Victoria Gold Corp. (OTCPK:VITFF) Q4 2021 Results Conference Call March 28, 2022 11:00 AM ET
Company Participants
John McConnell – Director and CEO
Marty Rendall – CFO
Mark Ayranto – COO
Lenora Hobbis – Executive Affairs Manager
Conference Call Participants
Chris Thompson – PI Financial
Don Blyth – Paradigm Capital
Andrew Mikitchook – BMO Capital Markets
Lenora Hobbis
Okay. Again, hello and welcome to everyone. This is Victoria Gold’s Video Conference Call to discuss the Fourth Quarter and Full Year 2021 Results. Please note that listeners and viewers will be muted while the management provides short review of the results. After the review, there will be an opportunity to ask questions. [Operator Instructions] Also note that this video call will be recorded and available for playback on the Company’s website.
We will be making forward-looking statements and I encourage participants to see our disclosure documents including our corporate presentation, AIF and MD&A and the cautionary notes there-in, which can be found on SEDAR and the Company’s website.
I’ll now turn the meeting over to John McConnell, Director and CEO, to discuss the financial and operating results.
John McConnell
Good morning, everyone. Pleasure to be here. Again, I’m John McConnell, the President and CEO of Victoria Gold. With me this morning from the management team is Marty Rendall, our CFO; and Mark Ayranto, our COO.
We’re going to start with Mark giving an overview of the operational results from Q4 and the full year. Then Marty will talk about financials. I’ll make a few comments on the guidance we provided, and then we’ll go to Q&A.
So, with that, I’ll turn it over to Mark.
Mark Ayranto
Good morning, everybody. As John mentioned, it’s Mark Aryanto, Chief Operating Officer for Victoria Gold, and certainly pleased to provide a production summary from our Eagle Gold Mine.
On the mining front, for ore, in Q4, we did 2.5 million tons versus 2.2 million tons in Q4 2020. Year-end, we managed to have 9.5 million tons for 2021 versus 7.5 million tons for 2020. That’s a 27% increase year-over-year in ore mining.
In terms of total tons mined, in Q4 2021, we produced 5.7 million tons versus 5.3 million tons in Q4 2020. For the year-end, we moved — we mined 24.5 million tons versus 19.9 million tons for the year-end 2020. That’s a 23% increase year-over-year. And we did so maintaining a strip ratio of approximately 6.1 — 1.6. I’m sorry.
If you look at mining rates, that generates, a daily average total mined rate of 67,000 tons per day in 2021 versus 54,000 tons per day in 2020. And that’s a 24% increase year-over-year.
On the processing side, you’ll recall from prior news releases, we experienced some supply chain disruptions with slightly lower tons than expected in — in Q4. In terms of ore stacked on the heap leach pad, in Q4 2021, we stacked 2.5 million tons versus 2.3 million tons in Q4 of 2020. The grade for this quarter was 0.83 grams per ton versus 0.81 grams per ton Q4 2020.
At year-end, we produced — sorry, year-end, we stacked 9.2 million tons for 2021 versus 7.3 million tons in the same period last year. That’s a 26% increase year-over-year. And the grade is pretty much flat. We had produced — we stacked 0.85 grams per ton in 2021 versus 0.84 grams in ‘20. That translates into a daily stacking rate of 25,000 tons per day in 2021 versus 19,900 tons per day in 2020 and is a 25% increase year-over-year. We’ll say on both fronts, grade and recovery are reconciling very well and are certainly in line with expectations.
On the gold production, in Q4 of 2021, we produced 49,496 ounces versus 42,436 ounces in Q4 2020. For the year-end, we produced 164,222 ounces versus 116,644 ounces in 2020. And that’s a 41% increase year-over-year.
So, with that that will be a summary of the introduction and John, back to you or over to Marty for a financial update.
Marty Rendall
Yes, Mark. Thank you.
