Earnings call transcript: Fortitude Gold Q4 2024 misses estimates

Fortitude Gold Corp (FTCO) reported its fourth-quarter 2024 earnings, missing both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -$0.11 compared to a forecast of $0.00. Actual revenue came in at $9.37 million, falling short of the expected $13.44 million. Following the earnings release, Fortitude Gold’s stock fell by 3.89% in after-hours trading, closing at $5.21, down from its previous close of $5.42. Despite the earnings miss, the company maintains an attractive 8.85% dividend yield and a GOOD financial health score according to InvestingPro analysis.

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Key Takeaways

• Fortitude Gold’s Q4 EPS and revenue missed analysts’ expectations.
• The company experienced a $2 million loss after taxes despite a pretax income of $1.4 million.
• Stock price fell 3.89% in after-hours trading following the earnings release.
• Exploration budget for 2025 has been reduced to conserve cash.
• Optimism about a more favorable regulatory environment under the new administration.

Company Performance

Fortitude Gold faced a challenging fourth quarter, with both EPS and revenue missing forecasts. Despite generating a pretax income of $1.4 million, the company reported a net loss of $2 million after taxes. The company’s focus on exploration and mine development continues, with strategic projects at County Line, Scarlet North, and Golden Mile.

Financial Highlights

• Net sales: $37.3 million
• Cash balance: $27.1 million
• Working capital: $37.7 million
• Gold ounces produced: 16,472
• Mine gross profit: $18.3 million
• Cash dividends paid: $11.6 million

Earnings vs. Forecast

Fortitude Gold’s EPS of -$0.11 missed the forecast of $0.00, marking a significant deviation from expectations. Revenue also fell short at $9.37 million against a forecast of $13.44 million. This miss highlights the company’s ongoing financial challenges and the pressure to improve operational efficiency and cost management.

Market Reaction

The stock price of Fortitude Gold dropped by 3.89% in after-hours trading, reflecting investor disappointment with the earnings miss. The stock’s movement places it closer to its 52-week low of $4.15, indicating bearish sentiment among investors.

Outlook & Guidance

Looking forward, Fortitude Gold is targeting permits for several key projects and anticipates a more favorable regulatory environment under the new administration. The company remains optimistic about potential production expansion in the coming years, although it has adopted a conservative approach to exploration and spending.

Executive Commentary

CEO Jason Reed expressed readiness to expand mining operations, stating, "We are ready to build more mines." He also noted a positive shift in regulatory attitudes, saying, "It was like a light switch. The week after the election results, all of a sudden the BLM’s attitude changed to us."

Risks and Challenges

• Financial performance pressures due to missed earnings and revenue forecasts.
• Regulatory uncertainties, despite anticipated improvements.
• Potential cash flow constraints with reduced exploration budget.
• Market volatility affecting stock performance.
• Operational challenges in expanding production capacity.

Q&A

During the earnings call, analysts inquired about the potential pit layback at Isabella Pearl and the rationale behind the reduced exploration budget. Executives also addressed changing regulatory attitudes and expressed openness to potential mergers and acquisitions opportunities.

Full transcript - Fortitude Gold Corp (FTCO) Q4 2024:

Conference Operator: Good morning, everyone.

Welcome to the Fortitude Gold twenty twenty four Year End Conference Call. At this time, all participants are in a listen only mode. Please note this conference is being recorded. I will now turn the conference over to your host, Jason Reed, CEO and President. Jason, the floor is yours.

Jason Reed, CEO and President, Fortitude Gold: Thank you, Jenny. Good morning, everyone, and thank you for joining Fortitude Goldcorp’s twenty twenty four year end conference call. Following my brief comments and associated presentation for those who joined online, we will have a brief question and answer period. Joining me on the call today for the Q and A portion will be Ms. Janet Turner, our Chief Financial Officer.

Let me remind everyone that certain statements made on this call are not historical facts and are considered forward looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10 K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward looking statements in the earnings release that we issued yesterday along with the comments on this call are made only as of today, 02/26/2025, and we undertake no obligation to publicly update any of these forward looking statements as actual events unfold. You can find a reconciliation of non GAAP financial measures referred to in our remarks on our Form 10 K filed with the SEC for the year ended 12/31/2024. ’20 ’20 ’4 was another successful year of low cost gold production and strong shareholder dividends for Fortitude Gold.

