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Allied Gold’s Q2 2025 earnings call revealed a mixed picture for the company. While the firm reported adjusted earnings per share (EPS) of $0.14, its stock price fell nearly 10% in post-earnings trading, closing at $16.93. The decline was attributed to concerns over high all-in sustaining costs despite a positive production outlook. According to InvestingPro analysis, the company, with a market capitalization of $1.58 billion, is currently trading near its Fair Value. The company is optimistic about future growth, projecting significant production increases and cost improvements, supported by strong revenue growth of 33.3% in the last twelve months.
Key Takeaways
- Allied Gold’s Q2 adjusted EPS was $0.14.
- Stock price fell by 9.99% following the earnings announcement.
- High all-in sustaining costs at $2,343 per ounce raised investor concerns.
- The company is targeting a production increase to 210,000 ounces in H2 2025.
- Future production for 2026 is forecasted at around 600,000 ounces.
Company Performance
Allied Gold reported a challenging quarter, with high production costs impacting its financial results. Despite these challenges, the company remains committed to increasing its production and extending mine life at several sites. The focus on operational flexibility and new exploration projects aims to position the company for future growth.
Financial Highlights
- Revenue and EPS figures were not specified beyond the EPS of $0.14.
- Operating cash flows before taxes and working capital stood at $116 million.
- Cash and cash equivalents were reported at $219 million.
- The company has an undrawn credit facility of $50 million and additional liquidity from the Kermuk stream of approximately $88 million.
Market Reaction
Following the earnings announcement, Allied Gold’s stock experienced a significant decline of 9.99%, closing at $16.93. Despite recent volatility, InvestingPro data shows impressive returns of 115.25% over the past year and 37.24% in the last six months. The stock trades well above its 52-week low of $6.09, maintaining momentum despite investor concerns over high production costs. For detailed analysis and comprehensive valuation metrics, investors can access Allied Gold’s Pro Research Report, part of InvestingPro’s coverage of over 1,400 US stocks.
Outlook & Guidance
Allied Gold is optimistic about its future production capabilities, projecting a total production of 600,000 ounces in 2026. The company plans to reduce its all-in sustaining costs to $18.50 per ounce in H2 2025. The Kermuk project is expected to start production in June 2026, contributing to the company’s growth plans.
Executive Commentary
Peter Maroni, CEO, emphasized the company’s long-term strategy, stating, "The sacrifice was one quarter’s costs in favor of lifeline and longevity." He also expressed confidence in reaching production targets for Cote D’Ivoire in 2026. Gerardo from the project team added, "We’re tracking well according to cost," highlighting the company’s focus on cost management.
Risks and Challenges
- High all-in sustaining costs remain a significant challenge.
- Dependence on gold price fluctuations can impact profitability.
- Geopolitical risks in Mali and other regions may affect operations.
- The need for successful execution of expansion projects like Kermuk.
- Potential supply chain disruptions could affect production timelines.
Q&A
During the Q&A session, analysts inquired about the Sadiola power solution and the company’s strategy for waste stripping at Agbaou. Executives confirmed that no further extraction from Coralisu ore is planned, and they provided clarity on their operational strategies moving forward.
Full transcript - Allied Gold Corp (AAUC) Q2 2025:
Conference Operator: Thank you all for joining us this morning. Before I turn the call over, I need to advise that certain statements made during this call today may contain forward looking information, and actual results could differ from the conclusions or projections in that forward looking information, which include, but not limited to, statements with respect to the estimation of mineral reserves and resources, the timing and amounts of estimated future production, cost of production, capital expenditures, future metal prices, and the cost and timing of the development of new projects. For a complete discussion of the risks, uncertainties and factors, which may lead to actual financial results and performance being different from the estimates contained in the forward looking statements, please refer to Allied Gold’s press release issued last night announcing Q2 twenty twenty five operating and financial results. I would like to remind everyone that this conference call is being recorded and will be available for replay later on today. Replay information and the presentation slides accompanying this conference call and webcast are available on Allied Gold’s website at alliedgold.com.
