Earnings call transcript: Artrya Ltd sees stock rise after Q1 2025 earnings call

Artrya Ltd (AYA) witnessed an 8.75% increase in its stock price following its Q1 2025 earnings call. According to InvestingPro analysis, the company is currently trading below its Fair Value, suggesting potential upside opportunity. The company has outlined a positive outlook for silver production and exploration activities, despite a challenging financial year in 2024. With a Financial Health Score rated as FAIR, investors should carefully weigh both opportunities and risks.

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Key Takeaways

• Artrya’s stock surged by 8.75% after the earnings call.
• The company reported a significant drop in profit in 2024 due to a one-time write-off.
• Positive guidance for 2025 includes increased silver production and exploration activities.
• Expansion of mining operations and new mill production were highlighted.

Company Performance

Artrya Ltd reported a challenging financial year in 2024, with revenue decreasing to $39.1 million from $42 million in 2023. The company’s gross profit margin stands at 12.1%, which InvestingPro analysis identifies as relatively weak for the sector. Profit also saw a sharp decline to $382,000 from $15 million the previous year, primarily due to a one-time $27 million write-off for the Tigirit project. Despite these setbacks, the company maintains a healthy current ratio of 1.63, indicating sufficient liquidity to meet short-term obligations. The company has made strategic moves, such as completing the Gundair mine expansion and reaching commercial production with a new mill.

Financial Highlights

• Revenue: $39.1 million, down from $42 million in 2023
• Profit: $382,000, down from $15 million in 2023
• Ending cash and restricted cash: $49 million
• Working capital: $23 million
• Single debt: $100 million with no capital repayment in 2025

Outlook & Guidance

Artrya Ltd projects an optimistic outlook for 2025, with silver production expected to increase to between 5.0 and 5.3 million ounces. The company is also targeting a mill recovery rate of 88-90% and has set an exploration budget of $25-30 million. Capital expenditure is projected at $7 million, with potential mine life extension through open pit mining and exploration.

Executive Commentary

CEO Benoit Lazal emphasized the transition from a construction-focused 2024 to a ramp-up year in 2025. "2024 was a construction year, 2025 is the ramp up year," he stated, highlighting the company’s strategic shift. Lazal also noted the low discovery costs at the Boumadin site, stating, "Our discovery costs at Boumadin have been extremely low around $0.1 an ounce of silver."

Risks and Challenges

• The significant profit decline in 2024 poses a challenge for investor confidence.
• Recovery challenges with ore blending need to be addressed to meet the expected mill recovery rates.
• The company’s reliance on a single debt from EBRD could impact financial flexibility.

Q&A

During the earnings call, analysts inquired about the permanent shift to more open pit mining, to which the company confirmed no expected impact on mine life. Questions were also raised about the potential resource update in summer 2025, indicating ongoing interest in the company’s exploration activities.

Full transcript - Artrya Ltd (AYA) Q4 2024:

Conference Call Moderator, AYA: Thank you, operator, and welcome to everyone who has joined AYA’s fourth quarter and full year twenty twenty four earnings conference call. Here with me today, we have Benoit Lazal, President and CEO Hugo Landry Tolyczuk, Chief Financial Officer Elias Elias, Chief Legal and Sustainability Officer and David Lalonde, Vice President of Exploration. We will be referring to a presentation on this conference call, which is available via the webcast, and it is also posted on our website. As we will be making forward looking statements during the call, please refer to the cautionary notes included in the presentation, news release and MD and A as well as the risk factors included in our annual information form. Technical information in this presentation has been reviewed and approved by Rafael Beaudoin, IAS’ Vice President of Operations and David Lalonde, IAS’ Vice President of Exploration, both of whom are IA’s Qualified Persons as defined under National Instrument 43,101, Standards of Disclosure for Mineral Projects.

I would also like to remind everyone that our presentation will be followed by a Q and A session. Session. With that, I would now like to turn the call over to Benoit Lasalle. Benoit?

Benoit Lazal, President and CEO, AYA: Felicia, thank you very much. Welcome, everybody. Welcome to this Q4 and full year twenty twenty four conference call. I will refer to the presentation that you have. And from Page two and three, where we have the forward looking statement, I draw your attention to our forward looking statement.

Moving on to Page four of the presentation and a review of the year. The highlight of the year 2024 is the fact that this Gundair expansion plant has been completed and on budget. For the year 2024, we produced 1,600,000 ounces of silver. We’re ending the year with $49,000,000 in cash and restricted cash. And we’re also announcing a budget, an exploration budget for 2025, which will be between $25,000,000 and $30,000,000 both covering Gundair and Boumedi.

So as I said, we’ve completed this Gundair mine expansion on budget, which you all know is extremely rare in our industry. We’ve expanded mining operation. The new mill reached commercial production at the end of twenty twenty four. It was on 12/30/2024, that we declared commercial production as it was expected and it had been communicated. We’ve completed the underground development, both lateral and vertical, which is something that we do on a yearly basis to get ready for the coming year.

