Earnings call transcript: Magna Mining’s Q1 2025 Shows Transformative Growth

Magna Mining Inc. reported its Q1 2025 earnings, highlighting a transformative period with significant financial and operational developments. The company posted an EPS of -0.03 USD and revenue of 4.45 million USD. The stock, currently trading at $1.17, has shown remarkable momentum with a 102.5% return over the past year. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculation, presenting a potential opportunity for investors seeking growth in the mining sector. The company emphasized strategic acquisitions and operational improvements, aiming for long-term growth.

Key Takeaways

• Magna Mining raised CAD$33.5 million in Q1 2025.
• The company acquired key base metal assets, including the Macri U.S. Copper mine.
• Production targeted to exceed 1,000 tonnes per day.
• Uplisted from OTCQB to OTCQX, with plans for a TSX uplisting.

Company Performance

Magna Mining’s Q1 2025 marked a period of strategic growth, driven by acquisitions and operational enhancements. The company produced 790,000 pounds of copper equivalent, with a focus on optimizing its Macree West mine operations. InvestingPro data reveals a strong financial position with a current ratio of 5.77, indicating robust liquidity to support its growth initiatives. The company maintains minimal debt, with a debt-to-equity ratio near zero, providing financial flexibility for future expansions. These efforts align with Magna’s goal to become a leading player in Canada’s mining sector, targeting steady-state production and resource expansion.

Financial Highlights

• Revenue: 4.45 million USD
• EPS: -0.03 USD
• Cash balance: CAD$38.3 million as of March 31, 2025
• Operating cash outflow: 2.6 million USD
• Free cash outflow: CAD$10.9 million

Outlook & Guidance

Magna Mining aims to provide production and cost guidance by early Q3 2025. The company is targeting an average production of over 1,000 tonnes per day and expects a resource update in Q1 2026. While InvestingPro analysis indicates the company isn’t expected to be profitable this year, with a forecasted EPS of -0.01 USD, its strong price momentum and healthy balance sheet suggest potential for long-term value creation. Discover 10+ additional exclusive ProTips and comprehensive financial metrics with an InvestingPro subscription. Ongoing exploration and infill drilling are set to support these objectives, alongside the anticipated closure of a property acquisition from Northex.

Executive Commentary

CEO Jason Jessup noted, "Q1 twenty twenty five was a transformative quarter for our company," emphasizing the potential unlocked through strategic leadership and technical expertise. Jessup also highlighted the importance of quality in increasing throughput, underscoring the company’s commitment to operational excellence.

Risks and Challenges

• Market fluctuations in copper and nickel prices could impact profitability.
• Integration of newly acquired assets poses operational challenges.
• Regulatory changes in mining policies may affect future operations.
• Supply chain disruptions could hinder production targets.
• Competition from established mining companies remains a threat.

Q&A

During the earnings call, analysts inquired about operational improvements following the KGHM acquisition and the company’s steady-state production targets. CEO Jason Jessup addressed these questions, outlining Magna’s strategic focus on exploration and potential resource updates to drive future growth.

Full transcript - Magna Mining Inc (NICU) Q1 2025:

Conference Operator: Thank you for standing by. This is the conference operator. Welcome to the Magna Mining Inc. First Quarter twenty twenty five Earnings Conference Call. As a reminder, all participants are in a listen only mode and the conference is being recorded.

After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Paul Fowler, Senior Vice President. Please go ahead.

Jeff Huffman, Chief Operating Officer, Magna Mining: Thank you. Thank you, and

Paul Fowler, Senior Vice President, Magna Mining: good morning, everyone. Before getting started, I’d like to mention that we may make forward looking statements or provide forward looking information on this call in accordance with applicable securities laws. Please review our most recent corporate presentation available on our website for cautionary language regarding the use of and reliance on forward looking statements, which may be materially different from the actual results obtained by the company and for the risk factors applicable to such forward looking statements that could cause actual results to be materially different from the statements that are set out in the company’s annual MD and A. Any scientific or technical commentary on this call today has been reviewed and approved by David King, our SVP, Exploration, who is a qualified person under National Instrument 40 three-one hundred one. With respect to non IFRS performance measures that are referred to on this call, please refer to the reconciliation to measures of performance prepared in accordance with IFRS accounting standards of the company’s most recently filed MD and A.

