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, and good morning, everyone. I am joined on the call today by Fran Summerhayes, our CFO, and Peter Rocky-O'Connor, our GM Investor Relations. Today, we released our FY 2026 full-year financial results on the ASX, including a presentation which will be the reference point for the call. Fran is excited to go through the financial results. In her first year at Evolution, so many new financial records have been set, and she is delivering a bumper record dividend. We also announced changes to our board. Tommy McKeith, who has been a director since 2014, will be retiring at our annual general meeting, and Jon Vann will be joining the board on 1 December. Tommy has been an invaluable contributor to the board, Evolution, and me personally. His knowledge and enthusiasm for the industry and almost every ore body is amazing.
As Jake commented in the release, it is fitting to acknowledge and recognize the lasting impact he has had on our business, culture, and success. Tommy will leave an enduring legacy, and we are extremely fortunate to benefit from his counsel, vision, wisdom, and friendship throughout his tenure. Jon is a geoscientist with more than three decades of experience across global mining businesses. I am sure he will be a valuable addition to our board and look forward to working with Jon when he joins us in December. Turning to the results and starting on slide three. Our record results reflect the quality of our portfolio and above all, the dedication and efforts of the entire Evolution team. We are generating high returns and delivering on our commitment to shareholders.
The record financial performance is on the back of safe, consistent, and reliable operational delivery, complemented by our disciplined approach to cost and capital management. As mentioned on the quarterly call last month, we delivered FY 2026 safely with our total recordable injury frequency of 5.9 remaining low.
Today, we also released our inaugural climate report under the new reporting standard, highlighting the positive work being undertaken throughout our business to leave a lasting sustainable legacy. Our high margin business is generating significant cash flow with a record cash flow of nearly AUD 1.4 billion. The updated dividend policy with a payout rate of targeting 60% of annual group cash flow is sector leading. This means a record final dividend of AUD 0.21 per share. For context, the total FY 2026 dividend of AUD 833 million is more than our market cap was in early 2015 when we made our first major acquisition.
The multiple projects at Northparkes, Ernest Henry, and Cowal will generate high returns and further improve the quality of the portfolio when completed. We are set to continue our safe, reliable performance in FY 2027 with guidance expected to sustain our high margin, high cash generation position. I will cover the guidance details later in the call. Moving to slide four. This slide demonstrates our disciplined allocation of capital to drive sustained high returns. Our balance sheet supports our strategy through the cycle, be that for value accretive acquisitions, high returning organic growth investment, or dividends. We adapt our allocation depending on market situations and the different stages of our mine plans. It is always done with a view to maximize our shareholder returns. While we've been mainly focused on advancing our organic growth pipeline in the past couple of years, we have not ignored accretive deals or our shareholders.
Over the past year, the allocation of funds between organic growth opportunities and dividends is almost a 50/50 split at around AUD 830 million- AUD 850 million for each of them. We have also done accretive deals. At approximately AUD 250 million, this is smaller in scale than normal, yet they are just as important to the portfolio. It clearly shows that we have the capacity and flexibility to allocate into all three areas to sustain the high returns for shareholders, which Fran will demonstrate. With that, I'll hand over to Fran.
Thank you, Lawrie, and good morning, everyone. It is my pleasure and privilege in my first year with Evolution to present our most successful financial results. These financial results reflect the quality of our portfolio, the consistency and resilience of our performance, and the benefits of a high margin operation. Importantly, we have banked the benefits of the higher metal prices, and we have shared this success with our shareholders. We are very proud of what our Evolution team has achieved. We delivered a record underlying EBITDA of AUD 3.2 billion, up 44% from last financial year with an annual record underlying EBITDA margin of 57%. Our costs are sector leading with our all-in sustaining costs of AUD 1,717 an ounce, resulting in an underlying net profit after tax of AUD 1.6 billion, up 63%.
This translates into a record group cash flow of AUD 1.4 billion, up 76% from prior year, with earnings per share reaching a record AUD 0.73 per share, up 57% on prior year. These financial results demonstrate that we continue to deliver on our commitments to our shareholders, returning a record fully franked final dividend of AUD 0.21 per share, up 62%, making a total dividend for FY 2026 of AUD 0.41 per share, more than double from prior year, and is 60% of our FY 2026 group cash flow. Whilst we have de-geared the balance sheet and achieved a net cash position, demonstrating that we can simultaneously invest in the business to enhance the portfolio while increasing our shareholder returns. Highlighted on slide six, this year, we have achieved a record net mine cash flow of AUD 2.1 billion, more than double from prior year.
