Good day and welcome to the Regis Resources Limited quarterly results briefing. All lines have 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 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 0. Finally, I'd 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 thanks for joining us on the Regis Resources March 2023 quarterly update, which looks like it's a very busy morning this morning with a lot of reports coming out. Thanks for joining us. Firstly, I'd note that I am joined here around the table with our CFO, Anthony Rechichi, and also with Stuart Gula, our COO, along with Ben Goldbloom, the Head of Investor Relations. Despite production falling below expectations, we made good progress on our long-term plans during the quarter, and we achieved a significant milestone at our growth project at McPhillamys. First on safety, our LTIFR, Lost Time Injury Frequency Rate, was steady and well below industry average at 0.6.
It goes without saying, but I'll say it anyway, the health and wellbeing of our people will always be a priority focus for the company, and we are proud of the progress that we've made. The installation of the 9 MW solar farm at Duketon South is on track, and we expect it to be commissioned in the June quarter of this year, so just a few couple of months away. We're looking forward to the first power from the farm, as it not only reduces our carbon emissions, but it also delivers direct power cost savings through the reduction of diesel fuel that's consumed currently for the DSO mills. Over the last two years, we've invested heavily in growth capital at our operations, totaling nearly AUD 350 million.
This investment phase is coming to an end with the declaration of commercial production, coming up at Garden Well underground at Havana Pit, in the June quarter. With this, we start the transition from investment to cash build. For the March quarter, overall, we produced just under 104,000 ounces of gold at an all-in sustaining of AUD 1,827 an ounce. Our growth capital was AUD 73.5 million. With the lower than expected production in March, we adjusted and tightened our FY23 full-year production and increased our AISC guidance to AUD 1,795-AUD 1,845 an ounce, as was released back on the 17th of April.
The June quarter has seen rates at production rates at Duketon South return to planned rates, while at Duketon North, we're seeing the wet weather having an ongoing impact this month. Stuart will make some comment on that a little bit later. Notwithstanding the impact at Duketon North, we are expecting subsequent a lift in gold production and cash generation to finish off this financial year. I'll now hand over to Stuart Gula, who will provide some more information on the operational performance. Thanks, Stuart.
Thanks, Jim, and good morning, everyone. Looking more closely at the operations, Duketon gold production was lower at approximately 77,000 ounces at an AISC of AUD 1,919 an ounce. Tropicana was also lower at just over 27,000 ounces at an AISC of AUD 1,458. Duketon North had lower production at just under 15,000 ounces at AUD 2,948 an ounce due to wet weather events limiting overall material movements. This was offset by decreasing strip ratios as geotechnical issues from the December quarter were addressed, enabling better access to ore. Access to ore will continue to improve in the June quarter, thereby improving its cash margins.
We do note that wet weather and its impacts has continued into April. It's largely affecting mining at our Blenheim pit, which is our single largest high-grade source of ounces at DNO. With DNO in the twilight of its current life, we lack the previous flexibility to mine from alternative sources in these type of events. We see this as a timing issue only and don't currently see any further impact on our guidance. The situation will continue to be monitored, though. We acknowledge the thin margins realized at Duketon North this year. Whilst the opportunity for potential exploration success remains, along with resource-to-reserve conversion, a number of scenarios are being evaluated in relation to the value contribution that DNO makes to the Duketon life of mine.
Duketon South production was also lower at just under 62,000 ounces, at AUD 1,673 an ounce AISC. A processing plant experienced maintenance events, limiting throughput, and ramp up of ore delivery from the Garden Well underground was slower than we expected. Garden Well underground is a new mine, and we'd planned for issues associated with ground conditions and dewatering. Ultimately, what we provided for and what manifested in the field differed. However, the teams have successfully learned how to deal with and overcome the varying conditions that we've experienced, and we're now moving forward at more acceptable levels of performance in line with our expectations. Pleasingly, Garden Well South underground delivered greater than 40,000 tons in March.
As this production rate continues into the June quarter, we will declare commercial production at the mine. The production maintenance issues experienced at DSO in the March quarter have since been rectified, and we are seeing a much improved performance in the June quarter. Across the Tropicana.
Tropicana delivered a lower quarter at slightly more than 27,000 ounces for an AISC of AUD 1,458, as stated previously. The shortfall in gold production was in part driven from underground mines as they experienced issues with frozen stopes and resultant lower ore production for the period. Open pit mining was also significantly lower as it was impacted by low fleet availability and productivity issues. The underground production issues have been rectified. We are expecting improved performance in the June quarter. We expect to declare commercial production at the Havana open pit as we see increased ore to mill feed and associated gold production. That's it from me. I'll now hand over to Anthony for the financials.
