Allied Gold Corporation press release
ALLIED GOLD ANNOUNCES THIRD QUARTER 2024 RESULTS: IMPLEMENTING OPERATIONAL IMPROVEMENTS, SECURING KEY REGULATORY APPROVALS, ADVANCING DEVELOPMENT AT KURMUK AND SADIOLA, AND STRENGTHENING FINANCIAL FLEXIBILITY THROUGH STRATEGIC INITIATIVES
TSX - Toronto Stock Exchange · Gold · Canada
Canada NewsWire
TORONTO , Nov. 7, 2024 /CNW/ - Allied Gold Corporation (TSX: AAUC) (OTCQX: AAUCF) ("Allied" or the "Company") is herein reporting its financial and operational results for the third quarter of 2024. Third quarter production of 85,147 was consistent with the first two quarters of 2024 and the comparative quarter of 2023. Year-to-date production of 258,459 was nearly 10,000 ounces higher than the comparative period of 2023.
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Production in the third quarter included minimal contribution from Korali-Sud (previously referred to as Diba) at the Sadiola mine. Korali-Sud, a higher-grade oxide ore body, was expected to represent a significant component of the Company's production at Sadiola for 2024 and 2025, displacing some of the lower-grade ore originally planned to be fed through the plant. It is now expected to represent a significant component of production for the fourth quarter of 2024, continuing through 2025 and early 2026. This is anticipated to improve both production and cost efficiency. In the second quarter, the Company began operations and stockpiling from Korali-Sud, although operations were suspended early in the third quarter, as the Company was required to complete the permitting process for Korali-Sud under the new 2023 Mining Code. Now fully permitted, the Company has begun processing stockpiled material and broader production activities. Korali-Sud is planned as a bridge between current operations at Sadiola and the completion of the first phase expansion, which will allow the plant to process more of the fresh ore. This first phase expansion commenced in the fourth quarter of 2024 and is expected to be completed by the fourth quarter of 2025, which will allow for sustainable production at Sadiola of at least 200,000 ounces per year. Lastly, the Company continued to drill other areas of oxide mineralization at Sadiola, including Sekekoto West, FE4, FE2.5 and Tambali South, so that they can serve as backup ore feed for Korali-Sud, as the first phase expansion is completed.
Production exceeded sales of 78,939 ounces in the period due to the timing of shipments in relation to gold pours, particularly at Korali-Sud. AISC (1) per ounce, which is calculated on an ounce sold versus produced basis, was impacted by certain expenditures being divided by a lower denominator, which is expected to normalize in the fourth quarter. Total cost of sales, cash costs (1) and AISC (1) per gold ounce sold were $1,750 , $1,514 , and $1,811 , respectively. For the nine months ended, total cost of sales, cash costs (1) , and AISC (1) on a gold ounce sold basis were $1,635 , $1,419 , and $1,619 , respectively, which better reflect the Company's costs, compared with elevated costs during the third quarter, which were impacted by administrative delays related to production at Korali-Sud.
Cost improvements are expected for the remainder of the year. At Sadiola, which will meaningfully impact the consolidated result, this will be achieved through the increased production resulting from the inclusion of oxide ore from Korali-Sud in addition to other operational improvements. Further, as expected and guided, Bonikro's sustaining capital and AISC (1) in the third quarter were impacted by capitalized stripping at PB5. The stripping activities being carried out during the year, and the expected ramp-up of stripping activities in the fourth quarter, will improve production and costs for the next few years, as high-grade ore will be exposed while significantly lower waste removal is planned.
The Company estimates production in the fourth quarter of 98,000 ounces to 102,000 ounces, making it the highest production quarter of the year and comfortably corroborating the Company's position that the production platform of the Company's current operations is in the 375,000-400,000 range, as previously disclosed. Mostly, production increases in the fourth quarter are attributable to more fulsome contributions to production from Korali-Sud which has had a nominal contribution to production year-to-date. Estimated production for the fourth quarter also accounts for reduced throughput when processing ores from Korali-Sud, as a result of clay content in those ores. Presently, ores from Korali-Sud are processed separately from ores from Sadiola under a tolling arrangement given different ownership of Sadiola and Korali-Sud. The Company is seeking approval from mining authorities to blend ores from the two deposits thereby optimizing throughput and production. The foregoing production profile is before any capital programs that will result in a step increase in production, notably from Kurmuk and the Sadiola expansion.
