TRX Gold Corporation (TRX) has revealed positive third-quarter 2024 financial results, with significant year-over-year growth in revenue, gross profit, and EBITDA, primarily driven by higher gold prices and increased production capacity.
The company's 2,000-ton-per-day plant is successfully ramping up, with current operations reaching between 1,700 and 1,800 tons per day. TRX Gold has completed its third mill expansion and is now concentrating on operational improvements and gold throughput increases.
Looking ahead, the company is preparing to initiate drilling in 2025 to explore further prospects in the Buckreef gold project. With strong operating cash flow and prudent capital management, TRX Gold is in a robust financial position, holding between $7.5 and $8 million in liquidity and remaining debt-free. Strategic M&A opportunities are on the horizon as the company seeks to enhance shareholder value and maintain its growth trajectory.
Key Takeaways
- TRX Gold reports strong Q3 financials, with significant growth in revenue and profits.
- The company's plant is nearing full capacity, contributing to increased gold production.
- Operational efficiencies and expansion of gold throughput are current focus areas.
- Plans to initiate drilling in 2025 to explore new areas of the Buckreef project.
- TRX Gold maintains strong liquidity and is debt-free, with strategic M&A under consideration.
- The company is enhancing its CSR and ESG efforts to attract additional investment.
Company Outlook
- Expectations of continued metric growth into Q4 and 2025.
- Plans to double throughput, impacting gold production and cash flow.
- The budget of $6 million allocated for plant expansion.
Bearish Highlights
- Analysts express concerns over low share price.
- Need for operational efficiencies in transitioning from oxides to sulfides.
- Increasing recovery rates is a challenge that the company is addressing.
Bullish Highlights
- TRX Gold has executed successful expansions and is seeing increased production.
- The company is exploring a joint venture with the Tanzanian government, which could lead to more jobs, royalties, and taxes.
- Positive government relations, with officials praising the company's operations.
Misses
- No specific figures provided for expected growth following plant expansion.
- Share price improvement is necessary to attract more investors.
Q&A Highlights
- Discussions on share buybacks, cash costs, and dividends.
- Focus on increasing operational efficiencies and shareholder value.
- Plans to increase visibility through trade shows and investor outreach.
In summary, TRX Gold Corporation is capitalizing on operational improvements and market conditions to bolster its financial performance. With a clear strategy for growth and a commitment to maintaining strong liquidity, the company is well-positioned for future expansion and exploration activities. Investors and analysts are keeping a close watch on TRX Gold's progress as it continues to navigate the dynamic gold market and enhance its position in Tanzania.
InvestingPro Insights
TRX Gold Corporation's (TRX) latest financial results showcase a promising trajectory, with a reported revenue of $36.72 million in the last twelve months as of Q3 2024, marking a 4.44% year-over-year increase. This aligns with the company's successful ramp-up to near full capacity in its plant operations. The company's focus on operational efficiencies is further reflected in its robust gross profit margin of 47.02% and its operating income margin standing at 23.56% for the same period.
Investors considering TRX Gold's potential should note the company's solid financial stance, as it holds more cash than debt on its balance sheet, an indicator of financial health and flexibility. Additionally, while TRX Gold does not currently pay a dividend, the company's net income is expected to grow this year, which could be a harbinger of future profitability and potential returns for shareholders.
For a deeper dive into TRX Gold's financial health and future prospects, InvestingPro offers additional insights and metrics. There are 5 more InvestingPro Tips available for TRX, which can be found at https://www.investing.com/pro/TRX. These tips could provide valuable information for investors looking to make informed decisions. To access these insights, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
Full transcript - Tanzanian Royalty Exploration BATS (TRX) Q3 2024:
Operator: Everyone, we'll just pause for a moment as participants make their way in from the lobby. 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, Kareen. And welcome everyone to TRX Gold Corporation's Third Quarter 2024 Results Presentation. As a reminder, all participants are in listen-only mode and the meeting is being recorded. After the presentation, there will be an opportunity to ask questions. So feel free to raise your hand and join us in the queue and ask your question verbally or simply write a question in the chat box. [Operator Instructions] And I would like to now turn the meeting over to Stephen Mullowney, our CEO. Stephen?
