Prepared remarks
Thank you for waiting, and welcome to the TRX Gold Corporation First Quarter 2026 Results Presentation. The meeting is being recorded. At this time, I would like to turn the meeting over to Stephen Mullowney, CEO. Please go ahead, sir.
Yes. Thank you, and thanks, everybody, for joining this morning. I believe it's Martin Luther King Day in the United States. And thus, you have a holiday. I think we got a little bit mixed up in that, but it's good to see a number of participants here today as well as we had really good participation on Friday on our virtual NDR with Renmark as well. So it's an exciting time here at TRX. We're going to go over our Q1 2026 results, which were really good. The results continue to improve the company's financial profile, working capital continues to improve. And Richard and team on site, Richard is joining us from Buckreef today, have been progressing very well on the expansion plans. As I mentioned and as the team has mentioned before, really, our business plan is quite straightforward. We have a robust asset in Tanzania, 1.5 million ounces, 2.5 grams a tonne. The business plan is to expand the plant in the next 18 to 24 months, increase production, which then helps fund the underground.
And then, we have an 18-year mine life between an open pit operation and an underground mine operation, all on the Buckreef main zone that's funded. Thereafter, we have some very prospective areas of the property, particularly Stamford Bridge, Anfield. Richard will also get into what we're finding on the geophysics side, and we're quite excited for the exploration side as well. And Khalaf will give a brief summary of our government relations side. So I'm going to try not to speak as much today. I have a very strong team. I have Mike Leonard, our CFO, here today. Mike, there we go. Richard, as I mentioned, is joining us from site, our COO. Raise your hand, Richard. I think everybody can tell who Richard is. He's got the orange shirt on. And then Khalaf is joining us from Dar es Salaam this morning. Good morning, Khalaf. So without further ado, so TRX at a glance, I gave a high-level overview.
We operate the Buckreef Gold project in Tanzania. We are in production, producing between 25,000 ounces and 30,000 ounces in fiscal 2026. That cash flow will enable our expansion of the plant, which will then be online with PEA for an 18-year mine life and the last 15 years are underground roughly. Richard will get into that today. We may be a little bit early on some of those items, but we won't overpromise as well. And we have 1.5 million ounces in the resource category M&I, about 2.5 grams a tonne. So I really want to focus on what we did in the first quarter and financial-wise. And I'm going to hand it over to Mike to go through Slide #5 with regards to what Q1 looked like, and he will be supplemented by Richard on some of the operational aspects. Go ahead, guys.
Terrific. Thank you, Stephen, and good morning, everybody. Thank you for joining us, particularly those in the U.S. on a holiday. As you would have seen, we did release our Q1 2026 results late last week on Thursday, we press released the numbers, and they were record results across the board. Yet again, starting right at the top on production. It was a record quarterly production quarter for us. We produced just under 6,600 ounces. That was a significant increase over the prior comparative period as well as even our Q4 results. We had indicated that over the first half of 2025, we undertook a Stage 1 strip campaign. And the idea was to remove overburden to access higher-grade ore blocks towards the back end of last year. What you would have seen is that we put through about 1.9 grams a tonne through the mill at higher throughput levels compared to the prior year. So, higher throughput, higher grade, and higher recovery, in fact, we recovered around 75% recovery for Q1 meant record production for the quarter.
And in terms of guidance, we'd indicated full-year production guidance of between 25,000 ounces and 30,000 ounces. Q1 was expected to be amongst the lowest quarters of the year. We do continue to access higher-grade ore blocks and remain on track for that production guidance of again, between 25,000 ounces and 30,000 ounces at a cash cost of between $1,400 and $1,600 an ounce. And in Q1, we came in at around $1,500 an ounce, right in the middle of that. You couple that record production with the record gold price environment that we're seeing. In Q1, we realized $3,860 an ounce, which was a record at that time. And of course, a few weeks later, here we are at over $4,600 an ounce. So gold continues to be very, very strong. We continue to demonstrate leverage to that gold price. And you couple a record gold price with record production and inevitably, you've got record quarterly revenue in our case of over $25 million for Q1 as well as things like adjusted EBITDA of over $13 million.
