Allied Gold

I always struggle for the words to start these presentations, but it’s always a pleasure to be following Martino and Montage. It’s a great success in a part of the world that we operate in. It’s a simple story to tell, and my struggle is that ours is a bit more of a complex story to tell. We have assets that are in production, and we have growth, and we have assets that will be generating the type of production and cash flow that that company has. And I hope I can make a compelling case to the people that are in this room and that are on the webcast that we represent at least the value proposition that they have and that other companies like ours have.

So where to begin? I guess a good starting point is that we’re a unique mid-tier gold producer. If you look at a barbell, the two ends of the barbell are these two tier one mines. In the middle is our Côte d’Ivoire asset. It’s two mines that we treat as a complex. And as a complex, they’ve been producing in the range of 180,000 ounces per year. That number will increase to over 200,000 ounces per year. It’s short mine life, but we’ve now made new discoveries that are already improving in probable reserves, and that continues to increase. That will extend mine life.

At the opposite ends, the barbells, are these two tier one assets. We have one in Ethiopia. That mine is just starting production. We’re just a little behind where Koné is, but we expect to do our first gold pour within the course of the next couple of weeks, ramp up to the end of the year, and be in full production for 2027, and then for the fifteen years of strategic mine life that we have based on proven and probable reserves, resources, and where we’ve identified new ounces in inventory. At the opposite end of the continent of Africa, in Mali, is the Sadiola mine. It is a tier one generational mine. We carry a large inventory of ounces, and it has been producing for at least a generation and will be producing for a generation to follow.

A little bit then on the performance of these mines. As I said a few moments ago, we do produce from our Sadiola mine in Mali and from our Côte d’Ivoire complex. We produce in the range of 385,000 to 425,000 ounces per year. That’s our guidance for this year. In the first half of the year, we produced 193,000 ounces. We’re on track to meet that 385,000 ounces plus. We’ve said that the second half of the year is more heavily weighted to the first half of the year, and the fourth quarter is the heaviest weighted quarter of the year. There’s a little bit more that occurs over the course of this year then.

We also expect to improve costs in the second half of the year. We’re running at about $2,200 all-in sustaining costs from our producing mines as they transition into better operations. But by the end of the year, as I mentioned, we’ll also be in production at our newest mine in Ethiopia, and that is a low-cost producer, as I’ll mention in a couple of moments. We have a strong financial position, strong backing from our shareholders. We have a new shareholder in the company with Zijin Gold owning 9.2% of the stock and with a cash balance, our pro forma cash balances at the end of the second quarter with the money that came in from the Zijin investment of $487 million. We spend about $36 million on exploration, and the reason for that, for the small company that we are, why we spend that much on exploration, is we are making new discoveries. And even with the long life assets that we have, we expect that we’ll continue to extend those long lives.

A little bit then on the mines. What can we say about Kramouk? Kramouk is not yet in production. We’re literally around the corner on the start of production. Wheaton Precious Metals got a special endorsement in the last presentation because they financed the growth of that asset. Well, they did the same thing here, and we’re very appreciative of the hard work that they put in in their due diligence. This is not a promotion for Wheaton Precious Metals, but it’s an endorsement that this is a high-quality asset that will produce what we say here.

We expect to produce 240,000 to 270,000 ounces next year. The average for the first four years of mine life, because of a higher grade closer to surface from the two initial open pits, is 300,000 ounces. Life of mine production of 240,000 ounces, and we expect that to increase. And all-in sustaining costs that are in the range of $1,300 per ounce. So that is assuming a $4,200 gold price. That all-in sustaining cost includes royalties, and those royalties reduce at a lower gold price and increase at a higher gold price. At $4,200, roughly where we are, we expect to produce every ounce of gold at $1,300 per ounce. Proven and probable reserves at 2.7 million ounces. That number continues to increase. And our target mine life is fifteen years.

