Welcome to the St Barbara FY 2023 Q2 December quarterly report and presentation. 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 number one on your telephone keypad. I would now like to hand the conference over to Mr. Dan Lougher, Managing Director and CEO. Please go ahead.
Good morning, everyone, and thank you for joining us for St Barbara's Q2 FY23 quarter report briefing. This is my first quarterly at St Barbara, and I'm pleased to join you on this call from Perth, the land of the Whadjuk of the Noongar people. With me today to help out are Lucas Welsh, our CFO from Melbourne, and Andrew Strelein, our Chief Development Officer, also joining us to, if there's any queries regarding the proposed merger and demerger. We've got a deck, preso, on platform. I'll talk through the safety performance, the highlights of the quarterly, and then I'll dive into the actual assets, and finish off with the conversation around the planned merger with Genesis and the demerger of the Simberi and Atlantic operations.
I'll ask Lucas to talk us through the cash flow waterfall, and any queries around that. Moving on to the disclaimer. I will let you read that in your own time. I would like to begin the meeting by recognizing the traditional owners, the First Nations people of the lands on which St Barbara operates in Australia, Canada and Papua New Guinea, and pay my respects to the elders past, present, and emerging. Now we've got the safety slide and, look, you know, we have safety as our number one commitment, as with any company, and especially with mining companies with two open pit mines and Gwalia being an underground mine.
It is disappointing to see that the Total Recordable Incident Frequency Rate is plateauing and going flat. I would think that we will be doing a lot of work across the sites moving forward to reduce this. We have had some positive site initiatives and we have had an improvement on our recordable injuries from quarter-on-quarter, from 11 in Q1 to just one in Q2. There are improvements and with the company, there are very strong initiatives which are being put through all of the sites. Obviously bearing in mind that we have, you know, a site in Nova Scotia and a site in Papua New Guinea.
There's a lot of effort and there's a lot of hard work, which I'm very happy to report on the ground, at the various sites. We're now on slide five, the Q2 FY23 highlights. Look, the second quarter was very challenging. We produced 61,000 ounces of gold at an all-in sustaining cost of AUD 2,666 an ounce, which obviously is tough. As I talk through the preso, you'll see that there are some green shoots and some improvements coming down through the operations. Once again, I guess, you know, COVID-19 and whilst I don't want to labor on that point because it's in everybody's backyard, not just ours, and we're trying to move forward. It is still there.
Over specifically the Christmas period, we did have quite a lot of absenteeism, and we did have some delays in getting into some of the, I guess, the larger stocks and the better grade stocks. You know, I don't wanna dwell on COVID. As I said, it's throughout the industry and we are not alone in that. As I mentioned when I started, that part of my portfolio would be to have a very good, deep look at Gwalia in Leonora and to review where we were heading and how things were being done at the site. To that effect, we appointed a very experienced General Manager, Andrew Lindsay, who's even older than I am. There's a lot of gray hair going around, but I'll talk a bit more about that a bit later on.
He's done some very strong, great work at the site. On a very positive note, Simberi actually has started perform well and has actually, I think produced cash first time in about 5 quarters. We'll have a look at that. On the downside, we had some wall failure issues related to Hurricane Fiona at Nova Scotia, at Atlantic. I visited Atlantic operations, early January 3, it just happens that they have the warmest winter start on record. Which was quite surprising for a Welshman. It was colder in Wales than it was in Nova Scotia. You know, we have got stockpiles, I'll talk a bit about how things will progress going forward at Atlantic.
We landed up with AUD 38 million in the bank at the end of the quarter, and as I said earlier on, Lucas will talk us through that. I guess on a, you know, very important note, on the 12th of December, we announced our deal with Genesis Minerals, which, if approved, will see the merger of our Leonora portfolio with Genesis and the demerge of Simberi and Atlantic to form Phoenician Metals. We'll talk a bit about that. On one of the areas in the Leonora area and the feeds to the Gwalia mill, we did look at the Zoroastrian Mine coming online, and we've basically suspended that in light of an ore source that will come through the Genesis camp, being Ulysses.
Also there'll be some ore sources from other assets that they have, and I'll talk a bit about that. At Simberi, the strategy has been built off the back of the strategic review, which we completed during the quarter. Atlantic, we will pause Beaver Dam and focus on the permitting of Fifteen Mile Stream. I'll talk a bit more about that later on. For now, I'll ask Lucas to take us through the cash flow slide 6. Yep. Thanks, Lucas.