We’re also finishing the year with a stockpile of 336,000 tons of ore running at an average of 153 gram per ton. This stockpile is being utilized when the mining is a little bit short of the ore that we need for the plant. We are ramping up the mill to reach steady state capacity. We’ve already reached steady state many days in a row in January and February, and our goal now for 2025 is to reach steady state capacity on a constant basis. In 2024, we’ve advanced the BoomEdgeen development.

We’ve completed 107,000 meters of drilling on the main trend and on other targets. We’ve extended the main trend where we see mineralization to 5.4 kilometers. Also, we announced a new mineral resource update in 2024 in April and in 2025 in February, we’ve updated the mineral resource estimate. During the year 2024, we’ve added 15 permits, expanding the Boumazin exploration footprint to over 200 square kilometers, which we’ve had by year end. We’ve unlocked in 2024 some non core gold projects.

So we’ve announced the spin out of the Amisil gold project into MX2, a gold exploration company focused on North Africa projects. Aya is the largest shareholder of MX2 and the closing is expected any week, whereby some new shareholders will be putting $16,000,000 of fresh money for the exploration of the MSD and other projects. And in 2024, we’ve continued to progress all our ESG priorities. A key one was the completion and commissioning of the electrical line, which powers Gundair from renewable energy, wind and solar. And we’ve also completed our ESG report with the name of enhancing disclosure.

Taking you to Page five, which is Q4 and the full year 2024 Skunder expansion completion with some basic statistics. So if we compare the year 2023 and 2024, you see the silver production is somewhat lower in 2024 by 16%. On the other side or on the other hand, the ore processed per tonne has moved in 2023 from 281,000 ton to 358,000 ton. So if you look at it on a yearly basis, it’s 1,000 ton a day, remembering that the name plate capacity of the older plant was 700 tonne a day. We were running them around 800 to eight fifty and we had in December the new plant that kicked in.

So when we looked at the ore process for 2024, we were close to 1,000 tonne a day. The average grade was lower from 2023, where we processed two fifty gram per tonne. In 2024, the average grade was lower at 171 gram per tonne. Mill recovery directly affected by a bit of a lower grade. It was 86% or 87% for 2023.

We were at 84% for 2024. You remember that the target once the new plant is up and running and is at ramp up capacity, where our goal is to have between 8890% recovery on a steady state basis. So the revenue for 2024 reached $39,100,000 compared to $42,000,000 the year before. The profit and loss of both years were at a profit. We generated a profit of $15,000,000 in 2023.

We generated a profit of $382,000 in 2024, which is directly related to the fact that we processed lower grade ore coming mainly from the underground mine. Furthermore, there was a one time loss on a charge related to the Mauritania asset, the Tigrayit project, and that created a $27,000,000 write off, which comes from a transaction that we put together four years ago. We did do a deal on TGA, and you will see this in the MD and A, whereby we wanted MX to take over the project and bring it to production. So but because of accounting rules and disclosure, we felt that we should take a write down of 20% the full value on our books of $27,000,000 So it’s a one time impairment charge, which has no effect on cash or cash flow. Moving to Page six of the presentation, you have again at the top, it just shows you the major milestone of the year, which was in Q3 once we were complete and we had completed the construction, we successfully tested the new Merrell Crowe system, which is a brand new system and we were able to have our first silver pour in Q3, but just from the Merrell Crowe system.

In Q4, when we received from the EPC contractor the plant, we started up commissioning of the new mill and we were able to declare commercial production on December 30. In early twenty twenty five, we also reached same plate capacity, which was communicated to our shareholders. When you look at some operational highlights, you see the year 2023 and the year 2024 and you also see the quarter. But when we look at the year, because I think now for us 2024 is behind us, We did the construction, we build it, we commissioned it, we did the commissioning, we build the ramp pad and now we are into the ramp up for 2025. But some high level statistics on the ore mined in 2024, we mined 444,000 tonnes compared to four ninety three the year before.

The average grade is 162 compared to two thirteen. The ore process at the plant you see is three fifty eight, as I mentioned earlier, compared to two eighty one. The mill recoveries are 84% for this year and the average grade process at the plant is 171 gram per tonne. So the total silver production for 2024 is $1,600,000 The silver sold, total silver sale is $1,500,000 So there is an inventory at year end, the difference of 135,000 ounces. The average net realized price in 2024 was excellent at 26,000.

Obviously, now we’re more towards $34,000 but that was very a good year at $26 in comparison to the spot price. The adjusted cash cost per silver ounces once we made some small correction due to the fact that we were ramping up and we were completely overstaffed, The adjusted cash cost per silver ounces was at $19 compared to $12 We understand that this is not representative of the company going forward. It’s just a fact of life as we were getting ready in Q3 and Q4 to really start the new plant. We were overstaffed, we had more equipment and hence the cash cost was higher than on the previous year, which was on a steady state basis. Moving to Page seven, and I think that’s where the new beginning is, is now that the construction is behind us, the ramp up of the plant is being done, The ramp up of the open pit is going extremely well.

The open pit is running at 1,500 on average ton per day and the underground right now is running at 1,000 ton per day. Obviously, we changed the focus of the underground from tonnage to grade. We want the underground to improve its grade and we want the open pit to give us the regular production that we’re looking for to feed the plant. So that’s coming along well. The open pit is on all cylinders at 1,500 tonne a day, and we expect that to increase and to grow until the end of the year.

