Thanks, Miles. Good morning, and welcome to the Evolution Mining December 2019 quarterly conference call. This morning on the call, we have Jake Klein, Executive Chairman, Lawrie Conway, CFO and Finance Director, Bob Fulker, COO, and Glen Masterman, VP Discovery and Business Development. As the new year gets underway, it continues to be a great time to be a gold miner. In 2019, US dollar gold price had its best year since 2010, posting a 19% rally, which resulted in global generalist investors beginning to wade back into gold stocks. This renewed interest was reflected in the strong performance of the U.S.-listed VanEck Gold Miners Index, which was up around 40% for the year.
In addition, the highly anticipated wave of M&A in the gold sector finally materialized, with seven deals announced in just the final two months of last year, and in the process, significantly changing the profiles of many of the companies involved, as is the case with Evolution's acquisition of the high-grade, long-life Red Lake Gold Complex in Ontario, Canada. We're looking forward to catching up with investors over the next month with marketing in Sydney and Melbourne post today's results, investor meetings in Sydney post our financials on February 12th, a London roadshow in mid-February, and conferences in Sydney, Zurich, and Florida in the second half of February. Thank you, and I'll hand you over to Jake.
Thanks, Bryan, good morning, everyone, thank you for taking the time to join us on the call today. We do know it's a busy day, and we really appreciate it. It is appropriate to start with an acknowledgment of the devastation the bushfires have caused right across Australia, the recognition of the fantastic work the firefighters are doing, many of whom are volunteers, I'm proud also includes a number of Evolution employees. To support these efforts, earlier this month, we announced that we have provided AUD 3 million in funding to Rural Aid Australia, the New South Wales Rural Fire Service, and Queensland Rural Fire Service to support the bushfire, drought relief, and recovery efforts. Our thoughts are with all those impacted by these terrible events.
Turning to Evolution Mining and our gold business, fundamentally and at its core, it is about discovering and producing ounces safely and efficiently, and converting gold in the ground into dollars in the bank. On this front, we have done well this quarter. The benefits of having a portfolio of assets is reflected in the fact that despite the headwinds we faced at Mount Carlton, we generated net mine cash flow of AUD 144 million and group free cash flow of AUD 84 million, which remains sector-leading. We ended the quarter with AUD 170 million in the bank, and are debt-free. In late November, we announced the acquisition of the Red Lake mine, and we are on track to close the transaction around the end of March.
It is a classic turnaround opportunity. A mine that has been under-capitalized over the last several years and is currently operating in a hand-to-mouth fashion.
Whilst we think the effort and change required will be significant, and as we said when we announced the transaction, the turnaround could take up to three years, we are very confident that this will be a cornerstone asset for Evolution's future. Newmont have been terrific to deal with and have been very engaged and supportive of making the transition of ownership as seamless as possible. Importantly, on the ground at Red Lake, there is a large number of very talented people who are motivated and committed to restoring Red Lake to an efficient, well-capitalized, low-cost mine. Over the last few weeks, we have had a number of people on the ground, and their enthusiasm about the potential of the operation is palpable. Red Lake has a significant gold inventory of over 6 million ounces of high-grade gold in resources, and the exploration upside is significant.
Cowal continues to go from strength to strength. The exploration results are exceeding our most wildly optimistic expectations we had when we acquired this amazing asset in 2015. The board has approved the commencement of a pre-feasibility study for an underground mine that we expect will result in a maiden reserve being declared in this calendar year. Mungari has had an impressive turnaround and is both operating consistently and it also has encouraging exploration momentum that Glen will detail. The net mine cash flow that Mungari delivered for the first six months year to date is more than it delivered for the 12 months in each of FY18 and FY19.
