Allied Gold Corporation press release
ALLIED GOLD ANNOUNCES SECOND QUARTER 2024 RESULTS: SETTING THE STAGE FOR A STRONG SECOND HALF WITH CRITICAL INVESTMENTS TO SUSTAIN PRODUCTION AND REALIZE UNPARALLELED GROWTH POTENTIAL
TSX - Toronto Stock Exchange · Gold · Canada
Canada NewsWire
TORONTO , Aug. 8, 2024 /CNW/ - Allied Gold Corporation (TSX: AAUC) ("Allied" or the "Company") is herein reporting its financial and operational results for the second quarter of 2024. During the quarter, the Company produced 88,135 gold ounces ("oz") and sold 84,611 oz at total cost of sales, cash costs (1) and all-in sustaining costs ("AISC") (1) per oz sold of $1,547 , $1,355 , and $1,498 , respectively. Importantly, Allied continues to deliver on its sustainable production base at sequentially lower costs, and has made significant investments during the quarter to meet both its current guidance and industry-leading growth plans, including:
[](https://mma.prnewswire.com/media/2478419/Allied_Gold_Corporation_ALLIED_GOLD_ANNOUNCES_SECOND_QUARTER_202.html)
Additional Oxide Ore Feed at Sadiola: As anticipated, ore from Diba was exposed and became available for mining in late June. Limited quantities were processed as part of industrial-scale tests to assess plant behavior, yielding positive results. Further production and initial sales of gold from Diba are expected to commence during the third quarter, subject to the receipt of authorizations for processing at Sadiola, which are currently in progress. Diba, an oxide and higher-grade ore body, is expected to significantly contribute to the company's production at Sadiola this year, replacing some of the lower-grade fresh ore initially planned for the plant. Exploration continues at Sekekoto West, FE4, and Tambali South to uncover additional near-surface oxide gold mineralization, maximizing short-term production and cash flows, and building a growing inventory of Mineral Resources. Investment in Self-Reliance and Operational Flexibility: During the second quarter, Côte d'Ivoire experienced sporadic power generation issues, leading to intermittent unplanned shutdowns of the processing plants. To address this, and as part of the Company's broader objective of becoming more self-reliant, Allied successfully installed backup generators at its Côte d'Ivoire operations. This investment effectively mitigated future power reliability risks. In addition to the immediate installation of generators, the Company is also discussing a turnkey solar power solution with a solar power provider. Bonikro and Agbaou demonstrated their operational mining capacity, significantly exceeding processing levels that were previously affected by these issues, which were rectified during the quarter. Executing Financial Strategy: On August 7 , 2024, the Company entered into a gold streaming agreement with a wholly-owned subsidiary of Triple Flag Precious Metals Corp. ("Triple Flag"). Under the terms of the agreement, Allied will receive a US$53 million upfront cash payment (the "Advance Amount") and Triple Flag will purchase 3% of the payable gold produced at each of the Agbaou and Bonikro mines, subject to a step-down to 2% after set delivery thresholds, in exchange for the Advance Amount and an ongoing payment equal to 10% of the spot gold price. Closing of the transaction and receipt of the of the Advance Amount is subject to certain conditions precedent, including certain third-party consents and agreements, and completion of related security documents which are expected to be completed in short order. Given the competitive cost of capital realized via the Côte d'Ivoire stream and strong market feedback, Allied is arranging a minimum $250 million Kurmuk funding package comprising a gold stream and a gold prepay facility for the development project. This comprehensive funding solution is expected to close by the end of September 2024 . The prospective stream validates the opportunities at Kurmuk, including its strong geological upside potential, and has attracted significant interest at a low cost of capital. The gold prepay facility would bring forward cash flow and include a built-in gold price hedge amidst favorable market prices. Progress on Exploration and Growth Initiatives: Exploration efforts continued to yield positive results in the second quarter, as shown in the press releases on April 10 and June 26 , 2024. The Company confirmed high prospectivity at Kurmuk's Tsenge gold prospect and new oxide discoveries at Sadiola's Sekekoto West, supporting the Company's goal of growing significant Mineral Reserves and Mineral Resources. Key advancements at Kurmuk include progress on the EPCM Early Works contract under DRA Global Limited, ongoing procurement of long-lead items including the ball mill (in addition to the already owned SAG mill), and the tendering process for contract mining and bulk earthworks.
