Thank you for standing by, and welcome to the Evolution Mining June 2024 quarter results call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you'll need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Lawrie Conway, Managing Director and Chief Executive Officer. Please go ahead.
Thank you, Darcy. Good morning, everyone. Joined on the call today by Barrie van der Merwe, our Chief Financial Officer, Glen Masterman, our VP, Discovery, and Peter O'Connor, our GM, Investor Relations. Today, we released our June quarterly report and an exploration update. Firstly, while safely generating cash is definitely king, as shown in our quarterly report, I have to start with the exceptional results at the Bert ore body that includes the highest grade intercept ever drilled at Ernest Henry, and definitely one of the best in Evolution's history of 52 meters, grading 4.1 grams per ton gold and 1.65% copper. Bert is starting to show real potential as an additional mining front for Ernest Henry, and Glenn is really excited to talk about that a little later this morning.
The June quarter generated some outstanding results and records to build on the improvements we delivered in the March quarter. The performance in June certainly sees us entering FY 25 in excellent shape. On the sustainability front, we achieved our targets or better across all key performance areas. Our total recordable injury frequency reduced by nearly 14% to 7.69, compared to a year ago. We are tracking very well on our targeted 30% reduction in emissions by 2030, with a 14.3% reduction to the end of May over our 2020 baseline. Our group cash flow for the quarter was a record AUD 230 million, nearly three times the March quarter. At the start of the year, we indicated that the build in cash flow would occur as the year progressed.
The June quarter demonstrates what the portfolio is capable of. Group cash flow for the year of AUD 367 million was delivered at achieved metal prices that were $460 per ounce of gold and $0.25 per pound for copper, below current spot prices. Gold production was 14% up to 212,000 ounces, and copper production was 20,000 tons. Our all-in sustaining costs reduced by 13% to AUD 1,275 per ounce, or $842 per ounce. This delivered over AUD 240 million in net mine cash flow, which was a quarterly record and is equivalent to AUD 1,170 per ounce. The three charts on the front page of our quarterly report gives a great snapshot of what has been delivered for the year.
Quarter-on-quarter, our operating mine cash flow has built up, with the June quarter being nearly double the September quarter. This is on the back of planned quarter-on-quarter increasing production and reducing all-in sustaining costs. As a result, our group cash flow was more than AUD 250 million higher than the first quarter of the year. This has reduced our gearing materially by 23% over the course of the year. As outlined on our business update on twelfth of June, production at Cowal and Mount Rawdon was impacted by weather, while seismicity impacted Red Lake, which were the main drivers to not achieving our group gold production guidance. Which flowed through to our all-in sustaining costs being slightly outside our original guidance, which we ended up achieving for the year. Our group copper production was above the top end of guidance.
We managed our operating costs tightly in a stubborn inflationary environment. The fact that our total capital investment for the year was within guidance reflects our disciplined approach to capital allocation. We did not approve additional investment merely because metal prices were well above our plan assumptions. All our operations were cash flow positive before major capital investment for each and every quarter of the year. The combined results, shown on the three charts, clearly demonstrates our focus on margin and then to ensure that the benefits of higher metal prices go to the bank account. That is something that we remain committed to doing. We ended the year with over AUD 400 million in the bank, which means we have reduced our gearing to 25%, compared to 33% at the start of the financial year.
Again, this was done at an average metal price below current spot prices. Turning briefly to the operations and where a number of key milestones and records were achieved. At Cowal, monthly, quarterly, and annual production records were achieved at 35, 95, and 313,000 ounces respectively. This was achieved despite the impact of weather and shows the benefit of a significant stockpile. Underground ore mine was up 64% to 476,000 tons, meaning we exceeded the planned annualized milestone of 1.8 million tons. The mine is on track to achieve the planned 2 million tons in FY 2025.
Cowal's full-year net mine cash flow was a record AUD 294 million and was generated at a gold price $460 per ounce below the current spot price. As I outlined during the site visit last month, Cowal is positioned perfectly to generate this type of cash flow over the next five years, even allowing for the capital investment plan to extend the mine life to 2040 and beyond. Anyone who does not see this operation as a cash cow, pun intended, going forward, is not modeling it correctly. At Ernest Henry, the operation has not missed a beat since returning to normal operations last June. Production and costs improved in the June quarter with the full year meeting guidance.
Operating cash flow was 45% higher than the March quarter, while the full year delivered over AUD 480 million and AUD 334 million of operating and net mine cash flow, respectively. Ernest Henry continues to be an outstanding cash contributor to the portfolio. A highlight was a record sales month in June of over $77 million or AUD 115 million in the month. Northparkes continued to integrate well into the portfolio, with over AUD 150 million of operating cash flow and AUD 74 million of net mine cash flow in the first 6.5 months of ownership. This is on the back of exceeding gold and copper production and the all-in sustaining cost being below the bottom end of guidance for the year.
