Thank you for standing by, and welcome to the St Barbara briefing on full year 2022 half year results conference call. All participants are in a listen only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the call over to Mr. Chris Maitland , Head of Investor Relations. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining us today. Please note the disclaimers on slide two. On our call today with me is our Managing Director and CEO, Craig Jetson, and our CFO, Lucas Welsh, who will discuss our half-year results, after which, as we just said, we'll open the call to questions. With that, I'll hand the call over to Craig.
Thank you, Chris, and good morning and welcome everybody to St Barbara's FY 2022 half year results briefing. As always, I would like to begin by recognizing the traditional owners and First Nations people of the lands of which St Barbara operate in Australia, Canada, and Papua New Guinea, and pay my respects to the elders past, present, and emerging. Today I'll be taking you through our progress for the first half of FY 2022. I will celebrate our improved safety performance and progress that we have made improving in the diversity and inclusion in our teams. After which we will discuss our operational results for the first half. I will then hand over to Lucas Welsh, our CFO, who will explain our financial performance. Finally, I will discuss our vision for St Barbara's future and our new aspirational production targets.
As always, safety remains number one priority, and we are committed to our goal of eliminating fatalities and life-changing injuries. We have continued with our trend in reducing total recordable injury frequency rate, which has dropped to 2.7 injuries per million hours worked. Although this is great to see the improvement, we are mindful of not becoming complacent. To that end, we have made significant advances in our Safety Always leadership program, which aims to build a better in-field safety leadership at all levels and encourage regular conversations about finding and fixing any areas of concern. Those of us that have followed my career will know that gender equality is something, among a lot, I'm very passionate about. I wanna take this opportunity to convey how happy I am that St Barbara is once again included in the Bloomberg Gender-Equality Index.
This is the company's second year of inclusion, recording significant improvement on performance metrics year-on-year on all GEI measures. St Barbara has already been recognized in the Australian Workplace Gender Equality Agency as an employer of choice for gender equality for a number of years now. As is the case with safety, we celebrate the great work that has been done to date in this space, but do recognize it's a journey and we have more to do. We have delivered a strong production result of about 133,000 ounces of gold at an All-in Sustaining Cost of AUD 1,539 per ounce. Our operations delivered AUD 42 million cash contribution after both sustaining and growth capital. A great effort considering all the capital works for the tailings facility at Simberi in this time.
For me, the progress we are making within the Leonora Province Plan was our biggest achievement. I'm going to go through that in greater detail shortly. The work I'm most proud of at this point was the work done by the Simberi team, who completed laying of the new Deep Sea Tailings Placement pipelines. The time to finish this complex engineering work and deliver the DSTP within six months in the middle of a global pandemic associated with supply disruption issues is nothing short of a great team effort. With that team effort, production at Simberi is able to commence early in this new year. This demonstrates that we can deliver complex engineering work, such as a Sulphide Project, in very trying circumstances. This half, we've also moved to reporting our reserves and resources over the calendar year periods.
The only changes in the report against the prior one relate to depletion and the change to Tower Hill as an open pit mine, which has increased its resource by 600,000 ounces. The first half of this year saw us delivering multiple steps of our Leonora Province Plan. The progress we have made on the PFS for Tower Hill led us to select an open pit mining approach to its development. This in turn grew our mineral resource for Tower Hill by 600,000 ounces and added a further 16 million tonnes of ore for processing. This means, in a short period of time, we will go from having excess capacity in our 1.4 million tonne processing plant to being mill constrained.
To accommodate this increase in volume of ore for Leonora, the PFS identified a cost-effective approach, expanded the processing plant to 2.1 million tons per annum. A capital outlay of approximately AUD 30 million will see the installation of a new ball mill and other associated debottlenecking equipment to expand the throughput of our current facility by 50%. The study also identified a Glencore Albion Process as a preferred process for treating refractory ore at Harbour Lights. This equipment will cost between AUD 110 million and AUD 120 million to install, and will uniquely position Leonora to take advantage of other satellite refractory deposits within 200-km radius of the plant. We believe we can make the Leonora processing plant a hub that could service multiple satellite deposits in the region.
