Thank you for standing by, and welcome to the Ramelius Resources Quarterly Teleconference. All participants are in listen only mode. There'll be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Mark Zeptner, Managing Director. Please go ahead.
Good morning, everyone. Thank you for taking the time to dial in this morning. With me, as usual, is Chief Financial Officer, Tim Manners. Following the standard course of events for these calls, I will run through the highlights from the quarter and make a few references to the actual quarterly report itself before passing over to Tim to discuss the numbers in a little more detail. After that, we'll open the line for questions. Although we, like others in the industry, have experienced ongoing COVID-related labor shortages for some time, it really became apparent for Ramelius during January and February this year, with a noticeable impact on the road haulage capacity feeding our Edna May Mill. This was the main driver for delivering a lower production figure of 58,602 ounces at an all-in sustaining cost of AUD 1,596 for the quarter.
Despite this, with the WA border reopening on the third of March, we are seeing significant improvements to road haulage tonnages to Edna May, with the month of March being up nearly 50% on the January and February average. This has meant all haulage performance above our planned levels for the first time this financial year. Perhaps more importantly is the fact that we do expect to do even better in Q4. In addition, it just so happened that both processing facilities had planned biannual shutdowns during March. It should allow us full milling capacity in quarter four, indeed for the next six months. As a result, we have maintained that the lower end of our original full year guidance will be achieved, and we are expecting to come in the upper end of our cost guidance, which is logical, I would have thought.
That is, we are now expecting 260-265 thousand ounces at an all-in sustaining cost of AUD 1,475-AUD 1,525. I reiterate that we are talking about original guidance here, announced last July, not a number that has been adjusted along the way. I would go as far to say that anyone who is achieving original guidance in the current environment is not doing too badly at all. The return to higher haul, haulage tonnes and overall gold production levels in March and then into Q4 is shown quite clearly in figures two and three of the report itself. We have had positive COVID-19 test cases, both on-site and off-site, but our processes have managed to keep the numbers to just a few here and there at any one time.
It is hard to measure the actual impact of these positive cases and the associated close contact quarantine requirements, but our best estimate is a slight impact to production and costs. While we have enjoyed increased numbers of road train drivers since the border reopened, there is no doubt that ongoing shortages pretty much across the board are affecting not only miners, but many industries across the state. Ultimately, this is unlikely to be resolved by Eastern State's labor alone. We will need access to overseas skilled labor to ease the widespread shortages in the market. On exploration, our exploration team continues to deliver some excellent results. While the section of the report is very comprehensive, it is worth highlighting some results from two of our projects, Bartus East at Mt Magnet and the Rebecca Gold Project.
At Bartus East, some deeper drilling has intersected some excellent high-grade results, such as 13 meters at eight grams per tonne, 11 meters at seven grams, 24 meters at six, and three meters at 10, as shown on figure 13 in the report. Bartus has similar geology to Eridanus, being only a few kilometers to the south. The potential for not only pit cutbacks on the shallower low-grade mineralization, but for an underground operation on these deeper, higher-grade areas is significant. More drilling needs to be carried out, but the feedstock of projects coming through at Mt Magnet is very healthy. Bartus is not included in our most recent mine plan, but we do look forward to its inclusion at a later date.
At Rebecca, we are in the early stages of a 75,000-meter drill program, but already we have some nice results coming through at the main Rebecca deposit itself. The eight meters at 8.6 grams per tonne is significant as it provides further evidence of continuity of the Jennifer footwall lode, which now has a number of high-grade results, but as yet is not included in the Rebecca resource or any of the previous pit optimizations. This, we believe, shows the exciting potential of this project to grow from its current resource base of 1.1 million ounces. Please refer to figure 18 to see what I'm talking about here. On the project development front, we have received approvals to commence the Orion pit at Mt Magnet, which is pretty much adjacent to Eridanus.
