TRX Gold's Q4 2025 Earnings Call: Key Contradictions in Exploration Strategy, Oxide/Sulfide Processing Priorities, and Capital Allocation Revealed

Date of Call: Not specified in transcript

Financials Results

• Revenue: $60 million for full year 2025, driven by record Q4 gold price of $3,363 per ounce
• Gross Margin: 53% in Q4 2025

Guidance:

• Gold production for 2026 expected between 25,000 and 30,000 ounces.
• Cash cost for 2026 expected between $1,400 and $1,600 per ounce.
• Capital expenditure for 2026 expected between $15 million and $20 million, focused on plant upgrades and expansions, and life of mine tailings facilities.
• Mill expansion to 3,000 tons per day (sulfide circuit) plus 1,000 ton per day oxide transition circuit planned, expected to be funded through cash flow.
• Exploration drilling to resume, focused on main zone, Stamford Bridge, and Eastern Porphyry.

Business Commentary:

* Record Production and Financial Performance: - TRX Gold Corporation produced over 6,400 ounces of gold in Q4 2025, sold nearly 7,000 ounces, marking a significant quarter-over-quarter increase. - This surge in production, coupled with a record gold price of $3,363 in Q4, led to record revenue, gross profit, net income, operating cash flow, and adjusted EBITDA. - The increase was driven by the completion of a major stripping campaign, providing access to high-grade ore blocks, and favorable market conditions with rising gold prices.

• Balance Sheet Improvement:
• TRX successfully recapitalized its balance sheet, reversing negative working capital and repaying all borrowings early in the year.
• The company increased its cash position by $8 million, with accounts payable averaging around 60 days.

• This improvement was achieved by leveraging free cash flow generated from high-grade ore production and strategic vendor financing during the stripping campaign.

• Mine Expansion and Infrastructure Development:

• TRX is progressing with a mill expansion to increase capacity to 3,000 tons per day for fresh material, with additional upgrades like thickeners and oxygenation systems.
• The company is investing in infrastructure and development, including a robust stockpile position of about 15,000 ounces of gold.

• These efforts are part of a strategy to sustain continuous mill feed, support blending strategies, and enhance recovery rates, driven by the Preliminary Economic Assessment (PEA) blueprint.

• Exploration and Geophysics Initiatives:

• TRX is conducting a geophysics study to identify additional drill targets, focusing on the main zone and other exploration targets like Stamford Bridge and Eastern Porphyry.
• The company has purchased its own drill rigs, expecting to start drilling at reduced costs compared to contractors.
• The aim is to increase the probability of discovering new gold resources and to lower exploration costs, enhancing the potential for future resource expansion.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed confidence, citing a 'very transformative year,' 'record Q4,' 'record revenue, record gross profit, record net income,' and being 'in a really good position' with 'record gold prices.' They noted production trends continuing into Q1, a 'robust stockpile position,' and a 'very successful 2026' expected. The tone was optimistic about expansion, exploration potential, and government relations.

Q&A:

• Question from Heiko Ihle (H.C. Wainwright): Can you give color on drilling focus, expected meters, time frame, and cost changes with owning rigs?
  Response: First reverse circulation drill starts immediately at Eastern Porphyry at ~$25/meter vs. $50 contractor rate; diamond drill starts Q3 at ~$50/meter. A 35,000-meter program planned to upgrade underground mine design. Second rig would take 4-5 months to import.

• Question from Heiko Ihle (H.C. Wainwright): What are the three most exciting catalysts for the next 12 months?
  Response: Potential upside in financial results from gold price; expected new, more transparent government JV agreement; and exploration potential from geophysics study and drilling, which could lead to higher NAV.

• Question from Unnamed (written): What is the company's hedging strategy for declining gold prices?
  Response: Currently unhedged and expects to remain so, relying on conservative budgeting and potential upside from high gold prices. Collars are an option but limit upside.

• Question from Unnamed (written): Is there any plan for a stock buyback?
  Response: Buybacks are in the early stages of consideration, contingent on gold prices, JV negotiations, and capital allocation priorities; plant expansion and drilling are current priority uses of capital.

• Question from Unnamed (written): Can we count on leadership to remain focused on growing the asset vs. being acquired?
  Response: The presentation focused on increasing asset value, not acquisitions, indicating leadership is detail-oriented and focused on execution and growth.

• Question from Unnamed (written): What attributes to the sustained increase in daily trading volume?
  Response: Attributed to better financial results attracting institutions, warrant expiries ($0.80 strike in Feb), and potential trading activity; core shareholder base remains sticky.

• Question from Unnamed (written): Are there near-pit oxide resources at higher gold prices?
  Response: Geophysics and ongoing drilling aim to identify more near-surface oxide material, particularly around Eastern Porphyry and other areas, to feed the oxide plant.

