Been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. Finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Jim Beyer, Managing Director and CEO, to begin the conference. Jim, over to you.
Thanks, Paulie, good morning, everyone, and thank you all for joining us on the Regis Resources December 2022 quarter update. Joining me this morning is Anthony Rechichi, our CFO, and Stuart Gula, our COO, and Ben Goldbloom is sitting with us as well. The December quarter was another one of reliable delivery to plan for Regis. First, on safety, our LTIFR, lost time injury frequency rate, was steady and well below the industry average, sitting at 0.6. As we always say, the health and well-being of our people continues to be a focus of the company. I would say that in this period, where we're certainly seeing elevated levels of turnover, that the challenge continues to be in front of us as to making sure we can maintain that safety performance.
Also, during the quarter, we were very pleased to release the 2022 sustainability report, which saw another year of improvements. While on sustainability progress, the installation of our 9 MW solar farm at Duketon South is on track, and we're expecting it to be commissioned in the June quarter. This will be very beneficial initiative as it both reduces our carbon emissions and also results in direct power cost savings through the reduction of fuel consumed per ton processed at the DSO mills. Across the business, we saw gold production deliver to plan as the transition of our assets into their production stages. We're very pleased with the progress, which we've now delivered three quarters in a row of reliable production. Pardon me.
For the December quarter overall, we produced 117,316 ounces of gold for an all-in sustaining cost of AUD 1,760 an ounce. That is Aussie dollars. The elevated cost environment continued in the quarter. However, we have seen some recent easing of this pressure in the area of cost of diesel, pleasingly. With the planned increase in production and a continued effort on cost management, we remain on track to deliver production guidance. We are expecting that our AISC will be at the top end of our guidance range.
With the approval of Garden Well main exploration decline, which we announced earlier, and some short-term delays in declaring commercial production at Garden Well underground and also at Havana, we have increased our growth capital guidance up to a range of AUD 180 million-AUD 190 million for this year. In line with the outlook of increasing production and reducing AISC and CapEx overall, in the second half, cash generation is forecast in the second half, improve in second half of this year, FY 2023. Look, I'd now like to hand over to Stuart Gula, our CEO, who I introduced earlier, who'll briefly cover the operational performance. Over to you, Stuart.
Thanks, Jim. Thanks for the promotion. I think I'm only the COO.
What did I call you?
I appreciate that.
Got it.
I guess, you know, looking more closely at the operations, Duketon lifted to 82,000 oz at an AISC of AUD 2,000 an ounce during the quarter, while Tropicana remained steady at 35,000 ounces at an AISC of AUD 1,119. Duketon North had lower production at 17,000 ounces, which was at AUD 2,959 due to higher strip ratios and waste movements associated with bringing forward stage three at Gloucester, which we had to do more aggressively than what was originally planned due to some ground conditions. Cash margins at Duketon North will improve in the second half of the year as strip ratios decrease. Overall material movement will drop, and ore production is expected to increase as well.
Duketon South increased to 65,000 oz at an AISC of AUD 1,757 an ounce as ore presentation improved in the open pits and grades in the underground returned close to reserve grades, which is as per the schedule. At Garden Well South, we had our first production stope firing, and it was delivered to the mill. We're expecting underground ore tone to increase as the year progresses. The team continues to work through the typical challenges associated with starting up a new mine. We expect that commercial production will be achieved in the second half of this year. While on Garden Well underground, during the quarter, we released our biannual exploration update.
You'll note that the results we're seeing in the Duketon South underground mines continue to reinforce the consistency of both ore bodies and our belief that these mines will grow both laterally and at depth. The underground operations at Duketon South remain a key focus and are expected to deliver significant value as they continue to grow. Across the Tropicana, we delivered a steady quarter at 35,000 oz for an AISC of AUD 1,119 an ounce. The underground mine provided a reliable gold production during the quarter, and as we extend it deeper, all indications are that the ore bodies continue down plunge and in a consistent manner. Open pit mining activity was completed in the Boston Shaker pit during December. Going forward, we expect open pit feed will be from Havana pit and supplemented from stockpiles.
This achievement of commercial production will see growth capital drop away and a commensurate change in AISC. That's it for me. I'll now hand back to Jim.
