Trekor Metals Ltd (TGB) Q3 2026 Earnings Call Transcript

Hello, and thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Trekker Metals Limited third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Brian Burgo. Please go ahead.

Thank you, Lacey. Welcome, everyone, and thank you for joining Trekkers' third quarter 2026 conference call. The news release and regulatory filing announcing our financial and operational results was issued yesterday after market close and is available on our website at trekkermetals.com and on CDAR+. I am joined today in Vancouver by Trekkers President and CEO, Stuart MacDonald. Trekker's Chief Financial Officer, Bryce Hamming, and our COO, Richard Tremblay. As usual, before we get into opening remarks by management, I would like to remind our listeners that our comments and answers to your questions will contain forward-looking information, and this information by its nature is subject to risks and uncertainties. As such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our third quarter MD&A and the related news release, as well as the risk factors particular to our company. These documents can be found on our website and also on CEDAR+. I would also like to point out we will use various non-GAAP measures during the call. You can find explanations and reconciliations regarding these measures in the related news release. And finally, all dollar amounts we discussed today are in Canadian dollars unless otherwise specified. Following opening remarks, we will open the phone lines to analysts and investors for questions. I will now turn the call over to Stuart for his remarks.

Thank you, Brian. Good morning, everyone. Welcome to our third quarter earnings call. And it was a great quarter for us, both operationally and from a financial perspective. Supported by strong operating results at Gibraltar, a great copper price environment. And steady progress on the Florence Copper ramp up. So a good production quarter at Gibraltar. In fact, our best quarter of the year so far with 34 million pounds of copper produced. That combined with a record realized copper price of 640 US per pound and a growing contribution from Florence led to 164 million of adjusted EBITDA. That's a quarterly record for the company. Cash flows were strong as well, even though we had a small inventory build due to timing of shipments. And Bryce can talk more about the financials in a minute. Looking back on the last year, we've generated almost $500 million of adjusted EBITDA over the last four quarters. That really shows how our business is changing in the current market, and we expect more growth as Florence's ramp-up continues. Operationally, at Gibraltar, we benefited from good access to higher-grade ore in the lower benches of the connector pit for most of the third quarter. Copper production increased by 12% over Q2, driven by those higher grades, which averaged 0.28%, as well as increased mill throughput, and also a step up in copper cathode production as we were able to realize a full quarter with both leach pads operating. Later in the quarter, mining operations began to transition back to the upper benches of the connector pit and into the more challenging oxidized ore that impacted Q3 copper recoveries, which averaged 77%. That transition back to the higher benches was completed in October, and we'll be there for the next few quarters. We expect to see lower production in Q4. But based on our year-to-date results, we've increased our 2026 production guidance to 115 to 120 million pounds. That's a 5 million pound increase over the original range. Costs in the quarter trended higher to 272 per pound. Diesel prices continue to impact operating costs at Gibraltar, and they're adding about 20 cents per pound of copper year-over-year. Explosives, which are up about 8% since the third quarter last year, is another area of cost pressure. And in terms of capex, we expect higher spending next year as we have work to do on the tailing storage facility and water management. But offsetting some of that is a continued strong molybdenum price, which gives us a great byproduct credit. And also low smelting and refining costs, which we've talked about in the past and will be negative for us next year. So turning to Florence now, the ramp-up has progressed smoothly in the quarter with steady monthly production increases resulting in 7 million pounds of copper. That was a 35% increase over the previous quarter. Production increases came mostly from the 20 new wells, which I spoke about on the last conference call. They went into operation in August and were the main driver for the 40% increase in solution flow rates this quarter. It does take some time for the new blocks of ore to become acidified and start producing copper and solution. That initial acidification can take as much as three months, so we expect a jump in PLS grades from those wells in the fourth quarter. And additional wells have been coming online every month now, as well-filled expansion is very much a focus. We had six drills running in the third quarter, and we've seen good improvement in productivities and expect to complete 100 new wells this year. We expect Florence to produce 25 to 28 million pounds for 2026 and targeting to hit the 7 million pound per month capacity run rate in the early month of 2027. And certainly, if we can achieve that, that would be a great result. You know, as we look back at our 2023 technical report, we actually plan for that ramp up to happen over nine months, or sorry, over nine quarters. So we're tracking well ahead of that. It's now been one year since we started wellfield operations. Over that period, we've gained a tremendous amount of knowledge and data which is being used to update production models. The team is continuing to refine and optimize operating strategies on the wellfield, so it's still very much a learning process as we ramp up. The SXEW plant is running very well. At the end of the third quarter, the site team ran a condensed cathode harvesting schedule. Running the plant at capacity for several days and confirmed again that the plant is more than capable of handling all the copper and solution that we can get out of the wellfield. On the cost front, we saw a significant step down in our unit operating costs this quarter, down to $3.54 per pound. That's our C1 operating costs. Most of our operating costs are stable now at Florence from month to month, so unit costs will continue to trend down as we produce more pounds. But one important exception to that is sulfuric acid, where we'll be using higher volumes of acid as we ramp up, and also expect higher acid costs next year. Although negotiations are still in progress, and we haven't locked in that price for 2027 yet. And a last note on Florence. I think it's notable that in October, we held our grand opening celebration to mark the start of production at the first major source of new copper production in the U.S. in nearly two decades. We had almost 300 people in attendance at the event, local, state, and federal politicians. Business partners, suppliers, and local citizens who have been supporting Florence for years now. We were grateful to receive the key to the town from the mayor, and the EPA Administrator Lee Zeldin spoke about the significance of Florence Copper to the U.S. industry. It was a great event and an opportunity to step back and celebrate what we've accomplished in recent years. Although we recognize and know that there's still lots of work in front of us to fully realize the potential of this great asset. Turning to Yellowhead Copper now, we achieved a number of permitting milestones at that project in the third quarter. And following the submission of the detailed project description in late June, the BC Environmental Assessment Office confirmed in July that the project was ready to move forward into the process planning phase. of the environmental assessment. In August, the Canadian government approved a substitution decision which allows the province here in BC, the provincial government, to lead a single environmental assessment on behalf of the federal government. It's also notable that in July, a consent agreement between the CIMP nation and the province of BC was signed. That agreement provides a framework for shared decision-making through the provincial assessment and the CIMP's own assessment process. So that will be... A coordinated approach. Overall, I continue to believe we have a very positive environment for the project today, and we look forward to the work ahead and advancing the permitting process. With that, I'll now turn the call over to Bryce to discuss our financials in more detail.