So the guidance for 2025 is extremely important. Our silver production for 2025 will be between 5,000,005,300,000 ounces of silver of ingot, no more concentrate. So very, very little because historically we were producing fiftyfifty concentrate in ingot. As you know, the realized price on ingot is a lot better than on concentrate. So here we are 5,000,000 to 5,300,000 ounces for 2025, and that’s assuming the ramp up.

So Q1 will be around 1,000,000 and we will have a ramp up till Q4 because there are many items that need to be adjusted at the plant, which is programming and pumps. And so these little things are getting done over 2025 to really come at the end of the year with a plant that is in full steady state and with top recoveries, top availability. So the silver cash costs on an average for the year should be between 15 and 18. And again, that is the average between Q1 and Q4. We expect Q4 to be lower than this because we will be we will have done all of the fine tuning.

Same with the recoveries to average throughout the year ’84 to ’88, understanding that our goal ultimately is to be between eighty eight and ninety as per the feasibility study. The average grade is similar in the thinking between 172, understanding that the grade in the open pit is fairly straightforward. But the underground where we had some issues in Q3 and Q4, we’re now is now improving. And that’s why I said the focus of the underground is more now grade control than tonnage control. So we really are pushing to have a better control over the grade.

The exploration for the assets for the two projects will be between $25,000,000 and $30,000,000 That’s something you recall we review every six months based on results because if you have a structure and you have more systematic drilling, then sometimes we have more meters. If it’s more exploration drilling, you have fewer meters and more geological work. So that’s something that we’re going to be reviewing as we go forward. So you see the major milestone on the chart at the bottom of Page seven showing you how the production profile is now changing. Historically, the company was set to produce about 1.6, one point seven million ounces, sometimes depending on high grade pocket, we did a little bit better.

But you recall the plants were geared to do 700 ton a day and 700 ton a day or even 800 ton a day that was geared to give us 1,600,000 to 1,700,000. And that’s exactly what we did in 2022, in 2024. And now we have this major change from 2024 to 2025, where we’re moving towards 5,000,000 to 5,300,000 ounces. Moving now to Page eight. A couple of financial highlights.

You’ve seen the numbers. Let’s go to the year end 2024 and year end 2023. We’ve talked about the revenue, the gross profit being $5,000,000 for this year compared to $15,000,000 last year. The loss is directly related to the write off of Tigirate, the $27,000,000 So when you look at the net loss for the period of $26,000,000 effectively the year, if you do not take into account TEGERATE, would come out with a $1,000,000 income, but TEGERATE is now a one time write off based on the fact that we have no certainty of the outcome. Working cap is at $23,000,000 a very strong balance sheet with only one debt, which is the EBRD debt, which is $100,000,000 which has no capital repayment in 2025.

So we are in a very strong financial position. The TG unit is the main element to remember when you look at this financial, the impairment of $27,000,000 We believe that it was the right time, though we are still working on Tigirit with different possibilities, we felt it was the right time to take the write down. Going to Page nine, which is the reason why we’ve created value over the last four years when we took over AyaMaya in 2020 is the geological upside, the exploration upside. Today, you have a company that has 1,200 square kilometers between Gundair, Bumadin, Azigu, and Izmirs and Imiterbis. We drilled in 2024, ’30 ’5 thousand meters at Zunder at the mine.

You’ve seen the results, you saw the results Tuesday and you saw how good those results continue to be at Zunder. Zunder is a major system and I’m going to show you the size of the property that we have now. Boumazin, Boumazin is an all star project. We drilled 107,000 meters or 107 kilometers last year. We’ve expanded the main zone as we discussed to 5.4 kilometers.

We have multiple potential parallel zones. Conductive anomalies have been identified. Now at year end, we still have 27,000 assays that are pending because we are utilizing all the lab capacity in Morocco. We are helping the labs now increase their capacity so that they can service us faster and that’s being done. On the Gundair Regional, which is very interesting and has tremendous potential, we’ve completed 10,000 meters in 2024.

We’ve tested Gounder West, Gounder East. We’re increasing our understanding of the geology, which is extremely important because we’re looking for a look alike of this Gounder deposit. If we have a look alike of this Gundyr deposit and we are looking at that for that, we will be able to increase the mine life past the eleven years and or increase capacity at the plant and increase the total production. So we are using all the tools and methods that are available, geophysics, mobile MT, we’re using all the tools available. We strongly believe that there is one or two more Grundyere deposit and maybe more.

It’s just now a matter of attending to it and getting the job done. And we have an extremely good team on Grundyere Regional. Amismeiz, well, that’s been spun out into MX2, and we’re going to follow this throughout the year. Going to Page 10, you have the picture of this Schoonberg deposit. You can see it.

It’s like a loaf of bread. It’s 1.4 kilometer long. It’s 20 meters thick. It’s 700 meters deep. And now you saw the results that we’re showing you here, 2,000 gram per tonne over 70 meters.

