Aris Water Solutions, Inc. Price & Performance (ARIS)

Thank you, operator, and welcome, everyone. Thank you for joining us for our full year 'twenty four earnings call. Today, I'm joined by members of the management team, including Richard Thomas, Richard Oruzzetti and Oliver Detson. We look forward to addressing your questions at the end of this call. But before we dive into the results, please note the cautionary statements on Slide two as we will be making several forward looking statements today. Starting on Slide three, I'm pleased to report that Q4 was a strong quarter, delivering our highest production for the year of 57,364 ounces. We generated $22,000,000 of net income and $6,000,000 to $7,000,000 of EBITDA in the fourth quarter. At Segovia, we reduced all in sustaining costs to $1,485,000,000 dollars and achieved an all in sustaining margin of $58,000,000 which is a 32% increase over Q3. We remain on track to commission the expanding processing facility at Segovia in the second quarter of this year. Following that, a gradual ramp up from 2,000 tonnes per day to 3,000 tonnes per day throughout the remainder of the year. This year Segovia is targeting annual production of 210,000 to 250,000 ounces and in the range of 300,000 ounces from 2026 onwards.

We've also been exploring opportunities to scale up Marmato's current expansion into a higher capacity operation by way of upgrading the carbon and pulp processing facility by 25% to 5,000 tonnes per day. We're also looking at expanding our CMP business model at the Upper Mine Flotation Processing Facility. Together, these upgrades and expansions are expected to increase Milatos and reproduction potential to more than 200,000 ounces. But Richard Thomas will be giving more information on that later on in the presentation. Growing cash flow generation and refinancing of our senior notes in October contributed to a year end cash balance of $253,000,000 We're well positioned and funded to deliver on our growth strategy. We expect to achieve an annual gold production rate of more than 500,000 ounces once our expansions and operations are fully ramped up to name plate capacities. With that, I'll now hand you over to Richard, our COO.

Thank you, Neil. Moving on to Slide four. For the full year, we produced 211,000 ounces from our mines, 188,000 ounces of gold from Siguvia and 23,000 ounces of gold from the Moloto Mine. As Neil mentioned, quarter four was our standout quarter, delivering our highest gold production of the year at 57,364 ounces. At Segovia, a modest increase in throughput in quarter four combined with a 7% rise in average gold grade processed at Segovia at 9.484 grams a tonne, resulting a gold production of 51,477 ounces, an 8% increase compared to the quarter three results. Despite an 8% higher realized holdouts, all outstanding costs reduced by 4% to $14.85 dollars per ounce compared to quarter three. Owner Mining all outstanding costs improved to $13.86 dollars per ounce in quarter four from the AUD14.51 in quarter three, while Contract Money Partners segment generated the highest quarterly all its sustaining cost sales margin of 39%. With that, I'll pass on to operator Orenzetti to cover our financial results and then provide an update on our growth initiatives. Thank you, Richard. Turning to Slide five, as Neil said at the outset, we had a very strong quarter, especially when compared to the third quarter twenty twenty four.

Full revenue of $148,000,000 was up 13% compared to the third quarter driven by higher realized gold price of $26.42 per ounce and higher quarter over quarter sales volumes resulting from higher production. Boltered by the revenue growth and a strong focus on cost control, income from mining operations increased 42% quarter over quarter to $54,000,000 Net earnings for the fourth quarter were $21,700,000 compared to a net loss of $2,100,000 This was primarily due to the increase in income from mining operations as well as a gain of $6,600,000 on financial instruments and a $5,100,000 FX gain recognized in the quarter. Adjusted earnings in the fourth quarter were $24,700,000 or $0.14 per share compared to $13,100,000 or $0.08 per share in the third quarter. Adjusted EBITDA was $55,600,000 in the fourth quarter, a 29% increase quarter over quarter reflecting the increase in adjusted net earnings.

For the full year 2024, we generated adjusted EBITDA of $163,100,000 and adjusted earnings of $55,900,000 or $0.35 per share. Now looking at Slide six. I'd like to draw your attention to the graph. As mentioned earlier, the increase in realized gold price, higher production and our continued focus on cost control supported a meaningful expansion in ASIC margin in the fourth quarter at our Segovia operations. Our quarterly basic margin reached a three year high of $58,000,000 up 32% from $44,000,000 in the prior quarter. For the full year of 2024, the Segovia operation generated a basic margin of $163,000,000 While we enjoyed a strong gold price environment, we remain focused on operational efficiencies and keeping costs low. Now moving on to Slide seven, I'd like to discuss some key items on our cash flow statement. For the full year 2024, our gold revenue totaled $499,000,000 and we generated a basic margin of $154,000,000 The adjusted sustaining margin after tax G and A together with working capital changes amounted to 66,000,000 supporting the funding of $157,000,000 of our growth projects, including $83,000,000 at Marmato, mainly for the Lower Marmato project and CAD65 million at Segolbi operations primarily for the processing plant and underground development and exploration.

