TRX Gold Corp (TRX) 2023 Q1 法說會逐字稿

Welcome, everyone. We'll just pause for a moment as participants make their way in from the lobby. Welcome to the TRX Gold Corporation first-quarter 2023 financial results presentation. (Operator Instructions) And the meeting is being recorded.

(Operator Instructions) I would now like to turn the meeting over to Stephen Mullowney, CEO. Please go ahead.

Yeah. Thank you, and welcome, everybody, to the Q1 2023 results call.

On your screen, you'll see an updated picture of our Buckreef Main Zone pit. The ore from this pit is what has provided us with the Q1 financial results and the good progress that we've made at site. It is also providing us with an exploration program that is funding the drilling program that is ongoing, by Andrew, who's currently at site, and the team at Buckreef and the immense blue-sky potential that we've discovered over the last year at Buckreef.

So Q1 2023 is really a turning point in the company's history. It's the first quarter where we can start to see the real profitability potential of Buckreef. The company has now been stabilized and has a great growth platform going forward. So we're very excited to get into what we've done, what the results were, and where we're going.

So first, a cautionary note. You'll find this in our corporate presentation. From a legal perspective, we have to say this, we will be talking about forward-looking information and such forth. Please have a read as a cautionary note. Thank you.

On the call today with myself, we have Andrew Cheatle, our COO. Andrew?

Hi.

So Andrew actually just arrived 10 minutes ago at site, I believe. Andrew?

That's a pretty accurate address. Yeah, 10 minutes ago.

Yeah. And they've served you a delicious fillet of tilapia.

That is correct. I think analysts that have been here will appreciate that indeed.

Yes. Also on the call as well is Mike Leonard, our CFO.

Good morning, everyone.

And also our VP, Investor Relations, Christina Lalli.

Good morning, everyone.

Excellent. Thank you, guys. So we'll get into some of the things that we got into in the past. And as I mentioned to a lot of people as I get presentations now, this story is getting a lot easier to tell. And it's also getting a lot easier to portray the growth potential that is in front of us: from a production perspective, from a resource expansion perspective, or from a value perspective.

So TRX, we're led by a team of experienced leaders. I think we're a little bit different in regard that some people would say we're not promotional enough, but I do believe we stand behind what we're going to do. And we say what we're going to do as well, so I think that is underlying the philosophy of the management team.

We've experienced rapid growth from a production perspective and from just a site perspective and everything that we're doing. There's now well over 400 people on the Buckreef Gold site across all facets, including our employees and contractors. So they're doing mining, geology, metallurgy, processing right across the board, and -- well, that's exploration.

So since I've joined, just over two years ago now, we always knew that the Buckreef Main Zone, and we've said this before, had great potential. We've extended that by 500 meters -- the mineralization. But the more you dig underneath the surface at Buckreef in just a mining package that is available here, there's a lot more potential. And it's not only the Buckreef Main zone; we keep on talking about Anfield, Eastern Porphyry, but there's other things around us as well. And Andrew will get into that in a few minutes as we get through the presentation.

So the foundation for future growth -- and this is really setting the stage. There's already a great resource here that can grow significantly. There's 2 million ounces of gold in the measured and indicated category. The great thing is comes to surface. Now, you see the pit in my background here; it comes to surface. We're mining it, we're processing it very cheaply. The key is wide tubes, 20 meters smart wide of mineralization, which helps us out with our cash costs.

Recoveries are great at 90%, and we've been experiencing that for a while now; and straightforward metallurgy and grind crush CIL; fully permitted SML. Processing plant is working great, as I mentioned. It is achieving a throughput capacity and above throughput capacity at times. It's also getting those great recovery rates.

We have a minimal environmental footprint from an ESG perspective around the electrical grid in Tanzania. We recycle all water; it's currently the rainy season, so there's no shortage of water at this point in time. And it's just a really good property from that perspective. And we have financial exploration potential which Andrew will get to in a sec.

So with regards to Q1 2023 highlights, we completed the 1,000 tonne per day plant. It's up and running. We declared commercial production on that. That's led to good gold production of over 5,500 ounces, which led to great quarterly gross sales, gross profit, net income, operating cash flow, and adjusted EBITDA -- real company statistics that are all really good and growing. That positive operating cash flow has funded the business, including the exploration program. We've done over 4,600 meters of drilling in Q1 on the Buckreef Main Zone as well as in Anfield and Eastern Porphyry, and those results are pending.

And importantly, we've done it all safely. We've had zero lost time injuries, no confirmed COVID cases, and we've achieved 1 million operating hours with no LTIs or long-term injuries. And so it's all been done really safely, really quickly, and we're really proud of that. Andrew, you just want to mention something on the safety record that we have at site because it's something that we're all really proud of.

Yeah. That's right, Stephen. The team here lives and breathes safety every day in terms of from toolbox meetings through to job analyses through to a culture where people can stop somebody and say, hey, let's just stop the work here; that doesn't look safe.

