Thank you for standing by, and welcome to the Regis Resources Quarterly Results Conference Call. All participants are in a listen-only mode. There will 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. Jim Beyer, Managing Director and CEO. Please go ahead.
Thanks, Darcy. Good morning, everyone, and thanks for joining us on the Regis Resources September 2023 quarterly update. I'm joined this morning with our, by our CFO, Anthony Rechichi, who just managed to get out of being stuck in the lift this morning. So I'm grateful that he's here to answer, to, to be part of this. Otherwise, I'd be on my own. Although, having said that, Ben Goldbloom, our Head of Investor Relations, is also joining us. So first up, looking at our key safety aspect, and our frequency rate. Our lost time injury frequency rate is well below industry average, as reported by DMIRS here in WA, with a frequency rate of 0.7.
I would make a comment that we are seeing a slight increase in the less serious injuries, and I think we see that as a bit of a function of the lifting and skills turnover that we're seeing across the industry, or personnel turnover, I should say. So we're obviously keeping an eye on that to make sure we don't let that get too far ahead of us. We're very pleased to start the year with a reliable quarter of gold production and a modest cash build. This is the third consecutive quarter of cash build for the company, and since December, since the December 2022 quarter, our cash and bullion balance has increased by nearly AUD 100 million.
Now, we're expecting a modest cash build for the remainder of FY 2024, and when the existing hedge book rolls off, cash build will accelerate and add more than an additional $170 million a year at current spot price. In fact, a little bit more at $3,150. Progress on our growth plans continues with the completion of the Garden Well exploration decline. The drilling program is making good, good progress and is expected to be finished by the end of December this year, or its first phase. We'll provide an update on the drilling results in the biannual exploration update before the end of this calendar year. At Tropicana, the joint venture progressed and the Havana Underground Project to the next phase.
Now, the Havana Underground Project has the potential to add seven years of life in addition to the current underground production, or seven years of additional production to the underground. On the ESG front, we saw more than just safety improvements. We commissioned the 9MW solar farm at Duketon South, which is now delivering a direct reduction in power costs and also on our carbon emissions. A key element in this period, this time now, the Safeguard Mechanism. At Tropicana, the joint venture has commenced the site works for the 62MW solar, wind, and battery facility. Overall, for the quarter, we produced just over 111,000 ounces of gold for an all-in sustaining cost of a fraction over $2,100, at $2,160 an ounce.
The September quarter was the first time all of our operating assets were in commercial production, and it was pleasing to see them deliver the plan. Just looking a little bit more closely at our operations, the Duketon gold production was higher than the prior quarter, at just over 76,000 ounces for an all-in sustaining of $2,180. And at Tropicana, we were just under 35,000 ounces for an all-in sustaining of $1,859. Now, it's important to keep in mind that Duketon's AISC includes $227 per ounce of non-cash inventory adjustment. Duketon North production was just under 18,000 ounces for an all-in sustaining cost of $1,925. Cash margins have improved at Duketon North as waste movements have decreased as planned.
The majority of mining at Duketon North will be completed by December 2023, as we get to the end of the Moolart Well pits. Some mining will continue at the Gloster pit until the middle of next year, in June, and this will represent the end of the current reserves, in-ground reserves. Following completion of the open pit, mill feed will be sourced solely from lower-grade stockpiles and will continue while they generate cash. Once that ends or we don't deliver that, then we'll put the site on care and maintenance, and we'll await further confirmation of the new deposits that we're working up at the moment, potential new deposits. At Duketon South, production was nearly 59,000 ounces for an all-in cost of $2,258 an ounce AISC. Underground mining progressed well.
Good development rates were maintained above 3,000 meters for the quarter. In the open pits, mining was at Garden Well, Russell Spine, and Ben Hur, and this will continue through the remainder of this financial year. At Tropicana, we delivered an improved quarter at approximately 35,000 ounces for an AISC of $1,859 an ounce. Now, we realized an increase in the AISC over last year, and I think we've already highlighted this or identified this before, but this is due to a shift in the classification as we move into commercial production and the capitalized waste stops being classified as growth capital and moves into AISC. Importantly, this is only a change in the, in inverted commas, "accounting" classification, and the cash margins remain broadly in line quarter on quarter.