I could not be happier acquiring Northparkes, which is proving to be a great operation and will be for many decades to come. During the quarter, the board approved the E48 Sublevel Cave study, moving to pre-feasibility study. The E48 Sublevel Cave will provide low capital intensity production in the coming years at Northparkes and also fill a production gap that we identified in our due diligence. I reaffirm that the capital investment on the E48 Sublevel Cave is AUD 40 million-AUD 50 million, as presented during the site visit last month. Mungari had a step-up in production in the June quarter, with improvements across all key metrics. Production was over 34,000 ounces at an all-in sustaining cost of AUD 2,246 per ounce, delivering its highest quarterly operating cash flow this year of AUD 42 million.
The 4.2 expansion project is on budget and schedule, which, when completed, will transform the operation into a material cash generator as production moves to 200,000 ounces per annum. At Red Lake, production was 8% higher at 33,000 ounces, while all-in sustaining cost was 11% lower at $2,537 per ounce, notwithstanding the issues we highlighted in our business update last month, which have now been resolved. Positively, we started to see the operational performance improvements flow through from the work done during the year, with the highest quarterly ore tons mined and the establishment of surface ore stockpile of over 25,000 tons.
Discipline on costs and the improved operational performance drove the 38% and 53% increases in operating and mine cash flow before major capital to AUD 28 million and AUD 16 million, respectively. It's been hard yards at Red Lake, but it feels like we are making more sustainable, positive progress. Mount Rawdon finished the year with a strong quarter, despite the impacts of the weather, at just under 20,000 ounces at a 22% better all-in sustaining cost of $1,608 per ounce. This delivered net mine cash flow up 63% to just under AUD 29 million. The operation is now mining on day shift only, with mining due to finish in the first half of FY 2025, where it will then process stockpiles through until the end of FY 2025.
Lastly, we completed the restructure of the technical team with the commencement of Nancy Guay as our Chief Technical Officer and Matt O'Neill as our Chief Operating Officer on the first of June. Additionally, on the first of July, we welcomed Fiona Hick as a new Independent Director. I'll now hand over to Glenn to provide details of the exploration successes for the quarter.
Thank you, Lawrie, and good morning, everyone. This morning, we released the drill result in our exploration announcement. That is one of the best exploration holes drilled by Evolution. I knew the moment our Ernest Henry geologist sent me the drilling update, that it was going to be good. The opening page of their report displayed a diagram of a hot, burning flame, signaling a sizzling step-out result at Bert. The intercept, highlighted on page 1 of the announcement and illustrated in figure 1 on page 2, is worth reading out. Hole 14 and 02 returned 52 meters, grading 4.1 grams per ton gold and 1.7% copper, and includes a 21-meter wide interval, grading 8.2 grams per ton and 2.2% copper.
In gold equivalent terms, the grade across the full 51-meter interval is 6.5 grams per ton, and the higher grade portion runs 11.4 grams per ton gold equivalent over the 21 meters. The whole ranks as the best-ever gold intercept drilled at Ernest Henry, and for a mine that has been operating since 1998, that is really saying something. The high-grade interval is located on the high hanging wall position of the Bert ore body and correlates strongly with high-grade mineralization in a previously reported hole, 1292, which returned 21.9 meters, grading 3.9 grams per ton gold and 0.8% copper. Figure 1 shows very clearly how hole 1402 will extend the footprint of mineralization at Bert beyond the previously modeled grade outline, as well as remaining open at depth. I'm thrilled about today's result.
The intercept reinforces the exciting potential for Bert as an alternative future ore source, favorably located only 50 meters from the north sidewall of the open pit, and with potential to improve mining and processing rates above the current rates of the underground material handling system, which would expand production. The metal grades are spectacular, and I'm excited about the possibility of repeating these results with our ongoing step-out drilling. Elsewhere at Ernest Henry, infill drilling north of the mine extension footprint has returned further positive results, solidifying our confidence in copper and gold grade continuity, connecting Ernie Jr. to the main ore body. In other news, we've commenced exploration at our Cloncurry North joint venture, where we are exploring for incremental copper-gold production opportunities within haulage distance of Ernest Henry.
Our exploration team has optioned the property because it consists of the same rocks as those hosting the nearby Ernest Henry ore bodies. Drilling is planned to commence on several standout gravity targets during the September quarter. I recently returned from two weeks in the field with our Canadian exploration team, who are in the midst of their summer field campaign. I visited our October project, where we are earning a 75% interest on a property located along strike of the 12 billion ounce Cote Lake project, 125 kilometers southwest of the mining town Timmins in Ontario. What I saw in the field was a priced opportunity to own an interest in prime geological real estate on one of the best gold endowed corridors in the Abitibi Greenstone Belt.
