Ladies and gentlemen, thank you for standing by, and welcome to the Evolution Mining September 2019 quarter results teleconference. At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question and answer session. At which time, if you wish to queue for a question, you will need to press zero followed by one on your telephone. Kindly use your handset when asking your question. Please note that this conference is being recorded today, Tuesday, October 15, 2019. I would now like to hand the conference over to your host today, Mr. Brian O'Hara, General Manager, Investor Relations. Thank you, sir. Please go ahead.
Thanks, Eddie. Good morning, and welcome to the Evolution Mining September 2019 quarterly conference call. This morning on the call we have Jake Klein, Executive Chairman, Lawrie Conway, CFO and Finance Director, Glenton Masterman, VP Discovery and Business Development, and Bob Fulker, Chief Operating Officer, who's dialing in remotely as he's attending his daughter's wedding later this week. One thing you can always be sure of in the gold sector is change. Changing gold prices, changing cost structures, and changes in asset ownership. In the current environment, where these changes appear to be occurring faster than at any time in recent years, it can be easy to get distracted. Today's results reflect that despite the current volatility and the challenges that operating gold mines often present, we remain focused and our shareholders continue to benefit from sharing in the record cash generation of our business.
We're looking forward to catching up with investors over the next couple of months at the Citi and UBS conferences here in Sydney, and at our AGM at the Sydney Sofitel Wentworth on November 28th. Thanks. I'll hand you over to Jake.
Thanks, Brian. Good morning, everyone, and thank you for joining us today. These quarterly reports seem to come around quicker than a quarter, but I'm sure I'm just expressing the sentiment of all panelists out there. I've always believed that when operating and managing a company in a sector as cyclical and volatile as the gold sector, it is worth pausing once in a while and reflecting on where we're at. It's easy to forget that only 12 months ago, the gold price we realized in September 2018 quarter was AUD 1,662 an ounce. Today, the gold price is AUD 500 an ounce higher. It is undoubtedly a great time to be an Australian gold producer. It is also a time when we must be rewarding our shareholders, realizing and banking cash from production and returning a healthy amount of it back to our shareholders via dividends.
Whilst we all hope the gold price is going higher, if you find yourself in the position of needing to invest all your free cash today to generate production sometime in the future, there is a very real risk that the gold price may not continue to rise and your shareholders could ultimately have little to show from the exceptional gold price environment we are currently experiencing. I believe Evolution has the balance right. In my Diggers & Dealers presentation in August, I used the "Show Me the Money" video clip from the movie "Jerry Maguire" to suggest that it was time for us gold producers to start showing investors the money. This quarter, Evolution has definitely done this. After investing a total of AUD 71 million in sustaining and growth capital during the quarter, we generated record cash flows. We are banking this cash. We are rewarding our shareholders.
The final FY 2019 dividend was a record fully franked dividend of AUD 102 million. 12 months ago, it was only AUD 68 million. With our new policy of paying 50% of free cash flow, our next dividend clearly has the potential to be even higher given our free cash flow for the September quarter alone was close to AUD 160 million. Our strategy of having a portfolio of assets is demonstrating its value as we manage through an unanticipated issue at Mount Rawdon, where the west wall needs to be mined at a flatter angle. Our discovery programs are generating excellent organic growth opportunities. We are still yet to define the scale of the very substantial endowment at Cowal, and we are having encouraging success at Mungari. Our focus on earlier stage opportunities has allowed us a low-cost entry into Crush Creek, which has the potential to extend Mount Carlton's mine life.
We are assembling a good portfolio of early-stage, high-quality exploration assets. With drilling scheduled to commence this quarter below the existing reserves, we believe there is very good potential they will be extended. I think this is a good mix and balance of cash generation, rewarding our shareholders today, and good investment in organic growth, which has the potential to be very value accretive in time. The strategy remains the same as it has been since day one in 2011 when Evolution was formed. We want to be a globally relevant mid-tier gold producer that will prosper through the cycle. I'll now hand over to Bob to provide you more operational detail.
Thanks, Jake. Good morning, everybody. This quarter, we are disappointed to say that our recent trend in recordable injuries has not changed. 12 recordable injuries, placing our TRIFR at 9.3. Addressing this trend, we conducted safety resets across all our operations to refocus our efforts. During these sessions, we received numerous suggestion improvements from the workforce. Pleasingly, significant incident investigations and action closeouts have been improving.