• Question from Unnamed (written): Thoughts on M&A landscape in Africa and protecting shareholder interests?
  Response: M&A activity expected to pick up in Africa; TRX's diversified, sticky shareholder base and limited share availability make an acquisition difficult and likely beneficial for shareholders if attempted.

• Question from Unnamed (written): Impact of political unrest in Tanzania?
  Response: Recent planned protests were peaceful; no impact on operations, which continue normally. Security is calm, and political stability is expected to continue.

Contradiction Point 1

Exploration Strategy and Focus Areas

This represents a fundamental pivot in the company's primary resource development strategy, shifting from a diversified "hub and spoke" model for high-grade smaller pits to a concentrated, large-scale porphyry target. This change impacts long-term project economics, capital allocation, and resource base expectations.

Where will you focus your drilling efforts? Could you provide insight into cost changes and how they compare to hiring rig owners? - Heiko Ihle (H.C. Wainwright)

20251210-2025 Q4: The first drill is a reverse circulation (RC) drill, starting immediately at Eastern Porphyry for resource definition... - Richard Boffey(COO)

What are the 2025-2026 regional exploration plans? - John Tumazos (John Tumazos Very Independent Research)

2023Q4: Exploration will follow a 'hub and spoke' model focusing on high-grade, smaller pits after the processing plant is fully operational. - Andrew Cheatle(COO), Stephen Mullowney(CEO)

Contradiction Point 2

Oxide Resource Development and Plant Utilization

This contradiction concerns the configuration and prioritization of the company's processing plant. The shift from an ambiguous, future-focused expansion decision to a definitive statement about a dedicated oxide circuit being part of the "upgraded plant" signals a material change in operational strategy and capital commitment.

Are there any near-pit potential oxide resources that would be economically viable at higher gold prices? - Question (from email)

20251210-2025 Q4: Geophysics and ongoing drilling will identify more near-surface oxide targets... The upgraded plant (including the 1,000-ton oxide circuit) will be able to process these materials... - Stephen Mullowney(CEO), Richard Boffey(COO)

好的，我现在需要处理用户提供的这个任务。用户是一位专业的金融文章作者，需要将来自美股上市公司财报电话会议的问答环节的问题进行精简。用户特别强调要保留问题的原意，同时使其简洁、精准，去除多余的装饰词，并且符合美式英语的读写习惯。输出只能是简化后的问题，而且必须保留结尾的问号。首先，我需要仔细阅读用户提供的原始问题：“Will future expansions beyond 2,000 tonnes/day be gradual or a single step-up to ~100,000 ounces/year?” 这个问题看起来是关于公司未来产能扩张的方式，是逐步进行还是一次性大幅增长。用户希望简化这个问题，但必须保持原意不变。首先，我要分析原问题中的各个部分。问题的核心在于比较两种扩张方式：gradual（逐步）和single step-up（一次性）。原问题中提到的“beyond 2,000 tonnes/day”和“~100,000 ounces/year”是具体的数字，可能需要保留，因为它们提供了具体的数据参考。但要注意单位是否一致，这里吨和盎司是不同的单位，可能需要确认是否有必要转换，但用户没有提到转换，所以应该保留原单位。接下来，检查是否有冗余的词汇。例如，“future expansions”可以简化为“expansion plans”或者“future expansion”，但“expansions”作为名词可能已经足够简洁。然后，“beyond 2,000 tonnes/day”中的“beyond”是否必要？可能可以保留，因为它指出了当前水平。而“single step-up”是否可以简化为“single-step increase”或者更简洁的表达，比如“one-time increase”？另外，用户要求符合美式英语习惯，所以要注意拼写和用词。例如，“tonnes”在美式英语中通常拼作“tons”，但可能原问题中使用的是“tonnes”，需要确认是否用户希望保留还是转换。但用户提供的原文使用的是“tonnes”，所以可能需要保留，但可能需要检查是否符合美式拼写。不过，美式英语通常用“ton”，而英式用“tonne”，所以这里可能需要调整。但用户的问题可能来自电话会议，可能已经使用了美式拼写，但不确定。如果用户没有特别说明，可能需要保留原拼写。然后，“~100,000 ounces/year”中的波浪号符号在正式文本中可能不太合适，通常会用“approximately”或“about”，但用户可能希望保留符号。不过，在正式写作中，可能更倾向于用“approximately 100,000 ounces/year”代替“~100,000 ounces/year”。但用户的问题是来自现场提问，可能直接引用，所以可能需要保留原符号。但用户要求的是符合美式英语读写习惯，所以可能需要调整。例如，将“~”改为“approximately”或者“about”，但用户可能希望保持简洁，所以可能保留“~”。现在，尝试简化问题。原问题的结构是询问未来的扩展是否是渐进的还是一次性的提升。可以简化为：“Will future expansion beyond 2,000 tonnes/day be gradual or a single-step increase to ~100,000 ounces/year?” 这里将“expansions”改为“expansion”更简洁，因为“expansion”作为不可数名词在这里更合适。同时，“single step-up”改为“single-step increase”可能更符合美式英语的习惯，但“single-step increase”是否自然？或者是否可以用“one-time increase”？例如：“Will future expansion beyond 2,000 tonnes/day be gradual or a one-time increase to ~100,000 ounces/year?”另外，是否需要将“beyond 2,000 tonnes/day”中的“beyond”去掉？比如：“Will future expansion to beyond 2,000 tonnes/day be gradual or a one-time increase to ~100,000 ounces/year?” 但可能“beyond”在这里是必要的，因为它指出了当前水平之上的扩展。所以可能需要保留。再检查是否所有信息都保留：未来的扩展是否是逐步的还是一次性提升到大约10万盎司/年。是的，所以简化后的问题应该包含这些关键点。最终，可能的简化版本是：“Will future expansion beyond 2,000 tonnes/day be gradual or a single-step increase to ~100,000 ounces/year?” 这里将“expansions”改为“expansion”，并将“single step-up”改为“single-step increase”，同时保留了单位和数字。检查是否所有修饰词都被去除，同时保持原意。是的，这个版本更简洁， - Jacob Sekelsky (Alliance Global Partners)