Can be seen by the corresponding material reduction, of course, in the great capital at Tropicana, where spend for the quarter was nominally about AUD 3 million. Following commercial production at Havana Open Pit in the June quarter, access to ore has improved and is expected to continue in the current period. Underground ore production was the highest since we acquired our share of ownership in that asset, and de-bottlenecking activities have had a great impact, and we look forward to further improvement as the year progresses. So what I'd like to do now is hand over to Anthony to give us a little bit more insight into the financials for the quarter. Thanks, Anthony.
Thanks, Jim. Onto the financials for the quarter. We sold just over 106,000 ounces of gold at an average price of AUD 2,560 an ounce, that's AUD, which does include the effect of hedges. This delivered AUD 273 million of gold sales revenue for the quarter. Operating cash flows have been solid again. Overall, we generated just under AUD 97 million in operating cash flows, that also includes the hedging, with approximately AUD 67 million coming from Duketon and AUD 30 million coming from Tropicana. On that point, you'd have figure 3 in the quarterly report, which outlines the cash flows for the quarter. Cash and bullion closed at AUD 250 million at September 30th. You can see that operating cash flows were AUD 138 million.
Partly offsetting this was AUD 41 million in hedge losses, owing to the delivery of a further 30,000 ounces into our hedging program. You can see that over to the right of that waterfall chart at Figure 3. Furthermore, we spent AUD 64 million on CapEx, AUD 17 million on exploration in McPhillamys, and corporate and finance costs were AUD 9 million. Regarding our debt, as announced yesterday, the company signed an amendment deed with its lenders to extend the maturity date of the existing AUD 300 million loan facility from May 31st 2024, out to June 30th 2025. The extension forms part of the broader funding strategy for the company's McPhillamys Gold project.
Following the expected completion of the Bankable Feasibility Study in the March quarter next year, it's likely the existing loan will be incorporated into a new financing package, along with operating cash flows of our own to fund the project. Thank you, and back to you, Jim.
Thanks, Anthony, and it is pleasing to see that within 20 minutes, you're over the trauma of being stuck in the lift. Okay, so coming back to touching on growth again, and our near future, and near-term growth plans at all of our assets. I mentioned before, Garden Well exploration is now. The decline is now finished, and we're feverishly drilling out what we, what we think will become a long and continuous mineralized system underneath the Garden Well pit. The initial drilling program will be finished at the end of this year, and we'll at least be able to provide some progress updates on our biannual exploration report or update, which will be in November, so next month.
At Havana Open Pit, we see the production hitting its straps, and later in FY 2025, we'll see total waste movement start to decrease as we break the back of of the stripping, while gold production will remain relatively flat. This will result in an uptick in free cash flow generation from that site, all other things being equal, price, of course. At Havana, the Havana Underground, the project has moved into the next phase, the move into the next phase was approved. The initial view is that the Havana Underground has the potential to add a new production zone for seven years on top of the existing underground plans, and we're very excited to see this progress in the project.
The Havana deposit is following a very similar maturity curve as its predecessors at Boston Shaker Underground, and also at Tropicana, and really reinforces why the entire asset is one of genuine Tier 1 asset going, Tier 1 assets going round. The value of the underground continues to grow well beyond the reserves as they were 2.5 years ago, or the reserves as they were 2.5 years ago when we bought the thing. And this is, this ongoing growth that we're seeing in the underground is certainly in line with our views on value at the time. I continue to be really pleased with the fact that we acquired that asset and have it in our portfolio. At McPhillamys, we await a response on the Federal Section 10 application.
