Fortitude Gold Corporation
Q1 2024 Earnings Call Transcript

Published: 8 May 2024

[Operator:]

Good morning, everyone, and welcome to the Fortitude Gold 2024 First Quarter Conference Call. [Operator Instructions]. We will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, President and CEO, Jason Reid. Sir, the floor is yours.

[Jason Reid:]

Thank you. Good morning, everyone, and thank you for joining Fortitude Gold Corp's 2024 Q1 conference call. Following my comments and associated presentation for those who joined online, we will have a brief question-and-answer period. And joining me on the call today for the Q&A portion will be Mr. John Labate, 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, May 8, 2024, 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 in our Form 10-K filed with the SEC for the year ended December 31, 2023. The first quarter of 2024 was successful on numerous fronts despite the ongoing permit delays and approval to mine the high-grade gold deeper in the Isabella Pearl pit. We had $8.2 million net sales, 3,983 gold ounces produced, $2.9 million paid to shareholders in cash dividends, $4.2 million mine gross profit, $661 total cash cost, $777 all-in sustaining cash cost, $3.6 million exploration expenditures and a strong cash balance of $41.9 million. We continue to work with the permit agencies on numerous permits with a focus on the Isabella Pearl D permit and County Line permit to begin construction. We have permits submittals ready to turn in once others are received like the Isabella Pearl mine plan boundary expansion to encompass the Scarlet target, looks to be growing toward a potential second open pit mine on the Isabella Pearl trend. We plan to submit that expansion permit as soon as we receive the IPD approval. The agencies continue to be understaffed and overworked, but we are seeing positive movement, albeit slower than we would have liked. During the quarter, we aggressively explored our properties and had as many as 6 drills operating focused on our County land project, the Isabella Pearl Scarlet target and East Camp Douglas. We intercepted from surface 90 speed grading 1.49 grams per tonne at East Camp Douglas North Veins as well as 5 feet grading over 1 ounce per ton at the same target area. Our Southern lithocap target at East Camp Douglas returned 40 feet grading 2.9 grams per tonne gold, where we believe we may have discovered our first feeder zone into the lithocap. We also released successful drill results from our Isabella Pearl Scarlet North target, where we drilled 70 feet of 1.14 grams per tonne gold from surface. The Scarlett North target just 700 meters away from the processing facility has great potential to become an additional open pit on the larger Isabella Pearl property. Subsequent to quarter end, we also released exciting drill results from the County Line property, including 16.76 meters grading 2.19 grams per tonne gold, 7.62 meters grading 1.28 grams per tonne gold and 6.1 meters grading 1.49 grams per tonne gold. We see strong potential to continue to add gold ounces to County Lines mineral resource. Overall, we feel very fortunate to have acquired these exceptional land portfolio of 8 gold properties. We own 100% in Nevada, now encompassing over 40,000 acres. Early in 2024, we announced the acquisition of 2 additional gold properties along the Walker Lane mineral belt, the Dauntless and the Intrepid properties. Our initial drill programs have made a gold discovery at Intrepid, and we are excited to share those results in a press release soon. We have also recently commenced our first drill program at our Dallas property. Before we turn the call over to any potential questions, I would like to thank John Labate for his service the past 3 years as Fortitude Gold's Chief Financial Officer. John's last day with the company will be June 1, after which he will be focusing on retirement. I have the pleasure of working with John at a prior company and felt very fortunate to pull him out of retirement to join us at Fortitude Gold. John has done an incredible job over these past years and has been a positive asset to this company. We wish him all the best in retirement. I would also like to congratulate Janet Turner on her promotion to Chief Financial Officer of Fortitude Gold. I've also had the pleasure of working with Janet for several years, and I look forward to working with her in her new role as Fortitude Gold's CFO. With that, I would like to thank everyone for their time today on this conference call. And operator, if you can please open up the lines for a possible Q&A. And after you announce how they do that. I do have some written Q&A I will get to

[Operator:]

Certainly. [Operator Instructions].