I will now turn the call over to Peter Maroni, Chairman and CEO.
Peter Maroni, Chairman and CEO, Allied Gold: Operator, thank you very much, and thank you to everyone for participating in this call. With me today are members of management, including our Head of Exploration, Daniel Racine, whom you know who will speak to our operations. Johan is at operations, and so he is available on the call for questions, but Daniel will take the charge relating to the better explanation or at least continuing explanation of production. And Jason LeBlanc is here, our Chief Financial Officer. Let me begin into the presentation.
In the first couple of pages of this presentation, we talk a little bit about some of the things that are fundamental to the mining business and often take a little bit more time to complete. Drilling for high grades in Cote D’Ivoire and Esatiola refining block models, which will continue into the second half of the year and the importance of it. And that allows us to be able to get confidence into higher grade areas for forecasting, certainly better short term planning and more reliability and predictability. One of the things that we did in the second quarter was we made a decision to do more stripping, more waste removal at Agfa. We continued with the waste removal at Bonagro.
And we began certain cost reduction initiatives in Cote D’Ivoire and Sadiola, procurement improvements. What’s the objective though? The objective, particularly with improvements to block models and the waste removal at Agbaou is to access higher grades in the second half of the year and beyond. We publicly said that we expect production to be weighted in favor of the second half of the year to the tune of 55% to 45% with a whopping increase and higher production with much lower costs in the fourth quarter. I think it’s important to explain a few things that perhaps come out of our MD and A and our financial results, but I think it’s important to highlight.
Our guidance at the beginning of the year did not consider that waste removal at Agbaou. That added roughly $850 per ounce to its costs, which would have a large impact on the total production given the order of magnitude, roughly 160 to $180 per ounce. This was an executive decision, we did not have to make that executive decision, but without waste removal, our costs for Agbaou would be more in line. However, we developed a plan for Cote D’Ivoire, which includes underground drilling, along with drilling of adjacent areas to our mining tenements. It also includes maximizing production and mitigating costs to pay for that.
Waste removal at Agbaou provides for roughly 4,500 ounces of increased production this year, And we estimate based on drilling alone and based on the efforts that we’ve undertaken so far with some of the waste removal between 11,000 ounces and 15,000 ounces of increased production next year. Without that, we would be winding down the operation beginning next year. Now this gives us cash flow and runway to carry out the balance of the program that we’ve begun and we will continue to highlight to the end of the year and to the first quarter next year the increased mine life. The worst case scenario for any operation, as most of you know, is to shut down or suspend an operation, particularly in the situations where there is daylight improvements and increases in mine life. Let me be blunt, this is a decision that this management made in the second quarter, more precisely, it’s a decision that I made.
The sacrifice was one quarter’s costs in favor of lifeline and longevity. And more to the point, while that waste removal came at a cost as we disclosed, the reasoning, my reasoning was that the value of an extra almost 20,000 ounces of production over eighteen months, the second half of this year and all of 2026, and that operation by far exceeds the cost. That’s in value alone. And then the value of maintaining a continuing operation without suspension and shutdown and what to do with reclamation and closure costs and employees adds to that value. We are now comfortable saying to you that we will be at 180,000 to 200,000 ounces of production for Cote D’Ivoire in 2026.
I anticipate that when we give our guidance at the beginning of the year, we’ll comfortably tell you that we can get closer to that higher end of production. I want to make one more observation, and that’s this. We should have explained two things better. One is the complexity of mining, particularly at these operations. And on that, consider what we refer here as the refinement to the block models.
Consider how long it takes to overhaul a block model with all of the drilling and informational data that relates to the operation on so many deposits at current and planned mining areas. It’s not just one open pit, it’s several areas of mining, particularly at Sadiola and Cote D’Ivoire. I give that just as an example. I’m not defending poor behaviour. What we could have done is we could have gone faster, but the decision that was made, the executive decision, my decision was to take time to get it right.