Thanks, Stuart. Onto the financials now for the quarter. We sold just over 105,000 ounces of gold at an average price of AUD 2,477 an ounce, which includes the effect of the hedges. This delivered AUD 261 million of gold sales, which included some record spot prices for the company. Operating cash flows remained strong. Overall, we generated a total of AUD 99 million in operating cash flows, again including those hedges, with approximately AUD 58 million from Duketon and AUD 41 million coming from Tropicana. Talking on an accruals basis, as we see in table one of the quarterly report, mine site capital expenditure during the quarter was AUD 93 million. In addition, exploration and McPhillamys expenditure for the quarter was AUD 18 million.
Growth capital was high this quarter at AUD 74 million due to the ongoing development of the Garden Well underground and the Havana cutback, this time also an increase in preproduction activity at DSO's Ben Hur line. With the Garden Well underground and Havana open pit transitioning to commercial production in the June quarter, growth CapEx reduces accordingly, with cost then reporting to all-in sustaining costs for those mining areas. I'll now point you to figure four of the quarterly report, which outlines the quarter's cash flows. Cash and bullion closed at AUD 204 million at March 31. You can see that operating cash flows were AUD 128 million. Partially offsetting this was AUD 29 million in hedge losses owing to the delivery of a further 25,000 ounces into our hedging program.
You can see that over to the right of the waterfall chart, where the hedge losses come in. Furthermore, we spent AUD 89 million on CapEx, AUD 15 million on exploration in McPhillamys, and corporate and finance costs were AUD 9 million in the quarter. We also received a significant cash tax refund. As flagged, in the December quarterly report, in March, we received a AUD 67 million tax refund relating to the loss carry back tax offset arrangements. In closing, I note that increasing gold production in the June quarter should provide an improvement in cash generation to finish off the year. Thank you, and back to you, Jim.
Thanks Anthony. Look, on the growth front, our projects have made good progress during the quarter. As you've heard, Garden Well Main underground, I draw your attention to, sorry, the good progress at Garden Well South underground. At Garden Well Main underground, I draw your attention to figure five in the release, which shows progress of the decline and the initial target zone. The underground exploration decline, at that decline, we've now completed nearly 550 meters to date, with the first diamond drill cores being delivered to the surface. On that, we're very excited to see some fine grain visible gold observed in quartz veins hosted by altered basalt, which means we're seeing what we'd hope to see and where we'd hope to see it.
It's still early days, but it's very exciting. We're expecting assay results in this current quarter. We're also on track for the decline in the diamond drilling to be completed by the end of this calendar year. We expect that when we release our resource and reserve statement for 2023 in June sometime, along with the exploration update, we'll be in a position to provide some more information on the progress of this work. It's safe to say that we remain very excited about the potential growth of this Garden Well underground area and are expecting this to deliver some significant value for the company. The underground story and storyline at Tropicana is very similar to Duketon.
Continuity of the underground is progressing as planned, with reserves actually outplacing depletion. In the last 12 months, we replaced depletion, and we added another 50,000 ounces. That's at 100% in calendar as, in CY 2022, which was announced earlier this year. It's great to see, exactly as we were anticipating, Tropicana underground is replacing its depletion and adding a little bit of life as well, which is very pleasing to see. At McPhillamys, we achieved a major project, a major approvals milestone with the New South Wales Independent Planning Commission giving the final state approval for the project. This is recognition of the substantial amount of work the McPhillamys team in New South Wales have done in working with all of the stakeholders to make this an approvable and a viable project.
In relation to completing the feasibility study and taking this project to FID, we still have a bit of work to do. With a multitude of modifications, such as layout changes, and arrangements on the site that occurred during the planning approvals phase of three and a bit years. We have a need to revisit some of the work done previously before finalizing the cost and the schedule. A good time-consuming example of this is the geotech drilling we're wanting to undertake on-site. Because some of the major equipment has been moved around, crushers, the high-pressure rollers have been moved. We need to do the geotech drilling before we can finalize the Class 3 estimate. This work is currently on hold while we close out the Section 10 application that's on the mining site.
