I-80 Gold Corp (IAUX) 2021 Q3 法說會逐字稿

Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I'd like to welcome everyone to the i-80 Gold Corp. Third Quarter 2021 Results Conference Call. (Operator Instructions) Mr. Ewan Downie, you may begin your conference.

Thank you, and thank you, everybody, for attending our Q3 2021 operating results conference call and webcast. This is the second one our company has performed and those who don't know i-80, we are Nevada-focused gold explorer, developer and producer.

Slide 2 is the management participants. The 3 principles who will be talking in today's conference call will be myself, the Chief Executive Officer; Matt Gili, our President and Chief Operating Officer; and Ryan Snow, the company's Chief Financial Officer.

Slide 3 is a standard disclaimer statement. Some of the statements in this presentation constitute forward-looking statements and/or forward-looking information. I urge everybody to read this disclaimer page.

Slide 4. i-80 is a relatively new company. We've been trading for just over 6 months now since the acquisition of Premier Gold and the spin out of the Nevada assets to create i-80. I believe that our company has really stepped out and executed on our plan to grow and grow quickly.

We -- the slide here, Slide 4, is one of the original slides in our presentation when we launched as a company. And we've already started meeting and exceeding some of our early targets we set. We set a production target for ourselves in the future to grow to more than 200,000 ounces. However, recent acquisitions of Lone Tree and Ruby Hill have the company increasing our future growth target to more than 400,000 ounces a year. Our plan is to build up to 4 new mining operations over the next 3 years, and our company is in a very strong financial position to achieve that.

we stated early on that we plan to grow by continually assessing our portfolio and monitoring for accretive M&A opportunities. The acquisitions of Lone Tree and Ruby Hill not only position the company as a unique operator in Nevada, given we have complete processing facilities, but significantly grow our resource endowment, such that we have significantly exceeded our early goal of having over 10 million ounces in total resources.

We -- as we said, assessing our portfolio to achieve this, we did trade our nonoperating 40% interest in South Arturo to achieve this. So I think our team that we are -- have built and are continuing to build in Nevada has done a tremendous job at executing on the plan to date.

On Slide 5, just to go through a few of the highlights that we saw in Q3, we entered into the agreement to acquire Lone Tree from Nevada Gold Mines. That was a real, in my opinion, company changer as we acquire an autoclave or we have now acquired that autoclave facility that will allow us to become a stand-alone producer in the state.

We entered into an agreement also to acquire Ruby Hill. That deal also closed subsequent to the end of the third quarter and represents the company's largest gold and silver resource base and we are producing gold from the Ruby Hill site today.

We ended Q3 with over $51 million in cash. Subsequent to the quarter, we completed a roughly $81 million equity financing. And we've entered into an agreement with Orion Mine Finance to raise an additional $125 million that should close here in the coming weeks. Sprott is anticipated to participate in that convert and Equinox is also anticipated to exercise its portion of its antidilutive right, and we are expecting them to take an additional $10 million equity. So our company will be in a very strong position to continue to execute on our plan.

We began the rehabilitation of the underground workings at Granite Creek. We're planning to commence the test mining here in the fourth quarter and are targeting a ramp-up to full production in early '22 at Granite Creek.

We also saw continued performance out of South Arturo. However, our interest in the property was transferred to Nevada Gold Mines subsequent to the end of the quarter, inclusive of all the gold produced.

We were credited with the profits from the gold production from Lone Tree in the third quarter. So the third quarter production at Lone Tree was -- the profits were credited to us at closing and the $7.3 million payment was made to our company by Nevada Gold Mines subsequent to the quarter end, as a result of certain prior expenditures at South Arturo.

So I'll jump into the heart of the presentation after Matt and Ryan go through the operational results. Matt Gili is going to talk about the operational results here on Slide 6.

All right. Thank you very much, Ewan. And as Ewan said, I'm Slide 6. So as Ewan discussed on the previous slide, we entered into an agreement to acquire the Lone Tree site for an exchange of the South Arturo site, including the autoclave of Lone Tree from NGM and that deal closed in the fourth quarter.

