Transcript: Superior Gold (SGI) - Turnaround Story Starting to Take Hold
Interview with Tamara Brown, Interim CEO of Superior Gold Inc. Superior Gold Inc. is a Canadian based gold producer that owns and operates 100% of the Plutonic Gold operations located in the world-class goldfields of Western Australia.
The Plutonic Gold operations include the Plutonic underground gold mine and central mill, numerous open-pit projects including the Plutonic Main Pit push-back project, the Hermes open pit projects and an interest in the Bryah Basin joint venture. The Plutonic mine has been in continuous production since 1990 and, having produced ~6 million ounces of gold, is one of Western Australia's largest historic gold producers.
- 1:44 - Company Overview
- 2:46 - Turnaround Success: Quarterly Results
- 4:29 - Setting the Foundations: Focus, Money Allocation, & Pace
- 10:49 - Future Growth & the Next Phase: Progress with the Open-Pit
- 12:57 - Candidates for the CEO Role: Why Doesn't Tamara Stay On?
- 16:23 - Exploration Plans & Budget
- 17:28 - Expectations for the Next Couple of Months
Matthew Gordon: Tamara, how are you?
Tamara Brown: I'm well, how are you doing?
Matthew Gordon: Very good. Spring is in the air. How are things there?
Tamara Brown: Very well. We've just come out of a quarter so everyone's happy at the end of reporting a quarter; you've done all that hard work and now you get to go back to the day job of working out what other great things are we going to look at?
Matthew Gordon: Yes, that's the reason for the call actually. I wanted to talk to you about some of those things because looking at the trends in the marketplace, Gold is in an unusual place - flat lining as they say. Before we get stuck into it, please give us that 1-minute overview of the business and I'll pick it up from there.
Tamara Brown: Superior Gold is a TSX listed Gold producer. We own 100% of the Platonic Gold operations in the heart of Western Australia, so a great mining jurisdiction with a big Gold ore body on top of it. It's produced around 6Moz in its history and has got a lot of life ahead of it. We bought this asset in 2017 from Northern Star and we are conducting what I would describe as a turnaround, with respect to getting the operation back and going. We've got a few different areas we’re focused on: there's an underground operation already producing Gold. We're bringing online new open pits. We have the opportunity to bring online a second mill and then obviously, also the opportunity to find that next big discovery. We're very busy, we have a lot of things we are working on and I am delighted to be here today.
Matthew Gordon: It sounds like it. We have had you on a couple of times before, and it's an interesting story to us because I love a turnaround story. But it's not just turning around operations on the ground, you've got to turn around people's trust in how you've got to where you are today. We've talked in the past about some of the things the company didn't get right. You've come in to restructure things and get things moving again. Now we're able to talk about some of those things, and the success of some of those things. Your quarterly numbers: can you give some of the highlights?
Tamara Brown: Absolutely. Since I've been here, we've been really focused on getting back to basics with respect to the geology and the mine, just putting in place the way things should be done, and as I said to you the first few times: it doesn't happen overnight. It takes a while to get traction. We've seen that, we have had quarter-on-quarter improvements but we saw what you might call a bit of a break out in Q1 with a jump in production level, and that absolutely starts to show that we have this asset, it can produce a significant amount of free cashflow and that's at these levels where we have a very low capex-growth profile ahead of us. I get excited about what tomorrow brings, but Q1: we saw production of just over 17,600oz, which is the best it has for quite a while here at Platonic. It’s the denominator story: with those ounces out, that All in Sustaining Cost/oz came down significantly, which is what investors really needed to see in order to start to build that confidence and belief in this.
Matthew Gordon: That's one of the basic numbers that they like to see because it's easier to understand and easy to compare against peers, likewise the increase in production - it's great. But in the context of the turnaround story, you can't just focus on early AISC numbers looking impressive, you have to do the basics to set up for the future. So again, remind us in terms of that turnaround story, where are you investing your dollars? Where are you investing your time to set up for a sustainable production level?
Tamara Brown: Great point, there are many layers to this onion. When I came in, it's very simple to say: our productivity levels are very low on our equipment that we have, they're in the maintenance bay more than they are operating for shareholders. That was a very early easy win where we said, let's invest some money into revitalizing that underground mining fleet. We brought on 2 new trucks and 2 new loaders, which has significantly improved that availability so the dirt is not sitting underground so to speak.