I've mentioned this Section 10 previously, and we are still confident it will be resolved, and now that the IPC decision is clear, we think this time is fast approaching. We see this completion of the feasibility study, along with confirmation of the funding strategy, resulting in a final investment decision targeted for late in the March quarter of FY 2024. Overall, it's very exciting moving into the next phase for all involved with McPhillamys, and we look forward to progressing our project that has significant potential value for Regis. On wrapping up, what the March quarter brought us was, despite the lower gold production, it was another quarter of solid operating cash flows and good progress on our long-term plans.
We saw a significant milestone at McPhillamys being delivered. We've got big milestones to come now at Garden Well South Underground and the Havana open pit. While cash generation has been lower than expected year to date, with gold production set to increase and growth CapEx starting to drop away in the June quarter, we're expecting cash generation to finish higher as we close out the financial year. As we now transition the business to the cash-building phase at our current producing assets, and we're making some very exciting progress with our growth projects, it certainly is an exciting time at Regis. Okay, I'll hand it back to you Paulie and we'll take any questions.
Thank you, all speakers. At this time, I would like to remind everyone, in order to ask a question, please press star then 1 on your telephone keypad. Your first question comes from the line of Matthew Frydman from MST Financial. Your line is open.
Sure. Thanks. Hi, Jim and team. First question is on the comment that you've got in the report around evaluating scenarios for Duketon North. Just wondering if you can go into maybe a little bit more detail on exactly what's being contemplated there. Obviously the result in the March quarter, not ideal given not a particularly broad cash margin generated there. Is it really around I guess the economic I guess yeah, the economics of future reserves and I guess particularly noting that you've got a decent tail of low-grade stockpiles there currently in the mine plan. You know, would that material still be economic currently?
Duketon North, as you pointed out in your question, our plans have been to finish the open-pit mining and finish the direct run-of-mine feed phase of Duketon North, and then run off into the low-grade stockpiles that we've got. We have some substantial stockpiles there, some pretty old stockpiles. Basically, with this now we also have some opportunity in the area. You know, we've been talking about the potential for Commonwealth and a couple of other potential small deposits.
You know, the price and the cost movements over the last nine months or so and the inflationary impacts, we're really taking a careful look at what those plans are like at the moment, and whether they still make as much sense as they did, 12 months ago when or, and before that, when we were planning on running these low-grade stockpiles down. There was always a view that the low-grade stockpiles are really not gonna make too much. They, they had the potential to make money. They certainly weren't gonna make a profit, but they would make cash.
As we're looking now and flowing through some of the inflationary costs, we're seeing that there's some, we've got to make sure and do a lot more work to make sure we're confident that that's the case, and if it isn't, then, adjust our strategy accordingly. You know, really there's no new material to be in the equation at Duketon North. What we're doing is we're wanting to work through and make sure that the plans that we had in the previous cost environment of 12 months ago is still applicable. If it isn't, then how would we, should we be cutting the cloth at Duketon North? We're working through that at the moment. You know, we'll obviously have a clearer picture on that. We'll update the market.
Yeah. Thanks. That's pretty clear, Jim. Would one hypothetical scenario -
Sorry, Matthew.
You go. No, you go.
Matthew, the other part of your question was talking about the costs at Duketon North for the quarter, and they are high. Part of the reason why they're high is we've still been - while the total material movement is starting to drop away, which is what we're anticipating, you know, as you come to the end of the mine life. These pits are all pretty small. You run like a cut snake for a couple of quarters to mine the waste and then you produce the ore. last quarter, our production was lower, and that really dragged our all in sustaining cost up.
We anticipate that if things run to plan and we're able to get on top of the weather issues in the Blenheim pit, which we are anticipating, that we'll see the all in sustaining cost drop there because production will be higher and also the waste movement will be lower.
Yeah, that makes sense.
Thank you.
Thanks for that. Just in terms of what would potentially be considered hypothetically, I mean, if you ended up with a scenario where you determine that the cash margins that could be generated from the stockpiles aren't particularly attractive, would you then, you know, potentially look at putting the Duketon North infrastructure on care and maintenance pending successful further exploration discovery? I mean is that one hypothetical outcome?
Yeah, that's one end of the spectrum of options that we'd look at, for sure.
Okay. The other end?
And so n o point running - no point running a business if it's losing money. That's what we're working on at the moment. It's understanding the options that we've got with, you know, some of the deposits that we've been drilling and working on is understanding, you know, can they work in with the low grade that we've got? Is the low grade still as attractive as it looked? You know, with the continuing movement in some of these prices, they can be quite sensitive. We're just wanting to make sure we don't undertake something that actually loses us cash.