[Jason Reid:]

So as we wait for any call in, I have several right in e-mail questions. So the first one is from Ray Leev. Are other companies getting permits approved in Nevada. What is the recent average wait time? Right I don't know that there's an average wait time, but I do know that we are not alone in our trials and tribulations on waiting for permits. I will tell you that someone an associate sent me an e-mail this morning pointing out that a company, after 3 years has finally gotten their EA for exploration permit, which is a lengthy time to get an exploration permit. But I guess the long and short of it, Ray is I don't have any average wait times. I think what the industry is feeling with these long delays, if you will, with permitting is a function that as I speak to you today, both the Bureau of Land Management and the Nevada Department of Environmental Protection are both operating at about 50% staff levels. And so, even if they were at 100% staff level, the permitting process can sometimes be long and arduous, but at 50% staff levels, I think we're seeing the ramifications of that. Quite frustrating when I watch this administration and billions of dollars overseas, yet won't focus on our own country in this regard. The second part of your question, Ray is, will there be a new resource estimate for Golden Mile and when? Possibly, Ray, what we've been doing at Golden Mile is we always knew there were these vertical mineralized structures. But then we realized that there's also some horizontal structure. So we've been working really hard to understand the structures. And so, it is possible that we do an update, but that's been our primary focus is just trying to understand the structural controls of that deposit. Another question you have, Ray, is East Camp Douglas a candidate for trucking concentrate to IP plant. As far as trucking anything out of East Camp Douglas, it is possible to potentially truck ore or we could potentially truck gold-infused carbon. What we're seeing, and we're doing a battery attests right now -- we don't have all the results back, but we're seeing a lot of East Camp Douglas have oxide material. There is some sulfide and there's some transitional. So I guess on the oxide piece of portions, we could potentially truck, depending on the grade, truck the ore down the mountain to develop pearls processing facility or we could build a facility Adis camp and then take a process gold to infuse carbon and truck the carbon like we plan to do it, Golden Mile.So we're unsure yet. But I think it's very positive that we have high-grade oxide up there. Okay. And then you have an additional question by Ray Leev, how much gold remains on the IP heap leach? Is probably close to what we had announced earlier. We added some. We subtracted some. I think it's around 48,000, 49,000 ounces. John will correct me if I'm wrong on that. But that's more or less where we stand today. Another question by Phil Dinsmore, -- at what point, assuming no new permits until late 2024, maybe 2025, do you change dividend rate? Yes, Phil, that's a great question. We're just going to have to wait and see. I don't have a crystal ball on all the -- what the future is going to hold. But at this point in time, with our strong cash balance, we fully intend to continue the dividend throughout the year. If we get to the end of the year and it's looking like the permits are a long way off, yes, we'll have to address that. And what I'm hoping, Phil, is that we get to the end of the year and we see a brighter future with a new a new president and one that is going to be more open to business here in this country. And if that's the case, I think permits will start dropping in like they used to under the previous administration much faster and like they were before. And yes, then we'll continue on. But if this administration gets in another 4 years and we delay the delay our permits for 4 years, yes, the dividend will change. But I don't have a crystal ball. Another question from Steve Banker, frustrated by the share price as I am sure you are, is this a permitting problem? Or has the market miscalculated the underlying earnings power of the enterprise. Steve, thanks for the question. In my opinion, this is completely a permit issue. Had we received the permits in a timely manner like we had previously under the previous administration for several years, we would be building County Line as we speak. We would be mining deeper at our Isabella Pearl high grade as we speak. This administration is dragging their feet on permits for miners, has caused the delays. And I think that ultimately has led to the share price being weighed on. So, again, if those permits have dropped in, we would be executing on our business plan. And we can only do what we can only focus on what we can control, right? And so we've shown with this company when we received the permits in a timely manner, we execute on the business plan. And I would say we would continue to do that as long as we get our permits in a timely manner. So as far as miscalculating or calculating the underlying earnings power of this enterprise, our business plan of producing high-grade low-cost ounces with a tight capital structure to pay a substantial dividend for 3 years running out ran our peers. So I think we have earnings power that's tremendous as long as we have the ability to build mines. So no, I don't think it has anything to do with the market miscalculating anything other than the market is scratching their head as we are wondering why these permits are taking so long. Operator, our -- do we have any calling questions?