In the fourth quarter, our after tax adjusted sustaining margin of CAD49 million more than covered our expansion of growth capital of $42,000,000 In addition, financing activities in the fourth quarter generated a cash flow of $164,000,000 including $136,000,000 in net proceeds from refinancing the 2026 bonds with a new issue of five year twenty twenty nine bonds and a $40,000,000 inflow for wheat precious metals stream pertaining to the Marmato Lower Mine Cluster. We ended the year with a cash balance of two fifty three million dollars up from C195 million dollars at the end of twenty twenty three. I will now pass it back to Richard Thomas and he'll provide an update on the expansion of the Securge processing plant and the construction of the Ramada Loveland line. Thank you, Richard. Now moving on to Slide eight. Sogovia Processed Bond expansion has progressed as scheduled. And as previously discussed, Phase one of the Sogovia expansion is complete. The new expanded receiving area for our CMP is fully commissioned and handed over to operations and working well. The new facility began processing materials in October 2024. Phase two, which involves its installation of the formal contractor receiving area is underway with commissioning expected in quarter two this year as scheduled.

Following the ramp up period, we expect it to reach production rate of about 300 tonnes per day by the end of twenty twenty five, enabling Segoto to produce 210,000 tonnes and 250,000 tonnes of gold in 2025 and in the range of 300,000 ounces of gold from 2026 onwards as per our guidance released earlier in January. The total cost of Sogorea's processing plant expansion project is still estimated at SEK 15,000,000 and at the end of the year last year, we had spent $8,500,000 If we could move on to Slide nine, please. I'd like to provide an update on the construction progress at the Momoto Lower Mine. As you can see from the study results on this slide, the construction of Lower Mine continues to advance with firstly, the access roads to Lower Momoto process facility and the accommodation camp now 100% completed. Secondly, a deep time development underway with 200 meters completed by the February 2025 and processing plant foundation networks 12% ahead of schedule as of the February 2025. At the beginning of this year, we initiated an engineering assessment to evaluate whether we could expand the plant, the current CIB plant currently under construction.

As a result of those studies, we have decided to expand the CIB, close to 66 to the lower mine from 4,000 tonnes a day to an expanded 5,000 tonnes per day, whilst also expanding our CMP business model, increasing the FEED and average grade to the existing Upper Mine flotation grant, thereby further increasing the goal of production. With the completion of these expansions, we expect Momato to be able to produce in the range of 200,000 ounces of gold per year, which compares to the previous life of mine leverage of only 162,000 ounces per year. If we move to Slide 10, please. As you can see from the drawing on this slide, the key enhancements required to take the throughput from 4,000 tonnes a day to 5,000 tonnes a day are straightforward as the upgraded 5,000 tonnes per day design will use the major components from the current 4,000 tonnes per day design while also integrating some higher capacity components, installing the secondary crushing unit, adding an extra beach tank to support the increased throughput and accelerating certain project components into the initial capital phase. We expect this ramp up to begin at H2 twenty twenty six.

Moving on to Slide 11. As of February 2025, we have spent $75,000,000 on construction. The estimated cost to complete revised construction, taking the throughput from 4,000 to 5,000 tonnes per day is $290,000,000 bringing the total upfront cost to $365,000,000 85,000,000 over the previous construction plan. The 35% bigger plant requires bringing forward the Tallinns business construction and the backhaul plant into the upfront capital and this is estimated at $50,000,000 We have also opted to build a $20,000,000 grid power line instead of relying on the third party power purchase agreement. The process front announcement that I mentioned earlier, namely integrating some high capacity components, a secondary crushing circuit and adding extra heat gain to support the increased throughput are expected to cost around about NOK10 million. Importantly, the net construction cost to Arris is NOK208 million considering the remaining stream funding of NOK82 million. In our view, this is a fairly attractive investment proposition, being able to meaningfully increase production of a long line asset for limited incremental capital against the backdrop of the report of high gold prices. Looking ahead with the new motto and the expansion of Siguvia, Ares is targeting an annual production rate of more than 500,000 ounces of gold.

With that, I'd like to hand over the call to Oliver.