Thank you, Stuart, and good morning, everyone. Trecker reported third quarter revenues of $342 million. The year-over-year increase of 100% in revenue is driven by a 40% increase in copper sales and also a 40% higher copper price, and we also experienced stronger molly prices and a weaker Canadian dollar compared to last year's quarter. Consolidated sales were 37.4 million pounds of copper, including 30.4 million pounds from Gibraltar and 6.9 million pounds at Florence Copper. Mollie's sales for the quarter were £358,000, generating revenue of £17 million and a by-product credit of $0.35 US per pound of copper. Cash flow from operations was £122 million and adjusted EBITDA was £161 million. Cash flow was impacted by Gibraltar carrying higher finished inventory at the quarter end due to shipment timing. The paydown of some AP and reversing some deferred revenue from Q2. Sales from Florence in the third quarter increased by 30% from the previous quarter to 6.9 million pounds, in line with our production of 7 million. This resulted in revenues of 60 million in the third quarter. Cathode quality has remained very good with all shipments well within all customer specs. In the third quarter, Florence site operating costs, including royalties, were $25 million per pound, or sorry, million, with no operating costs being capitalized this quarter. Sustaining costs for the quarter were also $25 million, most of which is the ongoing wellfield drilling that we're undertaking there. As Stuart mentioned, higher production in the quarter had a material impact on Florence unit costs. And they declined by about 25% from the prior quarter and are now reported at $3.54 per pound U.S. As most of the Florence operating costs are fixed, we will continue to see this decline in unit costs as production rises in the coming months and quarters. Depreciation and amortization has been increasing now that Florence is operating, and our depreciation averaged about $25 million in 2025 per quarter, and that was just with Gibraltar. So this past quarter, it was up to $45 million, with Florence contributing an additional $10 million depreciation to that amount. We're also amortizing some of the capitalized strip from the connector pit. Another item to note is project development costs. Last year, we spent $9 million on development assets, and most of that was Yellowhead. And then through the three quarters this year, we've already spent $19 million. And this increase in spending reflects the ramp-up in the environmental assessment activities at Yellowhead. We expect these project expenditures to continue to rise into 2027 as EA work intensifies in the next couple of years as we advance that project through the EA process and towards a construction decision. Trekkers' liquidity continued to improve in the third quarter. At the end of the quarter, we had cash balance of $214 million and total liquidity of around $400 million. On October 30th, we extended our bank's revolving credit facility for an additional three years out to October 2029. We've also increased the size of that facility from $110 million up to $130 million U.S., and there's also an uncommitted accordion feature for an additional $50 million if we wish to add further capacity there. Our hedging strategy continues to offer general downside protection to the copper price, but we don't limit the upside as we did in the past when we were building Florence. In the fourth quarter, we have copper puts in place, and they have a strike price of $4.75 per pound, and we've protected the first half of 2027 with $5 strikes for 45 million pounds. We'll look to continue to add to that protection going forward. As our cash flow continues to increase over the coming months, the priority remains delevering our balance sheet, but already our growing EBITDA from two copper mines and a strong copper price is reducing our leverage. And in the third quarter, on a trailing 12-month basis, our net debt to EBITDA ratio dropped to just around one times. So with that, I'd like to open the phone lines for questions. So back to the operator. Thank you.

