Superior Gold Inc.

Thank you, operator, and good morning everyone. Welcome to Superior Gold's quarterly conference call on which or during which we will be discussing our fourth quarter and full year 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 highlights of the quarter and full year.

During the fourth quarter, we produced 20,084 ounces of gold, representing a 21% increase over the prior quarter, and sold 18,899 ounces of gold at a realized gold price of $1,478 per ounce. Total cash cost during the quarter were $1,317 per ounce and all-in sustaining costs were $1,424 per ounce based on per ounce sold.

At Gold sells been able to match production, both total cash costs, all in sustaining costs would have been considered to be lower. During the quarter, we announced our five-year guidance plan for the underground portion of the Plutonic Gold Operations.

We ended the quarter with a cash position of $22.3 million. And finally, we announced positive drill results from the Baltic and Indian zones indicating the potential to increase mineralization in those areas.

For the full year, we achieved our revised production guidance with reduction of 83,035 ounces of gold. We generated a record revenue for the year of $160 million.

The sale of 83,241 ounces of gold had a record realized gold price of $1,387 per ounce. We also achieved our revised cost guidance with all in sustaining costs of 1,387 per ounce, which was near the lower end or revised cost guidance.

Finally, since the acquisition of the asset, which we achieved communicative production of over 275,000 ounces of gold. I will now the call over to our Chief Financial Officer to discuss our financial results for the quarter and full year.

Thank you, Chris. For the fourth quarter and full year 2019, we generated revenue of $28 million and a record of $116 million respectively.

Revenue for the fourth quarter increased by $4 million compared to the same quarter in 2018. Higher gold revenues, during the quarter resulted from an increase in the realized gold price to $1,478 from $1,237 per ounce, which was partially offset by 406 fewer ounces being sold in the quarter.

For the year revenue increased by $8.1 million compared to 2018. Higher gold revenues for the year were the result of an increase in the realized price of $122 per ounce to $1,387 per ounce offsetting the 1,675 fewer ounces of gold sold.

Cost of sales for the quarter were $29.1 million, a decrease of 1.9 from the fourth quarter of 2018. Costs of sales were lower in the current period versus the same period in 2018 predominantly due to a reduction in mining costs at Hermes of $6.9 million, following a temporary stoppage earlier this year.

And that was partially offset by higher payroll and maintenance costs at the underground operations. For the full year 2019, costs of sales were $122.7 million, an increase of $8.6 million over the full year 2018.

Higher cost of sales resulted primarily from higher maintenance and payroll at the underground operations resulting from additional personnel hired in the fourth quarter of 2018, as well as the company's focus on improving underground fleet performance. Compared to the fourth quarter of 2018, general and administrative expenses increased by 189,000 in the fourth quarter of 2019 due to higher payroll costs, as a result of the addition of the company's Chief Financial Officer, partially offset by lower share-based payment costs.

For the full year, general administrative expenses decreased by 733,000 compared to 2018 due to lower payroll costs as a result of the finalization in 2019 of accruals for 2018 short-term incentive program, in which no short-term incentive was awarded to executives for the 2018 performance. And lower consulting costs due to administrative projects that were completed in the first quarter of 2018.

Adjusted net loss for the quarter amounted to $3.2 million, or $0.03 per share compared to the adjusted net loss of $6.9 million or $0.07 per share in the same quarter of 2018. Primarily, due to the lower net loss in the current period.

Adjusted net loss for the year amounted to $11.6 million, or $0.12 per share compared to adjusted net loss of $10.5 million, or $0.11 per share for the full year 2018. Primarily due to lower operating income in 2019 and a lower income tax recovery.

For the quarter cash from operating activities increased to $10.5 million, or $0.11 per share from 374,000 in the fourth quarter of 2018. For the full year 2019, cash from operating activities increased to $15.9 million, or $0.16 per share from $6.6 million in 2018.

The increase in cash generated from operating activities resulted mainly from the net proceeds of the company's gold loan of $10.1 million, which has been classified as an operating activity. At the end of the fourth quarter, we had an excess of $22 million in cash and cash equivalents despite the additional capital investment required to prepare ourselves for the execution of our five year underground plan.

During the year -- during the quarter, we successfully obtained a $15 million gold loan facility with Auramet, which allows us to take advantage of the highest rating dollar gold price without taking any shareholder dilution. And this provides us with enhanced financial flexibility.

I would also like to highlight that the loan is only short-term in nature and will be repaid in 12 to 18 months time. 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. As I mentioned earlier, during the quarter we announced our five year guidance plan, which Paul just referred to for the underground operations of the Plutonic goldmine.

In this plan over the next five years, we expect to produce between 70,000 to 85,000 ounces of gold per year from underground operations at a total cash costs of between $925 per ounce and $1,050 per ounce. And all in sustaining cash costs are between $1,025 per ounce to $1,150 per ounce.