The other is that we are heavily weighted in the second half of the year. And in the second half of the year, we expect to get higher grades, operational flexibility at Sadiola consider that we can process more of the fresh ore, which is in ample abundance by comparison to the oxides. And just to give you an indication, in July, our production is in line with our budget. We expect to produce as we’ve guided roughly 91,000 ounces in the third quarter comparable to the second quarter, But our costs are coming in at considerably improved levels. Agbaou is already $1,000 below the Q2 level.
Monaco is roughly $1,800 per ounce and that will trend down through the year, through the rest of the quarter. And Sadiola is at about $400 to $500 better than what we delivered in the second quarter. So, we’re in July, we’re producing gold at approximately $2,000 to $2,100 per ounce. And we expect that that will continue to trend down for the balance of the quarter and certainly into Q4. Mobilization of new mining equipment, again, The mine that we have in this company were delivered with a former mine contractor.
When the new mine contractor took over, it was with the historical mining equipment and it was coming to its last legs. We were bandaging that equipment. We now have new mine fleets, much of which has arrived. And that improvement means that we have fleet availability that gives us the confidence to be able to tell you that that second quarter and into 2026, will have higher throughput, operational flexibility, and that will lead to improvements to operations as well. Exploration, we’ve been getting some significant feedback on what’s happening on the exploration side.
And let me begin with the punchline. We’ve increased our exploration budget from $20,000,000 to $37,000,000 We’re confident in our balance sheet, confident enough that we can spend another $17,000,000 It’s performance based on our three operations. We are targeting an increase of mine life at Agbao, as I mentioned before, by a pit expansion, high grade underground prospects and targets that are outside of the compensation area. Umay is at development north of Bonacro, where we’re seeing significant increases in resources that will extend its mine life. We’re targeting a large increase in Sadiola of total inventory, but just as importantly, we’ve made discovery of new oxide ounces.
And those new oxide ounces will provide further flexibility on operations and also improvements to production and to costs. At Kermukh, we achieved our project milestones for the second quarter, and equipment is being delivered to site. And we expect to advance the resource model later this year. Daniel will speak to the operations, he will speak to Kermak and go into some of the detail. But I will give you the high level.
In terms of the high level, these are the important milestones: substantial mechanical completion by the end of the year, the power line before the end of the first quarter, mining and sequencing, which we’ve already begun, and we expect to have at least four months of stockpile at surface by the time we start operations. And some of that stockpile will be much higher grade. We don’t want to process that high grade material as we commission the plant from April through to the end of the second quarter of next year. And production, production starting formally in June year. So we’re on track to be able to deliver that for the partial year next year, 175,000 ounces of production.
At Sadiola, we’re near complete on the phase one expansion. And as I mentioned, that will give us increased operational flexibility because we can process more of that abundance of fresh ore to that plant. And in terms of the long term, we’ve always talked about the second phase expansion, but we’re now looking at the opportunities for us to do an incremental expansion that would allow us to get to a comparable production level as phase two without having to spend that full $400,000,000 for that larger plant. And we’ll have more to say on that by the end of this year, as we complete our technical studies. I want to make a few other observations that relate to Mali.
And these are important points in my view. The environment in the country has significantly improved. There is a better geopolitical environment. There’s more support for mining investment and for private investment. We’ve had improvements to the asset, from a geological point of view with exploration, as I mentioned, with optimization and improvements of the asset, and with that phase one expansion now nearer to completion.
So, result of all of that is that it led us to a further point, which is that we decided that we were in a far better position to deliver value to shareholders by taking a progressive, self reliant approach relating to power, and not looking at corporate transactions that would mitigate our engagement in and our ownership of that asset. We listed on the New York Stock Exchange, we completed a share consolidation, and we reduced the holdings of some of the larger shareholders through secondary trades. The result of all of that is that we have significantly advanced from a market point of view as well. And that is just to give you a summary of some of the things that we’ve undertaken through to the second quarter this year. And with that, please let me pass it to Daniel to talk about our operations.
