Morning, everybody, and welcome to the Westgold Resources Limited December Quarter FY 24 conference call. Your speakers for today's call are Wayne Bramwell, Managing Director, Tommy Heng, CFO, Phillip Wilding, COO, Matthew Pilbeam, GM, EH&S, Simon Rigby, GM Exploration, and Melissa Wren, GM, People. With that, I'd like to hand you over to your first speaker for the call, Mr. Wayne Bramwell.
Thank you, Shane, and welcome everyone to today's webinar. I've got the full executive team with me today, so this will be a far more fulsome webinar. Let's go straight to slide 3. Quarter two, cash build continues at Westgold. Another solid quarter for Westgold during Q2, where we added AUD 21 million to the treasury, lifting the balance to AUD 238 million in cash and bullion. Our safety performance continued its positive trajectory, which was extremely pleasing. During the quarter, we produced 59,000 ounces of gold at an all-in sustaining cost of $2,245 an ounce. Production was lower than we would have liked and cost higher, and we'll talk to the reasons for both during this webinar. On a positive, our Starlight mine had a fantastic quarter.
On the flip side, Paddy's Flat and Meekatharra did not meet its targets during Q2 and will transition to an exploration phase in Q3. During Q2, we kicked off development of our Fender mine and at the same time, the Great Fingall project. We're continuing to drill across our asset package, and we'll continue to do so, converting our vast resource base into reserve. Phil and Simon will have more to say on this pipeline of projects we're working on now. Importantly, Q2 was the first full quarter where Westgold was exposed to the full gold price. Our average realized gold price for the quarter was $3,041 an ounce. At quarter end, Westgold is debt-free, our new $100 million corporate facility remains undrawn, and our treasury continues to grow. Slide four: Healthy cash build achieved despite lower quarter-on-quarter production.
Quarter-on-quarter, our production was lower than budgeted. This was mainly due to lower grades seen at the Bluebird Underground, lower production from Paddy's Flat, shutdowns and downtime at our Murchison Mills, and the impact of COVID impacting productivity across the group. As prudent capital managers, we've swiftly addressed some of these concerns, the main being implementing a pause to mining at Paddy's Flat that allows us to redeploy physical and human capital into our larger, more profitable mines. It is not uncommon for us to pause operations at Westgold. We've done this successfully in the past, case in point being our Bluebird mine, which was paused for several months in 2021 and brought back as a larger, more profitable operation. We've done the same at Fender, and both of these mines now are meeting their targets.
From a cost perspective, the major driver for the increase during the quarter on our AISC was an investment in our people. We are operating within a highly competitive labor market in WA, so to stay competitive, Westgold must compete. We've significantly enhanced and improved our offerings to attract and retain staff, and we are unapologetic about this approach. Both Mel and Tommy will talk to the detail of the changes we've made in this area. Slide five. Westgold remains on track for FY24 guidance. To the half, Westgold produced 122,000 ounces at $2,085 an ounce, all-in sustaining cost. We're very confident that we can meet full guidance this year. And why? Because of the inherent operating flexibility within the portfolio of assets we operate. Having multiple operating gold mines gives us multiple levers to pull.
We have the ability to pause Paddy's Flat and replace the output from that mine from our new Fender mine. There are shallow opportunities at Great Fingall, which we are looking at now, which can add ounces to this half. Also, the outperformance of Starlight is likely to continue with a greater contribution from Nightfall. It goes without saying, these are our key focuses for this half. I'll now hand over to Matt Pilbeam to talk about our safety performance.
Thank you, Wayne, and a very good morning to everyone on today's conference call. Today, I'm pleased to take you through an overview of some of our key environmental, health, and safety performance numbers for Q2 FY 2024, starting from slide 6. Pleasingly, Westgold has maintained or improved in all EH&S performance metrics this quarter against the last. Total recordable, lost time, and high potential frequency rates all had marginal improvements, with our TRIFR improving over 12% for the quarter to 7.75. Lost time remained steady at 0.98, and our high potential incident frequency also reduced for the quarter, down to 7.11. Importantly, the company has retained 0 frequency for significant psychosocial and environmental incidents.
