Everyone, and thank you for joining us for the Pantoro Gold Quarterly Webinar Update. Today's webinar will be presented by Pantoro Gold Managing Director, Paul Cmrlec, who will provide an update on operations at the Norseman Gold Project following the release of the company's December 2025 Quarterly Activities Report. Please feel free to submit your questions throughout today's webinar using the Q&A function located at the bottom of your screen. At the end of Paul's presentation, time permitting, he will address as many of your questions as possible, and where appropriate, we will group similar questions together. Before we get things started, I would like to remind you that today's webinar is being recorded. Paul, over to you.
Thanks very much, Sam, and thanks to everyone for joining us this morning and Happy New Year to all of our shareholders. So having a look at the December quarter, I think the key takeaway from the quarter is the strong cash flow that Pantoro is generating. You can see there, AUD 84 million of EBITDA and a AUD 35 million increase in our cash and gold quarter on quarter. So while our production was slightly below the expected 25,000 ounce run rate for the last quarter, our focus remains on that very strong cash flow and just ensuring that we generate as much money as we can during these very buoyant times in the gold market. So I think on the back of that, we are continuing to build flexibility for our production with Scotia.
In particular, you'll see through this presentation that we have additional areas continuing to come online down there at Scotia. And so as those things come into full production, we will see a substantial lift out of that mine. The OK Mine, we are continuing to develop the O2 and the Star of Erin lodes as we have been since the commencement of operations. We've also started development on the Main Lode, which is the area that was mined historically from the 1930s until the early 1980s. So we'll talk a little bit about that. Princess Royal open pit has gone reasonably well. We did have some minor geotechnical issues in there through the quarter, but that pit is still expected to be completed at the end of January at this stage. And we have started open pit mining at Gladstone.
So there's a lot going on, as always, within the production areas in Norseman. We have seven drill rigs turning across the site still. That will be eight in the near term. So by the end of this quarter, we expect the eighth drill rig, which will be another underground diamond drill rig, to be delivered to site and to be working. That drilling has produced some fantastic results through the quarter, both in the Mainfield and also in some satellite surface areas that we'll talk about. And we've reiterated that production guidance. We expect to be at the lower end of that 100,000-110,000 ounce guidance. So obviously, the last two quarters, we have had slightly less production than we expected for the first half of the year, but I think we're still in pretty good shape overall.
Again, I think the focus on that cash flow. You can see it All-in Sustaining Costs relative to the majority of our peers and peers with much larger productions that are mining in similar environments underground. I think our All-in Sustaining Cost is very competitive on that front. That cash flow generation, given that we are spending a large amount of money on both exploration and major project capital, I think it's been a great result for the company. In terms of safety, we did have some fairly minor restricted work injuries, unfortunately, during the quarter. As I say, they were minor. As a positive, we had no lost-time injuries right throughout the period. Great to see that safety metric continuing to improve.
On the community front, I think Pantoro has always been very active in the community, and we continue to be focused on our education support, both within the Norseman town at a school level and within the universities for new professionals coming into the industry, and great to see there too that we've been able to provide physical help with some bushfire emergencies and other issues around the Norseman community, so in terms of the operation summary, you can see it there. Production from underground, while the tonnage was down slightly, we have had a real focus on getting that grade up at Scotia. We expect that to continue to improve as we go into the northern areas of the mine, so our produced ounces for the quarter have increased. The Slippers' open pit, as I said, progressed well through the quarter. That'll be finished at the end of January.
And that production will really come in from the Gladstone mine towards the end of this quarter. And that Gladstone mine really gives us and just over a year of feed at the moment. Again, you'll see through this presentation that there's some real opportunity for that to increase further. But I think the real positive here is that we have really improved those C1 Cash Costs. We've improved the All-in Sustaining Costs. And as we increase that production moving forward, those two metrics will continue to come down. And they'll continue to be a focus for us. That overall cash flow from the operation in this environment is really critical, I think. So in terms of the Scotia mine, some really positive things came out of it in this last quarter.
We put a release out right at the start of December showing that our drilling in the southern and central parts of the mine are demonstrating that we still have gold well below our current production plans. We have additional drilling in that southern area planned from underground. Now you can see the decline that sits out there and allows us to do that. So we finished the surface drilling component on the south there at Scotia, but we will get in from underground now, drill that out, and expect to continue that development on in the southern part of the mine as well. We've had some good areas, sorry, adjacent to historical mining areas come up really well with drilling. And I'll show you the diagram on that from the announcement shortly.