We invested AUD 1.1 billion of capital into our operations with high returning growth projects that are all on schedule and budget. Across the portfolio, we have had annual record net mine cash flow at Cowal, Northparkes, Red Lake, and Mungari. We continue to deliver consistently high EBITDA margins across the portfolio, as demonstrated on the right side of this slide, with group EBITDA margin increasing 12% to 57%. Two standout year-on-year performance were Red Lake and Mungari. Red Lake delivered an underlying EBITDA margin of 62%, reflecting consistent and reliable operational execution and cost control in a tariff environment. This converts into almost four times net mine cash flows than prior years. The operation has demonstrated its ability to sustainably generate returns and has earned the right to compete for capital within our portfolio.
Mungari was another year-on-year standout, achieving an EBITDA margin of 65% following the successful commissioning and ramp-up of the expanded 4.2 million tonnes per annum processing plant. The project was delivered 15% below budget and nine months ahead of schedule. Importantly, this directly converted into a net mine cash flow of AUD 366 million, more than three times from prior year. These operations highlight the value created through disciplined capital allocation, focused project execution, and consistent operational delivery across the portfolio. We enter FY 2027 with a fully unhedged gold and copper portfolio. Moving to slide seven. These all-time financial records for Evolution translate directly into record shareholder returns as we continue to deliver on our commitment in rewarding our shareholders. At year-end, the group held almost AUD 1.4 billion of cash, with an undrawn revolving credit facility of AUD 525 million, providing us sufficient liquidity.
During the year, we have repaid all our bank term debt, and we now only have our low-cost and long tenure U.S. private placement with an average fixed rate of 4.47%, with the first tranche not due to be repaid until November 28. During the year, we have maintained our investment-grade credit rating, reinforcing the quality of our portfolio, balance sheet, and long-term outlook. Following these record financial results, we are pleased to reward our shareholders with our highest ever dividend. After paying a record fully franked interim dividend of AUD 0.20 per share, the board has approved a 27th consecutive dividend and a record fully franked final dividend of AUD 0.21 per share. Given our improved financial position and outlook, we have reviewed our dividend policy and increased the payout ratio to a target of 60% of annual group cash flows, a significant increase from the previous 50%.
This sector leading dividend policy is supported by our 17-year reserve life and reflects our confidence in the long-term strength of the business while reinforcing our commitment to rewarding our shareholders. Since FY 2023, we have delivered on our commitment to deleverage the balance sheet, reducing gearing from 33% net debt to a net cash position in just three years while continuing to invest in the business and deliver shareholder returns. Our capital management plan is designed to maximize long-term shareholder value while maintaining disciplined investment to continually enhance the quality of the portfolio and balance sheet. As slide eight shows, our record financial performance is underpinned by consistent and disciplined capital allocation. We continue to enhance the quality, resilience, and longevity of our portfolio through investment in high- return growth opportunities while improving overall portfolio returns.
The board-approved projects shown on this slide at half-year results demonstrate this approach in action. While this is one financial metric we look at, based on the current gold and copper prices, the expected internal rates of return for these projects are materially higher than the original base case assumptions, providing additional value and upside for our shareholders in current market conditions. As we enter FY 2027, Evolution is in a position of considerable financial flexibility. We are operating in a supportive gold and copper price environment and focused on banking the upside. We have a high quality and high margin portfolio of assets, a pipeline of fully self-funded, high-return growth opportunities, and the financial capacity to execute on our strategy and continue to reward our shareholders. I will now hand you back to Lawrie. Thank you.
Thank you, Fran. Slide nine summarizes our FY 2027 guidance. Charts on the right-hand side highlight our cash flow potential outcome at the midpoint of guidance at current prices and our sensitivities. Overall, our FY 2027 plan will enable us to generate significant cash flows. At current prices, our operating mine cash flow would be around AUD 3.6 billion, which is AUD 200 million higher than FY 2026, even allowing for cost escalation in FY 2027. If the metal prices were around consensus levels, the cash flow would be approximately AUD 3.4 billion. At a range of AUD 3.4 billion- AUD 3.6 billion, and allowing for our planned capital investment and other costs such as tax, exploration, and overheads, our group cash flow will allow us to sustain meaningful dividends for shareholders.
We know the main drivers to our cash flow, as shown on the sensitivities chart, and we manage each of these in line with our cost and capital discipline. In terms of the guidance details, our group production is guided at 660,000 to 730,000 ounces of gold and 63,000 to 78,000 tonnes of copper. Outside of Mt Rawdon finishing production this quarter, there is no material change in production capacity across the other operations. Production is weighted to the second half of the year as we complete the access to the second decline at the Cowal underground mine and access new mining areas in Red Lake. The normal semi-annual major shutdowns will take place at Cowal and Ernest Henry in the September and March quarters.