Stephen Mullowney: Yeah, thank you Christina for the introduction, and joining me this morning is Michael Leonard, our CFO, to go through our Q3 2024 results. We have a slightly revised and a new format to our presentation today. So we are going to thank Christina for that. And I hope all the participants on the call and shareholders enjoy the presentation this morning. And hopefully you don't quiz us too much on the questions, but there is not a question that we won't answer. So thank you very much. So Christina, you have the control of the slide deck today. Obviously, the disclaimer, we will get into forward-looking information, and I ask everyone to read that disclaimer. It's myself, Mike and Christina joining you this morning. So with regards to TRX Gold, I'd like to start off with this slide today. It's a journey. As everyone realizes and from our press releases, the 2,000 ton per day plant is currently in the wet commissioning and ramping up, achieving roughly between 1,700 and 1,800 tons a day right now, and will ramp up over the next couple of weeks into its nameplate capacity. This has been a journey since for myself, Mike and Christina, since 2021. Obviously, we refreshed management then, cleaned up the balance sheet the next year. And now we've successfully executed our third mill expansion. Where we're going from here is we're putting together a long-term business plan, as well as the drill bit will be turned back on in 2025. And we'll come to the market with what our forecast is after we get through our budgeting period over the next month or so for that 2025 year and the mine plan that's been put together for our particular year and what the ramp up is going to look like for 2,000 tons a day. Next slide, Christina. So operations, obviously we have a high margin, low cost, and what I consider a really good jurisdiction we're operating in. The focus in 2025 on operations won't be as much on expansion. Obviously I believe there will be more expansions coming, but there are a lot of what I'll call operational improvements that can be had to increase margins, as well as increase goal throughput through our existing plants. So the growth profile and buildup of the operations has been really quick. So now that leads to even though we're a low-cost operator, we should be able to be a lower cost operator as a result of some of the efficiencies that we believe are available in the expanded plant. So as everyone is aware, we've expanded that on time, on budget again, to 2,000 times a day. I'm really pleased with that and the property is really underpinned by a really good mineral resource that comes to surface that is mineable and straightforward metallurgy. And we believe there's a lot more gold on this property than currently in the resource statements and it's our job now to take the expanded plant and to attempt to try to unlock some of that mineral potential that is around the property. Christina? So I like this new slide and the reason why I like this new slide is it takes time to build this slide. If you look at from where we started a couple years ago to where we are now, these charts are starting to look pretty good and they're starting to have the right trajectory and you're starting to see the culmination of what we've done come through in financial and operational metrics. So we've, when I joined there was a test plant, now there's a 2000 ton per day plant and that's driven the financial metrics in order to get this thing into a cash flowing position. We haven't raised any equity in well over two years to do this. We do this with organically generated cash flow. Is this a little slower than some other operations? Yes, but it's a lot faster in other operations done on a cost effective shareholder accretive basis and doing it organically. And I, you know, we fully anticipate the, you know, similar type of approach in the future. So I'm very proud of the team and everybody that's been involved in this to get this growth trajectory on the right, in the right direction. And I look forward to increase in gold production, increase in the results going forward. So as I mentioned, there's been prudent capital management. You're starting to see this come through. Right now, if you look at the net cash that was raised after we came in and cleaned up the balance sheet and other liabilities, we've had almost two times invested into the asset, into that growth platform to generate the financial results and gold production that I mentioned earlier, while at the same time maintaining G&A expenditures. As we continue to grow, I think G&A will increase, but we want to make sure that the top-lines are increasing a lot quicker than any G&A increases. We will need more horsepower in certain functions at corporate and at site as this growth profile continues. So we can't hold it forever, but certainly it is not going to grow at the same pace as revenue and operating cashflow. Christina. So with regards to the Q3 2024 highlights, before Mike gets into the financial results, we had some good operating cash flow again, again really strong gross profit margins. Costs were up a little bit, but gold prices up more and continued with capital discipline. So it's important to get a sense of how we run this operation is we make sure that the expenditures that are spent on the operations are generated before they're spent. And so we are very prudent in doing that. We could advance drilling, for instance, a lot more quickly, but we need to have the cash flow to do that versus going to the markets and raising that cash flow to do the drill bit. So our focus in the last year or nine months has been really on the plant build. And the plant build to generate more operating cash flow in order to put in place a faster profile over the short to medium term. That has been the focus, that mill is now commissioned. And we are looking at utilizing that cashflow again and putting it back in the operations, both from an operational efficiency perspective, we believe there's a lot of costs that can be wrung out of the system, as well as on the exploration drill bit. Mike, anything to add to that?
Mike Leonard: No, I think you said it really well, Stephen, you've touched on it a couple of times. The capital management, prudent Capital Management has really been one of our calling cards and our primary area focus since the day we joined. The model was really, and you've heard it many times over for long time followers of TRX. The model was really to build a business that generated sufficient cash flow to enable value-accretive growth-based decisions, either through things like plant expansions, which you've seen, or exploration, which we've talked about. And you know, it's growth in a value accretive way while minimizing shareholder dilution, which I think we've done a very good job of demonstrating. So onwards, upwards from here.