Over the previous four years, Mount Carlton has delivered a very impressive AUD 390 million of net mine cash flow, as outlined in our release to the ASX on the 10th of January, it is confronting headwinds due to revisions in our interpretation of the ore body based on more recent drill results. The operation had a poor quarter and is now expected to produce between 70,000 and 75,000 ounces this year. The recovery to the Mount Rawdon wall slip is on plan. Cracow continues to be a reliable producer. Ernest Henry continues to be a powerhouse of cash generation with net mine cash flow of almost AUD 63 million. We are very pleased that the drilling program to test the extensions below the RL 1200 has begun. We at Evolution are excited about the future. We welcome Fiona Murfitt as our new general manager, sustainability.
The exploration and turnaround opportunity of Red Lake is enormous. The commencement of the underground mine design study at Cowal heralds a new chapter at our cornerstone asset. The drilling to extend the mine life at Ernest Henry is underway, and our diversified portfolio continues to generate sector-leading cash flow. With that, I'll hand over to Bob.
Thanks, Jake, and good morning, everyone. It's pleasing to start my quarterly comments with a positive from a safety perspective. The behavior safety programs, which are continuing at all sites, are yielding good results with the TRIF decreasing from 9.3 to 8.4 over the quarter. From a production and cost perspective, the December Quarter, the group produced 171,000 ounces at an all-in sustaining cost of AUD 1,069 an ounce. This resulted in a group mine operating cash flow of AUD 233 million and net mine cash flow of AUD 144 million. If we turn to page six for the Cowal and Mungari results. Cowal delivered 65,000 ounces at an all-in sustaining cost of AUD 898 an ounce and a mine operating cash flow of AUD 95.9 million, while net mine cash flow remained solid at AUD 51.9 million.
Highlights at Cowal for the quarter were no recordable injuries, reducing their TRIF to 4.5.
Wirraga decline completed and the bulk sample extracted for test work, 22,000 meters of drilling in the GRE 46 and the Dalwhinnie zones, which continues to indicate significant potential to grow their 1.4 million underground resource. With the current stage three water restrictions in the region, the Cowal team have been working over the last 12 months on a strategy to eliminate their reliance on surface water. We have made significant progress in this strategy with the following works. Commenced the installation of a second pipeline across Lake Cowal to increase our pumping capacity by 30%. This will allow us to pump 100% of our mine's water requirements from the current and future saline resources, the Bland Creek paleochannel, and the freshwater from the Jemalong Weir. This project is well underway with the pipe installation expected to be completed this month and full usage during the March quarter.
The commissioning of the additional three bores in the Eastern Saline Borefield is expected in the March quarter, and testing of the second saline borefield will commence in the March quarter. These would be expected to be commissioned in the September quarter, subject to testing of the water resources quality and quantity. A third saline borefield has also been identified for assessment to further de-risk the water supply. Of note, less than 20% of Cowal's total daily water requirements is currently reliant on surface water, which is at risk of being impacted by further water restrictions. With the program outlined above, we are confident there is sufficient water supply to meet the Cowal's ongoing water requirements with no material impact on operating costs or recoveries.
Mungari delivered just shy of 33,000 ounces at an all-in sustaining cost of AUD 1,344 an ounce and a mine operating cash flow of AUD 30.4 million.
Mungari's net mine cash flow increased by AUD 8.6 million against the September quarter with similar levels of production and continued its quarter-on-quarter financial improvements. Frog's Leg underground delivered 116,000 tons of ore. The Boomer access development continues on schedule, advancing 100 meters towards the mineralized zone. Plant throughput was again above plan with an annualized rate nearing 2 million tons per annum. We have commenced work to identify what the Mungari processing plant's natural limits are through the use of data, and further studies have commenced to assess optimizing mining and sustaining processing rates above the 2 million tons and assessing a rate up to 2.5 million tons. Excuse me. Cutters Ridge road construction also commenced late in the quarter, which will unlock further opportunities in the north. If we turn to page seven for the Mount Carlton and Mount Rawdon results.