From a production and cost perspective, for the September quarter, the group performed in line with plan, producing 192,000 ounces at an all-in sustaining cost of AUD 1,018 an ounce. This resulted in a record group mine operating cash flow of AUD 279 million and a net mine cash flow of AUD 207 million. If we turn to page four for the Cowal Mungari results. The results of our significant investment in growth at Cowal are starting to become more visible, with the operation delivering a record quarterly production under Evolution's ownership of 75,807 ounces at an all-in sustaining cost of AUD 885 an ounce. Mine operating cash flow increased to AUD 114.5 million, while net mine cash flow rose to a record AUD 89.9 million.
Cowal's highlights for the quarter were a record mill throughput of 2.1 million tons, 1,635 meters of development in the exploration decline, and 8,600 meters of underground diamond drilling completed ahead of our schedule. Some great intercepts from GRE46 and Dalwhinnie drill program, which continue to indicate significant potential to grow the 1.4 million ounce underground resource. Glenn will discuss this in more detail. Mungari delivered just shy of 31,000 ounces at an all-in sustaining cost of AUD 1,351 an ounce, and a mine operating cash flow of AUD 18.6 million. Mungari's net mine cash flow increased by AUD 6 million against the June quarter with similar level of production. Frog's Leg underground delivered 103,000 tons of ore with access development on schedule.
The new mining method at Mists is fully implemented and delivering consistent results. Plant throughput was above plan with a record monthly rate of 160,000 tons in September, equating to an annualized rate of 1.92 million tons. This was driven by a continued focus on operational and maintenance improvements. If we turn to page five for Mount Carlton and Mount Rawdon results. Mount Carlton delivered 20,900 ounces at an all-in sustaining cost of AUD 1,301 an ounce, and a mine operating cash flow of AUD 40.1 million. Production was lower than expected due to mining on the hinge section of the ore body, where mineralization boundaries are less well known. Production during the next quarter will be lower than the current run rate while we process mid-grade stocks.
Production will increase during the second half of the year, with no change expected to guidance. The portal for the underground was excavated during the quarter and development is progressing well. Mount Rawdon produced 19,200 ounces at an all-in sustaining cost of AUD 1,748 an ounce. As mentioned earlier, Mount Rawdon has been impacted by further instability of the western wall. With the safety of our people first and foremost, the wall is temporarily stabilized with an in-pit buttress using a remote loader. Long-term stabilization of the wall will require a minor cutback to reduce the wall angle to approximately 38 degrees from the current 45 degrees. This will require mining an additional 3 million tons over the next three years. Material movement in FY 2020 will be less than planned due to restricted pit access.
The grade of the ore processed for the remainder of the financial will be around 10%-15% lower than originally planned, whilst access to the high-grade ore under the western wall is rejoined. This has resulted in a reduction of the FY 2020 gold production of about 10,000-15,000 ounces, reducing our FY 2020 guidance to 80,000-85,000 ounces at an all-in sustaining cost of AUD 1,490-AUD 1,540 per ounce. Despite the difficult quarter, Mount Rawdon still generated a mine operating cash flow of AUD 14.5 million. We turn to page six for Cracow and Ernest Henry. Cracow continues its consistent performance, producing around 22,000 ounces at an all-in sustaining cost of AUD 1,307 an ounce, with a mine operating cash flow of AUD 23 million.
The work to improve stope dilution, which I spoke about in the previous quarter, has resulted in a strong grade performance. Ernest Henry again made a significant contribution to the group, producing 23.4 thousand ounces at a negative all-in sustaining cost of AUD 414 an ounce, generating a record net mine cash flow of AUD 66.1 million. Drilling below the 1,200 RL to extend the mine life at Ernest Henry is scheduled to commence during this current December quarter. In summary, our focus is on improving our safety performance whilst maintaining our production and cost focus. Pleasingly, cost and production for the quarter were in line with plan and we delivered record net mine cash flow.
Looking to the quarter ahead, although we manage our portfolio and provide guidance on an annual basis, due to the mining sequence and the production mix from our assets, we are expecting lower production and costs to remain elevated in the current December quarter before improving in the second half of FY 2020 to deliver our annual guidance. Thank you for your time, and I'll hand over to Glenn.