Stephen Mullowney: And in this slide here, you'll see a picture of the new crusher that is, and it's darker ore going through. It says more oxide material than sulfide material in this particular picture, but certainly, you know, the crushing circuit is delivering currently. Next slide please, Christina. So with regards, you see some of the new pictures here. You see the new crushing circuit and a couple pictures. You see the TSF facility. The TSF facility will be expanded so we can get a couple more years capacity in that and a long-term tailings plan is well underway. As mentioned in our Q3 release, the production is now up. We are currently processing almost 1,900 tons a day and 116% increase in over Q3 2024. That's led to an increase in Gold production. The improved crushing capacity, there is a lot of crushing capacity here for further expansion or what I'll call operational improvements to increase throughput. And we are looking forward to this growth to really start to unlock the potential of the Buckreef gold project. So Mike, I think I'm going to hand it over to you to go through the Q3 financial numbers, please.
Mike Leonard: Sure, sure. Happy to. And thank you for everybody joining us and good morning. Buckreef did have a strong operating quarter, well focused on ramping up the mill to 2,000 tons a day. The operating cash flow continued to be strong at greater than $3 million for the quarter. We're up getting close to about $10 million year-to-date. So year over year over year, seeing significant growth in operating cash flow, which again we put back into the business to grow things like plant expansions like we've done in a very value-accretive and growth-oriented way. Stephen touched on the gross profit margins, continue to be very, very strong. We saw a gross profit of about 43% for the quarter. Year-to-date, we're over 40%. It again shows that this is a low cost, high margin project and demonstrates significant leverage to these record goal prices that we are seeing. Liquidity remains strong. You know, again, Stephen touched on this, but our focus was on building a plant expansion through a self-funded approach. We did that and preserved and maintained liquidity at just under $8 million in cash, positive working capital, and a debt-free balance sheet. So again, prudent focus on capital management. And again, most notably we built this plant on time and on budget through organically generated cash. So really, really, you know really keen focus on prudent capital management. In terms of leverage to gold prices, we touched on this. What you will have seen in our results is a year-over-year increase in revenue, in gross profit and EBITDA. Our year-to-date realized price, as most will have seen, is up almost around $2,300 an ounce. Last week I sold gold at $2,460, which again is a record price. So these are all record numbers as we all know, and again this operation is benefiting from it immensely as we grow across all the financial metrics. We touched on gross profit margin. We got revenues for the quarter of over $10 million. Year-to-date, we're up around $30 million. So again, year over year over year growth and benefiting from the larger plant and higher gold prices, EBITDA is growing, operating cash flow is growing, and we're continuing to use all that cash flow in a prudent capital way by growing this business and maintaining liquidity and preserving our balance sheet. And I'll just touch on it again. We have guided the market to a plant expansion of about $6 million, which is again, very, very low cost to grow a mill to 2,000 tons a day like we did from 1,000 tons a day. We did it on time and on budget using our own cash. So as this reaches nameplate capacity, Stephen touched on it, we are doing over 1,800 tons a day during wet commissioning. We expect all these metrics to grow into Q4 and certainly into 2025, which we'll update the market on accordingly. Back to you, Stephen.
Stephen Mullowney: Yeah, Thank you, Mike, for that overview. Next slide, please, Christina. So again, not to really repeat myself, it's as Mike and I have mentioned, we are reinvesting the cashflow for funding of growth. We will in the future look at strategic M&A opportunities, particularly things that have a similar profile to Buckreef and can be grown fairly quickly on a cost effective basis like has been done here. We do, as I mentioned in several periods have capital programs in the near term that will drive efficiencies in the operations. That's both on the mining side, as well as on the processing side. And you will start to see some enhanced CSR and ESG disclosure and programs in place. And this is necessary in order to reach all investors. I'm a firm believer that more demand for an investment, hopefully to higher the price. And so we need to have our disclosures like other companies in this regard. And so that is well underway. So all-in-all, the operations are operating as we expected. And, you know, we are pretty confident in what the future lies at Buckreef and the growth profile that we can get. So with regards to the next slide, the drill bit is anticipated to go back in 2025 in a much larger way than it was in 2024. The focus will be on the Northeast and the South and on the main zone. You see those two stars there. In 2023 and 2024, we drilled out extensions to those zones. They need to be infilled in order for that to go into resource categories. Also down below the main zone pit, there will also be some infill drill program there and obviously looking around our property the Anfield zone, we have some holes in there as well as the Eastern Porphyry which we started to mine on the Eastern Porphyry. So stripping is happening now at the Eastern Porphyry. We did a grade control program there. That oxide will start to go through the mill and we'll be looking at the infill of that zone and get a much better handle on what we really have in that Anfield zone over the next year or so. So those are the high priority targets that we have for 2025. It's pretty easy to explain, which is good, and we're going to keep our fingers crossed that there's going to be a lot more gold there than we anticipate. You always have to have a little bit of luck in this, but you got to go nowhere to look for the gold in the first place, and we're pretty confident in it. Next slide, Christina. With regards to share price performance, as everyone is aware, and everybody asked me, we were kind of, I would say we're more in an oscillating zone between $0.40 and $0.45 at this period of time. I think the increase in cash flow from the expanded plant, as well as a successful drilling program should hopefully start to move the stock price out of this zone. We are debt free. We have around $7.5 million to $8 million of liquidity right now in cash on our balance sheet and with an increasing production profile. So pretty confident that hopefully we can start to get out of that oscillating range and into something that's more significant. With regards to in summary, again The Buckreef property is a good property. It has a lot of gold, good grades, minable, able to process it fairly in a straightforward fashion and grind crush CIL operation. It's high margin, we are increasing production. There's significant resource in the property. We know and feel confident in where we're going to go drilling and we're going to continue to reinvest the cashflow from the operations back in to the operations to grow it in order to get an increase in shareholder value. So on that, I would like to hand it back to the moderator and start the Q&A process.