THIRD QUARTER HIGHLIGHTS
Financial Results
Third quarter net loss (2) was $108.0 million or $(0.43) per share basic and diluted. Adjusted third quarter net earnings (1)(2) of $50.6 million or $0.20 per share basic and diluted, primarily reflecting adjustments for non-recurring items related to the Mali agreement (discussed below), tax adjustments, and unrealized losses on the revaluation of financial instruments. EBITDA (1) for the three months ended September 30, 2024 was a loss of $69.1 million , an improvement over last year. Adjusted EBITDA (1) was $52.1 million representing a significant increase from the prior year comparative period. The Company's strong Adjusted EBITDA (1) demonstrates its strong cash-flow generating ability and continued operational efficiency. Operating cash flow before income tax paid and movements in working capital was $87.2 million , up significantly from the comparative prior period. Net cash generated from operating activities for the three months ended September 30, 2024 was $72.6 million . This compares to an inflow of $2.2 million in the prior year comparative quarter. Current period cash from operating activities was positively impacted by higher realized gold prices and proceeds of the stream with Triple Flag that closed during the third quarter. Working capital impact was modest for the quarter, with mostly offsetting decreases due to the buildup of prepaid balances, VAT, stockpiles and finished goods inventory, and increases due to general timing of accounts payable. Cash and cash equivalents totaled $95.4 million as of September 30, 2024 . Cash balances increased significantly subsequent to quarter end with gross proceeds of approximately C$221 million received during October.
Operational Improvements and Significant Developments
Throughout 2024 and continuing in the third quarter, management made a series of improvements to its operational improvement plans to ensure a materially stronger fourth quarter and to position the Company to achieve its 2025 objectives and beyond, effectively strengthening and de-risking the production platform moving forward. These actions include:
Mining, Processing, Exploration and Administrative Improvements: The Company has been progressing to an operationally focused approach to the business and has implemented a series of improvements and optimizations, that once again support a strong fourth quarter and beyond. These include: Increases in mining and waste movement to achieve spatial compliance and access higher-grade ores, resulting in a lower-than-planned cost per ton. Processing plant optimizations have increased total tonnes milled across all operations throughout the year, which is expected to continue through the fourth quarter. Notably, operations in Côte d'Ivoire achieved substantial gains, with third-quarter milling rates up 15% at Agbaou and 39% at Bonikro compared to the first quarter. Consolidating and integrating critical activities, such as contract mining services awarded to Mota-Engil, a leading global mining and construction organization. Consolidating mining services with a well-capitalized partner is expected to enhance consistency, reliability, and to improve logistics and supply chain expertise, including customs and importation. Exploration initiatives aimed at extending mine life, focusing on expanding the Mineral Reserves of oxide ore at Sadiola and advancing exploration at several high-quality targets within the Kurmuk project.
Leadership Strengthened to Drive Operational Performance: The Company has appointed Johannes Stoltz as Chief Operating Officer, leveraging his 28 years of mining experience and deep knowledge of Allied's operations. Johannes' transition into the role has been occurring since the beginning of 2024, and he has been primarily responsible for optimizations and improvements initiated to improve operations from early this year, making strong progress toward achieving sustainable and predictable production goals starting in the third quarter. This appointment is part of an orderly succession plan that had begun at the beginning of the year as his predecessor was nearing retirement, and the company having determined that for its optimizations plan, and having improved its plant functions, a focus on mining was critical and its head of operations should be a qualified mining engineer. Allied has strengthened its Board of Directors by adding a new Board Member, Oumar Toguyeni. Mr. Toguyeni is a highly experienced global mining executive, with over 35 years of mining expertise. His career has included senior leadership positions at major international mining companies such as BHP, Alcoa Inc., IAMGOLD Corporation, and he has also recently been appointed to the Board of Directors of Hummingbird Resources. He very recently joined the board of that company in connection with the restructuring and recapitalization of the company initiated, and financially supported, by its largest shareholder. Beginning his career as an exploration geologist, Mr. Toguyeni has gained extensive experience in Europe , North and South America , the Caribbean , and particularly in West Africa , where he is based. His executive career includes senior operational and sustainability positions in Mali the result of which, together with his in country relationships, will assist in management of and board oversight over the Company's in country efforts. Fluent in English and French, he brings a wealth of international experience and insight to the Board. He is a geologist and also holds a Master of Business Administration degree. The Company is further consolidating its management into its head office in Toronto , rationalizing legacy offices throughout the organization. Adoption of a governance approach aligned with best practices established by public companies, emphasizing rigorous risk management and sustainability practices.
