Superior Gold Inc.

Good morning and thank you for joining us to discuss Superior Gold's first quarter 2020 results. I hope you and your families are all well.

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 results of the quarter.

During the first quarter, we produced 16,351 ounces of gold, exceeding our quarterly guidance despite a number of one time unexpected events that impacted the Plutonic Gold operations. We sold 16,850 ounces of gold at a record realized gold price of $1,570/oz U.S.

Total cash cost due in the quarter were $1,291 ounce and all-in sustaining costs were $1,416 per ounce, all the numbers will be U.S. unless otherwise stated.

During the quarter we announced positive drill results from the area between the Indian and Baltic Zones which continues to demonstrate the potential to expand the [organization]. Finally as a result of the progress made with the global resource recalculation we have decided to include it as part of our 2019 year end reserves and result estimates this will be available later in the second quarter together with the details of the plans for the open pit operations.

I will now turn the call over to our Chief Financial Officer, Paul Olmsted to discuss our financial results for the quarter and full year.

Thank you, Chris. For the first quarter we generated revenue of $26 million; a slight decrease from revenue of $29 million generated in the first quarter of 2019.

Lower gold revenues resulted from 5,654 fewer ounces being sold partially offset by an increase in realized gold price to 1,570 per ounce from 1,305 per ounce. The reduction in ounces sold was due to fewer ounces being produced as a result of decreased mill feed from Hermes and lower recoveries partially offset by other low-grade stockpiles and higher grades from underground operations.

Cost of sales were $23.7 million for the quarter, a decrease of $7.3 million from the first quarter of 2019. Cost of sales were lower in the current period versus the same period in 2019 predominantly due to a reduction in mining costs at Hermes of $9 million following its suspension, partially offset by higher payroll and maintenance cost at the underground operations.

In comparison to the first quarter of 2019, general and administrative expenses increased marginally at 44,000 in the quarter largely due to higher payroll cost as a result of the addition of the company's chief operating officer. Adjusted net loss for the first quarter amounted to $115,000 or $0.0 per share compared to an adjusted net loss of $2.6 million or $0.03 per share in the same quarter of 2019, primarily due to the higher operating loss in the comparative prior period.

For the quarter, cash from operating activities before working capital was $1.2 million or $0.01 per share and that includes the repayment of $1.9 million under the Auramet gold loan. At quarter end we had an excess of $16 million in cash and cash equivalents.

The decrease in cash and cash equivalents at quarter end relative to a year end 2019 is a result of a combination of the effect of foreign exchange movements, the timing of payables relative to quarter end and the repayment of a portion of the Auramet gold loan. As Chris mentioned, the Plutonic Gold operations produced and sold 16,351 ounces and 16,850 ounces of gold respectively.

Total cash costs of $1,291 per ounce sold and all in sustaining costs of $1,416 per ounce sold were below the realized gold price of $1,570 per ounce for the quarter. In comparison 22,474 ounces and 22,504 ounces of gold were produced and sold respectively in the first quarter of 2019.

Total cash costs of $1,145 per ounce sold and all in sustaining costs of $1,246 per ounce were below the realized gold price of $1,305 per ounce for the first quarter of 2019. Total cash costs and all in sustaining costs increased over the prior period primarily as a result of no contribution of tonnage is milled from the Hermes gold mine for the period and slightly lower underground tons milled offset in part by an increase in underground grade and the processing of other low-grade legacy stockpiles.

The lower underground tonnage resulted from limitations imposed on the operation as a result of power outages and heavy rains experienced in the quarter. The increase in underground grade from the prior period was a result of targeting higher grade areas of the underground mine were available as we focused our efforts on the development and sequencing necessary as part of our long-term plan.

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

Thanks Paul. For 2020 our guidance currently remains unchanged.

However, in order to minimize the risk of exposure to COVID-19 we have been and we still are only allowing site access to employees, contractors and suppliers that are deemed essential. As a result access to the open pit contract is required for open pit development has been delayed.