So we're demonstrating strong, strong cash flow, strong margins. And what we've been able to do, we've talked about this for a couple of quarters now, is basically take that free cash that we're generating, and we've overturned what was a negative working capital ratio early last year as we were in the middle of that strip campaign and have effectively recapitalized our balance sheet. So even relative to our year-ended August 31, where we had a working capital ratio of about 1.3x, we're up to 1.7x or about $15 million positive working capital at Q1, and that continues to improve. And amongst other things, we've been able to show an increase in our cash position to over $9 million, which is an increase relative to Q4, but we also continue to invest in the business. So we have significantly grown our ROM pad stockpile, which Richard can talk a little bit about in his remarks. But we've got over 22,000 ounces sat on that ROM pad stockpile, which is about 1.2, 1.3 grams a tonne roughly on average currently and a split between oxide and sulfide rock, which allows us basically to optimize what goes through the mill and also serves as a very, very good insurance policy for us to make sure that that mill feed is consistent and strong.
And material coming out of the pit is sort of prioritized relative to what's on the stockpile to make sure the highest-grade material is going through the mill. I guess the last maybe comment I'll make on the quarter. We do continue to invest in what Stephen talked about, the plant upgrade followed by the expansion, which once complete, will pay for effectively the underground development. During Q1, we used a lot of that free cash to put down payments on things like thickeners and elution plants and gold rooms and increased oxygenation, all of which is meant to help improve things like throughput and recovery, which will lead to higher production over time. So a very, very strong quarter, record across the board and certainly expect that to continue into Q2 and beyond.
Thank you, Mike. Now, let's move on to what I refer to as operational growth. I'll turn it over to Richard to provide a brief overview of our expansion plans and what investors can anticipate in the next 12 to 24 months regarding expansion and throughput. We are currently aligned with the Preliminary Economic Assessment, and our objective is to exceed its projections since we aim for a higher throughput. So, where do we stand on all our initiatives? There are many exciting developments, including Aachen reactors, ADR plants, confirmation and finalization of metallurgy, and progress on the SAG ball mill, flotation cells, and thickeners. There's a lot happening. Richard, you're on mute. Please go ahead.
Hopefully, how is that? You can hear me clearly? No, we're in the middle of one right now, which is why I asked. Anyway, in terms of the work we're doing at the moment, we are still heavily focused on upgrades to our 2,000 tonne per day plant. So right now, we're in the midst of doing a major upgrade and improvement to our crushing circuit. We've got more work lined up straight after that to move on to our mills and the power draw for the mills as well as the CIL circuits. We're installing a super oxidation system that will hopefully give us another couple of percent recovery. We've also made some major improvements this last quarter in the recovery areas, which Mike alluded to, and that's going well and is progressing again through this quarter. In terms of work towards the expansion, we have more or less finalized all of our metallurgical test work. We've done a full modeling in spec of the SAG circuit.
And for those people who may have read the PEA, we had planned to combine our existing 600-kilowatt ball mill with a SAG mill. And our modeling shows we're probably better to just invest in a larger SAG mill and make it a simpler circuit. So we're going out on price inquiry at the moment and full tender very shortly. And indications are that the lead time on that equipment is probably of the order of 7 to 9 months. The float plant and fine grind aspects of the expansion and the change in the process flow sheet have gone well. The met testwork was really focused on that, generally getting some excellent results in the lab and pilot plant with recoveries and mass pull, both better than expected. And our fine grind looks like we're going to optimize at about 20 microns instead of 15 microns, which again is a big improvement in energy expenditure and capital expenditure. So those aspects are going well.
On the water at the moment, we've got oxygen plants coming to site. So we've got ADR plant orders just finalized and under construction. So they'll be in towards the end of this financial year. I won't say we'll see much benefit from some of those aspects until financial year 2027. So generally, things are working pretty well. And as I discussed, this change to a straight SAG circuit for our new expanded plant allows us to effectively fully utilize the existing plant we've got, which is why we're confident that we can probably improve on PEA metrics in terms of throughput and ultimate gold production. Coupled with that, we're doing a re-optimization of our pits with this higher gold environment, and we're pretty confident we're going to see some added reserves in our known reserves coming out with a reduced cutoff grade. So all in all, things are looking pretty positive for us.
