TRX Gold Corporation (AMEX:TRX) Q3 2023 Earnings Call Transcript

TRX Gold Corporation (AMEX:TRX) Q3 2023 Earnings Call Transcript July 21, 2023

Operator: It’s now my pleasure to introduce Christina Lalli, Vice President, Investor Relations with TRX Gold. Christina, the floor is yours.

Christina Lalli: Thank you, Gaylene. Welcome, everyone, to the TRX Gold Corporation Third Quarter 2023 Financial Results Presentation. As a reminder, all participants are in a listen-only mode and the meeting is being recorded. After the presentation, there will be an opportunity to ask questions. If you wish to ask a question, please click the Q&A icon on the left-hand side of the screen. You will see the options, raise your hand to join queue and ask your question verbally, or write a question to submit your question in writing. When you are introduced, your line will automatically be unmuted. Analysts who have dialed into the conference call may press then one on your telephone keypad to join the question queue. I would like to turn the meeting over to Stephen Mullowney, CEO of TRX Gold.

Stephen Mullowney: Yes. Thank you, Christina for the introduction. My name is Steve Mullowney. I’m the CEO of TRX Gold, as mentioned by Christina, and we’re pleased to give you the Q3 2023 financial results as well as an update on operations at the Buckreef Gold project. Q3 was, I believe, our third quarter with the 1,000 tonne per day plant started in Q1 halfway through. And so we’ve been learning a lot throughout our operations throughout the year. And one of the biggest things in Q3 to come forward is the fact that we process sulphide ore, which was 6,500 tonnes of hard, fresh rock, went through the plant at a good recovery rate, which opens up to a much broader deposit to mining, and that will be now incorporated into our mine plants.

We’ve also upgraded the plant from our learnings from that. And recently, a cone crusher was installed as well as the conveyors and other parts of the crushing system got upgraded in order to accommodate that harder rock. So that’s a very, very exciting and extremely important value creation piece that occurred in Q3, and we’ll get into that in much more broader detail in the presentation. So I’m going to flip the slides here to the next slide. Obviously, I’ve got to say the cautionary note and forward-looking statements. You can find this note on our website, and we’ll just leave it at that and move forward. Today’s speakers will be myself, Andrew our COO, who is next to me, across from the table, Mike, who is also across from the table. Christina, who is sitting next to me.

For new people to the TRX, I know there’s a lot of shareholders on this call as well as analysts spoke for new people. What is TRX. We are a team of experienced leaders who have been executing on the Buckreef Gold project very rapidly. We’ve gone from zero ounces of production to an annual run of 25,000 ounces and growing very quickly. It’s a high-margin operation that has positive cash flow. And as we’ll get into further into presentation, the exploration upside is still here. There it is an underexplored property. There is still a lot of opportunity to increase minimum resources and mineable ounces here at Buckreef. Again, just at a very high level, around Buckreef Gold property, the last resource statement had two-plus million ounces and measured and indicated.

The resources come to surface. That’s where you see us mining in the oxides because it’s wide at 20 meters of width with consistent mineralization over two kilometers. We say easy metallurgy because it’s grind crush CIL and that is both in the oxides and has been proven out in the sulphide through the bulk sample. There’s a MET study be done for the broader deposit, particularly in deeper parts of the deposit with SGS in South Africa. We’re fully permitted to 2032, and that special mining license is renewable for the life of the mine of deposit. The processing plant and mine have consistently been meeting the production guidance that we’ve provided. We have a minimal environmental footprint. We recycle all water. We have good tailings management connected to National Power Grid, which is predominantly hydro power particularly with Julius Nyerere facility to come online.

And we have exploration potential and a lot of blue sky potential in this property over time. So with regards to the Q3 2023 highlights, the 1,000 tonne per day plant continues to run very efficiently. As a lot of the audience knows, there’s three main ball mills there, 15 tonnes per hour ball mills, it equals 1,000 tonnes per day, which gives us flexibility in our operations. We’ve poured over 15,000 ounces and sold over 16,000 ounces of gold, respectively, in the nine-month ended May 2023. We recorded positive operating cash flow that will continue to fund growth at both the operation and exploration levels. I believe, Mike, to Q3 2023 is almost $15 million of investment.