This quarter, the company also launched two significant programs focused on employee health and wellbeing, namely the Strong Minds, Strong Mines program and the development of our Blue Tree initiative, both heavily focused on employee mental health and general wellbeing. Moving on to slide seven, I'm now keen to update you on our hybrid power station project or our clean energy transition. Our CET project achieved a significant milestone recently, having all our hybrid power stations energized. Tuckabianna was commissioned and fully operational from August last year. Fortnum was commissioned and fully operational last October. At Big Bell, the gas power station is operating, with solar and battery commissioning to occur over the next few weeks. And at Bluebird, the mine is now running on hybrid power-
... However, the mill will continue to progressively draw increasing amounts of hybrid power as electrical infrastructure between the mill and power stations are commissioned. So with only a few items left to fully commission, we are currently running at a rate that achieves 75% of our projected savings. And when fully operational, our hybrid power stations are expected to reduce fuel usage by 38 million liters annually across our business, reduce overall emissions by 56%, and reduce our all-in sustaining costs by approximately AUD 60 per ounce, and we can't wait for that. I'll now hand you over to Mel Wren, GM, People, who will discuss our innovative employee benefits package rolled out during Q2.
Thanks, Matt, and hello, everybody. Western Australia is in the midst of a war on talent. Recognizing this, we went through a review and benchmarking exercise of our remuneration and benefits strategy. The outcome of the review resulted in an update of our salaries for individuals and groups deemed to be under market. In addition, several other initiatives were implemented, including bringing the commencement of long service leave to 5 years of service, a new family leave plan that includes the introduction of a 13-week paid parental leave, including of surrogacy, with this increasing to 26 weeks after 5 years of service, and leave for IVFs, specifically. Additionally, for attending medical appointments and treatments, an annual AUD 3,000 health and wellbeing allowance, discounted health insurance, and group salary continuance insurance. This by no means an exhaustive list of the Westgold employment offerings.
However, we have leveraged these changes and started communicating them more widely, as you can see on the slides, to great effect. This investment into our workforce brings Westgold to the table where it comes to attracting new talent and is already generating a significant drop in our turnover rates, upwards of 10%. Gold mining remains a people-intensive business. It's imperative for us to attract and retain people to the gold industry, and these initiatives go a long way in doing that. Thank you, and I'll pass the mic over to Phil, who will go through the operational review for the quarter.
Thanks, Mel, and hello, everyone. Slide 9, Bryah, a stellar performance from Starlight. Let's start with the Bryah region first, as it's performed really well for us this quarter. This region hosts Fortnum Mill, which is fed by Starlight Mine and regional stock piles. Starlight Mine had a fantastic quarter, producing 147,000 tons of ore, 3.1 grams a ton, for 14,600 ounces mined. It also achieved a milestone this quarter in which it produced greater than a quarter million ounces under Westgold. The significant improvement achieved by Starlight results in a previous quarter where it was down at 2.1 grams a ton, was a result of transitioning out of the legacy workings primarily in the calendar year.
More broadly, improvements stem from a decision made back in February to slow the mine down, such that development and drilling catch up to a point where a solid mine plan could be developed for the mine. Now, Starlight has a solid four-plus-year plan based on appropriate drill data density. Nightfall has had outstanding results and is shaping up to provide another mining front. This has the potential to lift mine outputs in the coming half with another decline plan to access and expedite extraction from Nightfall. I'll draw your attention to the photo on the left, the grab sample from the Nightfall lode we are mining. That's visible gold you can see, so you can understand our excitement about this part of the mine.
Fortnum Mill performed well and without incident, processed 199,570 tons of ore at a grade of 2.6 grams per ton and 95% recovery, resulting in a pleasing 15,866 ounces produced for the quarter. Rounding off a great quarter for the Bryah region. Slide 10. Encouraging results for Nightfall continue. We continue to operate three underground diamond rigs at Starlight. Some of this drilling will be used to support mining studies due to be finished in Q3 and look at optimizing mine at Nightfall. The first looks at how best to utilize the two declines, potentially allowing us to mine Nightfall via multiple mining fronts. Second study looks at how best to extend the deepest Starlight decline, such that both Starlight and Nightfall can be mined from a centralized infrastructure system.