Yeah. No, thanks, Dan. I think as everyone can see from the slides here that, you know, our cash position dropped by AUD 27 million over the quarter. That was largely driven by the lower production and I guess the following higher all-in sustaining costs, which impacted that in operating cash flow. As I mentioned before, I do want to call out Simberi's performance over the quarter. This is the first quarter Simberi's been cash flow positive for about 5 quarters. Now, Simberi has been able to ramp up production in recent times, and they did build up a sizable gold in circuit inventory recently over the last few quarters. You know, they were able to draw down on this GIC balance during December.
You know, meaning that we were able to sell more gold ounces than it produced in the quarter, contributing to that very healthy cash flow. In relation to other movements, really the timing of payments and receivables did result in a larger-than-average negative net working capital balance. And in relation to that working capital, with Atlantic starting to reach the end of its open pit mining, you know, we are seeing a corresponding reduction in payables there. It's, you know, contributing to some of that cash outflow. But also just due to the timing of Christmas holidays and New Year holidays, we did BAS returns, tax returns that we ordinarily would have received in December. These were pushed out into January.
We also, for the oil purchase payments that we do in Leonora, we paid for a parcel in December, but they weren't processed until January. Just a bit of a mismatch between payments and receipts there for that particular parcel. I do note that in January, we did draw down an initial AUD 20 million from our Australian dollar debt facility. That was really just to make sure we maintain a strong working capital balance during this next short period. Thanks, Dan. That was all I was gonna highlight on this particular page. Back to you.
Thanks, Lucas. Look, if there's any questions on that later on, Lucas will be on the line to talk through a bit more detail. Now I'd like to go to slide seven, where we'll get into the results a bit more. You can see on the graph there that the mine grade went down 4.8 grams per ton, which is obviously contributes to the cost. You can see the relationship there. That's not a secret. I guess what did happen is that we did have a slippage in the, I guess, bringing on better grade and not just better grade stopes, but actually larger tonnage stopes in that quarter, which we are now putting on the deck right now.
You know, we can, we can have a chat about that if anybody wants to look at looking forward the six months. We actually have improved development. We're actually doing a lot more development than we had in previous quarters, which will not immediately give us the, I guess, the tons and the grade that we need for the mill, but it will set up the operation for future quarters.
You know, you can debate as to how much you want to push the development, but it's fair to say that we've got a bit of catch up to do to bring the mine back into a even, I guess, planning in terms of getting the required stopes and the development for future stopes. 'Cause when you do development, you land up basically bringing in more diluted ore, and that impacts the grade. All in all, our very high all-in sustaining cost of AUD 2,796 an ounce, and that's obviously not what we're here for. We did push some more tons through, so that was very good because obviously, the mill is quite important, a very important asset, actually, to maintain our production, you know, through 24/7, basically, for this quarter that we are dealing with now.
We did do a couple of mill shutdowns to realign the mill and do some crusher works as well. That now is under our belt. It's not gone away because we do need to continue to do maintenance, plan maintenance on the mill to make sure that when we, when we bring in these high-tonnage stopes, which I'm glad to say that we have got two stopes on the deck as we speak. I know, you know, people will be thinking, well, thanks, Dan, that won't help last quarter, but it is certainly going to set us for this quarter and the fourth quarter. I'm pretty happy about that. Now, we talked about Zoroastrian, you know, it's 130 odd km down the road.
We started off the decline, when we went through the merger talks and agreed to suspend that. It can be started up quite quickly. If there's an issue with the, let's say, the deal doesn't go through, we will then restart. We'll also have an agreement that's in progress currently with Genesis to do some ore tote treatment from Ulysses and other areas, or other assets, sorry, in the Leonora area. That's something that's quite important for us. Now, I'm talking, going on to slide 8. There's a lot of initiatives, there's a lot of things that Andy and the guys are doing at site. One of the, obviously the talking points when I arrived in late November was, how are we doing with the contractor?
I have to say that to this date, we are actually having now a very strong relationship with Macmahon. Yes, there can always be improvements across the board with maintenance of equipment when you've got a large fleet. We are optimizing the fleet, so we've taken equipment out of the mine. To do that or to allow us to do that, we've had to make sure that the availability of the other equipment is there. Now, it is improving. In fact, it's actually improving. As you can see on slide eight, there's actually some very good improvements. As with December, sometimes you have some knockbacks. It's not a secret in the market. I'm not the first person, you know, to comment on the tightness of good quality, experienced mining personnel, but also, as important, maintenance personnel.
