Reid from Reid Corporate, I am very pleased to welcome you to this investor webinar with Australian gold developer Rox Resources, ASX ticker RXL. Thanks very much for your time this morning. Rox is focused on redeveloping the 2.3 million ounce Youanmi Gold Project in Western Australia, one of the few new high-grade development assets of scale in the Australian gold sector. I am very pleased this morning to welcome Rox's Managing Director, Rob Ryan, to run us through the Youanmi Pre-Feasibility Study, which was released to market yesterday morning. This positive PFS has confirmed the potential for Youanmi to become a 100,000 ounce plus per annum producer, a high margin operation with impressively low all-in sustaining costs and very strong financial returns.
On the back of the study, Canaccord analyst, Paul Howard, has this morning issued a flash update for Rox, reiterating his firm's speculative buy recommendation with an AUD 0.51 price target, that compares with Rox's current share price of around AUD 0.13. Before I hand over to Rob, just a reminder that this is intended to be an interactive session. If you do have questions for Rob, please use the Q&A tab on your browser to log them, and I'll make sure that I put them all to Rob as soon as he finishes presenting. With that introduction, Rob, welcome. We've got some lovely gold bars on the front of your presentation. That's what this is all about. Please go ahead and run us through the Rox Youanmi story.
Thank you very much, Nick, and I'm sure that we'll get to produce a fair few of these gold bars in the future. The Pre-Feasibility Study really does set the basis of what is a starting point for our development. At 100,000 ounces per annum, there's tremendous upside to be able to expand upon that in our 2.3 million ounce resource, as well as some of our exciting sort of high-grade targets outside of that. The Youanmi project, as it stands now, has delivered an ore reserve of about 540,000 ounces, at very high grade of 4.4 grams a ton. This will be a long life project with over a seven-year, nearly an eight-year mine life, with an average run rate of about 103,000 ounces per annum, with tremendous upside to be able to expand upon that.
When we start looking at the all-in sustaining costs, it's AUD 1,600 an ounce. At the gold price today, where it was around AUD 3,650 an ounce, that's AUD 2,000 an ounce in cash margin for every ounce we're going to produce. This is a high-grade project, it is highly leveraged to the gold price at these values. When you look at the Net Present Value, at the current spot price and the IRR, we're talking of a nearly AUD 700 million NPV at IRR of 55%. This does present a tremendous development opportunity for Rox. We're located in the Murchison district, which is a hotbed for M&A, development, and exploration activities over the past 12, 18 months. Youanmi is a tremendous opportunity to create a standalone project with a large resource base. It is a significant resource.
It is high grade at 4.5 grams a ton. There's not many resources that can compare to the scale of opportunity we have here at Youanmi. The resource in the top 400 meters averages around 4,000-4,500 ounces of vertical meter. You can see by the long section that when we start looking to the southern end of the project, there is very sparse drilling, and there is an opportunity to significantly grow the project, especially around the Pollard area and our recent discovery at Paddy's, which sits probably around 500 meters to the south of Youanmi Main Lode, to continue to build upon what is an exciting development opportunity. It has a high-grade ore reserve, 546,000 ounces at 4.5 grams a ton. Here we are.
We have a look at the long section, and what you can see is it is a continuous ore zone with a lot of potential to grow. Link has been an area that we focused on in the last 12-18 months, drilling Link out and building the resource and building the confidence in the resource through there. That's helped establish our ore reserve today. Link has continued to build from what was a small resource initially, a large inferred component, and we've been now to add the majority of that material into reserve. When we start having a look further to the south at Pollard, you'll see a small high-grade pod at the southern end of the Youanmi open pit. This is an area of extremely high grade, but just hasn't had the drilling applied to it.
We will look to drill this out over the coming months, and be able to get that up to a reserve level for the definitive feasibility study. The key study outcomes, it is a long life project. We're talking sort of 7-8 year mine life with the opportunity to continue to grow upon that. We'll look to build a processing plant with around a 750,000 ton per annum capacity, and there is the opportunity to be able to expand on that throughput. Total material mined over the project will be close to 6 million tons at an average grade of 4.5 grams. We'll look to continue to drill out some of the higher grade areas of this resource and continue to add more high grade underground ounces to this development profile in the future.