Daniel Racine, Head of Exploration, Allied Gold: Thank you, Peter, and good morning, everyone. I will now go through some highlights of the operation and the project in the second quarter. Our production was solid at 91,017 ounces and in line with plan and tracking well with our guidance for the year. All in sustaining cost was $2,343 per ounces of ounce sold. This was driven by sale lagging production due to the timing of gold shipments, which will reverse and benefit us in Q3.
Also, as we’ve described with our guidance, higher gold price impact all in sustaining costs due to higher royalties, especially with the Ad Valorant component. In general, we have said that every $100 per ounces increase in the price of gold results in $15 per ounces higher than all in sustaining costs. Our baseline for our guidance was $2,500 per ounces. At an average realized gold price in excess of $3,250 per ounce in the second quarter, consolidated all in sustaining cost was impacted by over $100 per ounces. At Agbaou, as part of our revised strategy to access more ore in the future and allow more time for exploration to extend mine life, we prioritized waste removal over ore extraction to better manage stormwater in the pit and to secure access to higher grade ore in the 2025 and beyond.
Mine sequencing and the increase in stripping resulted approximately $850 more in all in sustaining costs per ounces in relation to the 2025. While waste movement is expected to continue at similar level for the remainder of the year, ore feed, gold grade and production are expected to materially increase quarter over quarter, resulting in reduced costs in the second half of the year. As we discussed earlier this year, we expected production to be skewed toward the back half of the year with a 40 five-fifty five split across between the first half and the second half of this year. Q3 production should be similar to Q2, while Q4 production is expected to be meaningfully higher between 118,000 to 122,000 ounces. Costs are expected to trend down as production increase in the second half, driven by higher and reduced expenditure.
Assuming gold at $3,000 per ounces, we expect all in sustaining costs to average $18.50 dollars per ounces in the second half of the year, with declining costs quarter over quarter. Due to ongoing exploration successes, a further $17,000,000 has been committed in 2025 on an incremental program in Cote D’Ivoire, Kermug and Sadiola. The total 2025 exploration budget is now $37,000,000 For Cote D’Ivoire, we have allocated $7,500,000 on new funding to pursue opportunities to extend mine life, including drilling the Agbaou West And East Pit extension, the Eray Akisiso underground target and other new targets. At Sadiola, we are allocating an additional $5,700,000 to continue testing and extending structure at Sadiola Main, Tambadi, FE2 Tran, Sekokotu Tran and FE4. The exploration is focused on both oxide and fresh mineralization with a preference for oxides in the near term.
For Kernmook, we have assigned a further $3,700,000 in budget, with a goal to add new mineral resources and convert inferred to indicated. Drilling will continue at depth and along strike at Gay, as well as drilling the urchin target located near Ashashire. This work is aligned with the goal of the company to achieve an inventory of over 5,000,000 ounces at Kermok. At Sadiola in Q2, production was 49,283 ounces, with an all in sustaining cost of $2,471 per ounce.
Costs, as previously mentioned, show the effect of higher gold price in the royalty construct, especially at the higher relative contribution from Karalisud in the quarter, which is subject to higher royalties than Seviola. It is worth mentioning that we are finalizing the first phase of Coralini now, and going forward, the plan focuses within Sadiola Mining License, reducing the royalty impact into the cost structure. Construction at Phase one expansion continues to advance according to plan, with expected completion Q4 twenty twenty five, and I will speak more in detail about it in the next slide. At Bonny Crow, production was 25,775 ounces with an all in sustaining cost of $15.92 dollars per ounces. This strong performance was driven by higher grade, increased throughput and improved recoveries.
First half stripping is expected to result in substantially lower costs beginning in Q4 of this year, which will carry in 2026 and beyond, as grades are expected to be higher and waste removal will be minimal. At Takba, production was 15,959 ounces at an all in sustaining cost of $3,104 As I already mentioned, mine sequencing and increased waste removal drove the costs up, and this is expected to result in higher production at lower costs for the remainder of this year, and it allows us to access more ore in 2026, allowing for exploration to focus on long term target to increase mine life. Moving to our Kermug project, we’re pleased to see things are progressing very well. We have achieved several significant milestone milestones in the second quarter. The first picture describes graphically what was our focus during the first half of this year and in the second quarter.
