Superior Gold Inc.

Thank you very much. Good day, everyone and thank you for joining us to discuss Superior Gold’s third quarter 2021 results.

I hope that you and your families are all safe and well and looking forward to the coming festive season. As a reminder, please refer to Slide 2 of our presentation, which is posted on our website to view our cautionary language regarding forward-looking statements.

In addition, please note that all amounts discussed are in U.S. dollars unless otherwise noted.

Moving over to the next slide. Joining me today in today’s call are Paul Olmsted, our CFO and Russell Cole, our Vice President, Operations.

Looking at the investment highlights, as a reminder, we believe the key investment highlights of Superior Gold are that Plutonic is situated in Western Australia, one of the top mining jurisdictions in the world according to the Fraser Institute. It’s a world class operating mine with related infrastructure.

The business has a clear and concise optimization and expansion plan, adding it down with a significant mineral resource base with exploration upside. Finally, one of the most compelling attributes is the re-rate opportunity we represent compared to our peers.

In order to achieve a re-rate, our strategy is to deliver on three main goals. Firstly, to deliver a safe, stable and predictable operation at a consistent 70,000 to 85,000 ounces per annum gold and operational scaling stepping up to 100,000 ounces and ultimately 150,000 ounces per annum.

Commensurate to establishing a business of scale, we expect to see a reduction in cost and of course, strengthening our cash flow as a consequence. Smart investment exploration of known high potential targeted areas is our third goal.

I will now explain in more detail how we are going about to deliver these goals. We have a well-defined growth strategy and it’s based on what I originally said achieving three goals.

We will achieve these goals by focusing on four phases. In order to deliver the first goal, which is a safe, stable and predictable operation, in Phase 1, we are working to reestablish steady-state production from the underground mine to annualized rates of between 800,000 and 900,000 tons per annum in the short-term.

We have made significant strides in achieving this goal in 2021 and are encouraged to see if we turn to the state of improving positive cash flow in the first three quarters of 2021. The near-mine resource extension drilling and mineral exploration currently underway are expected to provide future mining fronts, delivering competent high grade and ore for stable cost effective feed to the mill.

Secondly, to establish an operational scale, our second goal, Phases 2 and 3 are designed to increase production firstly to 100,000 ounces and in subsequently 150,000 ounces. To achieve this, we are building on Phase 1 to increase production from the underground and augmenting feed to the mill by adding open pit production from a number of near-mill, past-producing open pit projects, which includes Plutonic East, which commenced on schedule in May of this year.

It’s now complete and Perch was commissioned in September of this year, with optionality into Hermes and Hermes South. A review of these opportunities, are currently underway targeted at maximizing the potential from these pits.

In addition, we are considering early entry low-cost targets into the main pit as a precursor with a larger main pit pushback project. The pits on our properties are targeted to feed a 1.8 million ton per annum milling circle.

Considering our growth strategy towards 150,000 ounces is recommissioning our second mill that is currently on care and maintenance. New sources of feed would be required and may come from exploration on our existing properties or from several other sources along the Plutonic Marymia Gold Belt.

We are actively exploring these opportunities. Phase 4 focused to deliver on exploration of known high potential targeted areas.

There is the potential for a new discovery as we invest in exploration at Plutonic. We have certainly been very encouraged by our drilling results in the last few months now that we have a third drill rig in the property – on the property dedicated to opening new mining fronts and one may expect regular updates on exploration.

Moving to the safety of our people, which is our top priority. Above everything, the health and safety of our people remains first and foremost in our minds.

We continue to successfully operate through the COVID pandemic and to adhere to the strict measures that we put in place to mitigate this threat. To-date, we are very pleased to report that we have had no incidents of infection from COVID-19 at our operations for seventh consecutive quarter.

In order to comply to recent legislation, all employees and contractors are expected to be fully vaccinated by the January 1, 2022. We are also putting a lot of effort into introducing a safety culture that is committed to a workplace free of accidents.

Our people of safety and risk transformation program commenced in October and will focus on safety leadership, critical control management that is on the job safety, process safety and material risks. Now, moving forward to the third quarter highlights.

Production ended up at 19,379 ounces of gold, with sales of 19,282 ounces of gold at a realized price of $1,772 per ounce. Total cash costs were $1,241 per ounce sold and all-in sustaining costs were $1,453 per ounce sold, that is down 5% and 4% respectively on the second quarter of 2021, which is a testament to the improved efficiencies and related cost benefits being implemented.

For a third straight quarter, we generated significant cash flow from operations and exited the quarter with a robust cash position of $20.5 million. Operationally, we continue to achieve our targeted stope grade of about 3 grams per ton with our 9-month year-to-date 2021 stope grade at 3.2 grams per ton, an improvement of 14% relative to the 9-month period in 2020.

