Black Cat Syndicate Limited ($BC8)

Hello everyone, and welcome. Thanks for joining today's Q3 '26 Investor Webcast for Black Cat Syndicate, ASX code BC8. I'm Stewart Walters from MarketOpen. And today, we're joined by James Bruce, Managing Director; and Nick Dwyer, Chief Financial Officer of Black Cat Syndicate. James and Nick will take you through the company's March quarter Q3 financial year '26 results, followed by a live Q&A session hosted by Andrew Lai, the Group Manager of Corporate Development at Black Cat. [Operator Instructions] With that, I'll hand over to James Bruce, Managing Director of Black Cat Syndicate.

Thanks, Stewart, and good morning, everyone. Thank you for joining us today. This is my first quarterly webcast as Managing Director. I appreciate your time for joining us today. I've been with the business now for about 2 months. And before getting into the details of the quarter, I wanted to share a few initial reflections. Firstly, I want to acknowledge and thank Gareth Solly, one of the founders of Black Cat who played a pivotal role in successfully transitioning the company from an exploration business that IPO-ed at $0.20 a share in 2018 to become a multi-asset gold producer today. It's a rare and significant achievement in this industry. I thank Gareth for his leadership and contribution to the company and wish him all the best in his future endeavors. Building on Gareth's foundations, one of the things I've been impressed with the most since joining the company is the culture of the business. There is a strong can-do attitude across Black Cat with people who take ownership thinking collaboratively and effectively and who are focused on getting things done safely and responsibly. Second, I'm pleased with the senior management team. The team brings deep operational experience and a proven capability to build, own and operate assets across the full life cycle. Importantly, that capability is demonstrated through the successful delivery of 2 gold operations into production over the last 18 months. Third, having spent some time across the operations, I'm genuinely invigorated by the opportunities ahead for Black Cat, with a strong balance sheet, robust cash flow and the right people and with 100% owned package of exploration tenure across Western Australia, we're well positioned to deliver near-term growth as our production momentum builds while also progressing longer-term value across the broader portfolio. My mandate is very clear to grow the business significantly in Australia and to do so in a capital-efficient manner. Firstly, at our 2 existing operations, Kal East and Paulsens, we'll increase our own production and fill the mills for longer. Secondly, at our 2 development projects, Coyote and Mt Clement, we'll define the potential to bring them into development over the next few years. And finally, we'll look at opportunities to acquire mineral leases and projects where we can leverage our in-house build-own operate capabilities. That clarity is important and it underpins how we think about capital allocation, growth opportunities and decision-making across the business. With that context, I'll now walk through the March quarter performance from an operational perspective before handing over to Nick to cover the financials and the balance sheet in more detail. Looking at the last quarter, I want to start with people and safety. During the March quarter, the group increased employee and contractor numbers by 12% to 618 people, reflecting the continued scale-up of our operations and investment across the business. Investing in people is a high priority. As we continue to expand the business, we expect employee numbers to continue to increase, supported by ongoing investment in capability, leadership and operational debt. Safety remains a core priority of the business, and the hazard reporting culture is strong at both our operations and I've observed that on multiple occasions. Our focus is on continued improvement ensuring that everyone goes home safe every day. Disappointingly, during the quarter, we had on LTI. As I often say, we only earn the right to exist if we are productive and safe disciplined operations are fundamental to that productivity. By leveraging the combined experience across the group, we continue to focus on improving the operational performance while maintaining a strong safety culture. Turning to gold production. Group production was 23,952 ounces during the quarter, which was below the outlook range of 25,000 to 28,000 ounces primarily due to the lower grade at Paulsens. Talking about that and Paulsens itself, production was 7,110 ounces, processed -- processing increased by 13% on a quarter-on-quarter basis to 102,000 tonnes. However, the grade was lower as we mined lower grade stopes, Production is expected to increase going forward as high grade stopes are accessed. Paulsens is a high-grade but nuggety ore body, and this can result in variability between quarters. Importantly, processing volumes increased quarter-on-quarter, reinforcing that the outcome was driven by grade rather than throughput or operational disruption. I've been impressed by the cost management of Paulsens with disciplined cost control over the last quarter, which was only impacted by grade variability rather than operational disruption. Turning to Kal East. Gold production in the March quarter was 16,842 ounces, representing a 4% increase quarter-on-quarter. This included 11,553 ounces from third-party ore, which contributed from the company-owned Fingals and Majestic mines, which processed their first batch of 100% Black Cat ore. Ore process declined by 5% quarter-on-quarter to 305,000 tonnes However, this was more than offset by higher realized feed grades with the average head grade coming in around 10% higher. The Majestic decline in infrastructure is well established. I'm pleased to say that yesterday, we successfully fired the first long-hole stope at Majestic. This is an important milestone, and you'll see increased tonnages of high-grade material in the months ahead. The Fingals open pit is now well established and will produce more tonnes than we can treat it at through the Lakewood mill over the next year. This will provide us operational flexibility. Overall, the June quarter will demonstrate an important transition for the Kal East operations with 100% Black Cat ore being fed from both Fingals and Majestic for the first time. And we'll talk more about that later. Nick will cover off on what that means. Just want to discuss fuel for a while. The company has not been immune to the events in the Middle East and the impact on fuel. To give an idea of exposure to fuel costs, it's increased as a proportion of operating costs during the quarter from 6% of total cost in January pre-war to 8% in March. It remains manageable in the group's cost structure. Even more importantly, the company has managed to maintain fuel supplies during the quarter. A new bulk fuel supply agreement was executed providing long-term supply certainly. Together with Lakewoods grid-connected power, the group is not experiencing any fuel supply constraints, which has supported uninterrupted operations across the portfolio. I'll now hand over to Nick to take you through the March quarter financial performance, balance sheet and the balance sheet in more detail. Thanks, Nick.