Yep. No, that makes perfect sense. Thank you for that. Second question around Garden Well South underground, and in particular, I think Anthony touched on the point that that'll be entering commercial production in the June quarter. Obviously, it was a pretty strong quarter from an all-in sustaining cost perspective at Duketon North, and part of that was the mining cost, you know, AUD 38 million, there or thereabouts, during the quarter. Just wondering what the quarterly impact to all-in sustaining costs in rough terms will be from Garden Well South entering commercial production.
Yeah. Well, it'll be a bit of a mixed result there. I mean, for a start, the ounces produced from underground at Garden Well will be obviously a lot more than they have been because we hit steady state stoping production, and actually the grades coming out of some of those stopes are pretty good in this on the levels that they're in. That would pull down the all-in sustaining costs. Of course, as you move into commercial production, the growth capital stops being defined as growth capital and starts being defined as sustaining capital.
There'll be some elements of the growth capital like specific pump stations and some ventilation infrastructure that's a little bit more, what's the right word? Sporadic, that will drop out and go in surges. You know, the decline in a lot of the development, which was previously classified as growth capital will then shift across and now being included in AISC. It'll be a bit of a shift from one area into the other, but all of that will now of cost classification, but all of that will now be divided over more ounces. Overall a better outcome.
In broad terms, you'd expect a positive impact to all-in sustaining costs from the commercial production from Garden Well South?
Overall it'll be a positive impact on cash flow because for similar cost expenditure, whether it's classified as growth or whether it's classified as all-in sustaining, the sort of the cost of running the business is roughly the same. It's just what buckets it's going in. Overall gold production is up.
Yep. Yep. That's pretty clear.
Which means more.
Okay. That's helpful. That's helpful. Thanks, Jim. That's helpful.
That's actually a similar scenario to what we expect to see at Tropicana with the Havana pit as well.
Okay. Thank you. That's helpful. Thank you very much, Jim.
Your next question comes from the line of Alex Papaioanou from Citi. Your line is open.
Hi, Jim and team. On McPhillamys, I appreciate that formal numbers will come with the feasibility study, but I wanted to hear your thoughts on what OpEx costs might look like, particularly given labor availability in New South Wales might not be as tight as it is in WA. Thanks.
Yeah. Look, it's still early days. Well, it's not early days. That's probably not the right way to describe it. I think we're, you know, there's... Are we seeing pressures on what we anticipate the operating costs to be relative to what we anticipated it would be a couple of years ago and back in 2017? Yes, clearly we are. I think you know, we haven't updated and we won't be updating any specific more guidance around AISC until we've completed that works. As a sort of a general question on your, are we seeing the same pressure on labor costs as we are in Western Australia?
Look, I think for us it's a little bit early at this stage to say whether we're seeing that explicitly because we just, we're not out there trying to recruit a mining team or our contractors not giving us the feedback on it. You know, we - I couldn't answer that one specifically. I mean I think from a from overall impacts, the information we're getting at the moment on how the construction costs are likely to be, there's certainly been a little bit of an easing of contracted demand, which means that their margins are becoming a little bit tighter. You know, that element we'll see flow through or we're anticipating seeing flowing through into our final CapEx number.
You know, in terms of the impacts on the oil and the operating costs, as I said, it's gonna be more than what it was back in 2017, the last time we put some detailed numbers out. How much more, it's still, we'll see. A lot of it depends on the competitiveness as well of the contractor landscape in, on the East Coast. We think may actually be better than we have experienced in the last couple of years.
Yep, understood. No, that's it from me. Thanks.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Matt Green from Credit Suisse. Your line is open.
Hey, good morning all. Look, just following on from Alex Papaioanou there. Jim, just wanna confirm, once you get the Section 10 in place, from a permitting perspective, there's no other potential hurdles or appeals or anything that could, potentially delay the timeline to FID?
Not that we anticipate, but that's not to say that. Look, the, once the Section 10's cleared, on that basis, we then get on and get out in the field and we've got a few months of geo tech drilling and assessment. In the event that we have final investment decision, that's a go. Then there's, I think there's around about three months worth of additional permits that we'll need to get, but they tend to be more bureau, perfunctory, you know, just permits that you have to get, like, you know, a permit to realign the road.
Things that we haven't been able to get until we got IPC approval, and frankly, with some government departments, they don't engage with you until you've committed to the project. In terms of anything that could be a major, a major stop for us, there's nothing in the formal process, whether somebody, you know, comes out of left field. I don't know. We're not expecting that. From here, we - once we've got the Section 10, we see that everything's pretty well in our control, but there's always, you know, you can't be 100% certain.
