Earnings Call Transcript - IAUX Q2 2024

Operator, Operator

Good morning. My name is Matthew, and I will be your conference operator today. I would like to welcome everyone to the i-80 Gold Corp Second Quarter 2024 Results Conference Call. All lines have been muted to avoid any background noise. After the speakers' remarks, there will be a question-and-answer session. Mr. Snow, you may begin your conference.

Ryan Snow, CEO

Thank you, operator. Good morning, everybody. And welcome to our second quarter 2024 results webcast and conference call. I'd like to remind everybody that today we will be making forward-looking statements and to please read our disclaimer slide in the presentation. I want to start with a couple of comments about production for the quarter. Production for the quarter was from the residual leaching activities at both Ruby Hill and Lone Tree and it was 1,636 ounces. In addition, in the second quarter, we sold 9,361 tons of oxide mineralized material from Granite Creek for revenue of $5.9 million. As this material is sold under an ore purchase agreement, i-80 does not report the ounces. For the year, the company has sold 19,528 tons of mineralized material that has generated $9.1 million in revenue and 4,122 ounces of gold. Revenue for the quarter was $7.2 million, bringing year-to-date revenue to $15.6 million. Production from Granite Creek has been primarily oxide and sold under the ore purchase agreement so far in 2024, and we will provide more details on this later in the call. The company reported a net loss for the quarter of $36.8 million or $0.10 per share when adjusted for the impact of mark to market losses on the company's convertible debt, outstanding warrants, gold prepay, and silver purchase and sale agreement, the loss was $25.8 million or $0.07 per share. During the quarter, the company continued to invest in exploration, evaluation, and pre-development, with $5.1 million invested, bringing the 2024 total to $7.9 million. This investment is focused on definition drilling at our projects that will allow us to advance the technical studies to feasibility level. The definition drill program continues to produce many great assay results, a summary of which were provided in our press release yesterday and will be touched on later in this call. The first six months of 2024 have seen the company invest $15 million into the development of Granite Creek, and Matt Gili will provide additional details on the development progress later in this call. The company ended the quarter with $47 million in cash and $39 million in restricted cash. Yesterday, the company also announced the establishment of an at-the-market equity program. This program is a tool in the company's toolkit to provide financial flexibility over the next 24 months with up to $50 million of additional liquidity. With that, I'll turn the call over to Ewan Downie.

