Artemis Gold (TSXV:ARTG) Q3 2026 Earnings Call

0:00 and Gerrie van der Westhuizen on. Thank you for signing by. This is the conference operator. Welcome to the Artemis Gold Third Quarter 2026 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad.

0:47 Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to Meg Brown, Vice President, Investor Relations. Please go ahead.

1:01 Thank you, operator. Good morning, everyone, and welcome. Thank you for joining our Q3 earnings conference call and webcast. Before we begin, I would like to remind everyone that certain statements made on today's call may be forward-looking, and we encourage you to refer to our public filings and disclosures, including the cautionary language in yesterday's news release, for a more detailed discussion of potential risks and uncertainties related to these statements. I will now hand the call over to Artemis Gold's CEO, Dale Andres. Over to you, Dale.

1:33 Thanks, Meg, and thank you all for taking the time to join the call. In addition to myself on the call today, we do have our president, Jeremy Langford, who's calling in, so there may be some delay in answering questions when we get to that, and our CFO, Erik Marchand, our chief business development officer, Tony Scott, and our Chief Sustainability, External Relations and Governance Officer, Candice Alderson. I'll take you through the highlights of the quarter and then turn it over to Jeremy to review the growth projects and then over to Erik to review the financials before we open the call for questions. On slide four, Q3 was a solid quarter on many fronts.

2:19 We produced almost 70,000 ounces of gold in the quarter, and are well positioned to achieve our full year guidance. We do remain one of the lowest cost gold mines with all unsustaining costs of $1,048 per ounce of gold in the third quarter. Phase 1A is now 77% complete and on track for tie-in and commissioning by the end of the year. And that, again, just as a reminder, will add 33% capacity to our processing plant. EP2 is also progressing well and continues to be on track for completion in the second half of 2028. Major Works construction began in August of this year ahead of schedule and Jeremy will give an update on the status of both 1A and EP2 a little later in the presentation.

3:11 During the quarter we announced an agreement to acquire Vista Gold. Adding an advanced stage gold development asset of scale in the favorable mining jurisdiction of the Northern Territory in Australia. On slide five, this shows our operating highlights for the quarter. Production, as I said, of close to 70,000 ounces of gold takes us over 205,000 ounces year to date. We achieved higher mill throughput compared to the first half with close to 1.5 million tons of ore through the plant. De-bottlenecking and improvement projects are continuing, including rectification of deficient contractor work on tanks in the leach circuit, which is scheduled to be complete at the same time as the Phase 1A commissioning.

4:03 Grades remain strong in the quarter, averaging 1.55 gram per ton. and recoveries were close to 90%. And proud to say all of this was achieved with a record now 8.9 million hours worked without a lost time incident. Slide six shows a recent drone photo of the open pit. And we recently had a visit with analysts and other investors and I said at that visit, how it looks is how it operates and it looks great. Additional mining equipment has arrived and is in service to support higher mining and processing rates with a new shovel and five new haul trucks added during the quarter.

4:51 We're also transitioning to self-perform on our production drilling and blasting and that's in progress and going well. We have worked hard to de-bottleneck and improve the performance of the existing crushing, grinding and leach circuits in anticipation of Phase 1a coming on stream, and the results are now showing. The crushing circuit is proven at the 8 million ton per annum rate needed for Phase 1a, and we are seeing improved plant availability and reliability as we continue to work through various mechanical and structural and process upgrades. I will now turn the call over to Jeremy to take us through the Phase 1a and EP2 growth project updates.

5:38 Over to you, Jeremy.

5:40 Thanks, Dale, and good morning, everyone. As we finish the third quarter, Phase 1 was effectively 80% complete and is on schedule for commissioning as planned. To date, we've completed a number of important construction milestones as we move towards completion. As you can see in the photo, the VertiMIL building is nearing completion. The new pre-aeration and leach tanks are complete and the shear reactor pump house and the shear reactors have been installed. The electrical cabling and piping installation across the 1A expansion scope is very well advanced and the new cyclone cluster, which ties in the new VertiMIL, will be installed during the upcoming Q4 plan shutdown. 33% Increase in plant throughput is expected to translate into significantly higher gold production in 2027.

6:33 That will issue guidance in early January on both production and cost for 2027. We can move now to slide 8 and EP2. EP2 represents a 13 million tonne per year increase over and above the 8 million tonne per year 1A processing plant capacity. and is expected to increase the overall asset throughput to 21 million tonnes per year by the second half of 2028. As a reminder, EP2 increases gold production to north of 500,000 ounces a year, which provides Blackwater with economies of scale that positively benefits unit operating costs. Clearly, this cements Blackwater and its position as one of the lowest cost and highest margin gold operations globally.

