Galiano Gold Inc (GAU) 2020 Q2 法說會逐字稿

Hello, everyone, and welcome to Galiano Gold's Q2 2020 Results Videocast. Please refer to our financial statements and MD&A on our website or filed on SEDAR for further details.

First, let's take a look at the Q2 results from the Asanko Gold Mine, which is managed and operated by Galiano. All information related to the Asanko Gold Mine is discussed here on a 100% basis.

The mine continued to deliver strong operational results with a sixth consecutive quarter of gold production over 60,000 ounces. During the quarter, the AGM produced a record 69,026 ounces of gold as the processing plant continued to perform very well with a record 1.6 million tonnes of ore processed at an average feed grade of 1.4 gram per tonne gold, with gold recovery averaging 94%.

It was also another exceptional quarter financially, with revenue totaling $101.5 million during the period, including gold sales of 61,357 ounces with a realized gold price for the quarter of $1,651 an ounce.

Turning to costs. The mine's cash operating costs were $725 per ounce, with all-in sustaining cost of $1,067 per ounce. This brings our year-to-date all-in sustaining cost to $929 per ounce, below our guidance of $1,000 to $1,100 per ounce for 2020. However, we are expecting higher all-in sustaining costs during the second half of the year, which we expect will bring us in line with the annual guidance.

In particular, the AGM started an important tailings storage facility raise in Q2, and the project is expected to be completed during Q3 at a forecasted capital cost of $9.5 million. In addition, mining activities are moving from the south pit back to the main pit at Esaase during Q3. Based on strong gold prices, the design for the main pit is expected to be adjusted from a $1,300 per ounce pit shell to a $1,500 per ounce pit shell in certain locations. This will result in higher waste stripping cost, but it will open up additional future gold production ounces.

Mining is expected to be focused in the Esaase Main and Akwasiso pits for the balance of 2020. The mine continues to deliver strong cash flows with $48.8 million in cash flow from operations and free cash flow of $22.6 million. With significant free cash flow for the fourth consecutive quarter, the joint venture distributed a further $30 million to the JV partners.

Corporately, at Galiano, our equity-accounted net income was $14.7 million or $0.07 per share, with adjusted EBITDA of $18.5 million for the period. And notably, the company's cash and receivables position increased to $68 million as at June 30 with no debt.

With continued execution at the operational level, we've been able to focus on exploration with 3 drill rigs currently turning. Early in Q3, we released drill results from both Akwasiso and Abore with positive results received showing the extension of mineralization at both pits. At Akwasiso, we're currently mining Cut 2 and this latest drilling program delineated a third cut, which we expect will allow us to continue mining operations into 2021.

At Abore, the drilling has extended the known mineralization north and our follow-up program will continue to test for mineralization along strike. Our near-term objective is to replace depletion, and both pits have the potential to be the additional sources of ore, supplementing our Esaase pit in the latter part of this year and through 2021 and 2022.

In addition, we recently completed a 4,000 meter drilling program at the Nkran pit to both increase the confidence in the resource model for Cut 3 and to test the mineralized system below the proposed pit shell. Our results are still pending for the drilling program and further work is planned on design and geotechnical engineering for Cut 3 at Nkran, which is not expected to start until late 2022.

The drills are now turning at our high priority Miradani targets, where initially, we'll be focusing on following up on a 2019 drill program at the northern tip of the 3-kilometer long mineralized trend. Based on the positive results from our exploration program to date, the company is proposing to increase our exploration budget from $10 million for 2020 to $20 million, subject to approval from our joint venture partner.

So turning to our outlook for the year. We maintain our current guidance on production between 225,000 and 245,000 ounces for 2020 at all-in sustaining costs of between $1,000 and $1,100 per ounce. Our all-in sustaining cost to date is $929 per ounce. However, we do expect to see a significant increase in Q3 costs as we ramp up sustaining capital expenditures to complete the raise of the tailings storage facility and increased waste stripping in Esaase Main. As planned, production is also expected to be lower in Q3 and Q4 as ore will be sourced from the lower grade of Esaase Main and Akwasiso pits as Nkran Cut 2 has been depleted.

We've achieved a lot over the past year, and I'd like to thank our team for their dedication and hard work. They've helped us to reach a very strong financial position during a challenging time with COVID-19. We were also very pleased to publish our 2019 sustainability report this quarter, and I invite you to have a look at it on our website. We believe it's a great start on our journey of implementing a best practice ESG program at Galiano.

So thank you for watching, and I look forward to our next videocast in November when I'll update you on our third quarter results.