Prepared remarks
Hello, and welcome to the Galiano Gold First Quarter Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to withdraw your questions, you could press star 1 again. I will now turn the conference over to Matt Badylak, Galiano's CEO. Please go ahead.
Thank you, operator, and good morning, everyone. We appreciate you taking time to join us on this call today to review Galiano Gold's first quarter 2026 results we released yesterday after market close. We will be making forward-looking statements and referring to non-IFRS measures during the call. Please refer to the cautionary notes and risk disclosures in our most recent MD&A as well as this slide of the webcast presentation. Yesterday's release details our first quarter 2026 financial and operating results. They should be read in conjunction with our first quarter financial statements and MD&A available on our website and filed on SEDAR+ and EDGAR. Also, please bear in mind that all dollar amounts mentioned in the conference call are in US dollars unless otherwise noted. With me on the call today, I have Michael Cardinaels, our Chief Operating Officer; Matthew Freeman, our Chief Financial Officer; and Chris Pettman, our Vice President, Exploration. For this presentation, I will initially provide a brief overview of the quarter, Michael will discuss operations, Matthew will discuss financials, and Chris will highlight the exciting growth potential at the SAF and our ongoing exploration success at Abore. I will then provide some closing remarks and open the call for Q&A. Turning to Slide 5, here, we can see the team delivered another solid operational quarter in line with our expectations for the period. Let me walk you through some of the key highlights. Safety continues to be our top priority, and I am pleased to report that we recorded no lost-time injuries in Q1, extending our LTI-free period to more than 12 months. This milestone reflects the team's ongoing focus and commitment to maintaining a strong safety culture across the operation. Turning to production, the Asanko Gold Mine reached an important milestone during the quarter, marking its 10th year of continuous operations. Over that period, the mine has produced more than 1.9 million ounces of gold, or just over 190 thousand ounces per year on average. In Q1, we produced 34.5 thousand ounces of gold, slightly above the midpoint of our first half forecast. Our full year production guidance remains unchanged at 140 thousand to 160 thousand ounces. During the quarter, we executed a 4-year extension to our mining contract with Rabotec, who have been actively mining at Assassi and at Abore since 2024. This strengthens an existing relationship with a highly qualified domestic service provider and highlights our commitment to local content requirements in Ghana. Our balance sheet remains strong, and we ended the quarter with $115 million in cash despite increased stripping activities at Enkran and an impact of higher royalties. Including the $75 million revolving credit facility added in Q4, total liquidity now stands at approximately $190 million, positioning the company well moving forward. Exploration activities also progressed well during the quarter, with the team advancing work streams focused on expanding mineral reserves at Assassi and growing underground mineral resources at Abore. With that, I will now pass it over to Michael to discuss production in more detail.
Thank you, Matt, and good morning, everyone. Starting with safety, our improvement from last quarter continued into Q1 2026. We recorded no lost-time injuries and no recordable injuries. I am pleased to report that in March we reached 12 months lost time injury free. That milestone brought our lost time injury frequency rate down to 0, and our total recordable injury frequency rate to 0.11 per 1 million hours worked. Turning to mining, RTSI ramped up production in Q1 as planned, and together with Abore, we increased total tonnes mined by 9%. Mill feed in the first half of 2026 is planned from these two pits, Zaborre and Esasi. Ore tonnes mined increased 6% compared to the previous quarter. As the year progresses, strip ratios, especially in Abore, are forecast to decrease. That gives us access to more ore and allows us to preferentially feed higher grade material to the mill, supporting higher gold production in the second half of 2026. At Enkran, cut 3 stripping continued. Volumes mined increased modestly by 8% in the quarter, and we expect material movement to build through the year as additional equipment is mobilized to site. Now if we move to the next slide, I will walk you through our processing performance for the quarter. Overall, the year has started well. In Q1, we completed a substantial plant maintenance program, including relines for both mills and replacement of the primary crusher pitman. As a result, tons treated were lower, but as expected. Importantly, with the circuit optimizations we have implemented, throughput is now performing in line with expectations. Grades and recovery met plan or were better during the quarter. That translated into gold production of 34.7 thousand ounces and sales of just over 34 thousand ounces. We are well positioned to achieve the upper end of our previously communicated production range of 60 thousand to 70 thousand ounces for the first half of the year, and we remain on track to meet our full year guidance. So in summary, both mining and processing areas are performing as expected, and we are tracking well against our 2026 guidance. I will now hand over to Matthew Freeman to discuss the Q1 financial results.