For the September quarter, we are expected to produce in the range of 160,000 to 166,000 ounces, and copper in the range of 16,000 to 17,000 tonnes. Our group all-in sustaining cost is guided at AUD 1,795- AUD 1,995 per ounce, which will remain one of the lowest in the sector. This is based on a copper price of US $5.72 per pound compared to the spot price that is approximately 15% higher. As outlined last month, the main drivers to the change in the all-in sustaining cost is the impact of cost escalation assumed at 4%-5% or AUD 150- AUD 160 per ounce, as well as the decision to invest an additional AUD 50 million- AUD 60 million in sustaining capital on fleet and infrastructure to ensure long-term operational reliability. Our group capital guidance aligns to our FY 2027 outlook outlined in our June quarterly report.
The main areas of investment for major projects and mine development are on the approved growth projects, namely E22, coarse particle flotation, and the expansion study at Northparkes, the Open Pit Continuation project at Cowal, and the development of Bert at Ernest Henry. All these projects remain within the original approved budget. In summary, on slide 10, we have a high margin business and a 17-year reserve life. We are very much focused on delivering sustained returns. The combined effort throughout our business over the past couple of years to deliver safe and reliable performance is set to continue in FY 2027. We remain committed to margin over ounces, while at the same time making sure we capture the benefits of the high metal prices. All our growth projects remain on schedule and budget. The balance sheet flexibility enables us to continue executing our strategy with confidence.
Out of all of this, we make sure our shareholders benefit, and our improved dividend policy targeting a 60% payout rate demonstrates that. For FY 2026, the dividend is equal to 20% of our achieved gold price, which is an outstanding return for our shareholders. Darcy, please open the line for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and waiting to be announced. If you wish to cancel the request, please press star two. If you are on a speakerphone, please pick up the handset to ask your. Your first question comes from Kate McCutcheon with Bank of America. Please.
Hi. Good morning, Lawrie. Congrats on the results. Can we just revisit the CapEx again for 2027, which you gave us last month? We previously had the AUD 0.9 billion- AUD 1.1 billion to FY 2030, so say circa AUD 5.6 billion, 2027 to 2030. Can you remind me what is in and out in terms of upcoming projects, like Northparkes mill expansion, for example? I guess I am trying to work out, do we still think about that same envelope extent to FY 2030? If it is just this year that is lumpier, how has that envelope changed?
Yeah. Thanks, Kate. The CapEx outlook of AUD 900 million- AUD 1.1 billion FY 2030. The projects that are in there are the OPC at Cowal, the E22, and Bert mine developments, the coarse particle flotation, and obviously our sustaining capital. They are all of those projects. The outcome of the study at Northparkes will determine what we invest in terms of if we expand the capacity there. The only changes to that previous outlook is the additional sustaining capital that we have outlined today and last month of AUD 50 million- AUD 60 million a year. We did say that we expect that to be at least for the next three years, that we will be investing at that higher rate. And this year, the AUD 70 million- AUD 90 million on studies and works that we are going to undertake for future growth options.
If you look at it, there is nothing in terms of capital inflation that we are building into there. There are no new major projects that we are bringing into that outlook, and the existing ones that are in execution are all on schedule and on original budget. Does that clarify it for you?
The envelope is still essentially the same, bar the sustaining CapEx?
Correct.
Studies? Yeah. Okay.
Yeah.
Thank you. Then we had the Carnaby deal that you announced for another 10,000 tonnes of copper a year, and I know you haven't got the keys to the asset yet, but when do you think you could have first ore to the Ernest Henry mill? Secondly, there was the third-party tolling agreement with Glencore that you announced there kind of separately. What is the thinking there, or how should we think about that part?
For the Carnaby deal, we expect that to close in November, subject to the Carnaby shareholder vote. We then have said it will be about 12, 18 months to really close out that feasibility study. Then beyond that, you'd be looking at about another 12 to 18 months. So you are potentially looking up to about three years from October, November. In terms of the third-party deal, that is linked to a project that Glencore has an offtake agreement on, the Mount Margaret one. If that project starts, that all would come through into the plant, given that we've got that capacity. When we look at the Carnaby deal and that offtake agreement, we certainly have the capacity to do those as well as anything that may come out of the Corella exploration program that we're currently running.
Okay, and the Mount Margaret pit being the one that Xstrata previously mined, the satellite?
Yes.
Okay. Got it. Then just quickly, the non-cash component that you've assumed in the Cowal all-in sustaining cost, please.
Give me 30 seconds. Cowal in the non-cash component is about AUD 50-AUD 70 an ounce this year added to cost.