Thank you, Bob. Good morning, everyone. Late in the September quarter, we announced two new exploration earning joint ventures. The first was the Crush Creek project, which is located 30 kilometers south of Mount Carlton. Under terms of the agreement, Evolution has the option to purchase 100% of the project, subject to meeting certain exploration expenditure requirements and cash payments over the next 2 years. The target at Crush Creek is a low-sulfidation epithermal precious metals deposit. Over 300 historic drill holes have been completed across three main target areas to an average depth of 70 meters. More drilling is required to convert the known mineral inventory to a resource.
However, significant historic results show evidence for bonanza grades in a series of narrow quartz veins. Work has already commenced at Crush Creek, which, given its proximity to Mount Carlton, has strong potential to extend mine life for the operation. Our second agreement was completed with Musgrave Minerals, whereby we have the option to earn a 75% interest in the Cue Project in Western Australia. Cue is located 50 kilometers south of our Murchison joint venture and establishes an exploration hub in the Murchison Greenstone Belt, which we had previously identified as being highly prospective for our Kanlow gold mineralization. The addition of Cue to our portfolio, which also contains the Murchison, Connors Arc, and Drummond projects, is consistent with our strategy of pursuing quality greenfields exploration projects in Queensland and Western Australia. Turning now to discovery programs across our operations.
Firstly, at Cowal, recent drilling results continue to keep us excited about growth potential of the underground opportunity at GRE46 and Dalwhinnie. Recent drill hole intersections, highlighted on pages nine and 10 of this morning's report, have extended mineralization well beyond the September 2018 resource boundaries. One result I'd like to draw your attention to is hole 453C, which returned an 84-meter true thickness interval grading 3.3 grams per tonne gold. This thick interval contained numerous high-grade zones, including six meters at 8.4 grams, two meters at 41.6 grams, and nine meters at 9.8 grams. The result is located up to 50 meters beyond the existing resource outline and reinforces our confidence the underground resource at Cowal will be increased in our MRR update at the end of the 2019 calendar year. A second underground rig commenced drilling in the Waroonga Decline during the quarter.
New drilling positions have been designed to enable the most optimal drilling orientations to infill deeper areas of the underground resource. Drilling is expected to commence from these areas later in the quarter and into early next year, when a third underground rig arrives on-site. At Mungari, a surface rig and an underground rig completed 22 holes into a laminated vein structure at Boomer. Several vein intercepts illustrated on pages 11 and 12 contain visible gold and base metal sulfides. The zone of high grade is being modeled as a series of small south plunging shoots. One of the things that gets me excited about this target is the potential for shoots to extend down plunge and potentially coalesce at depth in similar fashion to the way they do at Frog's Leg.
Drilling has continued this quarter with the latest holes showing promising visual results on the structure adjacent to the holes reported this morning. The largest part of mineralization delineated to date is located 300 meters from the nearest hanging wall development drives at Frog's Leg. Impressive results were received last quarter from the Picante Trend, located one to two kilometers north of the Castle Hill complex and approximately 35 kilometers from the Mungari processing facilities. Mineralization is localized along the eastern contact of the Kintore Tonalite intrusion. Potential for additional zones of steep plunging mineralization is being targeted in follow-up drilling. Our exploration and geology teams at Cowal Mungari carry their momentum over the end of last year into a very solid performances again this quarter. I'm confident we can continue to expect good things as our programs continue to unfold in FY 2020. With that, I'll hand over to Lawrie.
Thank you, Glenn. Good morning, everyone. The September quarter from a financial perspective was one where we continued to deliver a significant amount of cash with a record group cash flow of just under AUD 160 million. The detail of the financials are on pages seven and eight of the report. Two areas I want to cover off on today are costs and cash flow. With respect to costs, our all-in sustaining cost or AISC at AUD 1,018 per ounce was higher than the June quarter and the FY 2019 full year. However, it was under budget by approximately 2% with essentially all sites in line with plan except for Mount Rawdon due to wall stability issues and Ernest Henry due to lower by-product credits.