The project NPVs, on a post-tax basis, present a compelling investment opportunity. AUD 320 million post-tax NPV, discounted at 8%, gives a 33% IRR post-tax. When we start having a look at some of these outcomes on a current spot price basis, they accelerate quite dramatically. That is driven by our low all-in sustaining costs. When we start comparing ourselves to our peers who are of a similar scale and similar market cap in the junior gold space, our all-in sustaining cost at AUD 1,676 an ounce comfortably puts us at the lower end of the production profile. There is the opportunity to continue to build on what is quite a low all-in sustaining cost already by realizing increased throughputs and increased ounce production over the life of the project to be able to further reduce that all-in sustaining cost.
The project, as it currently stands, would generate in excess of AUD 150 million of EBITDA per annum. This is a significant cash build, and what it does mean is we can go out to financiers now and start having a look at getting project financing based on the pre-feasibility study. It is a high grade, high cash build operation, and it will be able to support a good amount of debt. The pre-production capital cost around AUD 245 million, and when you look at that in comparison to the NPV, there is a comfortable two times ratio on that CapEx to NPV. When you start running that at spot price, and we have calculated spot at AUD 3,500, which is still AUD 150 an ounce below where we sit today, it is almost a three times uplift in valuation.
When you look at our current market capitalization of AUD 59 million, and we do have around AUD 7 million in the bank as we speak today, the value gap there is about a five and a half x valuation in comparison to the value of the project. At the current spot price, it is almost at eight times valuation uplift. With that low all-in sustaining costs, it means that the project can be sustainable over fluctuations in the gold price environment. We have done a sensitivity analysis down to AUD 2,900 an ounce, plus all the way up to AUD 3,700 an ounce, and the metrics of the project still remain outstanding. There is the opportunity to continue to refine the mining profile.
When we start having a look at the grade produced over the project, you will see it does accelerate through years five to eight, and that is predominantly due to a lot of the high-grade material either being deeper into mine plan on the main lode or being in and around the southern area of the Pollard area that has a not as high drill density to get that material up into a reserve status. There is the opportunity, as we continue to drill out the ore body, to look to bring those higher grade ounces forward in the mine plan and to be able to increase that grade in the early years in the mine life. That will help with the ramp-up of production.
At the moment, three years, seven and eight is when we get some of the highest grade and some of our lowest all-in sustaining costs of the project. Being able to bring some of those ounces forward, we would be able to drop our all-in sustaining costs in the earlier years. The processing layout is fairly simple. It is a 3-stage crushing grinding circuit, which is pretty standard across the gold fields. It will go into a flotation circuit to produce a gold concentrate, which will then be treated using the Albion Process. It is essentially an ultra-fine grind and oxidation process, which has been employed by quite a number of junior gold companies over the past few years.
The intention is to produce doré on-site, we'll look to produce 100,000 ounces per annum of gold, there is the opportunity to be able to upscale on this process as we continue to drill out the resource and add more mining inventory. That'll be our next steps. The infill drilling campaign for the resource development will kick off in the next few weeks. The idea would be is to drill some of those inferred stopes out to an indicated status and get those into a mining reserve for DFS studies. In line with that, we will also look to grow the resource in and around that southern area of the mine, specifically targeting the high-grade Paddy's discovery that was made last year, drilling that out down deep and drilling that out to the north to join up with the Youanmi Main Lode.
We will commence our definitive feasibility study, which will focus on the variability test work over the ore body. That will really focus on refining that processing flow sheet and get it down to a point where it's at a final investment decision phase. We'll commit all the necessary approvals to get the project up and running, as well as getting all of our heritage surveys in line. There's tremendous room to grow the resource, as I said before. Specifically Pollard at the southern end of the ore zone, there's a very limited amount of drilling in and around that area, and we want to continue to drill that out and bring more high-grade ounces into the resource. Pollard, at the very southern end, eventually offsets to where Paddy's is.