Thank you.
Thank you. Your next question comes from Levi Spry with UBS. Go ahead.
Good morning, Lawrie and Fran. Maybe a question for Fran, I guess, just following on from the capital questions there. So, if I think about what's potentially coming next at Northparkes and maybe some of that Carnaby stuff and maybe some more at Cowal, can you walk us through the process to arrive at the 60%? What drives the upper band? And maybe you can talk to potentially what other forms of returns may or may not have come into consideration.
Yeah, Levi. I'll get Fran to talk about the capital allocation and dividends. All I'm working on the basis is that since Fran's arrived, we're paying a lot more out to shareholders, so she's got to build on that this year. In the capital, as I just said to Kate, all of the projects that are in execution and studies are in our outlook. The next major ones really will be the outcome of the study at Northparkes this year. Then at Cowal, it will be the outcomes of the exploration and drilling that we've got going on at E41 and the underground and potential for a second underground. They would be the next main pieces of capital. In terms of Carnaby and the Greater Duchess project, we believe there's a lot more work to firm up that feasibility study.
Once we take ownership in November, we're going to turn our attention to completing that study, and that's when we'll have the best indication to give you an outlook on what that capital would be. Fran, you just want to talk on the 60%?
Yeah. Sure. Thanks, Levi. Our capital management plan is consistent and focused obviously on maximizing long-term. What I mean by that is based on our life of mine plans, the quality of our assets, we look at the most economic way to bring our reserves and resources to market. We're focused on balance and be disciplined, investing in our high- returning growth options and opportunities within the portfolio, but also balancing rewarding our shareholders via capital returns. Given our financial position, the confidence in the outlook and portfolio, the highest return outcomes for our shareholders is increasing our target dividend payout to 60% of annual group cash flow. We'll be balanced in regards to investing in our business to maximize value and also maintain finance flexibility to confidently execute on our strategy.
As we've said before, we don't see value, and we don't intend to accumulate excess cash on the balance sheet. If the gold or copper prices remain supportive and continue to increase, resulting in, say cash generation before higher than our business requirements, obviously a good problem to have, we will continue to evaluate the full range of capital management options to reward our shareholders like we have done today.
Yep, that's great. Thanks, Fran.
Thanks, Levi.
Thank you. Your next question comes from Matthew Frydman with MST Financial. Please go ahead.
Sure. Thanks. Morning, Lawrie and Fran. A couple more following up from similar themes, maybe firstly on Carnaby. Can you comment at all on the structure of the consideration? Obviously, all scrip offer. You've got AUD 1.35 billion in cash and pretty low-cost debt as Fran outlined. I know it's a very small amount of dilution, but wouldn't it be better for your existing shareholders to put some of that cash and balance sheet to work rather than issuing more equity? I guess, yeah, just wondering how you think about the structure there. Also how that relates to any other sort of bolt-on opportunities in general across your portfolio, whether you see any other opportunities for that sort of M&A. Thanks.
Yeah, Matt. Look, I think when we look at it, we've got to also consider what was the Carnaby's board and team's preference in terms of the transaction as well in that, by us offering them scrip, they can continue to participate in the upside on the project, through taking shares in Evolution. I think the other thing, and we do try to limit issuing the stock, and this is 1%. I think when you look at it, that is the best use of our scrip at the moment in this transaction. Then as we look at other things going forward, if you look at all of our other acquisitions, we've always used a mix of cash, debt, and equity, and we will always do that depending on the size and the scale of it.
Yeah. Thanks, Lawrie, and maybe any other opportunities across your portfolio for similar sort of bolt-on acquisitions? Obviously, Ernest Henry has the benefit of latent mill capacity, but yeah, how do you see that across your portfolio? Thanks.
I think if we look across the portfolio, Cowal, we're able to keep that plant filled. Similarly at Red Lake. Ernest Henry, we've got the land at Corella, as well as now looking at Carnaby. Northparkes, I think we've got enough ore bodies there to fill that plant, be it at current state or expanded state, and Mungari is probably one that's got capacity, but there's not a lot of options right now for us to bring something in that would improve the quality at Mungari.
Got it. Thanks, Lawrie. That's helpful. Then maybe just following up on the capital management plan questions. Obviously, the company has a pretty enviable track record on dividends, and you've increased that further today with an update to the policy. So I do feel a bit like I'm complaining that maybe the beer's a bit too cold, but with the cash on the balance sheet, I guess, what made the board reluctant to consider, I suppose, a broader range there or perhaps a special dividend or something to really sort of accelerate those shareholder returns in the current environment, current metal prices, current outlook? Thanks.