[Operator:]

There are no questions in the queue at this time. [Operator Instructions].

[Jason Reid:]

Once again, everyone on your phone. Okay. We had a couple of more write-in questions here. Ariel Dickens, -- what is going on with the recoverable gold that is on the margins of the heap leach I remember hearing that there was a significant unleached goal still residing there or am I wrong? Ariel, no, you are right. You are correct. We have put a couple of cells of the margins of the heap under leach. We have a long way to go before we leach even 1/4 of them or half of them or all of them for that matter. But right now, we continue to mine from Civit Cat and we're continuing to leach from gold that's on the heap, and we are also starting and have been doing first bid starting to leach those sides of the heap leach pad. So that is going on as we speak. Another question from Henry Iosky. I apologize if I pronounced your last name incorrectly. Is there anything that shareholders can do with respect to their elected officials to facilitate the processing of permits Wow, Henry, [indiscernible] up for me. If you're voting for this administration, you're shooting your investment in the foot. I've said that before, I'll say it now, and I'll say it in the future. I just do not see any rational way and somebody can justify voting for this administration and then putting their money in resource companies when they struggle to get permits under this administration. So, yes, anything you can do, pay attention now you vote because it really does matter. I think -- let's see, another question came in from Ray Leev. has the majority of the overburden been removed from Civit Cat. We're mining through Civit Cat and there was a small resource and the initial resource over there, Ray. But we also intercepted some mineral outside of that resource. So we're looking to see if it's economic to chase. But no, we're still mining at the Civit Cat. So my answer to that is the overburden hasn't been completely removed because we're mining overburden mining waste and ore over there as we speak. Okay. I'm not seeing any additional questions. And if we don't have any phone questions, operator, let's confirm that.

[Operator:]

Absolutely. Your first question is coming from Stephen Mogan.

[Stephen Mogan:]

Jason, tell me, if theoretically, you started mining without the permit, what could possibly happen to the company.

[Jason Reid:]

We would get shut down in a heartbeat. And we would never do that.

[Stephen Mogan:]

Wouldn't you be able to litigate that in the court system and tie it up for many years?

[Jason Reid:]

We would be tied up for many years, but they would shut us down in a heartbeat. I would never do that. Everything I would ever want to do is to be legal and on site with the permitting agents.

[Stephen Mogan:]

I understand all that, but they're jeopardizing your business, it's like they're shutting you down, in other words, for no reason at all and not getting the staffing in there that they need or speeding up the process. I mean all you have is what's in the leach pad, and that's not going to last long.

[Jason Reid:]

Yes. Well, again, what we are focused on is what we can control. So what we do have is the ability to drill on several of our properties, and we've been doing that and getting excellent results. And so, whether it's adding ounces over a county line, whether it's discovering this new discovery, we just hit over it Intrepid, whether it's continuing to hit gold over Golden Mile -- East Camp Douglas excuse me. All that is exciting for our future. The regulators are not giving us any indication that we're not going to get the permit, Stephen. So it's not a situation where they're, I believe, saying, hey, we haven't heard anything saying you're not going to get them. They are so understaffed. And I have to imagine we're kind of a smaller fish when you look at the new [indiscernible] and the bigger companies that operate in Nevada, I have to imagine they get more attention than we do, but even other large companies we've heard of are struggling to get permits. We're going to get them at this point. It's just a matter of when. So we'll just weather through this. I cannot imagine they're going to stonewall everybody into oblivian, Stephen. They might. But I just -- I don't think that's going to happen.

[Stephen Mogan:]

Yes. But here's -- excuse me, here's my concern you had mentioned more or less that one of your associates had called and you spoke with him, and he said that he finally got another some sort of permit after 3 years. That's my [indiscernible] fear in other words, going forward, could you wait 3 years, a year or 1.5 years for permits?