We remain confident this will be cleared, and completion of the DFS is expected to be in the March quarter. A final investment decision in the following quarter will likely follow the release of this study. Look, you can count on one hand the number of development projects with the scale of McPhillamys, and we're very excited to own that and have that in our portfolio as well. On a final note here, I'd just like to thank Stuart Gula, who is leaving us after four years. He certainly made some material impacts on our safety and our operations and helped manage that through the COVID, the COVID era. Something that I think we've all put to the dark recesses of our minds.
Next week, I'm pleased to say that Michael Holmes will be joining us as the new COO. Some of you may know Michael, of course, from his time at OceanaGold. So when you sum up the Regis investment case, we have existing assets that are demonstrating great cash-generating capacity. We'll see a major cash flow inflection point in eight months and two days with the hedging rolling off, and we'll also see this commencement of the decrease in waste movement at Trop. Look, the reality is, as I said, eight months and two days, it could be less as we're examining and testing options to bring forward the end of the hedge book and to bake in the the benefits earlier... potentially.
One of the few growth, and we also, of course, hold in our portfolio one of the few growth development projects with scale being McPhillamys. So there's still time to get in while the stock's trading at cheap value. With such a relatively simple , we feel that Regis, with such a relatively simple story, clear production future, and cash-generating future, that the market will see, and we'll see this outlook reflected in the company share price very soon. All right, so what I'd like to do now is hand over to Darcy, and we're happy to take on any questions that you may have.
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 your question. Your first question comes from Andrew Bowler, from Macquarie. Please go ahead.
G'day, all.
Morning, Andrew.
Morning. Just looking at the commentary for Tropicana, talk about the open pits delivering more ounces compared to plan. Is that just due to higher rates of mining than anticipated? Or was that a beat in terms of the resource model?
Yeah, no. Look, I think the context of what we were talking about there is the underground developing is adding ounces in life. We're seeing, you know, we've seen, we've seen over the last couple of years that Tropicana has been replacing depletion and adding a little bit more. So we're pleased to see that continue, and we're certainly pleased to see the potential with the Havana Underground to continue with that by adding in new ounces that are outside of the recent- potentially new ounces that we haven't finalized since the feasibility study, of course. So that's the, that's the context of what we're looking at there.
Oh, okay, yeah.
Yeah, I guess the other thing is, you know, we are, we have seen a lift in back or the production levels at Tropicana are back to where people might have seen them a few years ago, certainly prior to when we bought them, as the Havana cutback has hit commercial production. So we are seeing additional production coming from that, but that's not. That's what we expected to see. That was part of the, part of our expected value, the proposition that we were buying into back when we bought it, just over a couple of years ago.
Yeah, apologies, I must have read that sentence wrong. But last one from me, just your final comments there about potential to sort of, you know, bring the closing of the hedge book forward. Are, are you thinking of accelerating deliveries into the hedge book, or is that, are you looking at sort of financial avenues to sort of bring the closure forward? Just a bit more on that, would be good, thanks.
Yeah, probably more of the latter than the former. You know, the, you don't wanna... You know, if our idea and the options that we're looking at is really, does it make sense to take the book out completely? You know, have we got the, capacity to do that? How does our balance sheet look afterwards? Certainly, our cash-generating, you know, on a monthly basis at a hundred and, annualized, AUD 170 million, you're adding so, you know, AUD 12 million-AUD 15 million a month in additional cash flow by doing it. So, you know, there are a few things that we look at. I'm not sure whether we'd accelerate them. We'd probably just bite the bullet and, and take it out. But that's that's an option that we- that's what we're evaluating at the moment.
No worries. Thanks. That's all for me.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from David Coates, from Bell Potter Securities. Please go ahead.
Morning, gents. Can you hear me?
Morning, Dave. Yep, we can hear you.
Yeah. Yeah, no, good. Sorry, my line seems to be dropping in and out this morning. Got a couple of quick ones. McPhillamys, I mean, it's great to have the, you know, March quarter feasibility update and potentially FID June quarter. Are you able to give us kind of any other... Getting any sort of concrete signs on this, on, on the Section 10 coming through?