I mean, and it’s on and on like that. This is a very, very large system. We just gave you some results this week at the bottom left hand side, which is the West. And we believe that this is like a baguette. I say it’s a loaf of bread, so it’s a baguette because we’re in Francophone, Africa.

And the fall that you see on the slide to the West is where the baguette was cut into two pieces. And we’ve been looking for that second piece. Now we did check at surface and it wasn’t there. So clearly, there was a displacement towards the bottom. And if you look at some of the results that we showed this week, it’s showing that the bottom right the bottom left to the west is showing very nice mineralization.

So we’re pushing the interpretation hopefully to find the second piece of the loaf of bread and to see it maybe lower down in continuation with this current structure, but starting from the bottom, touching the granite, which has always been the control rock where we see where the mineralization is. So very interesting project, lots of new theory behind the geology and a motivated team to find more look alike geolog that is Gundyr deposits. But this on Page 10 is a 2% or 3% of our property. And so when we arrived, we had 30 square kilometers five, four point five years ago, and now we have four forty square kilometers. So there is definitely a lot of potential to come with a new zone similar to Zwander Mine.

And we have a plant that has the capacity to grow, that has the infrastructure, it has power, it has water, it has a team at site that can take this plant and increase its throughput by 30% to 50% quite easily. Moving on to Slide 11, and that is the Tier one asset that we have called Boumadin. Boumadin, we completed in 2024 one hundred 7,000 meters of drilling. We’ve extended the strike from 4.2 to 5.4. Half of the drilling last year was extending the strike.

The other half was drilling other structures. And we have been drilling other structures and some gave us resource and were added into the resource update. So we did a mineral resource update in February of twenty twenty five, which started from the one we had done in April 2024. And we’re now pleased to say that we that Boomadzilin on the main permit on the main zone stands at four fifty two million ounces of silver. We’ve complete satellite mapping, all the studies, airborne geophysics and we’ve identified many parallel structures on trend to the main zone, north, south and we’ve also identified many new structures east west that seem to be carrying mineralization, which I’ll show you in one minute.

Furthermore, in 2024, we’ve added 15 permits to increase the footprint to two twelve kilometers from the original 34. And in 2025, we’ve added another 500 square kilometer to that. So we now control the district and we’ve done a lot of work to understand. Slide 12 shows you the mineral update, which was communicated at the beginning of the year. But if we’re talking about boomedic, we have to talk about the mineral update.

So as you can see, we’ve increased the percentage change in total ounces as silver equivalent. The total indicated went up by 120. The inferred went up by 19%. But what we need to remember is all this was done in two point five years. So we’ve discovered three four fifty million ounces of silver in less than three years of drilling with 200 kilometer or 200,000 meters of drilling.

So this is extremely fast. The discovery cost is around $0.1 per silver ounce, extremely low. It’s actually quite unique in our sector. When we’ve done the resource update, we also realized that 49% is pit constrained, so it’s an open pit and 51% is underground. So it’s like a fiftyfifty currently project with the underground coming from a couple of pits and as long as the open pit coming from a pit and the underground being underneath the pit and on that 5.4 kilometer structure.

Still open in all direction, south, north and adept. Going to Slide 13, that is the secret pathway to a Tier one very unique project. You see here all the permits. In the middle. You see the original permit where we have made the original discovery.

You can see this, it’s right in the middle. And the geophysics shows us clearly where the VMS system here, the volcanic system, the massive sulfide, which in this case here is pyrite and we can see it clearly. So look at all these targets. So you have the main system, which is North South. You have many parallel system north south to the east and to the west of the main system.

And then around that, you have some east west structures where we’ve walked the ground, we’ve looked at grab samples, we’ve looked at the geology and we’ve been and this is another mineralization type. It’s another movement. It’s not the first movement where we are North South with gold, silver, lead and zinc. The one that is East West seems to be more copper silver. So that is what we’re looking for, for 2025 as we are also increasing the drilling on the main zone to really fully understand the size of the main zone knowing that it’s continuing to the North, continuing to the South and it has parallel system.

So Boumazin is a very unique asset, very unique project, which you see on Slide 13 is our territory, it’s our ground and there are few little pieces missing, but we’re still in discussion with some families to add to the portfolio. So the exploration program, which is where we create value, and if you are with us as a shareholder, it’s because you believe in the exploration program. This year, again, we will spend between $25,000,000 and $30,000,000 on exploration and development, both at Zunder and at Boumediene. Boumediene will see again this year between 250,000 meters of drilling, Zwundeir will see between 45,000. And all of that is a function of results.

If we find a new zone at Zwundeir and we need to expand and drill it quickly because it could be another source of ore, we will be there and we will do this. As a group, as a company right now, we have sixteen, eighteen drills turning at all time. It’s a team of 100, just the geological team and that’s where the value creation is coming from. Of course, the plant, the mine, the cash flow is beautiful. It will fund all of this work over the next one or two years, but this is where the value is getting created.