Securing Fiscal and Regulatory Framework in Mali : During the third quarter, the Company entered into a definitive protocol agreement (the "Agreement") with the Government of Mali (the "State"), providing for renewal of the exploitation permit for Sadiola, advancement of the nearby Korali-Sud property including the issuance of a definitive exploitation permit for large-scale mining and processing of mined ore at the Sadiola plant, and the fiscal and regulatory framework for the phased expansion of the operations. Subsequent to the Agreement, other producers in the country reached similar arrangements with the State. The Agreement establishes a strong foundation for certainty and consistency, and leads to the Company continuing to operate in-country and able to pursue growth plans that result in stronger production and cash flow. The Agreement provides several benefits for the Company, setting the stage for advancing the Company's operational and expansion plans: _Permit Renewals: _The Exploitation Permit for the Sadiola Gold Mine has been renewed for ten years, and allows for further renewals after the initial ten-year term until all Mineral Reserves are depleted. This renewal enables operational continuity and supports the Company's phased expansion plan, which provide for the realization of Sadiola's inherent value. _Fiscal and Regulatory Stability: _The Agreement provides fiscal and regulatory stability, in which royalties align with the new mining code, although also provides for derogations from certain royalties. The derogations have substantial financial value, as compared to the mining code itself. In addition, the Company's ownership of Sadiola remains at 80%, with the State owning a carried 20% (the State's ownership of Korali-Sud will be increased to 35% whereas the Company will retain 65%) and maintain rights to fiscal stability, mediation and arbitration. As the Company was the first to complete negotiations and discussions culminating in the Agreement, the Company also secured a most-favoured-nations right which allows for it to claim any right or benefit settled with other companies operating in-country. This framework supports the phased expansion at Sadiola, fostering increased production and cash flow and creating a foundation for optimization projects to enhance recoveries and throughput. _Approval of Korali-Sud: _Korali-Sud represents significant value and offers near-term production and cash flow, advancing strategic goals at Sadiola. _Potential Upside through Joint Ventures: _The Company believes that entering into the Agreement has certain qualitative benefits which include increased goodwill which applies, in addition to other areas, to the pursuit of other in-country mining opportunities with the recently formed State mining company. These include nearby deposits which would benefit Sadiola. _Tax Stability: _Under the Agreement, Mali has agreed to abandon all outstanding claims related to the Company's customs, income and other tax matters up to the date of the Agreement, offering a clean slate for tax-related matters moving forward.
Kurmuk Progress: During the quarter, Allied continued the advancement of the Kurmuk Gold Project, progressing earthworks, camp construction, and supply chain activities according to schedule, including key agreements aimed at securing cost-effective operations. A signed 20-year Power Purchase Agreement with Ethiopian Electric Power ensures sustainable energy for Kurmuk at a fixed rate of US$0.04 per kWh, positioning it as one of the lowest-cost operations globally. Additionally, following a broad and competitive process, Allied selected Mota-Engil Group as its mining contractor, with preparations underway for mining operations to begin mid-2025. Mota-Engil, a multinational engineering and construction leader with nearly 80 years of expertise across Europe , Africa , and Latin America , will bring vital experience to Kurmuk, supporting commercial production goals by mid-2026. This selection aligns with Allied's strategic assessment of its West African operations and the performance of existing mining contractors on-site. Year-to-date, $47.6 million has been invested in the project, excluding capitalized borrowing interest under IFRS. Fourth-quarter expenditures are expected to increase as construction activities continue to ramp-up. The project remains on track on physical progress, however 2024 capital expenditures are now expected to be approximately $100 million excluding capitalized interest, below the original estimate of $155 million . The difference is mostly the result of detailed and optimized execution planning, favorable contract negotiations which lowered upfront payments, preference for local contractor deployment with lower mobilization costs, and optimization of certain earthworks. Some of these payments have been deferred into the first half of 2025, and consequently, the project remains on budget.