Michael Leonard: That’s right. Just under 50. Steven, correct.

Stephen Mullowney: Yes. And so we have strong profit margins of 42% and 49%, respectively. And in Q3, it was down a little bit given that the ounces weren’t as high given the wet season. So we expect that to pick up, particularly with gold prices being higher now as well. We continue to reinvest the cash flow as we mentioned. There is a new ball mill that will be upcoming to basically double the production rate, 75% to 100% of the production processing capacity. That mill is now shipped. Saw it on pictures of it on a truck last week, Andrew? Believe in China?

Andrew Cheatle: On the way to the port.

Stephen Mullowney: On the way to the port. So that – that’s the longest lead item and it’s well underway. We’re getting on top of other long lead items here now. We’ve successfully processed the sulphide bulk sample, which I mentioned at the beginning of this call is a game changer really from a planning and operational perspective. We continue to achieve positive near surface drill results at Anfield and Eastern Porphyry. We are now evaluating where best to go next in order to bring in mineable ounces and to increase the overall resources of the property. So in any exploration program, you have, what I’ll call, fits of starts and stops to reevaluate. We’re in that reevaluation phase now before we ramp it up again. We reported an all environmental or community related incidents during the nine months ended May 31 and continue to have a very strong social license in Tanzania.

So with that, I’m now going to hand it over to Mike, our CFO, who will go through our Q3 financial highlights.

Michael Leonard: Well, thank you, Stephen, and good morning, everybody. Thanks for joining us today. TRX continued to report strong financial results during the quarter, and this was off the back of again, lofty gold prices as well as production from the 1,000 tonne per day plant that Stephen touched on that continues to produce very, very efficiently and very, very effectively. During the quarter, we produced and sold approximately 4,800 ounces at a realized price of almost $1,960 an ounce. That’s up from Q2, where gold prices were trending around $1,850 an ounce. So we did benefit from an uptick this quarter, and we continue to see gold prices maintaining. In fact, this morning, it was somewhere around $1,975. So we continue to benefit from topline net revenues on gold price and production.

We recorded revenues of over $9 million for the quarter. And on a year-to-date basis, as you can see, almost $30 million of revenue. That generated operating cash flow of over $3 million for the quarter or almost $15 million year-to-date, as Stephen touched on. And again, we’ve substantially reinvested that operating cash flow right back into the business. Stephen touched on one example with the new ball mill that we’ve recently purchased. But we’ve also expanded our tailings storage facility, for example, quite significantly, which will accommodate much, much, much larger production. We relocated a road, which will allow us life a mine to a main zone unlock high-grade blocks. And we’ve also purchased other pieces of capital equipment. For example, new gensets, new generators this quarter…

Andrew Cheatle: [Indiscernible]

Michael Leonard: Yes, those will replace units that we had previously rented that we’re quite costly about a rental basis to impact our cash cost. So by purchasing pieces of capital equipment like that, end up benefiting longer term and the payback on those pieces of equipment is very, very, very short. So fair value increase. So the key takeaway, I would say, again, this is our philosophy and our model. We’re using organically generated cash flow to help grow the business by reinvesting right back into Buckreef. On the cash cost side, just previous slide, Steve, one or two more comments for the benefit of the audience. Cash costs for the quarter were just over $1,000 an ounce. I think at the mine sequence during the quarter had us undertake a stripping campaign, which we touched on in Q1 and Q2.

That stripping campaign involves sort of going wider and deeper in the pit as well as undertaking blasting activities, which unlock high-grade ore blocks, which we really expect to see benefit Q4’s production and certainly, production into early next year. And Stephen touched on this, but Q3 is the traditional rainy season in Tanzania, which was extraordinarily wet this year compared to prior years. So had a bit of a impact on head grade quarter-on-quarter. But again, on a cash cost basis, we still expect to fall within that $750 to $850 full-year guidance range that we put in at the start of the fiscal year, albeit towards the higher end of that. Importantly, being a low-cost operation, gross profit margins continue to be very, very high. You can see on a year-to-date basis, gross profits almost 50% and was 42% for the quarter.