That, again, is material that was outside of that original mine plan and just gives us that additional flexibility as we head into the second half of the year. And you can see where the decline has progressed to on the northern deeps area of the mine. So we will be developing ore and starting production from that area this quarter. So first of all, those extensions at depth. Obviously, the drilling from surface, we don't have a huge drill density in there at the moment, but you can see from the areas out in the south, well and truly below previously modeled ore, we're seeing some reasonable widths at very, very good grades. So similar to what we've seen across the mine. And we see that right through that south and central area.
And this is very hard to show in a plan view overall, but you can see on the inset diagram there the areas near the historical workings that are basically beyond the end of the development drives that were developed during the 1980s and 1990s. Some very, very strong widths at big grades right through there. Development into those areas over four levels has commenced now. So that's a fairly solid block of ore that will come online in the near term. The OK underground mine, we're continuing with the transition to getting the O2 lode that you see here to be an end-on access. So we are continuing to scope the areas that are fully developed while we get that transition in place. That transition isn't too far away now. I think a big positive from my perspective is the Main Lode here.
As I said at the beginning of the presentation, the Main Lode was the main area of handheld mining historically from the 1930s up until 1980. The deepest level there is on the 230 RL. The first level that we're developing on the Main Lode down at depth is at the 580 RL. You can see there that we have roughly 350 meters between what we're developing now and what was mined in the past. The really exciting thing about that is there's virtually no data in that area at all. There are a couple of holes that weren't drilled for the Main Lode that have gone through it and demonstrated the mineralization is there, but we'll have targeted drill programs going into there through the next year.
It looks very positive for the Main Lode to become a major production area as well as the O2 and the Star of Erin lodes, which are continuing to be progressed down at depth. The Princess Royal open pit, as you can see, we mined about 100,000 tonnes. That's between Slippers and Desirables over the quarter. We still have about 50,000 tonnes at a higher grade in the bottom of that Slippers pit to be mined this month and perhaps very early in February. That 4,000 ounces represents about a third of the ounces out of that open pit, which is unfortunately the characteristic of these smaller open pit opportunities. It's a great injection into those additional ounces as we come into this quarter.
We still also have about 50,000 tonnes of material stockpiled from the Desirables open pit, which will contribute to that feed over the next few months while we get the Gladstone open pit up and running. I think the last point on here that I want to talk about is our extensional drilling beneath the Slippers open pit and then further north up towards North Royal is continuing to look positive. We have some great visual returns from there. And I expect in the not too distant future, we'll have some results out of there. They're very much focused at the moment under this Slippers area and really looking to open the next underground mining opportunity at Slippers. So I think that there's a real chance that that becomes a reality over the next 12 months.
And following development of the Mainfield, which I'll talk about soon, that this Princess Royal position becomes another underground feed source in the next 12 to 18 months. The Gladstone open pit sits just eight kilometers east of the processing plant. So about the same distance as those Slippers open pits are from the processing plant. You can see that there's been some pits mined there historically. Stages one and two of the open pit is what we're heading into now and mining good grades, just under three grams a tonne. That will see us operating for about fifteen months overall. What I should flag there is there is drilling ongoing to the north. There are additional stages in that open pit, a stage three and a stage four.
We're currently grade control drilling to add a stage three there, which would effectively double the life of the open pit mining out at Gladstone. And I'll talk in the exploration area about the Daisy South area, which, so you can see the Daisy open pit that was mined here historically. We have some very good returns out of Daisy South. We have a mineral resource there, and we're currently doing some mine planning. So while we have about 15 months right now in Gladstone, we expect that to increase substantially as we move forward. So Daisy South, the infill drilling that we've completed, you can see the announcement that I referred to at the bottom of the page is some really good widths, some really good grades.
In that infill drilling through the area that you can see is pretty substantially drilled already, and we already have 20,000 ounces in a resource there. Extensional drilling, again, shown in that announcement with some sections about 80 meters to the west of that Daisy prospect. The initial holes that have gone through that zone have returned some really good widths and grades, and that is being followed up. So we don't have any resource on that at this stage. We have very few holes through it, but for a starting exploration, it's a really exciting prospect for us. So we will continue to advance that through the quarter. Moving into the Mainfield now. So we've talked a lot about the Mainfield, and previous presentations have shown the Mainfield in three dimensions. There's lots going on there, and our quarterly report shows that as well.
