Good morning, everybody, and welcome to the quarterly conference call for Westgold Resources. Your speakers for the call are Wayne Bramwell, Managing Director, Tommy Heng, Chief Financial Officer, Phillip Wilding, Chief Operating Officer, and Matthew Pilbeam, General Manager, EH&S. I'd now like to hand over to Wayne to commence the call.
Thanks, Shane. Welcome to all the analysts, shareholders, and most importantly, our staff who patch into this presentation. As Shane said, today I'm joined by Matt and Tommy and Phil. We'll dive straight into this presentation of the Q2 results. Let's jump straight to slide three. Slide three is a scorecard that we run every quarter. Again, Q2 for Westgold was a tough quarter. The team delivered. We'll talk to the Q2 results in some detail. I look at this slide and I really focus on where we are to the half year. The group production was solid, even with weaker outputs from the Bryah operations. Phil will speak to that a little later in the presentation.
For me, I look at this and I see that we are at the top end of production guidance for the half, and we are tracking towards the midpoint of All-in Sustaining for the half. We've certainly changed the trajectory of this business, and there is more opportunities to certainly address our cost base going forward. Jumping on to slide four and diving into the detail of the quarter. Most importantly, our EH&S performance is improving and Matt Pilbeam will speak to that in the next slide. 62,000 ounces for the quarter was a strong result and would have been stronger except for weaker operational outputs from the Bryah operation.
As I said, 128,000 ounces for the half, puts us very close to 130 for the half, tracking to the top end of guidance for the half year. Most importantly, we are now starting to move the dial on a cost basis, to the half year, we are tracking to the midpoint of our stated cost guidance. Really important to see positive Mine Operating Cash Flow for the quarter, up AUD 3 million on the previous quarter. This has really been driven by improved outputs from Big Bell and Bluebird. It's really exciting to see some of the drill results that the company's releasing most recently from Bluebird South Junction, there is a range of hits there from our four largest operations showing that the drilling program and the investment we've made is starting to pay dividends.
We're really excited about the Clean Energy Project. We've again, our first gas-fired power station supported by solar and batteries is underway at Tuckabianna, and we'll see that come online later this year. Another key point is the delivery of our first hybrid diesel-electric underground loader currently working in its new home in Starlight. That's the first of Caterpillar's new R2900 XE machines, and our team has had that for about a week now at Starlight, and it is putting it through its paces. Tommy will speak to our heads position, which we're rapidly unwinding over the next two quarters. At the end of the quarter, most importantly, we are, we retain AUD 159 million of cash and equivalence. The balance sheet is very strong, and we remain debt-free.
Over to Matt for slide number five.
Thank you, Wayne. Good morning to everybody on the call. To kick things off today, I'm pleased to take you all through the high-level EH&S performance results for the quarter. Starting from the top and in comparison to our previous quarterly results, we recorded a 30.2% decrease in our Lost Time Injury Frequency Rate, resulting in an overall frequency of 0.6 for lost time by the end of December. In addition, we also had a 22.1% decrease in our Total Recordable Injury Frequency Rate, resulting in an overall frequency of 14.36. Over this period, we also had an overall decrease, a 4.77% decrease in our High Potential Incident Frequency Rate, down to 6.55.
Finally, we're also able to keep our significant environmental events and our significant psychosocial harm events to zero for the quarter. Overall, and as a business, we're certainly proud of our improvement in this area, but also acutely aware as a management team, that this is just the start of something more sustainable and long-term within the Westgold business. With that detail, I'll hand you back to Wayne.
Thanks again, Matt.
Mm-hmm.
Slide six. Slide six really tells two stories. It really shows the depth we have within the business and the strength within the business. It also shows in a single image what we're doing in terms of strategy. The left-hand side of the slide, talking about the Bryah operations, the strategy there is very much to optimize what we do there. On the right-hand side, the Murchison operations, what we have been doing is simplifying it and expanding it. Inside that box, there was far more moving parts in the beginning of the year. Now we have two processing hubs and three large underground mines within that. The business is getting streamlined, simplified, and with that increases and enhances our ability to become more profitable. Back to slide seven for Tommy.
Thank you, Wayne. Slide seven. Look, this page demonstrates the trend downwards in our cost. As we can see, our own Sustaining Cost quarter and quarter decreasing to AUD 2,071. We are on track, as Wayne has mentioned earlier, with our production and cost tracking to guidance. Production, Phil will talk in more detail with regards to our Bryah impacting this quarter results. Slide eight. This gives more detail on how our cost base are continuing to be reduced. This is in line with the reset of our operating strategy implemented late in Q1 FY23. Pleasing to see our own Sustaining Cost continues on a downward trajectory. Look, I won't read through every single line of this, just to touch on a few. Capital Expenditure is now stabilized with our major mines in steady state.
