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Edited Transcript of AGB.V earnings conference call or presentation 5-Mar-19 7:00pm GMT

Q4 2018 Atlantic Gold Corp Earnings Call

Vancouver Mar 14, 2019 (Thomson StreetEvents) -- Edited Transcript of Atlantic Gold Corp earnings conference call or presentation Tuesday, March 5, 2019 at 7:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Chris Batalha

Atlantic Gold Corporation - Corporate Secretary & CFO

* Maryse Belanger

Atlantic Gold Corporation - President, COO & Director

* Sean Thompson

Atlantic Gold Corporation - Director of IR

* Steven G. Dean

Atlantic Gold Corporation - Chairman & CEO

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Conference Call Participants

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* Chris Thompson

PI Financial Corp., Research Division - Head of Mining Research & Precious Metals Analyst

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Presentation

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Operator [1]

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Good morning, and good afternoon. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Atlantic Gold Corporation Q4 and Full Year 2018 Financial Results. (Operator Instructions) At this time, we would like to ask Director Investor Relations, Sean Thompson, to begin the conference. Please go ahead.

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Sean Thompson, Atlantic Gold Corporation - Director of IR [2]

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Thank you, everybody, for taking the time to call in today. Again, my name is Sean Thompson, Director Investor Relations for Atlantic Gold.

Please note, we will be making forward-looking statements on this call, and I'd like to direct your attention to the statements of disclosure in the March 5 news release, financials and management discussion and analysis. At this time, I will turn it over to Chairman and CEO, Steven Dean.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [3]

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Thanks, Sean. Before we get started, I would like to introduce the team who's on the line here in Toronto, and the senior management are in fact all presently in Toronto for the PDAC conference. But today here with me in Toronto is Maryse Belanger, our President and Chief Operating Officer; Chris Batalha, Chief Financial Officer; Sean Thompson, Director IR; and myself, Chairman and Chief Executive Officer. Also in our Toronto office on the line to support any questions is Ryan Walchuck, our Director of Finance; and Ashley Kates, our Corporate Controller.

The principal purpose of this conference call is to elaborate further on our press release this morning, which principally deals with our Q4 and full year 2018 financial results. Before I start to speak to those results, I just want to emphasize the importance of safety. Our Moose River Consolidated Gold Mine continued an excellent safety record, and the financial performance should only be achieved if it is achieved safely. I'm pleased to say that the company maintains the lowest industrial lost time frequency rate in the province of Nova Scotia, and we have also again been nominated by the Labour and Advanced Education OHS Division of Nova Scotia for the John T. Ryan Safety Trophies Competition sponsored by the CIM for the second consecutive year.

As previously reported, in 2018, we exceeded our production guidance with total production of 90,531 ounces, and we were within our guidance on -- all cost guidance for the 2018 year. We maintained our very clear focus on margin. Our average realized all-in sustaining cash cost margin for 2018 was CAD 857 per ounce or about USD 650 per ounce. That's a margin of approximately 60% on revenue with the first year operating cash flow over 10 months. And that's important to know that is because we went to commercial production from the 1st of March, 10 months of commercial operation with operating cash flow of almost $70 million or $0.32 per share. Our cash costs were CAD 558 or USD 424 an ounce, and our all-in sustaining cash costs were CAD 731 per ounce or approximately USD 556 per ounce.

We maintain our strong balance sheet. Our cash balance at year-end was approximately CAD 50 million, which results in a net debt position on our balance sheet of approximately CAD 63.7 million.

Our operating data. Ore mined for the year was 3.972 million tonnes with a waste-to-ore ratio of 0.71. For the Q4 quarter, just over 1 million tonnes ore mined with a waste-to-ore ratio of 0.57:1. Ore milled for the Q4 was just over 540,000 tonnes at 1.37 head grade and for the year 2.1 million tonnes at 1.41 head grade, both consistent with our reserve grade.

Recoveries continue to be above the 2015 feasibility rate of just under 95% for the year. And of course, our mill throughput with design nameplate capacity of approximately 5,500 tonnes per day averaged in Q4 at 5,879 and the year ended December 2018 was approximately 5,776 tonnes, as I said, resulting in 90,531 ounces for the year, well above guidance. And the gold ounces produced in Q4 were 22,509 ounces.