This pit, while relatively modest in size, will provide an important oxide component to the mill blend, enabling the Mt Magnet mill to increase throughput in coming quarters. Also at Mt Magnet, we have kicked off work at the Galaxy underground to re-enter the top section of the historic 450 decline, which will essentially be rehabbed as required on the way down to new take-off positions for access drives to be developed across to the Mars and Saturn ore bodies.
I have stated previously that given the nature of the BIF ore bodies at Mount Magnet, that we would expect extensions to these deposits. Recent drilling generally below the current mine design already points to this likelihood, especially the nine meters at 4.73 grams, some 110 meters below mine design at Mars, and 7.8 meters at six grams directly below the current Saturn mine design as depicted on figures 10 and 11 of the report. Last, but certainly not least, at Penny, after completing the pit cutback during the quarter, the first quarter blast was fired yesterday on schedule at this high-grade, low-cost project, which is a credit to the entire team, as it has been delivered on schedule, and I have included a rather speccy shot of the blast initiation on page nine.
The team won't be resting on their laurels, as high-grade ore will be hitting the Mount Magnet mill in the September quarter. With that, I'll now hand over to Tim.
Thanks, Mike. As you pointed out, the impact of labor shortages during the quarter did hit home quite hard in January and February, which led to the slight reduction in gold production to just above 58,600 ounces. Furthermore, the lower production translated directly to higher Q3 all-in sustaining costs, AUD 1,596 per ounce. In the quarterly report, as Mike noted, you will see that we provided additional information to support our Q4 forecast, which should see us complete FY 2022 in line with the bottom end of our original guidance, at 260,000-265,000 ounces. Our costs have not escaped the impact of these labor shortages or indeed other COVID-related consequences. Our all-in sustaining costs are likely to finish the year somewhere between AUD 1,475 and AUD 1,525 per ounce.
Despite being higher than we would like, these costs still compare favorably to our peers, which is a trend we strive to continue as we focus on maintaining and improving our margins where we can. Although sales were lower than production this quarter, this is simply a timing difference between the production and sales of gold poured in the last week of March. We would expect this to reverse in the current quarter, leading into 30 June, 2022. The average price received continues to increase with a lift this quarter to AUD 2,405 per ounce. This reflects both the runoff of lower price forward contracts and a slightly higher spot price environment.
From a cash flow perspective, the operations added AUD 13.2 million in underlying cash flow, which is after the impact of approximately AUD 12 million in sustaining and project CapEx and AUD 7 million in exploration. Closing cash and gold balance of AUD 164.7 million was also after the final payments for the Apollo acquisition of AUD 3.8 million and additional AUD 9.2 million in income tax installments. While there was no material change to the liquidity of RMS during the quarter, we remain a well-funded organization with significant balance sheet capacity that can generate positive underlying cash flow, even in tough quarters like the one we just experienced. In addition to our existing financial reserves, we took the opportunity at the end of March to add further financial optionality by finalizing AUD 100 million corporate revolving syndicated debt facility.
At this stage, the facility remains undrawn, but it is now in place for potential use to support either a corporate transaction or to provide additional capacity for existing project development opportunities. Lastly, just a quick update on the hedge book. During the quarter, we delivered into 45,500 ounces at an average price of $2,373 and added 35,000 ounces at an average price of $2,660 an ounce. The hedge book at the end of March was 208,000 ounces at an average price of $2,470 per ounce. Thank you all for your time, and I'll now hand back to the moderator to open the line for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask the question. Your first question comes from Alex Barclay with RBC. Please go ahead.
Hi, Mike and Tim. Correct me if I'm wrong, but I think I heard you say haulage labor is not likely to be quickly resolved, with operators coming over from the eastern states anytime soon. With the higher planned haulage tons in the next few quarters, do you see any risk to that plan?
Thanks, Alex. It's Mark. Well, maybe you misheard me. I think since the borders reopened, we've seen a step change, and you see that quite clearly in the additional graphs that we put in the quarterly. March is up almost 50% compared to the average of January and February, and we would expect that to continue. In fact, we're actually forecasting better again. We've noticed quite an increase in access to eastern states' road train drivers. I think I was making more of a reference to shortages in the industry in general. That's not gonna be resolved quickly, but we've actually had a nice step change increase in our road train drivers. Apologies if I didn't make that clear.