Operator: Thank you, Stephen. 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 the question queue and ask your question verbally or write a question to submit your question in writing. When you're introduced, you will see a prompt on screen and you should click continue to confirm that you're ready for your line to be opened. [Operator Instructions] Our first question is from Mike Niehuser with ROTH Capital Partners. Please go ahead.
Mike Niehuser: Hey, Stephen. Had to get off mute there. I really I think this is kind of an exciting time. I think the current quarter is one of transition but it appears by all the [weeks] (ph) I can see is that it's going to stabilize at a higher level next quarter. So you look -- do you view this current quarter that we're now in as basically a transition to stability?
Stephen Mullowney: Yeah that's a good, that's the way we describe it internally Mike. It's a transition stability obviously the fourth quarter won't be the run rate quarter because you are going from the 1,000 tons to the 2,000 tons over time within the quarter, but certainly it's a transition to higher gold production, higher operating cash flow, and a better growth profile for the business. So yeah, I think you phrased it really well.
Mike Niehuser: Okay and it looks like you're still getting good recoveries. Do you have any comments on as you're moving from oxides to transitional ores or sulfides in terms of what you're seeing distinguishing recoveries or you got the crushing figured out with the fine sides to be able to have some confidence going into the sulfides with satisfactory recovery. Kind of a long-winded question, but I think you know where I'm going.
Stephen Mullowney: Yeah, I know exactly where you're going because we look at this on a weekly basis. Right now you're in a period where obviously in any mining operation sulfides are harder rocked. Typically you don't get the same recoveries as oxides because it is harder to grind it down to the size that exposes the gold to the cyanization process. With that in mind, what you have is a balance between throughput and recoveries to maximize revenues and profits. And so we're in that sort of phase now where we will look at operating efficiencies to increase the grind size in order to increase the recoveries on a cost effective basis. So there's certain, you know, typically you would see in sulfide operations either a HIGmill or [Sag-D] (ph) mill on the front, that will get evaluated over time. And also you may get evaluated over time a thickener on the back end as well. So these are sort of some of the operational efficiencies that we really need to look at to increase that recovery rate. Really, what we saw in our MET studies and what we continue to see, it's about grind size. And obviously, the finer you grind it, it's a little bit more expensive to do that as well. So we need to go through and figure out what is the optimal throughput and optimal recovery rate to maximize profit. That makes sense?
Mike Niehuser: Yeah, great answer. So you're still learning and that's good to see. With the higher throughput, are there going to be anything you're learning you can share about which expense items are going to be variable or where you might be able to make it up with the increased throughput. Not all things go, there is the variable and the fixed cost, but it seems like it's more exciting to have the margin expansion from operating expenses than the gold price, [strangely] (ph).
Stephen Mullowney: Yeah, no, I'd agree with that. So if you look at our cost profile now, the largest cost is mining. And we've been lucky in the way we've put together this business plan for growth, to be able to utilize a lot of Tanzania labor and contractors. But that is more expensive. So we don't have the equipment fleet that other miners would have. That will be some mills looked at over time to supplement the contract mining fleet is having our own mining potential. You know, there's equipment being delivered, I believe this week or next week, Mike, in that regard.
Mike Leonard: Yeah, that's right.
Stephen Mullowney: Correct. So, you know, now we're going to start to build that up a little bit better. We're in a position where we can do lease to own on a lot of that equipment. So you'll start to see that. That also helps us on the construction costs. So we utilize a lot of contractors for constructing of tailing facilities and earth moving and those sort of things. So we'll start to do a lot of that on our own going forward. So that helps reduce the cost profile. Obviously, you know, 1,000 to 2,000 ton per day plant you get efficiencies just by throughput. The labor doesn't really increase that much. We need to look at more efficient ways of utilizing the grid and the gensets by putting in place battery packs for continuity of power and things of that nature. That's all getting a look at. And then if you can increase your recovery rates, then that drops down as well to the bottom-line. So there's a lot of these sort of efficiencies that are starting to be looked at. We haven't had the time. You only have so much bandwidth and human capital to really drive that. So we need to, we've been focused on building for the last two years. So we just need to step back from building and look at -- looking at the operations to increase efficiencies and then build again.
