i-80 Gold Corp. Q2 FY2023 Earnings Call

Good morning. My name is Zenith, and I will be the conference operator today. At this time, I'd like to welcome everyone to the i-80 Gold Corp. Second Quarter 2023 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Mr. Gollat, you may begin your conference.

Thank you and good morning everybody. Thanks for joining us on this warm Thursday in Thunder Bay, and I'm sure it's a nice day in Reno as well. On the call with me is Ryan Snow, Chief Financial Officer, Matt Gili, President and Chief Operating Officer. Unfortunately, Ewan Downie is having a travel delay, so we're going to go on ahead with the call without him. So, you'll get the presentation from the rest of us. Going on to Slide 3, I just want to highlight that we will be making forward-looking statements, so I encourage you to read this slide and understand that some of that forward-looking statements will be made. With that, I'm going to turn it over to Ryan Snow to talk about the financial results, and then we'll get into a brief presentation on the Company. Ryan?

Thanks, Matt, and good morning to the listeners from me. Yesterday, the Company reported our financial statements and MD&A for the second quarter and first six months of 2023. They can be found on SEDAR, EDGAR, and the Company's website. On Slide 4 of the presentation, we present a graph of our production and sales by quarter for the year. This production is from the residual leaching activities at both Ruby Hill and Lone Tree, and also includes the oxide material we've placed on the leach pad from Granite Creek. Second quarter production was 4,329 ounces, and year-to-date production was 6,678 ounces. The Company expects increased gold production and sales in the second half of 2023 when compared to the first half. Slide 5 of the presentation highlights our revenue of $11.3 million in Q2, bringing year-to-date revenue to $16.9 million. This revenue generated a mine operating loss of $3.6 million for the quarter and $7 million year-to-date. The mine operating losses in the quarter and year-to-date were primarily the result of write-downs of leach pad inventory at both Ruby Hill and Lone Tree totaling $4.5 million and $8.5 million, respectively. The Company reported a loss for the quarter of $16 million or $0.06 per share when adjusted for the impact of mark-to-market gains on the Company's convertible debt, outstanding warrants, gold prepay, and silver purchase and sale agreement. The loss was $13.1 million or $0.08 per share. For the year, the Company is in a lost position of $29.1 million or $0.11 per share, and when adjusted for the items previously mentioned, was in an adjusted lost position for the year of $39.5 million or $0.15 per share. I think it’s important to highlight on this slide that the Company continues to invest in exploration, evaluation, and pre-development in 2023 with $11.1 million invested in the second quarter and $20.1 million so far in 2023. This investment has resulted in three new discoveries this year at Ruby Hill and many great assay results, the most recent of which were published yesterday, and we'll discuss in further detail later in this presentation. On Slide 6, the Company's liquidity position shows that we ended the quarter with $19.4 million in cash and had an inventory balance of $18.8 million. Current assets were $49.8 million while accounts payable and accrued liabilities were $22.3 million and total current liabilities were for $64.1 million. This resulted in a current ratio for the Company of 0.8 to 1. The Company took steps to bolster the balance sheet by closing the bought deal private placement on August 1, 2023, bringing $36.8 million Canadian dollars into the treasury. I also want to highlight the Company has set $47.6 million in restricted cash and ended the quarter with total net assets of $425.7 million. With that, I'd like to turn the call over to Matt Gollat.