On the twentieth of December last year, we announced we had entered into a scheme that will execute an all-scrip acquisition of Bardoc Gold, who own the well-advanced Aphrodite and Zoroastrian deposits. Leonora is uniquely placed to add the value to these deposits as the plant is connected to them via existing road and rail infrastructure. Developing these deposits accelerates our Province Plan by filling the mill much sooner. We plan to proceed quickly with the development of Zoroastrian. It's a high-grade free milling ore body, which complements Gwalia as a near-term mill feed. We are initially likely to transport Zoroastrian via road to be treated at Leonora at the rates of around 400,000-500,000 tonnes per annum, and aim to have this production by the second half of FY 2024 or sooner.
Ore produced from the much greater, much larger Aphrodite deposit is expected to follow within a few months, coinciding with when we expect the Leonora plant to be ready to process refractory ore. We are getting ready to commence the pre-feasibility studies and construction of both Zoroastrian and Aphrodite underground mines. Our exploration team have potentially identified a new mining front at Gwalia, which is a significantly shallower depth than their current mining operations. The high-grade intercepts at Old South Gwalia are very promising, and we are aiming to add them to our mineral resource in the fourth quarter of this financial year. We don't know yet how big this could be or its ultimate ramifications. However, an additional shallower mining front has the potential to increase the rate of ore delivery at Gwalia and add mining flexibility, which can reduce production variability.
We have also completed further drilling at Trevor Bore, where we are targeting a maiden mineral resource in quarter four FY 2022. Last Friday, we announced that the COVID-19 pandemic infection rates across the Tabar Group of Islands had significantly increased, impacting both our local community and our workforce in St Barbara. The graph on the slide shows how sudden this increase has been. Up until this month, we have been able to manage the case numbers with minimal disruption. We have had in place for some time now a COVID-19 management plan to minimize the risk of infection of individuals. The mine and the processing plant continue to operate, but at a reduced rate. The rising of infections is affecting various operational teams and departments in mining, processing, and maintenance. These departmental impacts have rippled through the entire operation.
Currently, we have a third of our workforce in isolation in camp, with a significant portion of senior management impacted by COVID-19. The positive cases require constant on-site care, ensuring the well-being of our people and community, which also takes considerable management time. COVID-19's effect on the maintenance team has meant we are building a backlog of maintenance issues that will require attention. These will come to take some time to work through. The mining team has also been hard hit, resulting in a mining ramp-up rate being faced far slower than we expected. At this stage, we do not know when we can get back to full production, full workforce, healthily on the ground. For this reason, it's too early to update St Barbara guidance that we withdrew last Friday. With that, I'll now hand over to Lucas Welsh, our CFO, to take you through our financial results.
Over to you, Lucas, and thank you.
Thanks, Craig. St Barbara has delivered a sound financial performance this half, given St Barbara was offline for the entirety of the period. We recorded a statutory profit of AUD 13 million and an underlying profit of AUD 15 million for the half, thanks to the strong operating performance of Leonora offsetting the losses at St Barbara. This meant that we were able to deliver an earnings per share of AUD 0.02 in a period characterized by fairly severe headwinds. Importantly, underlying EBITDA and EBITDA margin remained solid at AUD 103 million and 31% respectively, highlighting the strong business profitability and fundamentals underpinning the company. Despite St Barbara not producing gold, and therefore revenue during the period, AUD 19 million cash inflow to the business was recorded from operating activities in the half after corporate tax and exploration expense.
The overall cash flow of the business was underpinned by substantial cash contributions from the three operations of AUD 42 million after sustaining and growth capital. The balance sheet remains in good condition with a gearing of 13%, which puts us in a strong position to maximize the use of our current debt facilities, which will fund all proposed projects with sufficient headroom. In comparing our underlying profit between the first half of FY 2022 with the first half of FY 2021, it's easy to see that the significant increase in profit at Leonora has been more than offset by the significant drop at Simberi.