2023Q4: The company is prepared for both approaches [to expansion]. The decision will be based on shareholder value, valuation metrics, and the ability to secure financing... Analysis is ongoing, with potential news expected around mid-2024. - Stephen Mullowney(CEO)

Contradiction Point 3

Capital Allocation Priority and Shareholder Returns

This is a significant change in financial policy and capital deployment strategy. Moving from an unwavering commitment to a "self-funding, low-dilution" growth model that implicitly rewards shareholders through asset growth, to explicitly considering a stock buyback (even if conditional) introduces a new, potentially dilutive or value-detracting, use of capital that was not previously signaled.

Does TRX have plans for a stock buyback? - Question (from email)

20251210-2025 Q4: A buyback is **not currently promised** but has entered the early stages of consideration, especially if gold prices remain high... Capital allocation priority remains on plant expansion, optimization, and drilling. - Stephen Mullowney(CEO), Michael Leonard(CFO)

When and how will shareholders be rewarded? - Private Investor

2023Q4: The goal is to drive growth in the business plan, NAV per share, and EBITDA per share. A self-funding, low-dilution model is designed to survive market volatility. As the asset grows and resource estimates expand, shareholders should be rewarded through increased value. - Stephen Mullowney(CEO)

Contradiction Point 4

Oxide vs. Sulfide Processing Priority

This contradiction reveals a strategic shift in operational focus from the previously stated primary plan (sulfides) to actively highlighting and potentially prioritizing the processing of near-surface oxide resources, which are typically of lower grade. This change can significantly impact future production metrics and reserve economics.

Given the higher gold price, are there any near-pit oxide resources? - Question (from email)

20251210-2025 Q4: Geophysics and ongoing drilling will identify more near-surface oxide targets... The upgraded plant (including the 1,000-ton oxide circuit) will be able to process these materials... - Stephen Mullowney(CEO), Richard Boffey(COO)

With surface oxide material available, will it be processed or deprioritized in favor of sulfides? - Richard Michael Niehuser (ROTH Capital Partners)

2025Q3: The focus is on the main PEA plan for sulfides. However, the company constantly assesses nearby high-grade oxide material... There's a strategic trade-off between processing lower-grade oxides versus higher-grade sulfides. - Stephen Mullowney(CEO), Richard Boffey(COO)

Contradiction Point 5

Future Processing Capacity and Plant Upgrades

This involves a contradiction in the timeline and configuration for a key operational milestone (100% sulfide processing). Providing a specific end date ("2026 onward") for achieving this configuration is a material update that contrasts with prior, less definitive statements about the upgrade process.

Are there any near-pit oxide resources with higher gold prices? - Question (from email)

20251210-2025 Q4: A pre-leach thickener will be installed by the end of the calendar year, aiming to process 100% sulfides from 2026 onward... - Stephen Mullowney(CEO), Richard Boffey(COO)

How do you expect the throughput mix (25% oxide, 75% sulfide) to trend in the coming quarters? - Jacob G. Sekelsky (Alliance Global Partners)

2025Q3: The plant is being upgraded from an oxide configuration to a sulfide one. - Stephen Mullowney(CEO), Richard Boffey(COO)