Thank you, Richard. Turning to Slide 12, I'd like to summarize our previously disclosed guidance for 2025. Ares Mining expects consolidated gold production of between 230,000 to 275,000 ounces in 2025 with in progress expansion project to contribute to production growth in 2025 and beyond. With 2025 gold production expected to range between 210,000 to 250,000 ounces at our Segovia operations, the company anticipates a significant increase in Segovia's on sustaining cost margin this year of more than USD230 million using the midpoint of our 2025 guidance ranges at a gold price of USD2600 per ounce. This compares to an all in sustaining cost margin of USD163 million at Segovia in 2024. In 2025, production from the Segovia operations will be sourced approximately 50% to 55% from Olin Mining and 45% to 50% from mill feed purchased from contract mining partners. For the Olin Mining segment, all in sustaining costs per ounce sold is expected to range between $14.50 dollars to $1,600 per ounce and the CMP segment is expected to achieve an all in sustaining cost sales margin of 35% to 40%. The 2025 cash costs and all in sustaining cost guidance have been provided separately for the two segments, owner mining and CMPs, given their distinct primary cost drivers.

Owner mining costs are primarily driven by conventional expenses such as labor, consumables such as explosives and fuel and power. In contrast, CMP costs are mainly influenced by the cost of purchasing NOFI, which depends on material volume, recoverable gold grade and the spot gold price. Distinguishing between own and mining and CMP cost metrics is necessary given the current rise in oil prices and the resulting challenge in forecasting CMP costs. As a result, we believe the CMP segment is best presented on a sales margin basis to provide a clear representation of its financial performance. The Marmato Upper mine produced 23,000 ounces in 2024 and a similar production level is expected for 2025, while construction of the new large scale lower mine, which will access wider pulp remineralization continues. Ares Mining will resume providing cash costs in all the sustained cost values for the Mamata mine when the lower mine achieves commercial production. Now especially for our credit investors on the line, Slide 13 highlights and summarizes the strength of our balance sheet.

Strong liquidity of USD $253,000,000, lower net leverage of 1.5 times, insignificant near term debt maturities and a solid equity cushion sitting below our debt as evidenced by our gearing ratio. Importantly, total and net leverage ratios have already started trending down compared to when we issued our 2029 bonds in October from 3.1 times and 1.7 times respectively. I'd now like to hand the call back to Neil to conclude our prepared remarks.

Thank you, Oliver. We now move to Slide 14. But before wrapping the Q and A session, I'd like to summarize key takeaways that we've reported for this fourth quarter and for the full year. In Q4, we recorded our highest quarter production at 57,000 ounces. We expect total production in 2025 to range between 505,000 ounces, which is up from 211,000 last year. We see meaningful margin expansion as evidenced by our quarterly all in sustaining cost margin of $58,000,000 in Q4, increasing by 32 over the prior quarter. We're in a strong financial position with cash balance of $253,000,000 80 2 million dollars still to be funded by Wheaton under the Momato stream and growing cash generation from Segovia. To close, Harris Mining is on track to more than double annual production to 500,000 ounces and we have the means and the team to deliver that growth. With that, we look forward to your questions. And I'd like to turn the call back to the operator to open the line for questions.

Thank you.

Today's first question comes from Carey Macquarie with Canaccord Genuity. Please go ahead.

Hi, good morning, guys. Just wondering if you could give some color on how long you've been thinking about this expansion and sort of why now, I guess?

I think we've been thinking about the expansion for well over a year. When we started construction, we were following the plan that had been originally set up by SRK and then going on from there. That plan made sense to us. But as we got to know the upper mine more, we realized two things. It would not achieve the performance that had originally been anticipated, but it was a huge potential for the small miners. So we started to reshape our thinking on the basis that our license is limited to 2,000,000 tonnes a year as to whether we could increase the more profitable material from a lower mine. So we've been thinking about it for some time and put the analysis strictly into play at the beginning of this year.

Okay, thanks. And maybe just on the capital, can you give us a sense of how much capital we should expect this year versus next year for the expansion?

I mean, we are forecasting roughly this year about $260,000,000 and so the additional expenditure this year could be another $50,000,000 depending on the spend, so moving along.

And this concludes our question and answer session. I'd like to turn the conference back over to Mr. Woodyer for any closing remarks.

Thank you, operator, and thank you everybody for joining us. And if you need more information, please contact Oliver, who will be more than happy to take you through any more details. Thank you very much, everybody. We appreciate your attendance. Thank you.

Thank you, sir. This brings to the close today's conference call. You may disconnect your lines and we thank you for participating. Have a pleasant day.