7:23 Key milestones for EP2 development include early works construction which is complete and includes the addition of a new 612 bed construction camp which provides additional accommodation capacity to support the growing construction workforce. Plant bulk earthworks are well advanced and the sag and ball mill raft foundations are complete. Additionally the first lift of the ball mill pedestals have been poured and the SAG mill pedestal first lift was ready to pour in the last days of October. The leach and CIP ring beam civil works are generally progressing well and all long lead equipment has been ordered. Importantly, this includes the SAG and the ball mill.

8:08 Over to slide nine now, please. And you'll see by the recent drone shot illustrations, which includes the EPT footprint on the left and shows the ball and SAG mill foundations underway. and the dark circle-shaped tank ringbeams coming out of the ground. On the right of the screen also, a close-up shot of the SAG and ball mill foundations. As we turn to slide 10, we've provided a couple more photos, including the leach tank ringbeam foundations on the left and another recent drone shot on the right-hand side of the presentation showing outline of the plan view of Blackwater EP2's impressive footprint. One thing I'd like to point out two in addition to everyone for everyone is that recently we've created an image gallery on our website showing EP2 construction progress and I encourage you all to have a look and I can share the ride with us as our EP2 project advances.

9:06 To date I can say that although still early on in the project timeline EP2 is progressing very well. The project remains on budget an estimated capital cost of 1.44 billion dollars and our 13 million tonnes per year processing increase is on track for plan completion in H2 2028. Now I have to hand over to Erik who will take you through our quarterly financials. Erik, over to you, mate.

9:35 Thanks, Jeremy. The third quarter delivered another set of strong financial results. We generated revenue of $357 million, adjusted net income of $158 million, adjusted EBITDA of $222 million and adjusted ETS of 66 cents per share on a diluted basis. Importantly, we continue to deliver strong cost performance with ASIC of US $1,048 per ounce for the quarter. Combined with strong production levels and favorable realized gold prices, this resulted in healthy ASIC margins and robust operating cash flows of $183 million in the quarter. We sold just over 67,000 ounces of gold during the quarter with the majority sold into the spot market at an average realized price of Canadian $6,021 per ounce.

10:28 The balance was delivered under our mandatory and discretionary hedge programs and Goldstream commitments. Notably, we completed the final deliveries under our discretionary hedge program during the quarter. We currently have 111,000 ounces remaining under our mandatory hedge program with these contracts maturing over the next eight quarters at a weighted average price of Canadian $2,834 per ounce. As a reminder, a detailed quarterly schedule of the remaining hedge deliveries is included in our MD&A. Total growth capital was $180 million in the quarter, bringing year-to-date spending to approximately $400 million. As planned, we expect capital spending to increase through the remainder of 2026 as major works on EP2 continues to ramp up.

11:20 I'll provide more detail on our capital spending outlook when we discuss our 2026 guidance in a few slides. Turning to the balance sheet, we closed the quarter with significant financial strength and flexibility. At quarter end, we had total available liquidity of approximately $891 million including 191 million of cash and the full $700 million available under a revolving credit facility. We remain in a strong financial position and have taken prudent steps to protect our balance sheet during EP2 construction. Our gold put option strategy, initially established in Q2, continues to provide downside gold price protection. Since last quarter, we expanded the program with an additional 49,500 ounces covering the majority of Q3 2027 spot sales at a strike price of $5,500 Canadian per ounce.

12:17 As of November 1st, we have put options covering 173,000 ounces of Gold with strike prices ranging from $5,300 to $5,500 Canadian per ounce and expiry dates extending from November 2026 through September 2027. Importantly, this strategy provides a floor on gold prices for the covered ounces while preserving our full exposure to higher gold prices. Overall, our balance sheet provides financial flexibility to advance our growth initiatives while maintaining substantial liquidity and continuing to return capital to shareholders. Following the payment of our inaugural quarterly dividend of $0.05 per share on September 9th, We announced our second quarterly dividend of $0.05 per share earlier this morning, payable on December 8 to shareholders of record as of November 17.

13:11 This reflects our confidence in the strength and sustainability of our operating cash flows and is consistent with the progressive dividend policy we introduced earlier this year. Looking ahead, we plan to increase our base quarterly dividend to $0.08 per share in 2027, representing an annualized dividend of $0.32 per share. Turning now to guidance, we are maintaining our previously announced annual production and ASIC guidance at Blackwater. I would also note that we expect full-year ASIC to come in at the very top of our guidance range, reflecting broader inflationary pressures, including higher diesel prices, which we are working to partially offset through improved operating efficiencies and cost management.

13:57 Regarding capital expenditures, as previously mentioned, Phase 1A and EP2 spending is expected to be heavily weighted to the back end of the year. So we are maintaining our full year of guidance, but we do expect growth capital to be at the low end of the guidance range based upon current timing of expenditures. With that, I'll turn the call back to Dale.