I’ll jump right into the financial highlights from 2021. We did sell 159,000 ounces of gold during 2021. That was largely back-end loaded to the second half of the year and included 49,200 ounces of gold sales in Q4 2021. We received an average gold price of about $1,790 over the quarter and over the year. And those sales along with that gold price, that’s in U.S. dollars. So, in Canadian dollars, our average gold price was $2,240. So, that leads to revenue of $100 million during the fourth quarter 2021 or $357 million in revenue for the year.
Our operating in Canadian dollars were $47 million for the quarter and $143 million for the year. Net income for the quarter was $46 million. That equates to $0.73 per share. And for the year, net income was $110 million or $1.77 per share outstanding. Cash costs were Canadian $905. I know we like to think of cash costs in U.S. dollars. So in U.S. dollars, our quarterly cash costs for the fourth quarter were $718 per ounce. For the year 2021, our cash cost in Canadian dollars were $909 million or US$725 per ounce of gold sold.
If we look at our all-in sustaining costs for the quarter — rather let’s go to the year. For the year, they were C$1,496 or US$1,193 per ounce of gold sold for the year. EBITDA, earnings before interest, tax, depreciation and amortization, were C$66 million for the quarter or C$220 million for the year.
Free cash flow was $31 million for the quarter, which is $0.50 per share and it was $27 million for the year or $0.43 per share. Our cash and cash equivalents at the end of the year were $31 million. And that’s net of debt repayment of C$64 million during 2021.
A couple of other points to note is on inventory, you’ll notice in our current assets, our inventory is quite a large number, and it does include C$120 million in mineral inventory and that is gold, primarily on our heap leach pad as well as in stockpiles or finished goods. And I just want to remind listeners that that $120 million is based on cost. It equates to 105,000 ounces in mineral inventory. And if those ounces were valued at today’s gold price, the valuation is over C$250 million. So, we’ve got quite a slug of gold in inventory. We expect the vast majority of that inventory to come out to 2022.
And on debt repayment, I did mention that we’ve paid over $60 million in 2021. We do expect to repay at least that amount again in 2022. Dependent on where the gold price goes, we may pay more down than that $60 million.
With that, I’ll pass it back over to John.
John McConnell
Thanks, Marty and Mark.
Just a couple of comments on the guidance we provided. I’ve talked to one of our shareholders Friday, and he said, I don’t understand why you had to sandbag the market. I guess, my comment to that is I don’t think we’re sandbagging. We are being conservative with our guidance. It’s — we’re still in a pandemic. We’re seeing impacts on both, supply chain and the operations as a result of COVID. And we have a war going on in the Ukraine, which is further having an impact, particularly on supply chain. So, we were very conservative with our guidance. And I think we want to make sure that we’re comfortable that we meet it.
Two years ago, we missed guidance and it resulted in a class action lawsuit, which we think is frivolous, but it does take up a lot of management time. So, we’re being very careful. As a single asset company, we want to make sure that we achieve our guidance.
With that, we’ll open it for questions. Over to you, Lenora.
Question-and-Answer Session
A – Lenora Hobbis
[Operator Instructions]
John McConnell
We see Chris has a question.
Chris Thompson
Yes. Thanks, John. Good morning, everybody. Just a couple of quick questions here. I guess, the first one, could you just give us a little bit of an update with regards to some of the, I guess, the operational refinements and how successful they’ve been in the Q1 to date?
John McConnell
Sure. I’ll start, and Mark can jump in, if necessary. One of the items as part of Project 250 is to reduce the amount of non-stacking period. So, we got that down to 6 weeks this year. We did have some very cold weather which prevented us from starting up properly. We have no issues with the leach pad with cold weather. But, when it’s minus 50, you just can’t run the equipment, and we had some periods at minus 50 in January. So, we’re stacking now and we’ll come out with our numbers early in April for the Q1, but it is going reasonably well, despite the cold weather. Anything to add to that, Marty — or Mark?