What that shows is that the plant and the ore that we’re bringing out of the ground, again, it’s really, really efficient and effective and important – importantly, from a financial perspective, profitable. On a year-to-date basis, we produced over 16,000 ounces. Stephen touched on that. Again, revenues of almost $30 million. So year-on-year, quite a significant achievement as we continue to grow this business. And again, importantly, operating cash flow of around $15 million we put right back into the ground. Again, we’ve used cash flow from operations to make value-accretive investments back into the business. And you touched on a big one Steven with the new ball mill that we expect to be on the ground in the coming weeks. The balance sheet continues to be strong.

We had a cash balance of over $7 million on our at quarter end as well as lots of other pieces of liquidity that we can access working capital was positive at over $3 million EBITDA, over $3 million as well, again, all demonstrating strong liquidity, which helps fund organic growth. We do expect Q4 to be our strongest production quarter of the year, and we’ll touch on guidance here shortly, but we’re certainly on track to meeting our full year numbers and Steven touched down between 20,000 and 25,000 ounces. I think I’ll leave it there for now on the financial highlights. Back to you, Steve.

Stephen Mullowney: Yes. Thank you, Mike. So on the next slide, I’m going to hand it over to Andrew to go through the preliminary bulk sample that was done on sulphides, and I’ll supplement your comments, Andrew, around this. As I said, this is a game changer. What we found in that bulk sample is what we anticipated to find, which is the Buckreef ore is really about grind size at the end of the day. So the find you grind it, the higher the recovery rate of the goal that you’ll get. So when we grind it to 75% passing 80%, which we did in this bulk sample, we got what we expected, which was around 89% recovery rates. This lined up very well to what was achieved in the SGS preliminary MET study. When you really go through that study, we presented a number that was over 90%.

That was with a slightly different flow sheet of a flotation followed by a regrind and CIL. But if you just do a straight grinding and CIL, it came out to what we anticipated it to come out to if we grind to find and we get higher recovery rates. So it’s a trade-off between how much energy you use and the CapEx you put in to get a finer grid to get the higher driving size. So that will be trade-off studies that will be done in the future. But Andrew, go ahead.

Andrew Cheatle: Well, Stephen, you said also very well. But so perhaps I could just talk a little bit about that. Yes, we did take advantage of operational sequencing in the wet season to take that 6,000 tonne sulphide sample. But obviously delighted with the results, as you see, we’ve got recoveries here at 88.7% which is very much in line with the test work that SGS had done as in prior year. But what is also very important in that work is what we learned. What we learned is that we do have to particularly crush finer and has we’ve purchased the current crusher, which is on-site commissioned and is available for when we do a fresh or again. And the whole goal of that, as you said, is to get the better grind and throughput.

And what I’d like to see is you can sort of see up on the oxide ore going up – there is conveyor belts there, but it’s fresh rock, we want to see popcorn size rock going up into the ball mills. The hard work of grinding it down is then a lot easier for the ball mills if they’re getting a finer feed. So we’ve learned that, and then we do the absolute upgrades to 2,000 tonnes a day, we again focus on making sure we get as like to call it popcorn going into the ball mills. I think that’s it really.

Stephen Mullowney: Yes. So what does it really mean at the end of the day? What this really means is the sulpide ore will go through the existing plans.

Andrew Cheatle: That’s correct.

Stephen Mullowney: And we’ve recovered at a good rate. So that means that there’s no need to come up with a new circuit at this point in time for sulphide ore, which means we can continue to expand Buckreef the way being expanding, which is expanding existing plants and equipment over time or maybe faster, but it doesn’t mean a whole new processing facility for sulphide ore – industry-related CapEx is a much more complicated system.

Andrew Cheatle: Yes. And this all ties in very nicely but I think we touch on it, that ties in with the more detailed metrological studies we’re doing now with SGS in South Africa.

Stephen Mullowney: So on that point, what are we doing? So obviously, there’s a 2018 PFS that the company did prior to the management team around table coming in, and we’ve talked about this at year-end. A lot of work has gone into the infill drill program. That’s been completed. We’re doing the MET study, as we mentioned a couple of times. That’s across the deposit to make sure what we found in the bulk sample and in the preliminary study that there’s no changes in the ore across the deposit, both along strike and at depth. So that’s what that MET study will do. The Geotech study is ongoing that determines the pit slopes. At Buckreef, we have hard rock there. So we’re optimistic that we’ll get some good pit slopes in our planning.