Our focus now is obviously on our Clean Energy Transition Project, as well as the tailings lifts. Exploration, we continue to invest in the rigs. Further detail will be provided in the later slides. Look, the spend is a timing schedule. Slide nine. Thank you, Phil. Slide nine to Phil.
Thanks, Tommy. This chart here is showing our transition into profitability, and what it's really showing is the AUD 10 million reduction in the All-in Sustaining Cost spend last quarter. There's a little blip in there in November. That's due to the increase of stockpile drawdowns. Overall, the transition plan, as we've been communicating over recent months, is well and truly embedded. As per last quarter, transition started, and we are seeing these benefits coming through, and that can be seen on that chart as well. On to slide 10. Bryah operations. 12,900 ounces produced for it. It was a challenging quarter up at Fortnum. We had a 22% drop in the mine grade, which resulted in a 30% increase to All-in Sustaining Cost. This is something we don't see as a long-term issue.
With changes to the planning process and the management up there, we'll work through this over the quarter. The mill performed well. We've got crush upgrades happening this quarter to assist in the efficiencies. Three drill rigs are running underground here. These will assist in the planning for optimal scenarios for this mine. There's been some great results in the Moonlight and the Nighth awk ore bodies as shown. On to slide 11. Murchison operations. This was a good quarter for the Murchison. Steady ounces and a 9% drop in the All-in Sustaining Cost. The mills both performed well. The grade held up. Big Bell and Bluebird have again continued to grow and impress with the results. Big Bell is consistently now at a rate of over 1.1 million tonnes. There's the review underway externally to determine how big this mine can get.
Bluebird, its amazing ore system is simple, and it's growing. The teams here are doing a great job, and we're continually finding ways to make it bigger and better. We've got eight rigs running across our sites right now, some good results, which leads into slide 12. The results at the Murchison Paddy's Flat, Consols and Fenian's in particular, are getting some great hits here. We've actually now started to expose these high-grade spurs under the old Consols and St. Anne's workings. At Bluebird, got some crack results here, and especially recent on the released one, which is at the northern end of the South Junction pit. If you have a look at the image, it's just off center on the left. You'll see the high-grade hit there of 36 m at 4.02 grams.
This is an extension, we believe, to both the Bluebird and South Junction systems we've got in the one hole. It's pretty exciting. We've got follow-up drilling underway there right now. Big Bell, some nice big intercepts of good grades there, and it's continuing to show its potential at depth. On to slide 13. This is our four key mines. Currently, we've got seven rigs right now. We did have eight open most of the quarter. Paddy's has two, Starlight has three, Bluebird's got one, and Big Bell's got one. These rigs are drilling, so we can plan these mines efficiently. Over the coming quarter, we'll see more results out of them. Back to Tommy for slide 14.
Thank you, Phil. Slide 14. We're very pleased that our cash and cash equivalents have been maintained at AUD 159 million quarter on quarter. We're very pleased at that. This demonstrates that our reset plan, we're working hard to continue to improve on that. Just like to say that Q2, our mine operating cash flows is AUD 24, with a net cash flow impact for our mines of AUD 3 million. This certainly helped to maintain our cash and cash equivalents balance at the end of this quarter at AUD 159. I won't go through the rest of the detail except to say we remain debt-free, which is very critical to us, and we continue to invest in our exploration spend. Slide 15 on the hedge book. The hedge book is reducing, on AUD 10,000 a month for the next seven 7 months.
This will expose Westgold to more opportunities at the spot price. This has come down from the 13 ounces as demonstrated in the graph for the prior half. Over back to Wayne for slide 16.
Thank you, Tommy. I'll pick up the exploration and growth slide here. Again, people should read the detail in the quarterly. The early-stage exploration that's been done across some of the six early-stage targets, particularly around Emerald Bore, is really exciting. There's a lot more to be found at Meekatharra. Most importantly, we are early into the deep drilling at Great Fingall Deeps, and it's steady as she goes there. This is a critical program which we won't rush. We're two months through. Again, what we're seeing now is, and we're acquiring additional data, which is allowing us to modify the drill program. Super critical for us. We get this thing right, so it's steady, and results for Great Fingall Deeps will follow during this quarter.
Jumping forward to slide 17, which is really the end of the presentation, I just want to leave listeners with a couple of points. Westgold is a large business. We've certainly enacted some significant changes in this business over the last two quarters. Where are we today? It's really steady as she goes. There's a lot more work to do here. We're confident that with the way that our teams are operating and what we are delivering, we'll see a continued focus on efficiency and operating discipline. Cost is not everything. Efficiency is what drives this business. Maintaining high outputs is the key. One of the key points in here is about one of the things which are happening on an ongoing basis is optimizing our underground mining fleet. The detail of which sits on slide 19 at the back of this pack.
