Thank you for standing by, and welcome to the Regis Resources Limited quarterly update briefing. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. I'd like to turn the conference over to Mr. Jim Beyer, Managing Director and CEO. Please go ahead.
Thanks, Nick. Good morning, everyone, and thanks for joining us on the Regis Resources September 2022 quarterly update. First of all, I'd just like to introduce who else is sitting around the table with me. We've got Ben Goldbloom, our Head of Investor Relations, Stuart Gula, who is our Chief Operating Officer, and Anthony Rechichi, who is our newly minted CFO three and a half weeks into the role. Welcome to everyone and special welcome to you, Anthony.
Thank you.
Look, the September quarter was another one of reliable and planned business performance for Regis. First, if we look at safety, our lost time injury frequency rate reduced to an arguably sector-leading level of 0.6. A pleasing result, but look, as we reflect on the tragic industrial fatalities that have occurred in recent weeks in the mining industry, this is a very clear reminder that as individuals and as an industry, we have to remain vigilant. We can never afford to rest on our laurels. We need to be proactive, and even more so now as we see the potential for elevated risks where access to experienced and skilled personnel remains tight. On another front, we released our 2022 sustainability report a few days ago on the 25th.
On the sustainability front and cost reduction front, we approved a 9 MW solar farm at Duketon earlier in the September quarter, and we're expecting that to come into service middle of next year. Across the business, we saw gold production and costs delivered to plan as the improvements made in FY 2022 continued to be realized. For the September quarter overall, we produced 114,831 oz of gold at an all-in sustaining cost of AUD 1,782 an ounce. Now, while labor availability and inflationary cost pressures have shown some stabilization, they do remain at elevated levels and remain an area of risk in our business and the broader industry, of course, as we all know. We continue to work hard on managing these risks.
Notwithstanding these, we've maintained our guidance for the year, noting a number of factors that are planned to deliver a stronger second half performance. In line with this outlook, cash generation is forecast to increase in second half. With this positive outlook and a comfortable balance sheet, the board was pleased to declare a fully franked dividend of AUD 0.02 per share back in August with our full-year accounts. This will be paid this month. In fact, I think it gets paid tomorrow. Looking more closely at the operations, Duketon was on plan at 78,000 oz, all-in sustaining AUD 1,996. While Tropicana delivered its best quarter since Regis acquisition of 37,000 oz at all-in sustaining of AUD 1,243.
Duketon North improved production to 23,000 oz at an all-in sustaining cost of AUD 2,042. This was driven by better ore presentation from Coopers and the Moolart pits. All things being equal, we expect to see costs decrease at Duketon North through the year as the total waste movement starts to reduce in the second half. Duketon South delivered 55,000 oz at AUD 1,977 all-in sustaining, in line with expectations. Production was lower than the prior June quarter with a couple of factors impacting the short term. One being Rosemont underground mining lower grades as it mined through sections of low-grade stopes. This is all part of the planned schedule. We also experienced consistent, not really deluge type, but consistent wet weather, which caused some delays to surface haulage, but this is very short-term impacts.
However, what we did see was that this weather caused some geotechnical instability in oxide transition zones in our Rosemont North pit, which required some rescheduling of production and working around that. This has delayed some ounces, but only till later in the year. I would comment, as I think I have in the past, the Rosemont underground, and in fact, Garden Well will see the same, when it comes online over this year. We'll see mine grades move up and down as schedules dictate. However, over the medium to longer term, the grades will revert back to reserve grade, as you'd expect, over the life. Our grade control, which is performing well, is reinforcing this view. Most pleasingly, our drilling to extend the Rosemont underground is returning results that support potential lateral as well as depth growth of that underground mine.
Later in November, we will be putting out our biannual exploration report, which will have a considerably more discussion on this and some of the other points which I'll touch on today. At Tropicana, as I mentioned before, we delivered our best quarter since Regis acquisition, 37,000 oz at AUD 1,243 an ounce all-in sustaining. Open pit mining had clean access to high-grade ore at the bottom of the Boston Shaker pit, and the underground, once again, delivered to plan. We note Boston Shaker pit will finish up in the December quarter. The next key ore source from open pits, the Havana area. Havana cutback has continued well and progresses, and we'll see increased gold production from Havana with greater presentation of ore, the year progresses. Tropicana just continues to deliver reliable and strong cash flow.