14:18 Thanks, Eric. Although we've put up this slide a few times now, it's worth showing again to highlight our industry-leading growth profile. The Phase 1A expansion is now just weeks away from commissioning and with the much larger EP2 project now less than two years away from being in production. Beyond EP2, we believe Blackwater offers tremendous potential and we continue to advance on all of these fronts. and finally, the addition of Mount Todd in Australia, which is expected to add a large scale long life gold project in a tier one jurisdiction. And importantly, this provides a pathway to being a one million ounce per year producer.

15:06 On slide 15, we are also working on multiple fronts, as I said, to demonstrate the full potential of Blackwater beyond phase 1A and EP2. We are working to extend the mine life and expect to provide an update to our resources and reserves in the first quarter of 2027 together with a new optimized mine plan and that will use higher metal price assumptions and will also integrate recent resource expansion drilling data alongside current grade control reconciliation results. During Q3, the Regional Exploration Drill Program followed up on anomalies identified in the previous Top Lake Program and initial past drilling on targets in the Van Tine and Johnny Lake areas.

15:57 And we do have follow-up drilling planned in Q4, particularly at Top Lake. Various studies are progressing on other growth options at Blackwater beyond EP2. and these options include de-bottlenecking both phase 1a and ep2 to achieve 25 million ton per annum and that's currently being studied along with the potential to further expand capacity with a new phase 3 in the future. While our priority remains the operation of the Blackwater mine and delivery of the phase 1a and ep2 expansion projects The acquisition of Mount Todd provides the company with greater optionality for continuing what I believe has been a remarkable growth trajectory and provides a pathway, as I said, to producing a million ounces of gold per year.

16:51 Mount Todd is a rare asset and we see similarities to Blackwater when we acquired it back in 2020. With over 10 million ounces of contained gold in mineral resources, it can be developed at meaningful scale and we feel we have the ideal team to do it. It's located in a stable mining friendly jurisdiction and it has been permitted previously for the scale of operation we are considering. The acquisition is expected to close in the first quarter and post-closing we intend to provide an update on the proposed development plan for Mount Todd. So to wrap up, I would like to highlight the solid results we achieved during the quarter, driven by strong grades, consistent recoveries and overall improved plant performance.

17:41 Our balance sheet is in excellent shape, supported by strong operating cash flow and protected with a prudent put option strategy, which provides downside protection during the high capital spend period without, and importantly, without giving away any upside. We are making excellent progress as you heard from Jeremy on both Phase 1A and EP2. And lastly and importantly, we have now graduated to being a dividend paying company with an announcement earlier this morning and with plans to progressively increase the return of capital to shareholders in the near term. This concludes our presentation and back over to you, operator, for the Q&A.

18:31 Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question comes from Harrison Reynolds with RBC. Please go ahead.

18:56 Hi, good morning Artemis team and congratulations on the good quarter and appreciate the project updates provided. Can you walk through the puts and takes and the cost structure through year end and heading into 2027? On the positive side, how meaningful is the throughput uplift from phase 1a going to be and what are you seeing from ongoing processing optimization work and is that enough to offset what we're seeing in terms of inflationary pressure?

19:25 Yeah, thanks, Harrison. I mean, we're experiencing general inflationary pressures like everyone else. I do think we have not just with, you know, Phase 1a heading into 2027. Obviously, that will help economies of scale. But we have other efficiency projects and optimization projects, as you commented on. including the tank upgrades. We're having a strong start to the fourth quarter and I think that you know it's expected to continue obviously into 2027 once we tie in and commission phase 1a. I would just like to highlight and we put it in our press release that the The plant will need to be shut down for just over a week in early December. We've currently scheduled that for December 1st, so the first week in December. And then the vertimil and the new cyclone and tanks will be commissioned, and those are expected to ramp up fairly quickly. So the real benefit of Phase 1a is not going to be in the fourth quarter.

20:41 Again, with the stability we're seeing in the current operation and the ramp up in the back half of December, we see a solid quarter in Q4 from a cost perspective, but the real benefit of Phase 1A comes in 2027. Got it.

20:59 Thanks. And looking at the Phase 2 expansion, good to see the progress and good to see it firsthand earlier this year. Can you provide an update on the critical path from here, you know, by year end 2028 and really what are the greatest schedule and cost risks the team sees and how are those going to be mitigated?

21:20 I'll just say, you know, I'm really happy with the start we've had to date and declaring major work since August, but over to you, Jeremy, on that one.

21:32 Yeah, thanks, Dale. Hi, Harrison. Look, the critical path has really been de-risked to quite some extent because we did procure quite early on in the program and during the early phase, the ball and sag mill had been delivered and all the long-life equipment's been ordered. We do have some synergies between 1A and the EP2 I feel pretty good with the procurement today. We continue to manage or monitor, and I think I've mentioned this before, the world drain on electrical infrastructure. Switch gears, switch rooms, transformers, which the other industries in the technology sector seem to be getting the lion's share of.

