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Allied Gold

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September 17, 2024 at 4:10 PM (MDT)|Broadmoor Hotel & Resort

Peter Marrone

Executive Chairman and Chief Executive Officer

Peter Marrone is Executive Chairman and Chief Executive Officer of the Company, and was Executive Chairman of Yamana, which he founded in 2003. He has more than 35 years of mining, business and capital markets experience. As an entrepreneur, Mr. Marrone has founded and taken public several companies in various sectors and advised companies on going public and establishing the required protocols for governance in his role as an investment banker and lawyer before that. He has been on the boards of a number of public companies and has advised companies with a strong international presence.

Mr. Marrone currently sits on the board of directors of Aris Gold Corporation. Prior to Allied, Mr. Marrone was the head of investment banking at a major Canadian investment bank and before that practiced law in Toronto with a strong focus on corporate law, securities law and international transactions.

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.

David. Thank you very much. So, so we presented at this conference within about a week of going public last year, perhaps just a bit more than a week. We were delighted that we were able to be, we were, we were fit into the program. We're delighted to be back. But why I start with that is that last year. We said that we aim to become a dominant emerging market, precious metals producer with a focus primarily on Africa. And I'm comfortable saying to you now, a year later that we've established ourselves as that dominant emerging market producer, certainly in Africa and the countries in which we operate and we will continue to establish ourselves as a significant dominant emerging markets producer. We have an established, we're an established mid year producer principally because we have assets that are producing roughly 400,000 ounces of gold per year. Last year's production was 343,000 ounces. We expect to be above 3 75,000 ounces and that will increase in the years to come. We have three mines that are producing one in Mali, the other two in Cote d'ivoire and the two in Cote d'ivoire are 17 kilometers apart. We're essentially treating them as a complex and we have a development stage project and we have significant growth in mineral inventory but already a very large base for mineral inventories. We're carrying reserves of, of just over 11 million ounces resources in those reserves of 16 million ounces and another roughly 2 million ounces in inferred resources. And there is gold literally everywhere. We certainly think that with a $32 million exploration budget which is $12 million higher than last year, we're putting our money where our mouth is. We believe that we'll be able to demonstrate that we can get exploration successes that will lead to resource growth and then will lead to proven and probable reserve growth. We have an impressive pipeline of growth in production with improvements in Cote d'ivoire and the expansion of Sariola. It's a two phased expansion and our KU project in Ethiopia that will drive an increase in production from last year's 343. This year is over 375 next year, closer to 400 to 430 then that increases to over 600,000 ounces by 2026. When Kook is in production, that number increases further to 800,000 ounces. When the Sadio the second phase expansion takes effect, we say here in 2029 but you probably saw from our public disclosure that we brought that forward one year. So we're now committing to having, having that in production in 2028 we have a financial strategy to deliver growth. You can't deliver growth without paying for it, the capital for it. We have cash on hand, ongoing cash flows and an expected stream in gold prepay. We've already announced where we see that going. What we expect the terms to be because we're well advanced on that gold stream and that gold prepay along with other sources of funds, we're comfortable saying to you that we want to demonstrate that we're fully financed on that growth and that robust cash flow and I can't speak enough about it. So when we talk about a growth in production that in aggregate is more than 100% that's the top line. But the bottom line is because every one of these ounces is coming in at a lower cost than what we currently have. Indeed, we expect to be below $1000 per ounce by 2028. The result of all of that is that it over contributes debit cash flow and then to free cash flow. So I see 100% growth in production. The multiple, there's a multiple of that. But and to cash flow, we have a compelling valuation. I would like to address this afternoon why we trade where we trade, what we've done to compensate for that and to deal with it. But what is that upside potential based on our net asset value. So I know that some in the audience use consensus prices. I have to confess that I don't understand models that show the gold price is declining in the next several years to 19, roughly 1950 per ounce. Gold price is close to $2600 per ounce. If we use $2400 per ounce, we're already discounting the spot price. We have a net asset value at a flat $2400 gold gold price of $4.8 billion and a price. The net asset value that I will explain of 0.15 times net asset value. One of the issues that's also raised is liquidity. We went public by reverse takeover last year and what we've endeavored to do over the course of the last year is to improve the liquidity of the company. We announced recently that