Thanks, Michael. Good morning, everyone. As Michael outlined, we are pleased with the first quarter delivered in line with our plan. The continued strong gold price environment enabled us to generate record revenues of $166 million and cash flows from operations of $47 million. Our headline earnings numbers continue to be impacted by the losses on the hedges, but we now have only about 45 thousand ounces of gold left to settle. As production ramps up, these ounces will present a lower percentage of production allowing us to more fully participate in gold prices going forward. Adjusting for the unrealized losses on hedges to be settled in the future, we recognize adjusted net income of $0.11 per share. From a treasury perspective, the balance sheet remains very healthy with approximately $115 million in cash and the $75 million credit facility remains undrawn. Slide 9 illustrates our operating costs remained consistent period on period and have generally been well controlled by the site. As Matt mentioned, we are pleased to sign the extension to our mining contract with Rabotec in April, which provides some cost certainty over the next four years while being able to ensure strict compliance with local content requirements in-country. We have seen some inflation in recent months following the situation in the Middle East, notably on diesel. From the general assumption that this will be short term in nature, we are not expecting material impact on the overall cost structure of the mine in the full year 2026. Thus far, we have also not experienced any supply issues for consumables needed to operate the mine. CapEx remains focused on critical projects such as the tailings dam raise. We are also starting to invest in some of the village relocations that are required. So we expect growth capital to increase through the year in line with guidance. With respect to our AISC guidance, we are in line with where we expect it to be. Back in February, we guided all-in sustaining costs for 2026 as being between $2,000 and $2,300 per ounce, but noted that should the Ghanaian government implement the new royalty regime, it could add an additional $375 per ounce to the cost structure. I think everyone is aware the new sliding scale royalty regime was enacted in March. Where we sit currently with prices, the royalty rate is 12%. We were pleased, however, that the government did provide a marginal offset by reducing the Ghanaian development and sustainability levy from 3% to 1%. Now that we have certainty over the legislation, we have clarified the expectations reiterating guidance to between $2,300 and $2,600 per ounce. Fundamentally no change to what we previously outlined. The chart on Slide 10 clearly demonstrates the increasing royalty burden we have seen over the past five quarters, as a result of the significant increase in gold prices and then in Q1 2026 where we started to recognize the impact of the new regime. But it also demonstrates that the unit costs we can control have been consistently maintained and are very much levered to production. Such that as production improves over the next several quarters we expect this to reduce. We are pleased that our cash balance has grown to $115 million with AISC margin growing to $17.6 per ounce. As we look forward, the end of this year marks a real inflection point in cash generation. 2027 and beyond should see another ramp up in production and will be past the current hedge program, and therefore fully exposed to the price of gold. The company expects to generate significant cash flows to shareholders from this point going forward. And with that, I will turn the call over to Chris to run through the excellent exploration results we saw in Q1.