There's over 100 pieces of heavy equipment in that fleet. It's modern, it's new, it has a replacement value of over AUD 200 million. We have the internal capacity with that fleet now to be able to restart any of the mines we pause without requiring additional mobile capital. That's a key point for us. The other thing which makes me really excited at the moment is what we're seeing in the exploration front. We committed to significant expenditure and exploration, and I must say that the numbers that are coming out of all of these, this resource development work is super exciting. We're expecting to announce more results on the Bluebird South Junction drilling during the next or during this quarter.
Standby for that because the excitement around that asset is building and it's building fast. I'll close out today's presentation, and again, thank everyone for listening and really open up the floor for questions. This is an opportunity to ask any questions of the leadership team, and I encourage everyone to do so. Back to you, Shane.
Thanks, Wayne, and ladies and gentlemen, if you'd like to enter your questions into the question box on the call, we can read those out and take those. Wayne, we'll start with, would you like to comment on guidance?
Sure
... given where you're trending at the moment? Yep.
Sure. There were some concerns when we set the guidance this year, Shane. We've set a very conservative guidance. I'm very happy that we are tracking to halfway through the full year to H1. We're tracking to the top end of production and midway through the cost guidance. With the additional work we can see ahead, again, the objective is to deliver for the full year at the bottom end of the cost range, and I'm confident this team can get us close to that position with if we maintain the trajectory we're on.
Thanks, Wayne. We've got a question here. Would you be able to elaborate on commercial opportunities for Westgold?
Sure. It's a great question, Shane. The gold sector at the moment is fascinating. I look at Westgold, and I look at our peers, and what I see amongst our peer group is we are all dealing with the same inflationary cost environment. The only difference is, I think we started to address our cost base before many others. I see a lot of project startups now which have either taken longer than expected or cost more, and that is absolute a function of the cost environment. There's a lot of distressed balance sheets out there, and I suspect what the gold sector will see is another round of capital raising over the next quarter to support the distressed balance sheets. I can assure the listeners here, Westgold's not one.
Thanks, Wayne. We have a question now on Starlight. Is there any link between having three rigs at Starlight and operational concerns there?
Phil, do you wanna take that? I'm happy to take that unless you would like to take that.
I can take that one. There's three rigs up that mine due to a previous period of underinvestment. I'm getting the long-term future of that ore body. We've got one drill rig, which is focusing on deep down extensions to allow some long-term planning. The other two rigs are doing Grade Control, but also looking for all the opportunity that we have in the upper areas of our mine. Very underexplored. We've been focusing on a couple of areas. We're seeing a lot of extensions. In terms of performances, I don't think it's related to drilling. It's more to the execution of the plan.
I just may also. Thank you for that question, Phil. That was a really, really strong answer. Back to slide 13 when Phil spoke to where the rigs are deployed. I guess the macro strategy is we need to put rigs into these mines to extend our planning horizon. If we have better definition around these ore bodies, we can make better decisions underground, and that will lead to more efficient mining and lowering our costs. I think that's really why you're seeing three rigs at Starlight now. Better definition of that ore body will remove the variability that we see and certainly saw last quarter.
Thanks, Wayne. The next question is on capital management. Things are looking very optimistic. Is there a potential for a capital return in the coming 12 months?
Thanks, Tommy. I'll take that one. Thanks for that, Mark. That's a really good question. This company has paid a dividend before. We've been very clear about what FY23 is about. It's about setting this company up for growth into FY24. I'll never say never, but at the moment the focus is very much about putting, making this business profitable in FY23 to fund growth into FY24.
Thanks, Wayne. The next question is on All-in Sustaining Costs. Are there any more potential reductions in the All-in Sustaining Costs to come from the continuing reset, or have we already seen it all in Q2?
I'll take that one, guys, if I can. Absolutely. We are only just started moving the dial on the cost basis. I must say the team finds ways every day to do things better here. We're very focused on efficiency. We've not been able to harness economies of scale in this business very well until recently. We're about to kick off a business wide business improvement project this quarter. What is that really about? That's about harnessing the expertise within our workforce to find ways to do things better. Yeah, I'm confident that we can move the All-in Sustaining Cost down.
Thanks, Wayne. The next question is on Paddy's Flat. Are there any more thoughts on the future of Paddy's Flat, as it seems to be the most difficult of the four mines?