Currently, a pit slopes, Andrew, are around 45 about 40 degrees, and that’s in the soft rock. So I want to get to the harder rock, we expect that to be higher. There’s long-term TSF planning ongoing, obviously. It’s easier to take it out of the ground in the store. It’s got to be stored somewhere afterwards after close to the processing plant. So that is continuing on ongoing, identifying lands to purchase for that, also giving a really good look and relook at dry stack tailings that will be done over the next couple of months. We’re updating the mineral resource model to make sure that we have all our ducks in the always we put in place an updated mine plan. And now we all wrap into what a life of mine plan looks like today. Obviously, we anticipate that to improve over time as more and more drilling is done around Buckreef getting the blue sky potential around the Anfield, the Eastern Porphyry and those parts of the deposit as well as what’s at depth and along strike in the main zone.

It’s our anticipation that this will be a deposit given the width and the grade of the deposit that will go underground over time. There will be eventually to trade off between do you do more stripping, you go wider, to get deeper or do you just do your underground development. And there will be a point in time in any mine plan where that trade-off will cross and you will go underground. And so that is something that will be looked at as we due to mine modeling of the broader deposit over time. So anything to add to that, Andrew, did I forget any?

Andrew Cheatle: I think the other thing we’d like to do, Stephen, is we see this on the exploration slide is to get a couple of satellite pits up and running. And it builds optionality for the mine plan.

Stephen Mullowney: So for instance in Q3, we had that optionality because we had crushed stockpile. We had stockpiles. We had a main pit. Now we’re going to supplement that as everybody knows my mindset is they have redundancies in any operation of reduced risk. So that’s essentially what you’re doing in opening up areas. You may not mind it right away, but if something happens over here in the main pit for instance, you can pivot over to the satellite pits. It’s the same concept of having three ball mills operating. If one goes down, you already got to replace liners on one, the whole operation doesn’t shut down when you’re a single-mine company. So we’re very positive on putting in place those redundancies over time. Okay. So on the exploration side, Andrew, tell everybody what they have here where you’re going.

Andrew Cheatle: Yes. I think those that have been with us on previous presentations, we’ll remember the map on the right here, for those that are new, just very quickly. Each of the black squares is 2×2 kilometers. You’re looking at the special mining license in the red boundary, the existing main zone where all the color dots are, you can see where the plant is. And then highlighted in the dash lines are exploration areas. So we continue to be very excited, I think, is right in the geology team that’s now at site is getting very, very familiar with the geological models and controls on our organization. So just in summary, we did 239 meters in Q3. We’ve done over 11,000 meters so far in this fiscal year. So in terms of results for the quarter that came out, we did get some drawing on the Eastern Porphyry and the Anfield is both wider a few hundreds of meters to the east of the main zone.

As you’d expect, I’d put the best results up here for you to see. So but it was very, very encouraging to look at this 14 meters at 3.5 grams a tonne, between 3 meters at 10 in the Eastern Porphyry. We also had another intersection there in the same hole about 25 meters of 1.6. So we know that that zone can contain some very, very significant intersections, a lot more drilling to do. Another intersection again showing good width and a good grade for an open pit at 1.22. And then from the Anfield, we had some grab samples previously from the artisanal mine shaft, we redraw that coming back at 2.94 meters at 13.7 grams a tonne. For me, as geologists exploration, that’s very significant for a first drill hole to go into that target. And again, some of these good widths and grades.

The second hole from there 6.1 meters, creating 1.41 grams a tonne. I do draw your attention also to the fact that these intersections are shallow. And obviously, that’s very encouraging for getting some initial open pits going. Back to you Stephen.

Stephen Mullowney: Yes. Thank you, Andrew. So with regards to the year-end sort of guidance, as we’ve mentioned, we’re a low cost, low-risk approach to growth in the gold space. The 1000 tonne per day plant has been operating at nameplate capacity since the end of October. We’re going to reiterate our production forecast of 20,000 to 25,000 ounces. I think we’re on a 20,000 ounces now.