We are forecasting so grade to be in the range of 3.5 grams to 4.5 grams per ton gold. This will account approximately 75% of the underground milled fees and the remaining 25% of the underground fees will be sourced from development or which has a forecast average grade or 1.8 grams per ton.

Capital spend in each year will be approximately $7 million, which is higher than previous levels as we are planning to reinvest sufficient capital to maintain a longer term mine life. However, the increase in sustaining capital costs are expected to be offset by improved operational efficiencies.

Exploration spending will remain at $6.5 million a year but will increase with exploration success. This plan provides us with a platform to develop Plutonic Gold Operations into a stable 100,000 ounce a year producer.

And in that context is important to highlight that the plan has not yet included the potential open pit production from Hermes, Hermes South from past-producing open pits near the Plutonic underground gold mine. We have aim to incorporate this into the plan in the same time we put out our reserve and resource up there, which is typically the beginning of Q2.

During the quarter, we announced results in drilling target targeting the potential extensions to the Baltic mineralization. The drilling was focused on the area between the deepest parts of the Baltic zone and the upper parts of the Baltic Deep zone, where no previous drilling had taken place.

We are very pleased with the initial results, which we believe illustrate the upside potential of both the Baltic and Baltic Deep zone. These results demonstrate the potential to fill the gap between the two zones and extend Baltic mineralization into the Baltic Deeps.

As illustrated on Slide 9, highlights of the drill results include 26 grams per ton over 5.6 meters, sort of 10 grams per ton over 0.6 meters and 30.2 grams per ton over 6.7 meters. Subsequent to the quarter, we announced results from drilling tied to any potential extensions, to the gold mineralization within the Indian zone.

This drilling was focused on the areas of the Northwest of the Indian zone within an area, which then extends approximately 500 meters between the Indian and Baltic zones, and which has not been tested. We are very pleased also with these results, which we believe illustrate the potential to connect the Indian and Baltic zone.

As a reminder, the Indian Baltic zones are key components of the recently announced five year underground life of mine plan. Consequently, these results illustrate the potential to extend this plan beyond five-years.

As illustrated in Slide 11 the following key drill result was also noted from the Indian drilling. 27.9 grams per ton over 4.1 meters, 57.7 grams per ton over 0.8 meters and 22.2 grams per ton over 2.6 meters.

But 2020, we continue to guide always production of between 80,000 and 90,000 ounces of gold cash cost between 975 and 1,075 per ounce or between 1,075 or 11,075 per ounce an all in all sustained cost base. As mentioned, exploration spending will remain at 6.5 per year, but will increase with exploration success and as previously mentioned capital spend in will be approximately $7 million.

We previously indicated to the first quarter of 2020 will be the weakest quarter of the year as most of the production due in the quarter remains for mineralized areas that are outside the life of mine plan. Additionally, here in the quarter, the Plutonic Gold Operations suffered some unexpected weather related power outages and higher than anticipated arsenic content in some of the mined areas, which exhibited lower recoveries in addition to heavy raised design production.

This combined to lower our anticipated production for the quarter. The forecast of between 15,000 and 16,000 ounces.

However with a continued emphasis on improved underground development rates and the execution of our five-year life of mine plan, we anticipate a progressive improvement in our quarterly production results over the course of 2020, where production in the second half of the year will be materially higher than the first half of the year. As indicated in our previous slide our full year production guidance remains unchanged at 80,000 ounces to 90,000 ounces.

Our goals for 2020 include executing on the Life of Mine Plan. A continued improvement in the underground stope grade will lead to increased production at lower costs, our short-term goals consist of filling the mill at the best possible grade and completing the global resource recalculation projects.

We will continue to be aggressive on the exploration front and investing in ways to potentially start up and fill the second mill. In the near-term, we plan to provide our year-end 2019 reserves or resources update and we'll also release a new Life of Mine Plan to the open pit operations at the Plutonic gold operations.

We also plan to announce the results of our new global reserve and resource update, throughout the year investors should expect to see ongoing progress improvement in our operating performance as we execute on a Life of Mine Plan, as well as provide the market with regular expression updates. Operator, I think we were ready for questions here.

Hi Chris. Thank you for taking my question.

Two questions. First thing with maintaining your current guidance for the year and the production being back-ended for the second half.

What factors do you expect to make up for the short fall in Q1 will it be mostly additions from the open pit production? Or do you expect to, or you do budget the grade to increase significantly towards the end of the year?

Yes, the biggest is the grade. We expected to see that go up during the year.

So for us the grade is always the biggest thing. Obviously, probably the second half of the year, the open pit operation could start up.

So that could have -- would have a positive effect too.

Okay. And the second question is, with the power outages and you've been on generated power, what specifically was the issue?