Bardoc and Atlantic. The AUD 68 million profit increase at Leonora is attributed to the great work done by the team over the last year to improve production stability through increased mine development and increase in the number of mining headings at Gwalia, which has more than offset the decline in grade as we mine deeper. This enabled increased volumes of ore to be processed compared with the prior period. We were also able to use the excess capacity we currently have in the mill to process ore purchased from a third party. With no production at Simberi, there was an AUD 84 million profit variance compared with the prior period. At Atlantic, the profit variance was driven by reduced production due to lower ex-pit grades and rainfall events. This reduced production and gross profit drove the favorable variances in depreciation and income tax respectively that you see there.
The movement in cash over the last six months resulted in an AUD 39 million reduction in cash and cash equivalents at the end of the period. The waterfall you see is dominated by strong cash inflows by Leonora being offset by outflows from Simberi. Positively, though, the company retained a cash inflow from operations after sustaining and growth CapEx of AUD 42 million for the half. AUD 19 million exploration expenditure was split evenly between the amount expensed and amount capitalized. The capitalized expenditure related to advancement of the Simberi Sulphide feasibility studies and resource development Atlantic. While exploration activities in the Leonora Province, including Old South Gwalia and near mine activities in Simberi and Nova Scotia were expensed. AUD 22 million investment outflow consisted of an AUD 25 million acquisition of Kin Mining, offset by the sale of Duketon shares.
Approximately AUD 13 million was paid during the half, the 2-cent fully franked dividend relating to FY 2021. Finally, it was deemed prudent to draw down AUD 50 million from our syndicated debt facility to maintain liquidity in an operating environment contending with COVID-19 and other possible headwinds. This drove the net AUD 44 million cash increase from financing activity. We have organic growth projects in the pipeline. We're committed to funding all of them through a mix of low-cost debt and free cash flow from operations. Now, we just have over half a billion dollars of syndicated debt facilities. We intend to subscribe to the U.S.-denominated accordion facility as we construct the Simberi Sulphide Project. In combination with operating cash flows generated, the debt facilities will be sufficient to fund the expansions for the Leonora Province Plan, Simberi Sulphide expansion, and construction of Beaver Dam in Canada.
Note this half, we extended the term of these facilities from July 2022 to July 2025. Now, we have done significant balance sheet and project capital modeling and forecasting to be confident of our ability to fund all our projects from future cash flows and debt facilities. In the event of dramatic gold price movements, we have the ability to sequence our capital spend to ensure we can continue to fund the projects from cash flows and debt facility. One advantage we have with all our projects is they have short payback periods, meaning that the strong cash flow generated by these projects will mean we don't expect to have extended periods of debt. With that, I'll now hand back to Craig to take us through our aspirations.
Great, thanks for that, Lucas. As we've just outlined, St Barbara has gone through a fair amount of change in the last half. In fact, this has been a process of change which we commenced back in late 2020, when I outlined a three-step uplift strategy for growing St Barbara via the province plans set out by each of our assets. Due to the sheer number of these changes, I believe it has been difficult for us to articulate the net impact as we've had to communicate the changes on a stand-alone basis. That's why today, I am pleased to release our aspirational production profile for St Barbara, which looks to bring everything together. As suggested by the title, the profile is certainly aspirational and requires a project pipeline to go accordingly to plan. In essence, this is what we're shooting for.
There is further upside to this profile, of course, as it excludes for now Gwalia South, Old South Gwalia, which we're still diligently drilling out, and any mill capacity increase beyond the 2.1 million tons capacity of Leonora will be subject to ongoing studies. In broad strokes, it sees St Barbara going from 300-400 thousand ounce producer, where we are today, to a producer that averages around 600,000 ounces by or from FY 2025 or sooner. About half of this average production is through Leonora, where we aspire to produce approximately 270,000 ounces per annum through an expanded mill. Of this, 180,000 ounces is made up from production from Gwalia, with the remaining 90,000 ounces consisting of production from a multitude of ore sources and options available to Leonora.