Surprisingly, the property we've optioned has never been seriously explored for gold, despite exhibiting the geological criteria we believe is important to see in rocks that have the potential to host large mineral systems. I also had the privilege of visiting our 100% owned Lake St. Joseph project, 200 km east of Red Lake. It was great to spend time with our geologists, exploring a greenstone belt with similar geological characteristics to the rocks that host the Great Bear, Great Bear Deposit near Red Lake. Great Bear was discovered over five years ago in rocks where the geological dogma assumed there should not be any gold. We staked these mineral claims three years ago on open ground and have since developed several very attractive gold and copper geochemical anomalies, which are shaping as the future potential drill targets.
Briefly to wrap up, I'm looking forward to being able to report back on our drilling progress at Bert throughout FY25, where we are confident we will continue to grow this new, exciting, high-grade ore body that is shaping as a very attractive alternative ore source at Ernest Henry. With that, I'll hand over to Barrie.
Thank you, Glenn, and good morning, everyone. Lawrie explained earlier, our June quarter financial performance was excellent, delivering further improvements from the March quarter. As we promised last year to deleverage through FY 2024, we are now seeing this become a reality, with gearing reduced from 33% at the end of FY 2023 to 25%. Record group cash flow of AUD 230 million for the quarter resulted in liquidity of AUD 930 million, AUD 412 million better than at the end of FY 2023. This was achieved at a $3,190 per ounce realized gold, and $13,700 per ton copper price for the year, which is well below current spot prices.
Quarter-on-quarter operating cash flow increased by 40% to AUD 537 million, with all operations cash positive before major capital. We are particularly pleased with Cowal's performance, generating over AUD 200 million of operating cash flow for the June quarter, notwithstanding adverse weather impacts. Ernest Henry's continued predictable and steady performance, contributing AUD 150 million, and Northparkes 75 million dollars, showing the quality of this new addition to the portfolio. Record net mine cash flow of AUD 242 million was up 74% on the March quarter. Our focus continued to be on margin, and I was especially pleased that the quality of our portfolio was clearly demonstrated by our all-in cost margin per ounce.
That was up 36% from $947 per ounce in the March quarter to $1,292, compared to only an 11% increase in the achieved gold price. This performance is almost double what was achieved in the December quarter. The AISC per ounce was the lowest for the year, at $1,275 per ounce, down 13% quarter-on-quarter. AISC per ounce for the full year is $1,477, in line with our June business update. This is testament to our continuing focus on cost control in this inflationary environment and will continue to be a priority in FY 2025. We continue to be significantly leveraged to the current high spot gold and copper prices and have only 50,000 ounces of gold sales hedged.
For the capital expenditure on the Mungari 4.2 project in FY 2025 at $3,160 per ounce. There are no hedges in place for copper. The performance in the June quarter sets us up for delivery into FY 2025. Our capital management focus will continue to be on margin, banking the cash from high metal prices, reducing debt, and delivering improved share returns via dividends. This approach will remain a key priority as we move forward into FY 2025. With that, I'll now ask Darcy to open the line for questions. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Daniel Morgan, from Barrenjoey. Please go ahead.
Hi, Laurie and team. First question just relates to Ernest Henry, and the exceptional drill result at Bert. I know it's early, but what is the plan from here to consider, you know, bringing in as a mining front? Is there a scoping study that you're going to initiate? And, you know, perhaps you can just talk on any major risks you foresee in exploiting it, like impacting, you know, the pit ramp or the shaft. Thank you.
Thanks, Dan. You sounded a bit like Jake when he saw the results, that he wanted to jump straight to mining it. I'm gonna hand over to Glenn just to walk through the drilling program and where we go with it.
Thanks, Laurie. Yeah, Dan, look, I think what we would say about Bert is it's shaping as a very credible alternative ore source. We need to drill to scale extent to capture the right level of ore body knowledge. As we've stepped down the plunge, the grade is getting better, and we need to sort of obviously model and understand that, because that's really going to sort of drive towards the most optimal way to, you know, extract that in the future. I think what I'd also say is we always knew it would extend, and the results are consistent with what we've been thinking. Perhaps a little bit better than what we were expecting, which is always a good problem to have. Now, we're prioritizing now our step out drilling.
Now, particularly given that we've completed most of the infill program on the mine extension footprint, you know, we can start to really prioritize the extension step out work on Bert. And look, I think what we're seeing with the, you know, the drill holes that we have into it already is some really strong metal grades. And I'm confident we'll continue to be able to repeat that as we step down the ore body. I think, you know, we have obviously had our eye on Bert for a while. So there is certain thinking that's obviously underway on how we will sort of attack that in the future and action scenario.
But again, I think as the information we're collecting is sort of, you know, changing, you know, with each drill hole and improving the opportunity, we need to keep that drilling going.
Yeah. I think, Dan, just to round that out, you know, as Glenn said, we needed to finish the drilling on the Ernest Henry extension so that we could get that into the resource model for the feasibility study to finish. And given the drilling happening from underground, it's now freed up capacity for Glenn and the team to focus on Bert. That'll be the drilling going forward. And then in terms of the operation and when it comes in, would really. It hangs off those results that Glenn's expecting to get through the course of this year.