We went from the planned concrete contractor to the structural and mechanical contractor at the end of the second quarter. We started and ramped up the delivery of key components to the site, such as the CIL tank, the ball mill, which we see in the bottom picture, and fabricated steel among others, While other major components were en route to the site according to the schedule, the mechanical contractor was mobilized earlier in the year along with the equipment, and in Q3 the focus is on ramping up activities. A very important milestone was achieved in Q2 that is relevant for the start of the operation was the substantial advancement of the key bulk earthwork outside of the process plant area, which we achieved ahead of schedule. This includes the main water dam, which is receiving water as we speak, and the tailing facility, which is well advanced. It was key for us to advance these two areas ahead of the rainy season, so we can store water for the plant start up in 2026.
Another achievement that is very important to the execution schedule is the progress we made in the permanent accommodation camp to near completion in the quarter, allowing the project and mining operation to ramp up their manpower requirement as per the schedule in the second half of the year. Speaking of mining, the mobilization of the mining fleet is ongoing with the shovel and truck, which delivery to site occurred in July, and mining pioneering was completed during the quarter. In terms of what comes next, we plan to start bulk mining activity with the new fleet now in Q3, so we can stockpile ore ahead of commissioning. We will complete engineering in Q3, and we expect to make substantial mechanical progress in the plant area by the end of the year. We expect the EEP to energize the power line in Q1 twenty twenty six, and we expect commissioning and first gold pour to occur in mid-twenty twenty six.
Turning to Sadiola, Phase I expansion is also progressing well. During the second quarter, we completed engineering, the team basically finished the concrete work and added over the areas to the mechanical and structural contractor. And similar to Kermuk, we took delivery to site of steel and the ball mill. We’ve also secured a power supply for Phase one, and the shipping of crushing plant is in progress. Upcoming, we expect the Stage one crushing to be operational in Q3, and the new mill is expected to ramp up in Q4.
As a reminder, the Phase one expansion is a key development for Sadiola, as it will allow the plant to process 5,700,000 tonnes per year of ore, with a blending up to 60% of fresh ore, and most of the near the reserve 7,000,000 ounces in reserve are fresh mineralization and with higher grade than the oxide in inventory. With phase one in production, Sadiola is expected to produce between 200,230 ounces per year in a sustainable way and in anticipation of the next expansion phase. On this, we are advancing the progressive expansion studies, which is aimed to define a growth strategy with lower capital commitments, leveraging the installed capacity after Phase I. We expect to finalize the trade off study by the end of this year, which will include an update on the opportunity to increase recovery using the flotation and Albion. In Q2, we advanced the second phase of metallurgical testing for Albion, and we are advancing the flow sheet development now, and we expect to complete the studies also in Q4 to inform the path for expansion I just mentioned.
Last but not least, we spent a significant amount of time and effort in refining our power requirement and updating our power supply strategy for Sediola throughout its expansion phase. As Peter mentioned, we have landed on a short list of solutions we are busy negotiating at the moment and that we expect to be completed by Q4. With that, I’ll pass it to Jason.
Jason LeBlanc, Chief Financial Officer, Allied Gold: Thank you, Danielle. We had solid financial performance in Q2 with adjusted earnings per share of $0.14 and operating cash flows before taxes and working capital of $116,000,000 The balance sheet is strong with cash and cash equivalents of about $219,000,000 at the end of the quarter. We have an undrawn credit facility of $50,000,000 and further liquidity available from future draws on the Kermuk stream, which totaled approximately $88,000,000 Aiding in liquidity during the quarter, we closed on a Bakuil offering and facilitated a block trade, improving our balance sheet and increasing our flow. Looking forward, we expect 55% of annual production to come from the second half of the year, although more weighted to Q4. More significantly though, we’ll have a magnified effect on cash flow generation from lower unit operating costs that are expected for the balance of the year.
