and all-in sustaining costs for the Marmato Mine when the Lower Mine achieves commercial production.

Now, especially for our credit investors on the line, slide 13 highlights and summarizes the strength of our balance sheet. Strong liquidity of $253 million. Low net leverage of 1.5 times. Insignificant near-term debt maturities, and the solid equity cushion sitting below our debt as evidenced by our gearing ratio. Importantly, total and net leverage ratios have already started trending down compared to when we issued our 2029 bonds in October last year from 3.1 times and 1.7 times, respectively.

I'd like to hand the call back to Neil to conclude our prepared remarks.

Thank you, Oliver. We now move to slide 14. But before opening the Q&A session, I'd like to summarize key takeaways that we've reported for this fourth quarter and for the full year.

In Q4, we recorded our highest score for production at 57,000 ounces. We expect total production in 2025 to range between 230,000 and 275,000 ounces, which is up from 211,000 last year. We see meaningful margin expansion, as evidenced by our quarterly all-in sustaining cost margin of $58 million in Q4, increasing by 32% over the prior quarter. We're in a strong financial position with cash balance of $253 million, $82 million still to be funded by Wheaton under the Marmato stream, and growing cash generation from Segovia.

To close, Aris Mining is on track to more than double under production to 500,000 ounces, and we have the means and the team to deliver that growth. With that, we look forward to your questions and I'd like to turn the call back to the operator to open the line for questions.

(Operator Instructions) Carey MacRury, Canaccord Genuity.

Just wondering if you could give us some color on how long you've been thinking about this expansion and why now, I guess.

I think we've been thinking about the expansion for well over a year. When we started construction, we were following the plan that had been originally set up by SRK and then going on from there. That plan made sense to us, but as we got to know the Upper Mine more, we realized two things.

It would not achieve the performance that had originally been anticipated. But it was a huge potential for the small miners, so we started to reshape our thinking on the basis that our license is limited to 2 million tons a year, as to whether we could increase the more profitable material from the Lower Mine.

So we've been thinking about it for some time. And put the analysis strictly into play at the beginning of this year.

Okay. Thanks and maybe just on the capital, can you give us a sense of how much capital we should expect this year versus next year for the expansion?

I mean, we were forecasting roughly this year about $260 million and so the additional expenditure this year could be another thing, depending on the spend. So we're moving on.

Okay. Great. Thank you.

(Operator Instructions) And this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Woodyer for any closing remarks.

Thank you, operator, and thank you, everybody, for joining us. And if you want more information, please contact Oliver, who will be more than happy to take you through any more details. Thank you very much. We appreciate your attendance. Thank you.

Thank you, sir. This brings to a close today's conference call. You may disconnect your lines, and we thank you for participating. Have a pleasant day.