Yeah. Matt, I said over the last six months, no matter what capital management plan that Fran and the board end up with, we are not going to please every shareholder. If we try to please everyone, we are probably going to please no one. I think when you look at AUD 1.4 billion of group cash flow, we are paying out over AUD 830 million of that back to our shareholders. I think that is an incredible rate of return. We could have easily gone higher than that, but I think that is a good step from a 50% to 60%. We have always said, and as Fran said just earlier, we are not going to build a lot of cash. We cannot control. If the metal prices stay where they are, as I outlined with our guidance, we will make significant cash flows this year.
If the prices are higher, therefore, the dividend cents per share will be higher for our shareholders. In the next 12 months, if they do stay there, Fran has got another good problem of set a new record for dividends and work out how much more to give back. Is that given back through specials? Is it given back through buybacks or a higher payout rate? I am sorry we did not please you.
No. That is a very pleasing outcome. Thanks, Lawrie.
Thank you. Your next question comes from Daniel Morgan with Barrenjoey. Please go ahead.
Hi, Lawrie and team. First question, just Ernest Henry. Obviously, cycling down in production a tad and spend stepping up. Is this just for FY 2027 or is this sort of the multi-year impact of developing down to get the life extension infrastructure in? Just sort of trying to understand the production and spend outlook a bit more at Ernest Henry. Thanks.
Yeah, Dan, it's actually a combination. As we know from the weather event when we were out of production through the March quarter and where the water ended up was down at the development level. We've got to catch that up. We've got to put additional ventilation and refrigeration, and then we do have the trucking back up to the existing materials handling system. Some of that, as we said, as we get to the second half of the year and we get the ventilation and everything in place and we can therefore lift the productivity, you'll see some of that come back through. The other thing to note is that in FY 2026 and 2027, as we're going through some areas in the cave where there's waste in with the mineralized ore, we've got to take that with us, so that is obviously displacing ore.
Once we get through that zone, you then start to see it come back. So it is a combination of both of those. You'd likely see what we've got this year. We get ventilation back next year. We go a little bit deeper. So production 2027 and 2028 would be pretty similar, and then you start to get into it where you get [Board], you get back into more ore out of the cave and hopefully, not long after you get Carnaby coming through. Or I should be calling it Greater Duchess.
Thank you. I know it is a small deal, but you've just done a deal with Arizona Gold & Silver. If you could maybe outline what you're trying to achieve through this investment, both the investment itself and how you've structured it. Thank you.
Yeah. So look, that's a new opportunity that Glen and the team identified. The area where we've picked up with Arizona Gold & Silver is highly prospective, but historically it's only been considered for shallow drilling to do leaching operations. But this deposit, as we've seen some deeper drilling, is certainly showing some really good grades and grades over an extended area. So that's the reason why we've sort of got interested and invested in this. And it is allowing then Arizona Gold and their drilling program. So we've farmed into it via just under 10% of the company, with some warrants to acquire more of the company, and then certainly as the program progresses, if it proves up, we've then got the option if we want to make a decision to take out that project or take out a further percentage of it.
Okay. Thank you very much, Lawrie and team.
Thank you. Your next question comes from James Redfern with RBC. Please go ahead.
Hi, Lawrie, Fran, and Peter. Hope you're well. Most of my questions have been asked already, but maybe a question on the asset guidance, please, for FY 2027. You mentioned it's based on a copper price of $5.72 a pound, with spots around 660, which would indicate that maybe the asset is flat year on year. I'm just wondering if you have any sort of sensitivities around asset in relation to copper prices. And also, what are you seeing in terms of cost inflation in the industry outside of diesel costs? Thank you.
Yeah, sure. James, I'll hand to Fran in terms of the cost sensitivities outside of labor and diesel. If you do look at slide 14 in our presentation deck that we've released today is the AISC sensitivities. The copper price of around AUD 1,000 a tonne Aussie, therefore about AUD 0.30 a pound is worth AUD 90-AUD 95 per ounce. Every 1,000 tonnes of copper is worth about AUD 25-AUD 30 an ounce. In short, if you saw the current copper price sustained for the whole year, you're potentially looking at about AUD 190-AUD 210 an ounce benefit, which would sort of bring you back in towards what we achieved in FY 2026.
I do think when you look at the disruption in the copper market at the moment, we're a little bit more optimistic on the copper price and what it could do for our cash flows and AISC. Fran, do you want to touch on the cost drivers?
