Good morning. Good morning, everyone. Apology for the delay. We had a bit of a technical issue. Thank you for joining the 2026 March quarter results webinar. I'm joined today by CEO and Managing Director Bob Fulker and CFO Luke Anderson. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session open to analysts covering Hillgrove. If you wish to ask a question, please use the right-hand button at the bottom of the screen. I will now hand over to Mr. Bob Fulker, CEO and Managing Director at Hillgrove Resources.
Thanks, Jane, and good morning, everyone. Sorry for that slight technical hiccup. I'm hoping everyone can hear us now. Thanks for joining the Hillgrove Resources 2026 March quarterly results webinar. I'm joined on the call today by Luke Anderson, our CFO. Certainly living in interesting and changing times, with global uncertainty and pressure on both commodity price, exchange rate, and our cost base. These have not adversely affected us as of today, but we are closely monitoring the fuel situation and the Middle East events, like I'm sure most others are. Of importance, with all the uncertainty, is that the Australian copper price remains strong. Operationally, the March quarter delivered a strong start to the year, with key highlights being 3,120 tons of copper delivered, a fourth quarter-on-quarter increase.
Mine generated AUD 14.6 million of operating mine cash flow and a net mine cash flow of AUD 6.6 million after capital and rehabilitation expenses. Our cash balance increased by AUD 4.6 million, increasing the group cash balance by 22% to AUD 25.2 million at quarter end. On costs, Kanmantoo delivered an all-in sustaining cost of AUD 6.20 per pound of payable copper sold, within the guidance range of 2026. Adjusting for sales timing, the all-in sustaining cost on a produced basis was AUD 5.65 per pound, which better reflects our underlying cost performance and ongoing cost reduction initiatives. Overall, we're on track to deliver the 2026 production and cost guidance. As mentioned last quarter to you'll start to hear us referring to copper equivalents more frequently. This number has become more relevant as we increase Nugent mining, which has higher gold and silver grades.
During the March quarter, we delivered 872 ounces of gold and over 24,000 ounces of silver, bringing our copper equivalent produced tons to 3,671. Mining is advancing through the interpreted pinch zone. Both stope volumes and grades are showing improvements. Ore mined was stable above 400,000 tons, making March the second consecutive quarter at a 1.6 million tons per annum run rate. We'll have the third production driller arriving during the June quarter, enabling the next planned increase in run rate to 1.7 million-1.8 million tons by the end of the June quarter. This rig is part of the program to insource our production drilling, which is expected to reduce our ongoing operating costs. Processing plant performance remains steady with our copper recovery at 95%. To date, we have not experienced any diesel supply constraint.
Being close to Adelaide and the port material reduces our supply chain risks, and our processing plant operates on grid power, also reducing our exposure to fuel costs, as well as giving us access to over 70% renewable energy. During the quarter, the first stage of the Emily Star exploration drive was completed, enabling shorter and more targeted holes to close out information gaps within the Emily Star mineralization. The 2026 diamond drill program at Emily Star commenced shortly after the quarter end on the 4th of April. We also commenced the development of the Kavanagh North exploration drive in preparation for the planned 2027 diamond drilling program. Both Emily Star and Kavanagh North form important parts of the pathway for Kanmantoo to become a 2 million ton+ operation. Underground diamond drilling continued to progress according to plan with over 17,000 meters completed by quarter end.
Underground diamond drilling at Nugent has intercepted copper-gold mineralization with core intercepts of 8.5 m at 3.28% copper and 5.8 m at 1.4% copper. We also received the assay results for the final two Emily Star drill holes from the 2025 drilling program, and these notable results were 7.25 m at 1.6% copper and 4.6 m at 1.57% copper. These results continue to demonstrate the continuity and grade of the Emily Star system. Surface drilling targeting the depth extension of the Kavanagh system is also progressing well, with over 1,400 m drilled during the quarter. On our broader tenement holding, we relinquished over 2,000 sq km of ground during the quarter, allowing us to focus on the high priority prospects within our portfolio. One such target is the Kanappa target, located approximately 50 km northeast of Kanmantoo.
Last week, we defined a Kanappa exploration target and received regulatory approval to commence drilling. I'll now pass on to Luke to discuss the financials.
Thanks, Bob, and good morning, everyone. I'll now walk you through the financial performance for the March quarter. All amounts I refer to are in Australian dollars and all unit cost metrics are calculated on a copper payable pound sold basis unless otherwise stated. As Bob has mentioned, the March quarter marked a strong start to the year and reflects several ongoing activities to improve the mine and its financial performance. The headline results include record underground quarterly copper production of 3,120 tons was achieved at an all-in sustaining cost of AUD 6.20 per pound, within the upper end of the 2026 guidance range of AUD 5.75-AUD 6.25. 2,842 tons of copper payable was sold at an average realized price of AUD 16,629 per ton.