Thank you, Richard, for that. There was a lot of important information shared, which helps investors understand our direction and some upcoming news as we finalize our plans. As Richard mentioned, we may not use the 1,000 tonne per day ball mill in the SAGD circuit. According to our previous press release, we indicated that the three smaller ball mills wouldn't be utilized either, so the existing circuit will remain unchanged along with the new SAGD circuit. This means we expect higher throughput than we previously announced, but we still need to finalize the details. Regarding operating costs, recovery rates are increasing, partly due to improved oxygenation from our current use of hydrogen peroxide, and we anticipate that the Aachen reactor will enhance oxygen rates beyond what we currently achieve with hydrogen peroxide. This should lead to lower costs and improved recovery rates going forward, along with upgrades to the crushing circuit and the installation of apron feeders, which are vital for our operations.
This will enable us to run our 2,000 tonne per day plant efficiently, both before and after the expansion. Overall, the outlook is very positive, and we anticipate higher throughput rates this year along with an improved grade profile compared to last year, given our current position in the pit. As Richard pointed out, in any resource study, you select a gold price to determine optimal pit design and mining plans. In our Preliminary Economic Assessment, we used a price of $1,900 an ounce. Now that gold is at $4,600 an ounce, Richard and his team will reassess that assumption. As we refine the mine plan, we will likely encounter a bottleneck in our plant, and the stockpile will increase as we set aside lower-grade materials for later. This approach is typical in mine planning, and we expect to see a corresponding increase in our reserves and resources. Overall, it's a very positive situation regarding throughput. However, it's important to note that we haven't based our budget on a $4,000 gold price; we've used a lower price instead.
And the last bit, I think I've touched on, but we do continue to expect our production to be between 25,000 ounces and 30,000 ounces at between $1,400 and $1,600 an ounce. Capital, we had guided at between $15 million and $20 million. We continue at this stage to expect to spend at that level. But of course, at these gold price levels, if we generate additional free cash, we may move some of those capital expenditures around the plant expansion forward into the back end of this year, but we'll certainly update the market as and when we make that determination. And finally, we're spending on exploration. We expect to spend between $3 million and $5 million. We have procured a couple of drill rigs in RC and a diamond drill rig, which we'll talk about, which we expect will help our drill program over the course of this year.
Yes. Thank you, Mike. We will now discuss operational growth. I will turn it over to Richard for a brief overview of our expansion plans and what investors can expect over the next 12 to 24 months regarding our growth and throughput. We are currently aligned with the PEA, and our goal is to exceed its projections as we plan to have higher throughput. Richard, could you update us on our progress with various items? There are many exciting developments regarding Aachen reactors, ADR plants, confirming metallurgy, and getting into the SAGD ball mill and flotation cells, among others. Richard, please go ahead.
We are currently fully engaged in the design and assessment of our major TSF3, our life of mine facility intended to hold all the PEA material we plan to extract. In terms of risk management, we have decided to implement a third and final lift on our existing TSF2. This will provide us with an additional quarter or 1.5 quarters, extending our timeline to likely the first or possibly the second quarter of FY '27, which should give us ample time to construct the entire facility. Essentially, we are committing to the expenditure of a comprehensive life of mine tailings project in one construction phase. This approach allows us to take advantage of economies of scale, as we will primarily utilize the material we excavate to build the walls, minimizing the need for importing additional materials. The construction is expected to take about 5 months to complete, with approximately another month needed for permitting and final design.
Thank you, Stephen, and good morning to everyone. Good evening, Richard, at the site in Tanzania with me. As we know, Tanzania has gone through a challenging period, but we are starting to see things normalize following the election. Business is returning to its usual state. There are still some aftereffects that politicians are addressing as they work to reconcile differences. Tanzania has experienced some setbacks with international development funding, but for us, this could be a positive development as it places a priority on mining. There is a renewed focus on getting new projects off the ground and scaling up existing operations, which will ultimately benefit the government’s revenue. As previously discussed, we have been actively negotiating with the government regarding state participation regulations that were amended in 2022. We have an existing joint venture agreement since 2011.
