Thank you for standing by. Welcome to the Resolute Mining Limited March 2023 quarterly 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 1 on your telephone keypad. I would now like to hand the conference over to Mr. Terry Holohan, CEO. Please go ahead.
Thanks, Melanie. Good day to everybody. I'm pleased to be able to report to you today on our sixth consecutive improved quarter on Q1. At this stage, everything went to plan and as it is right now for Q2. I'll go through the highlights. I'll give you some color on the operations, and then I'm gonna hand over to our new CFO, Chris Eger, who I'd like to welcome to the company formally on this call. He'll take us through the corporate, and then I'll do a quick wrap at the end before handing over to questions. I think starting with the highlights, in terms of safety, we're starting to have a few medical injuries here. Our TFIRs kicked up a little bit. However, I'd like to reassure you, we're still not having LTIs. That's the bottom line on safety.....
We're not hurting anybody. I'll remind you that Syama kicked over in February, four years without a lost time injury, which is a tremendous record. Mako is coming up to about 20 months now without a lost time injury. That is the bottom line. We're not hurting people, and obviously we are focused really hard on improving our safety record at all times. The gold production, 92,000+ ounces, slightly more than the Q1 as our last 6 quarters have demonstrated these slight improvements. Very happy with that, and this was all underwritten by grade. As you know, over the last 18 months we've been focusing really hard on getting the mining correct, getting the grades right, getting the practices right. Now we've managed to do that, and we're focusing on obviously the productivities there to maintain these numbers now.
You're gonna see a little bit of flattening out now, I would suggest, over the next few months, next few quarters, at these sort of numbers while we coast in to do our 350,000 ounce plus guidance. Very comfortable with those numbers. Before we take off, start taking off next year with the improvements to the Syama circuit further. On all-in costs, I think we're starting to turn the corner now. We've been talking about costs. You remember I've said to you that it's very difficult to focus on the cost side of the equation when we're focusing hard on the revenue side of the equation. The initiatives that we cited out mid next year are starting to come through. I'll give you a little bit more color on those in a moment. We're starting to see improvement in costs.
As a result of that, we're starting to generate cash as we expected this year, which is a big plus for the company right now. Chris will give you some more information on debt. Our debt's coming down nicely. As I say, cash costs, we expect those to start reducing systematically over this year. In terms of the ore reserves, you've seen that we've put out our statement. We had 18% increase in mineral resources, and we had a 15% increase in ore reserves. This all against after the depletion. Very excited about our Syama North. That project is progressing exceptionally well right now. We are starting to get to the point in the study, the pre-feasibility study, where we're looking at potentially long lead items.
It's only a small increase, but it'll have a huge impact on our ability to treat the Syama North material in parallel with the underground mine material. I'll give you a little bit more information on that shortly. As I mentioned, guidance, yes, we're comfortable with our guidance. We're slightly ahead on the ounces, as we expected to be in the Q1. Essentially, Mako's put in a tremendous quarter, 33,000 ounces. Mako will calm down a little bit to about 29,000-30,000 ounces for the rest of the year, for the 3 quarters, as we go through the low-grade patch. The following year, 2024, we'll be back up to the 33 plus. It will actually deliver more ounces than the 33 it's delivering now once we get through this lower grade patch.
We're looking through to a far better year next year with Mako. Okay, if I go to the operations overview, as I mentioned, it's all about grade. Our underground grade for the full ops was 2.24 grams a ton. If you remember, we were sort of just under or on the 2 grams for most of last year. If you finished out about 2.1. This is just systematic improvements on the undergrounds and in the open pit. All that grade control that we did last year in Q1, Q2, just in front of the rainy season, is paying dividends now. We're starting to get the grades through in the oxide plant. Things are coming together. We're not reliant anymore on gold in circuit, as we were last year.
We're in control of our own destiny, and we're very excited by the way it's going forward. What is very encouraging to me, if we just move into the operations, is that at Syama on the sulfides, grades of 2.86, record grades coming out from underground. The design was 2.71, if you remember. At that, we're doing over 2.4 million tons at that grade. Remember, the design of the underground was 2.1 million tons at 2.71. It really shows that these guys are taking control of that operation. What is also encouraging on the sulfides at Syama is we shut down. We had a planned shut on the roaster to do some work on our ancillary lines. We took the roaster off, downtime 5 days.