[Jason Reid:]

Well, Stephen, that's what's weighing on our stock is our business plan had always relied on permits dropping in, in a relatively ordinary fashion. And under the previous administration, they did and we executed, and we all, as shareholders enjoyed the outcome of that. Under this administration, everything has changed, and permits are are a struggle, and they don't want to staff the BLM. That is by design. I truly believe. Why not take one of these billions that they're just throwing overseas and put it to this country, fully staffed and then we'd be off and running. They could choose to do that, they're not. So this is by design. But that's what's weighing on the stock. Now, having said all that, we have, fortunately, a lot of ounces on the heap leach pad, and we're going to be producing for years even if we didn't mine for a couple of years, so

[Stephen Mogan:]

You are not going to be producing much, but you're going to get a 4,000, 5,000 ounces a year? I mean it's not...

[Jason Reid:]

So no, good question, Steve or good point, Stephen. But look what we did last quarter. We didn't -- we did just shy of 4,000 and yet the mine made $4 million. So that's not an ideal situation, but look at what we did. And in doing that, we had 6 drills turning and we had tremendous exploration. So as the year goes by, we'll cut back on our exploration as far as costly drilling to manage our cash better. But look, Stephen, I fully expect -- we fully expect to weather this storm. And I keep my fingers crossed that we'll be dealing with a different administration, which the previous administration, they were looking to streamline. They were trying to move towards streamlining, truly streamlining the permitting process. So while I understand and hear your frustration, Stephen, we're going to be around for several years, -- and if all we can produce is 4,000, 5,000 a month like we've been doing, look what we just did, it's not the worst case in the world to weather this storm. If this current administration gets in for another 4 years, it's going to be a much tougher goal, but can I hear you, but coming back to what you originally said, we would never go just mine it. That would be the quickest way they would come shut us down, and then we wouldn't want to get in a suit with no production. And assuming the government that, to me, is never a good path forward. So well, again, Stephen, I share your frustration.

[Stephen Mogan:]

Just my thinking process is more or less you say in other words, not being able to mine without the permit. I understand that you want to do everything in a legitimate legal way. But -- what do they have scouts that they sent out to your Isabella Pearl mine and see if you're digging deeper than what you're supposed to -- how do they find that out? How does anybody ever find that out if a mind.

[Jason Reid:]

No, they make site visits on a regular basis. There's so many regulators that make site visits different factions, different whether it's imshaw, whether it's the BLM and EP, they wouldn't know

[Stephen Mogan:]

So they have resources to send out scouts, but they don't have enough resources to give you your permits. It makes no sense.

[Jason Reid:]

Well, it makes sense under this administration, Stephen. This administration is very anti-mining and has been from day 1. The day that this President got in office that very day, he put a stop on all permits, whether it's in wood, oil, gas, mining, whatever for 90 days saying nobody getting their permits. That was a shot across the bow. So, again, anybody who fills in the little dot under their ballot for this administration is voting against this company and any other resource company for that matter. So that's what you can do. Yes, get the word out to associates who may be considering voting for this administration. And if they do that, it's going to hurt our -- the is going to make my life tougher. I believe we'll still weather the storm, but it's just going to be much tougher.

[Stephen Mogan:]

And there's absolutely no idea on your part, when these permits could drop. You have not even a clot. You don't have an insider that you talked to over there at the BLM and the [indiscernible].

[Jason Reid:]

Yes, we talk to them all the time. My for instance, to mine deeper in the pit, should have taken 90 days. It's not a major modification. The pit boundary didn't get wider. We're only going deeper. We're not getting into any water. So it really was a routine expansion, if you will. And whether it's turnover in staff that the new lead needs to get up to speed and then they leave and then the new lead needs to get up to speed or them changing course and saying, okay, now we want to do this or add it to this permit. I mean there's always something. And so we just continue to work with them. We offer to help. We offer to actually higher at our cost somebody to work in their office. And the red tape around that is astounding. It just shows me how inefficient governments are. We are asking to help staff them. And they still -- it's unbelievable, really. I'd be jumping at that, right? But they haven't taken us up on it yet. So we're doing everything we can. Yes, go ahead. Do you have the question?