With that, I’ll hand the call back to Peter.
Peter Maroni, Chairman and CEO, Allied Gold: So ladies and gentlemen, let me pick up again on the guidance point, 175,000 ounces in the first half of the year versus an expected and planned 210,000 ounces in the second half of the year, that 40 five-fifty 5% split, of $18.50 dollars all in sustaining costs. We are no longer reliant on Coralde as of the end of the second quarter. We have better economics with the ore that we process from Sadiola proper. In the mining tenements, we have oxide ounces at Sadiola that come in at lower cost that we process to our existing plant. Phase one will be completed by the end of this year, which gives us more flexibility to mine fresh ore, which is in abundance and comes at lower cost.
We will have higher grades beginning this quarter and into next quarter at Agbao through 2026, and that’s true for Bonnikro as well. And finally, in terms of the longer term into next year, we’re still forecasting roughly 600,000 ounces of production next year at improved costs, and that production contributes to better EBITDA. We are now eight months away from commissioning at Kermak. In terms of upcoming milestones and exploration update, based on the successes to date that has justified that extra $17,000,000 to which Daniel referred for Sadiola, which is expected in October, Kermukh in November and the Cote D’Ivoire in January with a more comprehensive plan in the first quarter next year, by the end of the first quarter for how we intend to extend mine life and the successes we will have had at extending mine life at Agba. The Krumuk reserve and resource update by the end of the fourth quarter this year.
We will provide an update for Ume as part of our effort at Cote D’Ivoire later this year. As Daniel mentioned, the completion of the Sadiola Phase 1 expansion later this year. We remind everyone of the investor and analyst tour at Kremuk in January. The Sadiola expansion update, again, Daniel referred to as the interim steps or the modify expansion rather than phase two by the first quarter next year. As I mentioned a moment ago, the Agbaou Reserve and Resource update for the second quarter of next year and the startup of Krumovac operations within eight months with commissioning beginning in April and production in June.
Operator, let me hand the call back to you for any questions.
Conference Operator: Thank you so much. And we will now begin the question and answer session. At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. And your first question comes from the line of Kerry MacRury with Canaccord Genuity. Please go ahead.
Kerry MacRury, Analyst, Canaccord Genuity: Hey, good morning, everyone. So Peter, it looks like you’re making good progress at Chromebook. I’m just wondering with the costs incurred to date, how you’re tracking along your budget assumptions.
Gerardo: Hi, Gary, it’s Gerardo. Yeah, we’re tracking well according to cost. We do see some trends, like in any project, but also we have levers to pull in terms of what comes next. So, we’re busy right now detailing the plan for the rest of the project, and then making some tweaks, obviously with the aim to remain within the budget allocated to the project.
Kerry MacRury, Analyst, Canaccord Genuity: Okay. And then just regarding the balance sheet, obviously, without the $145,000,000 coming in from Ambrosia, do you think I have enough buffer on the balance sheet to kind of see it through
Peter Maroni, Chairman and CEO, Allied Gold: at these oil prices? Well, yeah, so again, a really good question. And while we touched on it, I think it’s important to go into a bit of a better detail. So, Carrie, we talked about $145,000,000 of upfront payment for the 50% interest of our interest in Seriola. In the course of negotiations, there was some back and forth of when a portion of that would be paid, was it paid upfront?
When would the closing occur? Let’s call it a full 190,000,000 to 145,000,000 that would be completely upfront. The difference within several quarters, which was what the negotiations were, where the negotiations were at. I think we have to look at it from the lens of what does it mean from a twelve month or eighteen month perspective based on the higher gold price? Where were we in February with gold price?