Also, Kanmantoo generated AUD 14.6 million of operating mine cash flow, contributing to net group cash flow of AUD 4.8 million for a cash balance of AUD 25.2 million at quarter end.
Before turning to the detail, I would note that with the reclassification of Hillgrove to a producing entity by the ASX, we are no longer required to produce an Appendix 5B and have included a full cash flow table in the quarterly for the first time. Revenue increased 5% for the quarter to AUD 53.8 million, reflecting higher copper and by-product pricing. This was also achieved despite an increase in concentrate inventory to 1,105 tons due to the timing of concentrate sales. Operating costs increased by 2% quarter-over-quarter to AUD 39.3 million, reflecting higher fuel and transport costs, and with Nugent now classified as an operating asset with more costs to expend. The operation spent AUD 2.3 million on major growth capital, with AUD 1.4 million spent on Emily Star and AUD 600,000 on Kavanagh Drilling to identify the fifth swell zone.
Overall, mine operating cash flow for the quarter increased 16% to AUD 14.6 million to generate total group net cash flow of AUD 4.8 million. This has seen the company's cash balance increase to AUD 25.2 million at 31 March, with a trade and other receivable balance of AUD 6.5 million and unsold concentrate of AUD 4.3 million. The copper market remains strong despite some volatility due to the current geopolitical situation. Copper prices have continued to increase this year, closing at $12,160 per ton at 31 March. The increasing price levels have been driven by some important short-term developments, including supply disruptions at several major mines and a buildup of U.S. copper inventories due to tariff uncertainty. They have also been underpinned by some underlying factors, such as challenges in developing new copper mines and the anticipation of strong demand growth from electrification and artificial intelligence.
These dynamics contribute towards a structurally tighter market for copper concentrate and Hillgrove is well positioned to benefit from the current market environment as we grow production. Higher copper prices saw the average realized price for copper sold during the quarter of $16,629 per ton, which included delivery into a number of lower priced hedges. On hedging, the company closed out 1,650 tons of copper hedges at an average price of $14,390 per ton during the quarter. As the hedge price was below prevailing spot prices, these settlements tempered the revenue benefit from the stronger copper market. At 31 March, the company had 2,200 tons of copper hedges outstanding at a weighted average price of $14,559 per ton, which is scheduled for delivery from April 26 to September 26. No new hedges were entered into during the quarter. Now moving to costs.
All-in sustaining costs for the quarter decreased slightly to AUD 6.20 per pound compared to the December quarter. The unit all-in sustaining cost base was skewed by concentrate shipment timing, as tons of payable copper sold were lower than the December quarter. All-in sustaining cost on a payable copper produced base was AUD 5.65, which is more reflective of the cost reduction initiatives realized despite increasing fuel and transport costs. Unit mining costs increased to AUD 4.16 per pound of payable copper sold, driven by lower payable copper sales and a higher proportion of operating development at Nugent ahead of the planned production ramp up and some impact from higher fuel costs. Higher diesel prices have not had a material impact on site operations as diesel only accounts for around 3% of operating costs, given our relatively short underground mine hauls and the processing plant operating on grid power.
We have, however, experienced some concentrate transport costs increasing in line with broader fuel pricing environment. On the corporate front, a binding tailings processing agreement was executed with Heavy Minerals for the extraction and sale of garnet from the Kanmantoo process tailings and tailings storage facility. An initial payment of AUD 50,000 was received at the signing of the agreement. If Heavy are successful in their project to extract garnet, the agreement will see Hillgrove benefit from an ongoing royalty stream.
The transfer of our standing rehabilitation liabilities to Heavy upon the closure of the mine. In summary, a good quarter. Record copper production. An increase in cash balance of AUD 25 million from strong cash flow generation. Costs within guidance, and on track to continue to grow the operation. I'll now pass back to Jane for any questions.
Thank you, Luke. We're now open to questions from our analysts. If you wish to ask a question, please press the raise hand button and wait for your name to be announced. If you wish to cancel your request, please press the hand button again to cancel. First question comes from Carlos. Carlos, please unmute and go ahead. Carlos, you've raised your hand, please unmute to go ahead and proceed with asking a question. Or we'll come back to you later. Again, as a reminder, if you wish to ask a question, please press the raise hand button and wait for your name to be announced. If you wish to cancel, please press the hand button again to cancel. Our second question come from Chris. Chris, please unmute and go ahead.