Thank you, Ryan. We'll start with a brief presentation about the Company. On Slide 7, i-80 is defined as a U.S.-focused gold explorer, developer, and producer, with all our assets located in Nevada. Our aim is to become the second-largest gold producer in the U.S. with an ambitious growth plan, and we intend to develop a significant resource base in the state. This includes 6.465 million ounces of gold and over 104 million ounces of silver in measured and indicated resources, along with more than 8 million ounces of inferred gold and over 76 million ounces of inferred silver. We have a strong team recognized for multiple discoveries, experienced in building mines in Nevada, and skilled at mergers and acquisitions, having created i-80 Gold from Premier Gold Mines. Moving to Slide 8, we see our location in North Central Nevada, a highly productive gold district that includes the Carlin, Battle Mountain, and Getchell trends. This region is home to Nevada Gold Mines, a joint venture between Newmont and Barrick. We are the second-largest holder of resources in this area, and we possess two processing facilities to support our gold and polymetallic mineralization as our business grows. On Slide 9, we can discuss our processing facilities. In the north is the Lone Tree Autoclave, located on Highway 80. Once retrofitted, it will allow us to process refractory gold, which is a significant competitive advantage since there are only five refractory processing facilities in the U.S. owned by three companies, and i-80 is one of them. Our second facility is the Ruby Hill site, currently a vat leach plant, and we are evaluating retrofit plans to convert it into a flotation plant to process the impressive polymetallic grades from our drill results at Ruby Hill. While we work on retrofitting the Lone Tree Autoclave, we have secured processing arrangements for both oxide and sulfide to generate cash flow while we develop our hub and spoke model for the three underground mines. Moving to Slide 10, we hold the third-largest resources in the state and are among the largest silver resource holders in the U.S. with over 104 million ounces classified as indicated and 76.5 million ounces classified as inferred. We are conducting an extensive drill campaign, and we expect to release updated mineral resource estimates for all our projects after this campaign. This will include our initial estimates for polymetallic resources from the Blackjack, Hilltop, and FAD deposits. In our strategy, the Lone Tree complex will be central to our hub and spoke model, aiming to develop the Granite Creek, Ruby Hill, and Cove underground mines, which will be transported to the Lone Tree complex. Upon completion, we will consider expanding with a Phase 2 plan that includes an open pit at Granite Creek and examining the potential for processing the base metal and polymetallic mineralization at Ruby Hill through the flotation plant. Now, I’ll hand it over to Matt Gili for more details on our assets, starting with Granite Creek on Slide 12.