What have we done to get it into production? Well, we’re on budget. We’re just a little behind schedule by a few weeks, but we expect to be there very soon. We’ve already advanced our mine plan. We’re in mining. We’re capturing grade. It’s reconciling on tonnage and on grade. We have a stockpile on surface of two-thirds of where we expect it to be when we’re in full production by the end of this year, with a million tons of ore stockpiled on surface. We’re in the commissioning process, but heck, the most important part here is we’re just about to start production. And when we start production, we have this substantial value creation with up to 270,000 ounces of production in the next year, an average of 300,000 ounces over the course of the four years beginning next year, with an all-in sustaining cost that generates a margin to the gold price, the present gold price of about $3,000 per ounce. This is a big cash machine.

I’m showing this picture just to show you the quality of work here. We talk about connection to the grid, but Ethiopia’s power is about 97% hydroelectricity. They know how to build hydroelectric power plants. This is high quality. We are connected to the grid. We have put ore through the crushing circuit. We’re about to start production, and our power costs are four cents per kilowatt hour. Just for those of you who are Canadian in the audience, that’s about one quarter of the power cost that you pay in Canada. So we’re a low-cost producer, in part because for twenty years, we have a power purchase agreement of twenty years that we’re carrying at four cents per kilowatt hour.

At the opposite end of the continent, as I mentioned, is Sadiola. That’s our other tier one mine. Sadiola is going through a transition. I can describe it as a mine that has produced 8.8 million ounces over more than twenty years of production. It is transitioning from an oxide mine to a fresh ore, and we’re going through the process then of accommodating that fresh ore with a plant that was not originally designed for it. It’s a modular expansion. We’ve completed the first phase of that expansion. That allows us to be able to get 60% of the ore by comparison to 20% from that fresh ore, more sulfide coming through that plant. So as much as 70%, certainly 60% in that range, that is fresh ore. That is higher grade, lower recoveries, but that also increases production.

We show here short-term production of 200,000 to 230,000 ounces. That’s what we’re presently producing. But if I go back three years to the first presentation we gave at this conference, we were producing just over 150,000, maybe around 155,000 ounces. So we’re taking a very gradual approach to the transition of this mine. But why it’s important to talk about this transition that ultimately gets us to that 360,000 ounces that we show on the screen and all-in sustaining costs of below $1,700 is because we’re carrying an inventory of over seven million ounces of proven and probable reserves, and that number continues to grow. That will be a big cash machine with a production platform that is larger than Kurumuk, about the same level of cash flow as Kurumuk.

And as I mentioned before in that barbell, in the center is a steak and potatoes complex, these two mines that produce each about 80,000 to 100,000 ounces for an average of 180,000 to 200,000 ounces. Again, if we go back several years ago, these mines were coming to the end of their mine life. We’ve extended mine life. We’re already carrying an inventory of about 1.7 million ounces of proven and probable reserves. At 180,000 to 200,000 ounces, that gives us about eight to ten years of mine life toward a goal that we had set of a mine life of ten years at a production level of 180,000 ounces minimum. Earlier this year, we indicated that we can up that ante at least ten years of mine life at 200,000 to 220,000 ounces per year. Proven and probable reserves are already beginning to demonstrate that and will continue to show that these mines can generate production, generate production for a long life, and generate cash flows.

Exploration is important to this company. I talked about $36 million of exploration per year. Each of the three mines and projects carries different reasons for exploration. In the case of Sadiola, which you see to the far left, the objective here is to find more oxide ounces. While we have a large inventory of fresh ore, those oxide ounces go through the plant even with the modifications, and they have higher recoveries. We’re already carrying an inventory of close to a million ounces of oxides, and we intend to increase that. The other objective is to see if these open pits, because they’re mineralized between the pits, can we create one large super pit that provides more mining flexibility and operational efficiency.