We're expecting this to continue for many years and remain excited about its growth prospects, particularly laterally across the Havana underground and down plunge from the existing underground operation, the underground ops. On the financials, we sold roughly 106,000 oz at an average price of AUD 2,294, and that's after taking into account the impact of hedges. This generated a total of AUD 76 million in operating cash flow, with approximately AUD 19 million from Duketon and AUD 57 million at Trop. The reduction in operating cash flow relative to the prior quarter was primarily driven by the lower production. Capital expenditure was AUD 68 million, and we saw AUD 52 million of this on growth. Approximately 35% of that 52 was underground development, mostly associated with development at Garden Well South and associated infrastructure.
The remainder of the growth CapEx was predominantly around Havana. If you look at Figure two, and sorry, I forgot to mention at the start, you should, if you have access to, the quarterly report which we released, I'll make reference to some of the diagrams. In Figure two, the cash waterfall, you'll see that during the September quarter, the company paid significant one-off costs, equating to AUD 60 million or totaling AUD 60 million. These related to the stamp duty for the Tropicana acquisition of last year, and also, the purchase of a rural property related to the development of McPhillamys, both of these which were flagged in the June quarter results.
It's worth noting that the rural property has since been sold last week for AUD 20.5 million, with funds from the sale expected in the current December quarter to be back into our accounts. The property purchase was undertaken to lock in a key high voltage line easement required for the McPhillamys project. The rural property came on the market midway through our negotiations for the access easement that we undertook to purchase and subsequent sale to lock in the easement and avoid what we considered to be a material risk of a costly negotiation for the easement with the new third party owners, or alternatively, having to go a much more expensive reroute. On growth projects made good progress during the quarter.
Garden Well South, our new mine starting up, progress was made with raise boring raises, ladder ways and level development. First ore from development was delivered to the process plant in the September quarter and pleasingly performed as expected. This new mine is in its very early stages and the experienced team is working through the usual startup learnings. Garden Well South has included considerably wet ground requiring well-planned dewatering. Also, we see boggy ground in some areas, which just requires some learnings as to how to safely mine through that. The team's getting on top of that. While the team works through these protocols and learnings, I'm pleased to say that we're still expecting first stope production later on in this December quarter, with commercial production expected in the second half.
Also at Garden Well underground, the exploration decline into the Garden Well main area, which I'd previously highlighted as an opportunity, was approved. The prep work commenced, and in fact, mining development of the stage 1 of that is underway. Figure four in our release shows the planned decline schematic, roughly approximate design, but it also shows the proposed drilling program. The key thing to note in that is as you can see, the drilling program extends all the way across. We think that whole area from the south, the underground south area all the way through to the main underneath the deepest part of the pit, is all high potential exploration area. This decline will be used to establish drilling platforms and undertake exploration drilling to target these potential areas.
The first area we should be getting an assessment of within the next six months. It can then, that decline can then be used as the initial access for new mining areas as they get delineated. We view this area as having some of the best, most exciting prospects in the potential to build on our existing underground production plans. At Tropicana, the Havana underground pre-feasibility study and Havana link continued. Figure five shows you the general layout of that link drive. The link development will extend from the existing Tropicana underground towards Havana and will be used, one, to access high-grade mineralization between Tropicana and Havana.
It will allow infill drilling once it gets there to inform on the Havana PFS, and also provides, in the future, potential additional infrastructure benefits for the Tropicana underground. Look, just like Garden Well and Rosemont undergrounds at Duketon, we view the undergrounds at Tropicana as having very exciting potential to grow on the existing plans, both laterally and down plunge. Pardon me. Regis will provide more information and context on this in the biannual exploration update that I mentioned earlier that will be later in November. Finally, at McPhillamys, I'm pleased to say we've now completed all outstanding requests for information and our application now sits with DPE Planning for final consideration. Pleasing progress there as well. Wrapping up, before I hand it over for Q&A.
The September quarter, what does the September quarter bring us? A solid start to the year. Reliable production at Duketon, increased production at Tropicana. Look, while inflationary cost pressures have shown some stabilizations. They do remain at elevated levels and as I mentioned before, remain an area of risk in our business and for the broader industry that we continue working hard on to manage. While costs were elevated in this first quarter, we remain on track to deliver full production and cost guidance in FY 2023. Noting, as I did, a number of factors that are planned to help deliver that stronger second half performance. Finally, we had good progress on our growth projects at Garden Well South. Exciting start to Garden Well Main.
At McPhillamys, progress as well, and also, last but not least, very pleased that we approved and installation is underway at the solar farm at Duketon. On that note, I'll hand it back to Nick and open up for any questions. Thanks, Nick.