Michael Leonard: Yes, we did 16,000 as of Q3. And again, we’ve obviously been producing since then. So well on track. Yes.

Stephen Mullowney: Yes. So we’re almost there anyway. So as of today.

Michael Leonard: And again, as mentioned, we expect Q4 to be the highest production quarter. So well on track towards getting that goal, yes.

Stephen Mullowney: Yes. So the cash cost guidance, we reiterate that as well. We’re advancing the third mill expansion in less than 18 months that will put 2,000 tonnes per day, which is roughly around 750,000 tonnes per annum Andrew. That’s not a small operation to decent size. So – and that will obviously increase the production levels at Buckreef. We don’t expect it to double instantaneously because we’ve got a great profile as well to deal with and putting it through the mill.

Andrew Cheatle: So I think also Stephen, just, we’re not expecting to substantially increase our fixed costs, we’re going to see some benefits on our cash cost as a result.

Stephen Mullowney: Yes, we’re going to see yes, exactly. So all in all, things are going as expected. And – and any time we run into an extra rain, for instance, and things of that nature, we’re able to pivot and a new value-creating opportunities.

Andrew Cheatle: Just again for our audience. The rest season this year was about 3x as well as the prior year.

Stephen Mullowney: Yes, exactly. Yes, there was a lot of rain there.

Andrew Cheatle: Say it, it builds a lot of bench strength amongst the team resilience.

Stephen Mullowney: Yes. So with regards to ESG is something as a public company in the mining space that we need to talk to and be participatory in. Our philosophy on ESG is that it’s mindful, it benefits and is integrated with the business. If you hire more local people, you don’t have to have them on site. It helps money in the community, it reduces social risk. And it also increases your productivity and government’s procedures by hiring a lot of local people. So our mindset is the big beneficiary of a mining operation is always a local community because if the workers come from the local community, they’re the biggest beneficiaries of the spend at the mining site. That helps reduce cost, the corporate, the social risk of the project.

And then you want to reinvest in that community if your employees are from that community in schools, and in our medical facilities because that’s where your employees are going or your children are going. So that’s really the philosophy that we have with regards to ESG, and we’ll continue to do so.

Andrew Cheatle: Stephen, if I could just have one more quick comment again for new shareholders and I think there was – you might have heard this story before. It’s worth hearing it again, is we also take a very clear approach to local procurement – so for example, the CIL tanks were procured three or four hours away and still the work is coming from the shipbuilding industry and ones that are substantially reducing cost at cost, substantially reducing our risk in terms of supply chain and giving us a lot of credit with the local government and people. So shareholders, communities, governments and everybody is just winning all around. They’re not [indiscernible] have to say from, say, Asia or Turkey or South Africa. So everyone’s benefiting.

Stephen Mullowney: So with regards to milestones that are upcoming, we continue to deliver on the milestones that we’ve put into the market. The third mill expansion, we’ll have that online hopefully early next year. We’ll have planning and execution on a much larger mine that we currently have in the next 12, 18 months, and that continues to progress. MET studies, Geotech studies, resource modeling, mine plan updates, all that is continuing as well as continuation in drilling. So more the same by just continuing to continue to execute at the Buckreef Gold project. On that front, this is a stock chart over the last year or so. As you can see, we’ve been in a range from a trading perspective. we’ve had peaks and valleys and relative to the market, I would say we’ve held up really well relative to a lot of single-asset producers as well as the preproduction comps that we look at from a trading perspective, we’ve held up decently well against that concept.

On that front, I’d invite anybody for any questions.

Q&A Session

Operator: Thank you. We’ll now begin the question-answer session. If you wish to ask a question, please click the Q&A icon on the left-hand side of the screen. You will see options to raise your hand to join queue and ask your question verbally, or write a question to submit your question in writing. When you are introduced, your line will automatically be unmuted. Analysts who have dialed into the conference call may press then one on your telephone keypad to join the question queue. Our first question is from Jake Sekelsky with Alliance Global Partners. Please go ahead.

Jake Sekelsky: Hey guys. Thanks for taking my questions.