we now can trade over the counter in the new, in the in, in the United States. We are becoming eligible for inclusion and indices. We see that liquidity continuing to increase. So let's talk a little bit about the assets. And what I'd like to do is go from right to left. So going from East Africa to the other side of the continent, West Africa in Ethiopia, we have the Ku project koc already carries an inventory of 3.6 million ounces of resources of that 2.7 million ounces is proven in probable reserves. It will be developed as a series of up of open pits. Presently, we have two that are fully the reso reserves and resources are fully identified in those two. We expect that that will increase. We have several areas of mineralization that we've already begun to explore. But even on the basis of that 2.7 million ounces in the two pits, we expect to produce 240 to 250,000 ounces per year. 10.5 to 11 years of my life unproven and probable some of that resource is already converting to reserves. And we're also getting exploration successes that will increase the resources and reserves. We publicly said that we expect this deposit to be more than 5 million ounces. And I think that we're on track to be able to demonstrate that. And that's why we're comfortable saying to you that, that mine life at 240 to 250,000 ounces per year is at least that 15 years that we show that we show here. Most importantly, we start operations in the second quarter of 2026. We're near the end of 2024. So we're now about 15 months to most 18 months from the start up of operations. And we've already provided an outlook that we expect in that first year to produce for the partial year. 175,000 ounces. And here's the kicker and this is why this company will be generating some very robust cash flows that are a multiple in growth of the growth in production. All of those ounces are coming in at below $950 all in sustaining costs. That's because of grade, that's because of the size of, of, of the the operation 6 million tons per year. But it's also because of power, Ethiopia is one of the lowest cost hydroelectric power providers in the world. And we've already negotiated a 20 year contract with a fixed power purchase arrangement of four cents per kilowatt hour. So let me give you an example of what the difference of that is in Quebec. It would be eight cents per kilowatt hour in Canada. It's 17 cents per kilowatt hour, four times the rate that we're paying here. That difference is a difference of about 100 and $20 per ounce on an operation like this. And so it's one of the factors that's important to us to deliver high quality ounces at low cost. And that's why it was important to us to enter into a long term power purchase agreement at that low cost on the opposite side of the continent is our asset in Mali Sariola. Sariola originally started as a mine that would process oxide ore. We're now transitioning into fresh ore. It just means harder rock, more crushing and grinding. We're taking a two phased approach three to be precise, find more oxide ounces. We've already demonstrated that we're doing that complete a first phase expansion to the existing plant that is modification to the front end with crushing and grinding that will allow us to be able to process some of that very large inventory of 7.4 million ounces in proven and probable reserves. That means that the production goes from last year's 1 75,000 ounces between the oxides and the fresh ore. With this modification to the plant that we begin at the end of this year and complete next year, that takes the production level to about 230,000 ounces. But it also takes the cost from last year's 1616 50 per ounce down to an average of about 1212 150 per ounce for the next three years. Its future however, will be a new plant and we intend to, to deliver on Ac IL plant that double the current capacity that is intended to process that fresh ore. And in doing that, then the production of the company increases from this asset at 300 to 400,000 ounces per year. And the all in sustaining cost decline to just below $1000 per ounce. And all of that will begin in 2026 to be completed in 2028 for its first full year production annualized by the end of 28 and into early 29. Finally, we have the Cote d'ivoire Complex that's two mines that was owned by two separate companies. Now in our 17 kilometers apart, there's an access road between the two. I prefer to think of these as more journeyman type assets individually, about 90 to 100,000 ounces per year, higher cost than some of our other mines. We think we can bring that cost down and we've already begun to demonstrate that we can do that but treating it as a complex with an access road between the two where we can mix and match what ores go to which plant 2.5 million tons per year for each of the two plants in size. Then it's about the size of Sariola. So we expect to be able to get a production of 180 to 200,000 ounces with all the sustaining costs that will be in the range of 1450 per ounce higher than our average, higher than the other mines, but still delivering very robust margins for the company and for its shareholders. So this is what we look like. Then graphically short term additional oxides at Sariola expansion. It at Sariola for the phase one optimizations in life of minds. Extension cote d'ivoire, intermediate term Kook coming into production in the second quarter of 2026 that brings our production. Then from last year's 3 43 3 44,000 ounces to 375,000 ounces minimum this year, a step up next year. And then finally, that bigger step up of 600,000 ounces in the year to