Thank you. If you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're on a speakerphone, please pick up the handset to ask your question. The first question comes from Alexander Papaioanou, Citi . Please go ahead.
Hi, Jim and team. Two questions from me. Thanks for providing additional color on some of the key metrics. Noting your earlier comments on the variable underground grade at Rosemont and Garden Well, in what timeframe can we expect underground grades to move towards that reserve grade of 2.8?
We're expecting the grades to improve this quarter.
Perfect. Second question, can we expect a similar D&A charge of AUD 808 going forward?
Look, I think that's with what we're looking at at the moment, that's as reasonable as we can, guidance that we can give. I mean, we don't normally give guidance on D&A, but that's what I'd say at the moment.
Perfect. Thanks. I'll pass it on.
Thanks, Alex.
Thank you. Next question will be coming from Andrew Bowler from Macquarie. Please go ahead.
Good day, gents. You commented on the AUD 62 million of growth CapEx in the quarter. That's clearly, you know, above the annualized run rate of that circa 150 number. I guess that's mainly Tropicana, but can you just provide us a bit of an update on how that CapEx profile might look for the rest of the year?
Well, we haven't changed the guidance on our growth. There's definitely I mean, what we'll see at Tropicana as Havana pit moves into what would be commercial production, which we're expecting at the moment to be very early in the new calendar year, early in Q3. Basically, that capital will not be deemed as being growth and will then be deemed as being sustaining. We've already factored that into our all-in sustaining cost guidance for Tropicana. I mean, basically, you know, what we'll see is that the growth capital at Trop will drop right away, but the all-in sustaining costs will lift. It won't. You can't.
You've also got to recognize that production will grow as well because as Havana comes online, that's where we get more tons and more grades. While there's a, you might say, there's a negative because there's now, you know, it stops being growth and starts to become sustaining, it's also got a larger divisor under it because the production lifts with Havana pit, high grades and tonnages. In terms-
Yeah
of other areas, you know, at the moment there is the key area of growth capital still sits around Garden Well, and that will sort of run off the back of commercial production. We haven't, you know, things that we may end up changing our guidance might be, for example, we're currently considering Commonwealth up in Duketon North, to see whether that might be a viable additional pit source. If that came on, that'd require a little bit of setup cost, which we haven't got in any of, because those ounces aren't in any of our guidance. It's not in any of our costs. You know, that'll be a good story for us 'cause it's more production.
At the moment, as I described it, this is its stance.
Yeah, no, it sounds like it's pretty unchanged from previous commentary.
Right.
Back to McPhillamys. I mean, I sort of have to ask. It seems like there's some pretty decent milestones ticked off during the quarter. You know, the creation of that specific purpose access license, potentially providing the pathway to get the surface water licensing. Can you add some more color around that? I mean, I know timing's sort of, you know, been a bit of a dirty word for this project, but is there any more information that you have that may sort of affect our view? Or is it, you know, just still wait and see on McPhillamys?
Yeah. Good question. If I could take you literally and say, how could you describe it? Can I put some more color around it? I would probably six months ago, frustratingly being, describing my color around it as being red, with a tinge of yellow. But now I'm certainly much more positive on the green side. Look, at the end of the day, timing on the decision and recommendations from the departments is something that's outside of our control. The pleasing part for us and what we consider to be quite a significant step forward is that we have no outstanding queries to respond to. So, that's not to say that we might not get another one as the Department of Planning starts to come in and finalize its views on its recommendation.
We're not aware of anything at this point in time. You know, we take that as being positive, certainly a significant positive. You know, as I think I've mentioned, you know, we're also pleased with the progress, but we're still waiting on the outcome of the Section 10 as well. I think, you know, from where we were on the last call that we had, it's definitely become more of a greeny tinge than a red tinge. In the end, you can't do much and, you know, I'll be a pleased MD when I've got something more clearer in my hands in the, you know, in black and white. I'm certainly pleased with the way it's progressed.
No, I just think so. I certainly appreciate the color analogy, and it sounds like it's, you know, not many roadblocks left. Cheers guys, I'll pass now.
No worries.
Thank you. Next question will be from David Coates from Bell Potter Securities. Please go ahead.
Morning, Jim. Morning, team.
Hi, Dave.
Thanks very much for the call this morning. Hope you're all well. Just quickly, just wanted to touch on, like, the costs at Duketon. You got a sort of a, you know, 25% reduction to bring them back into the guidance range. If I picked it up correctly earlier, Jim, it's a reduced stripping ratio, improved underground grades. Are they the kind of key drivers of bringing those costs into the guidance range?