I guess we can complain about the market until the cows come home, and I'm gonna probably set something different. We've got a large workforce underground at Gwalia, and we've spoken to Macmahon's, and we would like those guys who haven't got the experience to get trained at Gwalia and stay at Gwalia. As you know, the market's pretty open to transfers, but it appears that I think that if we follow down the path that we are discussing with Macmahon's, that we'll actually be able to retain people at Gwalia. In a meeting last week with the CEO and COO of Macmahon's, it appears that Gwalia is now looking like one of their best retention sites within Macmahon's. The last thing I want is a training mine and then people moving ahead.
People that can't move with the times and people that can't, you know, change with the rapid change in Gwalia, then obviously, they will need to be moved on. The bottom line is that we've now consolidated the mine, the upper mine, the middle mine and the lower mine with Macmahon's. We will have a saving, a fixed cost saving across the site with a change to a single contractor, and we will not be bringing any more equipment in. That work, which is probably a lot of rehabilitation, in the upper areas, which is very, very advanced, that will mean that the incumbent contractor, Macmahon's, will absorb that, and we will have a circa AUD 1 million a month cost saving out of those changes that we are doing.
obviously, equipment availability is a very strong talking point on a daily basis, and that still will be a strong talking point going forward and, but we are seeing improvements in that area. I mean, as you know, we've got, you know, 13 trucks underground. Every truck that comes up the mine needs to carry a full payload, so that's improving. We're now getting 54, 55 tons on each truck. We've got hot seating, on shift changing, which is adding benefits. We're getting people who are putting their hand up to stay over shift change and roster changes to actually get vent fixed up, et cetera. The morale, the culture is actually improving, quite a bit. As I say to the site guys, there's nothing different at Gwalia.
We've got some seismicity, it's little bit deeper than other mines in Australia, but it's still just a mature mine. With good planning, good procedural approaches to the operation, doing the basics the right way, and as I said, we dropped a 55,000 ton stope ahead of schedule the other day, and we've just dropped another stope yesterday, a week ahead of schedule, and we've got two large stopes to drop in February. When you've got the dirt on the ground, that means the ounces are broken, you're not drilling, you know, and squeezing ground, then that dirt flows, and then it's a matter of getting that stuff up to the mill and getting that mill running 24/7.
The focus on short-term planning, good scheduling, and having that reviewed by what I call senior engineers to make sure things, and then getting the stuff down the mine happening on a 24-hour basis rather than, you know, thinking about what's gonna happen in a, in a month's time. Let's think about what we're gonna do in the next 24 hours to ensure that we have things available or dirt available for the mill. The mill is getting a lot of attention and to bring back a lot of automation and, you know, repairing sort of the, I guess, the older assets in terms of crushing and the mill, liners, et cetera. That's work in progress.
I must say that, you know, Andy and the team at site, yes, they've got a big task ahead of them, but I am confident that we will see improvements in this second half, which will deliver more ounces. To that point, I won't be changing guidance to that last guidance in October that we 145,000-165,000 ounces. The other thing we're doing at site is we are now reviewing the personnel across the board through the contractors and also through our own technical departments. There has been some redundancies in that area, and there will be more going into this year as well to really bring into line, when you drop ounces, you've got to drop the costs. Gwalia is a circa 70% fixed cost operation.
Contractually, I think it's north of 80% fixed costs. That means that we've either got to produce the dirt or we've got to slim down. At the moment, we are pushing to get both happening so that the net result is a lower asset cost per ounce. That's work in progress as well. I'm sure there'll be some Q&A on that, so I'll move on to Simberi. As Lucas said, Simberi, which is slide nine there, Kasun. We've seen better grades coming out of Simberi. As Lucas mentioned, gold in circuit also has been pulled down, and we will be continuing to pulling that down through this March quarter. We are expecting to see better grades going forward as well.
We're doing a lot of grade control drilling and associated resource drilling around the pits. As I said, the strategic review was completed in December. We've managed to extend the oxide life through to FY 25, and with a bit of luck, we will be pushing and hopefully getting that through to FY 26 with the current drilling. We've confirmed also that the sulfide project could add ten years onto that as well. Obviously, we've deferred the sulfide project, and we're mining additional oxide material, and we will be doing some, I guess, impairments of Simberi, and that'll come through as with the Atlantic impairments on the half-year results scheduled in February.
At the end of the day, look, when we if we go through with the demerger and the merger, we will be creating a new company called Phoenician Metals. You know, the incoming CEO, Andrew, and his team will, I'm sure, have a closer look at how things need to go forward with the strategy at Simberi. I'd just like to say at this moment in time, thank you very much for, you know, what was a good quarter, and I'm hoping that the March quarter will be of similar success for Simberi. Turning to Atlantic operations now on slide ten. I guess it is disappointing that Atlantic, 10,000 ounces but at a cost of CAD 2,867 an ounce.