On a gross spend basis, operating and capital costs, we are tracking to plan or better and are not experiencing any material adverse effects on our costs outside the movements highlighted in our guidance and full-year financial results. In fact, in some areas, we have seen reductions to input costs. For example, at Cracow, we have one contract where we achieved a 13% reduction and further cost reductions are available from the adoption of technology. At a group level, we're in the final stage of a new contract for tires, which currently is a very tight market and prices are increasing. Not only have we been able to secure supply for our entire business, but we have achieved a lower cost outcome.
Changes to our AISC guidance, which has increased by AUD 50 per ounce to AUD 940-AUD 990 per ounce, are driven purely by two areas which are not linked to input costs into our business. They are operational issue at Mount Rawdon, which Bob has outlined, and the impact of metal prices. The wall stability issue experienced at Mount Rawdon increases our group AISC by approximately AUD 30 per ounce. The second item to impact our AISC are metal prices. From a financial perspective, and I suspect for our shareholders too, this is a good problem to be encountering. When completing our business plans, we used AUD 1,750 per ounce and AUD 8,800 per tonne for gold and copper respectively. The metal prices impact our AISC via royalties and by-product credits. The September quarter saw us achieve a 20% higher gold price and 5% lower copper price than planned.
We do not see these prices moving materially from current levels and have updated our guidance accordingly. Assuming AUD 2,100 per ounce for gold and AUD 8,400 per ton for copper, we would generate an additional cash flow of AUD 210 million-AUD 220 million. The impact on our AISC, though, is that it adds between AUD 20-AUD 25 per ounce, with AUD 20 per ounce allowed for in our revised guidance. Turning now to our cash flow, this is an area where I believe we are delivering real value for our shareholders, which is approximately 14% higher than was achieved last quarter. We achieved a 45% increase in group cash flow to AUD 160 million. Not only are we banking this cash, we are also delivering on our commitment to return excess cash to our shareholders via the new dividend policy.
In the quarter, we paid AUD 102 million in dividends at AUD 0.06 per share, fully franked, for our FY 2019 final dividend. Applying the new policy to our cash flow performance for the September quarter, this would equate to a dividend of approximately AUD 80 million or AUD 0.05 per share. That is only for one quarter. Looking at it from a per ounce produced perspective, our FY 2019 final dividend was approximately AUD 275 per ounce. This was more than AUD 140 per ounce higher than our peers. For the September quarter, under our dividend policy, we would be paying approximately AUD 415 per ounce, up almost 50% on our final FY 2019 dividend. Not only does this differentiate us from our peers, it shows that we are truly generating and delivering sector-leading returns for our shareholders.
In conclusion, while we are not happy to have changed our full year cost guidance, we believe we have good control on our costs and remain committed to keeping Evolution as a low-cost producer that generates significant cash, irrespective of the metal price, for either reinvestment in the business or returning it to shareholders. Thank you for your time. With that, I'll hand it back to Jake.
Thanks, Lawrie. Eddie, could you now please open the lines for questions?
Certainly, sir. Ladies and gentlemen, as a reminder, if you would like to ask a question, please slowly press zero, followed by the number one on your telephone keypad, and wait for your name to be announced. That is zero, followed by one on your telephone keypad. Michael Sofisky from Credit Suisse, please go ahead.
Thanks very much. Good morning. I've got several pretty simple ones. First of all, with respect to Rawdon, the layback of the wall that's required, how does that make you think about Rawdon on a go forward basis? Does that cutback reduce the cost of any future cutback that you might have contemplated if you were to change some of the assumptions and chase deeper material? Does the instability make you more reticent about it, because perhaps it actually increases what would be required for the next leg if you did proceed that way?
Thanks, Michael. I'm going to hand over to Bob to answer that. Bob?
Yep. Thanks, Michael. I think it's too early to say that the laying back of the wall will make the stage 5 analysis any different to where we've been in the past. Laying it back to the 38 degrees, there are potentials in the future if the walls improve as we go down to change that, but at this stage, I'd say that we should look at it as individual cases.
Okay, thank you. Secondly, with respect to that changed guidance, if I do it really, really simplistically, the midpoint of the prior guidance, midpoint of production, implied all-in sustaining costs, just multiplying it out of AUD 117 million. If I use the midpoint now of both, it's AUD 125 million. An AUD 8 million increase when you're going to be moving less material. How does that math work?