Thanks, Matt. Thanks, everyone on the call. First, let's review Granite Creek property. On Slide 13, we highlight the location of Granite Creek in Northern Nevada along the i-80 corridor and adjacent to the Twin Creeks processing plant. Granite Creek is the first mine that i-80 has brought into development. Current project status includes completion of mine rehabilitation, completion of Phase 1 mine design and proof-of-concept, and installation of additional dewatering capacity with Well 6 located at the intersection of the Ogee and South Pacific zone. Both oxide and sulfide material is being trucked to processing facilities. A total of 6,651 tons of oxide material were sold for proceeds of $2.8 million in the quarter. The upcoming milestones include the completion of the current and ongoing drilling program at Granite Creek, representing both surface and underground drilling. This drill program is primarily intended to upgrade inferred mineralization for inclusion in the upcoming feasibility study. Second, commence our monthly deliveries to NGM of refractory mineralization for total processing. On Slide 14, we show a long section of the underground gold deposits at Granite Creek looking to the Northwest. First thing I’d like to point out is that we have completed mining on two levels, the 4490 and 4445 of the Ogee zone, with the tons grade analysis from our muck pile samples shown in the figure above. The second item I would like to highlight on this slide is the inferred ounce in the underground resource, representing 339,000 ounces of gold. This inferred resource is the material being targeted in the current infill program. Onto Ruby Hill. Slide 16 shows Ruby Hill's location in Central Nevada, South Carlin. Current activities at Ruby Hills are focused on two main activities: one, advancing exploration and delineation of our multiple discoveries, I will talk more about this on the next slide; and two, advancing the studies and permits for underground development from the Archimedes pit. We have all necessary permits in hand to begin surface construction at the site of the portals. Permitting for the underground development itself is fully underway. We have also completed a scoping study for conversion and restarting the existing gold vat leach mill to a base metal processing facility. The upcoming milestones include: finalizing the permit for underground development, completing the PEA for the gold mineralization of Ruby Hill, ongoing detailed metallurgical testing of the base metal resources, and ongoing drilling for the base metal resource estimate. And not to be overlooked, the team at Ruby Hill produced and sold 1,629 ounces of gold during the quarter, 2,871 ounces year-to-date from the residual leaching program. The relative locations of all the deposits of Ruby Hill are shown here on Slide 17. Ruby Hill continues to demonstrate just how rich and diverse a property it is with six primary deposits and now Tyche. During the second quarter of 2023, drilling at Ruby Hill was focused on advancing exploration and delineation of multiple CRD mineralized discoveries. Multiple holes were also drilled for infill in the Blackjack and FAD zones. The Tyche discovery was made while infill drilling at Blackjack. A total of 13,439 feet of core and 13,275 feet of reverse circulation drilling was completed at Ruby Hill during the quarter. Additionally, 3,070 feet of core and 7,260 feet of reverse circulation drilling were completed in the quarter at our adjacent FAD property. Slide 18, I suspect by now you've had a chance to review the press release we issued on August 2 regarding Tyche Zone. Over 45 grams per ton gold and over 50 grams per ton silver on a 17.5-meter interval. This discovery was made in a previously untested area along the contact of the graveyard flats intrusive. Data suggests a different phase of the intrusive and a different style of the mineralization being high in bismuth and tellurium, low in arsenic, and with visible gold. Note that we have received permitting approval for our exploration work program and we will be able to drill this target conventionally from pads further to the South. And onto Cove. Slide 20 shows the location of Cove immediately South of Battle Mountain. The Cove deposit is expected to be the core asset in the Company's hub and spoke business plan, likely the highest grade of the three properties. Activities at Cove in the second quarter focused on completing the underground portal and exploration decline, including a second fault crossing that is all now complete, starting underground infill delineation drilling of the Cove resource that's in progress, and advancing studies and permitting for full underground development. The upcoming milestones include completing the Definition Drilling program for a full feasibility study in 2024 and advancing the full mine permitting. Slide 21 shows how the results we’re getting from our current drilling campaign. Those holes starting in iCHU23 reinforce and enhance what was previously drilled by Premier Gold, those holes starting in PG. Underground delineation drilling continues during Q2 with 13,350 feet of core drilled, yielding extremely positive results including the previously released acid results for hole iCHU23-11, which indicated 15.7 grams gold over 22.5 meters and 18.9 grams per ton gold over 29.3 meters. To date, we have completed 22 of the planned 115 underground core holes as part of our delineation drilling program. And now our final property, Lone Tree. On Slide 23, the Company continues to advance the engineering studies and cost estimate for the recommissioning of the autoclave facility at Lone Tree, working in conjunction with our partners at Hatch. During the first half of 2023, the Company continued leaching the residual material on the pads as planned. The team here is doing a fantastic job, maximizing the residual leach ounces produced. Lone Tree produced and sold from its residual leach activities 2,700 ounces of gold during the quarter and 3,363 ounces of gold year-to-date. ESG, Slide 24. The i-80 gold team continues to engage in community outreach efforts to earn us goodwill in the community and retain our social license to operate. Each of our operations are at a different stage of permitting, and it is imperative that we continue to interact with our stakeholders, including our employees, legislators, business partners, and community members to build trust, align our mission, and communicate our plans. Earlier this year, we published the inaugural environmental social and governance, our ESG report titled Driving the Future, which highlighted i-80 gold's ESG strategies, our policies, and commitments to deliver leading industry practices in Nevada. Over the past year and a half, i-80 gold has focused on the six pillars of our ESG commitments. We are building on these priorities to achieve our 2023 ESG goals. Our team is working with ERM to assist with data collection and building a long-term business strategy for continual improvements and our path to sustainability. Thank you. Back to you, Matt.

Thanks, Matt. That was great. So, I think we'll open it up to questions now given we've got some extra time here.