Mark Ayranto
Yes. I think the only thing I would add, the improvements that we did a year ago have really paid off. So those are working really well. And then lastly, here, we’re just building up, starting the — getting a team together on the reliability maintenance. And that’s going to prove very useful as we go forward.
Chris Thompson
Great. Thanks, guys. Just a final question, and then I’ll just jump back in the queue. But, could you just give us maybe a quarter-by-quarter breakdown of how you see sort of, I guess, mining and stacking rates?
John McConnell
Mark?
Mark Ayranto
Yes. As John mentioned, we have our annual shutdown. I mean, nominally, we have this cold weather Q1 period where we — initially, we’re not stacking. This quarter, we did have a 6-week maintenance down, as John mentioned, in a couple of weeks of tough weather. So, the split between H1 and H2 is somewhere around 35% of our gold production in H1 and the remainder in H2. But I do think coming up out of Q1, you start to see a pretty good ramp up and you start achieving on the order of 1 million tons a month. So, really Q1 and maybe the first month of Q2 is a little bit less than that, but on average, that’s what we expect to see, Chris.
Lenora Hobbis
And Don Blyth has a question.
John McConnell
Good morning, Don. You’re muted.
Don Blyth
Can you hear me now?
John McConnell
We can.
Don Blyth
In terms of the growth CapEx guidance, you gave US$40 million on your Friday press release, so about roughly C$50 million. The guidance back in January for the scalping — fine scalping project was C$18 million. Can you give some more color on the delta of about $32 million? Does that include or exclude the two trucks and loader required for that 11 months per year stacking?
John McConnell
You want to clarify that, Marty?
Marty Rendall
Sure. Sure. So, US$40 million for growth capital. It is primarily Project 250 related. As you say, Don, it does include the scalping system. It does include the two trucks and loader, and that makes up about $30 million of the $40 million. And then, it does have some Eagle deep exploration in it. We did separate out the Raven exploration under growth exploration. However, under growth capital at Eagle, it includes about $5 million deep exploration. And then on top of that, there’s $3 million or $4 million in other small items. So, primarily that Project 250 with the screening plant and the two trucks in the loader.
Don Blyth
Thanks. And just in terms of the guidance, obviously, you’ve given a bit of a range there. You’re hopefully going to be on the upper end of it. But, what kind of range are you expecting, or does that translate into tonnage? What kind of annual tonnage are you expecting?
John McConnell
In terms of stacking or mining?
Don Blyth
Yes. Stacking.
John McConnell
Stacking. Do you have those numbers, Mark?
Mark Ayranto
Yes. I mean, as I mentioned, really looking at about 1 million tons a month, Don. Some of that is lower grade raw. But on average, 1 million tons a month crushed outside of Q1, which is obviously lower. That’s a good ballpark anyway. Yes, sorry, in terms of the range, really is about getting tons for the pad.
Lenora Hobbis
Okay. And Andrew Mikitchook has questions.
Andrew Mikitchook
A whole bunch of questions been asked already, but can you give us a sense when we should expect to see some sort of updated 43-101 filings on the mine plan? To be honest this year’s guidance doesn’t match the kinds of mine plan — that’s in the mine plan anywhere near this part of the mine life?
John McConnell
That’s correct. We’re probably overdue on updating the technical report. And our schedule is to have that out in the fourth quarter of this year.
Lenora Hobbis
Thanks, Andrew. And Chris Thompson is back with the questions.
Chris Thompson
Yes. Just a follow-on question, just on these tons again. So, the Project 250, I guess, we’re assuming that really that’s not going to kick into gear until Q1 next year by way of, I guess, increased loading rates, is that true to say?
John McConnell
Yes. That’s correct. Again related to supply chain, we ordered the screen deck associated machinery back in November last year. Originally, it was a 6-month delivery time frame. They’ve already informed us that that’s gone out to 9 months. So, we’ll start doing earthworks in May, June, but we don’t expect to have actual plant up and running until Q1 of next year.