Upon completion of the Sulphide Project, for which we are currently working on the Front-End Engineering and Design work, we expect to average approximately 180,000 ounces from Simberi. At Atlantic, we are aspiring to produce 150,000 ounces once we see production from Beaver Dam and Fifteen Mile Stream together. We have a large mineral endowment at each site, which underpins our aspiration to have an asset operate for at least the next 10 years. Over the last 18 months, our Building Brilliance team has been working hard at Gwalia to increase production and improve production robustness. Between FY 2016- 2019, we experienced a decline in mining performance.
Limited by haulage capacity to the surface, production was maintained by prioritizing high-grade ore to be hauled to the surface, with waste material being stored underground, regularly where future mining fronts would actually have to be developed. At the time, the theory was that the waste would be stored underground, would eventually be used in the PAF plant when the PAF plant became operational. During this period, we also saw a significant drop in development meters. For example, in FY 2016, 971 meters were developed the entire year. To put this into perspective, to maintain today's rates and increasing rates, this year we are targeting 3,300 meters of development and look to increase that to 4,000 meters for next year. When I arrived at St Barbara.
Barbara, it became obvious to me that the PAF plant was not capable of clearing the extensive backlogs of stored waste from underground. It was clear to me that the lack of investment development meters had created a significant bottleneck for Gwalia and limited the mine's ability to deal with unforeseen events. In FY 2020, we overhauled our operating strategy at Gwalia. With the future production robustness and capacity in mind, we began increasing the amount of underground development and turned our attention to removing historical stored waste. We needed to access future stopes, which were being blocked by this waste at the time. As a result, for the two years, we have been hauling more waste to the surface, reducing our ability to deliver ore to the processing plant. As this work progressed, we started to declutter the underground.
We've opened up new areas from where we could mine. This work done by our Building Brilliance team led at the time, at this time, in particular by Lucas, driving improvements in the fleet, how we operate. The combined effort of this can be seen in the total material moved to the surface and beginning to increase of FY 2020 and FY 2021. FY 2021 was impacted by the September FY 2020 fall of ground. This event at the time reinforced the need to open up new areas for development, both at depth and higher up in the mine. I was determined that we would not find ourselves constrained by such events in the future. Despite this setback, we managed to clear the remaining stored waste in FY 2021. The hard work done by the team at site has paid off.
In November last year, we had another fall of ground event. Unlike what happened in 2020, we had invested in enough development meters that we were able to quickly change our mine plans and continue to mine while we remediated the affected area. In the future, I want to have more options and to further improve Gwalia's resilience. In particular, the identification of Old South Gwalia as a new potential mining front, I believe, will provide us with more optionality. Thanks to all this hard work, we are now in a position to be able to target 900,000 tons of ore to be delivered to the plant this year. We have sustainably increased the number of development headings and our haulage fleet once we changed our focus to delivery on this ore.
While not storing waste underground, we already have three additional new jumbos on site, giving us greater development flexibility, and we're expecting another two on site this financial year. With this additional equipment, we will be able to open more development headings in FY 2023, and we're aiming to reach 1.1 million tons of ore delivered to the surface from Gwalia underground. This has been a long road to return Gwalia to a robust business and was achieved in the middle of a global pandemic, which has made access to labor, in particular, access to supplies extremely difficult. With, hopefully, the impacts of the pandemic receding somewhat in the future, Gwalia's future certainly looks strong. In summary, we are focused on the near-term. We are targeting execution of our scheme of arrangement with Bardoc in April.