To be able to drill both Paddy's and Pollard and potentially link those two areas together, will give us quite a significant mining area over the southern end of that ore body, that at the moment doesn't come into very late in the mine plan. Being able to expand upon that and grow that, we'll be able to add additional ounces into our production target. The Pollard area, as you can see highlighted by the drill collars in the green on the left, sits at the southern end of Youanmi open pit, and Paddy's in the red box is the area that we'll look to continue to drill out and grow. The southern offsetting fault, as you can see in the inset, is where we initially had that very high grade, sort of 24 meters at 35 grams a ton, last year.
We'll continue to drill in and around that and grow Paddy's below that sort of 150-meter RL, as well as targeting the northern side of that fault, where there's been zero drilling below that 150-meter mark. Being able to target that potential offset of Paddy's, and potentially link that into Pollard, will give us quite a lot of development opportunity. To wrap it up, as I said, we've got a very high grade reserve and resource. What we'll look to do over the next few months is continue to drill out that resource and add additional ounces, one, to the resource, and two, to our mining reserve. There's a significant opportunity to grow that resource along that exploration target. There's 1.1 to 1.8 million ounces in the exploration target we've defined at Youanmi.
If we're able to convert at least half of that, we could potentially be sitting on an additional half million ounces to put straight into a mine plan. That would be a significant upside in not only the mine life at Youanmi, but also the production potential. There are compelling PFS financials already, as what we see as our base case scenario, this will be a platform that we'll be able to continue to grow from. Thank you very much for your time today, I'll hand it over to Nick, and I'll look forward to answering your questions.
Thanks very much, Rob. That's a great presentation. Very simple and clear. We have had quite a few questions. Just a reminder to everyone, don't miss out on the opportunity to quiz Rob while we've got him pinned down there over in West Perth. Rob, I'll dive straight into it. Just sort of starting from our first question, an investor makes the observation here that Calidus Resources recently had some issues, as we've read about in the press, due to a hedge book issue with their financing. The question really is, and it's a good one, what is your thinking around financing strategy for this CapEx? There's an issue in the gold sector at the moment. Can you talk us through your thinking around that and whether you would anticipate hedging? You mentioned the debt capacity of the project based on the financials.
Can you just give us some thoughts there?
We'll start taking this out and marketing the project to a lot of financiers over the coming months. Now, obviously, with any project development, it'll be a mix between debt and equity that you'll look to add. There's obviously hedging requirements that are required at times by some financiers. There are opportunities to look at hedging or try to potentially minimize your hedging by using put options and some other things. There has been some interesting instruments used over the last couple of years. I look at Pantoro for their funding solution, how they effectively got debt with zero hedging and was able to get that project into production. They've been in a position where they've been able to continue to ride the highs of the gold price through that timeframe.
I also look at some of the options that maybe Alkane Resources have done as well, where they've purchased a bit of downside risk protection that it's cost them about AUD 50 an ounce. They've hedged at a lower-end gold price of AUD 3,000 an ounce. They don't need to sell gold at that. It's just a bit of downside protection. There are some interesting opportunities out there within the financial market to maybe steer away from some of your typical hedging requirements. We'll continue to investigate those over the coming months and before we make an FID.
Fair enough. You're well aware of obviously the issues and I suppose the different options out there. A follow-up question from the same investor is, when is first revenue expected? I did note that you said DFS sometime in 2025. Can you give us a sort of high level timetable?
Yeah. For standard DFS timeframes, it's around 12 months. Now, we'll look to do whatever's in our power to be able to bring that forward, so we're working through that DFS schedule as we speak. The intention would be is to get the DFS complete by around the Q3 mark of next year, and then financing would probably be around six months thereafter. The ideal scenario is it'll be a 12-month production build, and then getting that out to first gold sometime in 2027.
Excellent. Next question here is, what are the advantages of processing to a gold doré rather than a gold concentrate?