Despite the long and arduous four challenging years for the resource extractive industries, including permit backlogs caused by the Biden administration and its anti mining PLM lead. Any shareholder who voted for that administration and for what would have been a devastating continuation of a Harris administration did so while voting against their investment and financial interests and Fortitude. For four years, it’s been widely known among shareholders including countless comments made by me on these conference calls that Fortitude’s business plan of layering production from several mines on top of one another was derailed by the Biden administration. Even staunch Biden supporters that our shareholders are coming out of the woodwork acknowledging to us how bad the previous administration was for our industry and our company’s business plan. At HarrisOne, Fortitude would surely return to the ranks of an exploration stage company, likely not receiving any new mine development permits and having squeezed everything possible out of the Isabella Pearl’s depleting asset.

But it is fortuitous. Most of America spoke and we are excited about the next four years under the Trump administration. Trump previously demonstrated support for natural resource extraction in The United States under which our Isabella Pearl mine was granted its permits. Trump’s proposed replacement for the BLM head is a pro business, pro extractive industry professional and I am excited to watch the confirmation hearings. What a novel idea to appoint such a good candidate to the BLM lead for the benefit and interest of Fortitude shareholders.

Twenty twenty four year end results including $37,300,000 net sales, $27,100,000 cash balance, 16,472 gold ounces produced, $37,700,000 working capital, $11,600,000 paid to shareholders in cash dividends, $1,400,000 pretax income, which did swing to a $2,000,000 loss after taxes $18,300,000 mine gross profit $12,900,000 exploration expenditures and $966,000,000 all in sustaining cash cost A substantial expiration budget of $12,900,000 was deployed in 2024, which focused on the County Line, Golden Mile and Isabella Pearl Trends, Scarlet North Area and East Camp Douglas. All of these properties returned high grade gold intercepts reflected in the numerous press releases issued throughout the year. As we look to conserve cash while waiting for permits, we have limited our drill exploration programs and are focusing on mapping new areas and modeling known mineralized zones. For 2025, our mine operations are targeting additional mineral opportunities that Isabella Pearl found outside of the original mine plan. We also remain highly focused on our County Line project as our next Nevada USA mine build along with Scarlett expansion at our Isabella Pearl trend and our Golden Mile project.

We will remain focused on obtaining as many mine permits as possible during these next four years. It is not a coincidence that the week after the election, the attitude and stance of the regulators began to change. We are seeing continued positive movement in our mine permit efforts within the agency since the election. Don’t let anyone tell you an administration doesn’t impact everything. Operationally, we estimate 43,000 recoverable gold ounces on the heap leach pad at the year end 2024 to be recovered in future years.

As of March, we will have effectively completed the mining of the Isabella Pro mine plan and are evaluating the economics of a pit layback to access high grade oxide and oxide transitional gold that continues into the Southeast corner of the Pearl Pit deep. But our long term objective and focus is on obtaining the needed permits to mine County Line, Scarlet North and Golden Mile. Our ability to execute our business plan is directly tied to our ability to acquire the needed permits to bring new mines into production. While the exact timing of BLM permits is out of our hand, we optimistically await the new administration’s pro business and pro mining team to be compiled, solidified and deployed on fixing the Biden permit backlog. For years, we have heard from the BLM that they were understaffed as one of the reasons for their delays.

We are now hearing from the BLM that they are nearing full staff. Again, the federal administration makes all the difference, even one whose reputation precedes them and is proving yet again to execute on an expedited basis on numerous fronts. We are ready to build more mines. We have been pivoting, creating optionality and tightening our belt during the last four years in the Biden Desert from which that administration caused damage to Fortitude’s business plan. We received our last mine permit for the Isabella Pearl mine under Trump’s first firm.

It is not a coincidence that we did not receive a mine permit during Biden’s term. So thankfully, we optimistically await our opportunity to put County Line into production under Trump’s second term. With that, I would like to thank everyone for their time today on this conference call. Operator, please open up the lines for any possible Q and A.

Conference Operator: Thank you very much. We’ll be opening the floor for questions.