Our goal is to reach a point where we can finalize better agreements with the government that are more transparent and facilitate easier operations in Tanzania, which would help avoid disputes and lower investment risks. We are optimistic about these ongoing negotiations, even if they are progressing slowly. Nonetheless, we expect that 2026 will be a pivotal year with significant acceleration. The groundwork and initial discussions are already in place, and we anticipate moving quickly. In the past month, we have met twice, once in late December and again last week with our partners. We are making progress, and our expectation is that by the end of this year, we will have new, more favorable agreements that are better suited for investment.
No, no. I think, look, it's progressing. And obviously, pace and politics are different in other parts of the world versus what we would be used to in the United States and Canada. But that is part of operating internationally. I have a lot of experience around this, and it has to go through its political departments and get to the right spot where decisions could be made. And I think we're at that spot, and we will hopefully be able to progress it with a little bit more pace than we've had before. Our agreements are a little different than what you see in other companies there. Other companies are looking to put properties in production, so they go straight to the framework agreement. We are dealing with an existing joint venture to switch to framework agreement terms. And in that, obviously, we're looking to basically put the agreements into better agreements than what we currently have for both sides, both for us and for the government, and that has been well communicated. So I think we'll come out the other side for us and for the government in a much better win-win situation.
Yes. No, absolutely. Perhaps I should add also that we are engaging with our embassies here locally. And they're weighing in and they're obviously quite involved as well in this process, working with the government to try and get all these things over the line as soon as possible.
Questions and answers
Today’s first voice question comes from Heiko Ihle with H.C. Wainwright.
Can you explain the potential bottlenecks in the larger processing facility when it ramps up? What impacts do you anticipate on the labor force, and how many additional staff do you expect to need? I assume it will be a limited number once everything is operational. Additionally, could you share your expectations for labor costs this year?
I'll hand that back over to Richard. I assume the - I'll answer the last part of the question. I assume that you're looking at labor as inflationary pressures. That your real question?
Labor is not particularly increasing significantly. It's more exchange rate affected than anything else at the moment. We've had a pretty stable sort of 36 months here. As we upskill our people, obviously, we remunerate them a bit better, but that will result in slightly reduced workforces. The expansion will increase total workforce but reduce unit costs and overall labor increments relative to what we're seeing at the moment. The underground aspect of the project is not that labor-intensive compared to what we're seeing in the open pit at the moment. We're looking to have quite an efficient contractor-run underground mine, probably only employing a maximum of 300 operators and maybe another 50 staff. So it's not going to be a huge increment, not like some of the other African mines where you're seeing thousands of people employed. I don't see labor being a big driver of costs.
Yes. So Richard answered that question more around what we expect processing cost per ton to be versus labor rates. We haven't seen a lot of inflationary pressure on labor rates in Tanzania. But certainly, versus what you've seen elsewhere, there is some, but it's not to the same extent. So Richard, do you want to answer the first part of the question?
Thank you, Richard and team. If you look at figure 8 on Page 7 of the press release from a high-level perspective, you'll notice a lot of high-grade material concentrated in the center, and it appears to be improving as we go deeper. When can we expect this to be mined, and will it be blended in a way that minimizes the impact? Or will there be one or two quarters with significantly higher mine fine grades?
Yes. Richard addressed that question earlier in the presentation, explaining that head grade will increase as we implement the thickener. The thickener allows us to avoid mixing lower-grade oxides with higher-grade sulfide material. As we dig deeper into the pit and access the underground sections, the head grade will change in our PEA, and there will be noticeable peaks due to the rise in head grade.
As we wait for any other verbal questions to come through, I can turn it over to you, Steve, there are some text questions that came through.
Yes. So there are some text questions, so I'll get into those. The first one is, could you explain what brought the plant utilization rate from 88% to 90% in hopes that I have a related question, are there any plans to place a lower strip ratio from 5.8. Thanks for taking my 2 questions. Great results this quarter. So on the first one, the utilization has gone up a little bit. Look, there's been a large focus on preventative maintenance and also bringing in a lot more spares on a working capital perspective. Both of those have had a positive impact on plant utilization. Richard, anything else to add to that?
