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Equinox Gold

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September 16, 2024 at 8:50 AM (MDT)|Broadmoor Hotel & Resort

Greg Smith

President, CEO, & Director

Greg Smith was appointed CEO and a Director of Equinox Gold on September 1, 2022. Mr. Smith had been President of Equinox Gold since March 2017, when JDL Gold merged with Luna Gold, and helped to lead the team through four mergers and an asset acquisition to grow the company from a single-asset developer to a multi-asset producer. Prior to his role as CEO of JDL Gold, he held the roles of CEO and founder of Anthem United, President and CEO of Esperanza Resources prior to its sale to Alamos Gold, and CFO of Minefinders Corporation prior to its sale to Pan American Silver. Previously Mr. Smith has held management positions at both Goldcorp and the mining division of KPMG LLP, and he also acted as a director of Premier Royalty prior to its sale to Sandstorm Gold. Currently Mr. Smith is a director of i-80 Gold, and is chair of Sandbox Royalties. Greg is a Canadian Chartered Professional Accountant.

This is an automatically generated transcript. Denver Gold Group cannot accept responsibility for mistakes, errors, omissions, or any action taken in reliance thereon. Use of this transcript is governed by Denver Gold Group’s Terms of Use.

Thanks Raj and thanks everyone for attending this presentation this morning. Before I jump into the main presentation, I will be making some forward-looking statements. This language is available on on our website and in this presentation deck which is on the conference website as well. So for those of you that are not as familiar with the company, we formed Equinox Gold back in late 2017. At that time, Ross Beatty became our chairman and our largest individual shareholder. And we started to execute on a plan to build a gold company of scale, a producing gold company of scale to do it quickly because at the time, we saw a buyers market and gold and we also saw an environment of coming increasing gold prices. And so we initially started with no production at all. In late 2018, we acquired our mesquite mine that gave us our first production. And then over the last six years from then, we've undertaken a number of mine developments. We've acquired some additional producing mines most recently and most recently brought our Greenstone mine into production this year after over 2.5 years of construction and commissioning. So today, we now have eight producing mines, three expansion projects within that producing mine portfolio. We've got a large reserve 19 million ounces of proven and probable. We've got another 16 million ounces of additional M and I gold resources and our, our plan today and our goal is to leverage our existing portfolio to increase our production to a million ounces of gold production per year. So last year we produced just around 565,000 ounces of gold. The midpoint of our guidance this year is just around 700,000 ounces of gold that's going to come from four primary mines for us. The first is our Los Felos mine in Guerro, Mexico, our Arizona gold mine in Brazil, our Bahia Complex in Brazil. This is actually a combination of our Fazenda and Santa Luz mines and we're currently working on what an integration of those two projects looks like. But together that's our Bahia complex. And then of course, our new Greenstone mine in Ontario, Greenstone, we did start out owning 60% of Greenstone in May. We completed the acquisition of the 40% of Greenstone we didn't already own. And so now we own 100% of the Greenstone mine. Of course, over the last three years or so, our primary focus has been on bringing Greenstone into production. So obviously a very important project for Equinox Gold. This is our new cornerstone asset for the company. This is a mine of substantial scale 400,000 ounces of gold production per year. On average for the first five years. It's got an initial mine life of 14 years. This is underpinned by 5.5 million ounces of gold reserves. We've got another 2.6 million in M and I, but in all categories, we've got another 4.5 million ounces of gold within the Greenstone deposit. The mine is not what I would call remote. It's only about a three hour drive northeast of Thunder Bay, Ontario, right on the Transcanada highway and just a few kilometers from the town of Geraldton, Ontario. Greenstone is, is also a significant mine, not just in Canada but also globally within Canada. It is one of the largest open pit gold mines in the country. It's also one of the highest grade open pit gold mines of scale in the country. And it's also one of the only minds of this scale globally that's not held by a you know, a major gold producer or a large private gold producer. There's very few of these left and we just saw another one go with Martin talking about sentiment earlier today. And if you compare Greenstone against the global gold mine cost curve, again, it's cash costs are going to be in the lowest quartile and all and sustaining costs are going to be well within the lowest quartile as well. So we've had a couple of recent milestones at Greenstone. These are what I would call feel good milestones. In May. We had our first gold pour. I attended the event as well as sort of community leader in partner, some of our suppliers. It was a, it was a great event and very cool to see that come to fruition. After so many years of hard work at Greenstone for the team. We also recently completed our ride to Greenstone fundraiser. This was a bike relay that we undertook from Vancouver to the Greenstone mine to raise money for the local hospital in Geraldton. This was a massive success. We raised over $1.3 million for the hospital in Geraldton. Another $200,000 for various causes around our other operating mines. And I can tell you that the people of Geraldton were very happy. This is going to be a big win for the community and it's also a big win for us because this hospital will provide high quality health care to all the mine employees going forward. I should probably say while I'm up here that we really appreciate the support of all of our sponsors which did include some Corporates and, and suppliers and and I really appreciate the support on that. And then finally, shortly after the ride to Greenstone ended, we did have our mine grand opening at Greenstone. Again, it