And have you developed a plan to address that going forward? And what's the progress in sorting that out?

Yes, well the progress is all sorted out now. But the areas of the mine, it was a lightning strike that actually affected one of the underground power generators.

So there was a few days of lost production in key areas. So but that's all fixed now.

And we had very heavy rains this year. I mean, last year we almost had none.

I mean, this year we had some very heavy rains for a long period of time, which made basically driving on the roads. There were periods where we just couldn't use the roads.

And in terms of the severe unexpected power outages and the heavy rains was a bit out of control out of your control. Now, in terms of the higher than anticipated arsenic content and mined areas, do you expect that being a problem continuing through the rest of the year?

No. Wait, we're out of that -- We're out of that area now.

It just -- I guess surprised us. It was an area where we knew what the arsenic content typically was and we ended up mining in an area that just had a higher, arseno pyrite content.

But as I said we're through that now.

I look at the values that you guys have put out in the plan and the market, I assume, doesn't really believe it based on the valuation, what can you tell us to give us more confidence that you guys will be able to make your numbers and what kind of confidence do you have in the guidance that you've put out there?

Yeah, well, I mean I think the valuation is terrible that we have right now is just showed me valuation around the Mark. I think you say, well show us you can do it.

But I think what we've done to ensure that we can meet our forecast is really strengthen the onsite team. So we're focused on delivering the best possible result with the best possible people.

That's really how I would answer that.

How much confidence do you have in the guidance? Like r a 95% confidence interval is there 50%.

Sorry.

Is it like a 95% confidence interval that you have in this guidance is it 50%? How comfortable are you?

I'm comfortable. I mean obviously there's any reason to be less confident we will let people know that we're starting out the year and we can see what we're doing.

So I have confidence in the guidance side.

Just a quick question for you. Any interruptions so far on the labor side with regards to the coronavirus?

Are you able to get people to site and then expanding on that supply chain as well? Any other interruptions getting key material to site?

Well, I, we have had no -- no one has the virus that side, so we haven't been affected at the moment but, we have the ability to quarantine people on site if they do get it and they ask, they can't get on the plane to site without acceptably answering some questions. So we haven't seen anything that is not related to the coronavirus.

So we haven't seen anything in the supply chain yet. I mean, obviously it's something we monitor a little on an ongoing basis, but anything that does affect it's going to affect every single goldmine operator in Western Australia to overseas.

Do you know what percentage of your employee base lives outside of Australia? I'm just wondering, you know, if these global travel restrictions really continue to snowball…

I would say, it's over 90% live in Western Australia. There's a couple of people who live in Eastern Australia, I believe there's one or two live in Bali.

So those would be the ones that you would be keeping an eye on.

And as a percentage, that's an incredibly small percentage.

Yes.

I have had a hard time just reconciling how you -- you are still forecasting such a low cash cost this year of 975 to 1075. Considering that we just had an awful Q4, Q1 sounds like it may be even worse.

If we look at sort of maybe Q4 2020, what are you expecting, how low will cash cost and the AISC go-to at that so that we could average these kinds of a much lower costs that you're guiding to?

Yes, well it's a fair question. But again, it all comes down and executed on that Life of Mine Plan because with the grades going up, the cost come down markedly.

If they did, it's always been that way for us. Once we get that stope grade up, the costs come down and we're improved.

We'll be got a sideways, additional cost reduction initiative that's ongoing.

So are we looking at something like $700 cash cost like in a good quarter when all things seem to align.

I'd be doing [indiscernible] if you got there. I don't think we've forecasted anything like that.

Okay. But Q1's going to be really bad.

I don't know what you're predicting for Q2. So a lot has to be made up in Q3 and Q4.

Yes, well I think over the last three quarters that's where we've plan to make it up. And yes, obviously Q1 it was always going to be the weaker one anyways, so we did build that insight around analysis.

Yes, thank you, operator. I believe we got one question on this coming from the webcast from a Nick Picard.

The question he asked was can we expect lower costs? Do lower oil, and lower Australian dollar, and how much impact in dollar per ounce to cash costs?

Well, obviously with the lower Australian Dollar I mean, its lowers your U.S. quoted price.

But, in terms of lower oil I don’t know what the percentage is, I mean, obviously we use fuel so it would have some impacts and our power is generated by gas or the gas pipeline. So to the extent the Gas as oil obviously that would help.

So that would answer that question. Well, I think if we don't, we've got all the questions out of the way operator.

So since there are no further questions. I would like to thank everyone for joining us today.

We are pleased to report these record revenues for 2019, which is a result of our achieving our full year revised production and cost guidance coincide with a record realized gold price. We also exit the year with a good cash balance and our focus looking forward is executing on our Life of Mine Plan bringing the production up and the cost down.

Thank you guys for joining us on the call today and have a great day everybody.