SECOND QUARTER HIGHLIGHTS
Financial Results
Net Profit before Income Tax for the three months ended June 30, 2024 was $36.1 million . Second quarter net earnings (2) of $8.3 million or $0.03 per share basic and diluted. Adjusted first quarter net earnings (1)(2) of $15.9 million or $0.06 per share basic and diluted, largely reflecting shared-based compensation and adjustments for non-recurring items related to unrealized losses on the revaluation of financial instruments. EBITDA (1) and Adjusted EBITDA (1) for the for the three months ended June 30, 2024 was $56.2 million and $63.7 million respectively, both of which represented a significant increase from the prior year comparative period. The Company's strong EBITDA (1) demonstrates its strong cash-flow generating ability and continued operational efficiencies. Operating cash flow before income tax paid and movements in working capital was $56.9 million , up significantly from both the first quarter of 2024 and the comparative prior period quarter. Net cash used in operating activities for the three months ended June 30, 2024 was $6.2 million , negatively impacted by anticipated income tax payments in the second quarter and working capital movements. Working capital was primarily affected by the timing of VAT credit receipts at Sadiola, the buildup of inventory stockpiles for Diba and Bonikro, the seasonal buildup of materials and supplies in anticipation of the rainy season in Mali , finished goods awaiting shipment, and, to a lesser extent, the general timing of accounts payable. Cash flows from operating activities are expected to materially increase through the remainder of 2024, driven by increased production contributions, lower costs in the second half of the year, and more normalized adjustments for changes to working capital. Expenses are expected to continue to trend lower over the remainder of the year, with quarter-over-quarter savings and improvements expected, the most significant of which are expected in the second-half of the year. As costs further decrease, and production increases, the per ounce cost of general and administrative expenses will decrease more than commensurately. Cash and cash equivalents totaled $78.0 million as at June 30, 2024 . With an expected strong second half of the year, punctuated by anticipated higher production and lower costs, which creates a step-change in cash flow generation, the Company is well positioned to cover its upcoming capital expenditure ramp-up at Kurmuk. Further, cash is expected to meaningfully increase in the third quarter with the closing of the $53 million streaming agreement with Triple Flag, subject to the satisfaction of conditions precedent.
Operational Results – Delivering on H1 Guidance with Improvements Expected in H2
Operating results year-to-date are consistent with the midpoint of the Company's guided range, taking into account the expected production split between the first and second halves of the year, despite the aforementioned power disruptions in Côte d'Ivoire and mining outpacing processing at Diba.
| | For three months ended June 30, | For six months ended June 30, | YTD Percentage | | | | | 2024 | 2023 | 2024 | 2023 | Improvement | | Gold Ounces Produced | 88,135 | 85,983 | 173,312 | 164,589 | 5 % |
Allied's sustainable production base continues to demonstrate a solid platform for significant growth, with consolidated production higher in both Q2 and the first half of the year compared to the same periods in the prior year. Production would have been approximately 13% higher, adjusting for:
Contributions from Diba: Ore from Diba was exposed and available for mining late in June, as planned, in order to commence the industrial scale tests at the Sadiola plant to confirm and optimize processing parameters. As such, limited quantities of ore were processed during the month to conduct these tests and assess the processing plant behavior and controls for the higher-grade ores in particular, and these tests were successful. The plant trial yielded production at better than expected grades. Further production and initial sales of gold from Diba are expected to commence during the third quarter, subject to the receipt of authorizations for processing at Sadiola, which are currently in progress. Diba, an oxide and higher-grade ore body, is expected to represent a significant component of the Company's production at Sadiola this year, displacing some of the lower-grade ore originally planned to be fed through the plant. This is expected to improve both production and cost efficiency. The quarter ended with approximately 175,000 tonnes of oxide ore stockpiled at Diba from the Korali-Sud mining license, representing approximately 6,400 ounces of mined gold. This stockpile included 74,000 tonnes of ore at an average grade of 1.9 g/t, which would have been processed had the formal authorizations been received during the quarter. These ounces would have been additive to production in the second quarter, but are not included in the