Yeah, sure. Thanks, James. In terms of cost drivers, obviously our biggest cost driver being labor at 50%, we are seeing that increase around the 4.5%. Particularly pressure in Western Australia in terms of retention and absenteeism, so we're doing what we can there around employee engagement. Our next biggest part is cost driver would be maintenance parts, and we're seeing that there's between about 3% and 10%, but we're focusing on our maintenance strategies and what we can do in regards to the cost pressures in maintenance. Our next cost base would be electricity at about 9%, but we're pretty much locked in there for long-term contracts. Big one, focusing on lower costs and lower emissions to supply electricity there.
As you mentioned, diesel, but I'll just remind you that diesel is low for us in terms of only 2%-3% of our cost base, and that's mainly at Mungari and Cowal. Other than that, it fits within the envelope that Lawrie quoted to the 4%-5% and reflected in our guidance.
Okay. Fran and Lawrie, thank you. That is great. Thank you.
Thanks, James.
Thank you. Your next question comes from David Radclyffe with Global Mining Research. Please go ahead.
Oh, hi. Good morning, Lawrie and team. I thought I would ask a similar question to everyone else about really, I guess, the link between capital and the production outlook. Maybe using Red Lake as an example where we have got lower production going forward, and we have got more capital. What is the way forward here for, say, Red Lake? If we take this as one that we do not get as much attention, and it does feel like a little bit, but we are still sort of stuck in the past. Is there any sort of optionality being opened up here from the extra development spend this year? I know you have talked about the tailings upside, but that maybe just seems still incremental given that it is still a very large, very high-grade resource.
And maybe if there isn't a way forward, this one, is it still core to the portfolio?
Yeah, look, David, I think there's a couple of things when you look at Red Lake. Firstly, when we talked about the sustaining capital and infrastructure, this is one asset that we have allocated more sustaining capital to in terms of fleet and fixed plant. We needed to do that. Also we have increased the sustaining mine development at the operation to make sure that we can keep the production levels at 30,000-40,000 ounces per quarter over the longer term. So it is seeing that lift. But I think if you first look at their all-in sustaining year on year, the inflation is that biggest driver that would add about AUD 140-AUD 150 an ounce, and then that additional bit of sustaining capital is what's getting you to the guidance range for this year.
What we are doing is making sure we can make it more efficient and the cost level is able to reduce over time. Does it fit into the portfolio? From our perspective, with the assets we've got and the projects we've got in the other operations over the next few years, having Red Lake and Mungari that are sitting there producing in the order of 320,000-350,000 ounces and generating cash back to the business, I think that's a perfect fit for the other three that are going through some high-return organic growth investment in the next three to four years.
Okay. Thank you. That's clear. I'll pass it on.
Thank you. Your next question comes from Mitch Ryan with Jefferies. Please go ahead.
Oh, hi, Lawrie and Fran. Hope you are well. Just as Mount Rawdon processing comes to an end, I think the prior closure estimate was roughly AUD 100 million. With pumped hydro proposal being prioritized, what is the latest closure and rehab estimate? Is there any residual value for third-party interest in the mill or existing infrastructure there?
Fran will talk you through the closure. From our perspective, at the metal prices, if they were to sustain or go higher, there is certainly a potential for a cutback, but we think that would be better suited for someone else possibly. There is nothing much in the way of what we are considering for the operation. We will move into care and maintenance through this year, as the priority right now. Fran?
Yes. So, Mitch, in terms of the balance sheet, we always took a conservative approach with Mount Rawdon, as if the pumped hydro would not go ahead. So the provision is sitting around AUD 75 million discounted on the balance sheet, and that is a spend profile out to about 2044, with the majority of the capital plan spend is in the first 10 years, and you see that start to kick up in about 2030.
A rounding error. Okay, thank you.
That is definitely a Jake rounding error, Mitch.
After the weather event at Ernest Henry, can you provide an update? Do you have any expected insurance recoveries there, and what is the process on receiving those if you do?
Yeah, look, we do have insurance at the operation, and as with 2023, we did receive insurance proceeds on that. In terms of this incident, same thing does exist in terms of the insurance coverage. For some of the mobile fleet that was damaged or destroyed during the event, that is covered and we are already getting replacement equipment in. In terms of the cost of recovery and remediation, we are working through that now, and that will then go to the insurers. Through FY 2027 is when we would see the outcomes of that claim.
Okay. Thank you very much for taking my questions today.
Thank you. Your next question comes from Hugo Nicolaci with Goldman Sachs. Please go ahead.
Morning, Lawrie, Fran, Rocky. I know you've got the site visits coming up, so I'll hold off recycling my question on the upside at Cowal. Maybe looking at Red Lake and building on David's question, it just does look like we're sort of reset a little bit further to that sort of 30,000-35,000 ounces a quarter from closer to 40,000. Are you able to just talk through a bit more detail, just sort of some of those moving pieces and based on the potential study outcomes, can we see that creep back up or is the study more focused on maintaining that lower rate from here?