Okay. Thank you. Just, turning to Red Lake, can I just expand on the physicals a little bit? What are the key drivers of building the surface stockpile, which to my mind, I think that's the first time we've had any meaningful stocks. Is that the CYD decline in the Upper Campbell access starting to come through?
Yeah, short, short answer there, Dan, is that, that's one part of it. So you're now having the material from CYD coming to surface, not, not linked into the, to the passes and the shaft, but also I think it's the work that John and the team have been doing over the last 6 months to get those mining rates up in, in all areas of the mine, to give that redundancy in the system. I think, you know, John has just brought that focus, from the other operations when he was at Cowal and, and the like, to, to Red Lake, to say that, you know, we, we will have problems underground. Having material on the surface is very helpful. That's really where it's gonna come from.
But as I said at the start, getting material out of CYD is also helping build that as well.
And then just last question expanding on that. What is the ongoing impact, if any, from the seismic events last quarter? Was it just the ore passes, which appear resolved in June, or are there temporarily quarantined ore sources or mining fronts? Thank you.
Yeah, it's not the quarantining. It was basically blockages of the past caused by seismicity pushing material into the passes. So, and as you'd recall from the visit last year, it's continuing to have alternative ore passes in place. With John and the team in Balmer, we're already working on the next pass that we needed at Balmer, which comes into play this quarter. So it's building that extra capacity. It's not restricted mining areas like we had in the first half of the year.
Okay. Thank you so much.
Thank you. Your next question comes from John Bishop from Jarden Group. Please go ahead.
Good morning, guys. Thanks for taking my questions. Just a couple, the Cowal asset obviously had a cracking quarter. You note in your open pit mining, you had a 15% quarter-on-quarter increase in terms of total ore mined there. And this is despite obviously the wet weather that contributed to that announced loss of about 26,000 ounces in the quarter. Can you sort of give us an idea of what the theoretical mining rate capacity is? 'Cause obviously that's exceptional performance despite that inability to access the pit for a period.
Morning, John. Thanks. Look, I think as you'd recall from the, the visit on site last month, you know, we had weather impacts in March as well, and so therefore, we adjusted the, the way we accessed the pit through the June quarter. We also then had the flexibility around two dig units versus one. So all of those things that, that Emma and Kyle talked about on site is what we saw those improvements in, in the June quarter. I think as we looked at it, I think it was between 45,000 and 50,000 tons per day is what was discussed on site, is what they see as the ability to, to run that pit, based on where we are at the moment in the pit.
Excellent. Thank you. And just around Northparkes now, I may have misunderstood, but I took away from the site visit, you've commenced the decline development to start the sublevel caving at E48. Is that correct?
Yes. It is a site that the minute they got the approval, the next day they started the work. So in early, early this month, the decline had started.
Okay. So can I just understand, I know this is semantics, but just the nuance around the language there. You've had board approval to commence the PFS, if I read that correctly, but the PFS results are not due until the March quarter of next year. What sort of numbers or considerations has the board essentially allowed the site to progress on?
So what we've done there, John, is we've basically taken a no regrets capital position on, while the study's going to bring it to reserve. The confidence level that the site team has in the existing ore body knowledge of E48 enabled the board to make the decision to allow that development work to be done, which is also gonna allow us to do more drilling in there as well. So that's as a part of the AUD 40-50 million capital is that development in there as well.
Okay, cool. That answered my follow-up question. Perfect. Thanks, Laurie.
Thanks, John.
Thank you. Your next question comes from Rahul Anand, from Morgan Stanley. Please go ahead.
Oh, hi, team. Thanks for the call and the opportunity to ask a question. Look, some of the ones I had have been asked, but I wanted to focus perhaps then on Mungari. You did have pretty good grades this quarter, and I think that's been driven by the underground performance. How should we think about that going into next year in terms of open pit and underground and how that sort of progresses?
Yeah, Rahul, look, I mean, as we'd said at the March quarterly call, the June quarter, there were two EKJV campaigns this quarter, so that gave us more of the underground material coming in. So as we go into this year, the split between the open pit and underground will be fairly similar, probably more from the open pit than underground in 2025. And therefore, you'll see an overall total grade a little bit lower than what we saw in the June quarter. Production in FY 2025, as we've said, there's no change in processing capacity, so there's not expected to be any real change in total production at Mungari this year. It is really as the plant comes on in FY 2026 that you'll see it.
Got it. Okay. And then just to perhaps go back to Red Lake, and, you know, you obviously had an outage there that was unplanned for the ore pass, but, how are you thinking about next year's guidance? I mean, you, you're obviously performing to below that level currently, and the asset does seem to have a lot of these unplanned issues. What type of redundancy or, or what type of, I guess, steps are you taking, to ensure that there's a bit more, bankability in some of these numbers that come out of Red Lake?