We've got a new safety leader at site who's come across from North Mara bank. And just a remarkable achievement, for those that have been in mining for a long time, to achieve 1 million hours LTI-free. It's quite something, and it doesn't happen every day. Of course, we need to do it again, and we need to get to 2 million now.

And we did that during the construction, which is always -- it's always risky business, but construction is always more risky than normal operations.

Yeah, that's right. But again, it was just wonderful as I did my own work to see people doing proper job observations, especially with working at heights, which is where a lot of accidents occur. So people were properly tied off from five-point safety systems for example.

But thanks for highlighting that, Stephen. The team here is very, very proud of this achievement.

Yeah. Thank you, Andrew. And now I'm going to hand the presentation over to our CFO, Mike Leonard, who will go through the Q1 2023 financial results. Mike?

Well, thanks, Stephen. And good morning again, everyone.

On the financial side for the quarter, Q1 was another milestone quarter for the company. Stephen touched on it, but during the quarter, we declared commercial production on the 1,000-plus tonne per day plant at the end of October after achieving nameplate throughput levels. And despite only one full month of operating at that full nameplate capacity of 1,000 tonnes per day, the company did achieve record results, record production, record sales, gross profit, net income, operating cash flow, adjusted EBITDA, all of which Stephen touched on.

During the quarter, we sold over 5,700 ounces at an average realized price of almost $1,690 an ounce. And that drove quarterly revenues of almost $10 million. And this was all achieved at low cash costs, as Steven touched on, of $732 an ounce. That was below guidance, so really, really efficient and effective quarter in that regard.

Gross margins were again quite significant operating at low cost. So consequently, the gross profit margins were quite high at 55%, driving some of those net income record numbers that we spoke of.

On the balance sheet, it continues to be very, very strong. We've got cash balance of almost $9 million at quarter end and growing. Our working capital was almost $5 million after adjusting for liabilities that we'll settle with equity. And again, adjusted EBITDA was record as well at over $4.5 million, which is really a good proxy for cash flow. And all of this really demonstrates strong liquidity the company does have to fund the organic growth around value-accretive activities like exploration that, again, Stephen touched on earlier.

Importantly, as we continue to grow and see a full quarter of operating results of 1,000 tonnes per day, we're endeavoring to improve on all these metrics over the course of the year, now that the plant's running at full capacity. Next slide, please, Stephen.

So in terms of the fiscal 2023 outlook, during the quarter, you would have seen in our MD&A that we reconfirmed our full-year production guidance of between 20,000 and 25,000 ounces. We do continue to expect the second half of the year's production to be higher than the first half. Again, we did declare commercial production on the plant at the end of October, early November. So certainly expect H2 to be higher than H1 in that regard but reconfirm that full-year guidance that we're tracking too very, very closely.

We do continue to expect cash costs to be between $750 and $850 an ounce. As mentioned, we did come in just below that number at $732 an ounce for the quarter but reconfirm that full-year guidance accordingly.

In terms of future growth, we do continue to advance a project that we touched on at year end, which is aimed at increasing plant throughput between 75% and 100% through the addition of a new ball mill. We're expecting to finalize the plans to purchase that new ball mill really in the coming days; this week, I believe, and hope to commence construction on an expanded facility in Q3, Q4 this year.

So importantly, that guidance, the guidance figures that we spoke of, the 20,000 to 25,000 ounces, does not consider the impact of the potential benefit of this upcoming expansion. So stay tuned, and we'll update the market accordingly when that project comes online.

In terms of the sulphide portion of the deposit, we are continuing with ongoing met work to assess whether the process plant and flow sheet can efficiently process the sulphide portion of the deposit, and importantly, potentially be expanded to accommodate a much, much, much larger production levels. And Stephen will touch on that. But that's really how we're referring to this deposit now. It's not so much an oxide/sulphide deposit, but what we're looking at is a much, much, much larger mine. So we are looking at that very, very closely.

And as we work through the oxide layer into the transitional and sulphide material, looking at using our current plants and flow sheet totally accommodate that portion of the rock. And in the interim, we've commenced some geotech work and studies to analyze a deeper pit design.

We are continuing to mine. You saw the picture on the opening slide. You can see an aerial view of the starter pit in December to your right and, as we continue to go deeper, are looking at, geotechnically, how to go about doing that.

So with that, I think I'll pause there and hand it over to Andrew, who will take us through the exploration results. Andrew?

Yeah. Just before we hand it over to Andrew, Mike, a couple of other items of note on the larger project development.

We've done an exploration program or an infill drill program as well to solidify some of those reserves and convert some of the resources to reserves, as well as the geotech work we're really looking at and just give the audience a sense of what we're doing there is. In any open pit mining assets, you have pit slopes. So the steeper you can put your pit slopes, the lower your strip ratio. So we need to confirm what our pit slope design is going to be, and that incorporates what our mine plan looks like as well.

Andrew, anything else to add with work that we're doing around this because there's -- it's quite extensive, everything that's going on.