Tools on, I would say, 5 days, couple of days out of the side for heat up and cool down. We managed to get the work done on schedule. We managed to recover because of the extra capacity we built in to that unit in Q1 last year. We managed to recover that metal that was put into the ponds. We recovered that in the quarter just to demonstrate we're in full control of that circuitry now. On the oxides, grade coming up nicely, 1.8 gram a ton. Remember last year, we battled a bit about 1.35 with all the issues we had.
We're now in a strong position, 1.8, and we're starting to accelerate the A21, which is the top layer of the Syama North, but not necessarily the Syama North ounces that we're recognizing in our PFS. That is the metal that we've always looked at taking off the top of the oxides. In terms of Mako's been operating exceptionally well this last quarter, 1.99 grams a ton. That was a good number. We managed to mine 775,000 tons. We've got a new excavator, we call it Excavator Five, came in last year.
Slightly bigger than the usual unit, so it's given us ability to excavate a little bit more and be a bit more selective on the grade, as you can see as we've put through the plant, 2.26 gram a ton. However, I will caution that's not sustainable. That was this quarter. Those grades will come down to about 1.99 sort of level for the rest of the year. As I mentioned, we expect Mako going forward to do 28,000-29,000 ounces the rest of this year per quarter. Before the following year, it goes up to 35. Exploration. The drills are still turning. We're getting very excited and still about the Syama North. We've been doing quite a lot of work now on the geotech drilling for the large open pit area in A21.
Those results will come out shortly. There's no surprises there. As I mentioned, we're starting on the PFS to focus in on long lead items. The mill looks like whichever way we go, it'll be a 4-megawatt mill, same size as the oxide plant. That'll give us the ability to put about 4 million tons through the sulfide circuitry and still maintain the oxides. It also gives us the flexibility, we can swing the oxide plants to full sulfides as necessary. Store in the ponds, when we switch back to oxides, we can actually use the smelter, or sorry, the roaster, the roaster to recover that material. The oxides, sorry, the Syama North, 854,000 ounces.
That's in our world, that's normally the kickoff for a number once you get above $750, where you just build a standalone mine. We're very excited with that. Remember, it's 2.9 grams a ton, significant number, and that's underwriting the PFS. The PFS, we will have a draft internally in May for our board. We've got an AGM and a board meeting coming up in May. We will be presenting some numbers there for approval to look at going on long lead items, the mill, so we can get this going in early 2025. We're really excited about that. Pre-feasibility study, I think I've covered that. ESG, all on track. You know, we did the ISO certification. We did the 45001. We've done the 14001. All on track there.
We've got against the World Gold Council's RGMPs, we are at 88% as per our audit last year. We've got our audit coming up in this quarter, we are expecting to hit 100% there and achieve exactly what we've told you about 2 years ago. We're really excited about that. With that, I think That's really the operations. I say it's all about grade at the moment, which is in control of our own destiny fully now. Focus on the operations is on costs. I think we've turned the corner. I'll hand over to Chris, who'll take you through the corporate stuff. Of course, he's been making hay while the sun shine. The gold is good price at the moment, he'll be able to give you a bit more color on that. Thanks, Chris.
Great. Thank you, Terry. Good morning to all, and afternoon. Also just want to highlight, very excited to be part of the Resolute team. As Terry mentioned, it's been a very strong quarter, and we've generated some very strong results across pretty much all of our metrics. Look, highlighting a few of the key numbers. Obviously, you can see on the documents that our production was at 92.2 thousand ounces, at an AISC of $1,453 per ounce, which were both better numbers versus the prior quarter and also better than our internal budgeted numbers. From a cash flow perspective, we generated good cash flow for the quarter, and had a meaningful reduction in our net debt. Operating cash flow was $38.1 million.
After CapEx, effectively our cash flows was $25 million from operations. We, as highlighted in the documents, made a meaningful reduction net debt by paying down our term facility as well as our revolver. Today we have around $155.8 million of free liquidity, which is a very different position to where the company was last year. We've put in a few more hedges, today we roughly hedged 60% of our material through Q1 of next year at an average price of $1,920 per ounce. We'll be pausing hedges at this stage as the business continues to prove in its operations and with a focus on driving costs down.