The next piece was that we bought back a Royalty on the property. We bought back a 2% NSR last year, which obviously paves the way for increased future free cashflow, and that was an important investment into the operation. I'm a passionate believer that if you can buy back Royalties, the assets deserve to put that money into the ground. That's the next piece: putting money into the ground. We got a third drill rig here, which is completely dedicated to exploration, and that's an important part of the story.
People say you just need to get ahead with your development, but if a mine is at a point where it doesn't have enough inventory drilled, you can't develop into it if it's not even drilled. The first step is drilling: increase the amount of drilling that you have with an ore body so that you can identify the places you're going to develop into etc. The drill rig has done an excellent job to be honest. To be transparent, in the first quarter, we put out a program where there were 7 holes, all 7 holes hit significant mineralization. That is a really positive return rate for their sand. When people talk about investing in the ground, that's exactly it: putting money into drilling ,putting money into development. We're doing both of those things and we're starting to see the benefits of that.
In addition to that, we are doing even more fundamental work with respect to geology. Here at Platonic, the geological ore body is quite complex. It has a system of parallel loads where the Gold folds and moves around. A geologist’s ability to interpret where it's going is challenged because they can't see under the ground. When I came in, it was one of the fundamental issues that I noticed. We have mined historically at platonic in and around 50% of our Gold outside of reserves and resources. That means that you have a reserve and resource, which is a model that estimates how much Gold is in the ground and then the miners come along and mine and they actually produce from that reserve, but also 50% of it is outside. This, by definition, the model wasn't predicting how much Gold has been here and that's for the last 30 years. That has been the piece that we've been most focused on, and it's a pretty simple process when you boil it down: it's informing the model with more information.
Historically, they will have included drill holes in the underground and they will have interpreted between this drill hole and this drill hole and said: the Gold continues between these 2 points, or I assume it does. When you get out there and you find that maybe that model doesn't predict it as accurately as you thought, you've got an issue and you can't manage your mine plan and your business as well.
Now, with the advances in technology, we have had the ability to incorporate all historical geological data. That's 30-years of face sampling, drilling, old pit, monitoring geological surface samples. All this data has gone into our database now, it is called 3D modelling, and we are now informing all of our mine planning, not all of it yet, but some of our mine planning with these improved models. Our plan is to do this across the whole ore body, and what we've found is that 3D models have structural alteration lithology: all the technical things that allow the geologist and actually the model to interpret where the Gold's going. It has improved our mine planning and our targeting, 2 very important areas that allow us to manage our business better. That's a lot of words around saying that we're improving the fundamentals of how we do geology and mining.
Matthew Gordon: I like the word fundamental when it comes to mining because it's based on truth; it's not about promotions or telling the story, necessarily. That's obviously significant as it's going to improve the likelihood of success. It also keeps the cost down – awesome, but all the smaller things that you were talking about doing there too, it seems almost too simple.
Tamara Brown: I think that the guys on site would tell you none of this is simple or easy. It's a lot of hard work. There's a lot of people involved in what I've just described. For example, putting this data face sample disks in takes hours and hours of geologists’ time. None of it just happens. It takes very experienced people, a long history of knowing the ore body, taking the new systems, the new technology, the new 3D modelling and incorporating those 2 things. It has turned a light on in the underground for us. This is a process that takes time. It would take us about 12-months to do this across the whole ore body, but from what I'm seeing right now, it is certainly better predicting where the Gold exists in 3 dimensions which allows us to manage our business better.
Matthew Gordon: You're starting to make Platonic sing a little, you have a long way to go, but you are starting. The next phase is open pit. Again, we talked about getting the fundamentals right and laying the groundwork down, where are you with that?
Tamara Brown: Our first open pit, Platonic East, comes online mid-year. We're on track to deliver that and that's obviously an improvement in that it is supplemental ore that we feed to the mill. It's a doubling of the grade, so obviously, there are more profitable tons going through that now, which is important. But I will note to you that that modelling thing I was talking about, doesn't just work in the underground, it actually helps us with these open pits as well. That technology or that improvement in our geological model will have added benefits throughout the operation.
Matthew Gordon: In terms of this quarterly, it's good, you need to keep doing it. To remind people, the last time we spoke at the beginning of April, your share price was at USD$0.64c. It is $0.80c today – a 25% Improvement. It's bucking the trend somewhat, not just mapping against peers in terms of how they're performing, but you're actually going up, which very few Gold companies are. That's good news. People are listening to this but they're going to need to see it next quarter, and the quarter after, and the quarter after that. The degree of confidence that you have - how would you describe that?