I'd love to be able to, but I can't at the moment. We've just been, you know, we've obviously been sending our inquiries into the department and getting the constant response of, "We'll let you know." But we're pushing on. You know, there's plenty, plenty that we can do, and as we, you know, work to finalize the feasibility study. So, you know, we'll just keep pushing on.
Great, thanks. Yeah, understood, understood. In your commentary, you just mentioned the stockpiles at Duketon North; they'll obviously be coming into the mix. It sounds just from the comments you made; it sort of sounded like that's potentially a little bit of a movable feast with the gold price ticking up a little bit. Are you sort of is that processing run sort of likely extended in a higher gold price environment?
Look, you're right. It is a bit of, it is very much a moving feast. You know, we, pardon me. Well, this, this low grade, this, these low-grade stockpiles are exactly what they, what we, as we described them, they're low grade. They've been building over many, many years. And at the, at the current price, I mean, this time last year, or probably 18 months ago, we thought there was viability in it. I think I've always said, you know, if we make a couple of dollars at an ounce, we'll do it. But the inflationary impacts on costs over the last 12 or 18 months have made that much more, much, much harder and basically impossible.
Of course, what we've seen, there's a pretty good gold price that we're sitting on at the moment, so, that could influence it. You know, we've got to wait and see how things look in the middle of next year.
Sure.
or, you know, probably by the end of the March quarter before we make a call on that. You know, we, we the key things for us is just making sure that we're managing the costs as best as we can, and we'll keep running with that over the next quarter or two. And then with that information, we'll also see whether the inflationary pressures have sort of eased a bit. Does it make sense to continue on, or do we just put it into Care and Maintenance while we wait for other material?
Right. Sure. And and finally, just on the Havana Underground, the feasibility study there. Can you give us a bit of a... I know, I understand that, you know, it's emerging as a work in progress, but can you give us a bit of a sense of scale of that operation compared to the Tropicana existing undergrounds at Tropicana?
Yeah, look, I'm a little bit reluctant to do anything too much. I mean, really-
Sure.
It's a conceptual... Well, it's a little bit more than conceptual, but we're still working on the, on on you know, really what the options might be in terms of scale, in, well, annualized production. But there's still, I mean, it's material enough to make a difference to the underground production, which is why we're excited about it. Once we've got a little bit more information, which I'm hoping will be, later next year, we'll be able to sort of expand a bit more and give an indication on the value that that brings.
All right. Thanks very much, Jim. Cheers.
Yep. Thanks, Dave.
Thank you. Your next question comes from Meredith Shears, from Bank of America. Please go ahead.
Good morning, Jim and team.
Hey, Meredith.
Thanks for the call this morning. Can I just follow on with McPhillamys? So I'm just trying to work out, you know, if you, if you get delayed potentially, and you don't get the Section 10 until closer to the end of the year, say, December, does that mean that you're still gonna stick to the March timeline for the DFS? You know, are you gonna be potentially taking, reducing the sort of work that you need to do to feed into the DFS? I'm just trying to think about, is that a fixed timeline to deliver or whether that could be pushed out, and what other work you may need to do after the DFS if you've kind of cut a few corners there to deliver the timeline.
Yeah, look, I think one of the things that we've been talking about is the Section 10 is limited access for us to get some construction quality in, construction cost-related information. I guess, you know, we've made a, we've made a taken a view that we'll continue with the estimations, but they, at the moment, they, we're evaluating just how wide an allowance do we have to make for what we don't know in terms of some of that geotech. If we—so, you know, I mean, in the end, you can, you can set any date for, if you like, you know, within reason, of course, you can set any date for completing the a study, but the less information that you've got feeding into it, the more variables, the greater the range of confidence.