Our mill grade for the third quarter in 2021 increased by 7% over the comparable period last year. Year-to-date, our mill grade increased by 15% over the comparable period in 2020, reflecting the impact of both higher underground grades and replacing low grade legacy stockpile material with higher grade open pit feed.

The higher grade also led to improved recoveries in 2021 with the year-to-date recoveries of 87% versus 82% over the same period in 2020. An improved understanding of the geology and mineralization at Plutonic has led to establishing two new mining fronts as demonstrated by exciting new drill results at the Baltic Gap Deep’s mining front and at the Western mining front.

Both of these are in close proximity to existing development and infrastructure. A bit more on the production results.

As we mentioned, our production for the quarter ended up at 19,379 ounces compared to the third quarter last year of 15,699 ounces in 2020. The increase is largely a result of the increase in the contribution of high-grade stope material that reduced the proportion of lower grade legacy being milled.

One of the key highlights for the third quarter is the 7% increase in total material mill to 405,000 ounces for the quarter compared to the same period in 2020. Throughput rights were increased as there was an increase in the availability of high-grade surface material for milling from the Plutonic East and Perch open pits.

Moving on to the next slide, we have seen a steady improvement in results following the operational improvements we have implemented here at Plutonic, which is illustrated in the slide. Overall, quarterly production has increased by 28% from a low in the second quarter of 2020, highlighting the importance of targeting the higher mine stope grades and its impact on our overall cash generation ability.

In addition, our net cash position has improved by $3.1 million in the third quarter to $20.5 million, a significant improvement from the end of the second quarter of 2020, reflecting improved operating performance, and of course, the repayment in full of our gold loan at the end of the second quarter 2021. I will now turn the call over to our Chief Financial Officer, Paul Olmsted, to discuss our financial results.

Over to you, Paul.

Thanks, Chris. During the third quarter, revenue totaled $34.2 million from the sale of 19,282 ounces of gold, an increase of $7 million from $27.2 million from the sale of 15,492 ounces of gold in the third quarter of 2020.

Gold revenues were higher as a result of the 3,790 more ounces being sold and a marginal increase in the realized gold price to $1,772 per ounce from $1,756 per ounce. Cost of sales, were $28.3 million for the third quarter of 2021, an increase of $2.7 million from $25.6 million for the third quarter of 2020.

This was due mainly to the Australian dollar, the impact of which resulted in $0.8 million increase, an increase in surface mining costs of $0.9 million from the mining of open pits at Plutonic East and Perch, and site bonuses due to improved performance relative to 2020. Adjusted net income for the third quarter of 2021 amounted to $1.8 million or $0.01 per share compared to adjusted net loss of $1.3 million or $0.01 per share in the third quarter of 2020 and that’s primarily due to higher operating earnings in the current period.

During the third quarter, cash from operating activities before working capital changes was $5.1 million, a $6 million increase over cash from operating activities for the second quarter of 2020. The increase in cash generated from operating activities was predominantly a result of stronger operating earnings in the second quarter – third quarter of 2021 in comparison to the second quarter of – third quarter of 2020 and the repayment of the gold loan at the end of the second quarter of 2021.

The chart on the right highlights that in the third quarter, cash flow from operations before working capital changes and before the repayment of the gold loan increased significantly by $4 million compared to the same period in 2020. As at the quarter end, the company had a strong cash and cash equivalent position of $20.5 million.

Of particular note is the fact that the gold loan was fully repaid at the end of the second quarter of 2021 and the company currently has zero term debt outstanding. As a result of the repayment of the gold loan and improved performance year-to-date in 2021, our working capital position has increased to $7.5 million over the December 2020 year-end position, a significant improvement.

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

Thank you very much, Paul. Moving on to the next slide in so far as guidance are concerned, our production guidance for 2021 remains unchanged.

However, we guide towards the upper end of guidance production of 75,000 ounces of gold for full year 2021. I’d also like to note that the year-to-date all-in sustaining cost is accumulated at $1,494 per ounce, which is below the lower end of our cost guidance.

Now moving on to the underground optimization, we are currently focused on unlocking the value in the underground through production growth, margin optimization and systematic exploration. First, we’re focused on optimizing our grade from the underground at an average stope grade of better than 3 grams per ton, which we’ve been very successful in achieving.

In mining operations, we’ve revitalized the underground fleet recapitalizing two new trucks and two new loaders. At the mill, which operates very well, the recommissioning of the gravity circuit earlier this year has had a positive impact on recoveries and increased and continue to do so.