South Arturo performed very well for us, producing 14,000 ounces through Q3, and that's versus our full year guidance for South Arturo previously announced at 15,000 to 20,000 ounces. The gold ounce production at El Nino was down in the quarter primarily due to timing of process plant and maintenance. Byproduct cash cost at El Nino were $952 per ounce and byproduct AISC was $1,355 per ounce.

Production focus has shifted to the ramp-up of Granite Creek underground. We're now in the process of adding an additional shift to the underground operations and have begun advancing the main decline down to the next mining level, while continuing with the previously discussed drilling program.

Lastly, we've taken over the operations of Ruby Hill and Lone Tree, both of which have active and producing heap leach facilities, and we'll be providing more information on these 2 mines in the upcoming quarter. Thank you very much. Hand over to Ryan, Slide 7.

Thanks, Matt, and good morning to those listening in today. Yesterday, the company reported our Q3 financial results and our financial statements and MD&A can be found on the company's website as well as SEDAR.

On Slide 7, you'll see the highlights for the period include $8.2 million in revenue from South Arturo, resulting in mine operating earnings of $3.3 million. Net loss for the quarter was $9.3 million or $0.05 per share while net loss from continuing operations was $11.9 million or $0.06 per share.

During the quarter, the company announced the asset swap for the Lone Tree complex, whereby we trade 40% interest in South Arturo for Lone Tree and announced the acquisition of the Ruby Hill Mine. As a result of the asset swap, we've accounted for our 40% interest in South Arturo as a discontinued operation in the quarter.

Net loss for the quarter was impacted by increased exploration expenditures at Granite Creek and the noncash impact of revaluing the outstanding warrants of the company. During the quarter, the company used $5.1 million in cash flow related to operating activities of continuing operations and ended the quarter with $51.6 million in cash and no material debt on the balance sheet.

Looking forward, as Ewan mentioned earlier, we completed an approximately $81 million equity financing on October 18 and are in the final stages of completing the previously announced $125 million financing package with Orion Mine Finance, that includes the ability to access an additional $100 million via an accordion feature at the company's option.

With these financing initiatives complete, the company will be well funded to advance our mining projects to production and refurbish the Lone Tree autoclave. With that, I'd like to turn the call back over to Ewan Downie.

Thank you, Matt. Thank you, Ryan.

We will now move to Slide 8 of the presentation. This is really, I think, a slide that tells the i-80 story. i-80 is centrally located in Nevada. Our operations are intermixed amongst Nevada Gold Mines projects. The Battle Mountain and Carlin Trends of Nevada collectively represent the world's most productive district. In fact, if Nevada Gold Mines were its own producing company from production in this posted stamp within Nevada, it would likely be the third largest gold producer in the world.

Next in Nevada Gold Mines, i-80 is now the largest holder of gold resources in the Central Nevada Mining District and our target is to become the second largest producer in the State. i-80 is currently planning 4 mining operations that will feed a central processing facility that includes an autoclave that's at Lone Tree, you see rate on highway international i-80 in the central part of the image.

Our projects, the 5 projects you see Granite Creek, Lone Tree, Buffalo Mountain, McCoy-Cove and Ruby Hill all are permitted or in the final stages of being permitted for full production. These core land positions are all road accessible. We have grid power and water rights. So the company is truly unique with our ability to process refractory ore or future ability to process refractory ore and also the fact that we are very advanced in terms of permitting, which will lead to significant organic growth over -- production growth over the next several years.

On Slide 9, processing is a key to long-term success in Nevada. Many of the more simple heap leach oxide projects have been mined out and a lot of these deposits have been transitioning or have transitioned into the sulfide at depth, which are mostly refractory in Nevada.

And the strategically located Lone Tree facility makes i-80 Gold 1 of only 3 companies in the State. In fact, I believe only 1 of 3 companies in all of the United States that has processing facilities capable of processing of -- processing refractory ore. The previously Nevada Gold Mines controlled 4 of the 5 and had, in my opinion, somewhat of a monopoly on Nevada, and this will allow i-80 to grow organically and to control our own destiny going forward.

The next few slides starting on Slide 10 is taking us through some of the fundamentals, what we've achieved as a company. Resource growth is something we stated we wanted to do early. Our target was to exceed 10 million ounces over the next several years, when we launched i-80 only 7 short months ago. Through successful M&A recently and previous exploration, we have steadily grown our resource base since we really entered Nevada back in 2014. At that time, in all categories, we only had about 400,000 ounces of gold in the state. So I think we've -- our track record of resource growth is second to none in the state.