Ewan Downie, President & CEO

Thank you, Ryan. I will provide an update on our projects. Currently, we are reviewing Slide 3 of the presentation. Our objective with i-80 Gold is to translate our exploration achievements into operational success. We have built what I consider to be a top-tier portfolio of assets, all situated in mine-friendly Nevada, positioning us as one of the largest holders of gold and silver resources in the United States. Our property portfolio is highly de-risked, given our road access and grid power, with many projects being past producing mining operations and brownfield sites that present a clear pathway to permitting and production. We have six strategically located projects in Nevada, two of which have existing permitted processing facilities, including an autoclave. We are one of only three companies in the United States with a facility capable of processing refractory ore. Our portfolio includes four high-grade Carlin type gold deposits, five oxide open pit projects or zones, and three polymetallic base metal deposits and zones that we are developing. There is significant exploration potential, as all deposits are open for expansion. Slide 4 emphasizes the infrastructure that we have built or that was previously developed at our sites. I won’t delve into these slides in detail, but Lone Tree is our central processing facility within our hub-and-spoke production model. Ruby Hill also features an on-site production facility that we aim to convert to base metals once a joint venture with a third party is finalized. At Cove, we have completed the first phase of underground development and are currently conducting a large-scale underground drilling program on what I regard as one of the highest grade development-stage projects in the United States. Granite Creek is fully permitted, holds a resource exceeding 2 million ounces, and we are actively producing gold and developing the core deposit. On Slide 5, our company ranks as one of the largest holders of total resources in Nevada, following only AngloGold and Nevada Gold Mines. We have yet to elevate our polymetallic deposits to resource status, but we plan to do so after the next drilling program. An updated resource for the Ruby Deeps deposit at Ruby Hill is also in the works for the next 12 months. What truly stands out in our projects are the grades. i-80 possesses some of the highest grade development-stage projects in North America, and we are advancing both open pit and underground initiatives. On Slide 8, the company is entirely focused on North Central Nevada, which is home to the Carlin, Battle Mountain, and Getchell Trends. This region is considered one of the most productive gold districts globally. Nevada Gold Mines, a joint venture between Barrick and Newmont, has all its operations shown in this image. If separated from its two owners, Nevada Gold Mines would be the fourth largest gold-producing company globally on an annual basis. In addition to various deposits totaling over 6 million ounces of gold in measured and indicated, over 8 million ounces inferred, and combined nearly 180 million ounces of silver, we also possess two processing facilities that will bolster our significance as a future producer. Lone Tree, highlighted on Slide 8, is our primary processing facility, providing us a substantial advantage in Nevada, especially as many of the more accessible oxide deposits have been depleted and the quality of oxide projects continues to diminish. A unique trait of Nevada is that most top deposits transition to sulfide at depth, meaning the gold mineralization is encased in sulfides and requires specialized processing to extract. Before acquiring Lone Tree two years ago, only two companies in the state had this capability. This acquisition positions us to be a long-term standalone producer with multiple operations. We plan to supply this facility through the development of Granite Creek, which is ongoing; Ruby Hill, which we expect to permit for underground mining this year; and Cove, also permitted for underground mining, where we are conducting a definition drilling program. An often-overlooked aspect of Lone Tree is the significant open pit resource expansion opportunity, with approximately 400,000 ounces in indicated resources and 2.76 million ounces inferred, alongside a considerable high-grade underground opportunity. While this project isn’t part of our near-term plans, we intend to revisit it later. Granite Creek, as shown on Slide 9, is our most advanced project, strategically located immediately adjacent to the Turquoise Ridge Mine of Nevada Gold Mines. The deposits lie in the same host unit next to the Osgood Mountain intrusive stock, and they are close to the Getchell or Range Front fault. The Turquoise Ridge mine boasts around 30 million ounces of production reserves and resources. Recent drilling at their site indicates they continue to extend southward toward our Granite Creek property, and we are advancing the South Pacific zone toward Turquoise Ridge. Our current program includes a significant exploration hole that is a considerable step out to the north on the South Pacific zone; this hole intersected mineralization before reaching the target depth, which is getting quite close. However, we did find mineralization in the precollar, with grades reported in our press release. This adds another structure on the property that warrants future exploration. The underground drilling we have conducted has yielded remarkable high-grade results and we have also carried out a limited surface program this year. The South Pacific zone depicted on Slide 10 in red is the principal deposit at Granite Creek, located north of the active workings of the Ogee, Adam Peak, and Otto Zone, as well as the Range Front zone. It was identified by following up on some historic intercepts north of the mine that had not been pursued. Although the deposit does not reach the surface, our deepest drilling between 200-250 meters has consistently encountered very high-grade intercepts, with our deepest drilling yielding the widest intercepts to date. The grades of the deepest intercepts in the recent step out exceed 15 grams per ton, providing excellent expansion potential. The drilling along the South Pacific fault structure running north has yet to be fully explored beyond hole 22-26. There is an old Home Stakehold located about 400 to 500 meters to the north that previously drilled through that contact and encountered two high-grade intercepts that we intend to follow up on in the future. With that, I will allow Matt Gili, our President and Chief Operating Officer, to guide you through the continued development of Granite Creek as we initiate the first stopes in the South Pacific zone, which we plan to be the primary ore heading for the future.