Yeah. If we look at it in two parts, 'cause if we look at Duketon North
Mm-hmm
Our plans see a very clear reduction in the total material moved, which is you know, a key contributor to all-in sustaining costs.
Yeah.
You know, the biggest lever of sustaining costs is waste movement for an open pit anyway. You know, if I look at what we moved as total material moved in at Duketon North in the first quarter relative to what we'll be moving in Q4, it's less than half. We're basically at the moment, you know, we're starting to run down to the end of that waste movement phase and, you know, as I was saying, you know, we will see the gold production still stays at its current level, but the cost burden of carrying that extra, whatever it is, 3 and a bit million BCMs that we moved last quarter will be significantly less than that.
Now, that's on the basis that that remains our plan. As I said, the thing that we would look at there would be, if there's an additional pit that we bring in, but that's a completely separate justification, right?
Yeah.
Certainly on Duketon North, the costs are expected to be driven coming down by way of that lower TMM. In the south, it's all off the back of increasing production. We'll see Garden Well South come in, and we will also see some of that high-grade material from the pit that was impacted by those geotech issues with the wet weather. We'll see that material starting to come back into the feed as well. That'll lift our production and, you know, that drops the divisor.
Okay. The two
Duketon North is about reducing the overall cost because the TMMs come down.
Yeah.
Duketon South is more around production levels increasing and reducing unit cost from that point of view.
You mentioned getting back to the 2.8 g reserve grade. Reading the commentary, it sounded like that was gonna be you know a bit more variable as you sort of you know got the underground ramped up and you know high grade and low grade stopes, but just from what you were saying a minute ago to Andrew, I think, or that you know that 2.8 g reserve grade is gonna remain pretty steady once you hit it. Is that correct, or still you know gonna bounce?
No, no. No, it won't stay steady once we hit it. I guess the point that I was trying to make on that is that these mines, I mean, we're yet to really get into any kind of rhythm at all with Garden Well.
Yeah
'Cause we haven't even started production. You know, we've got the drilling on 8 and 9 level, which will be our first production area, which are pretty, you know, a couple of scratchy stopes here and there. We don't get down into the meat of the ore body until next calendar year, where it's a lot more consistent. You know, our experience tells us that at Rosemont, just because of the way we tend to manage the schedule. It goes in surges, you know. For a couple of months we'll be producing out of the high-grade area while we're over in the Duketon South area developing stopes.
Then we'll flip, and we'll move. You know, we'll finish production in one, in the high-grade area, and then we'll move back to the lower-grade area.
Yeah.
What that means is that you tend to, you know, can go for a couple of months where things don't look great, but, you know, they average out overall. I mean, one of the-
Yeah.
One of the interesting things that we're seeing at Rosemont is this area called Rosemont South, which has got some pretty decent grades in it. That, if that starts to hang together like we hope it will, that might help us do a little bit more of getting a more steady feed grade to the mill. At the end of the day, it's what's best for the schedule, so we just manage it that way.
No, cool. Understood. I guess sort of just on that sort of the variability of that outlook, you know, big uplift in production at Tropicana this quarter. From what you're saying, we should expect some of those capital costs go from more growth to sustaining in the second half of this financial year. That production rate is obviously, you know, great to see that up.
Is that sort of still in a bit of a bumpy kind of ramp-up phase as well, or are we starting to get to see that sort of steady state in between that 450,000 oz-500,000 oz, you know, annualized run rate on a 100% basis coming out of Tropicana from now on?
Yeah, I think what we're expecting to see as we transition from the Boston Shaker open pit to the Havana open pit, there'll be, you know, a quarter or so where we just see some volatility, or some variability, and then we'll be much steadier towards the back end of this year.
Okay. Cool. All right. I'll pass it on. Thanks very much, Jim.
Thanks, Dave. Thanks for your questions.
Thank you. The next question will be from Patrick Collier of Credit Suisse. Please go ahead.
G'day, Patrick. You might be on mute.
Patrick, your line is open, and you're next to ask a question. Is your line on mute?
Sorry, can you hear me now?
Yeah.
Just following on from Dave's first question on the costs, specifically focusing on the numerator. You called out a reduction in mining costs at Duketon North, but I mean, how does that compare to the additional costs that come in? You know, you talked about Tropicana, growth capital converting into sustaining capital in the back half of the year. Then I guess Garden Well underground also potentially increased absolute costs. Just, you know, weighing those two together and whether there's anything else to consider that might fall out of the absolute cost base, across the remainder of FY 23.