Yeah. I take it you mean this year's guidance, not 26, but if we look at-
Yes, twenty-five.
If we look at it, you know, as we said, back in May, you know, we, we believe that the first thing that Red Lake needs to do is move to cash positive. So we've built a plan for FY 25 that gives them both redundancy and an ability to be, be cash positive, at our planned price assumptions. So I think what you'd see is we exited around 33,000 ounces. If you add in the impacts or take into consideration the impacts of the seismicity, you see that lifting, to the, you know, over 40-45, which is what we had planned for the June quarter. That was sort of the exit rate that we wanted to see as we go into FY 25.
We're finalizing all of our, our guidance for FY 25, which will come out with the full year results, but that's what we're looking at. And then if you go to the question on, on redundancy, the things that John and the team have been doing in the last 6 months, that I mentioned earlier. It's getting, you know, that mining rate. It's the largest we've seen, and as, as I mentioned to Dan, CYD is now giving us access from a, from a decline versus the shaft. So we see that flow through into FY 25, and then those additional ore passes that were identified as needed to give us contingency in the shafts, those works are being done to be completed early in FY 25.
So it's those sorts of things that are being done to build some extra redundancy into Red Lake's operational capacity.
Got it, and then you get a, perhaps a much better grade on the back of that as well, I'd appreciate.
Yes.
Okay. That's all from me. Thank you. I'll pass it on.
Thank you. Your next question comes from Levi Spry, from UBS. Please go ahead.
For a while, it is coming.
Good day, Laurie and team. Thanks, thanks for the call. Maybe just a quick follow-up from the site visit. Can you just run through the CapEx breakdown again at Cowal for that five-year guidance that you gave, and some of the items, the key items that will be spent on?
Just maybe clarify what you mean there, Levi. I mean, we've said, you know, the five-year average, you know, sustaining capital is gonna be pretty similar. AUD 40-AUD 50 is what we've spent the last couple of years at Cowal. There'll be a couple of years where it's above that and a couple of years where it's below that, but that's about what the site sort of needs. And then, if we look at the major capital-
Right.
We average around million dollars in the last five years, and as we said, we expect over the next five years, that to be about AUD 200 million-AUD 230 million. But I think the thing that people keep missing is that, you know, for the open pits, that's the mine development, and as we said on the day, the operating costs will be around AUD 95 million a year, depending on the ore and waste mix, which is about AUD 50 million a year lower than what it has been the last couple of years, because it moves from operating into capital.
So as we walk through all of that on the day, and there is the slide, I just can't remember the slide number, and Rocky can follow it up with you, which breaks down that spend.
Yeah.
Yeah. Can you just go on mute a minute, Levi? And that, that sort of is what we had said, gives you all of the information and, and it shows that, you know, about $900-$1,000 an ounce is the net margin that that asset will generate, in free cash over each year of the next five or average over the next five years.
Righty, then. Thanks. Yep, I'll follow that up later. And, we're just doing a bit of a review of underground mining costs across operations. Can you just update me on what you're expecting them to be at Cowal and Mungari in particular?
Yeah, look, I'll get Rocky to follow that up. That... I mean, for Cowal, as we said, it's about AUD 200 million a year will be it. So, you know, if you look at it, it's about AUD 100 a ton this year as we ramp up to 2 million, and then as we get up to the 2.4-2.5, that fixed cost starts to get absorbed and it comes down from there. And I'll just have to get Rocky to follow up on the Mungari one for you.
Righty, then. Thank you. Thanks.
Thank you. Your next question comes from David Radclyffe, from Global Mining Research. Please go ahead.
Oh, hi, good morning, Lawrie and team. I just had a follow-up question to Dan's on Ernest Henry. At the site visit a year ago, you sort of mentioned Bert and the fact that the proximity to the shaft could be sort of an issue, but it was something you were looking at. So just sort of wondering, sort of a year on, what are those studies sort of showing? So in other words, what are the engineers saying is sort of a safe radius that you need to maintain around that shaft? And what could that, therefore, be the impact to Bert? So could some of it be sterilized and therefore pushed to the end of mine life, or is it far away, enough away to actually potentially be mined, you know, in the near term?
Because it looks to be obviously moving away from the shaft as it extends down deep, so it looks to be pretty low-hanging fruit, given the fact you've got spare mill capacity. And just trying to work out, you know, is that the issue why you haven't already got a drive out there and starting to develop it?
I'll hand that over to Glen, 'cause I don't believe we saw that as an issue when... or talked about that when we were on site, but we will follow that up. I think when we look at it, the reason why we haven't done that work that you've mentioned, is we needed to finish the drilling on the extension. That was where we had the drilling capacity underground to do that. As Glen said, we're nearing finishing that now. That's why we were able to start on Bert, and we will go further drilling in the next couple of quarters. But maybe, Glen, do you want to pick that up?