was a great event and you can go to our website, there's video footage of all of these events. So from an operating perspective, the ramp up of production has been going well. We first introduced or in April and then got to our first gold pour in in May. And you can see on this graph here, this is the 30 day rolling average tons per day milled April through the end of August. And, you know, obviously it's not a, a line that's sort of straight up into the right. We did have the shutdown in late July, early August where we dealt with a few issues that had manifested as we had been ramping up. We've now come back up, we've exceeded 60%. It was actually 64% in August and are continuing to to trend toward full production. The last number of days have been around 80%. So, we definitely, as we've ramped up, we've had a few things we've had to deal with. We'll probably have, we did have another short shutdown in September. We've got another one planned for October. But again, the trend is going in the right direction. We're very pleased with the way the mine is ramping up. Same thing with mining. We've now got 25 haul trucks in operation. The mine has been able to do 100 and 50,000 tons per day X mine in, in September, as we've opened up the pit. And this month we're going to complete the excavation of some historic contaminated soils that have kind of restricted our movement in the pit. As that all opens up. Going into October, the mining should become a lot more efficient within the Greenstone pit. By the end of the year, we'll have another four haul trucks in operation. We'll have hired some more haul truck operators. And so by the end of the year, we'll be in a position to mine about 100 and 80,000 tons per year. Still pushing toward commercial production by the end of the third quarter. Looking to get to or around the end of the third quarter, I should say, and looking to get to 95% of full capacity, which is 27,000 tons per day by the end of this year. So now that we've got Greenstone into production, we are starting to turn our attention to the growth opportunities of Greenstone. The very easy and low hanging fruit is that some of the drilling we've done and we haven't done much as we've been focused on construction. But what we have done in the east end of the pit looks like that's going to pull the pit to the east. We also see an opportunity to pull the pit wall to the west those two, those two opportunities alone are going to add a couple of years to this mine easily. We also have in all categories, almost 4.5 million ounces in the underground. And this underground deposit has never been included in an economic analysis that's been public. It's something that we're going to focus on over the coming quarters and see if we can start to surface some of that value from the underground. Ideally, eventually this underground would run concurrently with the open pit and would have the effect of increasing the average fee grade. The other sort of simple opportunity is that the mine or at least the processing plant is sized for 30,000 tons per day. Our mine plan calls for 27,000 tons per day. Once we've had some time running this at full capacity, get our arms around running it, we'll look to see about increasing that throughput and then potentially increasing annual production just by the throughput increase. This is a regional map of the Greenstone area. Again, there's lots of targets in the regional area that could, could ultimately provide feed to the mine within sort of trucking distance of the Greenstone mine. We do have the Cayley and Key Lake deposits. Those two deposits today have 700,000 ounces of gold already and we've done no additional drilling since we've acquired Greenstone. And then further up the trend, you can see the call out up top, it's about 100 kilometers of of trend on the Greenstone gold belt. The Brook Bank deposit has another 680,000 ounces of gold, some higher grade underground material as well that could potentially feed Greenstone or it could be something that looks like a stand alone mine. The short story is there's a lot of prospective along this belt, a lot of near mind opportunities and targets that we can explore and this is something that we'll start to focus on over the coming years. So in addition to Greenstone, we do have three other expansion projects within our existing portfolio. The first is our Arizona mine in Brazil. Currently Arizona is operating as an open pit mine. We do have a pref feasibility study that we put out a couple of years ago on the addition of an underground mine at Arizona. This again would have the effect of increasing the average head grade and increasing the annual production from around call it 100 and 20,000 ounces a year right now to 140,000 ounces a year. With that increased head grade. We originally had intended on starting the underground development this year. At least the portal construction, we did have some geotechnical issues in the Piaa pit, which is where we're starting the the underground portal we're dealing with those now and then in Q one or Q two depending on, on how the rainy season looks. We'll start that development early next year or in the first half of next year. The next opportunity we have is our Castle Mountain mine in California. We had been running it as a small sort of contract mining contract processing open pit heap leach, which was our phase one, which was designed to excavate a historic fill that was already in the pits. As we advanced the permitting to for phase two, we've now suspended that operation or the mining of that of that operation we're still producing from the heat bleach pad and we're focusing over the next couple of years on completing the permitting and completing the detailed engineering. The permitting has advanced quite a bit in the last six months. We did get the notice of completion from the Bureau of Land Management. We're now working with them to get the notice of intent. Hopefully by the end of this year, that'll put us on a timeline to have that permit sometime in 2026. At which point, we want to be in a position to, to make a construction decision one way or the other. So in the meantime, we are focused on the detailed engineering. We're trying to get this project to a similar position that Greenstone was in when we started building that mine, basically having a high degree of confidence