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Justin Chen with SCP Resource Finance. Please go ahead.

Hi guys. Hopefully, I'm off mute and you can hear me. Thanks very much for hosting the conference. To start, I was wondering if we could perhaps get an update on what your thoughts are on Granite Creek for the second half, but from a production perspective. And then where's the ramp currently and where would you like to get to? And your current development rates, are you on track with where you'd like to get to where you want at the end of the year?

Thank you, Justin. While we are not providing specific guidance, I can share our progress with Granite Creek. In the first half of the year, we encountered unexpected oxide mineralization, which we set aside until we could determine the best processing plan. We initially attempted leaching at Lone Tree, which worked but was quite slow. Consequently, we connected with other operators in Northern Nevada and established an ore processing agreement with one of them. They have begun purchasing and processing the ore since May of this year. Simultaneously, we have been stockpiling material for the refractory processing at NGM as part of our toll-milling agreement. We now have enough material for our first 10,000-ton test parcel, and we are starting that process as well. In essence, we have substantial stockpiled material that we are integrating into our operations while continuing production at Granite Creek. Although we are not issuing guidance, you can expect a continued increase in production in the second half at Granite Creek. Currently, we are exactly where we anticipated being in our development. We have four active production levels, with three or four cuts per level depending on the specific sub-level. The first two full levels on the Ogee side are complete, and we are at the intersection of the fifth level to Ogee, which will soon extend into the South Pacific zone. We've also established a drill platform to access the South Pacific zone from underground. Overall, we are progressing steadily, with four levels in production and development ongoing on the fifth level, where we are close to accessing the South Pacific zone.

Got you. And how many more meters are on the map before that turn off to SPZ?

It's less than 100.

Okay. Excellent. So, you have got plenty of time, between now and...

We are still on track and we have discussed this previously. We expect to start operations in the South Pacific Zones in the first quarter of next year.

Right, but it sounds like you are actually well ahead of that. Just based on...

Yes. I don't want to give the wrong impression, but I am certainly pleased with the progress. The ground conditions in the decline have been among the best I've experienced in Nevada. Given our previous concerns about ground conditions, it's great to see such positive developments. Overall, things are going well.

I'm glad to hear that. And just one, if I can ask you for ore mining rates because it's a bit hard to tell right now because as you said, there is a lot of ore being stockpiled and such. I'm just curious what you think your ore mining look like in Q3 and Q4.

Okay. You asked a great question, Justin. I'm being very pensive here, so I don’t want to put out the guidance. But I will tell you that, right now, we are mining just under 100 tons per day from each of our production levels. So, the key there is adding more production levels. Yes, we will continue to have more production, as you would expect. Yes. So, I don't know if I answered your question or not, but I'm trying to be cautious and not talk about non-public information.

No, understood. I really appreciate that. So, roughly 100 tons a day per level, and you've got four levels going. Thank you, Matt. I appreciate that. Just one last question regarding Graveside Flats. Is the gold there a continuation from the contact, or do you believe there are significant sulfide deposits in the Graveyard Flats region? I'm aware it's the first discovery there, but I'm curious about your current perspective.

I mean, look, right now, as I described it, that's about what we have right now, and it's very exciting for us. It's very exciting for Nevada. This is the first time I've seen visible gold on one of my properties in Nevada. It's a high grade. We're just starting to understand that was discovered during the infill drilling program at Blackjack. So, look, just another example of Ruby Hill; just the surprises you get and where'd this come from, and oh my gosh, look at these grades. So, we're really just absorbing that, Justin, and I'm going to wait for Tyler to have a chance to really understand what's going on. He's got some other holes in there that he's analyzing right now and starting to get results back on for those as well. So, just anticipate further information as we understand that deposit better.

Yes, just maybe one last one on that. Sorry.