Yeah, David, the Bert ore body is situated about 50-60 meters in from the north side wall of the pit. It's quite a distance from the shaft, which is situated quite a ways east of the Bert ore body. So on the section that you're looking at, it's a composite one, so it does look like it's proximal, but it's actually the shaft is coming out of the page towards you in reality or in a 3D scenario. What we like about Bert is, given its location adjacent to the pit wall, is that we can access it from the pit ramps.
And the attractive piece of that is that it's not going to compete with, or can be mined independently of, the underground materials handling system. So that's essentially how we're thinking of it at the moment. As Laurie mentioned, you know, we're now bringing the priority to sort of drilling its footprint, full extent of it, to understand, you know, the geometry of the ore body and its metal grades. And, you know, once we have that ore body knowledge, we'll continue to progress our studies on understanding how we'll mine it.
Okay. Thank you.
Thanks, Dave.
Thank you. Your next question comes from Al Harvey, from JP Morgan. Please go ahead.
Good morning, Lawrie and team. Wanted to have a look back at your 2025 outlook you provided back in May. You kind of had a bit of an outlook for flattish production on 2024 levels and costs up, including labor, about 5% and other costs, 3%. So I just wanted to get a sense of how the thinking there has changed as you kind of move towards providing guidance. I guess we have seen some cuts to staffing levels across the industry, so both on the labor cost side and the other cost side, if you can talk through that, how you're thinking about that into FY 2025.
Yeah, thanks, Al. Look, that hasn't really changed from there. I mean, as we said, labor around 5%, and that's about $65-$70 an ounce, and the other costs are averaging around 3%, adding $35-$40 an ounce. As we've closed out the year, we've seen it pretty well lining up to that. The benchmarking we've done in the mining sector for salaries is saying that it will be between 4% and 5% is what the markets are moving, and certainly in Australia, with the, in July, the 0.5% increase in the super cap that most organizations pass through has also got to be taken into consideration there. So as we go into 2025, that hasn't changed from what we talked about in early May.
Great. Thanks for that, Laurie. And, just one for Glenn. Glenn, you did mention the geo report on Bert that the, the geos gave you. Can you maybe just give us a bit more of a sense on the, the geo's view on continuity? How many more drill holes you think you might have to take from that drill platform, timing, and, any explanation for the better grades there, and if that could be applicable to, your exploration strategy, around, Ernest Henry?
Yeah, good, good question, Al. I think, what we're doing at the moment is we're stepping out on sort of, you know, 50-meter centers, just to ensure that we can continue, you know, I guess, getting drill holes into it from the underground drill location. At some point, you know, presuming that it continues further down the plunge, you know, towards some of the deeper ore bodies, we'll have to change that drilling position, but that's the strategy at the moment.
I think, you know, in your question around why the gold grade is higher and why do we think we've got continuity, what I can say is that we've got, yeah, 3-4 holes into Bert at the moment, which is showing this mineralization, the higher grade element, particularly with the gold enrichment, you know, relative to elsewhere in the ore body, sits right on the hanging wall contact of the ore body. So it feels like there's a structural element that potentially plays a role in upgrading the grade there, for particularly for the gold. But what we're seeing, which is giving us the confidence in the geological continuity, is that we're hitting the gold in the same position, you know, of the ore body as we step down. So, we're not seeing any variability.
Confident it should, you know, continue for, you know, for at least a ways.
Sure. Thanks, Glenn.
Thank you. Your next question comes from Andrew Bowler from Macquarie. Please go ahead.
G'day, all. A fair few questions already been asked, but just heading back to Red Lake for a second, just to clarify about next year. I mean, obviously, you've given us a sort of indication of what it could look like in terms of production, but, you know, handy stockpile build during the quarter. Was building stockpiles part of the plan for FY 25? Or is that just more of a, you know, strengthening case for the outlook you've already given us?
Short answer, Andrew, no, it was part of the plan. We know we have, as I said, work on building passes in the first half of the year and making sure we've got material on surface was a part of that. I think the difference is that we got slightly more tonnage on surface than we expected, notwithstanding the past issues that we did experience.
No worries. Granted, it is early at Bert, just trying to understand the sort of quantum of the opportunity. Do you think there's potential for Bert to completely fill the mill, so top up, you know, the mill, in addition to the main sub-level cave, or is it more of an incremental story in terms of mining rates? I mean, it doesn't sound like it's big enough to support a, you know, mini sub-level cave or anything like that.
Yeah, I'll, I'll pass that to Glenn, but the short answer is we're running at about 6.8, and it can run up to 8.5, and I, I know that's just getting at that rate, but-
Yeah, I agree with Lawrie there, Andrew. I think it's a smaller footprint, you know, in terms of volume and hence tonnages.
But the grade's high. So that obviously gives us the improvement in metal production when eventually we do mine from Bert. I think, yeah, I think, though, that it really is just an incremental production opportunity that we're looking at, and as Laurie said, there's latent, and we're looking at all options available to help us fill that.