Okay. No, that's okay. That's quite helpful. Just sort of a background question on Edna May with the original purchase price from Evolution. How are you tracking versus that 200,000 ounce production figure? If you don't expect contingent payments to reach AUD 50 million without project or the stage three cutback approval, is that gonna feed into your decision whether to go ahead?
Alex Barkley, Tim Manners here, I can sort of chip in there. Look, if we don't ultimately produce the quantum that fulfills the full AUD 90 million, then, you know, we're obviously not obliged to pay that difference. Stage 3 would certainly see, based on the scoping study that we released, we'd see the full AUD 90 million paid across to Evolution over time. Look, the royalty component of the acquisition clearly does have an influence through the whole financial decision-making process for stage three. I think in the scheme of things, you know, we're gonna be sort of influenced probably more so by gold price and mining costs than sort of a trailing royalty back to back to Evolution.
Okay. Sorry, if Stage 3 wasn't approved, what sort of fraction of the contingent payment would likely be paid?
We've paid obviously the AUD 40, and we've paid approximately, I think the number's about AUD 18 million through the 50. We would anticipate current mine plan with excluding stage three, probably another five-10 being paid. Then with stage 3 coming on, the balance would kick in.
To be clear, Alex, we're well in excess of the 200,000 ounce hurdle. We've already started paying AUD 100 an ounce on our underground production. We see that underground going for some considerable time. Without a stage 3, ultimately, you would get there one day. It'll take you obviously a fair bit of additional production to get there. We're up to, what, 40, so 58 of the 90 as it stands today, approximately.
Okay. That's quite helpful. Thanks very much, guys. That's all from me.
The next question comes from Andrew Hines with Shaw and Partners. Please go ahead.
Yeah. Hi. Thanks, guys. Yeah, look, well done getting through what's obviously been a very tough period, and thanks for those charts and the quarterly helping understand, you know, that step up from February to March on the haulage. It's useful color. Just a couple of questions just in terms of some of the exploration and a new resource, just to get some sort of sense of the materiality of these. So you've made some comments that the Orion pit will gain some oxide material and that will then come into the Mt Magnet mill. Can you just sort of give me some sort of metrics around what that actually means? You know, how--i s it a change in grade? How much throughput?
What percentage of fee comes from Orion? Then secondly, the Bartus East prospect, obviously, you're going through all the work at the moment sort of defining what that actually looks like. But again, in terms of materiality, just to give us a bit of a sense of how big that is. You know, can you give any sort of reasonable range around the size of the potential resource there?
On Eridanus, Andrew, you might have noticed that our throughput at Mt Magnet quarter-over-quarter is down, and that's without having a decent oxide component and having purely a fresh rock feed. Let's say the grade is similar, but it'll be a tonnes gain. You know, we still say that the Mt Magnet mill is full, but the reality is when you've got an optimal blend, you can get more tonnes through. I would look back at previous quarters, and we'd revert back to that. I wouldn't wanna guess the number, but it's material in terms of additional tonnage that can go through that mill at a similar grade.
In terms of Bartus, it's the geos wouldn't want me to be guessing on resources and so I won't do that. There is some similarities with Eridanus, but it looks like there might even be some more higher grades. It might be a smaller pit, but have more potential from an underground point of view. Look, we probably need another three-six months of drilling to get close to a, you know, a resource on that. At the moment, we don't have anything on the books. The guys, because it's a stockwork with high-grade veins, it does need more drilling than just a simple geometry ore body. We'll prefer to do that before we start to make sort of any estimates on resource and grade, et cetera.
I knew that'd be your answer, Mike. Not getting on it. In terms of when you expect to report that, it won't be with the June/July, you know, resource numbers that you normally put out. It'll be sometime later in the year then?
Oh, look, I'll probably push the guys to have something in June/July. That
Okay.