Thanks, Stuart. Bad news, you're back to COO. Look, just before I pass on to Anthony, I just wanted to make a comment on Tropicana. We're very pleased with the building cash flow generating capacity at Trop. It is, you know, delivering and performing as we had anticipated when we purchased it back in the middle of 2021. Tropicana has returned now in the last quarter at its, an annualized production rate of 480,000, In fact, it's been sitting there for the last six months. I'd just point out that while it's sitting at that level, when we first picked it up, it was operating over the first three or four quarters that we had it at, you know, circa a little bit over 400,000 oz per annum.
Tropicana is doing exactly what we anticipated it would do and build its production rate up to that, back up to that 450,000-500,000. Obviously, that's all at 100%. The phrase gets thrown around a lot in our game, in our industry, but Tropicana truly is a long-life tier one asset in a tier one location and sits, we are pleased to say, very nicely in our portfolio. Now I'd ask, Anthony Rechichi, our CFO, to summarize the financial points for the quarter.
Thanks, Jim. Onto the financials for the quarter. We sold 121,000 oz of gold at an average price of AUD 2,412 an ounce, and that's after the effects of the hedges. This generated a total of AUD 93 million in operating cash flow, with approximately AUD 36 million from Duketon and AUD 57 million from Tropicana. Operating cash flows from the operations does remain strong. Capital expenditure payments during the quarter were AUD 77 million. We saw about AUD 61 million of growth capital, of which the majority of this expenditure related to the development of the Garden Well underground and the Havana cutback. As both of these projects reach commercial production in the second half of the year, growth CapEx reduces, similar to what Stuart was talking about earlier.
In other significant transactions, referring back to the quarterly report, if you take a look at figure three, the companies paid AUD 15 million in dividends and also received AUD 20 million for the sale of a rural property in New South Wales related to McPhillamys. Now, I wanna cover the tax refund opportunity we've noted in that quarterly report, where there's clearly an opportunity for us to return more cash to our balance sheet. As a bit of background information, one of the government's economic incentives in response to COVID was to allow companies to use a loss carry-back tax offset arrangement, whereby tax losses can be used to offset taxable income in recent financial years.
The losses applied against that previous taxable income effectively reduces the tax re-required to have been paid in those years, hence a cash refund is paid back to the company for the difference. Now, having said that, during the year ended 30 June 2022, Regis incurred AUD 52 million of tax losses. That's at the 30% company tax rate.
Applying those losses back to taxes we paid for the 2019 and 2020 year, we are eligible for a refund under these pronouncements. The final amount of the tax losses we can retrospectively apply and the election to trigger a refund under the temporary provisions will be finalized with the lodgment of the company's 30 June 2022 tax return in the March 2023 quarter.
We're nearing the completion of that work and looking to identify any more expenditure that will further bolster the available refund amount. In summary, with increasing gold production, decreasing all sustaining costs and CapEx in the second half of the year, we expect a significant improvement in cash generation compared to the first half. Thanks, back to you, Jim.
Thanks, Anthony. Look, I'll touch on growth. Our growth projects have made some good progress during the quarter. Stuart's already covered the progress at Garden Well South Underground, which is very pleasing to see. The Garden Well main underground exploration decline, which we mentioned earlier as well, we've now completed a bit over 240 m heading towards the north.
We're expecting that the first diamond drilling program or cuttings will be kicked off during the March quarter. With some results expected a month or so after that. We remain very excited about the potential growth of Garden Well Underground and are expecting this to deliver some significant value for the company. We're also seeing some very pleasing potential at South Rosemont or what we call the south end of the Rosemont Underground.
If you have a look at figure five in the release, you can see the area we're talking about and some of the, I won't go through the intersects that we've highlighted there. Clearly there's great potential for a new production area at the south end of Rosemont.
The underground story at Tropicana is very similar to that at Duketon. If you see figure six in the release. You can see the latest new potential area that we see down plunge of the already existing Tropicana mining area, the underground Tropicana. That's also, of course, in addition to the potential that we're seeing at Boston Shaker.
The results outlined in our biannual exploration update, released back in November, further reinforced the potential to grow on the existing plans, both laterally and down plunge, at all our underground operations. At McPhillamys, we achieved a major approvals milestone with the New South Wales Department of Planning and Environment, the DPE, referring the project to the Independent Planning Commission of New South Wales for final determination.