follow. And then two years after that 800,000 ounces with Sadio fully up and running and that's the longer term prospect. By that time, then we will be producing 800,000 ounces of gold and we will be doing all of that at our expectation between Sariola and Kook underpinning the costs. Our expectation that is that will certainly be below $1100 per ounce. We expect to get that down to below $1000 per ounce. So what does it mean then to the kicker that I described before? So if we're getting 100% production growth, but that production growth is coming with better costs. This is what it looks like. Then at least from an eta point of view, it would be the same for cash flow. We get significant growth and here we're using a discounted gold price but we and a partial year for for Kook in 2026 but we get 3.5 times the growth in EBITA and in cash flow and that increases to five times we're using $2400 gold. I think that's a reasonable number to use if we're right on the gold price. That's what we should expect in terms of the growth of EBITA and cash flow free cash flow. As compared to the growth in production of 100%. I want to highlight something else that's important that I think is important as an investor in precious metals mining companies. And remember that in allied gold, we did not come in as a management to take it public. We came in as investors, we put money into the company. We own 22% of the stock. As a management and board of directors. I look at optionality, I look at different measures for looking at value net asset value, multiples to revenue ebita and cash flow mineral reserves and resources and the geological endowment and potential in particular because all of that drives the optionality. The future value Kook will be worth more in 2026 than it is worth today if we assume the same gold price because we will have built it, the capital is behind us and the number of ounces in inventory will actually continue to increase. So the best way to capture that upside in a portfolio is underpinned by sustainable production, increasing production at lower cost allows for margin expansion and while maintaining and increasing that mineral inventory. And that's what creates that multiplier effect. So we have unparalleled optionality and growth, large existing mineral inventory, new discoveries that will demonstrate with a budget that we have of $32 million that we can increase resources improvement and probable reserves. Very robust growth, lower costs, even more robust growth. In the financial measures, but I can't leave this presentation without discussing risk. So someone said to me over a dinner last night, I wish that we could take the asset that we have. He was referring to his company and move it to some other jurisdiction. Well, you know what, that technology hasn't been invented yet. So we have to live with the jurisdictions that we're in and living with the jurisdictions that we're in. We have to deal with political risk and how do we manage through that political risk? In our case, Molly introduced a new mining law last year and we have to accommodate to that new mining law. I'm really happy to say that we did. We've entered into a protocol agreement. We were the first of the companies in Mali to enter into that protocol agreement of how we comply with the 2023 mining law with certain derogations and reductions in royalties that allow us to be able to deliver value to our shareholders. We were the exception at that time since then, other companies have delivered similar terms. That's now become the rule, economic risk mitigation, delivering improvements to operations. We entered into that power purchase agreement that I mentioned with relation to Kmo and we're just about to complete that gold prepay and stream that fully finances the development of Koc. We want to make sure that we've got social license to operate and technological technologically. We wanna be make sure that technically, we want to make sure that we're competent, advancing recovery methods at Sariola when we inherited these assets. When we completed our due diligence. The conclusion in the feasibility studies was 75% recovery. And we looked at that and said that's nonsense. We think we can do better than that with fine grinding alone. We can take that with a modest additional capital to at least 80% and we think we'll be able to take that recovery to 90%. So what does it mean? Then on a production platform of 350 to 400,000 ounces, if you get another 15% recoveries, go straight to your bottom line on production, straight to your bottom line on costs. And in the few moments that I've left, let's look at the valuation on the left hand side, I'm using what is in consensus now that that's the gold price that declines to 1950 per ounce. I personally think that that's nonsense, but that's where the market is at. But even then we have a $3 billion valuation. If we use 2.4 billion $2400 per ounce, we have a $4.8 billion valuation. Enterprise value to attributable minimum reserve is $65 per ounce. And we're trading at one time. Our e we certainly think that there's upside in the share price. So how do we unlock that upside? Clearly? One of the the critical path is to deliver on remark. And so what we're showing you here, we're committing to this schedule for development. Now, remember, we're almost at the end of 2024. So we're one year away from mechanical completion and roughly 15 months away from gold poor and start up of operations. That Gold Triangle is where we expect to be to get that 175,000 ounces of production in that partial year 2026. And I wanna leave you with an