Every deposit in our portfolio remains open for expansion. So we see continued resource growth into the future. And we have 2 major drilling campaigns underway. Roughly 20,000 meters of underground surface drilling is being completed at Granite Creek. We're about halfway through that program, and we have the major drill program that just started at the recently acquired Ruby Hill project.

On Slide 11, in the Carlin and Battle Mountain trends, the center of Nevada that we saw in the previous slides, i-80 Gold is now second only to Nevada Gold Mines for our resources contained within these trends. And we are third in the state in total resource endowment. We are targeting a 20% gold resource expansion by the end of '22 with our multiple drill campaigns that are either underway or will be undertaken over the next 12 to 14 months.

We plan to upgrade our Blackjack at Ruby Hill. It's a polymetallic zone immediately beneath the Archimedes pit and the second chance deposit, which is being permitted for production at Lone Tree. We expect to move those into resource status, so that should grow our resources overall.

We also, our company with a very significant silver resource base. The company, mainly at Ruby Hill, we have 103.3 million ounces of indicated silver resources and 73.5 million ounces of inferred, making our company also one of the largest holder of silver resources in the state of Nevada.

On Slide 12, our projects really stand out amongst other U.S. and North American projects for -- in terms of grade. The open pit grades rank amongst the highest in the U.S., especially when you compare them to other heap leach projects. All 3 of our underground deposits compare favorably with pure projects and the grade at Granite Creek and Cove are in excess of 10 grams, which is pretty rare in this day and age.

On Slide 13, I believe that there's still a good rebate opportunity here in i-80. We are a new company. I think relatively unknown. We're starting to become better and better known as we continue to deliver on our plan. But one of the ways of valuing company would be enterprise value per measure indicated resource ounce.

And on Slide 13, the companies you see around i-80 or other North American producers and developers. These are companies with basically 200,000 ounces a year of production or less. And you can see that we rank at the lower end so far of the -- of our peer group with a market cap of around $600 million. That equates to approximately $70 per measured indicated ounce, whereas the peer group is trading at over $360 an ounce on average, which would equate to a -- should equate to a much higher share price longer term for our company.

I view much like the Fraser Institute that Nevada is one of the best places for mining investment in the planet. It was ranked #1 by the Fraser Institute in 2021.

On Slide 14, I'll introduce our Lone Tree complex. This is a central processing facility that we expect will be processed ore from 4 deposits.

On Slide 15, our plan is to begin the retrofit of the Lone Tree processing facility starting in 2022. Currently, we are getting ready to do a significant metallurgical program to assess exactly what we need to do to ensure that we get maximum recoveries from our projects through this facility. And once we finish that work and working with an engineer, we will have a plan that what we need to do and how long it will take and how much it will cost to retrofit this facility.

But Lone Tree is really a game changer for our company. As it becomes our core asset, the site includes a whole ore autoclave that's capable of processing approximately 1 million tons a year, a flotation circuit capable of processing approximately 1.8 million tons a year a leach pad that has over 7 million tons of capacity left that we expect to utilize for the Buffalo Mountain deposit, a CIC circuit, tailings facility and waste dump.

So this is a very significant infrastructure for our company that will allow us to become a stand-alone producer, and it's strategically located right on Interstate AV highway and immediately across the highway from Lone Tree is the Northern Nevada Railway. So it is very strategically located for processing ore from other sites.

Moving on to Slide 16. Granite Creek is our most advanced project in terms of getting into development other than the Ruby Hill open pit. We are in advanced exploration and mine development as we speak. The deposit, as you can see on Slide 16 is situated immediately south of the very large Turquoise Ridge and Twin Creeks deposits currently being mined by Nevada Gold Mines.

Geologically, it occurs along the eastern contact of the Osgood intrusive complex, shown in the pinkish colors and the host rock of the mineralized zones at Granite Creek is identical to what you see at Turquoise Ridge to the north. Turquoise Ridge is a plus 20 million-ounce deposit when you combine historic production and current resources and reserves.