The DPE did, in its statement, consider the project was approvable subject to conditions. These conditions are in line with our expectations and not expected to materially impact the project. Although, we do note that they are still subject to finalization by the IPC, in the event that it makes a positive decision.
The next stage in the IPC process, because it already has kicked off, is the public submissions are currently underway. There's a, in fact, there's a portal where you can go and register your support for the project. It's either at the IPC website, or if you go to the Regis Resources homepage, there is a link there that will take you to a place where you can make a positive submission, if you like, and read some more about the project.
The public hearings, which were originally scheduled for early December, which got delayed due to tragic circumstances with one of the IPC members passing away unexpectedly. It has been rescheduled for early Feb. In fact, it's about two weeks' time.
I think it just kicks off about the 6th of February. That will run for three days. That will be starting to see the wrap-up of the submissions. Somewhere within three months of those hearings, we're expecting a final IPC recommended decision.
Now, this is a very exciting phase for the project, and quite a material one. It's been a long time where there's gonna be, it's gonna happen. There's a decision soon, we've seen that stretch. We've actually got the recommendation by to go forward from DPE, was quite a significant step. Which I'm sure anybody on this line that's been listening to the story for the last few years realizes and recognizes. Wrapping up, what did the December quarter brought us?
Was another reliable quarter of production at both Duketon and Tropicana. Costs are elevated in the quarter. We're continuing our efforts. We're not Robinson Crusoe there. Clearly the environment, the general economic environment's putting a lot of pressure on all miners.
We're continuing our efforts on cost management. We are maintaining our full-year production guidance for the reasons that we outlined. We do expect, as I said, that our all-in sustaining costs will fall at the very top end of our guidance range. We saw significant milestones at Garden Well South underground and, as I just went through, at McPhillamys. We've made some very good progress at the Garden Well exploration decline.
The cost environment does remain elevated, but with our planned higher production, reducing our AISC, and our planned lower CapEx in the second half of the year, we're looking forward to some more free cash flow generation as the year progresses. On that note, we'll pull it up, and I'll hand it back to Paulie for questions. Thanks, Paulie.
Thanks, Jim. At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from the line of David Coates from Bell Potter Securities. Your line is open.
Good morning, everyone. Thanks. Thanks, Jim. Thanks, Stu, for the opportunity to ask a question this morning. Good work on the quarterly. A couple of questions. So let's see. At, you know, Tropicana, good steady performance, costs coming down. Duketon sort of steady again, but costs there still an issue, particularly, you know, Duketon North.
You know, you've run us through a couple of the issues there. I'm just wondering if, you know, what your, what your thinking is on Duketon North. Are you prioritizing production at Duketon South to kinda keep the wheels on at sort of the more important operation? You know, are there sort of other factors that are driving the costs higher at Duketon North?
Yeah. Thanks, David. Yeah, look, just touching first on Duketon North. You know, those two sites, North and South, are quite separate. The only real connection between the two is a shared airport. Also we have a line running between them to send water in either direction, depending on which area needs it. I wouldn't say that we would be prioritizing the South against the North or vice versa. Our philosophy and our drive with Duketon North is, you know, clearly the reserves there are currently starting to run down.
At current reserve base, we will finish mining of open cut direct feed material this time next year, possibly even a little bit earlier than that. We run on to low-grade stockpiles for at least two to three years. What we're seeing at Duketon North at the moment right now, it's almost on a month-by-month or quarter-by-quarter basis.
The oil and sustaining costs are right up through the roof, as you can see, and that's because we're doing a lot of waste mining. Production levels are a little bit off, but it's the waste mining that's really pulling that oil and sustaining cost up to nearly AUD 3,000 an ounce. What we are, and we're already seeing, is that the total material movement up at Duketon North starts to drop away.
You know, we've demobilized, I think we've already demobilized a digger up there and, we'll see the, you know, the gross spend drop off. We'll see the AISC start to lift as well. Actually for some of the pits right at the in the final quarter, in the June quarter, we actually start to overproduce ore and put it on the, on the stockpile, which is something we haven't done up there for quite some time. I think, it's certainly, you know, Duketon is, Duketon North really is a story of, we're working it to at the moment, barely, well, arguably it's not, but barely to wash its face, keeping it running. It'll do well.