Thanks, Jane. Can you hear me, guys?
Yeah, we can, Chris. It's Bob speaking.
Great. Thanks. Nice quarter, guys. Well done on that. Just a couple of questions from me. Can you talk through a little bit more where you're at in terms of the pinch-and-swell zone, the understanding there, and perhaps what we should be thinking about in terms of grade over the next quarter or two, please?
Yeah, no worries. Thanks, Chris. We are working through it. As we said last quarter, it will be the first two quarters of this year. We are starting to see the grades lift and the zones getting wider as we actually develop down through it. We're pretty comfortable that the second half of the year, as we talked about earlier in the year, will be better. The grades this quarter will be commensurate with what we got last quarter, and then they'll start lifting again in the third quarter. Our tonnages will go and will start to lift, though. This third production drill rig will give us the ability to start boring and firing stopes up to that 1.7 million-1.8 million ton rate. We should start to see our production rate lift. That production drill rig is due in the next couple of weeks.
Okay. Thanks for that. That's helpful. A second question, and I note the comments on the diesel supply. That's really helpful. Certainly doesn't look like a major cost risk, but are you able to elaborate at all on the supply side from the sound of it? It sounds like you're good in the shorter term. Do you have any visibility beyond that sort of availability from suppliers and things like that? I appreciate that might be a bit tricky to answer, but appreciate any thoughts you might have on that at the moment.
Yeah, I'll answer a question you didn't ask. Fuel is around about 3%, Luke, of our total costs, 2.5%-3%. It's not a big percentage, but it is a percentage that we keep an eye on. We're sort of focused on the delivery on a daily and a weekly to make sure that our supplies on site don't diminish. We haven't seen any constraint to the delivery to date. It seems from Luke, the supply seems to be constant coming into Adelaide. Up till now, it's been okay. We do have and we do get updates from SACOME, which is our industry body here in the government, on a weekly basis. On site, they track it on a daily and a weekly basis of deliveries. We're very focused on it, but we haven't seen any issues to date.
Great. Thanks very much, Bob. That's all from me. Thanks.
No worries. Carlos, can you go off mute yet?
Yeah. Thanks, Bob. Sorry about that. Look, just a brief question on Emily Star. Can you just elaborate a bit more on timing and, yeah, there's a reference to considering two options for a portal at surface as well, in addition to the underground access.
Yeah.
Are you obviously trying to finalize that before June or what's the timing for that and can you just give us a bit more color on that comment, please?
Yep. No problems, Carlos. We've finished the first stage of the drilling. Sorry, the first stage of the development. We've started diamond drilling of that upper section. That's commenced. We've actually started assessing multiple decline/portal accesses to get a surface access into Kanmantoo and to Nugent. It will give us access to Emily Star as well. We're just assessing that at the moment because we're doing studies on the geotech regimes and the best location from a closeness to the plant. We are doing those now in preparation for decision still in the third quarter, so post-June this year. We will have the drilling completed. We will have the data ready to make a decision, an FID decision, for Emily Star towards the end of this quarter, beginning of next quarter. That's what our plan has been.
The reason for the two locations is we've got two locations that from our initial assessment came out as being potentially acceptable. We're just doing further assessments from a geotech and a track route/TKM perspective. We're just doing those assessments now in preparation.
Yeah. Thanks, Bob.
Anything else?
No, that's it from me. Cheers.
Thank you, Carlos. Next question coming from Paul. Paul, please unmute and go ahead.
Paul, can you hear me? Can you go off mute?
No. We'll come back to Paul in a minute. Again, if you wish to ask a question, please press the Raise Hand button and wait for your name to be announced. If you wish to cancel your request, please press the Hand button again to cancel.
Paul, did I hear you come online?
Yeah. Hi, guys. Sorry. I got a phone call, which kicked me off this conference call just as you asked me the question. Just to follow up Carlos's question on Emily Star, and we're just, I guess, unpacking that a little bit more over the medium-term, can we expect that to operate in parallel to existing ore feed or sequentially so you'll move on to this mining area exclusively over the medium term?
The idea, Paul, is that we use Emily Star to supplement the feed from Kavanagh and Nugent. That's how we go above that 2 million ton per annum rate. In Kavanagh North, I would expect the same. The diamond drilling is showing that the Kavanagh system continues to go down at depth. I'm not expecting that to stop anytime soon. The drilling into that fifth ore zone has started to hit mineralization. We haven't got any assays back yet, but as soon as we do, we'll get it out. These additional ore zones will supplement the current. It won't replace it. I guess what I'm trying to say is this helps us go above that 2 million ton rate.