We are now targeting commencement of production from the open pits in the second half of 2020 and as a result expected to be at the lower end of production guidance for the year. As previously indicated the first quarter always was anticipated to be, it will be the weakest quarter of the year due to a number of one timing unexpected events at the Plutonic gold operations.

However, with a continued emphasis on improved underground development rates and execution of our mine plan. We anticipate a progressive improvement in our quarterly production results of the course of 2020 where production in the second half of the year will be higher than the first half of the year.

For the second quarter we anticipate production of between 16,500 and 18,500 ounces. During the quarter we announced results from drilling that targeted the potential extensions of the gold mineralization of the Indian zone.

The drilling was focused on the areas of northwest of the Indian zone with an area which extends approximately 500 meters between the Indian and Baltic zones and which has not been tested. As a reminder the Indian and Baltic zones are key components of our longer-term underground mine plan and consequently these results illustrate potential to extend the mine life.

As illustrated on slide 7, the key drill results were noted. This actually may be slide 9.

27.9 grams per tonne gold over 4.1 meters, 57.7 grams turnover and 0.8 meters and 22.2 grams per tonne over 2.6 meters all previously released. The drilling was completed over a strike length of more than 150 meters and inversing extent of more than 100 meters.

Mineralization remains open both up and down and long strike. We are very pleased with these results which we believe they illustrate the potential to connect in different for concerns.

Our goals for 2020 include executing on our underground mining plant, improvement in the underground sub grade will lead to increase production at lower costs. Our short-term goals consist of filling the mill at the best possible grade and updating the resource from reserve estimation.

We will continue to investigate ways to fill our second mill which is currently under current maintenance. In the meantime, like Q2 we plan to provide our year end 2019 reserve resource update which will include the results of the global resource calculation and we will also provide an update for the open pit operations at the Plutonic Goldmine.

In July, we will report our second quarter detailed production results or by our full second quarter financial results in August. As we've done in the past we will write ongoing expiration updates.

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

Thanks, operator. Good morning, Chris.

Just a couple questions. First question, could you just touch on the scheduling of payables on this quarter and then maybe moving forward and how you expect them to impact cash flow?

Okay. Those are second question?

The second questions are related to any capital costs related to the open-pit.

Okay. I’ll answer the open pit one now because then I'll pass over to Paul Olmsted, capital costs with the open pit with Kensington managers schedule so that we don't incur those.

So the plan is when we release the reserve resource we will provide color on that and then in terms of payable timing I think you're better off listen to Paul Olmsted.

So it's Paul now. Just on the payables at each quarter we evaluate the payables and for the end of the first quarter we determined that it was appropriate to reduce the number of payables that we had at the end of the year.

So payables from your end are down $5 million. So I think just from cash flow perspective this will fluctuate from quarter-over- quarter but there was a significant decrease from December to March.

I think it's fair to say Paul that the fact that we did that order [indiscernible] financing gave us the flexibility to do that.

That's correct.

Yes. Which was the goal of the financing in the first place.

Does that help Philip?

Sure. Yes and then what are your expected cost related to exploration?

Well, I mean we still say the budget is, I think it was 6.5 million USD is what we stated. We still actively explore with a third rig underground.

We've continued to do that pretty much ever since we've owned the mine and we're currently putting together a sort of a longer-term plan to surface for the back end of the year. I think we made significant progress with our upgraded geological team in terms of understanding what it is we should be looking for.

So yes, we still very much focused on looking for the next thing and exploration is still a big part of our future for sure.

Okay. Thank you.

Yes. Good morning guys.

Chris can you give me a bit more color on the schedule for the open pits? Basically if you start work to get the all clear how long will it take before we start seeing or hitting the mill?

I've got Keith Boyle on the line with us. So he's probably in better place than me to actually answer that.

So Keith do you want to give some color on the startup period? Keith, hello?

I guess we --

No, sorry I hadn’t. No, no I had my phone on mute.

I am sorry. I was talking away there.

Good evening, Keith.