We had a major impact by Hurricane Fiona, which hit us in September. Caused some geotech issues in the north wall of the pit. That remediation required us to take out some low-grade stockpile materials to fill the mill, but also push the Touquoy pit into January, and that pit will now be completed at the end of this month. Obviously, the cost of taking that through another month is coming out in that sustaining cost. We have reduced the mining personnel and the corporate personnel to match now what we think will be the, as I said, the end of the pit.
When I was up there on January 3 and 4, I was part of that redundancy across, you know, the engineering, the mining operators and the corporate head office in Halifax. That's all happening and I must say, thanks to all staff who worked with that. It's never a good time to make people redundant. What is the next exciting part of things at Atlantic is really now waiting for the Nova Scotia regulators to give us the permit to do the in-pit tailings so that we can move and lock in the 2-year stockpile processing sort of final part of that site. We did lodge it on the 9th of January. We're expecting it to be approved by the 10th of March.
There is then another 60 days worth of deliberations, but we are quite positive on a, on a positive result there. You never know until, you know, we actually have the paper in our hands. We'll have sufficient, basically room then to complete the remaining stockpiles that we have at site, which as I said, will take us through for the next two years. We did announce with the December that we would be shifting our focus from Beaver Dam to 15 Mile Stream and that is now in progress. We need to have more discussions and time with key stakeholders around Beaver Dam permitting. I'm sure that we'll bring out some more information on that a bit later on in the quarter.
Just as a, as a, you know, a bit of a technical, Fifteen Mile Stream has the biggest reserve and resource at Atlantic, and that actually suppose will be the most profitable of our deposits in Nova Scotia. We're looking forward to that study being recommenced and having that really coming into play down the line. As I said, that the details of strategy, I think, will be as part of the demerger conversation. As I mentioned earlier on, we will be looking at some impairments of the carrying value, in our second half year results. Slide 11, I don't propose to go through this in great detail because you obviously have been privy to this back in December and there's been a lot of conversation around.
I guess just to reiterate is that if the merger and demerger approvals go through, then we will have a group that will basically, well, fully focus on the Leonora assets under a new company name called Hoover House, which would be the combined Genesis and St Barbara assets. The CEO and MD of that would be Raleigh Finlayson, and I will depart, but I will be on the board of Hoover House. At the same time, we will be demerging Simberi Atlantic with a new company called Phoenician Metals, which we aim to list on the ASX. It will be 80% owned by existing St Barbara shareholders, with the remaining 20% held by Hoover House as a cornerstone investor.
As I said, Andrew Strelein, who's currently on the line as well, which is happy to take questions later on, who's our current Chief Development Officer will be the new CEO and MD of Phoenician Metals. There's a lot of work, paperwork, legal requirements, court approvals, and if all goes well, we expect that transaction to be executed in May 2023. I mean, as I said, I don't really wanna go into great detail on, you know, you can read slide 13, which obviously was in that pack of December 12, and talking about why it makes so much sense to rationalize the mills in that area. I'm fully behind it. I think that there's significant gold in the ground, whether it be free milling or refractory.
Over time, I would be assuming that all of those assets will come online. Through the time for St Barbara, it would require significant capital injection, which currently we probably are not in a position to do. Nevertheless, the assets of St Barbara are a key part of unlocking the Hoover House going forward strategy. I look forward to seeing that, as Raleigh has said, that the five-year strategy plan will be due round about sort of in the September quarter. Looking forward to that. As you can imagine, there's a lot of integration work required, and that's proceeding now post the Christmas break.
Our, our lawyers and technical guys are busy with the, you know, independent experts to get all the assets DD done, et cetera. A lot of activity. I just want to reiterate that we at St Barbara still have a job to do to get Gwalia back to producing some really strong ounces in this half, and as well as making sure that we give the merger our best shot. A lot of work on the table. Just touching on Phoenicia Metals on page 14. You know, this is a very good, I guess, entry for St Barbara shareholders. There's, you know, 6.2 million ounces in resource, 3.7 million ounces in reserves. With our ASX listed investments, circa AUD 34 million, so and bringing in St.