In the case of Côte d’Ivoire, it is to extend mine life, and in the case of Kurumuk, to extend mine life, but also to take that 300,000 ounces per year for the first three years and carry it for a longer period of time. All of our inventory at Kurumuk is presently in two open pits, the Dish Mountain open pit and the Ashishiri open pit. But we have mineralization in some of these other areas, and we’re in a position to be able to say that we’re already finding that that will be carried into proven and probable reserves over the course of the next year to eighteen months. And similar to the two open pits, they carry higher grade closer to surface. So extending that 300,000 ounces per year for the four years for longer and extending mine life to that strategic goal of at least fifteen years.

We’re an established mid-tier producer with a production platform of last year of 379,000 ounces. That increases next year to between 600,000 and 650,000 ounces, and we expect that number to increase further with the further modular expansions at Sadiola that take us to closer to 800,000 ounces between now and 2030. We have large-scale, long-life assets. We have notable production growth, notable and more significant cash flow growth. While we have production growth, it is disproportionately more cash flow growth because all those new ounces are coming in at lower costs. And we have strength in operational performance, delivered on our growth projects. We have improved sustainability framework, strong financial position of almost $500 million. We’re increasing mine life, and we have further growth initiatives that will take that 600,000 ounces to 650,000 ounces next year to a higher level.

And finally, let me conclude by saying that we have an attractive valuation. We’re carrying a market capitalization of roughly $4 billion to $4.5 billion Canadian with a production platform, as I said, of already 400,000 ounces with that growth, with that improvement to costs, and with an improvement to cash flows.

In terms of upcoming immediate milestones and exploration update, that’s important to us to show extension of mine life and all the reasons that I gave a few moments ago. For example, at Kurumuk, the startup of Kurumuk operations, then a very rapid ramp-up to nameplate by the end of the year and full production next year. We give our Q3 results in early November, and we’ll provide an update in early November on what we intend to do with all of that cash flow. What’s our cash distribution policy to shareholders? With 16% of the shares held by management of the company, we bought our shares in this company, you can understand the importance of cash flow, you can understand the importance of cash flow distributions, and we think that’s important for shareholders generally. The Sadiola next phase of expansion, that modular expansion that gets us to seven million tons, that gets us to an initial 275,000 ounces by 2029 toward that goal of 360,000 ounces. And we expect an analyst tour in the first quarter, probably with Sadiola, but certainly with Kurmuk. And with that, if I can open it up to any questions that you have.

Thank you, Peter. We do have some time for questions, so please raise your hand and we can get a mic to you. I see one in the front here.

Hi, Peter, John Tomasos.

Good to see you, John.

Respecting your vast experience in Canada, South America, West Africa, now Ethiopia, Nubian Shield, how would you compare the literacy of the workforces, the fertility of the geology, the ability to do business?

So let’s start with the Arabian Nubian Shield. There’s been much said about the Arabian Nubian Shield, particularly in Saudi Arabia. In Saudi Arabia, that Arabian Nubian Shield is covered by a later layer of probably forty meters of sand. As you extend into Egypt, Eritrea, and then into Ethiopia where we are, there are surface outcroppings, there’s gold literally everywhere, and you can see that gold. So it’s a prolific place for mining. Right now we’re carrying an inventory of three million ounces of resources, just over three million, 2.7 million, as I said, of proven and probable reserves. Publicly, we’ve said we’re gonna get to five million ounces. I think that that number is gonna be higher than five million ounces, because what we’re seeing in our exploration effort is demonstrating that there are more ounces in these new deposits.

On your question of literacy, unquestionably, the literacy in West Africa for mining is better than it is in East Africa, certainly in Ethiopia, because Ethiopia does not have a culture for mining. And yet, it graduates geologists, it graduates engineers. It does not graduate mining engineers. But you mentioned South America, with my experience, our collective mining management experience in dealing with Yamana Gold, the predecessor to Ally Gold, and what we did in South America. South America forty years ago did not have the literacy that it has today on mining, and yet it has it today. So what we’re doing is we’re saying take those experiences that we’ve had over the many, many decades, personal experiences and then cultural experiences, country experiences, and apply them to these parts of the world where that literacy isn’t there. An engineer is an engineer, and if we can retrain that engineer to become a mining engineer, then why not? We are more reliant on expats than we normally are in a place like Ethiopia, but we expect to wean ourselves off of that over the course of the next eighteen months to two years.