Mount Carlton delivered just shy of 10,000 ounces at an all-in sustaining cost of AUD 2,182 an ounce. Due to the issues that we've outlined, mainly the main hydrothermal breccia zone, which makes up the bulk of the mineralization in the V2 pit, has tapered to a series of narrow, higher-grade feeder structures at shallower depths than anticipated. The underground mineral resource model has also been affected with similar geological interpretations applied to it. Mount Carlton was scheduled to produce significantly higher ounces in the June 2020 quarter from both V2 and the underground. Guidance for Mount Carlton has been adjusted to between 70,000 and 75,000 ounces at an all-in sustaining cost of AUD 1,150 to AUD 1,225 per ounce. On a positive, underground development has progressed well through the quarter, and the East Lode was encountered when expected in early January 2020.
Underground development continues, and stoping is planned to begin in the June 2020 quarter. Crush Creek drilling is expected also to commence during the June 2020 quarter. Mount Rawdon produced just over 20,000 ounces at an all-in sustaining cost of AUD 1,815 an ounce, with a mine operating cash flow of AUD 13.9 million and a net mine cash flow of AUD 9.1 million. Pleasingly, the increased attention on safety is paying off with a reduction of TRIF from 12.2 in the September quarter to 8.9 last quarter. The West Wall Stabilization project outlined in the September quarter report to remediate the area of the pit impacted by the west wall slip is on track, and material movement are in line with plan. Costs are expected to reduce as access to high-grade ore in the pit floor is regained during the June half.
If we turn to page eight for Cracow and Ernest Henry. Cracow continues its consistent performance, producing just over 20,000 ounces at an all-in sustaining cost of AUD 1,284 an ounce and a mine operating cash flow of AUD 23 million. Improvements in the processing plant have led to a quarterly saving in excess of AUD 120,000 and ongoing increase in recovery. Ernest Henry again made a significant contribution to the group, producing 23,000 ounces at a negative all-in sustaining cost of AUD 526 an ounce, generating a net mine cash flow of AUD 62.7 million. Drilling commenced below the 1,200 RL, with 10 holes completed for 4,400 meters. Good progress is being made at Red Lake from an operational perspective.
The interim mine plan to allow us to revitalize the operation and to start the transition to sustainable production includes accelerating capital development to 1,000 or at least 1,000 meters per month, while ceasing development in non-core zones. Finalizing plans and ordering new mine equipment to increase capacity and production efficiencies. Equipment would be expected to be commissioned in the FY21 year. The potential to decommission two shafts to reduce operating and maintenance costs, and completing major maintenance on the Campbell mill to improve reliability and utilization. We'll update again when the transition closes. In summary, our focus remains on improving our safety performance whilst delivering to guidance ounce and cost. Looking forward, the building blocks are in place at Cowal, Ernest Henry, Mungari, Cracow for a successful year.
Mount Rawdon is back on track with the material movement in line with our plan to deliver the West Ramp cutback and ounces for FY 2020. Red Lake is a great acquisition with enormous potential. The workforce are motivated and skilled, and I'm looking forward to working with the site team in future quarters to deliver another production pillar for Evolution. With that, I'd like to hand it over to Glen.
Thank you, Bob, and good morning, everyone. Significant progress at Cowal was achieved across surface extension and underground infill drilling programs last quarter. Our extensional drilling continued to expand the mineralized footprint in the south of the GRE46 Dalwhinnie complex. Results reported from hole 544B this morning, which includes seven meters grading at 124.7 grams per ton, were drilled in and around the 348 zone, as shown in figure one on page 13 of this morning's report. The identification of this new zone of mineralization on the Dalwhinnie position has revealed wide intervals of impressive grades, which we believe will deliver a significant expansion of the mineral resource when the results are incorporated in re-estimation of the underground block model. Extraction of the underground bulk sample occurred from the 985 level drive, with ore processed through the Cowal plant as a low percentage blend during the December 2019 quarter.