Barbara's royalty portfolio. I'm actually quite excited that Andrew has got a good set of assets. Some of them obviously need to be developed. There will also be a very strong, flexible balance sheet and again, circa AUD 85 million cash and no debt. With Hoover House as a, as a cornerstone investor, I think that's a very good option for our St Barbara shareholders. I'll stop there 'cause I am conscious of time, and I'm also conscious of my own voice. I'm happy now to move on to Q&A. Operator, please.
Thank you. Your first question comes from David Radclyffe. Please go ahead.
Hi, Dan. Well, I guess my question was, I was just trying to understand at Gwalia, the difference from sort of you putting your experience approach into effect here, taking over, you know, the role leading the company and that merger plan to sort of slow down ore targets in the future. There's probably quite a bit of overlap here, but just trying to understand how they kind of work. Also you mentioned development catch-up, and that's been a factor at Gwalia for a long time. It'd be good to get your idea on how long that would take to come to be effective. You know, looking forward, there's sort of been a lot of capital spent historically at the mine, you know, past projects, ventilation projects.
You know, is the plan or the capacity of the mine gonna be, you know, that 700,000-800,000 tons a year, but you've sort of got to bring capacity back to that old target of 1 million tons? Or is that old target just and always was unrealistic?
Geez, Dave, how many questions was that?
A couple.
Right. Yeah, look, I mean. Yeah, look, in a nutshell, the mining front at Gwalia is heavily influenced by geotechnical requirements. Because you've got more than one stoping front, you've got to avoid creating pillars. We get locked into a schedule that is predicated by, you know, not wanting to create seismicity. When you blast a large stope, you are almost wanting the seismic sort of release to happen immediately after the blast. Sometimes it hangs in there for a bit. Like this month, we had one that followed the stope blast four days. To get yourself out of that, you've got to get flexibility into the overall stoping requirements. You can't go hand to mouth. That sequence has been in place for probably 18 months, okay?
What we now have to do is try to divorce the development. That means the decline, the access development and ore driving away from, you know, the sort of non-flexible or Is it non-flex? unflexible stoping districts, for example. The districts have got peripheral stopes, which are smaller, more high grade, and requiring a bit more engineering to get a maximum grade out of them. Then we've got, you know, the lovely large, like 55,000, 60,000 ton stopes, which really is what you want, a bit of both to give that mill. 'Cause remember the reserve grade is five grams a ton, right? That's the average grade across all of the stoping fronts.
When I say, you know, we need to get back to basics or is Andy's really, what we're doing is in making sure that every factor that drives to blast, whether you're squeezing ground, re-drills happens in the shift and that there's no knock-on effect because if you lose control of the short-term planning at Gwalia, you'll end up with a very significant issue, you know, down the line. You may not see it today, development is key. When you come to ore development, okay, that's fine, you're putting, you know, stuff in the middle. When you go waste development, you're actually then having the trucks. Do you wanna take waste out or do you want to take ore out? When you blast a big stope, you really want to bog the...
I can't swear on the line here. You really wanna bog that stope every day, 3,000 times a day to get that mill. That mill is a hungry mill. What you wanna do is get that ton. You do have to come to a point where you wanna push waste development, but you'd still then, when you're mining these big stopes, you really need to then say, "Look, I do need to bog a bit more ore than waste." It's a balancing thing, and we're getting that right now. I said I am really sort of in cycle shock reading. The cycle times have been reduced by 4 hours. We're getting those cuts a lot more frequent. It, you know, it just doesn't happen overnight.
To reset, and I hate that word reset, to get that structural scheduling change, we've just finished a huge grade control program, which won't influence us now, but it will influence the future production for the new team coming in with a lot more, you know, sort of robust resource numbers. That could take. Look, I haven't got the exact detail, but I would say circa 12- 18 months. You gotta start today 'cause you've gotta get that development ahead of you. That's what is happening right now, we are finding big stopes. We've got that sort of fine line, short-term planning requirement happening right now. The team Andy's got up there is working through that in great detail. Obviously, you hit the nail with the merger.
Whilst the lawyers are beavering away in the background and costing us an arm and a leg, the requirements now coming into sort of March, April, you know, we'll be releasing new JORC numbers for resource and reserves. We are then naturally the cycle of doing our new budget, and obviously Genesis are doing the same. you know, Raleigh and I are engineers, so we won't be fighting, but we will start to talk about the merger process by that stage in March, that we need to model things almost a little bit in parallel, but I don't wanna do, you know, three separate, you know, their model, our model, and then a combined model.