It is. And I can confirm, Stephen, that the samples are packed and ready to be shipped. We're just doing a little bit of local administrative work to get those out of country. And way too much detail, but however, Terrane is shipping their technical gear from Canada tomorrow. So that brings everybody right up to speed on that.

I would also comment that, just on a visual observation, the footwall and hanging wall of the waste rock for the pit, the core looks very good. We're getting very good recoveries, and we are expecting to have positive results, but of course, Terrane and SGS do have to do that work, but it visually looks very good.

Yeah. So on it, I was going to mention are we allowed to say who is getting the met work, but I think you just mentioned who's getting the met work.

I didn't mention a name. No. (multiple speakers) We'll put out a separate press release with that.

Yeah. Excellent. So when we confirm that up, but the samples are getting ready to ship. Excellent. So Andrew --

It's a global name obviously.

Yeah. It's a global name -- yes -- and a global lab.

That's correct.

So without further ado, look, everybody is always interested in upside, the blue-sky potential. So it always puts a smile on my face as well because we haven't had any bad news or anything negative come out of what we're finding. It's always still positive.

So why don't you take the group and our investors and analysts through what you're seeing?

Yeah. Thanks, Stephen. And greetings, everybody, from Buckreef. I am actually in Tanzania at the moment and looking forward to getting out and going through a lot of this with the team over the next few days. And Stephen, we look forward to your arrival at the end of the month.

And so just to refresh those that have looked to this before, the image on the right is a composite from our drone footages. The SML is outlined in red, and each of the black squares is 2 by 2 kilometers, and the entire property is just over 16 square kilometers.

The Main Zone is very evident by the number of drill holes or those reds and yellows that you see. A drill hole is projected to surface, and I'll touch on that a little bit in a moment. The white is the ongoing work from our geologists that have continued to put their boots on the ground. And again, you'll see more and more little white dots appearing and these are the historical ASM pits that we've looked at, and I'll specifically focus in on a couple of those.

But let's get back to the Main Zone. The results that came out in the last quarter from the South. I think the South have previously been thought of as being at its limit. But when you get results, for example, over 35 meters at 1.3 grams a tonne, including 10 at, say, 3 grams per tonne internally in that and other intersections that are in that press release, you realize that we're still on the trend.

And Stephen, if you could just put your cursor where the south extension is. It's a little bit further up. We're good. And you'll see a few of the red lines that I've got is another nearly 1.2 kilometers to another series of artisanal workings; which have been on too, and that they're very strong, that they are historical, they're not being worked at the moment.

And what we've realized is, to the south, we're still wide open. We know that we're still wide open to the north. And Stephen, I think you mentioned earlier that we've extended now by about 500 meters in total, not the resources, but the understanding shear zone and the deposit continues out.

We will obviously do infill drilling, following up on the white space of that exploration work. So that in itself is over a 30% increase, and it's classic same. But this deposit, the Main Zone, still remains open on strike to the south, to the north, and at depth.

And on the depth side of things, if you do go back to the press release on the South, you'll see that some of the results are from underneath the pit, the South Pit. And they're very strong results indeed. So that's the Main Zone. So it's still open, still to play for on that.

Let's just focus in now on the Eastern Porphyry and the Anfield zone. I'm going to get into a little more detail than I have before, but those are the key, and I will see that there's actually three parallel trends of white artisanal workings.

The 30 grams per tonne samples that we'd had before are from the western part. Now, we've drawed those. We are awaiting assays, but as we've continued to understand the controls on gold mineralization, so we've continued to understand the growing importance of the Eastern Porphyry. That will give us, as shareholders like to say, some sizzle.

We have redrawed an RC or chip hole that came back at 30 grams per tonne over 3 meters. We've been able to identify the shear zone in some white space drilling. And there is very much a trend here that's got an awful lot of work ahead of it, but we're off to a really good start.

And then finally, to the audience, just in terms of targets, if you look down to the sort of -- see, if you could just sort of go down by Tembo, please, just up a little right there, there's two trends that would go from these two trends.

Again, I've been on the ground, these are strong workings. And over the course of the year, we'll continue to put a few holes into those. But again, you'll see all this looking and aligning in that sort of classic northeast southwest trend for us.

So what we're going to be doing is updating the Mineral Resource over the next few months internally to start off with. We'll continue to sort of expand on this. We have to move the drill rig now to some grade control drilling. The road is about to be relocated around the edge of the property. That opens up now the main zones.

We've got to get the grade control drilling in that. And then some sterilization drilling; we do have to obviously test the ground where we're going to put some tanning stamps and waste dumps. And then throughout again the year, we'll continue to look at Buckreef West, Eastern Porphyry, and Anfield.

So it's all self-funded, and assuming if I had three times as much money, I think we could spend it wisely and spend it well. But --

Yeah. And I'm not too sure people would like to share count at that point. But we'll do what we --

We're doing it. We're bringing it. It's step by step. And it is happening, and we continue to put up good results.