Detailed monitoring of metallurgical performance was completed on the underground ore blend, with no noticeable impact on recoveries when matched against a slight increase in mill head grade. Mapping of underground exposures in the 1057 and 985 level drives has confirmed the strong south to southeast plunging nature of the GRE46 mineralization, which has been previously identified and incorporated in our geological model of the underground mineralization. These observations validate our decision to complete level drives east of the exploration decline to establish the most advantageous drilling positions for the infill program at GRE46 Dalwhinnie. Drilling orientations can now be optimized from southeast to northwest in order to capture data that will more accurately model grade distribution for current and future mineral resource estimates. At Mungari, an access drive was initiated from the Frog's Leg decline and has advanced 100 meters towards the Boomer laminated high-grade vein.
We expect to be able to be drilling Boomer from footwall drill cuttings in the June 2020 quarter. Results of the closed space grade control program will allow us to develop a detailed block model estimate for a small section of the Boomer vein. The purpose of this is to determine how best to model the high-grade nuggety nature of the gold mineralization. We will also evaluate reconciliation of production from the same area against the gold predicted in the grade control model. Results provided this morning continue to confirm our interpretation that the Boomer mineralization will be a small-sized resource opportunity. The discovery of mineralization in this area has changed our original understanding of the structural architecture in the Mungari camp. We now interpret the Boomer structure to be a continuation of the Strzelecki Shear Zone, hosting a Raleigh complex on the East Kundana joint venture further north.
The change in our understanding of the geology means that the Strzelecki structure is in a different position as it tracks south onto our Mungari tenements. As a result, there is a one-kilometer-long gap of untested strike length along this structure that is prospective for high-grade laminated veins. We expect to be drilling to close this data gap over the next couple quarters. Last week, I returned from Red Lake following a week on site and came away very pleased with what I saw and experienced. Firstly, there is a talented team of enthusiastic and high-quality technical explorers who are very keen to get on with things. Along with taking the opportunity to enhance my knowledge of the geology and potential of the Red Lake complex, we spent time developing a plan to restart drilling activities when the transaction closes.
Immediate priorities are the completion of infill drilling to increase confidence in resource extension targets across lower Red Lake and at Cochenour. This drilling program will support the proposed operating strategy in these areas of the mine. Discovery drilling will focus on identifying more continuous ore bodies with potential for large resource additions. We expect to kick off our drilling campaign with up to five rigs until the end of June, and following that, ramping up to eight rigs in FY 2021. Overall, the December 2019 quarter delivered more pleasing results from our discovery programs across the group. We expect the Cowal underground resource to be upgraded and expanded from the December 2018 1.4 million ounce inferred resource. Details of our model updates will be provided in February when we release our annual mineral resource and ore reserve statement.
The discovery of the small high-grade Boomer vein at Mungari has resulted in a reinterpretation of the position of the Strzelecki Shear Zone, with untested gaps along strike to the north. Finally, we are looking forward to completing our position at the Red Lake Gold Complex so that we can drive an aggressive drilling strategy in the search for new high-grade resources in one of the most prolific Archean greenstone gold belts on the planet. With that, I'll hand over to Lawrie.
Thank you, Glen, and good morning, everyone. Today, I'll briefly cover off on the financial performance for the December quarter, with more detailed analysis of our half-year financial performance provided when we release our results next month. A summary of the financials is on pages 10 and 11 of the report. While the operational performance for the quarter was not as good as we would've wanted to deliver, the quality of the assets and benefits of a diversified portfolio approach was again demonstrated with sustained high levels of cash generation. Some assets delivered lower operating cash, while other assets were continuing their investment in major projects or others experienced some operational difficulties. A standout was Cowal, where in excess of AUD 50 million of net mine cash flow was delivered from essentially processing stockpile material and after investing over AUD 40 million in major projects.
Ernest Henry delivered another exceptional quarter at over AUD 60 million. Mungari delivered a third consecutive quarter of increasing cash flow at around AUD 25 million. These assets offset the lower performance at Mount Carlton and Mount Rawdon. Overall, we delivered just under AUD 145 million in net mine cash flow, which was the equivalent of AUD 830 per ounce sold, and this allowed for us to invest over AUD 70 million of major capital investment for future production. Major capital investment was up AUD 24 million in the quarter. Net cash generated before any M&A or debt servicing was AUD 83.6 million, while net cash increased by just under AUD 80 million for the quarter. This is the equivalent of approximately AUD 480 per ounce banked in the quarter.