There will be a lot of information available by March, and we will be hoping, I would be hoping that we will move into that, a merger. Although, as I said, we still have to deliver ounces and good cost to our shareholders, I'm not gonna lose that focus. On the futuristic view, as we all spoke in December, ideally, you know, we will look at Gwalia's natural flow of ounces. You know, we've talked about that's around circa 130,000 ounces. We've got to look at the fixed costs and the mill costs that go with that. Obviously, we are treating Second Fortune material right now, on a campaign basis, which is quite small. We'll be expecting Ulysses to come in later this year.
As part of, going back to the last point, the part of this planning process, we have to make sure we don't drop the ball in any area on Genesis ore coming in from other areas, plus Ulysses towards the end of the year, but also any other ore that's available in that area to boost that mill. We should be doing 1.4 million tons per annum, or we can do 1.4 million tons per annum. Now, we've got to make sure that the integrity of that infrastructure is in place, and that study is currently on foot. I'm hoping that we'll get that. Fast-forwarding, FY 2024, I'll be saying that, you know, Gwalia probably will be in that 130+ thousand ounces.
We do need to see how that Ulysses comes in and how the overall ounces flow out of that Leonora plant. Sorry, it's a bit long answer, but hope I made sense, Dave.
Yeah, no. There was a lot of questions in there. Just maybe as a quick follow-up. Could you just talk to then the testing that's been done at the Gwalia mill to treat Ulysses ore, if that has happened, or what-
Yes.
Still needs to be done there to reduce risk?
No, that's has happened, there's more happening right now. We are getting more material through to do more bulk sampling. Obviously, during the DD, we did do work on that, I assume Genesis as well did work as well. It is suited to the Ulysses ore, as with, you know, Tower Hill is suitable for the Desdemona mill. There's a lot of synergies there. I can't quote, you know, recovery tonnage throughput rates right now. I am confident that the Mets and the people in charge of the DD are all over it. I do know from Andy that we've got samples to just to enhance that information flow.
Great. Thank you very much. I'll pass it on.
Thanks, Dave.
Thank you. Your next question comes from William Saylor from Ord Minnett. Please go ahead.
Hey, good morning, Dan and team. I look just a couple of questions on Leonora. Firstly, are you able to provide any color in terms of achieving the low end of FY23 production guidance at Gwalia? Whether that's contingent on realizing any material uplifts in these development rates over the next couple of quarters and what that uplift might look like?
Yeah. Just to confirm, are you talking about getting guidance for FY 23?
Yeah. Correct.
Yeah.
Yeah.
Yeah. Yeah. Look, I mean, there's a terminology which I said to everybody I want to use, 'cause I hate it when guys tell me chocolate's for tomorrow. The bottom line is that you can see where we're at right now, and if you doubled it, say, well, you're not gonna get Mine is that, the second half is much stronger, simplicity of where we are in our production schedule. Fortunately, end this up to, as I said, five, 55, 60,000 tonnes stope. That's one. There'd be another. We just find another smaller one, but better grade, and we've got another two firings coming in early February. Now in December, I can't even remember if we fired a big stope or not. I don't think we did.
psych, the mine cycle level, it's gonna happen, and that's why I'm not changing guidance. Okay? The development rates, as we push them, obviously are critical for the next, you know, phase of Gwalia, which is, you know, FY 2024, FY 2025. We have to do that work. You know, the capital decline development for sustaining CapEx, and obviously the vent CapEx, is critical. Yes, we won't be building a paste fill plant or down a mine. We'll do the required sustaining CapEx on a vent decline, et cetera, to make sure the mine brings the best. 'Cause look, you know, engineering one on one, you can't go down into a mine at 1,800 meters with no ventilation. I mean, you know. We did a catch up there.
We did a huge amount of waste removal from the mine stockpiled to allow us to be able to use that stockpiling for all stockpiling while we reschedule the trucking. There's a lot of improvements in that area as well. As I said earlier on, you have to do development. You know, when you're blasting big stopes and you wanna free bog them, you need the big boggers, you know, that got the big buckets to do that free bogging, 'cause they don't have tele-remotes. When you go to remote, your production drops on a ton, you know, per day basis, and you still have to move the waste. That is short-term cyclic planning, and that's now improving. You can't believe it.
You maybe don't believe me, but I can tell you, I can see the difference, the culture, the morale at site. As they're getting wins, they are feeling much better about the work that they do, and that's a great positive for site.
Okay. No problem, Dan. Thanks for that.
Did that answer the question?
oh, look-
Go on again.
To an extent, yes.
Operator?
Um-
We appear to have been... Maybe you haven't paid the bills.
Hello, Dan, can you hear me?
I can. Yeah.
Pardon me. The speaker line is now reconnected.
Thank you.