So, you know, we'll make a call as to, as we get closer, is there, are we sufficiently confident that that we could perhaps firm or land on a number that's got a couple of unknowns in it, but they're in an area that, that, it's, the risk is quite minimal, or is it an area that we'd want to get more information before we, we finalize it? And of course, the subtle difference there is that we might land on it and publish our DFS, but not make FID until we've tightened up one particular risk area. I mean, there's a lot of moving parts in that, but there's a... So I hope that sort of answers the question that you're trying to get.
Yeah. Yeah, it does. So with, you may refine some of your, potentially your cost estimations between the DFS and FID, and then make a decision on, with FID, with potentially some updated numbers, in the meantime, between DFS and FID. So, I think that answers my question. Thank you. It's a little bit more-
Yeah.
Clarity just on, yeah, from what I wanted to know there.
Yeah. Look, our preference is, of course, you know, you do an FS, a feasibility study. We don't wanna have; we'd prefer not to have uncertainty and then say, "Oh, yeah, we've finished the study, but we haven't fin-- you know, we've still got more work to do to final- to tighten up the numbers." That's actually the least desirable situation, but then you've, then you've got the sort of the worst of both worlds. You've provided a number, and you haven't provided certainty. So that's-
Yeah.
That's not really what we want to do. We want to make sure, you know, we have to evaluate it as we go. But, you know, we're thinking that as we look at some of the detail we're after, actually, the variability that we might, we might have to provide for as a result of not having all of the information might not be that significant. So we're just doing that work at the moment.
Okay.
So I'm trying to avoid saying we're gonna come out with a study, and then we're gonna do more work and refine the number again. That's not what we wanna do. That's, you know, rather than, you know, saying we're coming out with a study, and then we're gonna do a bit more work, and you know what? It might go up, more likely our objective would be come out with a study and, with a certain range of confidence, and if we feel it's needed, we might do a bit more work solely intended to limit up the, the potential contingencies, for example, rather than the absolute number.
Yep, great. That's clear. Thanks very much, Jim. And a second question on Duketon South. I noticed the grades were a little bit lower for the quarter, primarily on that, you know, the open pit and the transition and some extra stockpile material. Are you expecting the grades to bump back up over the next 12 months as production stabilizes from those new sources? And sort of like looking at sort of similar levels to what you have over the last 12 months?
Look we would expect the, I mean, I think if you look at what our numbers were for our production was for the year, sorry for the quarter, and how that fits in with our guidance, we might see, we'll see, as you always do, the grades shift and move around, but we're pretty well, you know, bang on. We haven't made a comment about guidance, but, you know, we're clearly within guidance. And so we might see movements from, you know, I'd expect that we might see mining grades lift a little bit. The milling grades will shift around depending on the schedule that we've got lined up for each month for the low-grade stockpiles that we might be feeding in.
So it, you know, we have low-grade stockpiles down at Duketon South as well, and if we have some spare capacity for a week or a couple of weeks, we'll shove low grade into it just to help keep the mill full. But, you know, I don't think if you look at what our numbers are going to be over the year, we'll just see, you know, they're not gonna see a spectacular rise in the grade. It'll probably, you know, go up a little bit back in line with the, with the, with previous quarter. But, you know, our production will remain reasonably consistent.
Yep. Yep. Got it. Thank you very much. That's all the questions from me. Thank you very much.
Thanks, Meredith.
Thank you. Your next question comes from Hugo Nicolaci from Goldman Sachs. Please go ahead.
Morning, team. Thanks for the update this morning.
Hey, Hugo.
I just have a couple of questions, couple of questions on cost, but maybe just quickly a follow-up around the hedging piece and closing that out early. If you were gonna, as you put it, buy the bullet and close the whole thing out, would that just be simply paying the difference between the hedge price and the forward curve on volumes, or is there some extra fee in closing that out early?
I'll answer that one for you, Hugo. Look, it's never quite exactly just the mark-to-market position, 'cause that's always calculated off a midpoint. There's a bit of a spread there that you've got to deal with when you're entering, closing out those transactions, but it's quite, yeah, immaterial amounts. Insignificant, certainly in the context of the hedge.