Thanks, Matthew. The year got off to a fast start for us in exploration. We started the 2026 Abore step-out and infill drilling program in the first week of January in order to maintain resource expansion momentum on the back of a very successful 2025 campaign and the release of the maiden underground resource in January. Drilling has progressed well with 11.6 thousand meters of a planned 30 thousand meters completed in the quarter with another 3 thousand meters completed in Amri as discussed in the company's press release issued earlier this week. Some of the headline results are shown here at the bottom of Slide 12, and I will discuss these further in a few minutes. The Assassi resource conversion drilling program was brought forward in the exploration schedule and was kicked off in February. This program is a critical pillar in the Galiano organic growth strategy. On the back of initial positive results from the first 2.5 thousand meters drilled in Q1, we have significantly increased the program to its full scope and budget in order to aggressively grow the open pit reserve base, ahead of the 2027 MRMR update. With support of senior leadership and the board of directors, the 2026 exploration budget has been increased from $17 million to $25 million. Assassi is the AGM's largest deposit with over 1.7 million ounces of inferred mineral resource and a reserve of 532 thousand ounces, and through an aggressive campaign to maximize near-term reserve growth will underpin Galiano's strategic organic growth plan for the AGM. Because of the amount and density of historic drilling below the current reserve shell, Assassi is uniquely positioned to quickly leverage elevated gold prices and deliver significant near term value to the company. Multiple pit optimization studies have been completed using this data across a range of gold prices. These have demonstrated that the deposit is highly sensitive to higher gold prices and that the reserve can grow substantially while maintaining strip ratios in line with the current reserve. As shown here in Slide 13, a long section through Assassi shows the potential impact successful conversion of inferred resources can have on the reserve shell at gold prices up to $3,000 an ounce. The amount of historic drilling also means that we expect to see very high conversion rates from this program as a large portion of the inferred resource is spatially bound by indicated material. I will show an example of this in a moment. I mentioned on the last slide, drilling got underway at Assassi in February. 2.5 thousand meters of the first phase of the program were completed in Q1. On the back of positive results from this initial drilling, the program has now been expanded to its full scope of 33.4 thousand meters. Production has accelerated at site, and we now have five drill rigs active at Assassi. On this Slide 14, we are showing an example of a cross-sectional view of a conversion drilling target zone in the central portion of the Assassi main pit. Inferred resources shown in red are spatially bound above and below by indicated resources shown in green. In areas such as this, we have high confidence in the model and our ability to convert a high percentage of these inferred ounces to indicated with a small amount of new drilling. This section also shows the impact converting these ounces can have in terms of the scope of potential pit expansions at higher gold prices. Increasing the open pit reserve at Assassi will not only provide near term value by unlocking quality ounces and tonnage that are currently undervalued, but is also a critical first pillar that will underpin Galiano's long term vision for a transformational life of mine plan that includes a future transition to underground mining. An expanded Assassi has the potential to be large enough to supply quality open pit tonnes to co-feed with higher grade underground material from Abore and/or Nkran well beyond the current life of mine. To that end, while we are growing the Assassi open pit reserve, we are aggressively working to expand the underground resource at Abore. I will discuss this in the next couple of slides. At Abore, we continue to be excited about the results we are seeing. We have now completed approximately half of the planned 30 thousand meters of drilling for 2026. The maiden underground resource released by the company in Q1 provided the baseline from which we are now focused on growing the underground opportunity at Abore. Q1 drilling was focused on infilling areas adjacent to but outside the current mineral resource, while also continuing to step out at depth to expand the known extents of the Abore mineralizing system. The image here on Slide 15 outlines the primary areas of drilling so far this year, and where results to date are likely to drive resource growth. Current step out drilling has intersected mineralization up to 180 meters below the existing underground mineral resource, while infill drilling has significantly improved continuity across key mineralized zones but also stayed outside the resource. Drilling below the main and south pit areas continues to confirm robust extensions of mineralization, both down plunge and along strike of existing ore zones. A new high-grade zone has been identified under the northern end of the Abore main pit which is open along strike and at depth, representing a compelling new target area for follow-up drilling throughout 2026. A more detailed discussion of these results is available in the company's press release issued on Monday of this week. Continued drilling success at Abore provides increasing confidence in the ability of the underground resource to become a key pillar of an expanded life of mine in conjunction with reserve growth at Assassi. In order to most efficiently delineate an eventual underground mineral reserve and test deeper targets, the company is progressing the early stages of permitting an underground exploration adit at Abore. Permit applications have now been submitted to the relevant regulatory bodies in Ghana and dependent on both external and internal approvals, our goal is to begin construction of a portal and decline in 2027. And with that, I will hand it back to Matthew.