total disclosed production. Further, exploration continues at Sekekoto West, FE4, and Tambali South to define additional near-surface oxide gold mineralization, with the objective of maximizing short-term production and cash flows, and building a growing inventory of Mineral Resources. Côte d'Ivoire operations : As part of the Company's broader objective of becoming more self-reliant, backup generators were successfully installed in the second quarter at its Côte d'Ivoire operations for an initial unbudgeted cash outlay of $14.1 million . This investment, spread across its in-country operations, effectively mitigated future power reliability risks. Côte d'Ivoire continued to experience issues at some of its power generation plants during the second quarter, leading the mining industry to reduce consumption by intermittently shutting down processing plants while power generation equipment was restored to the grid. In addition to the immediate installation of generators, the Company is also discussing a turnkey solar power solution with a solar power provider. Bonikro and Agbaou demonstrated their operational mining capacity, significantly exceeding processing levels that were previously affected by these issues, which were rectified during the quarter by the aforementioned mobilization and installation of generators. The Company anticipates that it would have produced approximately 8,625 ounces more, comprising 5,175 and 3,450 ounces at Bonikro and Agbaou, respectively, had the intermittent power shutdowns not occurred.
As previously disclosed, production is expected to be weighted to the second half of the year with quarter over quarter variances due to mine sequencing and accessing higher grades as per the mining plan, along with the implementation of operational improvements. Production is expected to sequentially increase in the third quarter, and stay roughly the same in the fourth quarter, all of which aligns with Allied's guidance of 375,000 to 405,000 ounces for 2024 at a mine-site AISC (1) of $1,400 /oz.
On a longer-term outlook, the Company continues to target production of 400,000-450,000 oz at a mine-site AISC (1) below $1,375 per oz for 2025, and aims to exceed 600,000 oz at a mine-site AISC (1) below $1,225 per oz for 2026. These projected improvements are underpinned by additional oxide ore feed and the Phase 1 expansion at Sadiola, as well as the initiation of production at Kurmuk in 2026. Meanwhile, annual increases in production at Bonikro, as PB5 progresses, combined with stable production at Agbaou, will further enhance the company's sustainable production platform.
Advancement of Key Growth Initiatives
Kurmuk
The project implementation team, which boasts strong African project delivery capabilities, began focusing on early works execution planning in the fourth quarter of 2023, continuing through the first half of 2024. To date, the Company has completed execution planning and preparation activities, which included mobilizing the EPCM contractor to the site, advancing detailed engineering, and formalizing and executing the procurement plan. Activities also included defining and implementing all project procedures, planning logistics, tracking key logistic deliveries such as camp facilities, and placing orders for key early works contracts, including the installation of the starter camp and the construction of the temporary water dam. The construction of the temporary water dam, built by a local earthworks contractor under DRA's supervision, was completed on schedule and the dam is now full. Additionally, the construction camp build is advancing, with earthworks, civil works, and delivery of modules for the main 1,600-person camp ongoing. Operational readiness remains a key focus, with planning and preparation activities underway, including the recruitment of the General Manager and other operating positions. The Company intends to award the mining contract in the near future, with the objective of advancing earthworks and allowing for the early mobilization of equipment and the development of customs, importation, and logistics systems well ahead of the timeframe when mining will begin.
Exploration efforts continued to yield positive results in the second quarter. The Company announced positive exploration results at Kurmuk's Tsenge gold prospect, confirming high prospectivity for the property. These results support the Company's objective to deliver significant Mineral Resource growth. The continued progress in both project development and exploration activities underscores Allied's dedication to maximizing the potential of Kurmuk and establishing it as a significant gold mineral province in Western Ethiopia .
The Company looks forward to providing further updates as exploration and construction activities progress, and the project moves closer to its goal of delivering increased and sustainable value to stakeholders. The Kurmuk Project is fully permitted and licensed, on budget, and on schedule for first production in mid-2026.