Hello.
Sorry, guys. We asked the... Yeah. Right. We paid the bill-
Thanks, man.
We're back on.
Excellent. Excellent. Yeah, look, just a quick follow-up. I guess, just trying to reconcile, I guess during the quarter, you noted absentees and issues at Gwalia, particularly affecting the development crews, but simultaneously, I guess, subcontracting out the development operators that were previously developing Zoroastrian to work on Ulysses. Could you just talk through the decision process there and whether you've been able to kinda leverage, try and plug gaps at Gwalia, with those crew operators?
We had a start-up development team down at Zoroastrian. We'd taken the decline down 25 meters. If we hadn't commenced the merger talks, we would have continued with that. As you know, that saved us, you know, AUD 20 odd million for the financial year. We probably would have forged ahead with that. I don't really like stopping operations. It was a stage where we needed ventilation fans, et cetera. The only deployment we've done there is the underground managers have gone up, are working on with Genesis at the Ulysses to push that cut back and then the decline start up. It was Mark Mines. That crew basically came out of Kalgoorlie.
As I said, we've actually optimized the jumbos long-haul rigs at Gwalia, so we actually don't need any more. We are happy to actually start giving more away with the PYBAR contract coming to the end at the end of this month, with Macmahon picking up that work, there'll be a Macmahon's jumbo, which is already at site, obviously going in to pick up that work. As I said, there won't be additional workforce. What we have done, though, we realized, is that, you know, when you do a lot of development or increased development rates, you need service crews. The poor service crews are the guys that we fire, that, you know, make redundant the first thing we have a downturn.
When you're trying to ramp things up. We're actually putting on a second service crew to obviously make sure the vent stuff and all the stuff is happening down the mine, the pipes are in, water's down the mine. That's actually an add-on to. We are stripping out other costs and other sort of parts of the contract. Look, maintenance, you know, is a revolving door at the moment. As I said, we're not alone. The COVID is partially. We've got 16 odd people coming in from over East, which in itself, you know, is a burden on rosters and so forth.
The bottom line is that the relationship with incumbent contractor is now improving by the day and, you know, I don't like conflict, but I do like to get good returns on when I'm spending $1. So far, things are working according to plan. The availability of equipment is improving. Look, you know, can I say it's steady-state? No, it's not. We will need to keep on. Look, you know, I won't keep it a secret, but we have got some spare capacity in terms of our own people, and we are helping and putting in processes in place to help making sure the equipment is available for the short-term plans.
That's not, you know, hands doing fitting stuff, that's planning, making sure that the gear is lined up for the tasks ahead on a 24-hour basis. We've really gone back to the fundamentals of short-term planning to make sure that that happens. It doesn't help having a 3-month forecast if you can't deliver the 24-hour plan. That's where the emphasis with Andy is doing right now.
Okay. Wonderful.
That's it.
Thanks, Dan.
Yeah. Thanks, mate.
Thank you. Your next question comes from Matt Greene from Credit Suisse. Please go ahead.
Hi. Good morning, Dan. Hope you can hear me.
Oh, yeah.
I've got a couple of questions just in relation to the merger. I'll put them both into one just in the interest of time. Just in terms of the cash burn or net cash balance, that's required, I guess, is required to maintain. Is there a number and what is that? If you do breach that, do you renegotiate the deal or do you have to find additional funds? The second part of my question is, there's a lot of commentary in your presentation and in the slides about the risks of the deal, and I guess what happens if this deal doesn't go ahead. From your perspective, what do you see as the key risk from here of the proposed merger not going ahead?
To be honest with you, I don't think there's any key risk in terms of operational, in terms of doing the hard yards with the paperwork. We've got a de-merge on foot as well, there's a bit more paperwork to be done. We've got to get the independent experts across Simberi, Atlantic, which has happened or is happening. One, Simberi is done. Atlantic is today and Leonora's tomorrow. That's happening. We've got the court dates, that's not an issue because when we did the IGO deal, I had to wait for Her Honor to give me a date, which was, she was on holiday, that was a bit of a problem. I'm not seeing any major on an asset level other than there's a lot of work.
I'm not promoting them. I don't quite get that there's a lot of negativity in the risks. There is obviously risks. The scheme is so long in formulating that there's always something. Going back to the net debt, there's a number. It's on a group level. We don't think we'll trigger it. It's not really. Obviously, something that is Our main driver at the moment will be to make sure that we get the answers out of Gwalia and Simberi produces more cash going forward. As we said, Atlantic is, you know, touch and go on a even basis. We need that input permit. I'm not seeing any real risk to the actual deal.