All figures are in Canadian dollars unless otherwise noted. Our press release, MD and A and financial statements are available on SEDAR plus and our corporate website. With us today on the call alongside myself are Magna Mining’s CEO, Jason Jessup Chief Operating Officer, Jeff Huffman Chief Financial Officer, Scott Gilbert and Senior Vice President of Exploration, Dave King. Following formal remarks from management, we will open the lines for further questions. And I would now like to introduce Magna Mining’s CEO, Jason Jessup to present our quarterly results.

Jason Jessup, CEO, Magna Mining: Good morning. Q1 twenty twenty five was a transformative quarter for our company. On 02/28/2025, we completed the acquisition of a portfolio of base metal assets located in the Sudbury Basin from KGHM International, including the producing Macri U. S. Copper mine, the Lavac And Podolsky mines, which are permitted and non care and maintenance, as well as five exploration properties.

The closing of this acquisition takes us from an exploration and development company to Canada’s newest copper, nickel and precious metals mining company. We also closed a $33,500,000 financing through the issuance of a $23,500,000 convertible debenture and a $10,000,000 equity raise. We were pleased to be able to welcome several new institutional investors to our capital structure and retain the support and commitment of our cornerstone investor, Dundee Corporation. This financing puts us in a position to be able to invest in the underground capital and operating development at our Macready West mine to get it to an optimal sustainable production level by 2026. I would now like to hand it over to COO, Jeff Hoffman, to present an overview of our operational performance in Q1.

Jeff Huffman, Chief Operating Officer, Magna Mining: Thank you, Jason, and good morning everybody. Subsequent to the transaction close on 02/28/2025, Macready West produced 790,000 pounds of copper equivalent payable, which included 631,000 pounds from the 700 copper zone and 159,000 pounds from the Intermane Nickel zone. The total ore processed was 20,388 tonnes at an average grade of 3.01 copper equivalent. In March, we made some organizational changes and started to get a detailed understanding of the mine plan in its current form. We have made good progress in strategizing and communicating what is going to drive improvement to the mine plan and ultimately realize value creation for our business.

At current prices, the decision was made to cease planning towards any further intermane nickel production areas and focus on the 700 copper zone. We will mine the remaining Intermain stopes that are already into the production cycle. However, we will begin diverting focus towards the 700 copper zone in March. Also in March immediate focus was to increase mine development output along with contractor management and assessing our resources including labor and mobile equipment. Magnum’s management team was also able to perform an analysis of general business functions with respect to processes, business routines and reporting structures.

Many initiatives commenced immediately in March towards improving the functions of the business including improving overall culture and ensuring goals and key performance indicators were identified, communicated to the workforce and are being used to improve day to day operations. I would now like to hand over to our Chief Financial Officer, Scott Gilbert for the financial highlights of the quarter.

Scott Gilbert, Chief Financial Officer, Magna Mining: Thanks, Jeff. In accordance with the acquisition method of accounting, the acquisition cost of the KGHM assets was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The preliminary purchase price allocation resulted in a bargain purchase gain of $36,600,000 The allocation is preliminary and the fair values are subject to change as there has not been sufficient time to complete the valuation process. Evaluation work must be finalized within twelve months following the acquisition date. Mineral properties, plant and equipment, exploration and evaluation assets, reclamation obligations, deferred revenue and deferred taxes are all subject to change.