So Andrew, one of the things, just to give the audience a sense that like you and even myself and others on the phone really, really understand geology, but when you say there's three trends in the Anfield, Eastern Porphyry zone, you want to give just the investors and others just a simple explanation of how deposits are formed with hanging walls and footwalls and main zones.

Yeah, sure. I can do that.

Can you give outlines up to the three trends?

It does. And it looks like we do have a series of -- you can sort of see where the Eastern Porphyry, the red line that goes through Eastern Porphyry -- good to say that was the Main Zone. You can see that we've got a hanging wall zone to the west and some fall zones off to the east. So again, quite classic to sort of see these plays in multiple zones coming in on the shear zone host of deposit.

Yeah. And this is exactly similar to what the Main Zone is because the Main Zone has one line here. But in reality, you have a 20-meter Main Zone, and then you'll have, on one side, what is our hanging wall, like 3 to 5 meters and on the other side, you have another 3- to 5-meter mineralization.

Yeah. That's right. We're finding a number of zones, the hanging wall, and footwall. Sometimes they're not as continuous as the Main Zone, but they're there. And again, that's very evident in the northeast extension, and again, if people would get into the details, if you look on the western side of the Main Zone, you'll see there's a couple of sections with some very, very strong results in that footwall.

Yeah, exactly. And this is normal for this type of deposit.

Totally, totally normal. And I certainly would invite anybody in the audience if they wanted to go into a deeper geology lesson and discuss retail shear zones, et cetera, with me, we'll have a good session, but not for today.

You're starting to lose me now.

Yeah. What I would say, Stephen, again for our audience is that this kind of mineralization is well understood. It's very similar to Canada, very similar to the Juukan in Australia. And geologists do understand this kind of gold mineralization very well.

So turning our attention then to the next slide, Andrew, and on the Main Zone. Let's discuss the extension because we had 200 meters to the -- no, 300 meters to the northeast extension last year. We have another 200 meters to the south, which is, overall, 30% more of a strike length drilled out for a mineralization perspective. Give the audience a sense of what that means.

Yeah. I mean, first of all is you can sort of see it if you put the cursor, again, on the very last hole there, Stephen. We can sort of see that we've got some good grades, some good widths in there. We've got some good grades under the pits as well, like, for example, under the pits 34 meters at 1.3 grams a tonne, including tenant three.

These are very minable widths, whilst we're using the old historical south pit at the moment as a water storage, I mean, we'll drain that eventually. But what it means to us all is that we will continue to find and add ounces to resources and reserves in these areas.

And one thing that I did notice when I was on site last time is, and it's the first time that we did this, the road over to Anfield is out here on this slide, which is right here. And we've always stated Anfield of being about 500 meters from the main zone, but I walked it, and it didn't take me any time. So it's certainly closer to 500 meters.

That's right, Stephen. I mean, when we talked about 500 meters, we're referring to the sort of the main trend on Anfield and the artisanal workings. But you're quite correct. This hanging wall zone here is about 200 meters away from the main zone. You can see the drill pad just right at the very end of that.

Yeah, right here. Yeah.

And that is the location of the samples that came out from some artisanal workings at 28 grams a tonne, 36 grams a tonne. They were grab samples. But nonetheless, they're very exciting grab samples from fresh rock. And I think that important point for our audience is -- fresh rock -- and it looks exactly like our main zone.

Excellent. Thank you, Andrew. That's a great update.

Thank you, everybody.

So now with regards to an ESG perspective, what I would like to take away from this slide here is the land compensation process. So the land compensation process, in order to buy the land from landowners, was a long process, a very detail-oriented process as well. That has now predominantly been completed. I don't think there's very many left to be compensated.

We went through the final process over the last couple of weeks and made final payments, and that whole program costs around $2.6 million. It was funded over a couple of year process as the land evaluators went in, evaluated the land, and made the appropriate payments to those landowners. So now, the 16 square kilometers of the most of that property is now owned by the Buckreef Gold Company.

Andrew, you want to just mention a few other points around that process? Because it was a long arduous process and quite a successful one, actually.

It has been very successful. Again, we're very proud to say that the government of Tanzania now references Buckreef and the work that TRX has been doing with Buckreef as the example for others to follow. It's been a very meticulous, very patient process, but at the same time, we've had a lot of buy-in.

And as evidenced here, when you're just driving into site at night, the amount of new buildings that have gone up around the property and the new roofs that have gone on and the locals whose land we've compensated because many farmland and agricultural land are very grateful. And I'm just very pleased to see that kind of response in the community.

Yeah. It's not only that, Andrew. I think there's -- the mine is starting to have a secondary impact on the economy in the local region.

Yes.

And when you stand outside gates and there's taxis, shift changes, a lot of our employees and the contractor employees are from the local area, so we're now starting to see the spin-off effects of the mine generating income and growing.

Yeah, absolutely. The secondary industries, so businesses, as you rightly say, lot of motorbikes at the knock-off time from work.