The image on the slide depicts some of the high-grade intercepts we've assayed from Nightfall this quarter. It's shaping up to look like a great high-grade ore source, which could potentially be brought online very quickly. Slide 11, Murchison. In the Murchison, we have two mills, Tuckabianna, near the town of Cue, and Bluebird, near Meekatharra. Tuckabianna Mill is fed by the Big Bell Mine and stockpile ore blend. Excess ore from Big Bell, along with Fender ore, is trucked north to the Bluebird Mill, which gets a majority of its feed from Bluebird Mine with support from Paddy's Flat. Our Murchison operations did not perform as well as we would have liked. Although Paddy's Flat has been a major contributor to Westgold in the past, the mine has not been meeting its targets, and so we've elected to perform a reset on Paddy's.
It produced 54,000 tons of ore at 2.4 grams a ton for 4,000 ounces of gold this quarter. Grade was well below expectation. With Paddy's in a mining pause and transitioning to an exploration phase, Westgold will redeploy its physical and human capital to higher-returning assets within its portfolio. Bluebird produced 126,000 tons at a lower grade of 3.3 grams per ton, 13,000 ounces of gold this quarter. The lower grades were driven by an increase in stope dilution. Equipment issues also saw development rates drop below target, and Westgold expects a redeployment of Paddy's Flat personnel and mobile underground fleet to Bluebird in Q3. We'll see development rates return to expectation.
Big Bell performed to plan, producing 275,000 tons of ore at 2.5 grams per ton, a grade marginally higher than the previous quarter. We're continuing to mine at a southern portion of the cave, which typically presents with lower grades.... The Bluebird Mill gold production was impacted by a 4-week planned shutdown for the rotation of mill gear, whereby one ball mill was off and slower milling occurred. This is a once-off planned shutdown. Tuckabianna gold production was impacted by unplanned downtime, with failures to the secondary crusher, issues with the fine ore bin, and failure in mill pinion being the majority of downtime contributors. These issues have since been rectified and are not anticipated to impact further. Outside of regular running lines, there are no further major planned shutdowns in any Westgold's mills for the rest of this financial year.
Slide 12, the commencement of two mines. Q2 was a quarter of great significance to Westgold as it marks the start of development of two new mines, Great Fingall and Fender. In August 2023, we announced the board approval of the Great Fingall project, and we took the first cut off the existing decline in October. Great Fingall will be the next high-grade mine to come online for Westgold, following an 18-month decline development as planned and feasibility study. I'm pleased to report development rates have been consistently higher than the rates assumed in the study, and so development is ahead of the schedule. The study assumes steady state production at 45,000 ounces per annum, an all-in cost of $1,801 an ounce, with first ore in H1 FY 2025 coming from the virgin regions below the Great Fingall old workings.
That said, we're currently investigating several flat-lying structures higher up in the mine, which has potential to bring in additional ounces in the H2 of this financial year. If deemed economic, this will be done with a second crew, eliminating any impact on decline development rates. Development of Fender also started in Q2. We originally paused this mine in August 2022, while consolidating and taking stock of the business. Now that the business is stabilized and profitable, we are bringing the operation back on favorable economic environment. This quarter, Fender delivered 14,569 tonnes of development ore at 1.7 grams per tonne. The first level was developed and largely completed during the quarter, and the technical team are excited to report it formed better than expected.
We're now doing some additional drilling at Fender as a result of this high performance in order to add increased definition to levels further down the mine plan and also test incremental extensional potential. The first stop at Fender was fired at the very end of the quarter. We expect a steady ramp up at Fender ore over the next half as stopping commences. At steady state, Westgold expects Fender underground to deliver approximately 330,000 tonnes per annum at 2.7 grams per tonne to Bluebird Mill. Slide 13, Big Bell Deeps. During the quarter, Big Bell Deeps commenced, which will be a Long Hole Stopping operation planned to mine below the pegmatite intrusion, below the current Sub-Level Cave. The decline is already progressing beyond the pegmatite, reaching approximately 780 meter RL. Procurement and construction of the paste infrastructure is underway.