It'll do okay on cashflow when it's running through those lower grade stockpiles. Really, it's to hold that, hold it in operational state. Not, it's not expected to make enormous amounts of cash flow, but it keeps it running. Last thing we wanna do is unnecessarily close it and then reopen it again in a year's time because we've proven up some more reserves. We, we're sort of holding that. We're trying to follow that pattern of keeping it running while exploration continues to look for something material. We're not doing that in a way that means we lose money .
It's just, it's quite variable from quarter to quarter just because it's sort of, I guess, it's in the tail end of its business, if you like. I hope that makes sense.
Sure. Yeah, no.
Duketon South is quite.
No.
Yeah. Duketon South is quite a different story. We, you know, it's its improvements and lifting of its production come from the underground. You know, Garden Well South, sorry, is just starting to. You know, it's quite exciting there actually. We're doing a bit of stoping on the eight and nine level, where eight and nine level is. That ore body, like a lot of our ore bodies up in that area, they tend to pinch and swell as they go down in depth. The eight and nine levels, which are the first area of the underground, are right where it was pinching. There weren't a lot of stopes there, and a couple of the ones we thought we were gonna get just didn't carry.
We're down now mining on the 10, 11, and 12 level. And we've drilled that out all to grade control, and we're very pleased with what we've seen there. It's really stacked up well. We've got multiple development headings in there that area is down into the thick part of the ore body. We're not narrow vein sort of benching. We're actually transverse stoping, just as a, an indication of just how much, h ow meaty these stopes are.
We've got a lot more headings in ore as well. We're just getting into that now, and obviously that's where a fair chunk of the extra ounces for the second half come from. Tropicana. Look, Tropicana is in an interesting space at the moment. It's oil and sustaining is certainly looking good. As Stuart said, we are shifting and moving. Havana comes online, we'll see the it will declare commercial production. We're expecting that sometime in the next couple of months. We do that, the expenditure that we're putting into the waste mining, which is defined as growth capital, will basically shift across into AISC, and we'll see a commensurate lift in the AISC.
The key thing to note about Tropicana is that it's probably in the, in the heaviest part at the moment of its waste. Whether it's defined as growth or sustaining material movement, it's kind of irrelevant. We, we like to think that we make it, you know, how that's defined is less relevant because we just make our numbers transparent. We don't, you know, if it's not in growth, it's in sustaining. If it's not in sustaining, it's in growth. Pretty easy to figure that out. What we do see at Trop is, as we head into next year, the amount of material moved associated with Havana starts to drop away. Not by a huge amount next year, but, you know, maybe 10% or 15%, something like that.
It really starts to drop off as, you know, the pit gets all its waste, breaks the back of all the waste mining and just starts to become more, the strip ratio, instantaneous strip ratio drops. You know, we see Trop will continue along its path. The production levels will increase a bit. The cash costs, the overall costs probably stay similar. It'll just shift. Over the coming next year or so, we'll see all the unit costs start to drop, which is really great 'cause that's what we were planning.
Thanks, Jim. You've just answered my other questions. I did have one other. You have touched on it in the call just around the cost environment. You know, COVID disruptions and labor availability have been, and that disrupting production has seems to have been a big driver of high costs across the sector. You mentioned diesel costs, you know, easing. Are you starting to see those sort of COVID disruptions and labor availability and that sort of stuff also starting to
These, as well and helping the cost outlook?
Look, it's a mixed bag, Dave.
Yeah.
We're not, you know, we're not seeing some of the direct costs that we saw of COVID, where we were testing and time lost for all of that. We're still seeing absenteeism. You know, people are still getting COVID. They're still, as a result, getting crook, and they're not coming to work. You know, we are seeing empty seats, and that is having an impact on production. You know, it's technical side of things it's okay or, in the office environment, it's, you know, people can still work from home and you can sort of roll with that punch. If you don't have an operator on site to drive a truck, it just doesn't happen, you know? It's not as bad as what it was.
After that.
Yeah, you gotten after that. Yeah, yeah. Yeah. Not yet. It is, that continues to be, as I said, probably not as bad as it was, but it's still there and having an impact. Do you agree with that, Stuart?
Yeah. No, absolutely.
The other question was, you know, generally what's happening with inflationary, you know, The pressure's there, right? It's certainly not as bad as it was probably four months ago. Fuel by far was the biggest impact 'cause of the flow on that has on our rise and fall contracts.