I think I'd just highlight one other thing that we continue to focus on -- education, Stephen. And we're never going to be here for a long time. So part of the things we have to do is a little bit of CSR work as part of the law in the land. And we've worked with our communities and with our local governments on education. You can see here a group of students in a new science laboratory.

Typically the type of science laboratory room we have all been used to as in our own school days. And it's our ambition that we would hire from the local communities and students that are doing very well in science, technology, engineering, and math. So it's got a bit of a longer-term impact as well.

Yeah, thank you. So what I'm going to leave the audience with is there's a lot of rapid progress at Buckreef. We've made great progress. As I mentioned earlier, the company has now been stabilized. It's cash flow positive. It's growing. We're funding the growth to that business.

So we have a growth profile, as Mike mentioned. A new ball mill should be ordered shortly. We have a larger project to develop over time. We're doing a lot of activities around that, including evaluating ball mills. I believe Andrew is going to be on a trip in the next couple of weeks doing that. We're going through the met study, a geotech study, a lot of activity around that. And then it's underpinned by a great resource, already a great resource that has a lot of growth potential.

So all in all, this is a straightforward growth story that we've positioned the company for this growth. And we're very excited for what we're seeing. So I'm very proud of everybody at site: Gaston, our general manager; Isaac, our geology manager; the work that Andrew is doing; the work that Mike's doing out finance; work that Christina is doing in Investor Relations.

All along, quite pleased with the growth of the company and where we're positioned and where we're positioned for growth. And that's what I would like to leave our investors and our analysts with.

And we'll open it up for questions.

(Operator Instructions) Jake Sekelsky, Alliance Global Partners.

Hey, guys. Congrats on the quarter, and thanks for taking my questions.

Thanks, Jake.

So I mean, obviously, growth is a focus right now. And you were just talking about looking at adding an additional ball mill, and it sounds like you might be pretty close to taking one up.

Are you able to provide any color on the hopeful timeline there? If we assume you guys purchased one this quarter, do you think you might see some contributions from it in fiscal Q4? Or any color on that timeline would be helpful.

Yeah. So we've identified it. We know the size of it, and we'll now set when we actually put the deposit on it. It's coming from China again. It will take about 60 to 90 days to come to Tanzania.

And in the meantime, we'll be putting together the program to build some extra tanks and as well as figuring out the longer-term tailing strategy, and we're well advanced on all of those fronts. I would expect there is the possibility that you will see some production from it in Q4 of this year. But I would think that this is more of a 2024 story at this point in time.

Andrew, anything to add to that?

I think that's a fair comment, Stephen. We would love to squeak it in into Q4, but the 2024 timeline is a good comment at the moment.

Yeah. And so Jake, just a philosophy around that is we just want to make sure we get it right. There's a lot of activity going on at site, and we got to make sure, and we've been really, really busy. So I don't want to strain the human capital aspects of the business either. And we're cash flow positive at these levels as well.

Yeah. Stephen, just one final comment that comes to mind, and that centers around the power. And we've been very fortunate in that the local town control of about 40,000 to 50,000 people has come off our power line and gone on to the major cross-country power line. And that's freed up about 10 megawatts of power that we actually now have access to. So that side of it has gone very, very well.

Which means it can grow a lot bigger without new power lines. Yes.

That's correct. Well, substations and so on. So --

That actually brings up another good point. I mean, from a permitting standpoint, is there anything that you guys need to bring that ball mill online? Or are you all set there?

No, we're all set.

Second that. Yeah, we're being greenlighted by the government on that.

Yeah.

Yeah. So to give you a sense of one of the things I would have liked it to have it sped up a little bit further, but in Tanzania, you have to go through the local procurement process, which means it's really a planning process.

It's a little bit what I'll call laborious on the paper side, and we've gotten that approval through the mining commission to go ahead and purchase this ball mill. I think we got that approval about a week and a half ago or so.

Last Friday. Yeah.

Yeah.

Got it. Okay. That's very helpful. And then just looking out longer term at Buckreef, are you able to provide any updates on how the sulphide development study is done?

Yeah. So to give you a sense of how we're blocking and tackling that is we need to get the met work done just to confirm the metallurgy, what we're thinking, and the processing flow sheet. The first processing flow sheet that we mentioned was a flotation followed by a regrind. And then we mentioned when we released the drill hole results from that met study the current flow sheet that we're using, which is grind crush CIL, which, in the preliminary study, had almost identical recovery rates.

So what we're learning in current operations and what that preliminary study mentioned to us is it's about grind size. And so if you get 75 microns passing 80 in a CIL tank, you're going to get about 90% recoveries depending on the grade profile if you do the average grade of deposit. And so we need to confirm that, and so that's one aspect.

The next aspect is there needs to be a redesign of the pit from the 2018 pit. So we need to get the geotech work in. That pit design had 52-degree slopes. So we're hopeful, but we got to confirm this, that we'll be able to be more aggressive on the slopes given the hard rock in the deposit. And what that would mean is a lower strip ratio and a deeper pit over time.