So at Gundair, we will follow-up on the underground targets, especially the one we identified this week showing the West extension at depth and the Zunder Regional Permits where we have many targets. At Boumedzin for 2025, ’50 percent of the drilling will focus on the main trend in TZ, which was a beautiful discovery in 2024. And we will continue to extend the known mineralization trend along strike at depth, and we will infill some areas as well to understand it better. 50% of their drilling will be on exploration targets, which come from the geological pieces that the team is putting together and where we will be testing the East West structure, where we see copper silver and we will also test some of the parallel systems to the current main trend. To conclude the presentation and before the question period, what are the catalysts for 2025?

What will how are we going to set ourselves apart? Well, of course, we will commence the drill program. You have a company that will drill between 140 and maybe up to 200,000 meters depending on results and depending on what we’re seeing. Commence the Boumedzin PA that started in 2024, but it will accelerate in 2025. We still don’t know how big the plant needs to be.

And that is something that we’re waiting for drill results and for the geological team to tell us what they believe is the optimal size of the deposit right now, the main zone. We’re not going to take any of the other zone into account right now. Of course, one of the catalysts is steady state 3,000 ton per day processing at Gounder, ramping up to a steady state, ramping up to an availability of 92%, ninety five %, ramping up to a recovery between 88 and optimal 88% to 90%. That’s what we aim for. Of course, the average of the year is not going to be this because Q1, Q2, Q3, we’re ramping up.

We will do a midyear update on boom, as in metallurgy and PDA. That’s something that we’ve been working on now for many quarters and it’s something that we’ll have much, much more information over the summer. And we will also publish a Gunther mineral resource update as soon as the drilling is completed and we know the size of that first loaf of bread. We’re still looking for the second piece. But as soon as we’ve completed the first loaf, we will do a Skunder mineral resource update with a new mining plan, a new cash flow, new production profile, just to show the strength of the deposit, the strength of the plant and the quality of the production and the profitability and the cash flow going forward.

Thank you very much for your time. The team is here to answer any questions you have. And I would close and say 2024 was a very strong year where we build it on time. We were a little late receiving the plant, but we commissioned it on time. And then now we’re starting a new era, which is 2025 on with added capacity with bumadin where it is with MX2 to develop amismease and I really look forward to 2025.

Thank you very much.

Operator: Thank you, Benoit. And our first question will come from Cosmos Shaw of CIBC. Your line is open, Cosmos.

Cosmos Shaw, Analyst, CIBC: Hi. Thanks, Benoit and team. Maybe my first question is on Segunda. Benoit, as you mentioned, you’re transitioning to one third underground, two thirds open pit. Is that only for 2025?

Are we talking longer term as well?

Benoit Lazal, President and CEO, AYA: Cosmos, thank you very much for your question. Absolutely not for one year, but for a minimum of six, seven years. The open pit was a test in beginning of twenty twenty four. We were testing it because it’s not part of the culture in Morocco. And we were testing the contractors, testing the team.

We realized that we had great success as we saw that the costs were about half of the underground mining costs, we decided to review the mining strategy and we did and we decided in Q4 to go much more open pit and reduce the pressure on the underground. So currently, in the current mine plan that we have, we have a six year plan to be in open pit, but Rafael and his team are working over the summer on a completely new mine plan, resource update, reserve update, throughput update, new plant capacity. And we will see for how long, but it will be for much more than probably six years. You recall that the first three hundred meter down is not an open pit, it’s down the mountain. So we started we start with a first three hundred meter of just bringing down the mountain.

And after that, we’re going to go deeper into a pit. So we do have a lot of flexibility. You saw the drill results at the beginning of the week. Every time we do some condemnation drilling towards the east, we find new zones. So the pit is getting much bigger than originally anticipated for some very good news and the grade is excellent.

Furthermore, as you know, it’s much easier to reduce dilution in the open pit than in the underground because you have a better definition drilling and tighter definition drilling in the open pit. So it is a permanent change. The beauty is we’re fully permitted for that in Morocco, so there was no waiting time to get a permit. I mean, we’re fully permitted and we’ve executed it. Ralph and his team have executed this switch.

And as I indicated, we’re currently running at about 1,500 tonne a day in the open pit, and we’ve been doing much better in the underground at 1,000 tonne a day. So it is a permanent shift. Of course, towards the end or if that second piece of the structure is deeper on the West Side in seven years or eight years, maybe it’s going to be only an underground mine. But at that time, we hope that we will have discovered an other Zugun der look alike structure.

Cosmos Shaw, Analyst, CIBC: Thanks, Benoit, for a very thorough answer. I guess, reading into your answer here, my question is, is there any kind of potential impact to mine life? Or does it sound like it’s because it sounds like there is potential for converting some of what would have been previously underground ore into open pit. Is that am I reading it correctly or

Benoit Lazal, President and CEO, AYA: You are. There will be no impact on mine life. If anything, it will increase it with all the new structures that we’re identifying. It’s going to allow us to take some of the pillars that were there historically that were not taken out. And because this mine has been in production for two thousand years and historically, So the open pit you know us in Canada in 2022, we were kind of saying, why don’t we take this whole mountain down from top to bottom?

But in country, this was like Canada, no, we don’t do this thing. So we kept testing it and pushing it and now we see that it does work. And there are now another there’s another company, which I won’t mention because on the call, but that have now also gone to open pit mining for their silver assets. So it’s kind of indicating a new trend. The structures are there, the grades there and the open pit is a lot easier and a lot cheaper.