[Stephen Mogan:]

Yes. Basically, in other words, what you just told me, in other words, to me, if I spoke to an individual and gave them the information you just gave them. It's a 5-minute decision process. It's not rocket science.

[Jason Reid:]

Well, we've turned in -- there's a routine -- it happens about every 3 years or 5 years, a routine permit update, you have to do. You have to go through. We turned that in and they didn't look at it for a whole year. I mean that's the kind of delays that's happening. Again, they're understaffed. I'm not taking shots at the individuals at the -- either the -- their hardworking people, arguably overworked and probably underpaid. But it's pretty tough when you're working at 50% staff levels. So, yes, if we have administration that actually instead of gave away so much of our money and deployed it to this country, we could staff and we would be off and running, but yes -- Steven, I appreciate your comments, but we will never do anything that wouldn't be on site with the regulators. It's just not something that we would ever do.

[Stephen Mogan:]

That's not what I said. listen, don't get me wrong. I wouldn't want you to. I just said hypothetically, theoretical. In other words, what were not I'm just trying to understand that whole process and understand why it's taking so long. I mean I was on your last conference call. And it sound like within a couple of weeks, you were going to have those permits dropped.

[Jason Reid:]

Sometimes they say things that let us believe that and then they'll change course. And so you're not hearing me say that in this call. You're not hearing me say that anymore. I'm not quantificating that I'm not quantificating on any time frame. I've been led to believe it's going to drop in any day, and then it doesn't. So we're just going to dial back our optimism. It's going to -- they're going to drop in. I just don't know the timing, and that's where we land. But I cannot emphasize enough what has changed? The previous administration, we got our permits in a timely manner we executed on our business plan. We have mines to build. We have the ability to build them. We have the team and the money. What has changed? This administration?"That's what's changed. It's simple. Stephen, that simple.

[Stephen Mogan:]

I have to wait for Trump to get in. In other words, for everything to start moving along on your end. Another question, otherwise, I know you have $41 million in cash. You're going to reduce in other words, your regulation going forward. What level would that cash need to drop to before you do something with the dividend?

[Jason Reid:]

Yes. I don't know, Stephen. It really depends trying to look out in front. And we get to the end of the year. And if we don't have permits, it's going to be decision time on what we can do and where we stand. And you will see us over time throughout the year, the longer this takes, the more we'll dial back our exploration, which is unfortunate. And as much as we're [indiscernible] and his team are knocking it out of the park. I mean we're hitting gold, almost everywhere is drilling. So it would be great to continue that on. But under these permit delays, we're going to have to dial that back. So we'll just have to wait and see, but we're in a very strong position. And again, while it's not ideal cash flow, we produced just shy of 4,000 ounces and the mine made $4 million. So that -- we will be producing gold for quite some time. We have a lot of gold on the heap and we'll keep doing this. But we'll just be managing cash, and we'll make those decisions when we get down to it. But let's hope we're not waiting to the end of the year for permanent to drop in.

[Stephen Mogan:]

I hope so. I hope that things change for the company and those going forward because it's very annoying in other words, as a shareholder in towards to sit and wait, in other words, for something like that, in other words, to happen when it seems like it's such a simple easy process to

[Jason Reid:]

It is. Stephen, it is, again, it matters how you vote. It's as simple as that. And yes, I don't know else to say about that. We lived it with a different administration that was pro mining. And now, we live under one anti -- so it matters how you both

[Stephen Mogan:]

Well, I voted for Trump. When he got an office going back a number of years ago and all vom again. That's one vote.

[Jason Reid:]

Okay. Well, thanks, Steven. I appreciate the call.

[Stephen Mogan:]

Thank you, Jason. Have a good day.

[Operator:]

There are no further questions in the queue.

[Jason Reid:]

Perfect. All right. Matthew, thank you for helping us on our conference call today. And thank you, everybody, for listening. We appreciate it. We look forward to updating you next quarter. Thanks for joining the conference call.

[Operator:]

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.