Sadiola
Current efforts have been aimed at increasing the inventory of oxide and fresh ores, optimizing mining and processing, and conducting several technical studies on processing fresh ores through existing facilities. This will be followed by the development of a new plant dedicated to processing fresh ore and implementing enhancements to existing facilities to benefit both the current and planned new plant.
Significant improvements in production are targeted in the short term due to contributions from high-grade oxide ore. The goal is to maintain production levels between 200,000 and 230,000 ounces per year over the next two years, reduce AISC (1) , increase revenue, and provide robust cash flows in 2024 and 2025 to support development projects across the Company. This approach enables the mine to produce at elevated levels while incurring lower near-term capital costs.
Pre-construction activities for the Phase 1 Expansion are progressing well, with detailed engineering, procurement, and execution planning continuing. The updated engineering study for this phase reconfirmed a total capital expenditure of approximately $61.6 million and the design to treat up to 60% of fresh rock at a rate of up to 5.7 Mt/y in the existing process plant. Infrastructure upgrades to prepare the site for the next phase of investment will also be advanced during this period. The Phase 2 Expansion is planned as a new processing plant to be built beginning in late 2026, fully operational in 2029.
The Company is also advancing optimization opportunities for the project, including metallurgical test work and a pre-feasibility study to potentially increase recoveries by over 10% through the use of flotation and concentrate leaching. This study, supported by the Company's phased investment, seeks to significantly improve the project's financial performance. With this long-term and value-focused strategy, the Company is well-positioned to affirm that the advancement of the Sadiola Project is proceeding as planned, reinforcing Allied's commitment to operational excellence and long-term value creation.
Financing Strategy
The Company's ability to unlock the significant value in its large and expanding mineral inventory is supported by the financial flexibility needed to internally fund these optimizations and growth initiatives. Based on recent gold prices, the Company expects to be fully financed through cash flows; however, as a precaution, so that the Company is not dependent on the price of gold, Allied is actively executing a select number of non-dilutive alternatives. This strategic direction is prompted by the current capital markets not fully capturing the inherent value of the Company's assets, leading Allied to seek alternative sources of capital that offer low-cost options with the added benefit of more accurately reflecting true value to market participants.
In association with these efforts, on August 7 , 2024, the Company announced that it has entered into a streaming transaction with Triple Flag. Under the terms of the agreement, Allied will receive a US$53 million upfront cash payment and an ongoing payment equal to 10% of the spot gold price. Triple Flag will have the right to purchase 3% of the payable gold produced at each of the Agbaou and Bonikro mines, subject to a step-down to 2% after set delivery thresholds. Closing of the transaction and funding of the Advance Amount is subject to certain conditions precedent, including certain third-party consents and agreements, and completion of related security documents which are expected to be completed in short order.
The transaction recognizes the inherent value of the Company's CDI Complex and implies a valuation multiple significantly higher than that at which the Company's shares currently trade in the market and the price at which the Company went public. The CDI Complex comprises the Agbaou and Bonikro mines, which are located in Côte d'Ivoire within the Birimian Greenstone Belt. Allied is targeting a sustainable production platform of 180,000-200,000 gold ounces per annum on a combined basis and a mine life greater than 10 years for the complex, driven by an extensive exploration program, cost optimizations, and process improvements aimed at extending mine life and increasing value. The Company evaluated different financing options as part of this process, concluding that this transaction provides a much better cost of capital than any other alternative, including equity financing. The streaming agreement offers a competitive cost of capital based on Proven & Probable Mineral Reserves and remains favorable when assuming Mineral Resource conversion and exploration upside. Lastly, the Advance Amount ensures self-funding for Allied's extensive exploration program for the CDI Complex, with a total of US$16.5 million allocated for 2024 to advance highly prospective sites such as Oume, Akissi-So, Agbalé, and other targets. It also allows for the acceleration of improvement projects to increase the reliability of operations, optimize plant capacity, and bring forward value and extensions of mine life. Allied expects this flexibility to facilitate capturing further upside beyond the current life of mine plans. These enhancements are designed to increase asset value and unlock upside potential without diminishing shareholder equity.