At this point, that's a summary of our financial and operating results. The next steps in this call, we will have Chris Batalha speak to some of our financial metrics, and then Maryse Belanger will -- our president, will talk to progress on the exploration front.

But in the meantime, over to you Chris for financial metrics

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Chris Batalha, Atlantic Gold Corporation - Corporate Secretary & CFO [4]

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Thank you, Steven. We'll start with revenue. For the 3 months ended December 31, 2018, the company sold 23,405 ounces at an average price of CAD 1,612 an ounce, resulting in net revenue of $37.6 million. Note that net revenue is net of refining charges.

Out of those ounces sold -- the 23,000 ounces sold, we delivered 8,200 ounces into fixed price contracts with the remaining ounces sold at spot price at that time. Since commercial production started on March 1, 2018, the company has sold 80,914 ounces at an average price of CAD 1,589 for a net revenue for the 10 months ended $128,327,363. In terms of net earnings and net income for the year, for the year ended December 31, the company had net income of $27.9 million, an increase of $32.8 million when compared to the net loss in the prior year.

Again, I note that the earnings -- the operating earnings for the year contemplate commercial production starting March 1, 2018, with any earnings in January and February capitalized to PP&E. Out of the net income, mine operating earnings were $55,885,000 for the year ended December 31, 2018. This was offset by an increase from the prior year of $2.3 million in G&A expenses, an increase of $9.6 million in finance charges from the prior year.

In terms of the 3 months ended December 31, 2018, the company had net income of $8.2 million, an increase of $9.4 million when compared to the same period in the prior year. This recognizes operating earnings of the quarter of $16.2 million for the 3 months ended, offset by an increase of $2.1 million in finance costs.

Specifically, the mine operating earnings for the 3 months ended, it's made up of a breakdown of revenue of $37.6 million, offset by cost of goods sold of $13.6 million and depreciation and depletion of $7.9 million.

For the year ended December 31, 2018, mine operating earnings of $55.9 million had a breakdown of $128 million in net revenue, offset by $45.9 million in cost of sales and $27 million of depletion and depreciation. In terms of other elements of the profit and loss statement, in terms of the fourth quarter 2018, G&A expenses were $2.3 million, financing costs were $2.1 million, deferred income tax loss of $3.7 million. And this is partially offset by $200,000 of interest income. Deferred tax expense recognizes the consumption with historical tax losses previously unrecognized now that we're at operating mines.

In terms of the full year, G&A expense was $9 million. Financing cost was $10.3 million, partially offset by interest income of $600,000 with a deferred tax expense of $9.3 million. In terms of earnings per share, for the quarter, basic and diluted EPS were $0.03 compared to a basic and diluted loss of $0.01 in the prior period. And for the full year, basic EPS was $0.13 a share, diluted EPS was $0.12 a share compared to a basic and diluted loss per share in the prior period of $0.03.

In terms of cash position and working capital, I am pleased to announce that total cash at the end of December was $50.3 million compared to a total cash balance of $33 million in December 2017. Long-term debt has been reduced to $114 million versus $137.8 million in the prior year, and net debt has been reduced to $63.7 million from $105 million in the prior year.

I'll briefly reiterate what Steven mentioned at the top of the call in terms of non-IFRS performance measures. For the year ended December 31, 2018, we had a total cash cost per ounce sold of CAD 558 an ounce and an all-in sustaining cost per ounce of CAD 731. In terms of margin, the company had a average realized margin per gold ounce sold of $1,030 an ounce -- that's after cash costs, and an AISC margin of $857 an ounce. Adjusted EBITDA for the year ended December 31, 2018, was $77.5 million or 60%.

That is all for my part of the presentation. Thank you very much. I will now pass it on to Maryse Belanger for an exploration update.

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [5]

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Okay. Thank you, Chris. A brief exploration update on our regional program. We have presently 1 rig working and that's at the 149 Prospect with the plan of adding one rig next week. And essentially, we have decided to pretty much stand down tools for January, February and part of March to allow the team to do a full compilation and really focus on interpreting all of the data that has been collected, not only historically but the new data collected in recent drill programs.

With that work being close to being completed, we are going to define those targets that deserve further exploration, including drill testing, and a real focus on the Phase 4 Corridor Regional Program. We also know that the deposits that we've outlined so far remain open along strike and at depth. So we can expect to do further drilling around those already designed pit limits for 2019.