Where are we today? And with the higher gold price, particularly with the floor of the collars that Jason has put in place with at least $3,000 into next year, our conclusion was that we generate at least that much in cash flow for that period. So, we’re not getting any benefit for selling a portion of Sadiola for that 90,000,000 to $145,000,000 even at that $145,000,000 upfront amount, because we’re generating that in cash flow and the balance of the payments were actually made over time over the course of a five to six year period. So that’s one of the reasons that led us to the conclusion that we were in a better position, in part because of gold price, but in part because of improvements to the asset. And also in the context of improvements, we’re now at the back end of the completion of phase one’s expansion, which gives us, as Daniel said, a very comfortable, reliable 200,000 to 230,000 ounces at better costs.
We’ve got an abundance of fresh ore. The challenge for this operation is that it was designed for as an oxide mine with a plant that accommodates oxide ore. That’s up until present date with the exploration effort, we’re now beginning to see some clarity to that. But up until present date, that’s been the challenge, which is finding oxide ore. But with the ability through the first phase expansion to process more fresh ore, we’re in a position to more comfortably produce that 200,000 to 230,000 ounces at better costs, generating better cash flow and at a $3,000 gold price, that cash flow matches what was the upfront payment.
Kerry MacRury, Analyst, Canaccord Genuity: Okay, that’s helpful. Thanks. And maybe one last one for me. Just on the $18.50 cost guidance, you note that $3,000 an ounce, should we still be using the $15 per $100 We’ve got gold price sitting just south of $3,400 now.
Jason LeBlanc, Chief Financial Officer, Allied Gold: Yes, hey, Gary, Jason here. Yes, know it’s going to be higher just because that guidance was provided, call it at the margin for movements in gold prices, we’ve seen gold prices move quite a bit. So the impact on royalties isn’t purely linear. There’s a curve to it, right, because of step ups. So I put it closer to $20 on a $100 basis go forward here.
Kerry MacRury, Analyst, Canaccord Genuity: Okay, great. Thanks. Thanks everyone. I’ll pass it on.
Peter Maroni, Chairman and CEO, Allied Gold: Carrie, look, it’s difficult. We’d love to be able to give a like a raw number and say this is exactly what it is, but we can’t predict what the realized gold price is. And we do have these ad valorem royalties that are predicated on gold price. Jason’s $20 per ounce is a reasonable number on the back of a $300,000 gold price. Why did we use $3,000 If we look at the average for the first and second quarter, we were roughly a realized $3,000 gold price.
So that’s the reason for using that as baseline.
Kerry MacRury, Analyst, Canaccord Genuity: Okay, fair enough. Thank
Conference Operator: next question comes from the line of Mohamed Sigebeh with National Bank Financial. Please go ahead.
Mohamed Sigebeh, Analyst, National Bank Financial: Hi, Peter and team. Thanks for taking my questions. Maybe to start with Sadiola and your decision not to go ahead with sale of any interest in the mine and the power solution. Could you provide us with some more color on the power solution and how you expect Allied Gold to participate in that? Should we expect some financial investments from you in that?
And then how would that potentially impact your cost profile into next years? Thank you.
Peter Maroni, Chairman and CEO, Allied Gold: Yeah, so, Mohammad, another really good question and one of the amongst the many drivers of why we chose to go down this path. Solar comes across as an admirable solution, right? We had contemplated, as part of the corporate transaction, we contemplated 20 megawatts coming from solar with battery backup. But as we look at it from the lens of what’s the install capacity versus the utilizable capacity, because solar doesn’t work in cloudy periods, certainly won’t work at night. So, when we looked at the install versus utilizable, and then what is the order of magnitude difference between a smaller solar field, a smaller array of solar panels versus a larger one, it’s an order of magnitude difference.
So, to get 20 megawatts with the installations between one hundred and one hundred and twenty megawatts, And the ratio is even greater than that on the battery backup that goes with it. So, that’s a very large solar field. It’s a very large battery backup system. And the cost is not an incremental, hey, what if we go from eight megawatts to 20? It’s not the difference between 40,000,000 to 2.5 times that.