We have entered into a processing arrangement with Nevada Gold Mines as part of the recent transfer of assets to each other that will allow us to fast track development, the agreement allows for up to 1,000 tons a day of capacity at the Sage plant. That's the processing facility right there at Twin Creeks for our company until we get the Lone Tree facility up and running.

Yesterday, we announced the results of our PEA that showed an after-tax NPV utilizing a 5% discount rate of over $244 million, an after-tax internal rate of return of more than 34% initial capital, primarily for the open pit of approximately $70 million and all-in sustaining cost of less than $1,000 an ounce, resulting in gold -- life of mine gold production of nearly 1.25 million ounces.

I should point out that the PEA parameters were completed prior to the acquisition of Lone Tree and it contemplates life-of-mine third-party processing and also building a CIL plant at Granite Creek as part of the open pit project. There is a CIL plant at Lone Tree, and we expect during the life of mine here in the underground operation that the Lone Tree facility will be up and running and therefore, we will reduce our processing cost by utilizing our own facility longer term. So there will be some changes as we advance this project towards feasibility in the future.

Right now, we are underground at Granite Creek. The underground operation is preparing for test mining. And ultimately, that is expected to lead to full production ramping up in 2022.

Moving to Slide 17. You can see the image on the right is the underground project where we are both drilling from surface and from underground following the rehabilitation of the workings, plus 10-gram deposit that remains completely open on strike and at depth. In addition to the underground drilling that is defining several areas for mining, we are currently stepping out at depth to expand resources, and we are expecting to release the first results of that program as early as next week.

The drilling -- all of the drilling that's being completed at Granite Creek is that depth shallower than basically the talk of Turquoise Ridge to the north. So we do see significant expansion potential. We're also initiating the permitting process of the high-grade open pit opportunity here, and we expect that program to proceed for the next couple of years.

The deposits remain open at depth and on strike. And as I mentioned earlier, we are completing 20,000 meters of drilling. On that project, we're about 10,000 -- we're getting close to 10,000 meters in as of today.

The next project we expect to advance in our portfolio is the Brooks and Buffalo Mountain deposits situated at the new Lone Tree site. The Buffalo Mountain project was in the process of being permitted by Nevada Gold Mines when we entered into the transaction to acquire the project, and we are continuing that program with the goal of potentially ramping up the construction or development starting at Brooks as early as H2, the second half of next year.

The ore from both Brooks and Buffalo Mountain would be processed at the -- where it says processing area, that's where the current heap leach pad is. So that target of production would lead to -- ultimately to production coming from the Buffalo Mountain and Brooks projects likely early in '23.

Slide 19 is the introduction of the new Ruby Hill project. Ruby Hill has, in my opinion, excellent potential to host one of Nevada's largest sulfide gold deposit. The Ruby Deeps deposit at Ruby Hill has only been partially delineated, and indications are it is open in almost every direction.

The drill campaign that we have just started up will undertake to firm up the reserve -- resources to elevate to reserves for underground mining, but also expand on the mineralization.

As you can see on the Slide 19, there is significant infrastructure at Ruby Hill, the crushing facility and the milling complex at Ruby Hill, we're currently in revisioning, changing or retrofitting those facilities to facilitate the processing of base metal mineralization or polymetallic mineralization, owing to the fact that there is a significant mineralized zone that hosts significant lead, zinc, silver and gold immediately below the pit. It is not yet in the resource category.

On Slide 20 is the overall picture of what Ruby Hill is. Ruby Hill now represents the largest gold deposit in i-80's portfolio. The primary target for us in the image on Slide 20 is accessing the 426 in Ruby Deeps zones. What we collectively now refer to as Ruby Deeps.

On an indicated basis, the property is hosted more than 4 million ounces of gold, more than 103 million ounces of silver and inferred more than 3.6 million ounces of gold and almost 74 million ounces of silver. A large part of that resource base is held in the mineral point deposit, a very large heap leach opportunity that we will begin assessing in the near future and over the longer term, looking to permit and likely develop.

The current mining, as you can see on the image on the far left, is mining the last part of the East Archimedes open pit. We should see significant gold production from that in the first quarter of 2022. And -- but the main focus is where you see that machinery at the bottom of the pit, permitting for the ability to put in 2 declines out of the bottom of the pit to access the higher-grade material in Blackjack and Ruby Deeps.