on what we're planning to build. And that would increase production of castle to over 200,000 ounces of gold per year. Also a long mine life so pretty attractive opportunity for us. And then the third one is our Los Vilos mine. Los Vilos is operating as an underground and open pit heap leach operation. But this deposit certainly with what we're seeing in the underground. And as we get deeper into the open pits, you get much higher grade material and material that metallurgical really requires a mill to get the recoveries. We need for this mine to make sense long term. So we put out a feasibility study a few years ago on the addition of a 10,000 ton per day mill cil plant at Los Vilos. We have not made any decision to build it yet because we are working with the local communities to get long term agreements done that would create you know, an economic environment that would make this investment, something that we would want to pursue. There's a huge amount of geologic potential at little seals. This is a big mine. And we'd love to see this expansion happen, but we've got to get through this negotiation with the communities first and it's going well and, and we're having a good and and civil discussion with them and hopefully we get some clarity on that, you know, sort of toward the end of this year or Q one next year. But if we do that expansion, we would take Los Vilos from around 100 and 60 to 100 and 80,000 ounces to over 280,000 ounces per year. So we finished, this is at the end of Q two, we finished with 167 million in cash 100 million undrawn on our revolving credit facility. Plus we have $100 million accordion feature under our credit facility. Plus we have cash flow from our operating mind. So we're in a good position in terms of our liquidity. We do have debt on the balance sheet just over a billion dollars under our revolver and term loan, another 450 in convertible notes. And this debt really is related to the fact that we just built you know, a very large mine, the Greenstone mine and then in May, we took out another 500 million in debt to acquire the 40% that we didn't already own. But we're in a good position now to start deleveraging the balance sheet. Basically, we're at an inflection point in terms of our production and ca cash flow generation. So you know, coming into the end of 2024 going into 2025 we've got much higher consolidated production, much lower costs, much higher goal price and our capital expenditures are coming down drastically. So basically that puts the company in a position to generate substantial free cash flow. In addition, over 52% of our net asset value is now in Greenstone, this is on consensus numbers. And so that's now production N A from one of the best jurisdictions in the world. And you can see here, this is a bit of a complicated slide, but what it's showing is our leverage ratio, our net debt to IDA ratio over time. And you can see there's periods of time where it's increased as we've built mines taken out debt and then, or, or had, you know, production issues or cost increases or the gold prices come down and then as we've brought mines into production and seen the margins increase again, that E BDA ratios come down. The, the simple takeaway from this slide is that with massively increasing EBD in the back end of this year and into next year, that leverage ratio comes down naturally that EBID generates a substantial amount of cash, we use that cash to actually reduce our net debt that further accelerates the deleveraging. And as you reduce your net debt, you reduce your interest expenses and that frees up even more cash to pay down your debt. So what what we're showing here is that we're in a position to start a pretty rapid deleveraging cycle of the company starting sort of the fourth quarter of this year and into 2025 to 2026. And we think we can deleverage quite quickly. And that brings us to the, the valuation opportunity here at Equinox. You know, we were, you know, going into production here and commercial production. One of the, the, the, the largest gold mines, certainly in Canada, much lower cost, much higher production. We've got one of the highest reserve bases of our peer group. We've got one of the highest production growth trajectories of our peer group, but we're still trading at the very low end on a price to nav basis. And so again, our thought here is as we increase production, decrease costs, our capital comes down, cash flow goes up safe jurisdiction production. As we start to deleverage and start to manifest these things, we should start to see that revaluation happen at least toward our intermediate producers and hopefully toward the senior producers and the management team at Equinox. We're all very much aligned with our shareholders. Ross Beatty is, is our chairman and largest individual shareholder. Everybody on the management team myself included as a shareholder and many of our employees are part of a employee share purchase program. So we are very much aligned to create value here. If you look at the peer group, we've got the second highest insider ownership of all the companies save endeavor mining. So to sum it up, you know, right now, we are going very shortly into commercial production at, you know, a low cost long life mine in Canada, substantially increasing our production, decreasing our costs, increasing our cash flow. We're doing that in a macro environment of increasing well, strong gold prices and increasing gold prices and decreasing interest rates. This gives us the potential to start deleveraging the balance sheet quite quickly, which then puts us in a much stronger position to develop our our other growth opportunities within the company. And really just emerge here from this build as a much larger and stronger gold producer. I think I'll I'm gonna stop there and I think we got a little bit of time for questions. Thank you, Greg. I have time for one quick question. If there's any, there's one question, gentlemen there. Thank you. How many ounces per day are you doing in Greenstone? Now, I'm interested in the wrap up. Well, the, the gold ounces per day varies according to throughput and grade. Our goal for this year is to get to around 190,000 ounces total. So that's the, that's our target for the end of this year. Ok. Thanks everybody. Thank you very much.


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