Thanks for that question. I'll take that. Paddy's Flat, yes, it is a challenging ore system, which is why it's also been such a good producer. It's structurally complex but very high grades. The key focus for us there now is the Consols and Fenian's lodes, particularly in Consols, which is under the old, Consols and Fenian's. We're now down to the first true virgin levels and starting to expose those, and they are exciting. In terms of what the true future looks like, we'll know so shortly.
Thank you. Next question is on reopening some of your assets. Given the higher gold price, any thoughts on reopening some of the mines?
I'll take that one, Phil. At this stage, we are continually reviewing the economics of these mines. If we can't make them generate the returns we want, we won't restart them. Again, we're not giving up on them. There will be a scale or a cost base or a gold price, which will make sense to bring these things back on. We won't rush it. We wanna do it such that they generate a positive return. The days of running mines that don't cover their costs, be behind us.
Thank you. The next question is on Paddy's Flat. What is the prospectivity for extensions to Paddy's Flat?
The Paddy's system is about 5 km long, and it's very prospective. There's a lot of historical workings down there. It sits on most of it. At depth, drilling is quite minimal, so there is a huge potential. Our current focus, again, it's understanding its Vivians- Consols workings because we see that as the key short-term mine plan. For the long term, yes, they're all on the drawing board.
Thanks, Phil. The next question is, what do we see as the next stage of growth for Westgold?
I'll take that one. This year it's about making Big Bell bigger and Bluebird. Bluebird is getting big fast. The drilling is telling us it's actually demanding us to accelerate the growth, you know, within Bluebird. That is two internal opportunities to advance those two prospects faster than what we thought. The study on Big Bell, Big Bell is underway. The drilling which the additional drilling being done at Bluebird opens up a whole new frontier on the south junction side of that ore body.
Thanks, Wayne. The next question is, what do we see as the ultimate potential of Bluebird? Phil.
Bluebird, or at the moment, seeing that 40-42 a month come in late in the quarter. Our plan is to get it 50 over the next quarter. Oh, this is tons per month. What we're seeing with the south junction area, it's early days, but with the information we've got above us, it's gonna be a 70,000 plus ton per month mine. It's gonna make it pretty significant in the region.
That's why Phil's point's well made there. That's why our expectation is that Bluebird has the capacity to jump over Paddy's Flat as being the predominant supplier of ore to, in Meekatharra. This system is big, it's simple. We've been mining it at three and a half grams per ton consistently. The trick now is to continue to do that grade but up the throughput. We wanna mine output as quickly as we can.
Okay. The next question is a technical finance question. Are the lease and working capital costs likely to remain at these lower levels in the foreseeable future?
As part of our strategy on our guidance of AUD 1,900-AUD 2,100 absolutely. We are targeting the lower cost end. We are trying towards that. As Wayne says, we're on a trajectory from, as you said, this quarter we've ended downwards AUD 139 million versus AUD 129 million. Absolutely, working capital and the lease obligations, we will be maintained, if not pushing that down. Thank you.
Thanks, Tommy. The next question might be a little bit cheeky. The AFR had an article in December stating that Westgold and some others were reviewing the Gascoyne data room. Are you allowed to elaborate further on that at all? Wayne, you might not wanna comment on rumors, but, perhaps if you'd like to discuss the West Australian gold sector, yeah?
Listen, Shane, that's a fantastic question. We've been rumored to be looking at everything that's for sale in the gold sector. All I can say to that is we've got a very active business development program. I mean, our focus is very much on internal growth, but we're not closed-minded to external opportunities.
Thanks, Wayne. We've got another question on capital management. Have any opportunities been identified that would allow some of the cash pile Westgold has to be deployed?
I'll take that one if I can, Tommy. At the moment, it's about trying to build that cash pile. I think you've seen in the Q2 results, we basically maintain cash from Q1 to Q2. The short range strategy is to build that cash.
Thanks. We have no other questions in the queue at this time. If anyone else would like to put in a question. We'll just pause for a moment there. Next question. Given your comment on business development, what is your view on raising capital?
Thank you, Steven. We raised capital last year. We raised AUD 100 million, which fully funded our growth plan, so we have no requirements in the short term to go back to the market. We may be the odd ones out in the gold space at the moment because there's been a raft of capital raisings in towards the end of last year for project startups, which are costing more or taking longer. Westgold is balance sheet, cash rich. We have no debt, so no requirements in the short term.
We'll just pause there for a moment. Right, ladies and gentlemen, I'll hand back to Wayne now for closing comments.
Thank you very much. This has been a great call today. Thank you for the rest of the management team's input, and I hope the staff drew some information from this as well. Great to hear questions from the shareholders. Again, in this slide deck, there's an e-mail address for any other questions that are required. Thanks again for your time. Have a great day.
Thank you, everyone. That concludes today's webinar.