So in -- at the 149, we expect to do some deeper drilling, extensional drilling as well. And just a reminder that as far as Corridor Regional Program, 149 was our very first discovery. So for the short term, we have an initial program of about 6,000 meter that's planned and also following up on very encouraging early results for Seloam Brook, Mill Shaft and Cameron Flowage around Beaver Dam, we do know that those results warrant additional exploration, including drill testing.

And finally, last but not least, at Cochrane Hill, we know we have a very robust mineralization at depth. We have identified higher-grade ore shoots dipping to the east in the pit. It's a bit of new concept, and that will require further drilling.

So that was in a nutshell a bit of an exploration update. And following gathering and meeting sometimes later in March, we will better define the target and where we're going to follow-up on the regional program.

So that's it from me, and I think at this point, we'll open it up for questions.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [6]

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And just to finish off and before we open to questions, I think, it is also important to note that we expect to issue a resource update sometime over the next week or so. That's an important milestone, as Maryse said. We have not released a resource update since January of last year based on drilling up to July of 2017. So we have something of the order in excess of 80,000 to 90,000 meters of drilling that's been incurred. And Maryse and her team is beavering hard away at finalizing those resource models.

The next step after those resources are outlined for our 4 key deposits of Touquoy, Beaver Dam, Fifteen Mile Stream and Cochrane Hill. All 4 deposits will be the subject of that resource update. We will then also be following that up later in the month with reserve update and life of mine schedule updates off the back of that with those resource block models.

I think that does now complete the report from management, and operator, we'd like to throw the line open to -- for the questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question will be from Chris Thompson at PI Financial.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research & Precious Metals Analyst [2]

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Just one more quick question. I'm just looking, I guess, at the mine plan for this year. On a quarter-by-quarter basis. I mean, can you maybe talk to any variations in grade or strip that we should be maybe modeling or appreciating?

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [3]

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Maryse, why don't you answer that?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [4]

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Okay. Maybe we'll speak about the first quarter first. Let's go in order where, first quarter, we expect slightly lower grade. Also, a few more activities planned around maintenance. Starting to rebuild for -- adds life on the trucks as well. And then in the second period and fourth quarter, slightly higher grade and obviously less maintenance planned. And obviously, I would expect better production after April this year.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research & Precious Metals Analyst [5]

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Perfect. Any comments on strip ratio? Or is this going to be very much sort of constant quarter-on-quarter?

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Maryse Belanger, Atlantic Gold Corporation - President, COO & Director [6]

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Not much variation, I would expect for the different quarters this year, strip ratio to vary between 0.5 and 0.8:1.

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Operator [7]

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(Operator Instructions) And at this time, Mr. Dean, we have no other questions, sir. I would like to turn the call back over to you.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [8]

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Wow, that was very efficient. Everyone on the line should know that we've done a full week of IR in Florida last week, and we've met a lot of commentators and individuals all at the PDAC week. I suspect that, by the sound of things, we've answered most of the questions that people have in mind. There is actually one more question that apparently is on the line. We'll deal with that and then we'll close the call.

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Operator [9]

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Next is [Stefan Baer], private investor.

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Unidentified Participant, [10]

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This is [Stefan Baer] from Munich area in Germany. So thanks a lot for this information you delivered to us, and I just have got a request. It would be easier for me because English is not my native language to follow what you say if I could have a look at a set of slides, please. And second, there as we mark from my side, thanks a lot. You have done a great job, and I am proud of being investor of Atlantic Gold. Thanks a lot, from Germany.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [11]

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(foreign language).

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Sean Thompson, Atlantic Gold Corporation - Director of IR [12]

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[Stefan,] Sean Thompson, Director of Investor Relations here. If you send me an e-mail just off-line here, I'd be happy to flip you our latest presentation and/or have a phone call with you at any time. My details can be found from our website.

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Unidentified Participant, [13]

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Yes, I just mean that it would be fine to have this in parallel to your telephone session here.

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Sean Thompson, Atlantic Gold Corporation - Director of IR [14]

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Okay. We’ll keep it in mind. Thank you very much.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [15]

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Operator, I think that's the end of the questions. Yes?

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Operator [16]

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Correct, sir.

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Steven G. Dean, Atlantic Gold Corporation - Chairman & CEO [17]

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Thank you very much. And thanks for, everyone being on the line, for your time.

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Operator [18]

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Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your line. Enjoy the rest of your day.