Also, the infill drill program that has been done will extend the length of that pit. As Andrew mentioned, there is drill results now under the South Pit, which means in the first 2018 pit, that was a very shallow 40-meter pit. So that will now go a lot deeper than what was envisioned. So it is angling up to be a much larger overall project than originally in that 2018 PFS.

Also, we're working with Ausenco on longer-term tailings. So that is the bottleneck at this point in time is longer-term tailings, but that's well advanced on where that would be located, how will it be designed, and ultimately, it will be built more than likely from the waste from the mining activities.

So you'll just take your waste from one pit and build a berm over another side, put your tailings behind it, which is unique for a mining project because most of these mining projects, your tailings facility is built upfront from overburden stripping. We're just going to use our waste to build that tailings facility over time has been designed into a longer-term plan.

So there's a lot of activity happening. And at the same time, Andrew and team are evaluating ball mills now, and we're getting out in front of that for a longer-term solution to that as well. Anything else to add to that, Andrew and Mike?

Mike?

No. I think that was well said, Stephen. Nothing further to add. Thank you.

Yeah, I think, Jake, what I would take away from that is if you think about a feasibility study, you need your cost inputs. Well, we're operating, we know those. You need your building cost inputs. Well, we've built stuff, so we kind of got a good sense of that. And then you need your pit design. Well, we're doing the geotech work for that and the resource modeling, so it's -- whatever plan comes out, you may not have a feasibility study level stamp on it, but it has all the feasibility level inputs.

Yeah. Stephen, two quick points from me. And hello, Jake. Can't wait to get you over here at some point. We look forward to that.

Two points -- we do have a test plant. So we will also be able to do some bulk sampling or even able to sort of isolate the 360 tonne per day, the initial circuit, for even more extensive sulphide testing when that moment comes.

The starter pit in just one area is just meters away from intersecting sulphides and we might be able to skip just a few of those and to do some initial bulk samples to supplement the variability study that comes from the drill holes. And those that are looking even longer term, in my mind, there's no doubt that this project will go underground as well. Stephen?

Fair enough. That's all very helpful.

Yeah. So lot of work going on out there.

Thanks again.

Heiko Ihle, H.C. Wainwright.

Hey, guys. This is Marcus Giannini calling in for Heiko. Thanks for taking our questions.

Thank you.

So there's a sentence in the release that sort of caught our attention where you stated that through ongoing drilling, it becomes more evident that Buckreef has a potential for a much larger footprint and project, which implies that things seem to be improving sequentially.

So we were wondering if you could just provide a bit of color on maybe some of the exploration results in that area that particularly surprised you, relative to maybe what you anticipated?

I think I'll let Andrew follow up on my answer to this question. But as I've stated previously, we were always comfortable with the Buckreef Main Zone prior to joining this company. What we're seeing now is there's still a lot of work to do, but as Andrew lined it up, you're seeing a trend from the Eastern Porphyry north, right down south through Anfield, and right on down through.

There's 2.5 million ounces of resources in the Buckreef Main Zone. And this other trend has not been drilled out nearly as extensively, so there's that potential. And then there's potential around the rest of the property, particularly around what Andrew was referring to down south in around Tembo, there's some strong showings there. And Tembo itself is very good; there are still artisanals working in that area with the -- what are they called -- the mine superintendent government official, Andrew, there?

Oh, the resident engineer.

Yeah, the resident engineer. So there's a lot of gold here. And it's starting to come to the surface quite literally. Andrew, anything to add?

Stephen, if I could ask you to just go back to the exploration slide.

Yeah. This one.

And thank you for the question. So if I -- the line broke up a little bit, but I think the question was, has anything surprised us? Is that right?

Yeah.

Yeah, that's right.

And my answer, Andrew, was we like the Main Zone. And now, we are looking at probably another Main Zone.

Yeah. I think, yeah, that's a very good coincidence. I think what has really surprised me is just how much gold potential there is here. Now if you were to just even take Eastern Porphyry and Anfield and put that anywhere else on the planet, that would make a really great junior mining company exploration play.

It's when we, for example, have started to delve into the database of Eastern Porphyry, which hasn't really been worked for over 10 years through unpackaged that, had a look at it. And when you start to see some of the historical drilling that was in there, 30 grams a tonne over 3 meters.

And the fact that these zones are starting to line up, the surprise factor is like, wow, it actually is really happening, in terms of true exploration potential. And then, as you said, Stephen, the stuff by Tembo and then some of you might have spotted over to the east, halfway between the Main Zone area and Bingwa on the far right or the far east, we've identified yet another trend through having our boots on the ground.

So it's been exciting from that point of view.

And I would add too, Andrew, like the met hole results from an assay perspective were very good. So as you guys are aware, particularly analyst community, usually these deposits are built up through drill hole analysis results, assay results over time. And usually, you get some -- some of them are good, some of them are great, and some of them are average, and it builds up a deposit over time.