All disruptions. Yes.

Okay. Hi.

The startup of the open pit will be quite quick. We have, we're looking at early sorry in the third quarter there to do that provided the COVID lifting and everything works well the way Western Australia is going but because we're permitted, we have our permits ready to go.

We're in discussions with contractors now and really just waiting to pull the trigger.

Okay. And it will be done with contractor equipment as well or is it your own rolling stock?

No, no, the open pit material will be a contractor gear.

Okay. So just whatever time it takes to them to mobilize you sure.

Well, we've got to hire people to do the grade control. So the reason we have to start the grade control drilling while they're mobilizing and then where we go.

Yes.

Okay and what's the, what are things like in Western Australia this week? I know it's a dynamic world situation we're dealing with but is the industry moving towards getting back to full capacity with contractors and everybody sooner rather than later or is it stuck in the mud like other areas?

In Western Australia, the mining didn't actually, well it slowed down a little bit but not like it did here in Canada where operations actually shut down. Some did slow down but generally in Western Australia kept going.

We did have restrictions in terms of changing rosters to social distance and add [indiscernible] and whatnot but other than that it's pretty much on a phased approach since similar to around the world and we're right in the phase 2 now where groups of 20 or more are starting to be allowed and restaurants are being opened with social distancing, etc. So that too we are looking at getting ready to go back to our regular roster at the beginning of June.

Okay. Great.

Thanks a lot. That's all I have.

And Ian just to put into perspective, I mean whilst Australia's taking a hard line and terms shutting down its borders but there's been only and I say only because obviously for the people affected it’s not [indiscernible] but there's been nine deaths in Western Australia associated with COVID-19. So they've managed to control it pretty well I think.

Okay. Great.

That's good intel. Thank you.

Hello. Thank you for taking the question.

I'm just curious, it's been a long period of time now where we sort of underperformed our expectations and our equity value as a result has stayed relatively low versus our earnings potential and resource and reserves. How worried are you about hostile bidder there's been some step up in M&A activity and obviously if someone can execute properly then superior produces on cash flows.

So what are your thoughts on that?

Well, it's a good question. I mean I think they're typically hostile bids if they were to surface.

They generally don't succeed. So if it happens, it happens but I would not expect it happen.

I mean you have seen the case recently with Guyana Goldfields where the second hostile bid has been triggered by a friendly bid but really at the end of the day the best thing we can do is just turn this operation around and expose its value, so even if someone does want to express their interest then they've got to recognize the value. So the best thing we can do is to try and run the business the best we can and that's what we're doing.

Do you think that, if there was someone who was interested in pursuing a friendly transaction that had more capital and cheaper cost of capital that you consider a premium takeover bid?

Well, my job as a CEO is to look after the interest of the shareholders. So if someone came with a bid that met those criteria then clearly it would be my responsibility to bring it to shareholders but to-date that hasn't happened.

Do you have an idea where intrinsic value is now in your mind?

Well, I think every CEO thinks their stocks undervalued. So it's always higher.

It certain isn't where we are now, although having said that we outperformed our peers year-to-date. I think that's correct Paul?

Correct.

Yes. So despite our lower value compared where we all think it should be we've actually done okay year-to-date but basically –

I think you did very poorly last year, right? I mean that’s --

Yes. No, that is part of it for sure.

But anyway so it really all comes back to us delivering on what we think we should do. That's how we'd surface the value.

So we're focused on doing what we can control. We can't control anyone else's view of us but we can control how we perform.

I understand we have no webcast questions. So since there are no further questions, I would like to thank everyone for joining us today and we are pleased that we exceeded our first quarter production guidance despite a number of one-time unexpected events that impacted the Plutonic Gold operations through the quarter.

Excuse my voice. We remain focused on improving grade in addition to continued improvements of the undergoing development rates and the execution of our grade plan.

As a result we expect to see a steady increase of our quality production or improvement of our quality production results over the course of the year. Thank you again for joining us on the call and please continue to stay safe.

Have a great day.