Yep. In terms of paying for it, would I be right to assume that the CapEx guidance you've provided is for the ongoing studies of these only? If and when the time arrives to properly commit, you'll disclose an incremental level of expansionary capital to bring them online?
Correct. What we said earlier was that the major capital that we put in there was just to get to FID for Emily Star.
Yep
As well as some other minor, major capital. Once we make that decision, then we'll come out and say how much it was. If you remember back last year, we delivered Nugent production for AUD 21 million. We said we estimated that Emily Star would be in that AUD 23 million-AUD 25 million. We don't know what that is yet, but that's the sort of range of numbers that we're thinking about for Emily Star to come online.
Great. Just a couple of other ones. Just to clarify the costs, and I think everyone's sort of quite focused on diesel, but Luke, did I hear you say it was 3% of the mining cost? Bob, you said it was 3% of the total cost. Can I just clarify which one of those it is? Is that 3% at AUD 1 a liter where it was four months ago? Or is it 3% at, I don't know, probably AUD 2 and change you're paying now?
Yeah, it's 3% of our total cost. It's reflective of the increase, but not over a full period. Fair to say, we could see that sort of percentage increase a bit more if the price stays where it is, over a consistent basis.
If you'd asked me.
Yeah.
In January, Paul, what it was, I would've been saying 2%-2.5%, so.
Yep.
Yeah. I thought I read yesterday that Rio bought diesel last year for AUD 0.80 a liter, which is quite remarkable. Anyway, all right. We clarified that. Just one last question, if I may. Just on the deal around the garnet. It does seem at the margin, but maybe there's some benefits there around rehab and your obligations at the end of the mine life. Can you just expand a little bit more on, Luke, the comments you made about perhaps some of that obligation being passed on to the other party? Just in practical terms, what does that all mean?
Yeah, look, for us, there's obviously a bit more work that they need to do, to get the project up and going. For us, it just gives us a bit of a revenue stream. As you rightly point out, importantly, it would allow us to hand over our rehab liabilities when we close the mine. It would provide a long-term future for the Kanmantoo operation beyond our activities. Yeah, they're the main benefits.
I guess from my perspective, Paul, there's the royalty through our operation, which is, it's not significant. It's a small amount, but it's nice. It's not our main game in town. Our main game is copper and copper production at Kanmantoo. But that ability to hand over the lease for a couple of reasons. One is long-term economic benefit to the community. It's demonstrating that a mine can have a life after what was originally thought the primary reason for it to be there. It does actually give the rehab liability to Heavy Minerals, because they will be operating the mine through their life of whatever they manage to get their life to be.
As Luke said, there's still some way to go for them to get into production, but it's a nice sort of way to look at how mining can actually help the community, help the environment, and work together to get a better outcome for the long term.
Yep. Just to follow up, did I hear or read correctly that via them reprocessing some tails, it will sort of create some incremental capacity for you guys, so potentially negate some of the need for future TSF lifts?
I'll answer it, but I might not answer it. If I don't answer it, tell me and I'll try and answer it. Our tailings stream has 30% of garnet in it. They aren't taking all of that out of our tailings stream. They're taking somewhere around 5%-10% of the garnet out of our tailings stream. That will obviously be a reduction in our deposition on the TSF or tailings storage facility. It changes over time depending on how much they draw of our tailings stream and how much they actually recover. It does have some beneficial benefits to us. I wouldn't call them material at this stage, but it does have a little bit.
Understood. Okay. Thank you.
Thank you. Again, if you wish to ask a question, please press the Raise Hand button and wait for your name to be announced. If you wish to cancel your request, please press the Hand button again to cancel. There are no further questions at this time. I will now hand back to Mr. Fulker for closing remarks.
Thanks, Jane. In closing, the March quarter was a strong start to the year, with consistent operating performance and an improved balance sheet. We remain focused on creating shareholder value through safe and cost discipline operations, continuing the production profile ramp-up and advancing Emily Star as a potential third ore source. Finally, investing our capital prudently. We are on track to increase the mine run rate to a 1.7 million-1.8 million ton per annum by the end of June, and to deliver the 2026 production and cost guidance. Our next goal is to develop a pathway to beyond two million tons per annum. That concludes our webinar today, and I'd like to thank everybody for listening in, and you may now disconnect. Thank you, everyone.