First ore from Big Bell Deeps is expected early in FY 25 and is expected to lift the overall grade of the Big Bell mine. Incorporation of the Deeps means Big Bell has an initial 16-year mine life, thus helping to change Westgold's perception as an operator with short asset life. As you can see in the slide, we've continued to drill extensively, and it is showing that the system continues at depth with many great results, thus supporting the decision to develop the Deeps mine. With that, I'll hand the mic to Simon to discuss exploration activities.
Thanks, Phil, and good morning, everyone. The exploration team has had another busy quarter with both brownfields and greenfields activities underway as we work to build value from the FY 2024 exploration budget. Starting with brownfields activities, we recently announced the commencement of an exciting drilling campaign, which looks to both infill drill deeper areas of Bluebird and also to commence resource extensional drilling at South Junction. At its peak, this campaign will employ 5 drill rigs, 2 underground and 3 on surface. The South Junction program builds off the success at Bluebird, where drilling under the substantial historic open pit has resulted in the development of a modern underground mine. South Junction historically produced over 400,000 ounces of gold, but has never seen any substantial drilling at depth.
If successful, South Junction has the potential to become another mining front at Bluebird, which could provide a step change in the production rate of this mine and is a great organic growth opportunity for us at MGO. Moving to slide 15. In addition to the brownfields activities, the exploration team continued with greenfields or new mine exploration activities during the quarter. These included conducting targeting activities focused on the Peak Hill and Fortnum regions at FGO. Peak Hill, particularly, is an exciting opportunity, having been subjected to very little modern exploration over the last decade. We also completed several heritage surveys across various high-priority targets, both west and south of Bluebird, in preparation for upcoming drill programs. In addition, we also completed gravity geophysical surveys at Norrie, near MGO, and Day Dawn at CGO.
To date, we have completed processing of the Day Dawn data with some really exciting targets being developed, which were the subject of an ASX announcement earlier this month, and to which I will now speak to on slide 16. These colorful images show our Day Dawn package overlaid with the new gravity geophysical data, which we gathered and interpreted in Q2. You will note the position of our newest mine, Great Fingall, that Phil spoke about earlier. The image on the left covers the entire Fingall Dolerite in the brighter colors, with the hanging wall and footwall basalts to the north and south, respectively. The Fingall Dolerite is the primary host to gold mineralization in the Day Dawn region, with over 2 million ounces of endowment. However, there are also many smaller deposits and prospects located within the hanging wall and footwall basalts.
What the gravity data has shown is that there are a number of northerly trending faults controlling gold mineralization, depicted in the image as black dotted lines. These faults tend to rotate or refract at the basalt and dolerite interfaces, where clear offsets can be mapped in the gravity data.... As can be seen on the left image, Great Fingall, Golden Crown, Yellow Taxi, 3210 , and in fact, almost all the major deposits identified at Day Dawn exist along these faults, typically within the Fingall Dolerite. It is the recognition of these controlling structures and our ability now to track them with gravity data, that has generated a series of new priority drill targets, as shown.
The additional key, however, is that the Golden Crown deposit, which was discovered in the 1980s, 100 years after Great Fingall, but only 700 meters away from it, had only very weak mineralization at surface. It was not until subsequent deeper drilling that the ore body was discovered. So with the identification of new Fingall Golden Crown analogous structures and the knowledge that blind mineralization occurs in the belt, a whole series of exciting new targets have been developed for drill testing this year. In conclusion, the exploration team will be executing substantial greenfields and brownfields programs during Q3 and Q4 as part of the current FY 2024, AUD 25 million exploration budget. With that, I'll hand over to Tommy to talk about our financials on Slide 17.