Yep. No, that's great. Thanks, Jim. Then just secondly on Garden Well South, some of the I guess ramp-up challenges you had there, you highlighted ground conditions. I was just wondering if you could elaborate, please, on, was this quite an isolated event? I guess, what have you done to sort of help rectify some of those challenges you faced?
Look, I guess the thing that took us. We'd always planned for learning what the ground conditions were like and making provisions in our times and schedules for difficult ground, you know, structures, those sorts of things, as we just get used to what ground support regime is required. What we ended up finding was that, particularly in the upper areas, we started to come across a number of bugs, which are like voids underground. Some of them can be full of water. Some of them might be the size of a car. Some of them might be a little bit bigger. Some of them could be the size of a football.
You know, you just get these bugs full of crystals, and geologically interesting, but geotechnically a pain in the backside. You know, it's - if it's in the sidewall, for example, you can figure out how to manage it. If it's in the backs or if it's in the floor, you've got to come up with the right protocols 'cause you don't want, you know, you don't wanna be driving over a bug and potentially disappearing down into it, in an extreme case. It just took a while for us to get to develop our protocols around that. It means that a certain heading that might have had 100 meters a month in it or something like that, we had to slow that down in the early stages.
What we've found is that if, as we've progressed with depth, they've become less in number, so that's making it a little bit easier, less in size. But that's not to say that they've gone away, so, but the pleasing thing is that Stuart and the team have, and the team up on site have worked their protocols out. Instead of, sort of, frankly coming across it and sitting there scratching their heads for a couple of days trying to figure out how to safely manage it and, and work on ideas, they've now got their protocols as how to deal with that. And move much more quickly through it. Anything you wanted to add to that, Stuart?
No. No, I mean I think that it's not conditions that are unusual. It's just everyone. Although a lot of the team have done it in other places, this is the first time the team's actually got together and all done it together at Garden Well South, and they have to work it out, so, which they have.
The other was water. We had, you know, we've always known the mine was going to be quite wet. We've put in provisions. We've got in quite large pump stations, as I think we've put photos in some of the quarterlies in the past. Sometimes the water doesn't come out exactly where you expect it to be, and so you've got to put holes in different directions and allow time for the water to drain. We understand that a lot better now. You know, we're now putting our dewatering holes not where we think they should go, but where we know they should go because of the experience on the level above or two levels above.
Okay. No, that's clear and helpful. Thanks. Sorry, go ahead.
No, that's it, Matt.
Yeah. No, that's great. It sounds like this is quite a sort of isolated circumstance in the upper levels. It's not really sort of changing your view on, I guess, scheduling or scope design on the go-forward basis. You're still quite happy as where that sits.
Well, I'd much rather if it wasn't there at all. Every mine is different. I guess that's the point we're probably trying to make is that every mine is different. When you know, you get these event, these situations that you might have thought a bit about and planned for, and sometimes it goes exactly the way you think it's gonna go, and other times you might have over-planned for it or you might have under-planned. Our point is that, in this case, is, you know, we're only just getting into the production areas, and we're producing in it. It just takes a while to understand how you get into a rhythm.
You know, if a mine's been going for three or four, five, you know, four years, you understand how to deal with the issues. Everybody's sort of well-drilled on it, because every mine is different. If you're lucky, you go off without a hitch. I've never heard of that happening, but sometimes it, I guess, it must do. You just gotta, you know, as much as we learnt some lessons from Rosemont, and we've in that there's basically very little provision for this sort of thing. We copped it pretty hard when we were starting that up. We made a lot more careful thinking about how we'd plan around these events.
If we hadn't have done it would've been much more significant of an impact than it was, but it was still there. Basically, we've learned, we've moved on and the issues are still there. Water is still there, and the bugs are still there. The bugs are disappearing a bit more with depth or becoming less of a scale size issue. The issues are still there. We just know how to deal with them more efficiently now.
Yeah. Okay. That's great. Thanks for the color. That's all for me. Thanks.
There are no further questions at this time. I'd like to turn the call back over to Jim for closing remarks.
All right. Thanks, Paulie. Thanks everybody. Appreciate you joining us, and thanks for the questions. If anybody has any follow-up questions, please, give us a call, get in contact through Ben. Otherwise, have a good day. Thanks very much.
This concludes today's conference call. You may now disconnect.