Matt Gili, President & COO

Thank you, Ewan. So Slide 11, Granite Creek. During the quarter, we focused on development. The first half of this year was development heavy by design. We're at the inflection point in the ramp system where we branch out to include the South Pacific zone. This requires increased development footage for ore access as well as secondary escape. Additionally, significant improvements have been made in water control and water handling with the water treatment plant fully operational and work started on deepening an existing well, Well 5, for additional dewatering capacity. We continue mining of the Ogee zone across four levels. We accessed the first production level in the South Pacific zone, level 4185, with more details on the subsequent slides. We continue to surface drilling campaign focused on infill drilling of the South Pacific zone in preparation for finalization of the feasibility study for the property. We'll note that in order to increase the effectiveness and efficiencies of the infill drilling, we halted drilling for the surface and are repositioning to an underground drilling campaign. On to Slide 12, the South Pacific zone itself. As noted, we accessed and subsequently completed the first level of the South Pacific zone. Here you see the ore control reconciliations for the level. Note these are ore control reconciliations. Grade is as expected with notable upside in tonnage. This is the uppermost level and therefore relatively small in size and we are on the first level. So no inferences about the entire zone, but very pleased this went as planned. On Slide 13, ore types. So here you can see more detail on the distribution by ore type from the uppermost level of the South Pacific, almost entirely oxide mineralization at this elevation. Remembering, high-grade mineralization is sold through our ore purchase agreement, while lower-grade mineralization is being shipped to Lone Tree site for leaching. And lastly, on to Slide 14, South Granite Creek and South Pacific. Here you can just see some details of the individual ore control samples by heading. And again, note, while the current elevations for both Ogee and South Pacific zones are predominantly oxide, our drilling at lower elevations does clearly show a transition to a refractory sulfide deposit in the future. All right. Thank you. Back to Ewan.