Hugo, so yeah, when you look at it this year, next year, it's more towards the 30,000-35,000 because of where we are. As we said in the second half of this year, we accessed some new mine areas at Red Lake. When you look beyond the next couple of years, the work around the tails reprocessing and also some areas that we're putting some exploration dollars into about bringing that into, is aimed at getting it to the 35,000-40,000 ounce per quarter and above that, and that's really what the current life of mine plan is showing. I think when you look at Red Lake, three mining areas, it just doesn't have a lot of, I guess, excess capacity or mine areas, as some of the other operations have.
We have to work a little bit harder to get that back up at the 35% to 40%.
Great. That is helpful. Maybe one for Fran Summerhayes, just on the balance sheet. Is a 10% to 15% long-term gearing ratio still what you are running with there? Do you now, potentially with the CapEx coming up, look to maintain a more conservative balance sheet near term?
Well, over the long term and with the cycles, yes, we are still carrying the 10% to 15% net debt. I will also note we are prepared to go outside of that for high-value options. Like we did, say, in 2023, we are at 33% net debt, and then obviously within the three years, we are able to get into a net cash position with the higher metal prices. Yes, you go 10% to 15%.
Great, thanks. Just one more. Obviously, lots of positives and things to look forward to as you have reiterated today. Just maybe the other side of the ledger, is there anything that concerns you in the near-term outlook? Is it underground performance or maybe things like labor availability? If so, do you see any regions presenting particular issues at the moment?
No, I think if we look at it, Hugo, we are always alert to what can happen on the downside. But where we sort of sit across the business, we want to continue the consistency that we had over the last couple of years and do that through 2027. Because if the metal prices stay where they are today, we want to make sure that we get that cash and can reward our shareholders. There is plenty of things that are keeping Matt, Nancy, Fran, and the site GMs awake, but it is all part of being in the mining industry.
Great. Thanks, guys. Awesome.
Thank you. Your next question comes from Adam Baker with Macquarie. Please go ahead.
Morning, Lawrie and Fran. Just one on the production guidance. You mentioned it is weighted to the second half of the year. Just wondering if you can give us an approximate breakdown. Are we looking at a 48/52 split, or what sort of quantum we are looking at there? And noting your opening remarks were indicating 160,000-166,000 ounces of gold. So looks like September quarter is going to be your seasonally weakest of the year.
That is correct, Adam. If we get the 160-166, then the other three quarters have got to be better than that. It goes to the two shutdowns quarters, which are the September and March quarters, and as we said, the second half is as we get more access in the underground at Cowal. A split, I am not going to get caught into that because there will be ups and downs. Our outlook is over the year, we will deliver the 660-730 in the copper.
That is clear. Seconding the balance sheet, Fran, in very, very good shape here. Got the undrawn AUD 525 million revolver, no US private placement repayments till FY 2029. What further optimizations could we be doing from here, Fran, over the next 12 months?
Yeah, I think over the next 12 months, it is really just delivering on our commitments that we are making in our FY 2027 guidance ranges there. Obviously, the AUD 70 million-AUD 90 million call-out from Lawrie in regards to study and growth to see if we can allocate our capital to higher-returning investments. Other than that, as I said, if we bank the upside of higher gold and copper prices, we do not want to carry and do not see value holding large amounts on the balance sheet. So we will look to reallocate that out to shareholders. Thanks, Adam.
Thanks.
Thank you. Your next question comes from David Coates with Bell Potter. Please go ahead.
Morning, Lawrie, Fran, and Rocky. Congratulations on the result, and thanks for your time this morning. This has been covered a little bit, but just that slide four, which sort of lays out the kind of capital allocation as it's panned out for FY 2026. It sounds like we should sort of see that as a bit of a template going forward with sort of shareholder returns as like a top priority and then the balance kind of flexing between organic growth and accretive deals. Does that kind of fit with how you guys think about the capital allocation outlook?
Dave, I think as I said earlier on the call, what we've got to be able to demonstrate, and I think we have demonstrated, is that we can work in all those three areas to get returns for our shareholders, and it does depend on what's happening at the time. I look at Northparkes as the example. in 2023, we couldn't control the timing of when CMOC decided they wanted to exit. If something comes up in the next 12 months and it's something that Kieran and the team says to the board and I that this is something we should bring in the portfolio, we'll go into that area. If there isn't, then we'll continue to invest in the organic growth. But I go back to the earlier thing. We're investing at that AUD 1.1 billion right now. Yes, we're allocating a couple of hundred million dollars more.