Cosmos Shaw, Analyst, CIBC: Great. Maybe a question on the recovery. Benoit, as you mentioned in the press release earlier, February recovery was slightly impacted, 83% recovery, I believe, due to the processing of more oxidized ore. With more contribution from the open pit, is there any kind of potential impact on potentially more oxidized ore and then a potential impact on recovery for 2025?

Benoit Lazal, President and CEO, AYA: Cosmos, Rafael is on-site. He’s there. He’s moved from Montreal to Morocco. He’s there following everything. Rafael, did you get the question?

Would you answer if you did? Because I know sometimes the line is not great.

Rafael, Vice President of Operations, AYA: Yes, yes, with pleasure. So hi, Karl. Hi, everyone. Happy to answer that. Think of it this way.

Indeed, when we have stripping, when we have the upper section of the open pit and we take that ore, indeed sometimes it comes with a bit of clay material, which has an impact on recovery. That is for sure. What I have to say about this is any oxidized ore would not have been recovered anyway on the ground. So the open pit will give us a bit more oxidized ore than was initially planned. However, quite a bit of that would not have been accessible on the ground anyway.

So as we extend the pit and we find these extensions, indeed the first one to 10 meters are oxidized and we recover comfortably 80% plus And as the pit goes down, we’ll be able to blend it out and the clay content and the oxidized content that gives us sometimes a bit more trouble on the countercurrent decantation solution washing will be blended away and we don’t expect on the long term a lower recovery, but we do expect more ore. So that’s a positive thing. The long term recovery of the project is not affected because ultimately we get into fresh rock. It’s just that we have more ore and we need to blend it properly. And with the stockpile that we have, we anticipated that.

So we’re able to blend it better and better as the quarters will go and we’ll have more fresh rock from the open pit, more fresh rock from the underground that we can blend to minimize impact on recovery. But bottom line is when we have strip ore that is part of the stripping, it wouldn’t have been oxidized ore, sorry, from the stripping. It wouldn’t have been accessible on the ground anyway. So this is essentially extra ore.

Cosmos Shaw, Analyst, CIBC: Great.

Benoit Lazal, President and CEO, AYA: And Kasmo, in the feasibility study, if you recall, our target is to bring this plant to 89%, ninety % in over time and that still is the target and that’s why our guidance has an upper number of 88%.

Cosmos Shaw, Analyst, CIBC: Great. Maybe switching gears a little bit, just a quick question on accounting. Your share price is kind of weak today, I think in large part due to the write down at Tigerett. And I think it should be taken out for adjusted earnings in my opinion. From that perspective, two questions.

Number one, was the entire $27,350,000 taken out or expensed in Q4? And then number two, if I want to take it out for adjustment purposes, I want to tax effect it. What’s the tax effected number?

Benoit Lazal, President and CEO, AYA: Cosmos, I’m going to ask you guys with us here in Montreal to give you the answer. Yes. Hi, Cosmos. So yes,

Financial Team Member, AYA: the entire $27,000,000 was our entire book value for Tigirid. So today our book value on Tigirid is zero and that entire amount was taken in 2024. On taxes, the aspects that are in Mauritania, so the project is in Mauritania, don’t affect where we generate revenue, which is in Morocco. So there’s going to be no tax effect in Morocco. In Canada though, we will have a loss, but that will come and impact taxes.

And in Canada so far, we haven’t made a profit. And so as time goes and there’s profit from inter creditor loans and everything that come in Canada, we’ll be able to take some of the losses associated with Pigeon as part of that tax offset here in Canada.

Cosmos Shaw, Analyst, CIBC: Yes. So if I want to adjust your negative $0.23 per share in Q4 to a more sort of normalized number, I would essentially back out the entire $27,350,000?

Financial Team Member, AYA: Absolutely, yes.

Cosmos Shaw, Analyst, CIBC: Okay. And then maybe one last question. I think, Benoit, you mentioned adjusted cash cost per ounce $19.62 an ounce. Could you give us a bit more color? So I thought coming in, it was actually related to this impairment, but it doesn’t sound like it is.

So

Benoit Lazal, President and CEO, AYA: how should we use that number?

Financial Team Member, AYA: Yes. Cosmos, on that, a little bit like in Q3, I think we had a lot of costs that for us were more associated to our plant ramp up that we have to expense, but that don’t necessarily that we don’t see as ongoing. And so it made more sense for us to give a better sense of what our actual costs were to operate in the current plant to remove that. So it’s unrelated to titrant. It’s really our costs that were in Zgundar and what we thought better reflected our actual costs versus the additional costs that we have to pass through OpEx today, but that were more related to ramping up our plant.

Cosmos Shaw, Analyst, CIBC: Thanks. So would you are you expecting to report cash costs and adjusted cash costs for Q1, Q2, Q3 as well in 2025 or was that it?

Financial Team Member, AYA: No, no, we don’t. And now that commercial production has been declared, we don’t expect to have specific adjustments to cash costs moving forward.