Tamara Brown: As I said to you last time, I'm not yet focused on the share price. They'll become a time when that is appropriate. I am focused on just doing what needs to be done at the operation, in the underground, with respect to our productivities, all of our availabilities, and the HR side. There's so much work to be done here before I can say: now she's operating as it should be, benchmarked against appropriate peers. We've got a big gap there. I do believe that we can pull out another 20% with respect to our productivity in terms of how much Gold we produce for the dollars we spend.
Matthew Gordon: Thank you. Here's the question I wanted to ask you: we've had so much inbound about the job that you've done on the turnaround. I know it is the beginning end of it and it has a way to go, but people are really impressed by that. They're saying to you: why don't you just stay on as CEO?
Tamara Brown: I appreciate that. I really do. I think it's because when I came in to look at this, the board said, tell us what it needs. It was very clear to me with a blinking light: how can you execute on this turnaround to the utmost efficiency from anywhere other than Perth? I am not that 30-year experienced operator that has done this many times. I can see from a business perspective what needs to be done, but I believe that bringing in an experienced operator as the CEO will simply elevate that. I'm not going anywhere. I'm going to be on the board, I'm going to be having input into the strategy piece, which I'm passionate about. Having an operator on the ground in Perth, I think, is that piece that just needs to be completed, then we increase the speed at which we achieve these deliverables.
Matthew Gordon: Where are you in that process? Have you found someone?
Tamara Brown: Yes. I’m happy to say. We haven't yet announced and finalized it so we can't talk about it, but I was very impressed with the quality of the candidates who saw the opportunity here at Platonic. There are a couple of things driving that: Covid has had a big impact on the mining industry with respect to where people want to work. We have very experienced people who are caught in locations that maybe they didn't want to be, it's not where their family is, and I have the great advantage of having an operation sitting in Western Australia where we have a significantly experienced workforce with respect to mining. Australians are very good miners. They're known as very good miners. You've got a situation where people want to stay home right now. They want to not be caught in 2-week quarantines, flying in and flying out of international operations. Someone that has the opportunity to come in, base themselves in beautiful Perth, Western Australia, where there is no covid, where you are operating free from all of the restrictions we have here in North America and Europe. And they get the opportunity to come in, be a CEO of an operation that clearly has a lot of upside. It has a big Gold system, all of the infrastructure it needs, and a very clear turnaround plan ahead of it. I found people are very excited about that. So the quality of the people are excellent and I know that shareholders will be impressed.
Matthew Gordon: You have had a choice of people, there wasn't any difficulty there, so the timing: are you looking to Q2?
Tamara Brown: I came in on July 31st, so I had a 1-year mandate and that's coming up. I think it's fair to say to shareholders that by July 31st I'll know what's happening with respect to the business moving forward.
Matthew Gordon: But between now and then, in terms of the turnaround plan, is anything changing? You're not having second thoughts about any aspects of what you put in place?
Tamara Brown: No, it was pretty clear to me that this little mine just needed to be run and invested in, and that's what we're doing.
Matthew Gordon: Just a quick word on exploration and budget - is that still good?
Tamara Brown: It's great. As a reminder for people, we put in a drill rig dedicated to exploration in the underground. It's a big system here, we've got a lot of infrastructure. We could facilitate a second drill rig, and the results certainly warrant it. By mid-year, in our plan, we have for the first time in many years, a surface drill rig coming in. Obviously, it is part of that main push back, the infill drilling. But what it gets to do is drill that mineralized mine all across the property. If your investors remember, we talked about it last time. That hasn't been done since Barrick days. We're following up on drill holes of 16g over 2m, 20 odd meters below surface. So for me, the opportunity to uncover both an excellent underground operation with exploration upside but a brand-new open-pit surface plan for shareholders. I think that has the ability to turn this story very, very quickly.
Matthew Gordon: It is May. July is not too far away. Are you going to save all your news until the new CEO is here or have you got more for us?
Tamara Brown: We're not stopping anything. There's no reason to be slowing down on what we should be doing whilst we are waiting for someone. Shareholders shouldn't be thinking that. Anyone coming in has bought into what the board and I see here, and they're already a part of that team in as far as understanding what we're doing. And if I ever needed to, I could consult with them moving forward.
Matthew Gordon: Beautiful. Thank you so much for the catch up. Stay in touch. Hopefully, we'll see you soon. I'm looking forward to news on all fronts.
Tamara Brown: Terrific. Thanks so much for having us.
To find out more, go to Superior Gold's Website.