This level of cash flow was generated at an achieved gold price of AUD 2,090 per ounce, which is AUD 225 per ounce below the spot price.
On the back of the sustained cash generation of the business, we repaid the term loan outstanding balance of AUD 275 million, moving us to a debt-free position. Turning to our cost position and outlook for the year. For the first half, our AISC was AUD 1,041 per ounce. This performance is slightly behind plan, but we are on track to meet our guidance of AUD 940-AUD 990 per ounce. The main drivers to achieving the cost guidance are the production mix, sustaining capital, and operating cost profile. Our production in the second half of the year is expected to be similar to the first half, but with a different mix and different grades.
Cowal will be around 20,000 ounces lower in the second half as they continue to process stockpiles while waste ripping at Stage H is ongoing. These lower grades will be partially offset by higher tons and recovery.
Mungari will have slightly higher production due to higher expected grades, a stockpile buildup from mined tons being higher than processed tons, and lower costs. Mining costs will also be impacted as the development of Cutters Ridge mine commences, and those mining costs are capitalized as major project investment. Grade at Mungari is expected to be around 5% higher. Mount Carlton and Mount Rawdon are expected to have higher production and lower costs, especially in the June quarter as Mount Carlton accesses the underground ore and Mount Rawdon displaces stockpile material with higher grade ore from the pit. Cracow and Ernest Henry are expected to deliver a second-half outcome similar to their first half. Sustaining capital will be AUD 10 million lower in the second half of the year, which should reduce our AISC by AUD 25 to AUD 30 per ounce for the second half.
Major capital in the March and June quarters will be similar to the December quarter. All commitments remain in place for the completion of the Red Lake transaction, which will comprise an AUD 600 million five-year term loan facility and a new CAD 125 million three-year performance bond facility. Existing facilities of a CAD 360 million three-year revolver and a CAD 175 million three-year performance bond facility will also be renewed. A couple of items which will be incorporated into our half-year financial results include our exploration costs of AUD 17 million-AUD 22 million will be expensed, with the majority of this expense relating to Tennant Creek. In repaying our debt facility during the quarter, approximately AUD 5 million-AUD 7 million of non-cash facility costs will be expensed.
I look forward to updating you next month on the half-year financial results. With that, I now ask Miles to open the line for questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, just please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, just please press the pound or the hash key. Star one on your telephone. Your first question today comes from Levi Spry from JPMorgan. Please ask your question, Levi.
Good morning, everyone. Just a couple of questions on timelines on some of the studies and reserve resource updates that you're working on, particularly at Mungari and Mount Carlton. Can you just give us an idea of when those pieces of work are due to be finished?
For Mount Carlton, the updates, Levi, will be in February when we release our mineral resource and reserve statement.
Okay
Likewise for Mungari.
At Mungari, what about the studies on the feeding the plant, increasing the plant capacity that Bob outlined there, and the drilling that you're only really just starting at Boomer and Dalwhinnie, as I understand it?
Dalwhinnie is at Cowal, but Boomer's at Mungari. Yeah, that'll be in the next 12 months, in the next MRR update. We're doing the study to look as to whether we can increase. We've already got this plant operating at a sustained rate of 2 million tons per annum, We're looking to see whether it makes sense to move it to two and a half million tons per annum. Also the drilling, which Glen's doing, is certainly giving us enthusiasm and encouragement about the potential of that district.
Okay. Thank you. Thanks.
Thanks, Levi.
Your next question comes from the line of David Radcliffe from Global Mining Research. Please ask your question, David.
Thanks. Good morning, Jake and team. A couple of follow-up ones just on Mungari. The comment about transitioning to Cutters Ridge, is there any read-through there to the decision on the White Foil underground?