Thanks, Chris. In closing, I would like to highlight the position of strength the company is operating from today and the deliberate steps we are taking in 2026 to drive additional shareholder value. Firstly, I am pleased with another solid operational quarter and encouraged by the momentum we are building, keeping us on track to meet our full year guidance. As production levels continue to improve, hedges roll off and the deferred payment is settled in December, we expect a meaningful cash flow inflection beginning in January 2027. Secondly, as Chris outlined, reserve expansion potential at Assassi is meaningful. The company has committed the required capital to execute the drilling program, positioning us to deliver a reserve update in early 2027. We believe these results have the potential to extend mine life well beyond the current eight years. Lastly, drilling at Abore continues to return encouraging results and support resource growth. In parallel, we are advancing permitting efforts for an underground adit to test mineralization continuity at depth, which represents additional upside. With these near term catalysts in mind, a brief comment on valuation. As shown in this image when comparing our African peers on an enterprise value versus mineral reserve ounce basis, Galiano trades at a discount despite operating in one of Africa's premier mining jurisdictions. When we layer in the reserve growth potential discussed today, this valuation disconnect becomes even more compelling, benefiting from being highly leveraged to gold price, a visible near term cash flow inflection point, and a clear line of sight to expanding mine life. Galiano is well positioned to deliver meaningful shareholder value in the near term. With that, I will hand it back to the operator and open the call up for any questions. Thanks.
Questions and answers
Thank you. If you wish to remove yourself from the queue, simply press star 1 again. One moment please for your first question. Your first question comes from the line of Heiko Ihle of H.C. Wainwright. Your line is open.
Hey, Matthew and team. I assume you guys can hear me alright. I am traveling, so there is a little bit of background noise. My apologies.
Yeah. We can hear you. Heiko, no problem. Go ahead.
Excellent. Cut 3 at Nkran, I mean, obviously, almost 5 million tons of waste, big, big operation. You mentioned that there is additional mining equipment that is coming. I mean, we are halfway through Q2 tomorrow. What kind of equipment has already shown up? What else is coming? And we will just maybe get a bit of an overview on what you see with efficiency gains at site, given that this thing is getting bigger and bigger.
Hey, Heiko. It's Michael here. Thanks for the question. We had a third fleet arrive in April, which was obviously after the end of Q1. So additional PC2006 triple sevens have been delivered to site. We still expect two additional fleets sometime this year. So we are expecting a significant ramp up. We will see ramp up, obviously, from the third fleet that arrived in April in Q2. And then Q3 and Q4, we will see subsequent increases in production along the lines of our expectations for the budget.
That is helpful. Again, as I mentioned, we are going to be halfway through Q2 tomorrow. And building on that last question a little bit, anything at site that should surprise us or even better phrase, anything that has surprised you in the last 45 days that may or may not be incorporated in our models quite yet?
No, Heiko. I mean, production certainly over the last few quarters has delivered to expectations. And as Michael just pointed out, the strip at Nkran, which is critical for us to deliver high grade ore in late 2028, is going to ramp up during the quarter as well. I mean, obviously, Matthew spoke a little bit about the royalties, and that was kind of forecast potentially occur in our previous disclosures as well throughout the quarter. We have kind of updated the market on that. Maybe there is, obviously, the diesel price situation at the moment is something that is affecting everyone globally. We do have supply in Ghana at this point in time that has not been negatively impacted on that front. With regards to costs, I think we are probably paying upwards of about $1.90 per liter at the moment in terms of diesel costs, but, you know, in due course that will come down, and the costs that we are currently paying have been reflected in our cash cost guidance update as well. So, there should not be any surprises from the diesel front with respect to costs.
Got it. And then just one quick clarification on the press release. It says there were four drill rigs operational at Assassi at the end of Q1. Did I hear you guys correctly that you have five rigs operational right now, so one was added between the end of the quarter and today?
Yeah. Hi, Heiko. It's Chris. Yeah, that is right. So at the end of Q1, we had four rigs at Assassi and we actually had three operating at Abore. We have since moved one of those rigs from Abore to Assassi. So we have five running at Assassi and two at Abore.
Got it. Okay. That is why I thought so. Just double checking. I will get back in queue. Thank you.
There are no further questions at this time. I will now turn the conference back over to Matt Badylak for closing remarks.
And again to everyone who dialed in today, thank you for your continued interest in Galiano. We look forward to updating you on our progress in subsequent quarters. Thank you.
This concludes your conference call. You may now disconnect.