Cosmos Shaw, Analyst, CIBC: Understood. Thanks, everyone. Thanks, Benoit and team. Those are all the questions I have and have a good weekend.

Benoit Lazal, President and CEO, AYA: Thank you, Cosmos.

Operator: Thank you. And one moment for our next question. Our next question will be coming from Justin Chan of SVT Resource Finance. Your line is open Justin.

Justin Chan, Analyst, SVT Resource Finance: Thanks, everyone. Thanks, Benoit, team for hosting us. My first one is just on the plan through the year. I think you mentioned on the call 1,000,000 ounces in Q1, Benoit. I think you’re trending above that with two months reported.

So just curious there if there’s anything to know on plan like plan shutdowns or anything in March because I think you’re on pace for a little bit better than that. And then just but the trend through the year, I think we understand fairly well on on the production side. I’m just curious on the cost side or unit cost side, maybe if you can give us some guidance on how to model that?

Benoit Lazal, President and CEO, AYA: So Justin, you’re right. We had a very strong January. We have a February that actually per day was quite strong. In February, though we did have fewer days and we had a planned shutdown. March, the numbers are going to be coming out early April.

March was a little bit more difficult because of some adjustments that they made to the plant and they tried a few things on the recovery. So there’s it’s just normal, normal adjustments. So we know that we’re trending above $1,000,000 or around $1,000,000 for Q1, which was our budget. So our plan is when we gave you the guidance between $5,000,000 and $5,300,000 it’s a ramp up here. So Rafael is on-site and I’m going to ask him to comment on the ramp up in a minute because your question is directly related to that.

But yes, we’re fixing things, we’re doing some programming, he’s adding some chemicals, changing. And it’s we’re working on the perfect recipe because we want to be in Q3, Q4 on a much higher run rate, much higher recoveries, much lower cash costs. So and this is the reason why we gave you 15 to 17.5 on an average. So and we believe that Q4, we’re going to be below 15 on a cash cost basis. So it’s just a matter of being conservative and giving you a bit of predictability.

But so yes, technically, we could have been in March a little bit higher, but there were some adjustments that were made by the team, which were absolutely normal. And in our planning and in our budget, I mean, Q1 will be a little bit better than our budget and our planning. So we are there and the cash cost, of course, is going to be a little bit higher at the beginning and it will be coming down below 15 hopefully for Q4.

Justin Chan, Analyst, SVT Resource Finance: Got you. Thanks, Benoit. And in terms of maybe just on Scunadera exploration and also as it relates to mine plan and a potential expansion, there’s still looking at your long section, there’s a lot of drilling potentially below where your resources are to the depth of the granite. I’m curious if maybe for a potential expansion if that is something you’re considering, is there an ounce target you’d like to see? And in terms of access to get the drills in there to drill out Scudera depth, do you feel like you’ve been able to prioritize that more or is that something to expect more throughout this year?

Benoit Lazal, President and CEO, AYA: So Justin, the access was built last year. So we have been drilling the it’s just we have not yet updated the long section, but the white part that is below level nineteen fifty or nineteen twenty five going all the way down to the granite, most of that has been drilled now. You see some drill results. We will update that over the summer, but we have been reviewing all of this, getting some very nice hit, very nice mineralization. And the so that’s being drilled and the access is available.

We do we will do a resource updated over the summer, I would say. And yes, absolutely, we expect to increase our resource. We expect to as we told earlier that the mine life is also going to be expanded. And we will have a new business model and business case on Gundyr available in Q3, Q4 for the market and for everybody. So it’s being done.

Maybe I can ask David, who’s online to comment about the section to the bottom, David, and what you’re seeing now at Gounder on the extension to the west and to the east.

David Lalonde, Vice President of Exploration, AYA: Yes, with pleasure. Hello, Justin. So most of the drilling has been done last year. We got the exploration gallery and drift ready for drilling. So we’ve almost completed all the drilling.

There’s a tiny bit of drilling left to do at the bottom part of the deposit. And the idea, as Benoit mentioned, is to update the resource later this year with all the information at this. Basically, what we’re seeing is exactly the same type of mineralization that the rest of this windmill deposit is. So very wide mineralization with some pockets of very, very high grades. Like you’ve seen in the last press release, there’s again incredible results and silver assays.

So we basically expect similar type of resource as the rest of the deposit. We didn’t see any surprise besides that it’s nice and rich all the way down to the bottom of the granite.

Justin Chan, Analyst, SVT Resource Finance: That’s great to hear. And I guess in terms of I guess when you have an updated resource, which will give you more life, I’m curious if there is thought towards doing an expansion.

Benoit Lazal, President and CEO, AYA: We have the resource yes, sorry, go ahead, David.

David Lalonde, Vice President of Exploration, AYA: No, I’m basically saying what you say all the time is like the place is very tight at Gunda. So expansion of the mill, we’ve mostly put the focus on finding satellite deposits in a trackable distance from Skunda to allow some places to bring ore to the mill.

Justin Chan, Analyst, SVT Resource Finance: Okay. Thanks. That’s very helpful. And then maybe just one on this year. In terms of capital or sustaining capital outside of your cash cost guidance, I’m just curious what would be a reasonable number to expect this year?