And ultimately, as shown in Slide 21 is our conceptual plan to mine both deposits simultaneously. So in yellow is the Ruby deeps deposit. It is wide open for expansion. You can see the drill intercept of anywhere from 7 to over 10 grams per ton in the step-out drilling, and it remains wide open for expansion.

Blackjack shown in orange is not yet in resource status. We will be completing primarily from underground. We expect the drilling that will upgrade Blackjack to ultimately to resource status. But home stake back about 20 years ago when they own this project, below the Archimedes pit had numerous high-grade intercepts of both Carlin-style gold mineralization but also polymetallic mineralization. We highlighted in this image, HC1751, they returned 24.5 meters of more than 3 grams gold, 13 grams silver and 27% zinc.

The Ruby Deeps and Blackjack deposits remain open for expansion. Ruby Deeps structure, we expect will produce mineralization for several kilometers along trend based on geophysics and soil sampling and a couple of drill holes that were drilled hundreds of meters to the north of where the deposit has been outlined.

McCoy-Cove on Slide 22 is a 100% owned project that we held in our portfolio for several years in Premier. It is one of the highest grade gold deposits in the United States. The project is permitted for underground development. We completed that permitting more than 2 years ago in Premier, but we put the development of that underground program on hold because of our inability to process refractory mineralization, which is the majority of the material at McCoy-Cove is refractory.

The agreement we entered into not only to acquire our own facility, but also to secure a long-term processing arrangement with Nevada Gold Mines will now allow the company to proceed with the underground program and we expect to begin the underground development here in 2022 now with our strong balance sheet.

And the goal of moving from PEA shown on Slide 23. We completed in 2021 of PEA. But longer term, we expect to put in the decline -- complete the definition drill program as most of the resource over 1.3 million ounces of the mineral resources that McCoy-Cove are currently in the inferred category.

So to move to full feasibility, we need to complete a significant underground drill campaign in order to upgrade those resources to indicate it and ultimately complete the feasibility study in advance of developing the project.

Our goal would be to have Granite Creek underground, Ruby Hill underground and McCoy Cove underground all operating at the time we start the Lone Tree processing facility and our target for restarting the Lone Tree processing facility is 2.5 to 3 years from now.

So over that period, we expect to utilize the agreement with Nevada Gold Mines for both roaster and autoclave facility to fast track development of our projects. But ultimately, the plan would be the bulk of our processing would be done at our own facility once we get the Lone Tree facility running.

So as a summary, our company is positioned to have a very significant growth profile over the next several years organically with our current projects. And it's our company's goal to become in the future, the second largest producer in the state with sustainable development opportunities. We continue to grow our reserve and resource bases through aggressive exploration campaigns, 2 of which are underway. This will lead to increased production and in the future, increase cash flow.

As we develop our projects, we're looking to prioritize reserve increases and high-return mine development with minimal share dilution. And that is why the recent Ryan my finance package is intended to be a bit of a mezzanine-type financing package so that we limit the share dilution that would result instead of going entirely equity. So with that, I will open up for questions. And we have Ryan and Matt on the line to assist. Our company does have a hard stop here today in about 10 minutes. Thank you.

(Operator Instructions) And we'll go to our first question from Justin Chan with Sprott.

Thanks for the question period and congrats on the PEA. My first one is just on the mine plan and kind of the differential between the PEA and the envisaged scenario and the facts on the ground now. I think in the PEA, there was kind of a year of preproduction and I think from the study about 4,050 meters of development.

The first year of production was 60,000 ounces. I'm curious how that compares to I guess, the development schedule and the production schedule as you see Granite Creek underground going into production next year?

I'll let Matt Gili jump in for that one.

Of course, Ewan, all right. Yes. Thanks, Justin. Thanks for your question. You're correct. When you look at the PEA, we used the base case there of 1 year of preproduction development and then ramp into full production. We -- we're looking at that much differently now as we're progressing past that PEA. We're going to do a gradual ramp-up of our production starting -- really starting now.

We started developing on the main decline. We'll see a gradual ramp-up of our production through all of 2022 and 2023. So I do appreciate what you see in that PEA, and that is how the PEA was laid out. That is not what we're planning. That said, Justin, I haven't put out -- we haven't put out guidance for next year yet, and we're working on that internally. Does that answer your question?