Any adjustments made will be recognized retrospectively and comparative information will be revised. The mine generated CAD0.3 million in cash margin during the month of March 2025 with cash costs of CAD5.98 per pound or CAD4.16 dollars All in sustaining costs of US6.65 dollars per pound or US4.63 dollars For Q1 twenty twenty five, the company had operating cash flow cash outflow of US2.6 million and free cash outflow of CAD10.9 million. Our cash balance at 03/31/2025 was CAD38.3 million. The company raised CAD33.5 million of proceeds to the private placement which closed on 03/05/2025 which included $23,500,000 from convertible debentures and $10,000,000 from equity. In connection with the acquisition of the KGHM assets, the company entered into a letter of credit facility with Federation de Caste Desjardins to Quebec pursuant to which the company can obtain letters of credit having an aggregate maximum face amount of CAD12 million.

At 03/31/2025, the company had drawn down CAD10.3 million under the LC facility. On 03/31/2025, PNCI, the subsidiary of the company entered into a factoring agreement with Desjardins. The aggregate amount factored under the agreement at any one time is limited to $24,000,000 At 03/31/2025, the company has not factored any of the receivables. I will now hand the call back to Jason for some final comments on the quarter.

Jason Jessup, CEO, Magna Mining: Thanks, Scott. I’ll now give a brief overview of current activities at McCree West, Lavac and Crane Hill followed by a question and answer session and then closing remarks. So at our McCree West mine, we’re focused on optimizing the current operation and the key to this optimization is increased underground development footage and sustaining capital investment at the mine. The previous owner of this mine did not view McCree West as a core asset, therefore it did not receive the capital and attention that we believe it deserved. I believe that we have the operations leadership, the mining and maintenance talent and the technical expertise to unlock the potential in this mine.

The rest of this year will be focused on underground mine development for long term sustainability and providing access to the unmined western extension of the 700. Diamond drilling at Macready West in Q1 focused on production support, primarily in the 1010 and the eleven fifty levels of the 700 Copper Zone. 2 drill rigs are active in the area, defining remnant mineralization adjacent to historical stoping, which will support detailed mine planning. As development progresses this year, it will provide new diamond drill platforms to drill holes outside of existing resources. I would expect that the first results from this drilling will be reported in Q4 of this year.

The Lovac mine was operated by KGHM International until 2019 and is currently under care and maintenance. There are two surface diamond drill rigs active at Lavac and a third drill was mobilized to site in late April. The 2025 drilling program at Lavac is designed to support Magna’s internal Lavac mine restart study and exploration for new footwall and contact style deposits. Since the March, drilling at Lavac has been targeting the near surface Keel footwall copper zone and deep footwall copper targets in previously underexplored areas of the Lavac mine. The drilling done in the Keel zone has provided Magna with more certainty in the orientation of the vein trend and provided fresh core which can be used for metallurgical testing as required.

We are now able to move away from the known steel zone mineralization and begin expansion drilling with the goal of growing the resource closer to surface and to the east towards the main ore body. Now moving on to Crane Hill. In Q1 of twenty twenty five, we continue to advance engineering and technical work at our Crane Hill project. The second half of twenty twenty five will be moving forward with power engineering, further commercial discussions and water pretreatment design and installation activities as we continue to advance that project. I will now open up the line for questions.

Conference Operator: We will now begin the question and answer session. The first question today comes from Brandon Gaspar with SCP Resource Finance. Please go ahead.

Brandon Gaspar, Analyst, SCP Resource Finance: Hi, gents. Good update here today. I was just wondering about maybe a little bit more detail on the initiatives that you guys have initiated since taking over the asset in terms of development rates and costs or throughput. So maybe you could just touch on that sort of what were they doing before when KGHM was operating it and how you guys improved it already?

Jeff Huffman, Chief Operating Officer, Magna Mining: Jeff, you want to take that one? Yes, absolutely. Brandon, thanks for the question. Great question. As Jason said, development has really been the focus as far as key performance indicators and just understanding resources.