No worries. And last one from me. Obviously, some, you know, pretty big news out that Nickel West is pulling up stumps very shortly. Just a general labor market question in Western Australia. Yeah, how's the absentee, or should I say, vacancy rates going over at Mungari? Are you noticing any pickup in you know numbers applying for vacant positions, et cetera?
Yeah, look, I mean, it's if we look at Mungari over the last six months, their, their turnover rate and, and ability to fill roles has, has reduced and improved in, in that order. And then, you know, obviously, that announcement now and, and Fortescue's announcement yesterday means there are more people becoming available in, in the workforce. So, you know, from our perspective, we see that as a positive for, for Mungari. But that's probably what we're gonna have to track over the next six months compared to what we saw in the last six months when, when these things hadn't actually started to take place.
No worries. That's all from me. Thanks, guys.
Thank you. Your next question comes from Alex Barclay, from RBC. Please go ahead.
Thanks. Morning, Laurie and team. Question around that 26,000 ounce impact you flagged during the quarter. And I know you've already commented a bit across those three sites on this call already. Just trying to get an idea whether you think the impact ended up being around 26,000 ounces? Obviously, the guidance came mid-quarter. Just trying to get an idea of what you think the overall impact was and a bit across those three sites to what was already a pretty good Q4 result.
Yeah, Alex, I mean, you know, when we look at it, that was for the two months. We did see further rain—less rain at Rawdon. We did have two or three more rain events at Cowal, so they got impacted by about another 3,000 ounces. The pass in Red Lake probably took another 1,000 ounces in June, and then there was a couple of thousand ounces in sort of roundings across each of the sites in terms of where they finished at June versus where we would have liked to.
Okay. So it sounds like things, yeah, could have been, could have been better still. Just one more question. Quick one, Red Lake, around that Campbell Young Dickenson decline and timing there. Do you expect much more CapEx to continue into FY25, and when do you think we might see a steady state production level there?
Well, in regards to the second part of the question, you know, I do think the work that the site team's done in the last four to six months is starting to get some benefit. So we'd like to see that, absent, say, those seismic events, we're starting to see that stability in the production, and as I've mentioned in the call, we've seen the costs coming down there. And then, as we go into this year, we do see less in terms of mine development.
But we do, as we mentioned at the, at the roundtable, because we've been operating both the Red Lake and the Campbell Mills nearly full time for the last few years, and that wasn't planned, we have to then convert the Red Lake tails facility into a larger single tails facility to service the site going forward, and that work will start in midway through FY 2025. So that's, that will be some major capital there. But as I said earlier on the call, we now put a plan to the board that shows Red Lake as being cash positive for this year at our planned prices.
Okay, sure. That's very helpful. Thanks very much.
Thank you. Your next question comes from Jonathan Sharp, from CLSA. Please go ahead.
Yeah, good morning, Laurie and team. Thanks for taking my question. Just the first question, given the recent performance and financial results, how are you approaching capital management in for this year, FY 25, particularly in terms of dividend and share buybacks? Are there any changes or adjustments to the current policies or payout ratios?
Thanks, John. No, look, I mean, in terms of our capital management, the dividend policy that we've got at the moment, which is a percentage of group cash flow, targeting around 50%, remains in place. We don't see at the moment value in buybacks, so that's not something that we're looking to move forward with. And as Barrie outlined, you know, focus is on discipline in terms of capital we invest in the business, deleveraging, and making sure we start to increase returns to shareholders. And as you'll see, we generated AUD 367 million of group cash flow for the year, and that's the thing that we'll look at when we consider our dividend in August with the board for FY 2024.
Thank you. And just, another question on costs again for, to this financial year. So, you know, overall, costs were pretty good for FY 2024, but still, you know, you know, inflationary pressures, and we usually do see costs increase with higher gold prices. So how are you addressing the cost inflation? Is it just economies of scale or, you know, what, what particular strategies are you-
Putting in place?
Yeah, look, I mean, I think when we, when we look at it on the labor front, it's making sure we've got the, the right amount of people we need across the business to deliver the plan that we've, we've got. As I mentioned earlier, we're, we're expecting that to move around 5% this year versus last year, and that will increase our AISC by about $65-$70 an ounce. I think in the, in the other areas where we've said, you know-- and labor makes up around 50% of our cost base. The other areas, it's really about efficiency of use of, and consumption of the, the goods and services, and then obviously testing the market.
You know, we have seen in the last sort of 4-6 weeks, some really good prices come in for some of these items that we use, but, you know, when you're talking, these items are less than 1% of our overall spend. They're not having that material impact yet because, you know, you've got power, diesel and those that really make up, pardon me, most of our cost base. So I think what we outlined in May remains in place, that we see AUD 60-AUD 70 on labor per ounce and AUD 35-AUD 40 on other costs, coming out of FY 2024.
Okay, great. That's all from me. Thanks.
Thank you. Your next question comes from Anthony Barrett, from S&P Global. Please go ahead.