Yes. Yes, that's definitely helpful. Just good to get a sense of how those 2 things relate and how the schedule starts to change. And then I guess another one would be just on the overall concept. The CIL was quite prominent in both CapEx and the overall mine plan. I'm curious how that compares to how things -- how maybe you're seeing things as right now?

Yes. So you're very astute, Justin, and you catch all the details. The -- there is a CIL in the PEA that comes in on year 3. And that CIL was -- is put in there to target the higher grade portions of the oxide open pit. That is the best case scenario, and that does lead to slightly improved NPV and IRR, but at the cost -- of course, at more capital cost.

As Ewan mentioned, that PEA was produced before we had finalized the agreements on Lone Tree. And so now as we progress into the next stage of the study, which is really the part where you do the trade-offs, certainly CIL -- building a CIL at Granite Creek versus trucking to another facility versus just putting it on the heap leach and managing those recoveries. All of those are part of the next stage of our studies, and that is certainly not -- we're certainly not committing at this point to building a CIL at Granite Creek.

Okay. Got you. And third one, sorry to all the other people on the line. I know there's a hard stop. Just on the -- I guess, with regard to the overall kind of capital profile and the ramp-up, I guess, sequencing the open pit now versus the underground. What is kind of the -- what is the thinking on that? In terms of -- I guess this is a '23, '24 idea?

So you're speaking specifically to Granite Creek, correct, Justin?

Yes.

Yes. So look, to be sure, the permitting process for the open pit at Granite Creek is a 2-year process as Ewan pointed out. So we are not committing to any capital spend on the Granite Creek open pit for the next 2 years. And then we'll make that construction decision once we get closer to finalizing the permits for that facility.

(Operator Instructions) And we'll go back to Justin Chan with Sprott.

Well, no one can say I didn't play fair. Another one on just the underground mine plan. I'm just curious what were the -- I guess, what were the considerations that went into -- ultimately how many ounces went into the plan? And I'm curious, I guess, on 2 things.

One, when you should have much lower cost now that you have your own facility. How much does that affect the trade-off? And how much of that was just drilling at depth with regard to how many ounces you could convert versus how many you think are likely to factor and realize?

Another great question, Justin. So the difference between the -- owning our own processing facility versus the toll milling arrangements that are contemplated in the PEA that has a big impact on our economics, of course, but because of the high-grade nature of Granite Creek underground, it doesn't really -- that's not really a big change for how many ounces make it to the mine plan. It's all about the drilling. And that's why we've initiated that we're right in the middle of that 20,000 meter campaign at Granite Creek, we are actively drilling underground.

That deposit deserves a lot better understanding of the ore boundaries from an underground standpoint, and we're committed to that before we just jump in and make mistakes or repeat mistakes that we made previously.

I'd say the Turquoise Ridge Trend is known for along the major fault structure that there are in places challenging ground conditions and that, that will sort of dictate how many tons per day we could bring out from the operation.

One thing I hope you'll learn on the site visit next week is how the deposit appears to be -- It's early days, but with the deeper drilling we're doing, we're gaining a better understanding of what happens in mineralization as you go to depth and there could be some opportunities there to increase our throughput based at depth.

Right now, we're targeting utilizing 1,000 tons per day, which would be the amount we're allowed under the toll processing arrangement with Nevada Gold Mines. And over the next couple of years ramp up to hopefully that rate out of Granite Creek, so we are utilizing the maximum of our agreement. And longer term, that would be sort of the run rate I'd envision we'd be trying to achieve as we even process at our own facilities. So that would be a good gauge of where we hope to get to at Granite Creek in the future.

Got you. That's very helpful. And like I said, I'm really looking forward to seeing it firsthand. I think that's it for me. I'll free the line in case anyone was slower on the button than I was. But thank you very much, guys, and see you next week.

And at this time, there are no further phone questions.

Okay. Well, thank you, everybody, for attending, and feel free to reach out to us off-line, if you have any further questions. And we look forward to putting on this call again at following our year-end and be able to update everyone on continued development and how we're executing on our plan going forward. Again, thank you for attending today's conference call and presentation.

This does conclude today's conference. We thank you for your participation.