Makes a lot of sense. We'll do what we can. It's just, you know, drilling results, modeling, et cetera, takes longer than it used to. Look, that'll be the aim, is to get it into our resource report for that point in time, middle of the year.
Okay, great. Thanks, guys.
The next question comes from Andrew Bowler with Macquarie. Please go ahead.
Yeah, gents, I had a lot of my questions answered there. I guess just on Penny West, I did jump on a little bit late. I heard you talking about it, maybe you mentioned it earlier. You talked about a release of a potential decline to that area for a bit of exploration. I'm assuming the plan is there sort of get stuck into Penny North and get producing before that all happens?
Yeah. Yes. Thanks, Andrew. Definitely. I just made mention that we'll put in a little takeoff not far down from the portal to give us access across to Penny West. We'll look at that probably in the next 12 months as to at what point we put in an exploration decline so that we can drill
That Penny West resource, which I got no doubt has got potential, underground potential there. You're right, we don't wanna be distracting, one bit from our Penny North production, which is definitely the focus. It'll just be a stub take off, and a bit of planning and preparation for that Penny West work.
Thanks. Also just on the timing of Penny, I mean, you sort of mentioned that it is on schedule for first or next quarter. Is there any sort of risk around a potential ramp up in terms of scoping, you know, staff shortages and that sort of stuff? I guess, you know, or before that is the jumbo development on track, I mean, obviously you've only just started there. Are you expecting any impacts from labor shortages there? Are you making it a priority and sort of manning up there first before anywhere else sort of?
Yeah, it is a priority. It's very important to the business going forward. We do have the benefit of having RUC Mining as our contractor. We also have them at Vivien and at Edna May. We can move some people around and ensure that our priority areas are looked after. I think we get a benefit from there, from the contractor. It's just relatively small number of people, 60-70. We also get a benefit from the contractor that we've chosen.
All right. That's all from me, James. Thanks.
Thanks, Andrew.
The next question comes from Stuart McKinnon with The West Australian. Please go ahead.
Well, good day, Mark and Tim. I just wanted to drill down a bit further, Mark, on your comments around foreign labor. I don't know how much thought you've given to it, but I'm just wondering, are you thinking more along the lines of like an expansion of the permanent skilled migration program? Or is it more sort of around temporary working visas? Or were you thinking that it'd be helpful for a reintroduction of something like the 457 visa system? I was just wondering, you know, how much thought you'd given to, you know, how we could get more foreign labor into the country to ease that labor shortage.
Yeah, I haven't given it a you know a detailed thought, but you know the 457 program was pretty effective. I do remember we had employees under that scheme. At the moment, we have a certain number of vacancies, and they fluctuate up and down, and I'm sure every other business has got the same thing. If they could be filled, and at the moment, you're not gonna get to zero. I don't think you're getting zero in most scenarios, but you've got no chance in the current environment. If you're able to fill them with overseas skilled labor, then we wouldn't be the only ones putting our hand up. I'm not sure exactly what the detail of the or the design of the program is, but I think you're not gonna.
It's not gonna solve itself. You probably heard that from a number of others.
Mark, is it just currently off the cards? Like, it's completely impossible to get foreign labor over and into working for the company. Is it almost mission impossible?
Well, not that, you know, we've looked into that detail. Look, I imagine given borders just opening up and people are just able, I think it's really been impossible to look at that closely. What we're allowed to do, we'll be exploring, I think, along with others now, going forward now that we've got, you know, borders and you're removing vaccination requirements, quarantine requirements, et cetera. It opens it up. We have to go back and have a look and see what ability we have there. Because at the moment, you know, it hasn't been looked at for two years, let's be honest.
Sure. Thanks, Mark. Appreciate it.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Larry Hill with AIMS Asset Management. Please go ahead.
Mark and Tim, thanks for sharing the quarterly with us. Just the timing of the debt facility and what that might mean for, you know, opportunities you're assessing and, you know, cash versus scrip offers and, yeah, whether you do use that debt as, are you thinking maybe ring-fencing that for some specific development opportunities for some drill out or for some more inorganic opportunities?