But I just really want to focus on this Crown South area and also the O'Briens' lode, which sits inbound of Crown South here. O'Briens has an existing resource of 40,000 ounces. Drilling that has basically gone through O'Briens to drill Crown South has continued to add some substantial intercepts into that O'Briens lode. They are approximately 200 meters to the north of the existing resource at O'Briens. So there's some really big expansion potential there, which drilling will focus on over the coming quarter to try and really expand that O'Briens panel from where it is now. The Crown South panel has been a great success. So you can see there's a very small amount of stoping historically. We've drilled about 200 meters of strike now, lots and lots of visible gold, some good widths with really high grades that Norseman's renowned for.
We'll continue to drill those up dip and down dip. But for now, we're very confident in both O'Briens and Crown being positive contributors to production in the very near term. So we are working up the planning for our next underground production centre out of these two lodes right now. I expect that over the next couple of months, we'll have some mine planning information and additional results out on this package and focused on starting development and then production out of this area as soon as we possibly can. So I don't think those announcements are too far away. So I think that really covers the bulk of what's going on at Norseman for the moment. We're in a great position of generating strong cash. And as I say, that will continue to be a real focus for us.
We've said consistently that we are aiming to get that AUD 250 million plus before we look at distributing some of that cash. We want to make sure that we're very well equipped for these additional underground mines that we have a real line of sight on now to bring that production up. But as we grow that cash, I think there will be movement in terms of how we distribute some of that. We have additional open pit feed coming from Gladstone from the end of the quarter, and we think we've got some great addition to that at both Daisy South and in additional stages from the Gladstone open pit.
Of course, while we're doing all of that, our focus will remain on getting those additional underground mines up, lifting that overall feed grade to somewhere between five and seven grams a tonne through our process plant and getting ourselves to that 200,000 ounce run rate that has been our stated aspirational target over the past year. I hope that's covered the majority of what people were hoping to see out of our quarterly report today. Sam, back to you. Very happy to take any questions. Thanks, Paul. We've had quite a number of questions come in throughout your presentation, so we will endeavor to get through as many as we can during the time we've got assigned for this webinar. The first one is around capital allocation. Is the company considering a dividend in the next 12 months? If not, when?
Look, it's most likely, as I've said pretty consistently, that the first phase of distribution will more likely take the form of a buyback. The reason for that is that the company had a large balance of usable tax credits, both when we picked the company up and on the back of developing Norseman. So we expect those tax credits to be exhausted at the end of this financial year. The year after that, effectively, we'll be paying cash and generating franking credits. When we can pay franked dividends, we will look at the possibility of switching between a buyback scenario and dividends. And I think which way you go there is very dependent on pricing of the company's shares and where we see the value in the market. Obviously, if the value is looking good, a dividend makes sense.
If the company's looking cheap, buybacks make sense, so we'll continue to monitor that.
Thanks, Paul. The next one's around exploration. How is exploration of the salt lakes proceeding?
Look, we've done the geophysical surveys or the bulk of the geophysical surveys across the salt lakes. We haven't commenced that drilling as yet. We're continuing to work through the access on those areas and expect the first phase of drilling to happen before winter. The geophysical surveys, I haven't seen the results of those yet, but they are getting close to completed. Noted. In the last quarter, the OK underperformed. It was expected to pick back up to eight-10,000 ounces, but it did not. Is this trend going to continue? Look, that's a good question. OK, as you can see, we're transitioning to the extremities of the ore body. We have started developing the Main Lode as well.
It's really about getting that flexibility in front of us there where we're making some changes to the way that we're developing there as well, which we expect to see resulting in that production picking up as we go forward. We'd expect to be between that seven and 9,000 ounces in this coming quarter, just based on where things are at right now, and then ultimately picking up to that 9 to 11 again, up around that 40,000 ounces as we have that access fully established and the other changes that we're implementing being in place.
Mr. John, on underground ore, can you detail why underground ore mine in the quarter was down 17% from the prior quarter?
As I said through the presentation, the ore out of Scotia in particular was a little bit lower. There was a move previously to mine a whole lot of lower-grade material that it didn't make a lot of sense to be spending that time on and going forward on. And so that focus on quality has driven a larger ounce production out of Scotia. The ounces that we produce and therefore the cash that we produce is much more important than the tons that comes out of there. As we continue to develop further in Scotia through those northern areas, we will have more production areas online, and that production will continue to pick up from both a tonnage and an ounce perspective. But overall, it's not a massive change in terms of the tonnage that we mine between quarters, but the quality has picked up.
Following questions around the mill. Why did the mill only process 269,000 tons this quarter? Any reason why it didn't process 300 if you had stockpiles?