Ewan Downie, President & CEO

Thank you, Matt. As many are aware, our focus is primarily on developing sulfide or refractory mineralization rather than oxide. The fact that we've entered the upper level and achieved high-grade mineralization over 0.3 ounces per ton is promising for our future. As Matt mentioned, we extracted more tonnage than anticipated from the topmost level of our operation. The next topic is the Cove project, located near Battle Mountain, where numerous mines and deposits are being explored. To the north, you can see our Lone Tree processing facility, where we plan to transport minerals from Cove for processing. Buffalo Mountain, situated to the southwest, is an oxide gold deposit in our portfolio that we are not currently advancing but may consider in the future. The most recent step-out hole drilled into Buffalo Mountain yielded a gram oxide over a 134-meter intercept. Lone Tree and Buffalo Mountain are positioned just north of the Marigold mine owned by SSR, which is further north of the Phoenix mine operated by Nevada Gold Mines. Adjacent to Phoenix are the Cove and McCoy deposits on our McCoy-Cove property. Our 2022-2023 drill program has produced many significant results as we continue infill drilling to upgrade inferred resources to measured and indicated status for a feasibility study. We are developing a hydrological plan following large-scale pumping completed in December 2023 for full mine permitting. The first phase of underground development was finished by mid-2023, providing a platform for delineation drilling with improved definition and significantly reduced costs compared to surface drilling. The ongoing drill program is centered around the historic Cove pit, which produced over 2.6 million ounces of gold and 100 million ounces of silver. The Gap and Helen zones are part of the Cove deposit being drilled from underground. The completed holes are shown in green, while the remaining program is in gray. There is drilling occurring in the area between the Gap and Helen zones, where the deposits intersect high-grade Carlin-type mineralization. If the grade holds, additional drilling will be justified between these zones. The lower image illustrates the location of the deposits. Cove presents substantial upside potential as we have discovered more polymetallic and gold-silver mineralization that has seen little to no follow-up. We believe there is considerable opportunity to identify more deposits on this property, with minimal exploration conducted outside of the primary Cove deposit. We are also reevaluating the McCoy deposit, visible in the bottom left of the Slide 16 image, along with the oxide mineralization present there. We released new results from our underground drill program yesterday, further confirming Cove as one of the highest-grade development stage projects in North America. On Slide 17, we will present our flagship Ruby Hill property, which holds a significant land position in the Eureka Mining District. It is located 250 kilometers from the Lone Tree site and contains oxide gold deposits, sulfide gold deposits, and polymetallic base metal deposits, including both Skarn and CRD. This property is noteworthy for its diversity of mineral types. We are currently focusing on the development of base metals in the Hilltop and Blackjack zones, along with the Ruby Deeps deposit for sulfide mineralization in the near term. In the first half of this year, we completed a drill program, funded by a third party, to enhance the metallurgical understanding of this project as part of the due diligence for a planned joint venture. About a month ago, we released the results of our metallurgical work and are now working on definitive documents with the proposed partner. Although negotiations are taking time, they are progressing well. The open pit mineralization at the Mineral Point deposit, located to the north and immediately west of the Archimedes pit, is our largest gold deposit. This oxide gold project contains over 5 million ounces of gold in all categories and 170 million ounces of silver, making it one of the largest gold-silver deposits in the United States. We are working on an initial scoping study to evaluate the economics of this project and conducting additional metallurgical work to potentially improve silver recoveries. On Slide 18, our near-term plan for the property includes advancing the Blackjack, Hilltop, and Ruby Deeps deposits, likely through underground workings. After finalizing the joint venture, we plan to meet with our proposed partner to outline the program for the remainder of 2024 and all of 2025. We anticipate a significant drilling campaign to expand mineralization in the Ruby Deeps and Hilltop areas, particularly in the region between Hilltop and Blackjack, which remains open and has seen high-grade polymetallic mineralization in many of the drill intercepts. We are in the final stages of permitting for underground development. The proposed program on both images includes one decline to access both polymetallic base metals and gold. On Slide 19, we are advancing the underground plan for the sulfide mineralization. This image shows the preliminary mine design for the Ruby Deeps deposit, which is the refractory gold deposit that is part of our larger plan and the hub and spoke model for the Lone Tree plant. This year, we will complete additional metallurgical work and explore ore sorting and other methods to potentially reduce transportation costs. At Mineral Point, we are conducting further tests for silver recoveries and ongoing hydrology work for long-term mine planning. The polymetallics have been a notable success since acquiring this project about three years ago. Initially, our exploration focused primarily on the Ruby Deeps deposit and the refractory gold mineralization. In mid-2022, we tested a new target that led to the discovery of the Hilltop zone. Since then, we have identified four distinct lenses in the Hilltop deposits, both CRD and Skarn, along the Hilltop fault structure, which strikes northwest and remains completely open. The southmost hole drilled into the east Hilltop zone was our widest intercept, with over 114 meters of 9.5% zinc, 12.6 grams silver, and elevated copper mineralization. That elevated copper was found in several of the deepest and southernmost holes drilled into the Skarn deposit and will be a focus target when we resume drilling later this year or early in 2025. In terms of the Ruby Hill property, the highest grade and largest of the polymetallic deposits is the FAD project, located on the adjoining Gold Hill property that we acquired from Paycore. We believe the FAD deposit is among the highest grade polymetallic deposits globally. Our furthest west hole drilled in 2023 intersected 9 grams of gold, 92 grams silver, and over 13% combined zinc and lead over an intercept of 14.6 meters, leaving the deposit open along strike to the west. The eastmost hole and the final hole of the 2023 program intersected 3.9 grams gold, over 185 grams silver, and nearly 15% zinc and lead over an intercept width of 25.4 meters, also leaving the eastern extension open. This deposit is not part of the company's current resource, but we plan to advance it to resource status in the future, expecting a significant increase in both our gold and base metal resources. The initial metallurgical work conducted here was very positive, and we anticipate that the gold will report to a pyrite concentrate. So in summary, on Slide 22, we have assembled one of the top portfolios of gold deposits, high-grade gold deposits in North America. To achieve our future success, our plan is to convert resources to reserves, deliver the technical studies to enhance our financing options and deliver our long-term production plan. As I said earlier, the goal of our company is to turn exploration success into operational excellence. Thank you, everybody for attending the conference. We will take a few questions here. Following that, people are welcome to call the company at their convenience.

Operator, Operator

Thank you, everyone, for participating in the conference. We will now open the floor to questions. Our first question comes from Don DeMarco of National Bank Financial.

Don DeMarco, Analyst

My first question has to do with Granite Creek. So we continue to see oxide ore sales and that's great. And the work at the South Pacific zone looks very encouraging. The read-through there of course is increased tonnage as the refractory sulfide ore, but just to try to quantify some of that a little bit. How do you expect the toll milling of the refractory ore to trend over the next few quarters? And revenue so far remains somewhat modest. Is this a potential material source of liquidity if you can get that SPZ zone up and running and the toll milling of the refractory at higher levels than currently?

Ewan Downie, President & CEO

I'll pass that question over to Matt Gili, who heads up our Nevada office and our operations and allow him to answer that question for you, Don.