At this time, if you would like to ask a question, please press star 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Craig Hutchison from TD Cohen. Please go ahead.

Hi, guys. Good morning. Great to see the free cash flow and deleveraging the quarter. A couple of questions for me. Just on Gibraltar, throughput was up this quarter, but it's been trending below kind of design level here for about a year now. Just kind of curious, are you still in kind of harder ore, and how should we think about throughput for the balance of the year and into next, just based on where you are in the PITS sequencing? Thanks.

Yeah, Craig Richard here. I think throughput going forward, you should be thinking about it at the design basis, and that's what the plan is to run forward at.

And so back to sort of like, you know, 84,000, 85,000 tons per day kind of range?

Yeah, the 85,000 short tons per day range, correct.

And then the grades in the fourth quarter, will they be down from Q3? You guys are still, I think, in the same area of the pit, are you not?

We've transitioned out of the bottom of the pit, so likely looking at lower grades in Q4 and certainly lower recoveries. Those upper benches have some of the more complex or more oxidized material, so definitely stepping down in overall production in Q4.

Yeah, I think we've talked previously about kind of supergene ore versus hypogene, and we're back up mining through supergene ore, which just doesn't perform as well in the mills as the conventional hypogene ore that is a predominant feed that we typically have at Gibraltar.

Right. Okay. Maybe just switching gears to Florence. Obviously, you guys are spending a bit more now because you're ramping up and adding the wells, but can you just give us a sense of what is a steady state sustaining capital that you guys are looking at on maybe a quarterly or annual basis as you guys kind of reach steady state in the early months of 2027? Thanks.

Well, I mean, the big item in sustaining CAPEX is drilling, obviously, in wellfield expansion. You know, this year we'll add 100 wells. I think it's still a bit of a consideration and an under-review as to exactly how many wells we're going to add every year going forward in the longer term. But certainly in the short term, we're going to keep advancing the wellfield at the rate that you've seen in the last... You know, a couple quarters. So, yeah, something in the range of, you know, 25 million per quarter-ish U.S. dollars. But longer term, it's a bit early to really be too definitive. We're going to see how things ramp up and see how many wells we ultimately need to feed the plant with 85 million pounds of copper.

Understood. Thank you.

Again, if you would like to ask a question, please press star 1 on your telephone keypad. There are no further questions at this time. I would now like to pass it back to management for closing remarks.

Great. Okay. Well, thanks, everyone, for taking the time today on an ugly market day, and we look forward to talking to everyone next quarter. And if there are questions that come up in the meantime, we are always here. So thank you. Bye now.

Ladies and gentlemen, this concludes today's call. You may disconnect.