22:23 But we've ordered our stuff early enough to keep an eye on everything and mitigate accordingly. Cost pressures like Dale just mentioned before, you know, the oil price going up and the diesel costs do impact the project because we're on the mains power less than everybody else really and rely on diesel fuel, you know, for most of the activities. But we continue to manage that with shorter term interval control. and you know we're moving towards the winter months now so it's all about just keeping our short-term goals and milestones within reach and just taking those off as we complete 2026 and moving to 2027.

23:04 Great thank you yeah I appreciate all the detail Dale and Jeremy and thanks again and congratulations on the ongoing progress.

23:14 Thanks Harrison.

23:15 Cheers. Once again, if you have a question, please press star then one. The next question comes from Jeremy Hoy with Canna Continuity. Please go ahead.

23:28 Hi, Dale and team. Thanks for taking my question. First one is a follow-up to Harrison's on 2027 costs. With phase one, you mentioned it should be a very quick ramp to to the 8 million tonne per annum level. Do you expect to be at that level sustained at the start of 2027 or should we expect to see a bit of a ramp through Q1?

23:53 And Jeremy can speak to this on the VertiMill in particular, but we expect, you know, they're fairly simple tie-in. The biggest job we have for commissioning Phase 1a is the change out of the cyclone pack. and once that's done, the vertimals should be fairly quick to ramp up. So I do expect us to be at the 8 million tonne per annum rate starting in Q1. Is there going to be some potential commissioning in early January maybe, but it's not going to be material for the year in 2027. But Jeremy, I don't know if you want to add any colour to that.

24:38 Good morning Jeremy and thanks Tom. I'm in alignment with Dale here. Jeremy, it's generally, and I think you've heard me say this before, the diverting mill is pretty much a pump and a tank effectively and coupling those in with the current milling circuit and the one stage one plant is not overly complex. We certainly all understand that we will have to learn how to operate a bigger and a slightly newer plant, if that makes sense. So there's always those challenges that we face but our training and migration of things such as the control system and the new operating philosophy has been underway for quite some time. So we're de-reasing that as much as possible and we're entering the snowy months of the year and it's a little bit colder now so the behaviour of the asset changes a little bit from time to time and season to season.

25:34 and you know we're adding a new trick to it this year so I think we're doing the best we can and we'll keep you updated if we hear otherwise.

25:44 Okay, great. Thanks for the call or both. Jumping around a little bit, in the past you've discussed potential variable dividends or buybacks as well. Could you talk about what would trigger either and how you would balance shareholder reserves against EP2 and Mount Todd funding?

26:07 Yeah, I appreciate that, Jeremy. You know, I was really happy to be declaring our second base quarterly. I think we flagged, we intend to, and obviously this is subject to board approval, but we do intend to raise our base quarterly dividend to $0.08 a share per quarter in 2027. So that would be $0.32 on an annual basis. You know, we're just getting really started on the, you know, the bigger EP2 spend. So I don't want to comment on share buybacks. Obviously, it depends on gold price, which has been a bit volatile recently in 2027.

26:53 But as we head into 2028 and start to ramp up the EP2 project, Beyond the increased base dividend of 32 cents per year, I think there's going to be lots of capacity, obviously depending on gold price, but to consider both a variable dividend higher than the base, on top of the base, to consider potential share buybacks, and to advance, I would say, not just Mount Todd, but also further expansion projects at Blackwater. We're going to be a plus 500,000 ounce producer. We'll have had our hedges cleared by, you know, the third quarter of 2028.

27:44 And we'll be in a strong financial position, obviously, depending on gold price. So I think we can consider all of the above, Jeremy.

27:54 Okay, great. Thanks. Good to see gold price back above 4,000 today. The last one for me is on... The silver sales in Q3, all the sales went into the stream with those spot sales. Is silver being held in inventory or are the stream deliveries front loaded? Just wondering if you could provide some clarification on what to expect Q over Q in terms of those sales spot versus stream.

28:20 I'm going to hand that over to Erik to respond.

28:26 Jeremy, a lot of it has to do with the recovery of silver right now and just the overall production of gold. So we did amend the silver stream into fixed ratio, and it really just is a timing difference at this point that we expect to reverse in the future and kind of normalize into more of a 50% ratio.

28:47 Okay, great. Thanks for the color. That's all from me. I'll step back in the queue.

28:53 Thanks, Jeremy. This concludes the question and answer session. I would like to turn the conference back over to Dale Andres for any closing remarks. Please go ahead.

29:06 Thanks, operator, and thank you again to everyone who joined the call. Hopefully we answered all your questions. We are available for follow-up and look forward to updating you on our optimization and growth progress over the coming quarters. Thank you. This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.