If metal prices stay where they are for last year, shareholders are still going to be getting somewhere around the AUD 800 million- AUD 850 million back. What we're trying to say is that we work in all three areas. It depends on what's happening at the time, but we don't just focus on one of them. And our balance sheet, we're very comfortable and confident that it will meet the requirements of all three.
Okay. No, it's in a very flexible position at the moment, no doubt about that. Then secondly, more micro question. Red Lake, really strong improvement year-on-year. Obviously, gold prices help that, but what are the operational changes? What's enabled that improvement?
Look, there's a number. We did have a KPI of not getting many questions on Red Lake, but I think this year's guidance is going to draw some attention. Essentially, the key things that change there, David, is with a number of the areas that we're mining, we had to change the mix to get a good balance between some selective mining and bulk mining. By having done that, by having changed out some of the fleet there, and the workforce buy-in to that mine plan, has enabled us to really get that improved reliability. In terms of then the cost structure, it was around standardizing rosters, it was around being able to move people and equipment between the three mines. It was certainly around when the productivity lifted, get the cost base down. Everyone started to participate in the quarterly performance bonus.
Once they got that, they never wanted to go back to no bonuses. So that helped in terms of cost discipline and productivity. It's been a whole mix of things there at Red Lake. The only thing I'd say is that compared to all the other assets, it's one that you just can't stop. I explained it to Rocky, it's like riding up a hill. The minute you stop pedaling, you'll be back down the bottom. Probably not a good analogy for Rocky, who got hit by a car on a bike last week, but it's the anal.
Awesome. Thanks very [inaudible]
Thanks.
Thank you. Your next question comes from Zane Guo with JPM. Please go.
Thanks, team. Just following up on the all-in sustaining cost. Understand that diesel prices are only 3% of the cost, but nevertheless, keen to understand what diesel price you have assumed for FY 2027. Just on the 3%-10% inflation on maintenance parts called out by Fran Summerhayes earlier, are you seeing similar cost pressures across your growth CapEx spend?
On the growth CapEx, no. All of our projects are on the budget. We knew when we approved the projects there would be some cost escalation, and we have allowed for that, and we are not outside that range. In terms of diesel, look, it is somewhere in between what it spiked to when the situation first started and then where it sort of got back down to when tensions eased for a period. As I said, and you mentioned it is not a material cost for us. When we look at it, the main users are at Mungari and Cowal in the open pit.
Yeah, understood. Just to follow up on Red Lake, what is the latest thinking around reprocessing the tails? I guess, what are the hurdles you need to see to sanction the project and potential timelines?
Yeah. Look, over the next 12 to 18 months, we will finish that work. We have got drilling going on. We have got the study happening, and then what we have got to look at is, we have got three plants there, which is going to be the best way to put that through, and then you have got the permitting. So you are talking at least two and a half, three years before you see anything coming through on that one.
Understood. That is helpful. Thanks.
Thank you. We have a follow-up question from Kate McCutcheon with Bank of America. Please go ahead.
Thank you. I just wanted to see if Rocky was okay after that. No, I do have a question on Cowal. So you have noted that back end uplift in production with the second decline there. You did 2.4 million tonnes last year, annualized the last quarter at 2.77 million tonnes. What does your mine plan at Cowal have you annualizing into H? Or how do we think about a step-up in those underground tonnes with the second decline? Or does something offset with face positions at the decline that you have got?
Yeah. So Kate, good call out on Rocky. In terms of the Cowal underground, what you will see in the second half is that we then have that capacity to go above the 2.4 million tonnes annualized rate. I think when you look at FY 2026, we did have some easier areas to access, and therefore, we were able to get some productivity. We were going through a change in mining contractor there. So we did have two contractors working on the site in the June quarter as that transition happened. So that gave us a lift up there as well. As we get into the second half of the year, you get that capacity to go above 2.4, targeting somewhere between 2.4 million tonnes and 2.6 million tonnes. Then looking through the course of this year, what could we go beyond FY 2027?
When we get to September with the investor update and the site visit and looking at Glen's plans on the exploration, that is when you will get, I think, a better insight as to what we are thinking about in terms of the underground there.
Okay. Thank you.
Thank you. There are no further questions at this time. I will now hand back to Mr. Conway for any closing remarks.
Thank you, Darcy. Thank you, everyone, for your time today. Really do appreciate your interest in asking Fran what she is doing with all the cash and why she is spending so much capital on high-returning projects that we have got in train. Do look forward to catching up with you who are attending our investor briefing and site visits to Northparkes next month. Thank you again for your time.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.