As I've already outlined today, this will herald a transformative acceleration of our Leonora Province Plan. Where we've got the potential of new mining fronts in Gwalia Shallows, we will have more drilling to do, but the shallow mining front offers huge potential benefits for us in ore delivery rates, mining flexibility, and production consistency. The Bardoc acquisition accelerates our plans to extend the capacity of the Leonora processing plant by 50% to 2.1 million tons or greater and adds the capability to process refractory ore. The upgrade will see processing plant become a large, unique processing hub in the region for treating both refractory and free milling ore. We've continued to advance other ore sources for Leonora as well.
We have increased the mineral resource at Tower Hill and progressed drilling at Harbour Lights and Trevor Bore, and I'm looking forward to sharing more about those drilling results in the very near future. With Simberi back up and running, although at this point severely restricted by issues previously mentioned, I'm very pleased to have all three operations in production once more. We are now focused on delivering on our production, also finding ways to bring production and growth opportunities as laid out today forward. With that, I will now open the line for any questions that the listeners may have. Thank you very much.
The first question will come from David Radclyffe with Global Mining Research. Please go ahead.
Hi, good morning, Craig and team. I might start first off with an accounting question and just looking at Simberi and just trying to understand the treatment there of costs. I think you talked about a cash flow outflow of nearly AUD 70 million, but recorded costs of AUD 25 million.
Yeah.
Maybe talk about how you treat that because it sounds like, you know, costs were capitalized. Is that correct?
Look, I'll pass over to Lucas to answer that detail, David.
Thanks, Dave. That's correct. You'll note in the financial statements, we note that AUD 28 million of those costs were capitalized as ore stockpiles and as deferred waste stripping.
Okay, perfect. Thank you. In terms of the dividend, maybe could you give some more color around the decision not to pay the interim? How we should think about, you know, the potential for a final dividend given, you know, the future capital requirements you've laid out for us. You talked about modeling the cash profile there. Does that actually include dividends or not? And if so, what sort of level? How should we think about that?
Yeah, David, as the first and foremost, we are going through our position on dividend payments, and we're certainly reviewing and creating a dividend policy within that we will publish. People will then see how we calculate and when we pay our dividends, et cetera. I think given the headwinds that the organization's faced over the last six months in particular, with COVID now affecting Simberi coming online later than what we would like, the permitting challenge that we still have at Atlantic, although strong performance out of Gwalia, and with some of the projects that we have certainly got in our pipeline to deliver, and Lucas spelled out quite clearly how we believe we're going to fund those. The timing still remains a bit of a question.
The overall performance of the cash performance, in particular of the company, should have been much stronger than what it was, given the issues at Atlantic and Simberi affected those. Cash management, I think at this point in time, was probably prudent not to commit to paying an interim dividend. The full-year dividend is still up for question and certainly will be based on the full year's performance at the time and will be reviewed by the board. Knowing the shareholders' view on dividends, it certainly would be in our best interest to get the bottom line of performance where it has to, where it's obvious where dividends can be in affordability of the business.
Great. Thanks. Maybe just one last one just on the Gwalia, just to check something there. You talked about improving the underground and clearing the waste, which is great. Getting the ore hoisted back to 1.1 million tons. I think that was right. I'm just wondering, does that include Old Gwalia at all in that 1.1 million ton target, or is that potential upside to the performance of Gwalia?
Yeah, David, I mean, there's two ways to answer that. I would use it as 1.1 with the Old South Gwalia, absolutely making that 1.1 a robust million ton delivery to the plant. And why I say that, as Gwalia Deeps gets deeper and the grade drops off, it becomes more and more difficult to be able to target 1.1 million tonnes from the Deeps in particular. For now, until we understand the mine plan a bit more, the impact, optimize the mine with that mine plan, I would model it around a stable 1.1 for significant amount of time coming forward.
Because that 1.1 that was stated some time ago was always going to be a problem in the future years, probably no more than 18 months from now. As we went deeper, the challenge to deliver 1.1 out of that one decline was very, it was going to be very difficult, if at all possible. I don't think the mine plan or the work had been done at the time to make that call. What I'm saying here now, as I know it, before I see what the intermediates can deliver, I would calculate it in the 1.1, but that could be conservative.