Finally, the addition of the third underground dual rig that is dedicated to expanding into new mining fronts has resulted in some very promising results recently, and I will discuss that in a little bit more detail shortly. During the second quarter of 2021, open pit mining commenced at Plutonic East as I said before.

In the third quarter, mining at Plutonic East was completed, and the company initiated mining successfully in the Perch open it. Production from these open pits, as previously mentioned, the potential for early entry into the main pit as a precursor to the larger main pit pushback project along with operational improvements from the undergrounds expected to increase production and improve on Plutonic gold’s free cash flow generation capability.

Moving on to historic step-out drilling and a few highlights there. This slide is a reminder that there are significant intercepts in close proximity to existing infrastructure as well as all grade intercepts located 1 kilometer outside the mineralized map.

It should be clear that the limits of the mineralization yet to be found and a continued investment into the exploration of Plutonic is warranted and considered. In the near-term, our focus on the underground is on exploring and developing into new mining fronts.

We believe that the two new mining fronts, that being the Western Mining front and the Baltic Gap will be key in improving the profitability of this operation in the near-term to earlier FY ‘22. We have recently announced drilling results from three main areas, being Baltic West, Indian Access and Baltic Gap, which is highlighted in those presentations.

Talking about the extension into the Baltic Gap, on August 17, we provided an exploration update in the third quarter with drill results from the Western Mining front. The results were highlighted by drill hole 24141, which intersected 42.2 grams per ton gold over 5.6 meters and 24376, which intersected 17.7 grams per ton gold over a 6.4 meters length.

This new mining front now extends an estimated 1,600 meters by 60 meters outside the current mineral resource envelope. As a reminder, the Western mining front is directly adjacent to existing underground infrastructure, thus requiring minimal capital to develop into this area.

The expansion of existing mineral resources are key components of our current strategy to expand into new mining fronts and improve our mining grades productivity and, therefore, reduce our reliance on remnant mining, which we expect to start in FY ‘22. Looking forward to a few upcoming catalysts, we have a number of them I’d like to highlight.

Firstly, going forward, we expect to provide more regular underground exploration update now that we have the third drill rig operating and dedicated to exploration. The next update is expected within November 2021.

In the near year, we expect surface drilling results to flow forward as well. We expect more opportunities for improvement as we complete the full potential assessment to unlock the latent capacity in the operations.

We also expect to be commencing and announcing results of heritage surveys which will hopefully have some positive impacts on the Main Pit pushback project and make clearer the timing of the Hermes South project. And over the next 12 months, we have a healthy pipeline of development and exploration catalysts to look forward to.

Moving forward to the capital structure in this slide, quick summary of the analysts currently covering the stock, our key shareholders and, of course, the capital structure. We are very encouraged by the support of some significant long-term goal fronts and note the analysts see a significant upside to our current share price on the top right – the table on the top right.

We also maintain a tight share structure within just 123 million shares outstanding, as shown in the table on the bottom right. I remind everyone of our very well-defined simple and growth strategy.

And I’d like to just remind us on a few elements there. Firstly, we’re focusing on three main goals.

The one – first one being to deliver a safe, stable operation between 70,000 and 85,000 ounces, and that is by unlocking the potential in our underground. Then secondly, moving the business to a level of scale of 100,000 and the 150,000 ounces by not only unlocking and increasing throughput from the underground, but also augmenting that feed into the open pits which we have already started.

And in addition to that, looking for alternative feed for our oxide mill, the 1.2 million tons per annum mill, which is currently in care and maintenance, which will see the operation move to 150,000 ounces per annum. Phase 4 focused to deliver on exploration of non high potential target areas.

Now there is potential for a new discovery, as I said before, and we continue to be encouraged by the results we’ve received from previous and current drill results. We are absolutely focused on repositioning Plutonic for the long-term success and unlocking shareholder value.

Thank you. So with that, I conclude the presentation portion of the call.

Operator, you may now open the line for questions. Thank you very much.

Hi, there is [indiscernible] on behalf of Steve. Steve unfortunately couldn’t be here for the call, but I have a few questions that he wanted to ask guys.

Of the 4 new mining areas being opened for 2022, is the grade better than the average underground C grade from Q2 and Q3?

So I just want to make sure that I get your question correctly. You mentioned four mining areas?

Yes. There is 4 new mining areas being opened up, right, for 2022 for underground?

So it’s extension of current mining areas. As we said, we did drill extensions in those areas, which is Baltic Area 134, Timor and Indian.

Those areas, we expect at the current forecast to be at similar grades. What we are doing is we referred in to previous presentations, the form technical work that we’re currently doing.