Stephen Mullowney: Hey. Good morning, Jake.

Andrew Cheatle: Good morning, Jake.

Jake Sekelsky: Good morning. First on the rainy season, and you guys touched on it a bit with it being a bit more severe this year than in the past. I’m just curious, was the duration the same the typical March to May time frame? Or did it extend into June or even July?

Andrew Cheatle: I can answer.

Stephen Mullowney: Yes. You can answer that one, Andrew.

Andrew Cheatle: So, yes, Jake, it started a little bit earlier and went on a little bit later as well. It was quite consistent. That said, is the team obviously knuckled down and got on with the job, but there’s obviously something a bit tougher for us, but we got through it and learned to be prepared better for next year.

Michael Leonard: And Andrew, I think it didn’t trickle too far into June, though, from memory. I think it largely sort of subsided towards the back end of May. So I think we’re going with that, Jake, in terms of modeling Q4. Don’t expect it to have a significant impact.

Andrew Cheatle: We’re all done by the second week of June.

Stephen Mullowney: Yes. So on that point in Tanzania, either rains or it doesn’t – there’s really no in between. So it’s quite dry at site at this point in time.

Andrew Cheatle: As you can see where the guys on the bottom right there rolling out the lineup.

Stephen Mullowney: Yes. That would have been a couple of weeks ago. Yes. I’m going to take one question from the Q&A from the queue. Right now, the question is, what do you foresee as being the biggest threat to overall cost. IRR, gross net margins are great, with anticipated rising cost in gold price, the multiple expansion could look stunning. However, controlling cost is a premium. So yes, having control on cost is always number one. The operation has grown quite rapidly. So there’s a lot more controls going in place even as we speak around cost involving those costs. So that is one area where we’re managing costs. We continue to procure local, which is reducing cost. And it also reduces supply chain risk. We’re also, what I would say is our next expansion.

It isn’t proceeding as quickly as the other two expansions. Prior to that is to control the cost to make sure that the operations are currently cash flow positive, so we could control the cost of that build a lot better than if we were to rush it. Obviously, we’ve got a double mining rates as well in that equation. Fuel prices have stabilized. So fuel is always a large component of cost in any mining operation. So we’re good there. I don’t see any overly bearing inflation pressures, Mike?

Michael Leonard: No, no. And Andrew, you touched on this earlier, I mean the plant is scalable as well. So you don’t expect to see a lot of additional fixed costs as we grow and expand our plants, don’t expect head count to expand dramatically again a big benefit from this sulphide bulk sample is that we can expand this facility as you touched on a few times and again expect costs to come down as a result.

Stephen Mullowney: Yes, exactly. So as Mike mentioned, there’s a lot of been what I’ll call it infill CapEx. Tailings has been expanded. We look at things like generators. It cost us a lot of money, so we bought them. And that IRR payback is quite good on that. So that reduces cost, loaders this morning, right? So we currently rent a lot of loaders. So we’re now purchasing those, and that’s got to pay back for three months or something that, right? So we’re looking at that across the entire operation. So that’s the answer to that question.

Andrew Cheatle: Steve, you mentioned you fuels just as an example, as just drained down a little bit – we have now got vendors to basically a fuel station, that’s Buckreef. But to access that controllers the operators get cards, they have to be swiped that all goes into our electronic system and through the enterprise system, like that you look at…

Stephen Mullowney: Yes, the ERP is fully integrated.

Andrew Cheatle: This is all integrated anomalies can be observed as you’d expect, it is all got cameras as well. So these are examples of just controls that are going in.

Michael Leonard: And Stephen, I think we got – we got a little ahead. I think Jake is probably still on the line, Jake. Back to you if you had any further questions.

Operator: One moment please, I need to unmute his line again. One second. Jake your line is open.

Jake Sekelsky: Great. Just one more quick one for me. On the sulphide, you mentioned the resource estimate due out around the end of this year. How quickly do you expect to move forward with in updated economic study on the back of that resource update?

Andrew Cheatle: Yes. We’re right in the throes of that at the moment. Thanks for the question. And we’re anticipating to close out on that in the next quarter.

Stephen Mullowney: Yes. I always expect by the end of the year.