I don't know where that's come out. It is just a lot of6 legal beagle stuff because of the demerger and the merger. Look, the net debt trigger, I'm not overly concerned about that.
I think, Dan,
Okay.
It's Andrew here. Just to mention, I think some of the concern you might be referring to is we have a number of questions about the just the rationale for switching off Zoroastrian at this point in time. Some of that commentary is just to reassure that we've made a sensible decision there in terms of with the larger ore bodies likely to come online because of the merger. We've chosen that pathway, put appropriate protections in place. It's just to explain that, you know, given that we got off to a great start as Zoroastrian, what was the rationale for suspending that? Maybe that's what you've read into it, that's more just reassurance on the sense of the decision there.
Yeah. Okay. Thanks, Andrew.
That's.
Thanks, Andrew.
Yeah, so Dan, what is that net debt trigger, please?
It's CP on the schedule. I think it's AUD 40 million.
Okay. you'd have to have-
Differential.
AUD 30 million.
Differential. Yeah, differential. It's not a number, it's a differential number.
You had AUD 47 million net cash when this deal was announced as of end of November. You have allowance to essentially burn AUD 30 million by May. Is that how I should be interpreting that?
Yeah. Lucas, do you?
Yeah.
chip in, yeah?
Yeah, thanks, Dan. Matt, it's based on a forecast number which, you know, obviously hasn't, you know, we're working towards, but it's just within a range of what we expect to be around about the time it gets done. As Dan said, we should be able to comfortably make that.
Okay. All right. Thank you. Sorry, if I could just add one more. Dan, you mentioned on the getting stakeholders involved on the Beaver Dam permitting. Can you just elaborate as to what that means? I mean, could we see that permit actually come through?
I'll pass that on to Andrew, who's a lot more across it than I am. From my perspective is that, you know, there are some regulators. We've got some on board and some First Nations which need a lot more time. You know, what we don't wanna do is, you know, miss opportunities in other projects, which we are a lot more, I guess, comfortable with the local stakeholders to get that operation up and running. That's the changeover. You know, Andrew, do you wanna comment on the stakeholders at Beaver Dam?
I think if I understood the essence of the question was do we think that Beaver Dam permit could come through, I think the sort of answer is definitely yes. Those engagements are gonna require more time. There's still concerns that we are discussing in terms of the pathway forward there. I think the key why we wanted to flesh that out in December was that we had been putting in every effort to try and get Beaver Dam in so the first ore would arrive around or before or at the time of the stockpiles completing by the end of 2024. With the prolonged discussions, that is no longer, we can see that's no longer possible.
We've taken the pressure off those, the formal permitting process and giving ourselves more time to engage with the First Nations groups in particular, but also Department of Fisheries and related stakeholders. I'd still think that the intention there and the expectation is that we'll get that permit through eventually, but obviously we need to make sure that it's to the key stakeholder's satisfaction. Again, the issue with Beaver Dam was the next one that we could get in fastest, but Fifteen Mile Stream is really the bigger story in Atlantic in terms of larger ore, overall ore reserve and resource position and future cash contribution.
Okay. Thanks, Andrew. That's clear. Thanks a lot.
Thanks, mate.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Lougher for closing remarks.
Thanks, everyone. Sorry about the technical. I've got a lot of people around me now telling me that how to work it, but, sorry about that. Look, I mean, in a summary, it was a difficult quarter, but I am encouraged that there are things that I'm seeing that are going to make the second half a better half. We have seen, and I've made it very clear to everybody, all our contractors, that we are not here to fight. We are here to actually deliver to our shareholders, and nobody wins if one is not making any money. That's the message, and I think it's getting through. Obviously we are looking forward to that in-pit tailings approval and getting now work ramped up on 15 Mile Stream.
Look, you know, I am very keen to get the St Barbara and Genesis merger happening. I think it's a good outcome and, you know, when you fast-forward a bit, the Leonora District will be a very big producer of gold in West Australia. I'm looking forward to that. Look, you know, there'll be plenty more times to have a conversation, but everything is on track and we don't have any issues that I'm aware of right now that would hinder that progress. You know, St Barbara shareholders will get that dedicated vehicle from Phoenician Metals. I think that's also got a very exciting future ahead of it as well.
Thanks for listening to me for such a long time, and happy to take, you know, any other questions offline, through Chris and Kasun. Thank you, everybody, and just wanna thank all sites for hard work, all the hard work they've put through. Sometimes it's difficult, and we just gotta push through. Thank you very much.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.