That work is still currently underway, and that will inform us in a more granular fashion as to what we may expect for next year, but we’re currently forecasting that we will be on the same ballpark as mentioned before.

Okay. And then the idea, obviously, these zones will allow for increased underground ore supplies for the mills, right?

Yes, absolutely. Look, the high grade, there is no doubt the high grade comes from the underground.

At those grade open pits is probably just north of 1 to about 1.5 grams per ton on the stretch in some of them, others about 6.7 grams per ton. So there is no doubt the underground is the mainstay of supply for the 1.8 million tons per annum mill.

Okay. And then with regards to the study about the early limited mining from the open pit like how does it look so far?

I know it’s not done yet, but is there any kind of early kind of findings you could share with us?

Yes. I have to say, I think at this stage, it shows promise.

Just to give you a bit of background, we initially targeted three areas. Two of them have been limited.

We’re focusing on one very specific area in the Main Pit, which is the bottom of the Main Pit. The main issues that we need to resolve there is about the interaction of the open pit with the underground workings.

And in addition to that, the – taking care or making sure that we’re fully aware of what mining has happened in the underground in that area to have proper forecast. Maybe one more thing that I’d like to add is we’re working currently in closing our approach on that specific early entry because we believe that could form potentially part of our budget for next year.

Okay. Great, thank you.

Thank you.

Thank you, operator. We will now check the webcast for any questions.

The first question is what areas of the underground mine will see the opening of the new mining fronts in 2022 mine plan?

Sorry, Sandy, could you just repeat that question? Which areas in the underground?

Which areas of the underground mine will see the opening of new mining fronts in the 2022 mine plan?

We are busy finalizing exactly what that mine plan looks like, but it will be towards the Baltic Gap and Western Mining fronts.

The next question is how many tons or quarters of production are scheduled from the open pit mining of Perch and Hermes?

Right. So Perch is currently in operation.

We are looking at about six months worth of production coming from there. We have not finalized yet what the next open pit target would be.

As I mentioned, we have options into Hermes, Hermes South as well as early entry into the Main Pit. That work is currently underway.

The next question is in what quarter do you anticipate achieving 25,000-plus gold ounces a quarter and thereby in what year you anticipate reaching the production of 100,000 gold ounces a year?

I think that is a question we are all working very hard to answer as quickly as we can. As I mentioned earlier, we are in the process now of finalizing our budget.

As I also mentioned in our strategy, a key enabler to unlock an annualized rate of 100,000 ounces per annum would be access to consistent supply from our open pits. That work and the sequencing of the open pits are still currently underway.

And not before that is done, we would have a clear line of sight on exactly will hit the 100,000 ounces per annum. Those – that answer, I don’t think it’s far off.

We certainly want to get a very clear view in the next few weeks as we finish our budget and propose it to the Board as to how we see that going forward. I think also what’s also very important to note here is that the reconsideration of the block model, the resource and reserve statement as well as the license mine based on the technical work that’s currently underway will only be complete in Q1 of next year, which will give us much more granularity as to what we can expect in the next few years for the operation.

The next question is, what are the plans or outlook for the Main Pit in 2022? And can we expect a fairly large capital requirements in the coming years for the pit layback?

No, I don’t think – we do not expect a major capital outlay for the Main Pit pushback. What we do expect is having an answer on early entry into the Main Pit.

And at this stage, we are very encouraged with the results that we have seen. Clearly, there is some more technical work planning and scheduling that needs to happen before we make the final call of whether we are going to access the Main Pit as an early entry option.

The next question, are you now looking for more properties in Canada for cash flow?

Well, I think at the end of the day, the business is very clear in its strategy. The strategy ultimately is supposed to develop this business more organically.

And what I mean by that is demonstrating to the market that we can safely, sustainably and reliably deliver with the assets that we have. And the first step was taken the operation to 100,000 ounces.

The next one is taking it up to 150,000 by unlocking the second mill. And that will put us in a very strong position for much more improved cash flow generation.

And I think that will be our key focus in the near-term to get that done and dusted first.

The next question is, will the second mill be used in 2023?

We are looking at options of potential feed for the mill. That depends on when that ore will be available.

We do not expect that ore feed will come from our properties. It will come from external properties.

Exactly when that’s going to happen, that is so currently in development. And it depends on the conversations and discussions that are currently underway.

What I can say is that we are actively looking at opportunities near-term hopefully, potential ready opportunities for open oxide feed – open pit oxide tree for the mill. What I also would like to add is that remember that process plant has been shut down for a number of years in care and maintenance.