Whereas Buckreef never had that sort of evolution. And so as Andrew mentioned, you go back in and dig into the results of the Eastern Porphyry, his eyes popped at some of them. You get those in the Main Zone as well.

And it -- and so as we start to get really into this, it wasn't built up the same way as other exploration plays were. So it came together as a resource potential, but when you start to look at it, there's some really good zones in both of these deposits.

Yeah. That sort of speaks to the continuity. And again, those on the call understand that continuity is critically important to build a mineral resource and a mine.

Yeah. You have to have continuity because what you can't do is go through one great zone, and it better pay for getting to the next zone. That doesn't happen here. It's 20 meters wide and continuous -- in the main zone, and we're seeing similar trends on the Anfield, the Eastern Porphyry zones.

Okay. Awesome. Yeah. No, that was a fantastic --

Which is kind of a highlight and probably --

And then -- yeah. No, perfect. Thank you. And then just the trend line in the quarter were at essentially $5 million of gross profit, $4.4 million EBITDA.

Could you maybe walk us through, as much as you're comfortable with in this setting, of what you think Buckreef can do in the next several years and what you model out as realistic goals from a cash flow and EBITDA perspective?

Mike, you want to take a stab at that? I think it's a little early for some of that sort of stuff. We've indicated what we're doing on the larger project perspective, which is where you're really going with that. Mike, you want to just take a quick stab?

Yeah. I think, so I mean we obviously haven't guided out that far yet, guys. And so a little bit premature, I think, to start speculating on cash flow. Again, I mean, I think in the near term, you've heard about what we're doing with our mill that we're looking to purchase, doubling throughput, and certainly depending on the grade profile, hopefully, coming close to doubling production in the near term.

What we're modeling out is how much strip and dirt we need to move to continue to get at the deeper part of the deposit producing at a 50,000-plus ounce production profile over the next couple of few years. And once we have our arms around that, we'll certainly guide the market accordingly.

But I think in the near term, again, you've heard when we expect the mill to come online and roughly what we expect the production levels to look like. And you could probably extrapolate, like I said, the very, very near term, what our current cash flow levels look like on a quarterly basis for the next four to six quarters. And we'll guide the market early next year on longer-term guidance thereafter.

Yeah, I think the best way, Mike, to really answer the question, I'll ask Andrew, if you could just give a broad range of the size of ball mills you would envision for a larger project?

Yeah. Well, certainly the short-term one that we're looking to get on site in Q3, it'll be 1,000 tonnes a day. That's the doubling of tonnage. As you alluded to, Mike, we're going to get a quite double gold production because of great profiles, but we will get as close as we can.

And then beyond that, we're going to be looking at about 6,000 tonnes a day into the sulphide project to a mine that will be well in excess of 100,000 ounces a year is what we're looking at. That's what I'm going to be looking at first week of February.

Hey, you might have given a little bit too much information there, Andrew. But thank you.

That was for a range. Let me give that as a range, 4,000 to 8,000 tonnes a day.

Fair enough. Fair enough. Okay. Thanks for the answers, guys.

I would like to just -- it's a good question. Maybe back to Stephen and Mike on this. We built the first 1,000 tonnes a day for what? $6 million, Mike?

$6.5 million.

That's correct.

$6.5 million, right? Are we able to shed any light on the cost of the expansion, the first part of that?

Yeah. We haven't certainly quite guided to that yet. But I would certainly use the first 1,000 tonne a day sort of cost profile as a good analog for what we expect the next thousand to look like.

It's the same amount of (multiple speakers)

It's going to be a little cheaper than that, Mike. We could say it's going to be cheaper than $6.5 million, so don't expect it to get that high.

Thanks, Marcus.

Yeah. No, thanks, guys.

Mike Niehuser, ROTH Capital Partners.

Great. I'll keep this quick because we're running short on time. But on page 9, Andrew, you showed a map of the mining concession. And when I was out to the project a year ago, I got the feeling that the south zone kind of petered out at surface, and it went deeper in the north.

And I guess what I'm seeing here, to everybody's surprise, is it actually seems to be more horizontal than dipping to the north. And when you look at those artisanal workings to the south, it just sticks out in a big way. So really, could this be a much more horizontal than a dipping mineralized body?

Yeah. What you're referring to, Mike, and greetings -- the high-grade shoots do dip, if you like, call it plunge, at approximately, say, 20, 30 degrees. It does look like they are flattening to the north. The south has been a very pleasant surprise to me.

As you rightly say, if you look at the historical data and the culture that have built up around that particular part of the deposits, I wasn't anticipating as stronger results as the ones we got. So very pleasantly surprised with the tenure of those. So there will be definitely gold mineralization, I think, continue with down the trend, but there will be high-grade shoots within that.

It just seems to be very consistent. I mean, you used that word earlier in the call, but north and south, it just seems to be -- it seems it wouldn't be a surprise to have your expectations met to the south. I guess that's what I'm saying.

Yeah. There's this precious little drilling there. So we do see in the Main Zone that we have so far very clearly there's continuous mineralization. But then, if you like, there's an overlay of just three higher-grade shoots that's very evident in the data.