Lawrie?
Sorry, just go through that again, Michael. You're talking the AUD 30 an ounce?
If I take your new guidance for Rawdon, take the midpoint of production guidance, midpoint of cost guidance, multiply one by the other and subtract from that the prior guidance, the delta is sort of AUD 8 million more costs. I was trying to reconcile that with the commentary around actually moving less material because of drawing from stockpiles. Is it a P&L impact for stockpile costs or something like that?
Yeah, there's a few things there. I mean, the impact at Mount Rawdon is about AUD 290 an ounce, all up, and most of that will hit C1. C1 is a little bit less because it doesn't have royalties. What we are seeing is then you'll have inventory drawdowns. That's what's contributing to the AUD 290 an ounce movement at Rawdon. Then you've got the impact of the lower production and grade. I'm just still trying to work out your maths.
Oh, if you can-
Happy to take that one with you.
Yeah.
I mean, that's essentially what's happening, is we'll do about 2 million tons less material mined in the pit. We'll then have the drawdowns of stockpiles to keep the plant full. The grade will drop about 10%-12%. We've obviously got the offset to that. Sorry, the other impact is the higher royalties impact on the AISC.
Yeah. Okay. I'll see if that works. Thank you. With respect to the Ernest Henry opportunity, the drilling that commences this quarter, is that designed to convert the existing resource below that 1,200 meter RL, convert that resource to reserve or to grow that resource or both? Trying to get in my mind what you're actually drilling out, how far below the 1,200 RL are you targeting and where there's already confidence of the ability to just to convert it by infilling versus expansion opportunity.
Bob, I think this is another one for you.
Michael, I think the plan that the team at Ernest Henry have got is to try and convert, not to expand.
Right.
Glenn's got all the information I have at this moment.
Okay. Thank you. Finally, with respect to Boomer, thanks for the little simplified sections. It's still not clear to me, though, what you think it might actually shape up to be. I wonder if it's possible to scope out what the potential size could be if it works out to the model that's postulated.
Michael, it's Glenn. I'll take that one. I think it's still pretty early days there, Michael. We've only got a relatively short section of strike length drilled along the Boomer structure. Within that, we're seeing probably two shoots develop. They're relatively modest in size at the moment. What we're doing is, one, confirming confidence around the pods of mineralization as we currently know them. We've also got a step-out program underway to understand the full scope and size. We haven't really done much in the way of looking at the actual resource that we have at the moment. We want to complete a fair bit more work before we're in a position to complete that work.
Okay. Thanks, Glenn.
Just to add something, which Glenn may be scared about right at the moment, because Glenn has done very well at toning me down as I keep seeing these laminated veins on his computer. Glenn has shifted from saying, "Well, let's see what it is and let's keep drilling," to maybe "Let's go and develop out there and see what it really looks like." As I understand, not every drill hole is going to hit grade. Once you find these laminated veins, there's a good chance that you're onto something.
Yeah.
I have seen a light shift in Glenn's view of that.
Okay. In the context of his conservatism over Boomer, but somewhat enthusiastic presentation of the opportunity for Crush Creek to extend Mount Carlton life, what's the pre-resource inventory that forms the basis of excitement for Crush Creek?
Michael, that's in the range of around 100,000-200,000 ounces, on Evolution kind of numbers at the moment. We would hope to not only confirm that, but to expand the known inventory as well. We see a fairly good upside in the opportunity there.
Tremendous.
Just to qualify that and help Glenn out on that one, it is pre-JORC and it's not a resource at this stage.
Yeah. Understood. Thank you very much.
Thank you.
Thank you. Your next question is from the line of Sophia Spartalis from Bank of America Merrill Lynch. Please go ahead.
Good morning, Jake and team. I just wanted to hone in on the guidance. Obviously, take your notes in regards to the Rawdon guidance. Just in terms of Cowal, you were saying here in the commentary that process grade is expected to average between 0.9 and a gram per ton for the remainder of FY 2020. It seems as just from the modeling, I can't seem to get to the annual production guidance of 255 to 265. Can you just walk me through that, please?