It's a much easier market to sell gold in. Everyone takes gold bars, I guess. I guess that's the easiest answer that you can put out there. Even though the gold concentrate market is quite well-developed, there are a lot of buyers in there's still a lot of opaqueness, obviously with a lot of the smelters being in China and working through traders and the like. I'm not adverse to gold concentrate production and pushing that through the process as well. The benefit of producing gold bars is, as I said, everyone buys gold. You, me. Probably just about 75% of the population has invested in gold in some way or form, whether it be through their super funds or the like. That does present a much easier sales process, and the benefit of producing gold bars on-site is it dramatically reduces your all-in sustaining costs.
You don't have the transport charges associated with shipping the concentrate, and you don't have the TCRCs applied as well. Lowering that all-in sustaining costs will mean that you have the potential to continue to find more gold and make a much higher margin over a much longer term.
Yeah. Clearly, you're sending a message with all those gold bars on this presentation, so I like that. The next question here is, what work have you done to prove that the Albion Process can process your ores efficiently? I suppose a follow-up to that, this project obviously operated using BIOX very successfully, I think, in the '80s and '90s. Why have you opted for Albion as opposed to, say, BIOX?
We had a look at the BIOX Process, as well as the Albion Process, and they're two very similar outcomes in terms of financial metrics and capital exposure and the like. We looked at it on a bit of a SWOT analysis, so it was a qualitative decision that we made. One of the benefits that you do have with the optimized grind and oxidation of Albion is it is a process. You're less reliant on biological matter. You're probably less susceptible to water quality and temperature issues than what you are with BIOX. Obviously, Youanmi can get quite hot in the summer, up to 45 degrees Celsius. Maintaining your tanks or trying to maintain a process at 60 degrees can become quite hard, especially when it's an exothermic reaction.
There has been a lot of work done on the Albion Process across testing the various main lode, hanging wall lodes, and having a look at what was a previously mined stope hole as well. We have a lot of data on the BIOX process that shows you only need a very low oxidation rate, and that is very similar to the outcomes of the Albion Process as well. Now what we'll look to do is a full variability study across the whole ore zone that will then give us the data for a definitive feasibility study for the Albion Process and will get us to a point where we can lock down 100% the processing routes and the amount of oxidation time needed in that Albion reactor to be able to get the ultimate outcome of what will be a 92%, 93% recovery.
Excellent. Thanks, Rob. Next question here is just in relation to power. The investor makes the observation that the power cost used in the PFS is AUD 0.283 per kilowatt hour. This appears high compared to operating assets in the region. Is there a reason for this?
We've had a look at some of the gas costs, and there has been a rise in the natural gas costs over the past six to 12 months. When we start comparing that to our peers, it's just the point in the cycle where we are at the moment. A PFS is always done at a point in time, and one of the things we've seen in our costing scenario is a lot of costs are probably at the highest they've been for a long time. What that does show is we're doing this study at a time where costs are extremely high and our all-in sustaining costs are still extremely low. The opportunity for then is if we're able to further refine those costs as we move into DFS, there is the opportunity to improve on the financial metrics of the process.
All subject to optimization as part of the DFS?
Correct.
The next question is: Will future metallurgical test work programs include pilot-scale test work to confirm the sizing of the Albion circuit and associated infrastructure?
Yes. What the core technologies in Glencore have is they've developed a pilot style scenarios where they run through. That's where they effectively are able to develop the process where it runs in their lab. Then what they can do is do batches of variability test work or using that sort of pilot scale scenario. That's the next step of the process that we've been sort of talking to the guys with over the past sort of few weeks. We'll look to start implementing that met work test work campaign over the coming months.
Excellent. Next question. Did the PFS or any previous studies consider the pressure oxidation process?
We have looked at pressure oxidation. There has been a comparison to pressure oxidation. There's really, at the scale of the asset, the capital costs become prohibitive. Through previous experience, I've had a look at what a similar scale, POX plant would be. Capital costs just for the POX end of the circuit could potentially get up to sort of AUD 200 million. When we're considering it's an extra sort of AUD 40 million or AUD 50 million for an Albion plant, it's a significant cost differential for a POX. The operating costs are higher than an Albion. Generally, POX plants work in what is evidenced by sort of what you see with Glencore, is when it's done at much larger scale.
Your types of mines, like your Lihir and the like, where they're treating millions of tons of concentrate per annum, not so much where a smaller scale producer's trying to produce 100,000 tons of concentrate per annum.