And did I hear you correctly that you're going to be coming out with the updated resource in the next couple of months?

We're doing this work internally first, Mike, and then obviously, this kind of work does ultimately have to hit the market.

So do we have any --

I'm going to remain non-committal on that timeline at this point as we really just started that work.

So when you do come up with it at some point sooner or later, you will be announcing that to the market, maybe not in the couple of months, but maybe four to six months or so?

So let me keep it very, very broad, and Stephen's laughing at me a little bit. It is we very deliberately brought up, Mike, I'd love to get it out as soon as I can. But I'm very confident we will get it in this fiscal year. And we have to because we're now mining, and we have to update the reserves and we have to update the mineral resources. So -- yeah?

Also, is there a point where you might be updating us on the metallurgical work, the summary of conclusions, even on a preliminary basis later in the year? Do you have a -- all you can share for that?

Yeah. The overall work will take about six months, but I would agree with you. Once we have some key metallurgical results, we would feed those into the market as we have done and demonstrated so by releasing the meters and grade of the samples that are going off to be analyzed.

And I guess just lastly, about your million hours of lost time without a lost time accident is just stunning to me, and it seems to be a lot. I know that mantra is growth, growth, growth. But it's not coming out of the cost or the safety.

And I know you guys are careful at the top in the C-suite, but all the way down with the guy with a hammer and a thumb. So I just want to compliment you. It is something that almost should lead all the metrics, but thank you for that. Glad to be included in the call. Thank you.

Yeah. Thank you, Mike, and come back any time.

Yeah, thank you.

Robert Paulson, Paulson Strategy Group.

Robert also texted in his question. So what I can do is read aloud the question and then answer it if he's not online. Okay. So that's what I'll do.

His question is, congratulations on all the great things you and TRX team are doing to make TRX successful, growth opportunity. Gold is at or close to long-term highs and stock prices at are close to all-time lows. What are the thoughts about TRX being a takeover target and how committed are you to the long term?

So I answer the first part of that question. I've been here for just over two years. In that two years, there's been gyrations in markets. Vis-a-vis other junior mining companies, I would say that we've outperformed those particular companies on a year-to-date -- well, sorry, a last year basis. We're about even on a five-year basis, the stock is about even. So it's outperformed the vast majority of junior miners.

I think a lot of long-time shareholders go way back to 2012 and remember $3, $5, $7, $9 stock prices, and the company has transitioned and had a lot of change since that period of time. And for myself, I look at our performance over the last two years since joining.

With regards to being a takeover target, look, if you become a takeover target, you've done your job successfully, hopefully, particularly if you're not in the distressed situation. We are not in our distressed situation. I don't go out seeking takeover targets. We're committed to the long term. We think this project has a lot of potential.

And right now, will we consider ourselves a takeover target? I think we still got some work to do to really display what the long-term potential of this project is. As we continue to execute, I'm hopeful that we'll get rewarded in the markets for that, and shareholders would be rewarded as well.

I hope that answers your question, Robert.

Yeah, Stephen, I'm just going to add also the team that the audience is looking at, backed up by the team here at site and in country, is really also kicking into gear and is also delivering on the results.

Eileen, next question?

The next question is a text question from Craig Sutherland.

We have heard for a long time about dividends. What is the company's plan, additionally, with the M&A activity picking up? Have we had any discussion on this topic or doing a joint venture with a major?

Yeah. So dividends is a topic that has been discussed around this company in the past when it was set up more as a royalty company. And shareholders have heard from myself about growth plans, I believe the company is still better served growing its cash flow, its revenue, its EBITDA, and all the valuation metrics that are used by mining investors and analysts, including net present value.

So that is the current plan of the company. There is a lot of capital needs. We prefer to generate cash flow to fund those capital needs. That's certainly the mantra in the short to medium term. That will change over time as the company reaches its potential, particularly on a production profile basis.

With regards to doing a JV with a major, the company already has a 55%-45% ownership split between TRX and the State Mining Company. So it would be very difficult to bring in a major into that joint venture discussions. It would mean dilution on our part and dilution on STAMICO's part.

So what I would say is under the right situation, we might do that. But certainly, it's not in the short term. I prefer to unlock the value of Buckreef first before having any of those discussions.

All right. This concludes the question-and-answer session. If you have any additional questions, please e-mail Christina Lalli, Vice President of Investor Relations.

I'd now like to hand the conference back over to Stephen Mullowney for a few closing remarks.

Yeah, thank you. Look, Q1 2023 was a great transition period, got the plant up and running. You see the pit in the background to me. We're mining. We're processing, and the drill bits are turning.

So I believe, and our management team believes, and our employees and colleagues believe there's a great potential at the asset. And we continue to grow, and we're all having fun doing it. So I'll leave the audience with that.

I think this has been a very in-depth and insightful conference call. Thank you.

This concludes the meeting. You may disconnect. Thank you for participating, and have a pleasant day.