Look, only that we're getting this process plant a little bit better organized. We've brought some expatriate expertise for consulting and management to improve our reliability-based maintenance planning.
Regarding the strip ratio, it is primarily influenced by the mine plan, which includes factors like gold price, recovery rates, and mining operating costs. The mine model aims to maximize net present value and cash flow. The strip ratio fluctuates based on the amount of ore blocks compared to strip or waste blocks in the mine plan. When stockpiles increase, the strip ratio usually decreases. Conversely, when drawing from stockpiles, the strip ratio tends to be higher. As miners, we typically assess the life of mine strip ratio, which will exceed 5x due to the characteristics of the deposit. At a gold price of $4,600, a higher strip ratio is advantageous for maximizing cash flow. There is a crossover point where it becomes more expensive to strip than to develop underground. Thus, the strip ratio is constantly changing.
With regards to the second question, the TSF3 is listed as taking 1 quarter to build later in fiscal 2026. What are the risks of completing this on schedule given? So Richard, take people through TSF3. Obviously, you and I were discussing this earlier on this morning. We are doing a lift to TSF2 and then doing TSF3. And TSF3 then removes almost all tailings risk because it will be predominantly for the life of the mine. So just take people through the process on this. Sure. So we're in the full swing of design and assessment of our major TSF3, our life of mine facility that's based upon holding all of the PEA material that we're planning to mine. We're in terms of risk, we've made the decision to put in a third and final lift on our current TSF2. That will buy us another quarter or 1.5 quarters. And that really gives us till probably the first or possibly the second quarter of FY '27, which should give us plenty of time to build this full facility.
So we're basically committing to the expenditure of a full life of mine tailings project in one construction effort. And basically, we're doing that for the economy of scale in the area of basically everything that we dig out, we put into walls, and it's a very even match. So we're not importing a lot of material. And that will probably take us about 5 months to complete construction, and we've probably got another month of permitting and final design to go.
Thank you for your question. The answer is that we have the situation well under control. Regarding initiatives for 2026 to promote TRX and its stock, we aim to enhance awareness among high and ultra-high-net-worth investors about the value of our company, especially in light of our strong operational performance. Currently, we have engaged several marketing firms to reach out to retail brokers, high-net-worth individuals, and institutional investors, resulting in many meetings. Additionally, our company's performance has attracted the attention of various investment banks, which have consequently introduced institutional investors to us. However, a key challenge we face is that many in the mining industry expect discounts through private placements, which we are not providing. Instead, we offer investors the opportunity to buy our stock directly from the market. Consequently, many institutional investors are choosing to participate in capital raises for other stocks rather than purchasing ours without a discount.
We are firm in our stance on this issue, believing that not increasing our share count will be more beneficial in the medium to long term. As a result, the growth of our shareholder base may not happen as rapidly as desired, but we are committed to this approach. Additionally, we conduct a significant amount of marketing at small to mid-cap conferences in the United States, as well as at various mining conferences. Our collaboration with three marketing firms has proven effective in attracting high-net-worth individuals, which has been a successful strategy for expanding our shareholder base. These initiatives are indeed a priority for us.
No, I think you articulated it well, Stephen. As you mentioned, we are approaching conference season, and I have three conferences scheduled in the next four weeks. Our calendars are already filled with a significant number of high-net-worth and institutional investors who have shown interest in the results we are beginning to achieve. There is active interest in the market. In the coming weeks, we expect to engage with some potential shareholders, so stay tuned.
Stay tuned, yes. I think that's it for the questions, operator.
Yes. that is correct. There are no further voice questions at this time.
Thank you for joining the Q1 conference call. We are pleased with our results, which continue to show growth. We are aligned with our business expansion plans, utilizing free cash flow. We will provide exploration results later in the year. As Richard mentioned, we plan to drill over 40,000 meters and have more prospective targets beyond just Anfield and Stamford Bridge. We are excited about the future at Buckreef in Tanzania. Thank you.
This brings to a close today's meeting. You may now disconnect. Thank you for participating and have a pleasant day.
Yes. Thanks, Richard, and Khalaf for joining from Tanzania.