Mike Leonard: Well, and Stephen, I might just make one comment for Mike to add to that. You certainly touched on it, but the synergies from this larger plant will be quite significant around things like processing cost per ton. Where you will have seen in the key stats, Mike, that we've been up around $25, $26, $27 a ton processing. And you'll expect to see that end up, perhaps not quite half, but you're effectively using to Stephen's point, the same labor force to do 2,000 tons a day that you would have to run the 1,000 ton a day plants. So that will come down significantly and you'll start seeing some better margin out of the processing plant as a result.
Stephen Mullowney: Yeah, G&A, all that stuff gets covered at site. That doesn't increase, right, from higher through.
Mike Niehuser: Another good answer, both answers. Two more questions if I could. It looks like, you mentioned M&A, but I'm really sensing that after listening to your answers that the money is going to get spent on de-risking and further refining recoveries with capital improvements possibly or with exploration. So really the money is going back into the project just to sustain that level and potentially be able to expand into the sulfides if you get the right recoveries. So that seems where the real opportunity is to get to where you want to go. Is that close?
Stephen Mullowney: Yeah, so the struggle is when you look at M&A, do you find a better opportunity than what you have in front of you? Just leave it at that.
Mike Niehuser: Well I think fair enough, I guess that leads to the second question is that with the safety record and the community work you are doing, it is all significant and real. It seems like the government relations have got to be good and that opportunities are going to come to you because you've earned them is that too much of a softball kind of question or because I really sense that there's an opportunity for some kind of negotiation with the government that might actually improve upon the current agreement that you have. Do you care to comment on any of that?
Stephen Mullowney: Yeah, look, I can comment on that because it is in the present Tanzania. We have at the earliest of stages started dialogue around a joint venture agreement with the government with the goal of increasing jobs, royalties and taxes for the government, obviously, and on our end, making sure that we have a reasonable economic arrangement with the government. So those are at the earliest stages. I can't comment much more on that -- than that, but you know, that is something that is out there as well. So the government relations side of things are very good. We had a large government delegation on our site, probably twice in the last six months. So, and when the politicians want to show up and praise what's going on there, then you are going to be in good stead.
Mike Niehuser: Well you're really manufacturing producing a lot of credit to go around, so why not? Good answer again, fair enough, and thanks for taking my several questions and congratulations. Thank you.
Stephen Mullowney: Thanks Mike.
Mike Leonard: Thanks Mike.
Operator: [Operator Instructions] While we're waiting to see if anyone else wants to join, I'd like to hand it over to Stephen Mullowney to take us through questions submitted in writing.
Stephen Mullowney: Yeah, okay. So let's see if we have any questions submitted in writing. The first one is with regards to -- have we considered any potential taking profits and share buybacks? That's an interesting question. I think we need to see how much cash flow is going to be generated. We have a good sense now, but we need to get through a budgeting process and then look at how it looks long-term before we look at a share buyback program to shrink the share base, the number share base. But certainly, look, I think I'm of the view that -- if there are opportunities to increase shareholder value, which is the increase in share price ultimately, it would have a look at it. The liquidity obviously of small caps in the United States market is not as robust as it was a couple of years ago and we're not immune to that. And so if there's an opportunity to increase shareholder value, it would be something to be looked at. But I think right at this point in time, in the short-term, there's more benefit to increasing the profits and the operational efficiencies at Buckreef with that cash. I hope that answers the question. Next question is, so the next thing gets into recovery rates and I am on the sulfides versus the test run. And obviously the rates that we're getting in the plant are different than what it was in the test run. So in the test run, the ore was grinded much finer than what we are experiencing in the operations. And that's why you have to hire recovery rates. It's all about grind size. As I mentioned, we need to go through and analyze what is the ideal recovery rates, whether it's 85%, 86%, 82%, or 88% versus throughput levels to maximize profits. That is something that we'll be looking at over the next little bit in order to determine what the next business plan is and how we develop this milling asset. So it could mean that we put a HIGmill, or a Sag-D mill on the front or could mean that we just expand it again. We need to get into and work with our consultants and people on site to determine what that ratio should be. Cash cost of $1,100 an ounce. Yes, there is a difference between what we had as guidance and what we have experienced. And in the last year, we've experienced much more rain than anticipated. So mining costs are a little higher. We've also have experienced a different mine plan than originally anticipated. The ore hasn't gone anywhere. So we've had a little bit lower of a grade profile than we originally anticipated in this year's operations. Now, obviously, we'll go back and get that other grade ore or higher grade ore in the future. So that has all led to the higher cost than what we originally had anticipated. So all of those sort of factors, Mike, anything to add to that? Because you're really on top of that as well.