Yeah, if you were trying to model the impacts, you'd just take whatever the spot price is on the day-
Yeah
Subtract it off the hedge.
Yeah.
The hedge value of AUD 1,571, multiply it by the ounces, and you're pretty close. You know, so many other things in our business to vary. So, you know, and that's the thing for us, that we evaluate how much does that cost? What's our balance sheet looking like? What's the outlook? And, you know, the value in it, and can we do it without make, you know, make a sensible move without putting our near-term liquidity in issue. And, you know, we certainly, with eight months and two days and less approaching it, it's making, you know, the potential for it to be a real option for us is certainly materializing.
Great. Thanks for that, guys. And then just on costs, looks like, you know, relatively low sustaining CapEx in the quarter. Can you just remind us of what the timing of that sustaining CapEx is across both assets for the rest of the year, just with regard to planned maintenance and the like?
Yeah, look, we haven't. There's obviously a waiting in this quarter. I think if you, you know, if you did the simple math and multiplied Q1 by four, you'd see we're well over. But that's obviously impacted by timing and mine schedules and movements to commercial production and those sorts of things. So we're still holding, you know, we're keeping a close eye on whether inflation is pushing any of those unit rates up, and whether that's gonna have an impact on our, on our growth guidance, and we're certainly not seeing anything to make a decision on that at this point.
The other thing that I would add, as part of the Havana Underground, there'll be a little bit of thought going into, well, what additional extra unplanned development do we need to put in to access that area as part of moving the project into the next phase? And once we've got a bit of a handle on that, if it's material, then we'll let people know, but I'm not expecting that to be anything of substance at all, you know, very, very low number.
That makes sense. I mean, and then just sustaining CapEx piece, just shutdowns. I mean, did you have any shutdowns in the September quarter? And then broadly, what the outlook for the rest of FY 2024 looks like there?
Yeah, we did. We had shutdowns across the board at Duketon. But I wouldn't see those as being overly material. I mean, they just average out pretty quickly.
Yep. No, I thought the case. And then just this last one from me, just looks like a bit of a step-up in mining costs at Trop in the quarter. Is that simply just a factor of the step up in underground ore, or are there some other factors there as well?
... Are you talking about the AISC and sustaining?
Mining costs specifically.
I think, yeah, because we've seen an increase in the, in the proportion of underground production, we're just seeing a bit of an elevation in that. But of course, we're also seeing, you know, the, the, the pit, Havana, pit is getting a little deeper, and we're moving more material. And, yeah, in terms of, there's no more pre-production at Tropicana that's going off into growth capital or anywhere. It's all, it's all reporting into the, the sustaining costs.
Great. Thanks, guys. I'll pass it on.
Thank you. Your next question-
Thank you.
comes from Kate McCutcheon from Citi. Please go ahead.
Hi, Kate.
I think the lines might have been mixed up. It's Alex. Hi, Jim and Tim. I'm McPhillamys.
G'day, Alex.
Can you talk to if you're seeing any further changes in CapEx expectations? At the June quarter, you mentioned that some costs had started to come down.
In where, sorry, Alex?
At McPhillamys in terms of future CapEx expectations.
No, I mean, we're still. I think we've been saying, you know, this thing's AUD 500 million or AUD 600 million. It's a little bit too early to make any comment about anything materially coming down. I mean, there's certainly the pressures that were there 18 months ago have dissipated, but then inflationary impacts have come in through that as well. So, you know, I think we've just got to wait until we see where that number plays out.
Great. Thanks. That's it from me.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Beyer for closing remarks.
Okay. All right. Thank you. Thanks, everybody, for joining us. As always, if you've got any follow-up questions, please give us a call. Contact Ben, and we'll do what we can to help you out where we can. Otherwise, thanks very much for joining us, and have a good day.
Thank you. That does conclude our conference for today.