Matt Gili, President & COO

In response to your question, Don, we are currently focused on oxide mineralization, which is being sold through our ore purchase agreement. You are correct that as we move towards refractory materials, we will switch to a toll milling agreement that offers slightly better terms. This represents the future for our property and efforts. When we acquired the property, they had successfully completed gold assaying, but not much work had been done on the oxide refractory split. Our deeper drilling has clearly identified a refractory deposit. At this stage, we understand the gold well, but we are still working to understand all the details regarding the oxide refractory split. Currently, we are mainly working with oxide materials and are transitioning to refractory. The first quarter was significantly focused on development, and we anticipated this at the beginning of the year. The second quarter began somewhat poorly due to water issues, but improved significantly in June, as we had forecasted. That's where we stand, Don. I'm unable to provide too many specifics or guidance, but those are the trends we are observing moving forward.

Don DeMarco, Analyst

Yes, because I think I saw in Q2 from Granite Creek, it might have been $6 million in revenue. Are we looking at a potential 1 or 2 times that amount after we get somewhere or is it magnitude and any color on that would be helpful?

Matt Gili, President & COO

Being really cautious because we don't provide guidance by design. But we are certainly in the ramp. From where we are with the mine plan, both in the budget and in the April forecast, it clearly shows that we are accessing more ore levels. The June production was significantly higher on 8 ore tons per day than our previous yield in the year to date. So we're in that ramp up. And again, it's a function of number of ore headings. The number of ore headings is a function of development. So really the critical path for Granite Creek is development, which we focused on in the first quarter. One of the enablers for development is dewatering, which is the other thing that we focused on in the first half of this year.

Don DeMarco, Analyst

Just shifting over to Ruby Hill, it seems like there's been good progress on the JV. Could you give maybe a little bit of color on the reason for the delays? Would you expect this finalizing this JV to be an H2 item or 2025?

Ewan Downie, President & CEO

The delay on the joint venture arises from the need to ensure that the partnership with another company related to our flagship asset is properly established. Past experiences, such as the issues with Premier, reminded us of the importance of getting it right to avoid project stalls. We made a press release to address financing requirements, mentioning that it was contingent on metallurgical due diligence. This process included a four-month drilling campaign interrupted by the Christmas break, followed by sending samples to labs for metallurgical analysis that confirmed the recoverability of the polymetallic mineralization, a crucial factor for our future partner. We shared our results about a month ago, which we view positively. We are currently finalizing the documentation for the partnership and anticipate its completion before the year's end, with most major issues now addressed as we navigate the legal aspects.

Don DeMarco, Analyst

It's been a few months since the AGM when you announced that you'll be passing on the CEO title to someone else. Could you give us an update on this process or maybe additional color behind your decision or what the potential timing of this might be if that information is available at this point?

Ewan Downie, President & CEO

The original plan for CEO succession was put in place about two years ago. Two years ago, I made the decision that, as you know, Don, I'm more of an explorer than a developer. I'm actually not known for being a mine builder and have constructed or operated multiple operations. Though, Premier was a producing company. I believe we've taken this company to huge success in exploration. To achieve the next level for this company, I fully believe it's important we increase our operations capacity in the upper levels. That was part of the decision but also some ongoing health issues that I have to deal with at some point. It's something that we did press release but it is a plan. For now, I continue to be the CEO, but at some point, I expect that there will be a transition.

Don DeMarco, Analyst

Well, thank you for that. We certainly wish you the best in the process and whatever other issues you might be dealing with. But thanks again and good luck with the rest of Q3. All the best.

Operator, Operator

And your next question comes from Justin Chan of SCP Resource Finance.

Justin Chan, Analyst

Maybe if we could go back to the slide that showed the long section of the South Pacific zone. I was wondering if you could maybe talk us through where you're mining now and what the rest of the year looks like in terms of what's in the mine plan?