David, it's Bob speaking. We're doing the drilling in the bottom of the pit for the White Foil, and we're just still working through those studies. The transfer or the movement over to Cutters Ridge is actually a planned move just as the White Foil pit comes to the bottom of the natural limit. Glen, did you want to add into that, or?
No, I think, as you pointed out, Bob, we're doing some more infill drilling to close just a few gaps in the underground resource block model for White Foil. Along with a fair bit of drilling over at the Boomer target to continue delineating the Boomer vein as another alternate underground target.
Okay, thanks. Just following up then on Boomer. Do you think you're already at the stage there to keep putting underground infrastructure in place while the drilling continues, or do you sort of wait for results? I'm assuming here you're still thinking about this as an underground. Just trying to think about how quickly it could potentially come into the mill.
Look, David, we're sufficiently encouraged by the results in the drilling to date that we've decided to push a level drive out towards Boomer, for a couple of reasons. The first is actually to get into a closer position from the footwall from which we can drill a pretty detailed grade control program. Then as we're drilling that, the ramp will continue to advance the vein itself to open it up. The plan really is, as you can imagine with these high-grade laminated veins, they are very nuggety in nature, and modeling these can be quite challenging at times. Our intention is to drill a close-space pattern of grade control and then compare that with what we extract from when we open up a section of the Boomer vein to understand how it's going to reconcile.
That's the intention at this point in time, and we feel that we've got, as I said, sufficient encouragement to get out there and do this body of work at the moment.
Okay, thanks. The last bit would be then just with the new interpretation there and the fact that you're seeing a kilometer zone, in terms of the strike potential of Boomer for the Strzelecki. Is this literally an area where there's been no historical drilling, or is there some historical drilling that maybe gives you some insight and some immediate targets to follow up on?
There's some shallow drilling in this area. The previous interpretation of the position of the Strzelecki was that it sort of tracked more closely to just sort of down along the side of the White Foil pit. Not quite in the White Foil pit, but pretty close to it. With the, I guess, the development on the Boomer vein itself, what we've understood is that that Strzelecki Shear Zone has changed direction. There's some shallow drilling in that area across it. We feel that that drilling's ineffective, and we need to test deeper on where we're interpreting the structure to be in order to really understand whether or not we can open up some additional strike length. I think that's probably, for us, the most exciting piece to this Boomer development over the last 12 months or so.
Brilliant. Thanks, guys.
Thanks.
Your next question comes from Michael Slifirski from Credit Suisse. Please ask your question, Michael.
Yeah, I think I've got two quickies. First of all, with respect to Red Lake, I want to understand what you see as the greatest challenges, given you've given yourself a fairly long runway to get things in order. What are the greatest challenges? Is it just sort of industrial relations and getting rid of people? Is it sort of environmental stuff, or is it simply the sort of lack of investment development and other capital that has to be overcome.
Thanks, Michael. Just before I answer the question, I just want to check that you're okay, because it's the first time on a conference call that you haven't been first off the ranks. Everything okay with you?
Well, I'm struggling today with four quarterlies. Thanks for scheduling it that way to keep us busy.
Pleasure. It just says subperformance. On Red Lake, I think the biggest challenge has been the underinvestment, the fact that it's a big mine, and it really hasn't had the exploration spent on it for some time. It hasn't had the development spent on it for some time. It's being reset effectively, where exploration and we're starting to develop this interim plan that will focus on drilling bigger areas that allow us better sources of production without being as spread out as they are. Starting to get a sustainable business. The resource is there. It really requires recapitalization. There's a very strong recognition on-site that changes need to be made and that the current basis of operating over the last few years is not sustainable. There's an engaged workforce. The geology is exciting and the opportunity is there.
I don't know, Glen or Bob, do you want to add anything?