I would just add to that. Yes, so it's the current contact, but what's really exciting about this hit, obviously the grade is very exciting. But it's been drilled in a brand-new rock unit in the camp, and it's a different type of mineralization that we see at Ruby Hills, a high-sulfidation mineralization, which leads to a greater conversation around what's the fertility of the camp and what's the driving force behind it all. So, it's another ingredient to end potential, but what we see Ruby Hill to be, that'd be the best way to put it.

And what kind of a host do they look at?

It's the graveyard stock. Matt, do you know how to describe this stock?

Yes. Tyler described it to me; it's vuggy. So, like it's been bleached and then re-deposited, I mean, I'm kind of testing all of my geologic knowledge right now. But I'm just going to let Tyler expand on that as we get more results back from that area.

Okay, great. Thank Matt, appreciated. Thank you very much.

Thank you. Your next question comes from John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Thank you. Congratulations on all the great results. In terms of having several projects, does it strain your management team to have success on so many fronts? And if we were to be in a little bit of a slower capital market, which projects would you prioritize to be the one or two first to get capital versus the ones that might be less emphasized?

That's a great question, John. You're correct that the market has been slow recently. Just to remind everyone on the call, we closed this financing earlier this week. We have a $100 million accordion with Orion that we're actively negotiating to secure more capital. For our current plan to succeed, we need all three underground mines operational to get the Lone Tree Autoclave up and running. Granite Creek is essentially cash flow neutral and will be cash flow positive very soon as it nears the end of its development life. At Cove, we're drilling the deposit to convert it into measured indicated resources for inclusion in an upcoming feasibility study. At Ruby Hill, we are progressing with studies and have the necessary permits to create an underground ramp. We truly need all three projects to be successful to supply the autoclave. In the meantime, we can also generate cash flow from our toll processing agreements with Nevada Gold Mines. If you're asking which project is currently attracting more exploration interest, it's clearly Ruby Hill with many promising results that suggest it could be a game changer. I could let Matt or someone else elaborate on the complexities of managing different assets. We view them all as part of one mining camp, with separate portals feeding into a central milling facility. Matt managed the gold rush mine, which utilized a similar model with multiple underground mines shipping ore. This operational approach is not new to Nevada. We aim to create what could be described as a mini Nevada Gold Mines operation, and we believe our team is capable of achieving this without overstretching our management. However, I acknowledge that it's a capital-constrained environment, and fortunately, we have strong partners like Orion to help navigate through it. I hope that addresses your question.

Is it an option to not restart the autoclave and have third-party processing or to chase the lead zinc zones that carry gold and silver at Ruby Hill and the FAD deposit? There's nothing wrong with cash flow probably even if it comes from lead and zinc.

You're absolutely right. I would say the polymetallic mineralization is not as advanced as the gold right now, but at some point, that could be the case. I'm confident that we'll be able to finance our way to grow the business. What was the first question? What was the second question there, John?

Is it an option to just not fool with the autoclave and chase the base metals or to go for third-party processing? Let's just say that you're mining successfully at one of the underground mines, but not all three of them.

So, I would say, and I don't want to speak for Nevada Gold Mines, but they don't want to toll treat our ore forever, would be my thinking. They certainly are great partners and they want to see us succeed and get our autoclave up and running, but I don't think they want to be a third-party processor for another company in perpetuity would be the way I would answer that.

Is the Jerritt Canyon roaster good for any of your ores?

Well, it's a roaster, so it will process refractory ore. It's further away from our projects than the Nevada Gold Mines refractory processing facilities and certainly further than our own. But yes, it is a roaster and it does have the ability to process refractory gold.

It's good to hear that there are lots of options.

Thanks, John. Thanks for the questions.

Thank you. There are no further questions at this time. You may proceed.

Well, thanks everybody for joining us. We really hope you got a lot from this call. And if you have any other questions, Matt, Ryan, and myself are available at your convenience to call and have follow-up discussions with. So, feel free to call any one of us. And we hope you have a great day. Thanks.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask you to please disconnect your line.