Okay, thanks, Craig. I'll pass it on.
Once again, if you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. Again, that is star then one. The next question will come from Matt Greene with Credit Suisse. Please go ahead.
Hi, good morning, Craig and team. Craig, your comment just on Gwalia hitting 260 by FY 2025 or earlier, is there anything in particular that could accelerate you reaching that production level sooner than FY 2025?
Yeah. Look, really good question, Matt, and it comes back off the, I think, the back of David's question about where do all of the sum of the pieces actually fit once you've got a mine plan and you can optimize? We're not quite there yet. We don't know how significant the intermediates or Gwalia South could actually be. So I think for now, you know, the 270 certainly could be brought forward depending on the Bardoc acquisitions or what we do there and how soon we can bring that on, how soon we can develop the shallows and bring that online, and then how that interfaces with any traffic trucks or any issues from the deeps.
I think not fully optimized and modeled yet. It could be brought forward somewhat. Then it has to line up with plant expansions and some other bits and pieces as well. I think when I look at you know the opportunity there is still growth left in that production tank yes and sooner.
That's great. Thanks. That's helpful. Thanks for providing the CapEx up there on your growth. So it's about AUD 470, give or take, from FY 2022- 2025. My first question there is just AUD 170 on Simberi. It shows from FY 2020. I presume that's from the second half, and none of that's been spent in the first half. More broadly across that CapEx profile, are you able to give us a sense of which year you will see peak CapEx spend and how much that may be?
Yeah. Look, I'll leave the quantums to Lucas to answer because we've done quite a bit of work, obviously, on forward cash prediction as you would imagine what we're doing. It does rely on a couple of things really. One of the major unknowns at this stage is the permitting for Atlantic. Now, I guess the situation at the moment is certainly improving, and we're progressing with the permitting. But it still needs those permits to be approved. I think the timing of those permits approval will determine when we forecast accurate cash flows in the right year. We have to call it as we see it at the moment.
I think the other piece to this will be, as we're about to finish the feasibility study on the Sulphide Project, the pieces of that puzzle will come together in terms of the mine plan in particular of how much oxides do we have left, how does that affect the business moving forward, if at all, and then when do we start construction of the Sulphide Project. We're still working through that. The timelines that we're being given are indicative of when the cash will flow. I think the big, I guess, selling point here from a cash perspective is between now and the next 12 months to when we start really spending some of the growth capital money, we've got 12 months of cash income.
We've got debt facilities to be able to cover that if we so choose. The debt is very long-lived. It's only, you know, 2- 3 odd years in most cases of our projects before payback. Lucas, I'll hand over to you for any other comment.
Thanks, Craig. Matt, I think if you think about Simberi, and I think taking on the comments that Craig has made, you're probably looking at, you know, for that particular project, assuming, you know, we get approval in the coming months and the mine plans are worked out, you're probably talking about, you know, FY 2023, you know, that capital is starting to come online, but the bulk of it in FY 2024. Now there is some expenditure that has been done at the moment, but, you're probably looking at a reasonable split over those two years with probably skewed a bit more to FY 2024.
In terms of the allocated capital, again, scenario dependent, but you know, currently our timeline has you know all been delivered around the December 2023. That's you know you've got the ramp-up capital heading into that period for there. With Leonora you know assuming the Bardoc you know process goes through, the capital will probably start to be spent during you know during this year, but probably the bulk of it during FY 2023.
Thanks, gents. That's helpful. That's all for me.
Thanks, Matt.
To ask a question, please press star then one. There are no further questions at this time. I would now like to hand the call back over to Mr. Jetson for closing remarks.
Look, Sid, thank you very much for dialing and listening, everybody. Also thank you for the questions and interest shown in us in doing so. With that, I'll now end the call and we'll talk again soon. Thank you very much.
This concludes today's conference call. Thank you for your participation. You may now disconnect.