Superior Gold Inc.

Thank you, and good morning, everyone. Welcome to Superior Gold's quarterly conference call on which we will be discussing our third quarter 2019 results.

Before we get started, as a reminder, I would like to ask everyone to refer to the Slide 2 of our presentation, which is posted on our website, to view our cautionary language regarding forward-looking statements. I will now discuss the key points of the quarter.

The financial and operating results this quarter reflect our decision to sacrifice the short term to set up a long-term sustained success at the Plutonic Gold Operations. During the quarter, we produced 16,627 ounces of gold and sold 17,900 ounces of gold at a record realized gold price of 1,483 per ounce.

Total cash costs were $1,504 per ounce and all-in sustaining costs of $1,652 per ounce. During the quarter, we announced our five-year guidance for the underground portion of the Plutonic Gold Operations.

We ended the quarter with cash and cash equivalents of $14 million, and subsequent to quarter-end, we significantly enhanced our financial flexibility through the arrangement of an A$15 million gold loan facility. Finally, we reached a significant milestone in achieving cumulative production in excess of 250,000 ounces of gold since we acquired the Plutonic Gold Operations.

With total historical production approaching close to 6 million ounces, this is truly a long-life, high-quality gold asset. I will now turn the call over to our Chief Financial Officer, Paul Olmsted to discuss our financial results for the quarter.

Thank you, Chris. During the third quarter, we generated revenue of $26.6 million from the sale of 17,900 ounces of gold, a decrease of $4.7 million from $31.3 million from the sale of 25,842 ounces of gold during the third quarter of 2018.

Lower gold revenues resulted from about 7,900 fewer ounces being sold, which was partially offset by an increase in the realized gold price to 1,483 per ounce from 1,211 per ounce. The reduction in ounces sold was due to fewer ounces being produced as a result of fewer stopes available due to the lower stope development and as we focused our efforts on the development necessary to deliver on the new long-term plan.

Cost of sales were $29.8 million for the third quarter, a decrease of $2.7 million compared to the same period in 2018. Cost of sales were lower in the current period versus the same period in 2018, mainly due to a reduction in mining costs as a result of Hermes temporary stoppage, partially offset by higher payroll and maintenance costs at the underground operations.

Compared to the third quarter of last year, general and administrative expenses increased by 70,000 ounces – $70,000 in the third quarter of 2019, due to higher payroll costs as a result of the addition of the company's Chief Operating Officer, partially offset by some lower share-based payment costs. Adjusted net loss for the period amounted to $3.9 million or $0.04 per share compared to adjusted net loss of $2.1 million or $0.02 per share in the third quarter of 2018.

As Chris mentioned, at the quarter-end, we had $14 million in cash and cash equivalents despite the additional capital investment required to prepare ourselves for the execution of the five-year underground plan. And subsequent to quarter-end, we successfully obtained a $15 million gold loan with Auramet International, which allows us to take advantage of the near all-time highest drilling gold price without taking any shareholder dilution.

And this certainly provides us with enhanced financial flexibility. I would also like to highlight that the loan is short term in nature and will be repaid in 18 months' time with payments beginning in January 2020.

We now have the financial flexibility to execute on our long-term plan. And with this plan now in place, we expect our ability to generate free cash flow to improve significantly going forward.

I will now turn the call back to Chris to continue with the rest of the presentation.

Thank you, Paul. In October, we announced our five-year guidance plan for the underground operations at the Plutonic Gold Mine.

Part of this plan, we expect annual underground gold production of 70,000 to 85,000 ounces of gold. All-in sustaining cash costs are expected to average less than $1,100 per ounce over the five-year plan, which demonstrates robust margins in excess of $350 per ounce at current gold prices.

This plan provides a platform to develop the Plutonic Gold Operations into a stable 100,000-ounce-per-year producer. It is important to realize that the plan excludes potential open pit production from Hermes, Hermes South and past-producing open pits near the Plutonic underground gold mine.

We hope to provide details for this by the end of this year. This plan is a result of detailed analysis and work completed since we appointed our Chief Operating Officer, Keith Boyle in April.

One of the key goals of the plan is to return to the operating performance that we’ve previously demonstrated in the first 15 months of operations, during which we generated significant free cash flow. We believe that there is potential upside to the mine plan by: one, further closing the gap between the stope grade and the reserve grade; two, converting a larger portion of the 1 million ounces of underground, Measured and Indicated resources and the 1.6 million ounces of Inferred resource into the mine plan; and three, incorporating potential operating efficiencies, which have not been modeled into the plan.

For 2019, we continue to guide towards production of between 80,000 and 85,000 ounces of gold and cash costs of between $1,250 and $1,350 per ounce and between $1,350 to $1,450 per ounce on an all-in sustaining cost basis. As indicated in our five-year plan, we anticipate cost to improve in 2020.

During the fourth quarter, we aim to release a new Life of Mine Plan to the open pit operations at the Plutonic Gold Operations. In the New Year, we will be providing our year-end 2019 reserves and resources update, and we also announce the results of our new global reserve resource recalculation, which will be released in the first half of 2020.

With that, we conclude the presentation portion of the call. Operator, you can now open the line for questions.

Good morning, Chris. Thanks for hosting call today.

Yes, first question, could you just give us a sense of maybe what zones at Plutonic are coming online or where the development had been targeted to in order to bring in some of these zones into the near-term mine plan, like as a Timor?

Yes, there is really three key areas.

Yes.

Yes, there is really three key areas, which is where most of the reserves are, which are Timor, Indian and Baltic and Baltic Deeps.