So look, obviously, a lot of that stockpile that we've got is oxide material from Desirables and Slippers for most of the quarter. So Slippers is mining in fresh rock now and rolling through. But the stockpile out of Desirables is a pretty big oxide component, and that is more difficult for us to get through the process plant. We've reported on that previously in the optimization work that we've done to get that material through the plant. So again, we'll continue to see that improve. I think the viscosity work that we've done in dealing with that oxide has really advanced over this last quarter as well. So again, we should see that overall tonnage picking up and being back towards the 300,000 tonnes for a quarter.
But real driver is that oxide material into the plant that we haven't had to deal with until the last q uarter and a half. And I think we've got that in a good position now.
Next one's on Scotia. Scotia underground also produced less ore than the September quarter. The grade improved, but only by 0.7 grams per tonne. Will we see a dramatic uplift in the March quarter?
Look, I don't think you see a dramatic uplift. It's rare that in an underground setting, things that are being developed and progressed have a massive jump. But I think you will see an ongoing improvement out of Scotia, both on the grade and the tonnage front. The northern side of the mine is a higher grade in terms of the resource than the central and south. We have some big zones there that will continue to come on through the quarter. No, you won't see a dramatic increase, but I think you will see an increase.
What is the timeframe for the company to hit the proposed 200,000 ounce per annum production?
Look, it's really about bringing those additional underground mines on. I think we've always stated that we're aiming for FY27 to be stepping up and then FY28 to be hitting that 200,000 ounce run rate. That hasn't changed from where we were previously. You can see that we've got very well advanced on an additional production centre out of the Mainfield. I think there's real potential that that becomes more than just one decline pretty quickly in other areas that I haven't talked about today, but that we are advancing and will report on as we get those drill results.
And the drilling that I've outlined down out of Princess Royal is also looking very positive for that additional underground mine. So nothing's changed in our strategy overall. I think that everything's progressing well with that exploration and delineation. But these things take time and effort to get them ready for mining and to be progressing. So the plan, as it was six months ago, is the plan now.
Regarding Gladstone, why is it only going to provide one year of base load? Or you mentioned potential upside to the production. Can you elaborate?
W e have currently approved stages one and two, which gives us that 15 months, as I said. As I said through the presentation, we're currently infill drilling all of stage three of that open pit. And like I say, there's also a stage four.
So the stage three would effectively double that timeframe, and bringing Daisy in will add a substantial amount of time there as well. So once again, nothing has changed there overall. It's just what we have approved for investment and production right now is those stages one and two, with stage three being drilled out to increase that confidence. On capital allocations, a question around why wait until you get AUD 250 million of cash to implement a buyback, considering your line of sight into free cash flow over the next six months? Look, that's been our stated strategy for, once again, for several quarters now. And I've explained it in each quarter that you can see that we have a number of additional underground mines to develop.
We have a large exploration program going that, in a best-case scenario, we discover another very large ore body that needs a really big drilling effort. And we just want to ensure that we are in a good position to fully fund those developments and anything larger that comes along that we don't need to go back to the market. And that timing, as you can see from the cash flow that we're generating now and with an ever-increasing gold price, I don't think that that mark is too far away. So it's prudent for us to manage the company such that we can fund everything that we need to going forward. And from there, we will implement that strategy that we've talked about for some time.
Looking to second-half guidance, Paul, can you please split up the different ore sources that will make up the nameplate levels of the mill?
Sure. So look, Scotia is the biggest driver there, followed by OK. So between the two of those sources, we see about two-thirds of that gold coming out over the coming period. The remainder is coming from, obviously, in this first month, we have about 4,000 ounces coming out of Slippers before we head into Gladstone. And then the remainder will be from some fairly minor stockpiles that we have there going forward. There will be a small production out of the Mainfield as we continue with our exploration work there. We are developing some small areas of ore there as well. But that won't be huge.
Thanks, Paul. That's all we have in terms of questions. I'll just pass back to you for any closing comments.
T hanks everyone for tuning in today. Like I've said, I think our focus on cash flow generation has put us in a really good position relative to the majority of our peers. So obviously, some of the bigger companies are generating a lot of cash. But I think relative to companies of a similar size for the production that we're pushing out, we're pushing out a lot of free cash flow. A lot of that is born from the fact that we didn't take a whole lot of debt. We didn't hedge. And we'll continue to manage our operations really focused on that cash flow as the number one requirement as we move forward.
And you'll see that as that production increases, as you saw between last quarter and this quarter, as that production increases, the cash flow really accelerates with the majority of our costs being essentially fixed. So thank you very much for your time. And look forward to catching up with a lot of you over the.