Chris Thompson
Just a final question, I guess, on recoveries. Can you just comment on where you sit on the recovery curve right now?
John McConnell
Mark?
Mark Ayranto
Yes. Chris, I mean it’s — I’m not sure entirely. What I would say, our leach kinetics are performing as we expect them to. So overall, if you look at just the tons we placed versus the tons we’ve recovered of the recoverable ounces, we’re sitting somewhere in that plus percent range. Of course, you haven’t got everything leached, you still have some nice slopes. You have area that you’re using for working equipment, et cetera. But if you look at our modeled recoveries and you look at the kinetic curves for each of the ore types, we’re within a couple of percent. So, we’re quite comfortable that the grade — the recovery reconciliation versus our expectation is quite strong.
Chris Thompson
Okay. I mean, that’s — I mean, we’re not talking about plus 70%, we’re pulling about plus 60%, is that right?
Mark Ayranto
Yes, overall. And keep in mind, Chris, as we come up out of in-valley leach, it’s a little different than a flat leach pad. We’re not expecting to hit a full surface area available for — meet our nameplate leaching capacity until end of Q2 of this year. And that’s always been in the plan. It just takes a bit of time to build up surface area. So, I guess, so you go back to the recovery curves and they look pretty strong.
Chris Thompson
Right. In my model, I have plus 70%, I guess, recoveries. So, I’m just trying to sort of reconcile that with what you’re saying at the moment?
Mark Ayranto
Yes. I mean, I’d probably better take it offline a little bit, but…
John McConnell
Yes. It’s — sorry to jump in there, Mark. I just wanted to say that the 60% Mark saying is what we’ve actually produced. You did ask in your question, as of right now what we’ve produced. But certainly, we’re expecting well over 70%. And then when you include the 105,000 ounces on the pad that have not been recovered, that’s how we get to well over 70%, Chris. Over 70% is correct. It’s just going to take us some time to actually recover that.
Chris Thompson
All right. I’m going to continue to pound on this. But Marty, can you give us a sense on time line to achieve that then?
Marty Rendall
I’ll turn that over to Mark on the recovery time lines.
Mark Ayranto
Yes. It’s a loaded question, Chris. But I tell you, on our heap leach pad, we do basically a reverse block model, and there are 30 meters by 30 meters by 10-meter lift. And we track when we place material what the material type was, it’s crush size and how many days under leach. And so, you’ve got various areas that have got x period under leach. You have — and that gets kicked out into this over 60% project to date. And as Marty said, we’re still projecting well over 70% life of mine. So, some of those ounces will come out fairly quickly. You can appreciate we’ve got some stacked or that has yet to get leach lines. We’ve got things like side slope liners, you need a working path that are going to take a bit longer.
But we remain confident that in the first 60 to 90 days, you get 85% of your overall recovery and the rest of those ounces getting to 100% of ultimate recovery come out over the next 180 days or so. I’ve got a rounding here, but just to give a sense of the quantum. And then, you always end up with some ounces that get delayed under leach, like I say, side sloping or working areas.
Lenora Hobbis
Andrew has a question?
Andrew Mikitchook
Yes. Just one quick follow-up. Are you guys still at kind of a choke point with the stacking. Mining, I believe, has a stockpile. Is it more the stacking end of the effort on site, or are you now some combination of materials handling through the crushing and stacking in terms of what kind of holds you guys back?
John McConnell
Yes. Andrew, it’s materials handling. And it’s a little bit about operational excellence and a bit of discipline and some reliability and those are all imminently in front of us and present real opportunities that we can don’t get ourselves to that 30,000 tons a day, and that’s what we expect for this year.
Lenora Hobbis
Okay. I don’t have any further questions. [Operator Instructions] Okay. Thank you, everyone, for your questions. As there’s no more questions, we’ll close the session for today. Have a great day.
John McConnell
Thanks, everyone.
Marty Rendall
Thanks, everyone.
Be the first to comment