It is going to take some capital to get back up and going, current indications between AUD20 million, AUD25 million. In addition to that, there is probably about 9 months to 12 months of work to get that mill ready to get up and going.

Of course, we will try and optimize that, but it’s not something that’s going to happen overnight. It’s going to take some time to get that mill up and going.

The key here and the critical power would be getting access to ore rather than getting the mill ready for operation.

The next question is, what is the total cost per meter of drilling?

Okay. On a year-to-date basis, we just confirm I have just been speaking to Russell Cole here.

On a year-to-date basis, $171. It might seem $171 per ounce.

It might seem high, but that is due to the nature of the drilling and the extents to which we have been doing drilling, where it tends to become more expensive. Russell, I don’t know whether you would like to add some more color into that.

Yes, we have during the last quarter, in particular, we have been doing some extension drilling, trying to define the boundary of some of these areas, and that’s probably where our costs have risen recently. Prior to that, I think at the end of Q2, I think we were at $141.

$141. Thank you.

The next question is, do you expect a negative impact by the vaccine mandate…?

No. We have a contingency plan already in place.

The operations responded proactively in identifying the number of people and people that might impact the operations in so far as vaccines are concerned. Currently, we are on almost 80% fully – sorry, first vaccination, which needs to be done by the first of December and fully vaccinated, we are on about 72%, 75%.

So, it’s trading very well, and that’s a good indication of the overall population on site. That – this includes contractors as well as our own employees.

So no, we do not expect any material impacts from the requirements or due to the requirements of vaccines.

Great. And the next question, any plans to hedge gold sales going forward?

Sorry, any plans?

To hedge gold sales going forward?

Paul, do you want to answer that, if you don’t mind?

Yes, sure. Obviously, at this point, the hedges that we currently have in place that were tied to the gold loan will be running out at the end of December.

Any decision on hedging going forward, obviously, would be a discussion that we would have with the Board, whether it’s necessary to benefit a specific project. So, at this point, we don’t have any plans, but there is certainly always a discussion that we have with the Board.

Thank you. The next question, are you currently drilling on surface?

Sorry, Sandy, you broke up there a little, just repeat it. Are we…?

Currently drilling on surface.

Yes.

And the next question, do you need to raise external capital to realize the current budget?

No. We do not expect and do not foresee any capital required to achieve what we currently have in our base case budget.

The next question, has there been any discussions with other companies to obtain ore for the second mill?

Yes, we are in conversations.

And the next question, how about the reprocessing of the old tailings?

Yes. That’s a very interesting challenge and opportunity.

In fact, some of the drilling that we are currently doing on surface is in and around that area, depending on what we found – we find in the ground below the TSF will give us indication what the potential strategy might be with the TSFs and whether retreatment makes sense. At this stage, indications are, from an economic basis that it will probably be more amenable in treating the TSF if we want to access the ground underneath the TSF as opposed to just treating the TSF as a standalone project.

Thank you. The next question is, have there been any supply chain issues?

I will ask Russell to answer that.

No, we have had no supply chain issues to speak of. There has been good supply throughout at the moment.

Great. Next question, what do you expect to happen with the $14 million north of the lines…?

Paul, I think that’s in your court, please.

Yes, sure. The exercise price on those warrants is $1.52.

So, that’s approximately CAD2. So, I mean there is still some value left on those warrants, but it has a long way to go before there is any consideration if they were exercised or not.

Thank you, Paul. The next question, could the Main Pit early entry feed ideally [Technical Difficulty]

Sorry, Sandy. I heard you said something about the early entry into the Main Pit and then it went all muffled.

Yes. The question is, could the Main Pit early entry feed ideally be used to start the mill?

Start the second mill?

Correct.

No. We are very clear about it that the main open pit, and if you look at the ore that we will be getting out of the main open pit will be directed to the current operating mill of 1.8 million tons per annum.

Great. Thank you.

All the questions from the webcast have been answered.

Thank you very much, and thank you very much for the questions. Very insightful and really appreciate the time taking out.

So, since there are no further questions, I would like to thank everyone for joining us today. We are extremely pleased with the robust third quarter results.

That shows the company has returned to a state of significant cash flow generation and look forward to further improvements. We would like to continue to advance the strategic projects and necessary to reposition Plutonic for a sustainable long-term success.

Now, this includes fully optimizing the underground operation and incorporating new sources of open pit feed as I spoke earlier, to increase our production levels, while further advancing our understanding of the expansion of the mineralization of Plutonic. We expect that these improvements will drive a continued improvement in our financial performance over the course of 2021 and 2022 and beyond.

Once again, thank you for joining us on our call today, and I wish you really well. Thank you.