Yes, thanks. I'll start, and if Bob needs to add to it, he can. Essentially, we'll see that over the course of the year, it's not much different to the plan where you'll get between 2.7 million and 2.8 million tons processed in each of the next three quarters at sort of 0.95-1 gram. It'll be a little bit lower in Q4 at about 0.85-0.9. Recoveries will still be in the line of the mid-eighties as we achieved in Q1, which will still give us in that range of the AUD 250-AUD 260. That's what it comes through at.
Okay. Coming into then the second quarter, we'll see production dip a little bit lower and then recover in the second half. Is that sort of the profile?
No, I think what you'll see is that the first quarter will be the highest quarter as we're getting the high grades out of the final parts of Stage G. We'll then get a little bit of that into Q2, and then it falls away over the course of the year. You sort of see in the mid-sixties for Q2, mid to low sixties in Q3, and high fifties in Q4 to give us that production range. Because we are processing the stockpile material as the year progresses.
Sorry, Lawrie, just on that. Just in terms of that profile, you said high 50s in the 4Q, 2Q, and 3Q. What was that guidance?
2Q will be mid to late 60s, high 60s. 3Q will be in the low to mid-60s, and 4Q will be in the mid to high 50s.
Right. Okay. Just in terms of then the overall production guidance remaining the same, it seems as though there's more downward pressure on production than upward pressure across the portfolio. Any other guidance that you can provide at the mine level, or you're happy to stick with the mine-by-mine guidance that was provided at the last quarter results?
We've stayed with the full year guidance range. Obviously, with Mount Rawdon losing their production numbers because of the access to the western area, it does move us down where we expected to land within that range. With all the other sites running at full capacity on their plants, there's not a lot of opportunity to offset that. What we have seen through the performance in Q1, and particularly Cracow, Mungari, and Ernest Henry, they are mitigating some of that impact of Mount Rawdon. We didn't change any of the other sites because they're all staying within that range. Rawdon will obviously bring us down a bit to the mid-range of the group range.
Okay, thanks, Lawrie. Just to follow up, in terms of Rawdon, what's the timing on when you think that you can be back up at 100%? When do you think that all these remediation efforts will be complete?
Pass that one to Bob.
Thanks, Lawrie. Sophie, we won't be back up for the remainder of this year. As Lawrie said, the actual profile is the reason why we've changed the ounce guidance. It will be a slow sort of increase towards the back end of the year, so that next year, we will be starting to get it up. I haven't got the exact figure on me, but I can get back to you.
Okay. Just to confirm, you expect it at this stage to be isolated to FY 2020?
Yes.
Okay. Thank you.
Just on that, Sophie. Bob's right that over the course of this year, the next sort of quarter and a bit is to get access to that. As we then get into Q4, they will be able to get back into some more ore. It'll obviously be a lot less than what we had planned for the year. As we go into FY 2021 and 2022, there's still more waste, but we access the ore, just that the strip ratio is going to be different to what we had in this current LOM.
Okay. Thank you for that clarification.
The ore in the last quarter is significantly higher than the next three quarters.
Yeah.
Thank you.
Thanks, Sophie.
Thank you very much. Your next question is from the line of Daniel Morgan from UBS. Please go ahead.
Hi, team. Possibly a question for Bob. Just want an update on the Cowal float leach project and what I know you've given us numbers this quarter about recoveries overall, which are 83.6%. Just wondering what your latest expectations are, where recoveries level out on, or does that shift with change in grade? Just want to talk your recovery expectations.
Thanks, Dan. The FTL has actually been delivering to design in the last couple of months. We're getting between five and six on average % before slip. I don't think we would be expecting that to significantly change.
Okay. Another question, more on the exploration offsite of Cowal. Every quarter, it seems like you guys are hitting more gold. You're expanding or finding gold outside of the resource envelope. What is the latest thinking behind what a mine might conceptually look like? Is it still too early to talk about that and expand? What is the concept, which I think was about 1 million tons of underground ore, high-grade underground ore? Should we be thinking larger than that, or is it still too early to talk about that?
Thanks, Dan. I'll let Glenn answer that, and then Bob can add anything he wants.
Thanks, Jake. Yes, Daniel, I think at this point, in terms of the scope of resource potential we're seeing on the underground at Cowal, we feel or we're expecting that it's probably going to double on the 1.4 million ounces that we see there today. That's sort of an overall kind of scope over the next couple of years as we develop this opportunity.
