TRX Gold Corporation (TRX:CA) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights strong financial performance, with record production, revenue, and gross profit margins. Despite potential bottlenecks and market volatility, the company is managing costs well and maintaining operational efficiency. The Q&A section reveals proactive measures to enhance production and investor relations, with management addressing concerns on labor and expansion. The stock price is likely to see a positive impact, driven by strong quarterly results and strategic initiatives, although some uncertainties remain.

Key Financial Performance

Quarterly Production Produced just under 6,600 ounces, a significant increase over the prior comparative period and Q4 results. This was due to higher throughput, higher grade (1.9 grams a tonne), and higher recovery (75%).

Cash Cost Came in at around $1,500 an ounce, in the middle of the guidance range of $1,400 to $1,600 an ounce. This reflects operational efficiency and cost management.

Gold Price Realized Realized $3,860 an ounce in Q1, a record at that time, compared to over $4,600 an ounce currently. This reflects a strong gold price environment.

Quarterly Revenue Over $25 million for Q1, driven by record production and record gold prices.

Adjusted EBITDA Over $13 million for Q1, reflecting strong cash flow and margins.

Working Capital Improved to a ratio of 1.7x or about $15 million positive working capital at Q1, up from 1.3x at year-end August 31. This was achieved by using free cash flow to recapitalize the balance sheet.

Cash Position Increased to over $9 million, reflecting improved financial health and operational performance.

Gross Profit Margin Over 50%, demonstrating a high-margin, low-cost operation with leverage to gold price.

ROM Pad Stockpile Grew to over 22,000 ounces at about 1.2-1.3 grams a tonne, providing operational flexibility and insurance for consistent mill feed.

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Operating Highlights

Record Quarterly Production: Produced just under 6,600 ounces of gold, a significant increase over prior periods.

Plant Expansion: Plans to expand the plant in the next 18-24 months to increase production and fund underground mining.

Metallurgical Test Work: Finalized test work showing high recoveries and optimized fine grind at 20 microns.

Gold Price Leverage: Realized $3,860 per ounce in Q1, with current prices over $4,600 per ounce, demonstrating strong leverage to gold price.

Exploration Program: Plans to drill 40,000-60,000 meters in 2026, targeting new areas like Stamford Bridge and Anfield.

Cost Management: Achieved cash costs of $1,500 per ounce, within the guidance range of $1,400-$1,600 per ounce.

Working Capital Improvement: Working capital ratio improved to 1.7x, with $15 million positive working capital.

Recovery Enhancements: Implemented oxygenation systems and other upgrades to improve recovery rates.

Government Relations: Ongoing negotiations with the Tanzanian government to update agreements for better transparency and investment conditions.

Self-Funding Growth: Reinvesting cash flow into plant upgrades, exploration, and expansion without additional capital raises in over four years.

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Risk or Challenges

Regulatory and Government Relations: Negotiations with the Tanzanian government regarding framework agreements and state participation regulations are progressing slowly. The process is subject to political and bureaucratic delays, which could impact operational timelines and create uncertainty for the company.

Supply Chain and Equipment Procurement: The lead time for critical equipment, such as SAG mills, is estimated at 7 to 9 months. Delays in equipment delivery could hinder the planned plant expansion and throughput improvements.

Operational Execution: The company is undergoing significant upgrades to its crushing circuit, mills, and CIL circuits. Any delays or inefficiencies in these upgrades could impact production targets and recovery rates.

Exploration and Resource Development: The company plans to drill 40,000 to 60,000 meters in 2026, but success is contingent on favorable results from geophysics studies and drilling. Unfavorable outcomes could limit resource expansion and future production potential.

Economic and Market Conditions: While the company benefits from high gold prices, any significant decline in gold prices could adversely affect revenue, profitability, and the ability to fund expansion projects.

Capital Structure and Warrants: The company faces an overhang of warrants expiring in February 2026 and February 2027. This could create stock price volatility and impact investor confidence.

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Guidance & Outlook

Production Guidance: The company expects full-year production guidance of between 25,000 ounces and 30,000 ounces of gold at a cash cost of $1,400 to $1,600 per ounce. Q1 production was 6,600 ounces, and the company remains on track to meet its guidance.

Plant Expansion: The company plans to expand its plant over the next 18 to 24 months, which will increase production and fund underground development. The expansion includes upgrades to the crushing circuit, mills, and CIL circuits, as well as the installation of a super oxidation system to improve recovery rates.

Capital Expenditures: Capital expenditures are expected to be between $15 million and $20 million for fiscal 2026. Additional free cash flow from higher gold prices may allow the company to accelerate some capital expenditures related to the plant expansion.

Exploration Program: The company plans to drill 40,000 to 60,000 meters in 2026, focusing on targets identified through geophysical studies, including Stamford Bridge and Anfield. The exploration program aims to identify new resources and expand reserves.

Gold Price Leverage: The company is benefiting from a strong gold price environment, with realized prices of $3,860 per ounce in Q1 and current prices exceeding $4,600 per ounce. This is expected to enhance cash flow and profitability.

Future Production Metrics: The company expects higher throughput rates and improved recovery rates due to plant upgrades. The grade profile is expected to increase, with a steady grade of 2.1 to 2.2 grams per tonne and higher grades anticipated in Q4.

Mine Plan Optimization: The company is re-optimizing its pit designs and mine plans using a higher gold price assumption, which is expected to increase reserves and resources.

Government Relations: The company is negotiating new agreements with the Tanzanian government to align with updated state participation regulations. These agreements are expected to be finalized by the end of 2026, improving investment conditions and operational transparency.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What are the potential bottlenecks during the ramp-up of the larger processing facility, and what are the impacts on the labor force?

A:Labor is not significantly increasing, with stable conditions over the past 36 months. Upskilling employees will result in slightly reduced workforces, but the expansion will increase the total workforce while reducing unit costs. The underground mine will employ a maximum of 300 operators and 50 staff, which is not a significant increment compared to other African mines.

Q:When should we expect the high-grade material to be mined, and will it be blended to mute the impact?

A:The head grade will increase as the thickener is implemented, allowing for less mixing of lower-grade oxides with higher-grade sulfide material. As the pit deepens and transitions to underground mining, head grade changes will be reflected in the PEA, with peaks due to higher-grade material.

Q:What brought the plant utilization rate from 88% to 90%, and are there plans to lower the strip ratio from 5.8?

A:The increase in utilization is due to a focus on preventative maintenance and bringing in more spares. The strip ratio is determined by the mine plan, which aims to maximize net present value and cash flow. Strip ratios will vary depending on ore and waste blocks in the mine plan, with a life-of-mine strip ratio expected to be higher than 5x.

Q:What are the risks of completing TSF3 on schedule, and what is the process for its construction?

A:The design and assessment of TSF3 are in full swing. A third lift on TSF2.2 will provide additional time, ensuring TSF3 is completed by FY '27. The construction will take about 5 months, with an additional month for permitting and final design. The project is designed for economy of scale, using excavated material for construction.

Q:What initiatives are planned to promote TRX and its stock to high-net-worth investors?

A:The company has hired three marketing firms to approach retail brokers, high-net-worth individuals, and institutional investors. They are focusing on small to mid-cap conferences and mining conferences. The company is not offering discounts through private placements, encouraging investors to purchase in the market. This approach aims to maintain the share count and benefit long-term shareholders.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the specific timeline for mining high-grade material and blending impacts, providing only general information about head grade changes and PEA peaks. Additionally, the response on strip ratio changes lacked clarity on specific plans or actions to achieve a lower ratio.

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Earnings Word Cloud

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