Jason Reed, CEO and President, Fortitude Gold: Operator, while you see if there’s any live questions, we do have several write in questions. The first came in via email. I apologize if I mispronounced your last name, Wayne Polaskek. Three questions. What is gold production required to achieve the top of the aggressive dividend per share of $0.6 Fun question, Wayne, I like where your head is at, but there’s too many variables for that.

Obviously, what our capital expenditures as we build new mines, what the gold price is, what our production levels are. So I don’t have that at the top of my head of what that would be and in large part because there’s too many variables. The second question, since the corporate report lists 1,380,000 plus waste tons for 2024, what is the intended use of the waste? Does it contain cassiterite? The waste is just waste.

There’s nothing else in it and we won’t be doing anything with that. Number the third question, can tory processing companies extract any other elements such as tin from the waste? Any additional elements that the refiner that purchases our DORAZE gold, silver, alloy, any additional metals wouldn’t be material. And so that’s kind of a non event, but interesting question nonetheless. We have several additional questions in the portal.

What is your this one comes from Blair Salisbury, a retired mineral explorationist. What is your sense of the local labor and housing market as it may be involving today? I assume you mean local labor and housing market in our areas as it relates to the mines. We have a team in place, so and obviously they have housing, so that’s not going to impact us at all as it relates to building additional mines. Another question from Ray Leeb.

How much mining of Isabella Pearl Deep has occurred since permit was received in September? And what remains? How much exploration results need to be reported from last year? What feedback have you received from the BLM? Okay.

Conference Operator: Okay. Just bear with me a second. I

Jason Reed, CEO and President, Fortitude Gold: hope we’ve

Conference Operator: lost Jason. Can you hear us, Jason?

Jason Reed, CEO and President, Fortitude Gold: I can. Can you hear us?

Conference Operator: Yes. Your line just cut out slightly, but you’re back, so all good.

Jason Reed, CEO and President, Fortitude Gold: Okay. Thank you. So, I was trying to address Ray Leib’s question. How much mining at Isabella Pearl Deep has occurred since permit was received in September and what remains. So we mined everybody knew we were mining down deeper in Isabella Pearl Pit, primarily the Pearl and that ore transitions from oxide into transitional and into sulfides.

And there’s a lot of gold in the sulfide form, but we don’t plan to do anything with that. We don’t have the processing facilities to do anything with that. But what we did find and we’re through that to answer your question, but what we did find is there’s oxide and transitional oxide, high grade gold that goes deeper, and it goes off at an angle to the Southeast that would require a pit layback. So we’re running some evaluations, both in an initial pit layback and then a much larger pit layback to see if one or both makes sense to go after. And so that’s what we’re doing right now.

Hopefully that answers your question. The second part of your question, how much exploration results need to be reported from last year? I think we’re pretty much done. There might be a few stragglers, but for I think all intents and purposes, just consider them out. The third part of your question, what feedback have you received from BLM since the change in administration?

It was like a light switch. The week after the election results, all of a sudden the BLM’s attitude changed to us. That tells me and this is solely my opinion, but that tells me that this directive came from above, came from the Biden administration to slow things down and they ground it to a halt in excellent fashion, not just us, but many miners, many other resource extractive industries. And so it was interesting that the day after the election was like a light switch, far more responsive. We’re hearing word recently that they’re staffing up.

It’s pretty amazing. And in doing so, without even the new PLM lead being appointed. So what that tells me is the BLM, hardworking BLM individuals on the local level that are doing a great job, they were hamstrung by the federal administration. And now they’re trying to get back to doing a great job. So, interesting times, that’s for sure.

Okay. On to the next question, Scott McLeo. If you get all the permits, what do you think we can anticipate in ounces in the ground at County, Golden Mile and Scarlet? We’re still working on that and we’ll continue to do so. Scott, in this industry, it’s such a long lead time industry.

It can be fifteen, twenty years sometimes from going from discovery to putting a mine in production. We don’t operate that way. We look at what the minimum number of ounces we find in an area, what’s the capital to put into production, what’s the payback we move forward. So that’s how we were able to get Isabella Pearl into production two years from acquiring it. So we operate a little differently.

So we don’t have all the answers. We don’t need all those answers. We operate pretty nimble and quick. We know we have a couple of years of production at County Line. Golden Mile, that is real fun potential.