That would turn it into a close to three million ounce ore body. Bob, do you want to add anything?
I'm pleased Craig is not with me because I'm going to promise for him. I think what you've got so far, Dan, is conservative. We're doing the work. We're planning probably in October quarter 2021 to be getting the approval to start mining. I'd expect it to be higher than what you currently got. Saying that, we've got to do the work and we've got to actually get the drilling that Glenn is doing finished. I think it's going to come out better.
Just, I guess, to expand a little bit on that. It's getting bigger. There's nothing that would suggest a change to mining method or this is going to be a stope development. Is that what we're thinking?
I think if I was a fortune teller, that there'd be multiple methods of mining. We've got a range of narrow potential ore bodies or stuff that we'd have to take out with narrow mining. We've also got some areas that are starting to prove up to be quite a bit wider, which would be more amenable to classical open stoping. That's the work that we're doing at the moment, Dan, and as I said, we haven't actually finished it, but I think there would be multiple different types of mining methods, whichever is appropriate for the mineralization. Glenn, do you want to add anything to that?
No, I think that's right, Bob. I think there are a range of styles. There's sort of narrow high-grade styles of mineralization and wider sort of moderate grade styles, which should be a different style of mining.
Thank you very much.
Thanks.
Thank you, sir. Your next question is from the line of Matthew Frydman from Goldman Sachs. Please go ahead.
Thanks very much. Good morning, gents. Just a couple of questions on Cowal. Firstly, on the mill, obviously continuing to perform quite strongly in the quarter, and, Lawrie, just if you have a bit more detail around the kind of rates you're expecting from that stockpile material. I guess the question is 8.7 million tons per annum still the target for fresh material throughput on the stage 1 expansion? Or have you had a bit of a rethink on what you think that mill can achieve?
Bob?
Yeah, I think the mill can achieve a bit more than that, Matthew. That's the work we're doing. We've still got a few additional pumps and duplication to be installed in our latest project. That's going to give us better availability. I think there's still a little bit of upside.
Is there any timing around when you'd expect to finish that stage 1 works? Is it still December quarter?
It'll be finished this financial year. Obviously progressing through, so as we get more of the installation completed, we get better improvements.
Sure. Thanks, Bob. Secondly, on processing the stockpiles. You guys highlighted that you're not expecting really any recovery impact, even as you dip below one gram a ton and also obviously pushing throughput for the rest of the year. Just wondering if there's anything that you're doing differently to achieve that outcome. Is it a finer grind? Is it more utilization of the flotation tails leach capacity? Is there something that you're doing there to keep recovery steady?
Yes. The Float Tails Leach, optimizing the actual circuit itself, ensuring that the geometallurgical blend is the appropriate one for getting the most optimum recovery. All of those things are working together, Matthew. It's making the plan operate as a system and as an entity, as opposed to just looking at one section. They're all being optimized, and they're all being improved.
Sure.
Just one thing there, Matt. I mean, we will see in Q4, and that's where we see that drop-off in production that I mentioned in the mid-50s to just under 60,000. That will be impacted by grade and recovery. I mean, your recovery will drop 1.5% in Q4. That's where we see that lower production come through.
Sure. Thanks, Lawrie. Just to remind me, even beyond the end of this financial year, you've still probably got what, another 12 months before Stage H kicks in? Is that right? We might expect to see, again, lower grades and potentially lower recovery into FY 2021 until Stage H kicks in?
No. Our plan sees that as we go into FY 2021, we start getting back into Stage H ore. What you'll see through the course of that year, the grade will come back up. The higher grade is then achieved in FY 2022. We do access, through the last part of this year, some ore out of Stage H, and then in FY 2021, we are mining ore from Stage H.
Okay, sure. It'll be a gradual ramp-up of that Stage H ore. Then I guess, just following on from that. We've seen total prime material movement trending downwards at Cowal for the last few quarters. Just wondering how this looks for the remainder of the year as obviously you complete the ore out of Stage G. Are we expecting a material pickup in waste movement as you're reallocating the fleet to more Stage H pre-strip? Should we expect that prime movement to pick up pretty materially?
Yeah. I mean, what you'll see is total material mined will pick up in Q2, Q3, and Q4. As we now will finish Stage G, that tonnage will go over to waste. You will see the waste pick up in the back end of the year at Cowal.