Quite happy with where our hedge book is at this stage. The priority will be really to continue to work with the company on reducing its costs and delivering on its results. Like I said, a very strong quarter from a operations metrics perspective and also from a financial perspective. Key focus for the business, at least from my perspective in the coming months and quarters, one will be to continue to facilitate the transition, sorry, from our Perth office to London.
I think as Terry highlighted in the past, we're moving the bulk of the operations out of Perth into London to be much more in line with where we operate, which is going very smoothly. It's allowing us to also change how we operate the business and push a lot more responsibilities down to site, which I think is key. Another key focus will be obviously to continue to work with our sites to reduce our costs. You may have seen from our financials that the business has also carried a fairly high inventory value over the past coming years and has grown.
There's great opportunities in reducing our inventory values both on OpEx and CapEx, and that additional free cash will be used to help fund our internal growth activities, mainly the Syama North PFS study that's going to be coming out in the coming months. Finally, look, as I'm new to the business, I see great opportunities in continuing to optimize our balance sheet. We've had very strong quarters here in the past few months. We'll be looking to refinance our balance sheet in the coming months/quarters. There's no pressure to do so as we have it sitting on a fairly well-established level of liquidity. So again, very excited about the business and where we're heading and see great opportunities in the future. With that, I'll turn it back over to Terry. Thank you.
Thanks, Chris. Thanks very much. Just a couple of items. If you look at the cost issues, we've got some major initiatives coming down the track. I think the key ones at Syama on the underground now, we've completely refurbished all our mobile equipment or equipment underground. Now we're seeing the benefits on that. We've also just completed an underground workshop. That will save on average 2 hours per vehicle per day on vehicle availability. We don't have to truck these vehicles, which travel pretty slowly onto surface to maintain them. We'll be shortly maintaining all those vehicles underground. That's really exciting for us. That's gonna improve our productivity there significantly.
On the Mako side, you've heard me over the last sort of 18 months talk about the work we've done on the mill, the software that we've put into the Mako mill to optimize power. That project is going exceptionally well. We're seeing about, on average, about a 7% increase in throughput there. As a next step, we focus on the classification circuits, the cyclones, and we're looking to gain another 4% there on throughput going in over the next year. Huge gains are being made in those operations. We should see the benefits of those over this year. With the other cost initiatives in place, which there are many, we expect to be able to comfortably improve on our guidance numbers for our costs. With that, Melanie, I'll hand over to questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Reg Spencer with Canaccord. Please go ahead.
Thank you. Good morning, Terry, and welcome aboard, Chris. Congratulations on another good quarter. I was just wondering if we could dive into that cost, let's call it a cost optimization program that you're about to embark on. When you mentioned that you would look to improve on your cost guidance numbers, are you in a position to provide a range as to, you know, what kind of percentage terms you think you can get your All-In Sustaining Cost to over the next year or so?
We're hoping to shave at least $100 off. It's as simple as that.
Okay.
You know, we're sort of talking $1,400s. We want to be in the $1,300s this year, we want to be in the sort of approaching the $1,200s next year without unnecessarily increasing our units. Those are our target numbers. Do I think that's reasonable? I think it can be. It's a lot of work, we do have a lot of initiatives in place, it's a combination also of cost and productivities. I mean, just to give you an example, the oxygen plant that's coming in on Mako in Q3 is going to give us a 2% improvement in recovery. That's as simple as that.
Yeah.
It's a combination, but I do think our costs, we can get down into start talking in the $1,300s and with a view, you know, the following year, we'll be starting to talk about the $1,200s.
Okay. So this is not just a temporary thing. This will be an ongoing, you know, cost optimization program.
Oh, yeah.
And, and-
Correct.
I guess in part that reflects your improving confidence in the way that your operations are now running. Okay.
They do.
That's useful. Thanks, Terry. My next question is on Syama North. You guys have provided quite a lot of very useful detail there, in terms of the shape of it and what it's gonna look like, especially cost. When you talk about CapEx being $30 million-$40 million, it, you know, that sounds like that's what the PFS capital number's going to be. You've provided a lot of detail around the configuration of the two process plants and how they're gonna come together and the flexibility there.
In terms of the oxide and sulfide flexibility there, is that being designed in a way to allow you the optionality given, you know, the, there may be the potential for the discovery of further oxides in and around the place over the course of the rest of the mine life there?
Correct. I mean, if you look at that, 824,000 ounces, 8% of that oxide. Sorry, 8% of that is oxide.