Okay. And then which – of those three, which one is the most attractive on grade profile?

Well, Indian and Timor all have the best grade whereas Baltic and Baltic Deeps probably have the most exploration potential.

And then touching on that exploration potential, what’s been completed there in recent years, if any?

Well, there’s been quite a bit and actually probably in the very near future, we’ve got some information of that coming out that I think people might find interested. Well, I think it will.

Okay, fair enough. And then just looking at Slide 7.

So in the middle there, you've got 136,000 ounces over the previous, I guess, 18 months ending in June. But a lot of that would have been skewed with open pit mining, correct?

Correct.

And so what portion, if any, on the all-in sustaining costs would have had a higher number related to the mining at Hermes?

I think you'll find that, that was – that cost is probably pretty much the same for both underground and open pit.

Okay. So I guess what I'm trying to take away from this slide is that the increased production coming from Hermes, if it was typically a low-sustaining cost open pit than we'd ideally back out and see higher sustaining costs related to Plutonic over that 18-month period.

Yes. Well, but it's not the case, because like I said, the cost structure was very similar for both underground and open pit during that time period.

Or could we look at it as the 15 months ending in 2017, the underground at Plutonic had been undercapitalized on sustaining items?

Oh, yes. I mean, that is the case.

I mean, there's – as we've very openly told people that the management at the site was not doing the development needed to outline the new stoping areas. So it wasn't beneficial to that.

However, had we done the development that would have set us up for the future, we still would have generated free cash flow. But probably, you'd look at that – the additional development is capital as opposed to the stated cost mining.

But it's – there would have been less free cash generated during that period, but there still would be free cash.

Yes, yes. Okay.

And if you look at the five-year mine plan, I mean, I guess, to give you a sort of a sense of the difference, the five-year plan includes the additional development that was needed to just keep the mine going as opposed to hitting the wall like we did in the – at the beginning of 2018.

Would you have the different development rates available from the – as this kind of mine sequencing was broken out? Would you have – like, those monthly development rates?

I think you're trying to get up to 800 meters a month or something there.

Yes, yes. And we're – yes, I mean, previously, we were doing 500 to 600 meters of development a month.

We're now up to 800.

So most recently, October, you did approximately 800?

We've done that for about two months now.

Okay.

Which is setting up – which is what you need to do to set yourself up to execute on the plan.

And then so once you reach that plan, what is your development rate? Are you going to stay at 800 or move to?

Yes. No, we'll keep it at 800 because what that allows you to do is keep staying ahead of yourself.

Yes, exactly. Okay.

Good. Thanks a lot Chris.

Thanks Philip.

Good morning, gentlemen. I wonder if you could just help us understand on the hedging program.

I understand that you have sold some calls against production. And what would happen in the event that you cannot – a call is made and you can't deliver the gold, you don't actually have the production to deliver the gold?

Well, I'll let Paul Olmsted, our CFO, answer that.

So just on the calls, the level that we set them at on a per-month basis are well below what we – is anticipated in the Life of Mine Plan. So we don't foresee any issue in delivering into those calls in the event that the gold price increases and hits that strike price.

Certainly, I think at the prices that we're setting on those calls at a range of A$2,275 per ounce up to A$2,360 per ounce, certainly, if it – if we are achieving that level, I think the company would certainly benefit from that higher gold price.

I guess what I was wondering was, in the event you had to suspend operations for a period, the price had gone up, gold had gone up, and the call was made and you didn't have the gold to produce to meet the call, then is there someone else standing behind you? Or what would be arrangements fee or what would happen at that time?

Well, at this point, we have no reason to be shutting down the operation, given that we're moving towards the – and executing on the mine plan.

Okay. I understand that.

It was just in the event that something happened for whatever reason.

But it's a theoretical question. I mean, we have no intention of shutting the mine down given what we see ahead of us.

So it's a question I don't think we – that doesn't need to be answered, I don't think, at this point in time.

Thank you.

Hi guys.

Hi Bereket.

I was wondering regarding Hermes, what the grades are there right now? And how much of the processed ore is going to come in Q4 and going forward from Hermes?

And what your overall throughput rate you're expecting for Q4?

Well, in terms of Hermes, we've been mining the stockpile. So most of this quarter, it's been between 0.7 and 0.9 from the Hermes Stockpile.

And that will be used up by the end of this year. In terms of grades for the quarter, I guess, we've targeted the highest possible stope rate, which is the key driver from underground to making money.

And we've been – certainly want to see above 3.5 grams. And I guess without giving information away, all I can say is we're pleased with what we've seen so far.

Okay. And what do you think your overall throughput rate is going to be for the quarter?

And what portion of that will come from Hermes?

I beg your pardon, overall what rate?

Throughput. Like, processed ore.

Well, we – the mills, we're doing about 75,000 tonnes a month from underground, which is stope ends and development, we've got two-thirds stope one-third development, and there is a similar tonnage from Hermes.

Perfect. Thank you.

Thank you, operator. Since there are no further questions, I would like to thank everyone for joining us today.

In summary, as expected, third quarter operating results were negatively impacted by the necessary decision to sacrifice short-term results in order to focus on the long-term success and the need to establish sufficient development to execute on our new five year mine plan. We believe this plan provides the platform to deliver on our goal of establishing the Plutonic Gold Operations as a producer, capable of delivering at least 100,000 ounces of gold annually.

We look forward to providing additional details on the – pit portion of our plan in the fourth quarter and to execute on this plan in – to 2020. Thank you, again, for joining us on the call today.

Have a nice day.