Executing Financial Strategy: Allied continued to enhance financial flexibility to support growth plans this quarter through an overnight public offering for C$221 million and a $53 million gold streaming agreement with Triple Flag Precious Metals Corp. The Company is also in advanced discussions for a $150 - $175 million gold stream on Kurmuk, covering approximately 6%-7% of its production, with a step-down to 4%-5%, and a $75 million gold prepay package. These initiatives validate significant opportunities across the asset portfolio and demonstrate Allied's ability to attract substantial investment at a low cost of capital, enhancing financial flexibility and accelerating cash flows.
Operational Results and Outlook
As previously disclosed, production is expected to be back-end weighted, with quarter-over-quarter variances driven by mine sequencing, access to higher grades per the mining plan, and the implementation of operational improvements. Third-quarter results and year-to-date production were impacted by temporary suspension related to permitting in accessing higher-grade ore at the Korali-Sud (Diba) property, as well as previously disclosed power issues in Côte d'Ivoire.
| | For three months ended September 30, | For nine months ended September 30, | YTD Percentage | | | | | 2024 | 2023 | 2024 | 2023 | Improvement | | Gold Ounces Produced | 85,147 | 84,473 | 258,459 | 249,062 | 4 % |
Fourth Quarter Expectations: The Company expects production in the fourth quarter of 98,000-102,000 oz, making it the highest production quarter of the year. Run-rate production is expected to comfortably support the Company's platform within the 375,000–400,000 oz range, as previously disclosed, even before the impact of capital programs anticipated to drive a step increase in production, particularly from Kurmuk and the Sadiola expansion.
2024 Production Expectations: Full-year production is expected to be 360,000–367,000 oz, an increase of approximately 20,000 oz at the midpoint, or over 5% from 2023 production levels.
Cost Expectations: Costs for the first half of the year were in line with expectations, and with anticipated strong production in the second half, full-year costs were initially projected within the guided range. However, challenges encountered during the third quarter, along with the updated full-year production expectation and anticipated effects of Mali's 2023 Mining Code, are expected to increase full-year AISC (1) costs by approximately $200 per oz relative to prior expectations. Expenses are expected to continue trending lower through the remainder of the year, with quarter-over-quarter savings and improvements anticipated alongside a significant increase in fourth quarter production. As costs decrease and production rises, the per-ounce cost of general and administrative expenses is projected to decline at an even greater rate.
Advancement of Key Growth Initiatives
Kurmuk Development
The Company continues to make substantial progress on the Kurmuk Project, achieving key milestones to date, including:
Successful completion of early works and project setup Completion and filling of the construction water dam Substantial completion of key engineering packages Procurement of major services and critical equipment Final negotiations of key construction contracts in preparation for the fourth-quarter construction ramp-up Establishment of the starter camp and advanced construction of the main camp Initiation and steady progress on plant site and general facility earthworks
The mining contract for Kurmuk has been awarded to Mota-Engil, a Portuguese-based engineering and construction company with demonstrated competency and robust financial capacity, following a comprehensive tendering process conducted by the Company. The award will advance pioneering earthworks at an early stage, allow sufficient time for the importation and mobilization of equipment well ahead of the timeframe when mining will begin, and also allow for the early establishment of infrastructure, support and training of personnel.
Year-to-date, $53.9 million has been invested in the project, including capitalized borrowing interest under IFRS, or $47.6 million excluding interest. Fourth-quarter expenditures are expected to rise, primarily supporting:
Further progress on earthworks, including main water dam excavations Ramp-up of concrete, batch plant, and civil activities Start of steel fabrication and other construction activities Advancement of main camp construction Procurement of other services and supplies