Thank you, Simon, and hello, everyone. From a quarter-on-quarter perspective, our total all-in sustaining costs was up from AUD 122 million to AUD 133 million. The key driver for this increase was the investment in our remuneration and benefits strategy, which is already starting to deliver positive returns in our turnover rate and our ability to attract talent. This investment drove an AUD 11 million impact to our all-in sustaining costs, for which AUD 7 million comprised of a one-off non-cash adjustment in accrued employee entitlements and benefits, with the remaining AUD 4 million cash component for salaries back paid to the start of the financial year. The increase flows through into the mining, processing, and admin buckets of the all-in sustaining costs, as per the waterfall chart.
The remaining AUD 4 million increase within the mining and processing buckets comprises increase to the key supply contracts, increases in maintenance costs, and the timing of transitional costs for the switchover to hybrid power. We had some material increases to key supply contracts, particularly material increases to haulage rates. However, these were partially offset by reductions in other contracts, such as explosives. Maintenance costs in processing were high as a result of the 4-week planned shutdown at Bluebird and the unplanned downtime at Tuckabianna. The Clean Energy Transition project in Q2 has commenced delivering material cost savings, though delays in switchover at Bluebird and Big Bell saw diesel consumption above forecast, together with the timing of transitional costs, which were incurred in Q1 and flowed through into Q2. These increases were largely offset by the consumption of lower volumes of stockpiles quarter-over-quarter, which assisted in lowering our AISC.
In addition to the savings being brought online by the continued implementation of our CET project, the Westgold workforce continued to innovate and target cost savings through our immensely successful business improvement program. On a per ounce basis, these costs are spread over the lower production, which drives the all-in sustaining costs per quarter up. From a capital sense, we had an increase from AUD 23 million to AUD 35 million, mainly as a result of commencing development at both Fender and Great Fingall. The remainder of the capital expenditure is predominantly for the ongoing expansion of the Bluebird and Big Bell underground mines, the CET project, processing facility upgrades, and camp infrastructure. We spent AUD 4 million in exploration, ending the quarter with 9 drill rigs spinning.
This is set to increase to 12 drills early in this Q3 as we ramp up exploration activity within our existing set of targets, as outlined by Simon and Phil earlier. We remain on track to spend AUD 25 million on exploration for the full financial year. Slide 18. For me, the cash flow waterfall is most informative. Our operations, again, generated substantial cash flow. This graph shows our cash flows for the quarter and depicts our closing cash and bullion, which grew by AUD 21 million quarter-over-quarter. Our revenue benefited from a full quarter of spot gold price exposure. Overall, our operating cash costs for the quarter at AUD 130 million was in line with the prior quarter's AUD 129 million. Capital expenditure this quarter increased as a result of commencing development at Great Fingall and Fender.
In addition, continued expansion works at Big Bell and Bluebird. Our investment in exploration continued over the quarter, aimed at extending mine lives in the existing operations. This spend keeps us on track for spending the allotted AUD 25 million guided in the full year, with a ramp-up in spend expected in the coming quarters as we progress exploration of our high-priority targets. With all that, we finished the quarter in a very strong position with AUD 238 million of closing cash and bullion. The last point I'd make on this slide is that we are extremely pleased that two banks with the quality of ING and Soc Gen have agreed to support us this quarter by providing AUD 100 million revolving corporate facility to use as we see fit. With the facility remaining undrawn, we remain debt-free. Slide 19. Just a quick note on hedges.
As I stated earlier, this quarter marks the first full quarter where Westgold was completely exposed to the spot gold price. This quarter, our average sales price for gold was AUD 3,041 an ounce, which is a great result for us, allowing us to achieve an all-in sustaining cost margin of almost AUD 800 an ounce. We have 15,000 of zero-cost collars of the 30,000 we commenced at the start of the financial year, or about 11% of our annual production. These zero-cost collars allow us to sell at the spot price, so long as the put and call options are not struck at the lower protection trigger of AUD 2,700 or the high cap of AUD 3,340 per ounce… Slide 20.