Yeah, hi, just following on from that question on labor and cost, and you mentioned the stubborn inflationary environment. How does that balance out against what's happening with the, you know, record gold price at the moment? And how do you see producers like yourself, particularly in Australia, being able to perhaps, you know, lower costs or lift, lift production even?
Yeah, Anthony. Look, I think, you know, from our perspective, and as Barry sort of mentioned, you know, our cashflow increase was at a greater rate than what the metal prices moved. When we look at it, as I said, if you take the labor and the other costs that I've mentioned, that you get up to about $110 an ounce could be impact. Through the course of the year, we've seen the benefit of about $400 an ounce, $500 an ounce on the gold price, so it's certainly outweighing it. And when we look at the spot price today, it's about $460 an ounce higher than what we achieved last year.
So, you know, from our expectations, if we were to see spot price maintained through the year and we take the inflationary impact, you're sort of picking up $350 an ounce better. So the gold price is certainly beating off the inflationary impact on our cost base.
Just to clarify that, when you refer to those dollars an ounce, that's Aussie dollars?
Aussie dollars, yeah.
Yeah.
Everything's Aussie dollars.
Thank you.
I wouldn't mind if the gold price was up $450. I'll take that.
Thank you. Your next question comes from John Bishop, from Jarden Group. Please go ahead.
Thanks for taking the follow-up. I was just wondering if you could give some more granularity around the allocation of sort of all sources in the medium term for Northparkes. I mean, you've talked about E48 as an opportunity to fill an identified shortfall in, in production in the short to medium term. Do we sort of look at the tonnages there? I think it sort of implies 2 million tons per annum as bridging that gap between, I guess, the average throughput for the last five quarters you disclosed at site. Is that the way to think about it, taking it up to the seven point six million tons per annum?
Yeah, I mean, I think as we explained on site, we sort of have around 6.5-6.8 million tons capacity in the materials handling. We've got E31, both E31 and E31 North, that is supplementing the underground. So those are what will allow us to keep the plant operating at the rate it currently has for the last couple of years. So if you look at it, John, and I just don't have it in front of me, but there was a slide on the site that showed the tonnage from E48. You know, we get up to 2 million tons for a period. E48 runs for about 8 years over those 4 levels.
You then got E26 operating, and then you've got the pits, and then we're looking at those other ore sources in the short term, you know, whether it's E28 or, yeah, E28 was the pit to keep the plant operating at capacity.
Okay. That's helpful. Thank you.
Thank you. Your next question comes from Matthew Frydman from MST Financial. Please go ahead.
Sure. Thanks. Morning, Lawrie team. Hopefully a pretty quick one from me. Just wondering if there's any reason why you're waiting until the financial result to release FY 2025 guidance. Obviously, you've already given the market some pretty helpful indicative commentary, but just wondering if that's reflective of, you know, maybe a change in the timing of finalizing your annual budget versus what you guys delivered in FY 2024, or if there's any other driver there behind that. Thanks.
Yeah, look, I mean, what it, what it is, Matt, is that we, we actually normally like doing it with the full year financials. Last year, we had the Investor Day, first week of June, so we didn't see it appropriate to have an Investor Day, do site visits and not actually talk about FY 2024. So that, that's sort of it. So it has varied a bit, but our preference is there. I think, you know, at the end of the day, if we look at the information through the March quarterly, the business updates and two site visits, we believe there's a good amount of information out there to enable us to have conversations with our shareholders.
And unfortunately, the last one is to try and make sure that the models that you and your colleagues are accurate and up to date. Because unfortunately, when I look through Visible Alpha and the like, having people saying that our costs are going to be sub $1,100 an ounce next year, or $1,200 an ounce, based on the information that's in the market, I think it's worth for us to make sure that that's right before we put the guidance out there. Because at $1,477 and the inflation we've talked in a full year of copper, I'd love to know how we're gonna get to $1,100 an ounce.
No, I'm sure that's not helpful for anyone. No, thanks for that, Laurie. That's helpful. Cheers.
Thank you. There are no further questions at this time. I'll now head back to Mr. Conway for closing remarks.
Thanks, Darcy. Thanks everyone for your time today. Really do appreciate it, for you to take the effort to join the call. I do just want to finish and reiterate what I said at the start of the call. You know, we generated record cash flow in the quarter, AUD 230 million. We finished the year with over AUD 400 million in the bank, and we delivered, as we said, on the deleveraging, to take our gearing down to 25%. You know, that was delivered on improved operational performance in the second half of the year. The performance at the back end of the June quarter really lays that foundation's going to FY 2025, which has really put us in good shape.
We've restructured the technical team, and Matt and Nancy are on board now, and that, that really helps us as we go forward as well. We do look forward to hosting people at Mungari operation as part of the Diggers and dealers next month, where we can show the 4.2 expansion project, and look forward to then updating with the full year financials and FY 2025 guidance on fourteenth August. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.