Mm.
It's patchy. The key would be, as you're mining in there, you stockpile your oxide till you've got to Again, it's high grade. It's 2.9 gram a ton, so it represents the highest grade oxides we've got on the mine. We stockpile that material. Once we've got a significant amount, you know, 6-8 weeks of material, then you switch from sulfide to oxide. That switch, we're focusing on that design. We can do that switch cleanly within 8 hours. You don't want to do that every week. You wanna do a campaign of 6 weeks of oxides, and that gives the roaster the opportunity to recover any concentrates that we've built up in these sulfides.
Sorry, in the ponds, again, because we're running the front end faster than the roaster. So we're gonna, you know, it'll be a systematic look at the economics. Okay, we've got the plant here. Should we run it on oxides? Have we got enough material? Have we got enough material in the ponds ready for the, so that the roaster doesn't have to slow down while we're doing the oxides? That's the cleverness, I think, of the operation. That's why it's taking a little bit of time to make sure we get all that engineering right. Once we get there... This is not uncommon in industry to have a plant that you can flip over from one to the other, and in such a short time.
It gives us the flexibility of attacking some of the best oxides we've got on-site once we've got them into a stockpile.
Okay. That's understood. Well, you know, is it safe to say then, Terry, that, you know, an FID at the board level is almost a fait accompli? You know, it does look like, it's quite robust.
Yeah
In terms of the plan. You've got a solid resource there now.
Correct.
This is just a matter of process more than anything else.
Correct.
You know, we can expect you to be potentially, you know, opening up Syama North in early 2025.
Correct. You know, and we are, you know, we're stripping the existing old oxide areas in Syama North with a view that this is gonna be a larger pit, so we're not sort of, you know, messing it up, so we have to go reclaim the areas and then before we carry on. We're already starting to think of that as our key design now. It's all eight... You know, we've got the pit shells on-site. We're looking at them. We're just confirming with the geotechs. We've done 20 out of 24 geotech holes. When we did the original scope study, and in fact, the ore reserve, we were very, very conservative 'cause we had no geotech work, so we actually had pit angles as low as 30%.
I haven't seen a 30% pit in this type of material for a long time.
Yeah.
It should be between 45% and 60%. I think with the PFS work, that $854 will also get a kick up as well.
Okay. Very good. Last question. Just conscious that I'm chewing up a lot of everyone's time here. on top of them, the one last piece of the puzzle there, Syama North, that you guys haven't helped us with today is just around the OpEx. That also is pretty straightforward. Is it safe to say that we should see some overall improvement in the Syama or sustaining cost profile as a benefit of Syama North coming in?
Definitely.
Yeah.
It's gonna be cheaper than our existing operations on oxides. 'Cause the strip ratios are sort of between 5 and 6. I would say, I'm not giving costs out at the moment because I don't believe that we'd be mining a pit at 30, 33 angles. You know, that's not, you know. Once we've got those accurate numbers and all the geotech holes are showing that we've got competent rocks there, we confirm those angles, we can reduce those strips to where we think they should be. That's obviously the major cost. The boon on this is you're gonna get the grade.
The grade's gonna be over 2 gram a ton, whereas we're, you know, even with the smaller pits, we're mining it particularly well now we've got the grade control in control. We're sort of, you know, we're coming up at a 1.8 gram a ton feeding the mill. We're gonna be replacing that with over 2 gram a ton. Yeah, so the overall costs are gonna come down. It's just what is the correct ratio. That's gonna be the fun part of it. You know? We're gonna be looking at each area and saying, "Well, that's the best economic area. That's the one we need to focus on now." If you've got an issue with that area, some, you know, problems, what's the number 2 swing to that?
We'll have a lot of flexibility until we can build more plant. I do think, you know, this modification we're doing is phase one. This is really to prove that there is a bigger plant op project coming down the track at some stage.
Excellent. That's fabulous. Thanks, Terry. Appreciate it. Congratulations again on another good quarter.
Thanks, Reg. Good to talk to you again.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Richard Hatch with Berenberg. Please go ahead.
Thanks. Yeah, morning, guys. Thanks for the call, and well done on another good quarter. Just a couple of questions. Just firstly, just on North again. You've talked here about potentially looking to expand the roaster capacity as well, a bit further down the path. Can you just sort of talk a little bit about kind of your thoughts on that, and where you think you might be able to get that to and, you know, the ore feeds that would then feed into the front end to support that? That's the first one.