Mike Leonard: Yeah, I mean, I would also maybe just add, Stephen, that you touched on it. Because the mine sequence was slightly different than what was originally envisaged at the start of the year, because of things like rain and equipment availability with our mining contractor, we ended up encountering a higher proportion of sulfide ore as compared to oxide ore than was considered in the original plan. And what you're looking at is harder rock effectively that requires additional drill and blast, for example in the mining. It's harder on some of the mining equipment. So you end up with more maintenance, for example, in terms of throughput through the mill, it requires more reagents and grinding media and consumables. So you end up with, to your point, a higher mining cost per ton and a higher processing cost per ton than they're originally envisaged. So hence the reason for the adjustment to the guidance figure on the cash cost number.
Stephen Mullowney: So the next question is, oh I love this one, is the fair value to derivative liability. So when we recapitalized the company, well over two years ago now, we needed to take out warrants. So that derivative liability is related to those warrants. It gets mark-to-market every quarter. Sometimes it works in our favor. Sometimes it works against us. We're fully aware that there's even a significant part of the US Market that will trade particularly Algos and financial players on EPS numbers, et cetera. And that has an impact on that. This will be an expense or income item that will dissipate over time as the warrants get closer to maturity. So we're fully aware of it. We don't like it either, but it was a necessary evil in the recapitalization of the company at the time.
Mike Leonard: And I can maybe just give a very, very, I won't get into all the Black-Scholes inputs that go with the valuation, but importantly this is a non-cash adjustment, plus or minus. It will be settled with equity of the company if and when they're either exercised or expire. But in summary, the higher the share price, the higher the liability on the warrants, and consequently the higher the loss. And if the share price goes in the wrong direction and goes down, you end up with a gain. So it's been variable as we all know with each quarter, hence the pluses and minuses, but it's all non-cash and perhaps something we look at for a future non-GAAP measure and adjusting it?
Stephen Mullowney: Yeah, it's something that we've had discussions with our warrant holders, but they won't allow us to deal with the warrants at this point in time. That's all I'll say. With regards to the last one, I get asked this question of dividends in gold or cash or gold all the time and is this something for in this era? I think Mr. Sinclair was a gold bug. I'm a gold bug. And I think when he was envisioning these sort of statements, his vision of gold price is a lot higher than the current gold price, which makes declaration of dividends in cash and gold a lot easier to do. I think something in the future is certainly something of consideration. I believe there's other ways, and I answer this question the same as I always have other ways to create shareholder value in the short-term than a dividend in cash or gold at this period of time the operational efficiencies. I think are one thing to look at. I also you know, we haven't done enough analysis on this, but the question that was asked earlier in share buybacks may have a -- may or may not have a better impact that would need to be assessed against that sort of consideration of cash or gold but in the short-term. I don't anticipate a dividend in cash or gold.
Operator: Stephen we do have another question from the phone lines if I could introduce them. The next question is from Craig Sutherland with Conceptual Solutions. Please go ahead.
Craig Sutherland: Hi, good morning. How are you?
Stephen Mullowney: I'm doing good. How are you, Craig?
Craig Sutherland: Doing great. Thanks again for the update. It sounds and looks like everything is going very well. Most of the questions that I had already been answered, but I do have one particular because obviously share prices with the shareholders are concerned with as they should be. My question is really focused on if we are doing all the things what you're doing correctly it appears; cash flows increasing, productions increasing not taking on any other debt. It's a great story. You've got a 20% rise in gold price point to point from this point last year, but the stocks basically flat or slightly negative. Volume has not picked up a whole lot. So my question with that being phrased is I know you're focused on building the company which I appreciate and you should be. However there also has to be a component of visibility. I know you've done some trade shows and some things like that. But what specifically is the company doing in talking to analysts and getting that type of visibility? Because there's something missing because the story is building such great momentum, such great traction, but it's not being realized. So in your meetings with analysts or whatever it is, what are they telling you that they need to see to make recommendations, to pick you guys up, to give that visibility to the market?
Stephen Mullowney: Yeah, so that's a good question. And I think you know, this is a journey as well with regards to getting the story out there. Part of the thing that is starting to resonate with them is we've actually done what we said we're going to do. So if you look at this even a year to two years ago, we would talk to analysts and institutional investors and they would have a smile on their face not really believe us. Because this is unfortunately in this an industry where there's been a lot of disappointment. I'm going to just say that in an industry perspective, particularly around putting assets into production and growing them. If you look over the last couple of years, not a lot of great stories out there in this industry. So it is a [doer] (ph) industry and we'll invest afterwards. So you know, basically, do as you say and then we'll consider you. So we're starting to see that. I even look at the number of participants on this call versus what we had two years ago and it's probably triple. So, you know, the story is starting to resonate more and more, we are picking up on trade shows and we will also start to pick up on reach out to institutional investors and retail conferences. Now that we -- as Mike said earlier, it's a transition quarter. The company is in a lot less risky of a situation. It will now hopefully start to appeal to a lot more investors than where it was 18 months ago.