Larry, it's Tim here. Thanks for the question. I suppose fundamentally, we, you know, we have the philosophy, I suppose, of putting debt facilities in place when you don't necessarily need them. Banks tend to be a lot harder to extract funds from when things are tight. You put them in place when you don't necessarily need the funds. It's a two-year plus one term. For all intents and purposes, we can use it on whatever we like. There are obviously certain minor restrictions that apply to any facility of this type. At this stage, you know, we're really quite open to where it's used and where it's best used for the business. The flexibility is there for us. We don't and haven't yet assigned any sort of particular purpose for it.
I guess, as I say, the flexibility in potential uses remains. We'll see how the project development pipeline, particularly at Mt Magnet, develops with some of the recent exploration results, as Mark's pointed out, and with the Galaxy Underground underway. We do have some very strong cash flow coming from Penny. That's one of our stronger assets looking forward. Look, it's there, it's available for use, and around a corporate transaction. It would really depend on what type of transaction that is, as to whether or not it's a debt, cash, scrip type mix. You would have seen what we've done in the past. Comparable size transactions would probably suit a similar structure, but we'll have to wait and see for what that n ext transaction looks like.
Okay. Well, yeah, good to see you sort of got yourself organized if that does occur. Okay. Best of luck, guys.
Thanks, Larry.
Thanks, Larry.
Next question comes from Richard Hart, a private investor. Please go ahead.
Oh, hello, Mark and Tim. Thanks for the quarter. The recovery in March with trucking was amazing. Well done. My first question is about Mt Magnet Mill. I haven't heard anything lately about that. Is it still being considered, an upgrade to increase throughput?
Thanks, Richard. At the moment, we put that on hold, pending some of these studies and some more work at Mt Magnet. I think you'd need a strong sort of + 10-year runway to go back and look at that again. When we looked at it last time, the refurb was gonna cost us more and the, you know, the return on capital just wasn't there. We sort of understood that you'd need a really strong runway to maybe make it 13-year and bring that back into sort of a 10-year life of mine, because that's one of the things that does happen when you expand a mill, you reduce your mine life. We're looking to build out our mine life at Mt Magnet.
I suppose post our next mine plan update, likely to be later this year, we'll potentially go back and have another look then.
Okay, thanks. One last question about the Bartus East, which has got some nice results, I must say. It seems like you're suggesting there will certainly be a mining effort there. The Bartus South is quite close to the Bartus East. Looking at the drill results, actually, I was a bit put off on the right-hand side of that diagram. It goes from 100- 300 below surface. Looking at the diagram, is it at all feasible that Bartus South could become part of a pit?
It's feasible, Richard. It's feasible. You know, back in the day, we must have an error on our scale, our depth scale. Good pickup. I'll talk to our drafters on that.
I think the first 300 meters below surface.
Should be 200.
Should be 200, Richard, so.
Yeah. Good pickup.
Yeah. No, I worked that out the other side. It's 200 on the other side, is right.
Yeah. The story goes that the original Bartus pits and Duncan Coutts, who's our COO, was here when they were mined. They were. In his terminology, they were real honeypots. You know, he's obviously very supportive of us drilling below and around these pits because they were very good back in the day at a much lower gold price. Look, we'll see what the optimizations tell us once we've drilled these things out. Bigger is better, as we've seen with Eridanus. Look, we'll look to exploit everything that's there, Richard.
Sorry, I'm carrying on from here. Has there been any drilling to the south or southwest of the Bartus South?
Couldn't answer that question, Richard, but I'll go and ask the guys and look. Because it becomes a focus, we'll look to put out some more detailed information going forward, maybe more than just one section. We'll put some plans out as well.
Okay.
Yeah.
Look, thanks for the time, and well done in trying times. Thanks, Richard.
Thanks, Richard.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We'll just pause for a moment for any last-minute questions. There are no further questions at this time. That does conclude our conference call today. Thank you for participating. You may now disconnect.
Thanks, everyone.