Yeah. Thanks, Richard. You're probably aware, I know because you've just been outside, we just had our fundi, our expert, Alexandros from the Goethe University Frankfurt on site with the team, and we've just done quite a study on the roaster. At this point in time, it has that 30% extra capacity. We've always said if we put oxygen on there, we could double the throughput on that. We've confirmed over this last 2 weeks that we could double it in terms of sulfur oxidation. There is a bit of an issue still, however, we wouldn't get necessarily the high burn of the carbon. We are sort of, you know, we burn about 90% carbon. It would come off to about 85%, which is not acceptable.
We're looking at that as part of the longer term modification. We think we could do somewhere between 60% to 100% step up still above the 30% extra capacity we've got at the moment. We'd have to do some refinements probably on the grinding and we'd have to do a bit more of the pre-grind to liberate more of the carbon, open it up so we can actually burn it. There is another option that we're looking at. The roaster does operate at 710 degrees centigrade. The integrity of the equipment can handle up to 900, but you don't wanna go there. You wanna keep a lot of ballast on that system.
We are thinking Alexandros is saying we could still get that carbon burn at 745 degrees centigrade, and that could double the size of the roaster. We just need a little bit of test work to confirm that. That is, you know, firmly for the phase two. It's ongoing, and it's quite exciting. I think there is a lot of good options coming out after that workshop this last month.
Okay. Gotcha. Then just on North, just on the costs on North. I mean, just kinda looking at it on a back of an envelope sort of standpoint, you know, if you've got good grades that you're pushing through the mill, that's gonna help you on an ounce basis and absorb some of those costs. You know, last, this quarter we've just done, we're sort of $1,600-$1,700 on the oxide circuit. I mean, is it too early for us to start chucking numbers around like $1,200, you know, below for North? Or do you think that that's a bit too optimistic? Or, you know, or is it just too early and we gotta wait?
I think it's too early, but I'm sorta looking, you know, $1,400 less, you know. It is, it all depends on the patchiness of the oxides, and we're getting all that information now. It is, there are lot... You know, when I say it's patchy, it's not little bits here and there. There are significant size blocks, and I'm just waiting for the engineers to give me those numbers now. I'm not quite there yet. I would suggest I'll be there within a month or so.
Yeah. Okay. Cool. Last one, Chris, just on the hedge, I mean, gold price is up at $2,000. You know, you've got 216,000 ounces hedged at $1,920, you just put in another one, a little bit below that. You know, just give us an update on your thoughts around, you know, the hedge book, how you see that, you know, with debt refinancing potential over the next sort of couple of years. You know, do you still think there's merit in having a hedge in there, or would you like to see it ease down over time? What's your view?
Sure. Look, look, the hedges were put in place historically, as you know, because of our significant debt facility that required hedging. We've been maintaining the levels required for that, for that book. We put a little bit more hedges in this year, actually at around the $2,000 mark, when we got levels hitting, just to ensure kind of our profitability for the next 12 months. I think we're very comfortable with what we have at this stage. Yes, we would like to ease out of the hedges over time. I don't know. We have not landed on our plans post Q1 of next year. That's something we will discuss at our next board meeting.
Look, the reason the hedges were put in place was obviously at the time, the business focusing on stability of operations, and we had a high cash cost. Now that we've stabilized operations, working down the cash costs, as Terry highlighted, we see real strong opportunities to reduce our cash costs by over 10%. The reliance on hedges won't be as needed. I think, like I said, we're not gonna put any more hedges on at this stage for the rest of the next 12 months, and then we'll reassess what we do long term in the coming quarters. That's kind of how we're thinking about it at this stage.
Cool. Gotcha. All right. Thanks very much. Keep it up. Cheers.
Thanks, Richard.
Thank you.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Holohan for closing remarks.
Once again, thank for taking the time. I think if you've heard what we've had to say today, I think it's very clear that we're focusing this year on consolidation of the operations further, hitting those grades, hitting those tons consistently, and we're very comfortable we're in that place right now. Focus on cash and growth. It's operations, cash, and growth are the recipe for the rest of the year. Thank you very much.
That does conclude our conference for today. Thank you for participating. You may now disconnect.