Yeah, look, I think if you look at our guidance, broadly speaking, looking at Duketon North, our all-in sustaining costs are obviously sitting above our guidance range for the quarter. We're anticipating that will come down because, you know, a key driver of all-in sustaining the total material movement will just sort of start to fall away. That sort of, that's one that's coming, brings it down. I think if you look at the all-in sustaining costs for Tropicana, which was AUD 1,243, that's actually I think sitting below the guidance range. We're anticipating that the all-in sustaining costs for Trop will start to lift.
They're both actually doing, I suppose, what we were expecting them to do in this first quarter. Reflecting the, sort of, very short term nature of 3 months of activity. Certainly, a key element of the Duketon South costs coming down is the elevated production. You're right, there's certainly that will come with costs from the underground, although, you know, Garden Well South is a little bit more of a bulky approach than Rosemont, so we're anticipating that will be a bit better costing on a cost per ton basis. But we're also factoring anticipating that there'll be some softening.
While we don't see softening in the inflationary costs, as we are assuming in that there's a bit of a drop in fuel prices as well, which we'll see some flow through. If that doesn't eventuate, then obviously we'll keep the market informed as to what impact that might have.
Okay. Thank you. Yeah, so it sounds like the fuel price kind of might be pivotal. I suppose, can you remind us, firstly, what percentage of cost broadly is exposed to that? And then also what you're assuming over the remainder of the year?
Yeah. What I've done is I've talked about the prior costs for last year. We used about 100 million L of fuel across the Duketon business last year. Probably half of that was in power generation, and half of that was in earth movement. You know, you can do the math and figure out that if the fuel price goes down by AUD 0.10, you know, well, there's what? AUD 10 million less cost dollars per ounce for the year over what? I don't know. You know, so 350,000 oz, whatever, you know, whatever number we wanna put in there. You can see that that's, you know, what is that? AUD 40 an ounce, something like that.
It is, I think in round numbers, it's probably around 12%-15% of our overall costs. I'd have to check that. Don't quote me on that one. Unfortunately, it's moved a bit up since. Our current assumptions on the fuel price going forward, I think we average what is it? AUD 1.475. That's our average assumption for the rest of the year.
Okay. That's very helpful. Thanks for that. I'll pass on.
Thanks. Thanks, Patrick.
Thank you. The next question will be from Alex Barkley, RBC. Please go ahead.
Thanks. Morning, Jim and team. You mentioned-
Morning, Alex.
You don't expect to pay any corporate tax this year, and you're also looking at your tax position FY 21, 22. Can you talk us through why you're not expecting that tax payment and what the potential extra refund might be?
Okay. I'm gonna put him into the limelight and hand that over to Anthony for him to answer that question. Over to you, Anthony.
Thanks, Jim. Good day, Alex. Look, we've got a couple of benefits that potentially will come our way, from mainly we'll be taking advantages of the allowances that we're getting now, for predominantly the FY 2022 year just gone. There'll be some benefits from the temporary full expensing allowances that we can capitalize on, where we get to take quite a significant amount of immediate deductions, for that window that's been open for that sort of couple of years or so. Look, more importantly as well, we're focusing on the benefit we'll get with cash refunds via the loss carryback allowances as well. That's moved us from, you know, looking at that now with the types of capital costs that will be immediately deductible in FY 2022.
That's moved us to a position where we're reasonably confident that we'll be able to take a cash refund through those allowances, which is also as well removes our, you know, provisional tax payments that we would have ordinarily made over the course of this financial year.
Okay. You're saying you might actually get some refunds during the course of this year, but still determining what that might be.
That's right. Yeah, we're working through that now.
I think that's what we've.
Okay.
We noted that in the report, Alex. We think that it's reasonable opportunity for us. We're taking advantages of the shadow that we get as well from the Tropicana acquisition, which is helpful.
All right. Thanks very much, guys.
Thanks, Alex.
Once again, if you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. There are no further questions at this time. I'll now turn the call back to Mr. Beyer for closing remarks.
Okay. Thanks, Nick. I'd just like to thank everybody for joining us on the call and, once again, welcome Anthony to the team. If anybody's got any follow-up questions or anything that they'd like to ask, as you know, we'll do our best to answer them as we can with disclosure, etc. Please give us a call, get in touch with Ben, and we'll do what we can. All right. Thanks, everybody. Have a good day.
That does conclude our conference today. Thank you for attending. You may now disconnect.
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