Before I hand it over to Glen, Michael. From my perspective, everything Jake said, further on a couple of them. Development, we need to get developed stocks ahead of us. Before we can actually get those developed stocks ahead of us, Glen needs to actually properly delineate them and get that grade control drilling to fully develop the mining plan. To me, it's about getting that consistency of geology with mine planning and metallurgy and getting it all working in cohorts together to bring a consolidated plan together. Focusing the mining into areas where we know we can get nice improvements from an effective and efficiency perspective of material movement. Focusing the guys on clean mining of the ore body. They're all going to come with a little bit of time to get there.
Really getting that drilled stock, that developed stock, and then that stoping stock ready to be mined is why it can take a little bit of time because it's been underinvested and we need to get back to be able to deliver consistency.
Thanks, Bob.
Great.
Michael, the drilling program is really focused to support the mining priorities at Red Lake. We've identified the Lower Red Lake and Cochenour as areas where we really want to get ahead of the grade control drilling. That's an area that's been underinvested at Red Lake for a period. The other piece to that is even just some basic resource definition drilling along strike of known mining areas where the ore bodies have not been closed off. These are focus areas just in the initial instance that we want to start to commence developing our knowledge base in those areas of the mine. In parallel, what we'd like to achieve is really to identify larger and more continuous, and I guess mining-friendly geometries on these shear zones.
There are a number of targets in the Lower Red Lake and extensions along strike and even up and down deep at Cochenour, where we'll be stepping out and initiating some extensional drilling in parallel with all of our grade control and res def.
Terrific. That's very, very helpful. Thank you. Second question, I guess is to Bob, on Cowal. The move to saline water. I think in the past you've said that reagent consumption is low, maintenance is low because of the high-quality water that the plant has always operated on. I know in your commentary earlier, you said that you don't anticipate any significant change in OpEx, but having previously articulated great condition of the plant and low consumable cost because of good quality water, how do you see the medium term for the plant with a lesser quality water?
Thanks, Michael. To put it in context, we're talking TDSs in the range of eight to 10,000. It's not what you'd call the same you'd be mining with West Australian or Central Australia from a total dissolved salts perspective. I don't expect us to have significant increases in reagents or costs. Somewhere up above 20 to 30,000, you start to see deteriorations, but at that sort of eight to 10,000, which is what the saline level is that we're talking about, we don't really expect to see much difference than where we are now.
Terrific. Thanks very much.
Thanks, Michael.
Once again, if you wish to ask a question, just please press star one on your telephone and wait for your name to be announced. Your next question today comes from Daniel Morgan from UBS. Please ask your question, Daniel.
Hi, Jake and team. Just a quick follow-up on the water at Cowal. You've just completed a pushback, and you're going to be moving towards using stockpiles this year. Just wondering what proportion of the throughput of the stockpiles is going to be oxide ore in nature?
Dan. Off the top of my head, I haven't got the number.
Can we get back to you on that one? All our forecasts are obviously based on the stockpiles and what we know of them.
Yeah.
We can get back to you on that.
Yeah. I guess, maybe taking a more high level, it just comes down to the water consumption. I think there's a water study that Cowal has out of a couple of years or so vintage, where the oxide ore has greater consumption when it goes through the plant. Just wondering if you can talk on that, on how you expect water consumption over the next 12 months to look versus what you've experienced.
From a high level perspective, we have been feeding increased oxides in the last three to six months, from the stockpiles. The model that we have now and the simulation for the water model actually takes into consideration the additional water that's required from an oxide feed perspective. It also takes into consideration that when you put oxides through the mill, you get lower returns from the TSF because of the fineness of the oxide when it goes through the processing plant. All the modeling actually is taking those things into consideration, and the return water is probably where you get a bigger hit than the actual consumption water. When you add those two together, they're being considered. I don't have a percentage, sorry.
Thank you very much.
Thanks, Dan.
There are no further questions at this time. I'll hand the conference back to the Evolution Mining team for any closing remarks.
Thanks. Thanks, everyone. Recognize it is busy, and there's probably lots of calls and reports you need to write. Thanks for your time. Appreciate it. Look forward to having another call on February the 12th when we release our half year accounts. Thanks for attending.