Ewan Downie, President & CEO

You mentioned Slide 10. In this slide, the very top section where the word "open" appears indicates that we have drifted over to the uppermost part of the South Pacific zone. The decline extends into the Ogee zone at depth. As we go deeper, we drift over multiple levels into the South Pacific. With each subsequent level, we anticipate an increase in strike length. In Slide 11, the focus is on the upper red area above the flat section. As we descend, we expect to encounter more mineralization. We plan to expand on that image because there are intercepts beyond these shapes that we believe will turn into mineralized areas with definition drilling for future development. As Matt Gili mentioned earlier, achieving the necessary definition for this drilling from the surface is quite expensive. We are experiencing significant deviations in our drilling and are setting up an underground platform to enhance our ability to conduct accurate definition and expansion drilling.

Justin Chan, Analyst

As a follow-up for Q3 and Q4, what are your expectations regarding ore volumes? Do you anticipate reporting forward ounces, or will it primarily still be ore sold similar to this quarter, which was roughly 50-50 oxide and sulfide?

Ewan Downie, President & CEO

For the gold that comes off the two existing residual leach programs, that is gold sold and the refractory mineralization under our current contract is where we receive the gold. It is reported as gold ounces. We do expect that to ramp up significantly quarter-on-quarter going forward as we get more and more South Pacific zone mineralization and go to depth in that zone. Oxide, I would expect to remain more consistent going forward given that we do expect more and more sulfide going to depth. But as Matt said, the more headings we get put in place and the more available phases, the more mineralization we'll be getting week on week and month on month, and that ramp up is occurring as we speak.

Justin Chan, Analyst

Could you give us any steer on what you think for Q3 and Q4?

Ewan Downie, President & CEO

As Matt said earlier, we don't provide official guidance as we haven't declared commercial production. We just expect it to improve as we add the headings.

Justin Chan, Analyst

And maybe just one in terms of the plans at Ruby. Is it fair to characterize that most of the DD work has happened and it's just about negotiating final terms? Just trying to get a sense of what you think the key milestones are for that agreement going forward, what potential timing might be?

Ewan Downie, President & CEO

Right now, it's primarily just negotiating definitive document structure, tax structure, things like that. Both gold and polymetallic mineralization are key focuses. The incoming partner, I would say, is more focused on base metals. It’s just about getting the right balance for that. All commercial terms though have been negotiated and completed.

Justin Chan, Analyst

Do you think this is likely to be finalized this year or maybe early next year?

Ewan Downie, President & CEO

I would like it to be next week. But as you know, when two sets of lawyers are working on documents, things can go back and forth quite a bit. We’ve seen a lot of back and forth and then arriving at conclusions. If it went into next year, I'd be very shocked.

Operator, Operator

And your last question comes from Spencer.

Unidentified Analyst, Analyst

With the price of gold hitting new highs, it looks like a lot of M&A is heating up. Just wondering if your price getting so cheap that you consider the possibility of a friendly or even unsolicited takeover rather than the joint partner way?

Ewan Downie, President & CEO

It's hard to comment on M&A. In our industry, the lack of new discoveries in recent years has created an environment where larger companies who are seeking to pad their reserves and resources for the future are always on the lookout for projects. A good example was Osisko yesterday. We have, as we showed in really the first slide of our presentation, we also, in addition to having our sulfide deposits that we focus the most attention on, we also have significant oxide projects and the polymetallic. Our company is diversified. We do have several open-pit oxide projects that we don't carry in our corporate presentation and talk very little about today. However, those projects have attracted and continue to attract a lot of attention. We are constantly discussing with other parties about what to do with some of these assets. There is a possibility we could sell some projects within our portfolio. There's always interest, especially in a place like Nevada, for larger companies to take a look at what we have. I wouldn't like to see a proposal for our company at these levels, given our significant resources and one of the safest jurisdictions in the world. I think we offer tremendous value, and right now isn't the time for us to consider M&A.

Unidentified Analyst, Analyst

From the standpoint of the shareholders, will a joint partnership work as well as a straight buyout or takeover based on the price of gold now?

Ewan Downie, President & CEO

Thank you for your question, Spencer. Feel free to call our office and talk to Matt, Ryan or myself if you have more questions or if you'd like to discuss further. We’re quite open for calls. We're butting right up against our time, so we have to conclude. Thank you everyone who attended. Please feel free to reach out to us if you have any further questions.

Operator, Operator

Ladies and gentlemen, this concludes today's conference. We thank you for participating, and ask that you please disconnect your lines.