So from a labor perspective, the mine operated up until we took over in March on a shift schedule that only allowed 12 out of 14 shifts to be manned up at the mine. So nobody was working within the underground McCready West operation on Saturday nights and Sunday nights. So we moved to maximized just coverage there by changing the shift schedule immediately. So due to the fact we’re in a unionized environment, we did have some dealings with workforce in the union to make sure that that was a smooth transition which happens in April. In order to do that as well we started to recruit to fill more positions as we spread those shift schedules out across a complete sort of 20 fourseven coverage.

So lots going on with respect to the labor workforce with equipment as well doing an analysis essentially of what we had for development and production gear. A lot of the equipment is quite aged. So we’ve moved on our fleet management strategy. We received well, in March, would say we moved to understanding the fleet management strategy and putting that strategy together and we will begin to execute that in Q2 with some new equipment coming into the mine. As far as output, as Jason alluded to, this was a non core asset, not a whole lot of development being put into the operation historically.

So we moved to increase I believe we started development on March 7. We increased immediately by 10% to 15% on just average daily output and continue will continue into Q4 to increase that. So lots of initiatives going that’s just specifically in development, general business, essentially every department Brandon, we’ve got working on business improvement initiatives, lots identified and yes, lots going on.

Brandon Gaspar, Analyst, SCP Resource Finance: Excellent. Thanks for that. Could I what sort of what does steady state sort of look like for you guys by the end of the year in terms of throughput? The implied tonnes per day by this one month obviously isn’t that 600, seven hundred tonnes per day for the quarter that was when you guys took it over. Is steady states where the second half year is still in that sort of above 1,000 targeted?

Jeff Huffman, Chief Operating Officer, Magna Mining: Yes. Mean, yes, Jason, I’ll just maybe put it across the I’m not 100% sure how forward looking we want to discuss on this call. Sure.

Jason Jessup, CEO, Magna Mining: Yes. And that was going to be part of my answer. We still see a great potential in increasing throughput, but we also recognize there is a very big importance on quality. And so it’s a balance between getting the overall tonnage to the optimal level where we can maximize revenues and really maximize profits. And that comes down to both grade and tonnes.

So to answer your question, I do believe we’re on track to produce an average of more than 1,000 tonnes per day. But what that final number looks like, it’s really going to depend on the grade and we still have more work to do in diamond drilling on that and this will be a continual optimization out to the end of the year.

Brandon Gaspar, Analyst, SCP Resource Finance: Understood. And my last question is just about the exploration that you have planned. Is there plans to do a resource update after all this drilling is done and sort of when would you look to do that?

Jason Jessup, CEO, Magna Mining: At this time, I can’t give firm guidance on when we will put out another resource update at the Macrady West mine. We will be looking at that in Q4. And our ambition, our hope is to be in a position where we’ll be able to give some guidance and perhaps an updated resource in Q1 of twenty twenty six. But at this time, that’s not certain. It could be later.

Brandon Gaspar, Analyst, SCP Resource Finance: Okay. Thanks guys. I’ll leave the questions to everyone else.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Jason Jessup for any closing remarks.

Jason Jessup, CEO, Magna Mining: Thank you. Again, Q1 was a transformative quarter for our company and we continue to execute on our strategy for growth around three pillars: production, exploration and acquisitions of non core assets. We are planning on providing some guidance as to the production and costs for the second half of the year sometime in early Q3. We’ll be continuing our exploration and infill drilling for the rest of the year and we’ll provide results on a regular basis. We’re also expecting to close the previously announced property acquisition from Northex, which will grow our exploration property portfolio in Sudbury quite substantially.

We’ve uplifted recently to the OTCQB from the OTCQB to the OTCQX and plan to uplift to the TSX from the TSX Venture later this year. I believe that over the next two quarters, we will begin to demonstrate the impact of the changes and optimization initiatives we are currently undertaking at McCree West, and this will set up Magna Mining for a strong 2026. Thank you very much.

Conference Operator: This brings to a close today’s conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.

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