important message relating to value multiples and value comparisons. You are aware of a deal where one company is agreeing to buy another Anglo. Gold is agreeing to buy sentiment. And so we looked at that and said, how does that compare to our chromebook asset? They're comparable assets. We have more production, lower cost, greater cash flow. But if we use the same multiples that are used in that purchase, then we can justify a value of up to $2.8 billion for this asset alone. We then looked at it and said, Lundin go, that's a really smart company. They've done a great job, Ecuador, Ethiopia as that, that wasn't well understood a jurisdiction that was not a mining jurisdiction but soon to become a mining jurisdiction. So what did they do? Were they financed very similar to what we're doing with the gold prepay and stream and what has happened to their stock? They've gone to 1.35 times net asset value and an equity value that is delivered 344% returns. Now, if we start from our 0.5 times that we're trading at net asset value, you can see where the upside is in the company. So why are we trading at that discount and what have we done to deal with it? So, stock market liquidity, we're tackling that. we can now trade over the counter in the United States. We will soon be entering into indices. We will be able to get more liquidity. We're already beginning to demonstrate that a comprehensive financing package for Kuk, we've already given indication of where we expect to be and we expect to close that very soon. And we've navigated the geopolitical and fiscal uncertainties in particularly Mali, we've been told that that's a hold back on people investing. They wanna know that there's certainty in that country. And now we're able to say that yes, there is. So to conclude this presentation, compelling valuation with a net asset value that is significant and increasing ebita that is significant and increasing and a valuation that will catch up to execution. We are a mid size company with a large cap profile. We have two assets that underpin this company that are assets that would normally be found in a much larger company than ours. That's Kook and Sariola. And yes, that is a wolf in sheep's clothing. I should have used a lion in sheep's clothing perhaps because we're in Africa. But the point is that we are hiding in plain sight as a high-quality company delivering high quality value. That should be, that is significantly bigger than our size and should demons. We will, will soon demonstrate a significantly better share price. So with that, thank you. Brilliant. Thank you very much paid up other questions. Now, we do have time for one question at the front here, please. So I don't think the microphone was on for the benefit of others. I'm being asked about the protocol in Mali and what was in some respects? What was the process to get us there and what was agreed to there was an attempt to fit one size fits all but this is very bespoke. We are subject to the 1991 mining law as are some other companies. Some other companies are much subject to the 2012 mining law. 2012 does not protect royalties. Certainly not to the extent of the 1991 mining law. And if we look at it further, we'd say that some companies have longer term exploitation permits that have already been renewed and some companies do not. Our exploitation permit was coming to an end this summer. It actually had come to an end. So we have to look at it sanguinely and we have to look at it responsibly and practically what can we do to comply with the 2023 mining law? Yes, it does mean more royalties. Yes, it does mean a payment there that we have to make to settle all outstanding disputes. But one that will not be painful to our shareholders and one that still delivers value. So, on the royalties, we've increased to a higher royalty rate. But what does it represent? It represents probably $25 million more per year in royalties. That's a lot. But we've also gone from a 19 $50 price for gold to $2500. There will be other opportunities for us to be able to negotiate something better. I think we haven't invested yet. We have to invest $60 million for the first phase next year and $390 million from 2026 to 2028. We'll come back to the question of what is a proper level. But where we are today is what we think is the responsible practical result that gets our shareholders the certainty that they're looking for that. We can move forward with this expansion. The tax rates are 30%. So the tax rates have gone from 25% to 30%. I don't know if I have time but how many people in this audience are Canadian? Yes. So those of you who put up your hand, how many of you are happy you can still put up your hand when the liberal government in Canada changed the capital gains tax and nobody's put up their hand. So these things happen, we get it, it happens in developed countries, it happens in developing countries. But this was a year and a half in the making. We're paying more tax. We can't disagree with that, but we also have certain offsets to that. And remember, we have a large capital investment that we have to make that we can write off, which means that we're not really paying taxes over an extended period of time. One final point on taxes, we do have a tax holiday for five, for the first five years of that larger plant. We've not yet negotiated and we don't expect to negotiate that away. We do have to deal with OC OECD rules on what is minimal taxes that can be paid, but that has not been negotiated away yet. Ok, brilliant. Thank you very much, Peter. Ok.


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