Finally, in August 2023, we announced an update to our dividend policy, which speaks to the company's commitment to delivering sustainable and consistent returns to our shareholders. The policy pays a minimum dividend of AUD 0.01 per share each financial year, up to a maximum of 30% free cash flow generated for the financial year. The payment will be contingent upon Westgold retaining a minimum net cash balance of AUD 100 million after the payment of the dividend. At the end of Q2, we had AUD 238 million in cash and bullion. The half-year audited accounts are due late in February 2024, and once signed off by the company's auditor, the board can determine if an interim dividend should be paid. Wayne, back to you.
Thanks, Tommy. Slide 21. We've ended the first half in a position which allows us to maintain our guidance. Looking forward, the strategy for the rest of the year is very simple: We only really need to focus on three things. One, continue to drive cost out of the business. Two, continue to focus on generating free cash. And three, continuing to extend or expand our mines via drilling. On that point, I'd like to close off this webinar and open up the chat line for any questions.
Thank you, everybody. If you have any questions for any of the presenters today, if you'd like to enter it into the question box on the webinar, we'll just pause for a second to allow time for people to do that. Once again, if you'd like to ask a question, please enter it into the question box on the webinar. Your first question comes from David, and it is: "Are there any costs associated with pausing Paddy's Flat production?
Thanks for that, David. The cost is actually quite minimal because we're redeploying all the equipment and people from that mine. There will be some holding costs as it goes back to a drill out, but those costs will be minimal in the scheme of things.
Thank you. Once again, if there's any further questions... Your next question is from John: "Can you please give historic production at Paddy's when running full out in prior quarters, and also if higher rates at Starlight are sustainable to make up for the shortfall?
Two points there, John. I think Paddy's Flat at its maximum throughput used to operate around 60,000 tonnes a month. It's actually not connected to Starlight. Starlight, its underground mine basically feeds the Fortnum Mill, whereby Paddy's Flat, actually, that ore used to be processed by the Bluebird Mill. We've said in the quarterly, really, the flexibility within the business allows us to pause Paddy's, and that output replaced by the ore coming now from Fender. Couple more questions. "Any holes put into Peak Hill yet?" John, that is my favorite project. Simon's sitting next to me now, and he's getting set to drill some holes at Peak Hill. So you and I both share the same love for that, for that gold camp.
Next question is from Rob, and it's might be one for Tommy. "In relation to all-in sustaining costs, figure four of the quarterly, there was a specific month that the non-cash charge to REM impacted, or was it spread over the three months? I.e., should we think about AUD 45 per month being the monthly all-in sustaining cost run rate?
Thank you for your question, Rob. Essentially, we're getting at the end of a half, so all these adjustments, together with the REM and BEN, are booked in the December month. Spreading over three months, I think it should be more looked at as the REM and BEN over the six months because all those benefits were backdated to the beginning of the financial year. Thank you.
Thanks, Tommy. Another question on Paddy's, and it's really a question about what sort of timeframe do you think it could be for a restart?
Thanks for that question, David. Our model internally is to define a 3- or 3-to-4-year mine plan, an optimized 3-to-4-year mine plan. That's what we've now got at Starlight, and that's sort of the benchmark in terms of what we see as a minimum to restart Paddy's. Just...
We have a question. Wayne, I'll hand it back to you.
Yep. Thanks for that, Shane. Just in terms of closing out, today's presentation, a key point Tommy alluded to, the half-year accounts are audited in February, and the board will sign off on those accounts at the, February board meeting. That's really the point where the board decides about paying the dividend. But as people can see, we are very, very much above the metrics we set. In closing, just want people to think about one thing when they think about Westgold. Westgold is a portfolio company. We have multiple operating gold mines. That gives us inherent operating flex within the business, whereby if, during one quarter, if one mine underperforms, we're often in the case where another overperforms. This has been the case this quarter, with Starlight shooting the lights out effectively for the quarter, while Paddy's underperformed.
The ability within the business to take our foot off the gas at Paddy's and drill it properly and start Fender is something which many people don't understand. Anyway, a lot of work to be done here. It was a tough quarter, but still, adding AUD 21 million to the treasury in this quarter was an outstanding effort by all the site and operating teams.
Thank you, everybody, and that concludes today's webinar.