Craig Sutherland: Yeah, no, and I appreciate that too, because if you were to take the list of companies of the same size doing the same work, I think the field would be extremely small, if any that would have the same profile with no debt, positive cashflow, and a resource that's continuing to expand. But again, I want to go back. Have the analysts said anything to you? Is there a certain amount of sales net that they're looking for? Is there that sweet spot that as the story's unfolding, you're doing what you're saying? Is there like, we want to see, once we get to here, then it's, that's go time for us or, you know, there has to be something that is coming back to you guys that you're building towards.
Stephen Mullowney: Yeah so if you look at it okay you're also looking at any investment advisor universe to change in what they could put their clients into. So one of the things is that we get constant feedback on is just the fact that the share price is $0.45 or considered a penny stock. So that's one thing that needs to be looked at over time and they increase that and make sure that that gets to a point where it's investable for that sort of crowd. Then from the institutional perspective it's around market cap and size and one of the things that we can do that is continually grow the financial metrics in order for them to say, okay, this is such a compelling investment. So we had a conversation this week with an analyst that was starting to look at free cash flow yield to share price, to market cap. And our metric there, when they said 2,000 tons a day, your metric is way out of whack with the market. Because the market, for instance in a large miner will have a free cash flow yield of Mike, I think the number was around 70%, which ours would be significantly higher than that. So it's certainly starting to resonate on those sort of financial metrics. One thing that is dissipating a little bit is the Canadian market for instance, focus on amount of ounces, whereas the US and European and Asian markets will focus more on free cash flow. So we are predominantly traded in New York and most of our shareholders are US shareholders. So our focus has been on those financial metrics. And I hope that we'll start to see the rerates. I also think that if we can get to an economic arrangement with the government, that makes more sense. Yeah, we get the benefit of that as well. That is a drawback as well. There's no doubt about it. That 55%, 45% is a drawback. But that is for us to tackle.
Craig Sutherland: Thank you for all that. I guess one last touch point, if you could, and it was already brought up, I think Stephen may have asked that. This is either the third or fourth call in a row that you've mentioned M&A. And you did a nice job of kind of talking without talking about it. And I'm trying to ask the question respectfully and in the way that you can answer it. From an M&A standpoint, are you referring to us acquire, you said of like properties? Well, there's not really a whole lot of like properties in the general area that where you're at that I could see. So is this something that you're looking to possibly do M&A with smaller ventures for us to acquire them? Or you -- and I've asked this on a couple other calls, are there larger properties and mines that we want to, how do I say it play with?
Stephen Mullowney: Yeah, so look, when I look at M&A opportunities, it's -- there are opportunities more than you would think of, not with the [share] (ph) resource numbers, but, you know, similar opportunities to get assets into production fairly, quickly. There's more of those than you would anticipate, and I would say that they haven't been as prudent on capital management, particularly capital structure. And but it takes time to get through the social issues of the fact that there's probably not a lot of equity value there yet, but the value is held by other holders, say debt. And you've got to wait for those opportunities to percolate appropriately. There has been interest in Tanzania, obviously. Perseus acquired OreCorp, which is around 30 kilometers away from us, for a couple hundred million dollars. And there is people more and more looking at Tanzania as a safer investment jurisdiction than what it has been in the past. So ultimately, we would prefer to be an acquirer and do similar things that we've done at Buckreef, and we think we can do that in the future.
Craig Sutherland: Okay. I appreciate that. Thank you guys so much and continued success to all of you.
Stephen Mullowney: Thank you.
Mike Leonard: Thanks, Craig.
Operator: The next question is from Stephen Reiser with Family Office. Stephen Reiser, your line is open.
Stephen Reiser: Okay, great. Can you hear me okay?
Stephen Mullowney: Yeah, I can hear you. How are you doing, Steve?
Stephen Reiser: Good, Stephen. Hope you and everyone on the team is doing well. Great. Firstly, congratulations on the excellent achievement in terms of this third expansion of the plant. Certainly it looks like an inflective moment in TRX history and the fact that the team has brought it in on budget, on schedule, and managed to avoid capital dilution. All these are things that really are great indicators of credit in the TRX team and the performance to date. So much accolades in that regard. What I wanted to do is just ask a couple of questions, one of which is building a little bit on Craig's discussion, is he and you were talking about Stephen, ways to free up the share price or liberate the share price of TRX from some of the current constraints. Is the team planning to do more along those lines regarding the story on Tanzania, because I think one, there is still a level of investor apprehension around Tanzania generally, but as one looks secondarily at Tanzania, there actually is a pretty good underlying story to tell in terms of significant economic growth, the fact that they are in a strategic location within Africa, that they've got the second largest port, that in fact they're creating a more friendly business and investment climate, that there's been a new investment act promulgated. So to the extent that the company can, enriching the understanding on Tanzania would help to [evade] (ph) investor perception. So I wanted to get your views and thinking on that dimension.