Jake Sekelsky: Okay. So you think, we might see that economic study sometime in first half of next year or before that?

Andrew Cheatle: We’re going to do an economic analysis on that concurrently.

Jake Sekelsky: Got it. Okay. That’s helpful. Thanks.

Stephen Mullowney: Yes. Thanks, Jake. Back to you operator.

Operator: There are no further questions in the queue.

Stephen Mullowney: All right. So I’m going to answer a couple of questions in the chat. So one was an update on Jim Sinclair. So Jim is currently Chairman of the company. I spoke to him yesterday. So he is well, still working part time and is more in, what I’ll call semi-retirement type mode given is of 83, but he’s doing extremely well. Another question is, and I keep on getting asked this one is the dividend paid in gold? So back in a company has changed significantly over time. Back in the day when I believe the dividend paid in gold was mentioned, the company would have been much different than it is today. But the Buckreef Property has a joint venture agreement with STAMICO in Tanzania. And as part of that, the gold is sold to Argor-Heraeus in Switzerland to fund operations and that revenue then comes back to a bank account into Tanzania, I wouldn’t expect to see a dividend paid in gold in the short to medium term is the quick answer to that question.

And I think the next one, I think that’s it for the question because they’ll been answered. Operator, any other questions? Maybe one at the bottom there.

Operator: Yes. We actually do have two questions now from the meeting. I’m going to announce [Stephen Reiser]. Your line is open.

Unidentified Analyst: Hi. Thanks very much. And hope you all can hear me. Thanks very much for the update. I appreciate the strong operational performance coming out of TRX. I wanted to ask you, you indicated on one of the PowerPoint slides that you’re expanding, looking or aiming to expand the scope of the PFS by 2x to 4x. I know you talked about 18,200 Steven metric tons in that original study by 2x to 4x – what actually does that mean? Is that expanding the metric tons by 2x to 4x? Or is there another way to think about what that means tangibly?

Stephen Mullowney: Yes. So I’m going to go back to that slide, Steve, and answer that question and how we think about this. So we’re now about halfway to the annual or billing tons with about 1.5 million tonnes. So once we do the next expansion, we are right around 750,000 tons. So our goal here and ironically almost at the average annual gold production amount in the next expansion. So what our goal is, the way I always think about value from a mining operation needs. The goal is to have 10-plus years of mine production at over 100,000 ounces of annual production. Then you get into the metrics of having a valuable mining operation. And so that is how we think about 2x to 4x the PFS levels. We want an increase in the gold production and hopefully, an increase in the life of mine of the project.

Maybe not 16 years and maybe less than that, but certainly, a lot more in the ounces in production, which expands over time with additional resources through to. Does that answer your question?

Unidentified Analyst: Yes. Appreciate the clarification. Stephen.

Stephen Mullowney: Thanks, Steve.

Andrew Cheatle: Thanks, Steve.

Operator: There are no more questions at this time from meeting participants by voice. Pardon me, we do have another question. It’s from Christopher Taylor. Christopher Taylor, your line is open. Mr. Taylor, your line is open. Doesn’t seem to have a connection. The floor is back over to you.

Stephen Mullowney: Yes. So there is couple of more questions in the queue. With regards to Mr. Sinclair, no, he has not sold the company. He’s still a shareholder in the company. In order to sell the company, all shareholders would have to sell their shares. There’s over 15,000 shareholders in TRX Gold. With regards to share based payment expense. Mike, do you want to just answer that question, what that relates to?

Michael Leonard: Yes, maybe you could just scroll down a little bit so I can see the rest of the question in the queue.

Stephen Mullowney: It just says under.

Michael Leonard: Okay. Very good. So that I presume is referring to relying on our G&A section of our P&L or income statements. That’s basically a mark-to-market on share-base compensation for the management team and the site-based employees. So we recognize those shares on our books via the market.

Stephen Mullowney: Yes. And part of that is – there are some liabilities in the equity for shares to management, which we have not received yet and have done that in order to maintain capital balances in the company.

Michael Leonard: Yes, good point, Steve.

Operator: We do have another question – verbal question from a meeting participant, [Craig Sutherland]. Your line is open.