It’s an order of magnitude difference. And that was affecting our costs. And so, we publicly said we want to get to an average somewhere in the range of $0.16 to $0.17 per kilowatt hour, but we want to get there from the get go. And so the best way to be able to deliver that is with a combination of thermal, some diesel and solar. But solar should be substantially smaller.
We’re estimating in the range of eight megawatts, perhaps as much as eight to 12 megawatts, but also make it scalable. There’s one more point that I think is important here. And that is that we do want to make it scalable. The original proposal provided us with the power that we required, but only for the first phase. We still had to go from 20 megawatts to 38.
With this approach, we now have the flexibility to be able to do that and to do it modularly. We can actually expand on the thermal with an extra engine, we can expand on the solar with the installation of a greater array of solar and battery backup. And that incremental is consistent then with the approach that we’re taking on the expansion to the asset. You asked the question, is there an upfront amount that we need to invest? And the answer is, we’re looking at this from the point of view that this is installed, that it’s turnkeyed, we pay an amount per kilowatt hour, in the range that I’ve just described to you, and as an average, and that’s what we would be doing.
However, we do have the flexibility to say that we would be an investor. And that’s part of the discussion that’s taking place in the context of the broader geo geopolitical environment in the country. Power is increasingly important in the country in order to fulfill some of the objectives of government to encourage investment. There is inflexibility, some challenges on the power grid, as you are aware, or the two power grids. So one of the options available to us is to actually scale this greater than what we need to provide us with backup for when we need it, but also to provide power back into the grid.
So, these are some of the things that we are advancing near complete in the discussions. And we are considering the possibility of having a direct investment, which would give us a stake in the game, not just an off take from those who install it.
Mohamed Sigebeh, Analyst, National Bank Financial: Thanks for that color, Peter. If I could maybe shift to the operations. So as I said, you had just specifically on the feed coming from Coralisu, given the fact that it’s higher royalties. I know that it’s substantially done by the end of Q2, but should we still expect some contribution in Q3 from that that would potentially impact the royalties and the cost there? Thank you.
Yohan, Operations, Allied Gold: Good morning, Mohammad. Yohan. So the answer is no. In the short term, we we we did not, plan any additional ore sources from Kerali Sud. The focus is on cellulola with oxides and then also the fresh material going forward.
Mohamed Sigebeh, Analyst, National Bank Financial: Great. Thank you. And then just on Agbawa, just wanted to confirm in terms of the CapEx and the waste stripping into the second half of the year, So I understand the higher production with the higher grade and throughput into there, but waste stripping, I’m guessing it will continue at these levels for the second half in order to better gain clarity on 2026 or should we see that trending lower as well? Thank you.
Peter Maroni, Chairman and CEO, Allied Gold: Stripping will continue. So the waste removal will continue, but the cost per ounce will become substantially lower because we will be getting into higher grades. And so in other words, the denominator becomes larger, the number of ounces increases relative to second quarter. Jason, go ahead.
Jason LeBlanc, Chief Financial Officer, Allied Gold: Yes, Mohammad, just to carry on to what Peter mentioned there. Yes, I think so, as we said, waste, the total tons are going to be similar, but we’ve got more ore coming from that activity. So the strip ratio drops pretty substantively. So that results in a lower cost as Peter mentioned there.
Mohamed Sigebeh, Analyst, National Bank Financial: Great. Thanks a lot for that color. I’ll go back in queue.
Conference Operator: And there are no further questions at this time. I will now turn the call back over to Peter Maroney for closing remarks.
Peter Maroni, Chairman and CEO, Allied Gold: So ladies and gentlemen, thank you very much for participating in this call. And we do have a number of presentations to sales desks and meeting with our investors. And we’re looking forward to that. And we’re looking forward, of course, also to our third quarter results. And I want to reemphasize the importance of why we’re saying that that guidance for the second half of the year and into 2026 is well within our reach as a result of all of the steps and approaches that we’ve taken through to the end of the second quarter of this year.
Ladies and gentlemen, thank you very much for participating on the call.
Conference Operator: And this concludes today’s conference call. Thank you all for joining. You may now disconnect.
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