Stephen Mullowney: Look, obviously there's been a lot of press and a lot of things happening in Africa in general, particularly West Africa. There's a lot more gold miners in West Africa than there is in East Africa. Certainly what we're hearing from analysts and investors is East Africa is now perceived to be less risk than West Africa. People have been able to deal with [indiscernible] before in the past in West Africa, that doesn't scare investors as much. It's the other geopolitical influences in West Africa that are becoming problematic, particularly the Russian influence from a Western investor perspective. So that's part of what we're starting to see in East Africa and what we're being told. Also, you are right, since Mama Samia became President, and there has been a switch in investor sentiment, but that started really before she came in. They are out searching for more and more Western investment. The Perseus acquisition of OreCorp is interesting as well. And the fact that they'll spend probably over $0.5 billion to put that into production. And that's the plant. Also the life zone metals that is in the -- Western United States, I believe that has a market cap of, you know, $300 million, $400 million, or it might be even higher today in the nickel property that has BHP as a cornerstone investor into that property. It leads well as well. They're looking for investors into the natural gas space and that sort of thing. The buy world, I believe, just took over the port operation. So there's a lot of these sort of things that are percolating around that are certainly lean into us. But again, what I say is, all this stuff, we go and talk about it, but it just takes time, right? It takes time for all of this sort of things to come to the surface and to all come together. And we're starting to experience it, but it just takes time. I've learned to have a little bit more patience in this role than I had in certainly in professional services where things happen a lot quicker.
Stephen Reiser: Understand that makes sense. Stephen, I do agree with you on the time dependent element. Certainly the more we see periodically even on the website about the -- what we consider an improving situation in Tanzania, I think the better the company's posture in the marketplace will look. The second element or second question we wanted to ask is, in terms of the excitement around the expansion of production to 2,000, or throughput to 2,000 tons per day, I recall that like in 2023, you all generated around 20,000 -- 20,700 ounces of gold, $17 million in operating cash flow, if memory serves correct. As one looks out over the next 12 months, just to get some early pro forma view of potential. Do you all have a view of what type of ounces of production we might expect to see over the next year and what type of operating cash flow we might be looking at over the next year now that the plan is nearing operation, the third expansion that is?
Stephen Mullowney: Yeah, we're coming out with it and we're currently within the budgeting process. So we do have a sense of that. Obviously the throughput will double and gold production is going to be dependent on the grade profile, as well as the recovery rates that are achieved from that throughput. So, you know, I have a goal in mind that I would like to see in those particular numbers. And I'm willing to say what it is today in the public realm because we just need to do a little bit more work to firm it up. But certainly, I think the direction-wise that you're looking at, it will be the direction-wise that we're looking at. Remember too that this will over time go up and down depending on grade because you can't move the rocks around just to get high grade first and then low grade second. You can only do so much of that. So the grade profile will be a little bit under, I believe, what we've experienced, say, last year. But we're still going to have healthy growth in gold production and margins and cash flow, extremely healthy.
Stephen Reiser: Okay, great. And last question, we've talked about 2,000 tons per day, but I recall from the recent news release that you are talking about potential, the grind capacity is actually higher than that significantly. I don't have the figures right on my fingers yet.
Stephen Mullowney: So the processing plant, the way the processing plant works is obviously in any processing plant you have bottlenecks and that's just the nature of it. Once you remove one bottleneck you got a new one and throughput capacity. So that's the crushing circuit, has more than 2,000 tons a day. And you want that to be more than your grinding capacity. So the ball mills are grinding, the crushers are crushing. And so we do have room to increase the grinding because the crushing is larger. Again, we will look at what's the most efficient way to increase throughput as well as recovery rates and get that balanced. We haven't done or completed that work at this point in time.
Stephen Reiser: Okay, thanks for the clarifications and continued good luck with the program.
Stephen Mullowney: Yeah, thank you, Steve.
Operator: Stephen that's all the questions we have from the phone lines. I will hand it back over to you.
Stephen Mullowney: Yeah, so thanks everyone for joining the call today. It's a good question. So I am very pleased with the questions. And we're available any time to answer any questions that anybody may have. You can pick up the phone or contact Christina. Her contact information is in the Investor Deck. This Investor Deck will be updated.
Christina Lalli: Stephen, I just want to quickly jump in. I think we do have one more question through text line just regarding shared dilution. I think the question is asking whether we expect to live any shared dilution in the near future.
Stephen Mullowney: Not in the near future. I think we made it. It's all cash flow from operations.
Christina Lalli: It looks like that was it.
Stephen Mullowney: That was it, excellent. Yeah. That was the easiest question to answer, thus for today. And so Thanks everyone for joining us. Continue to follow us and contact us anytime. And, thank -- we'd like to thank our shareholders for their continued support. And as I say in Tanzania, Asante Sana. Thank you very much.
Christina Lalli: Thank you everyone.
Operator: This concludes the meeting. You may disconnect. Thank you for participating and have a pleasant day.
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