As the TKMs reduce because of where the mining is going as well, Matthew, you'll see a net increase in the tons, as Lawrie said.
Sure. Your space to dump haulage distance is dropping, obviously, because you're not hauling ore, so you can move more material as a total.
Yep. Correct.
Okay, great. Thanks for the details. That's all from me. Thanks, guys.
Thanks.
Thank you very much. Your next question is from the line of Nick Evans from The Australian newspaper. Please go ahead.
Yeah. Good day, guys. Just sticking with the theme of Cowal. The New South Wales drought is hitting pretty hard out there. How concerned are you about the impacts of that on, or how is it out at Cowal, and how concerned are you that the impacts of that on water use and also, I guess, potentially over the environmental sort of regime when you come to submit your documents on the underground expansion?
Sure, Nick. I'd say we've been focused on this for some time now and working on it. I'm going to hand over to Bob for details, but clearly it is and has been front of mind for us for some time.
Thanks, Jake. Thanks, Nick. Look, water at Cowal is and has been identified as one of our material risks. We're actively working on, A, reducing and recycling our water. We're also actively working to reduce our reliance on new water coming into the operation. We've been looking at how we can actually reduce our reliance on water resources like the Lachlan and the things. They're all things that we're working at, that we've been working on for quite a period of time now.
Yeah. There's been some talk of, say, Northparkes and perhaps Cadia only sort of potentially having to make production cuts in 12 months or so if the situation doesn't change with the drought. Is Cowal facing sort of similar risks of time constraint?
Look, if we have an exceptionally dry summer, and none of our strategies come off, we've got potential issues by the end of this year going into next year. That would say that nothing comes off of all the mitigating strategies that we're working on.
Yeah. Just last one from me, Jake, Red Lake, any interest in, is that the kind of mine that would be of interest to Evolution?
I'm really happy you asked that question because it's the first question I've been able to answer on the call. I'm not even going to answer that other than to say the stock standard answer, Nick. We've said we're interested in things which are being divested of. If there were processes, you could expect that we would be looking at things through the lens that we've always said we'd look at things through. Will it make us a stronger company, and is it accretive for our shareholders?
Thank you.
Does that answer your question, Mr. Evans?
Yeah, sorry. Thank you. Thanks.
As best as I'm going to answer it.
Thank you, sir. Your next question is from the line of David Radclyffe from Global Mining Research. Please go ahead.
Good morning, Jake and team. I've got a question on Mungari and just trying to work out how close we are to an update on the midterm plan there. Because I guess you talked of potential for 10 years, but we still don't know about the underground at White Foil and how you actually plan to extract value from those lower-grade satellite inventory. Also, the plant looks to be going well, whether there's actually upside there for maybe an expansion or do some of these sort of discoveries push this sort of back into maybe next year?
Hi, David. Thanks for the question. I think obviously these discoveries help. We're working on it, and we're working on the optimization. I'd say towards the end of this financial year, we'll start delivering some outcomes on that.
Okay. That sounds like it's a little bit back. Maybe just one on safety-
When you see a drilling hole that have 130 grams per ton, it will be pushed back a little.
Sure. On safety, obviously, you're probably pretty disappointed about the TRIFR and how it just keeps rising. How much of this is actually your focus on safety seeing more reporting? I didn't see the underlying LTI number was that up, and what else can you do to change this trend? I guess you've talked about focusing on it for a while, but it doesn't seem to be working.
Yeah. I don't want to make excuses about it, I'm just going to say we are having way too many injuries. Mainly fingers and hands have been in the line of fire. We have to do more to improve the safety. I don't want to talk about it as being a change in our reporting culture. We're having too many injuries.
Okay. Well, thank you.
Thank you very much. There are no further questions at this point, sir. Please continue.
That's it. Thank you very much. That was an interesting call, and I appreciate your interest and attendance. Look forward to having lunch with some of you now and then to the Citibank conference tomorrow and Thursday. Look forward to seeing you over the next few weeks to update you. Gold price high, generating lots of cash, and the discovery part of the business going really well. Thank you.
Thank you, sir. Ladies and gentlemen, that does conclude our teleconference for today. Thank you for participating. You may all disconnect. Thank you.