Unidentified Analyst: Hi, everybody. Continued success. I like what I’m seeing. I came on to the call a little bit late, so I apologize if this question has already been answered, but expansion of existing resource base. I know there’s been production with other drilling. Is there a time period on what that might look like? And can you comment on possible size of expansion of the resource?

Stephen Mullowney: Andrew?

Andrew Cheatle: Yes. Thank you very much for that, Craig. We’re in the process of updating the mineral resource. As I alluded to earlier, that’s do that in the next quarter along with an updated economic model. So as you’re probably well aware, I can’t comment on any numbers.

Michael Leonard: So what you’ll see in that update to give you some guidance on how mineral resources are now classified as the – you have in pit amounts. So what is looked at is what’s mineable ounces. What you can take out today in mine at a profit in a pit or in an underground scenario. That is really what the focus is, is a real big focus on mineable ounces. And that is where the new standards came in that all companies now have to follow. The old standards were where is all your gold and will it be mined in the fullness of time is the way to put it. And so these are – what we’re looking at is what is mineable.

Andrew Cheatle: Historically is more global. Nowadays, the reporting has to be more focused more focused.

Michael Leonard: More focused on mineable ounces.

Andrew Cheatle: Underground, yes.

Unidentified Analyst: What is a pit constrained mineral resource look like?

Michael Leonard: That’s what we’re working on.

Stephen Mullowney: Yes. So one question that we have here is to explain the initial plant CapEx over three years of $76.5 million. So this is a good question. And so in this 2018 PFS, remember, the company had no production in 2018. So the engineering firm when it went about its work saying, if you were to construct a plant, what would it cost in order to get the level of production, they would go and get quotes, those sort of things. And in that 2018 PFS to get the average annual production of 51,000 ounces that would have cost $76.5 million in 2018. We’ve gone and developed this property differently and the production profile and property differently by going putting it into production and building the plants on our own not utilizing, for instance, EPC contracts. So to get to the level of production that we’re anticipating at 2,000 tonnes per day. Now the plant cost all in of that will have ended up being around mean $13 million, Mike.

Michael Leonard: Yes, that’s right.

Stephen Mullowney: Yes. So significantly under that $76.5 million. So even if you double it to get to 1.5 million tonnes per annum. We’ll be looking at $25 million roughly versus $76 million. And obviously, the $76 million that’s plant capital. So we’re coming in a lot under that number. And this is the beauty of testing the sulphides. And as we mentioned before, we don’t need to go out and build a plant right away if we don’t want to or don’t have the capital resources to do with. We can continue just incrementally increasing this plant size over time or if the economics make a lot of sense, doing a lot more quickly. So any IRR payback and EBITDA increase is there to make it accretive to all shareholders. So we have options now that we didn’t have in the 2018 PFS. I hope that answers the question. Operator, any more questions?

Operator: There are no further questions at this time.

Stephen Mullowney: Okay. There’s only clarification. So Chairman selling the company, the go through with the way companies are bought and sold in the mining industry as a public company. So, if the company were to be sold share owners would have to vote on them. They would go thorough a process in which it is marketed to a lot of companies under a strategic advisory type of mandate. And then it would then – you would take the highest probable price and by a party that would have a full financing in place and then to shareholders would have to vote on. The Chairman in on of himself, cannot sell a company, I cannot sell the company. This is sort of would need to be approved first by the Board of Directors and then take it to the shareholders for approval on the vote. The Board would have a recommendation – the shareholders will then get the vote on that. Operator?

Operator: We have no further questions at this time.

Stephen Mullowney: Excellent. Well, thanks everybody, for joining our Q3 2023 conference call. A lot of good things going on. A lot of moving parts. But we’re pretty positive on what’s upcoming. We reiterated our production guidance, our cash cost guidance where we’re going in our planning of Buckreef, and we continue to look forward to positive operating and exploration results going forward. Thanks, everyone, for joining the call today. Greatly appreciate it. You can call any one of us at any time, at any questions. [Indiscernible]

Christina Lalli: Goodbye.

Michael Leonard: Thanks everyone.

Stephen Mullowney: Thank you.

Operator: This concludes the meeting. You may disconnect your lines. Thank you for participating, and have a pleasant day.