It’s really complicated geologically. That is a good thing. It’s a good thing and a bad thing. Bad thing is complicated. Good thing, a lot of open spaces for ore bearing fluids to move.

But we want to produce from gold to mild. But then the Scarlet has been the dark horse that’s on our Isabella Pearl trend, it’s 700 meters away, but we’ve discovered several pods of gold mineralization, good grade, some outcropping surface. Well, unfortunately, the previous BLM under the previous administration said, look, we’re not going to give you any NOIs, notice of intent to drill over there, because it’s so close to the operation. So they were kind of tying our hands over there, but now we’re moving this thing forward I think with the new administration that we’re really moving to get additional acreage to drill because we ended in gold at the last drill program. So it’s open, if you will, to add more.

But we target to be producing from each of these. Right now, I see County Line and then Scarlet filling in between that and Golden Mile. That would be the poll. Thanks for your question, Scott. Moving on, there’s a lot of questions.

We may not get to them all today, guys, but thank you for the interest. Carl Lobou, apologies if I mispronounced your name. Have you asked the governor to help with your issue with the regulators? We don’t have a lot of connections in government. We’ve had a little bit, but under the previous administration didn’t get us very far.

I don’t think that’s going to be needed going forward, Carl. Things have just changed. It feels different. When you talk to the BLM, the offices, etcetera, it feels different. And we’re seeing more movement forward in just a few weeks than we’ve seen in months and months with the previous administration.

So I don’t think that’s going to be needed, but good question. Next (LON:NXT) question again with Scott McLeod. How much money do you anticipate spending in 2025 on exploration? Good question. We are pulling back on our drilling.

We’ll still do a ton of mapping, which needs to be done, a ton of field work, which is always good. It generates targets. But because we’ve lived these last four years in this brutal Biden administration where our hands were tied behind our backs, we find ourselves today where we need to start looking at conserving cash. So we’re not spending $12,000,000 like we did last year. So we’ve curtailed dramatically our exploration drill budget.

But yes, we don’t until we get our permits, I’m not going to have really an answer to that. We’re not going to drill much, I guess, with the long and short of it until we get our permits and then have some clarity on when we can get County Line up and running. Another question from Scott, would you look at M and A in regards to expanding our ounces under control? We always look at M and A. 99 of what we look at doesn’t work, doesn’t fit, isn’t accretive, but we’ll continue to look at it.

Some interesting things out there. Funny thing is on some of the M and A, you talk to some of these special individuals, not companies that have prospective properties with gold on them. In their minds, they already think they have a gold mine that’s operating and they’re worth tremendous amount of money. So it’s pretty challenging to do M and A under environments like that. Plus the way the metal prices are running, I think there’ll be less and less M and A from us anyway.

Unfortunately, the industry does huge M and A when the gold spikes. M and A should be done when the gold is in a bear market and we did most of our M and A and acquiring most of our properties during the last bear market.

Conference Operator: You have a little bit of distortion on your line, Jason.

Jason Reed, CEO and President, Fortitude Gold: Okay. I was going

Conference Operator: to see if

Jason Reed, CEO and President, Fortitude Gold: I can

Conference Operator: sort that out.

Jason Reed, CEO and President, Fortitude Gold: Yes. No, thanks for that. How is that? Is that any better?

Conference Operator: It’s a little better. I think it’s a signal related.

Jason Reed, CEO and President, Fortitude Gold: You think it’s phone related? Yes. It’s we can’t I can’t understand you at the moment. See. Okay.

Well, yes, I think this is where I’m at in making this call. Can you hear me?

Conference Operator: I think you’ve just come through again. Could you say your name and I’ll just

Jason Reed, CEO and President, Fortitude Gold: check? Jason Reed. Jason Reed.

Conference Operator: Okay. We’ve got you back. We’ve got you back. Great.

Jason Reed, CEO and President, Fortitude Gold: Okay. Well, listen, yes, we’ve gone through a lot of questions. How about this? Since we’re having kind of a rough connection and then I apologize that’s on my end, we’ll just conclude the call today. And those of you who are in the queue for questions or if you come up with one down the road, contact Greg Patterson or myself, we’re happy to circle back with you.

And with that, let’s close the conference call out and thank you for your time. We’ll talk to you next quarter.

Conference Operator: Thank you very much, Jason. This does conclude today’s conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

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