Excellent. Thanks, Rob. There are some questions around the upcoming drilling program.
Firstly, when do you expect that program to kick off?
The program will kick off in August. We are just finalizing contractors now, and we look forward to making an announcement on that, in the coming weeks.
There's a specific question here about, will Currans be part of that program?
Not at this point in time. The key focus for the program will be drilling out the inferred resources in and around Pollard, and then looking to extend Paddy's to the north between there and Pollard as well.
What would you consider, sort of on a success basis, what would you be hoping to achieve from that program?
To achieve from that program, we really want to get some high-grade answers from that Pollard area into the mine plan. That will initially be a big focus. When we look at Paddy's to the south, that is an immense upside opportunity on the development of the asset. If we start looking at that southern area, we've defined Link, which sits to north of the main lode. We've defined that over essentially what is a 400-meter strike down to about sort of five, 600 meters below surface. Now, there's very limited drilling on that southern portion past main lode. We've got a small resource that we're mining up at Pollard, and there's the ability to really be able to expand that out. You've got the new discovery at Paddy's further to the south.
If you were to add up all those areas in strike length, there's probably 600-800 meters of strike length potential between that area. If we're able to continue to build upon that and build those down at depth, there's a potential mining area there that's much bigger than Link. That adds more working fronts to your overall mine plan and will able to increase any throughput or production target that we look to develop as part of the DFS.
That sounds like an exciting, and that's a pretty big program as well, Rob. Quite a bit of news flow to come for the company in the weeks and months ahead. When would you expect to start seeing some assay results generated from that drilling?
I'd say probably the first pass. If we start, say, mid-August, the first results would probably be six weeks post that, I'd say.
Excellent. Obviously in parallel with that, your DFS work will begin.
Correct. In parallel with that, we're having discussions around potentially starting some met test work campaigns. We'll start having a look at getting increased news flow in on the development of the asset as we move forward as well.
You'll make regular updates on the DFS progress?
Yep.
There's a quite specific question here about the processing aspect. What grinding media are you likely to use in the IsaMill?
The IsaMill is generally an ultra-fine grinding. We will look to grind it down to somewhere between 10 and 14 micron. In terms of the media, that's still yet to be decided what the actual media will be. It's more so targeting now about what the optimal grind size will be to get the optimal recovery of the ore.
Excellent. Well, look, I think we've covered the questions, Rob. We might just sort of get back to you just for, I suppose, a general wrap-up. I mean, look, the study, the PFS seems to have sort of been well-received. It's hit the mark. It's delivered some good outcomes with very realistic pricing assumptions. Do you want to just give us a bit of, I suppose, high-level thoughts? What feedback have you had on it, and how do you see things sort of moving forward from here?
I think when we look at the PFS as a whole, we've done this PFS at what could quite possibly be one of the high points in the costing cycles, and it still shows a tremendous all-in sustaining cost. The net benefit is that you do get good financial returns on the back of it. I still believe that this is still the base case of where we want to move forward from. If we're able to add an additional half a million ounces through resource expansion and get half a million ounces into the mine plan, then that has the potential to continue to grow not only that production target. Maybe it won't be 100,000-ounce per annum development opportunity. Maybe it's 150,000 ounce per annum plus. That's the opportunity that we see on continuing to drill out that southern area of the ore zone.
That new discovery at Paddy's, as well as Pollard and the like, will continue to sort of bear fruit for the company.
Excellent. Thanks very much for that, Rob. Look, that's been a good run-through. I mean, this is an exciting story, and you're clearly on the pathway to a development and production scenario here. Congratulations on the PFS. I'm sure this is just the first step in what will be an exciting journey for Rox.
Thank you very much, Nick.
Look, thank you to everyone for tuning in, and thanks for your questions as well. We do appreciate it. Just a reminder that a recording will be available later this morning, and it'll be posted through company socials, our socials, and on the website. Thanks for tuning in. Stay tuned to the Rox story. We look forward to having Rob back again in the coming months. Thanks for your time, and have a great day.
Thank you.