Benoit Lazal, President and CEO, AYA: The capital in our budget is $7,000,000.

Justin Chan, Analyst, SVT Resource Finance: 7 million dollars. Okay. 7 Okay, thanks. That’s really helpful. Okay, that’s I’ve taken up the line for quite a while, but thanks very much guys.

I appreciate it and looking forward to seeing the ramp up this year. Actually just maybe one last one, sorry to do this everyone else on the line. I was just curious to the status of the PACE plant and I remember late last year that was maybe a factor in controlling access to some of your higher grade secondary. So I’m just curious if that’s up and running and if we should expect to see some better grades as a result of that?

Benoit Lazal, President and CEO, AYA: Yes. Fahad, do you want to comment on the pace plant and maybe also comment on the ramp up because the first question was related to that and you’re the best person on-site to comment?

Rafael, Vice President of Operations, AYA: Yes, absolutely. So the cement plant is up and running. All the piping is done and it has been used to backfill some of the stopes that we wanted to continue develop. So that’s well ongoing. And as we extend the pit, it will be moved through the year, but it won’t affect our operation.

And as for the ramp up, Benoit mentioned it earlier, we wanted to reach a higher rate in Q1 to minimize the draw on our stockpiles and that’s going well. I mean, in January on total mining rate, we did about 1,600 in January. In February, over 2,200 and for March, we’re well on track for close to 2,500. So the ramp up has been impressive and will continue.

Benoit Lazal, President and CEO, AYA: Thank you, Abed.

Justin Chan, Analyst, SVT Resource Finance: Thanks guys. Thanks very much. And yes, I’ll free up the line. Thanks so much for your time.

Operator: And there are no further questions. I would now like to turn the call back to Benoit for any closing remarks.

Benoit Lazal, President and CEO, AYA: Thank you, operator. Twenty twenty four was a very busy year on construction and ramp up of the underground and ramp up of the open pit. Most companies when they do that are not in production, so they don’t report any costs. They capitalize everything due to the fact that we have two plants running at Gunda and we are in operation and we do pay taxes in Morocco. A lot of expenses or a lot of costs were put through the expenses, which had a direct effect on our cash costs and on our all in costs.

You also see that on our balance sheet, we have a $3,000,000 receivable tax receivable from the government because we put through these expenses and we had less income in the country. Hence, we are now waiting for a $3,000,000 refund. So it’s hard to predict 2025, ’20 ’20 ’6 based on 2024 because contrary to the industry, we were very, very conservative at what we capitalized and we were expensing as much as possible. But the guidance is very clear and it’s very conservative is we are now heading into a beautiful year of production and the team is on-site. We will do between five and five point three.

We will minimize our cost and that’s something that we’re always watching to have the best cash cost possible. But for us, as you see over time, our ASIC is very close to our cash cost because the sustaining CapEx is extremely low. So when we go from a $14 cash cost, then we have a 15.5 ASIC. So that’s the beauty of this project is that a lot of the development is done and the ASIC costs will be very close to the cash cost. The recoveries, we talked about that.

Our aim is to be to 89%, ninety %, which again for a silver mine is very, very good. The plant is very well built. It’s brand new. It’s operating very well. And we have the open pit that’s giving us beautiful production.

As Rafael just said, we’re running in March at 2,600 global, which is 1,600 coming from the open pit where the grade is much better and where the we’re running at 1,000 ton per day on the underground where we are now focusing more on grade than on tonnage and which is also helping. So with this and with one of the largest exploration program in the industry with a goal to drill between 150,000 and almost 200,000 meters at Gundair Regional and at Boumazin. It’s a unique value creation proposition where so far our discovery costs at Boumazin has been extremely low around $0.1 an ounce of silver and we hope that we will be continuing this in the coming years. So 2024 was a construction year, was a development year. 2025 is the ramp up.

We are making very good money. We sold silver yesterday at 34.19. Thank you, Yigal. Thirty four point one nine. You also saw for the ones who look at the financial statement that we did not sell the ounces at the end of the year.

We kept them in inventory. So there’s 130,000 ounces that were pushed over to Q1 that were kept in inventory. We are extremely good at selling at the best price possible. If we don’t like the price, we do not sell. Obviously, it has an effect on our financial statement.

So technically, there was 130,000 ounces that were sold in Q1 at a much better price. So we follow this closely. We are producing close to 15,000 ounces a day right now. We are in production. Our costs are well controlled.

Our selling price is currently $34 and up. So we are generating very strong cash flow and that will continue. Morocco is still an amazing country to operate in with fantastic mining code, fantastic people around us. You see it at Boumedzin, they are supporting us. We’ve been able to acquire like 18 permits very quickly.

So we know that for 2024, it was a transition year, but we expect a very, very good year in 2025. Thank you to all of you who are following us. Thank you to all the analysts who are covering us. And you always you can communicate with the team. Alex and myself are on the road 80% of the time probably.

So we do pay a lot of attention to our market and to our shareholders. So thank you very much. We will see you in May when we will be reporting Q1 and also at that time we’ll be able to give a little bit of guidance on how the ramp up is going. Thank you very much.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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