Let me make one more observation. Ethiopia is a country that has existed for 5,500 years. It is a culture that goes back to biblical times. There are biblical references to it. It is a proud nation, fast learners, entrepreneurial. And I would say the same is true for Côte d’Ivoire and for Mali as well. There are lots of headlines about the things that are happening geopolitically in these countries, but there is an entrepreneurial spirit and there is entrepreneurship, and they are fast learners. That is true in Ethiopia, and so we’re taking that as an opportunity to say, “We can train you if you’d like to be trained,” and then we are as reliant on locals as we have been in prior experiences in other parts of the world. Taking that South American and Canadian experience and also West African experience and applying it to East Africa is gonna deliver some very impressive returns for us.

Peter, I have a question. At CDI, we recently saw a 60% increase in proven and probable reserves, and that takes that reserve life out to 2030. And today you presented a strategic mine life of ten plus years. How do we bridge that gap, and which of the exploration targets at CDI gets you most excited?

So I called it a complex. It’s two mines that are seventeen to twenty kilometers apart with an access road between the two. And historically, the two mines were producing between 80,000 and 100,000 ounces per year, and they were small mines by the two prior owners. Combining them into one complex has given us a universe of possibilities. Let me unpackage and clarify what’s in your question. In the case of Bonacro, the northern mine, we’re already carrying an inventory of just about 1.4 million ounces of proven and probable reserves. So we can demonstrate there that we have at 100,000 ounces per year, that’s its current nameplate production. We can demonstrate a mine life of at least ten years and closer to twelve years.

Agbaou is the runt of the litter at this point. We have changed the pit design. We have new areas of exploration near it. There’s a possible underground opportunity at Agbaou. We’ve already extended mine life from roughly a year and a half in eighteen months to four to five years. And we see line of sight to getting that to at least eight years. Between the two operations then, a comfortable 200,000 ounces per year for ten years. I called it 1.7 million ounces between the two, that’s where it’s at. A little bit more than 1.7 million ounces. So if I looked at it and said 180,000 ounces per year, we’re not yet at ten years, but we’re getting very close. And if we go back two years ago, we were nowhere near where we are today.

50% of our exploration budget has been devoted to Bonikro and Agbaou, to the CDI complex, because of the very significant opportunity that it presents. A couple of years ago, we would have valued it at a few hundred million dollars. But at 200,000 ounces per year, I always look at things from the perspective of what’s the value creation. At 200,000 ounces per year, at all-in sustaining costs between the two of $1,800 to $1,900 per ounce, at a $4,200 gold price for ten years, I can’t do the math fast enough, but somebody in the audience must have a calculator to be able to tell us that it’s very close to $1.5 billion.

And finally, Peter, with the forty-five seconds we have left, could you just mention capital allocation priorities post-Zijan and how you feel about a dividend?

What a question to leave in the last thirty-eight seconds. But we’re about to generate some very robust cash flows as we optimize and improve existing mines, as I mentioned. But Kromak is really the one that is the cash machine. It’s this big cash machine. Four cents per kilowatt hour, $1,300 all-in sustaining costs at a $4,000 to $4,200 gold price, 270,000 ounces, an average of 300,000 ounces for each of the next four years, and I think that that will be extended. Again, I use the term I can’t do the math fast enough. That’s a lot of margin. And at a tax rate of 25%, that’s a lot of cash flow.

So our objective then is to say, look at that cash flow, give patient shareholders a reward. How do we deliver dividends? How do we do stock buybacks? We will have leftover money. That leftover money will be used for the other areas where we think we can increase production. And boy, do I think there are a lot of opportunities out there that we could be looking at, at the right share price when it’s that time. But you should expect that before the end of the year, we will announce our cash distribution policy as we generate that cash flow.

Ladies and gentlemen, please join me in thanking Peter for his presentation. Well done. Thank you. [audience applauding]