Yeah
Probably just about everybody else, I would imagine. Pleasingly, you know, we have seen. You know, we were probably in the first half of this year, we were paying a bit over, I think it was AUD 1.56, AUD 1.57 on average for the first six months. This month we're seeing it down to about AUD 1.30. It's softening, which is pleasing to see. You know, we've still got to, we're not out of the woods by any stretch. I'm talking about the industry.
Thanks so much, Jim. Yeah.
Yeah.
Yeah, yeah. No, I'll pass it on. Thanks very much.
Thanks, Dave.
As a reminder, if you would like to ask a question, please press star then the number one on your telephone keypad. Your next question comes from the line of George Eadie from UBS. Your line is open.
Yeah, thanks, team. My question was kind of-
Hi, George.
Same as David's on cost. Maybe just changing to Havana Link Drive. Maybe just the timeline on that development. When we start getting some exploration updates firstly, sir?
Look, Havana Link will be quite a while yet. I wouldn't be expecting too much coming from that this year. You know, I think it's there and it's something that we and Anglo are certainly excited about. It's in actual fact, some of their priorities have shifted back to the areas that I mentioned before because of it's it looks to be a bit more prospective. That's not to say that the Havana Link has fallen off the edge of the Earth. It's just a little bit lower down on the priorities at the moment. You know, we'll keep you informed with the progress there, but I'm not, certainly not expecting to see anything material in this year, this financial year.
Yeah. Okay. Awesome. Thanks, Jim. Just there as well on Tropicana, the Full Asset Potential project. I know you guys spoke to productivity and cost improvements, but is there anything you can talk to a bit more detail there and how we should look at that going forward? Is there any even potential to look into other strategies to bring down cost at Duketon and similar to how Anglo looked at Trops?
Yeah, look, I think there certainly are some takeaways for us that we're thinking about. You know, we could. I know that Stuart's been sort of giving that some thought as to what we could do to take the methodology and apply some of the concepts to Duketon. You know, at the moment, there's a lot of focus, quite frankly, on making sure that we're getting our undergrounds up and running, and that's the best thing that can add value and continue to add value to our business. The Full Asset Potential at Tropicana, I think was quite a successful process. It, it identified a couple of things. It probably identified that there wasn't a huge amount of low-hanging fruit.
The guys at the team up there had already done a pretty good job of that. It did result in a, you know, rethink of the overall strategy of the place, which also didn't come up with anything, I think, substantially out of whack. You know, it's a process that sort of forces you to go back and make sure that what you think is actually the right way to think. We're having a look at that. As we head into, pardon me, as we head into our reserves and resources, re-estimation period in the, over the next few months, we'll be looking to see what lessons of that assessment and, what's the right word?
The scenario planning that we can look at in that, in that area as well, and basically make sure we're still running on the right overall strategy.
Yeah. Awesome. Thanks, Jim. Garden Well updates coming in the March quarter. Will we get a resource reserve update for all assets then too?
I think what I heard. The update, the drilling that we're going to be doing at Garden Well Main will be occurring during the March Quarter. I'm not sure when we'll get the results for it. I doubt whether it'll be in the March Quarter, and that'll only be, you know, core results. It won't be any modeling or anything like that because it's pretty early, very early in the process. Our resource and reserves process is something that we sort of kicking off now, but we don't normally put our resource and a reserve update out until sometime in the June Quarter, usually towards the back end of it. That's the timing that we follow there. I'm not sure if I answered your question, George.
No, no, that's perfect.
I didn't quite hear.
It sounds like back half of the year we'll get a bit more color there on Garden Well and resource reserves coming through. Awesome. Thanks for that.
Yeah. The two, they won't be connected. As we get information updates on Garden Well Main, we'll let the market know. It won't be tied in with the RNR release. Sooner the better as far as I'm concerned on that we get the info from Garden Well Main.
There are no further questions at this time. I would like to turn the call back over to Jim for closing remarks.
All right. Thanks everybody for joining us. We know that it's been a pretty busy morning this morning with a few releases. No doubt a result of having Australia Day tomorrow. Look, we thank everyone for joining us. As always, if you've got any follow-up questions, please drop us a line, get in touch with Ben, we'll do our best to help you out. All right. Thanks, everybody. Have a good day.
This concludes today's conference call. You may now disconnect.