Thank you, James, and good morning, everyone. I'll step through the March quarter performance in a bit more detail, starting with gold sales and cash flow before finishing with the balance sheet and capital deployment across the business. Now turning to sales and cash flow. Gold sales for the quarter totaled 10,374 ounces at an average realized price of $6,817 per ounce, generating $70.7 million in gross revenue. In addition to gold sales, $18.5 million of revenue was generated from third-party tolling at Lakewood and this resulted in operating cash flow of $61 million after $32 million in operating costs. During the quarter, the group invested $54 million in project sustaining and exploration capital. So turning to the balance sheet and capital deployment. The group continues to maintain a strong balance sheet and liquidity position. At quarter end, the group held $53 million of cash, $4 million of investments and 5,323 ounces of gold bullion on hand, which was valued at roughly $36 million. These amounts totaled $90 million, which was held at quarter end. This quarter-end balance was broadly stable compared to the previous quarter, with profits from Paulsens, the Myhree joint venture and third-party tolling being used to fund the start-up costs of Fingals and Majestic and other capital. As a result of this capital investment at these mines, ore stockpile increased to 184,000 tonnes by quarter end, providing increased processing flexibility going forward. In addition, the Board approved the $20 million expansion of the Lakewood processing facility to 1.5 million tonne per annum from the current 1.2 million tonne annual rate, which will be spent over the coming 12 months. The investment is expected to be funded from operating cash flow and is aligned with the group's disciplined, capital-efficient growth strategy. Looking ahead to the June quarter, an important milestone is the fact that production across Kal East is expected to be sourced from 100% Black Cat ore following the successful transition away from third-party feed. As a result, and combined with the investments that we've made during this March quarter, we expect cash flow generation to be stronger in the coming quarters at these gold prices. In summary, while the March quarter reflected some operational variability, the financial position of the group remains strong and capital continues to be deployed into assets that will underpin future production and cash flow. I'll now hand it back over to James to cover the operational outlook and the path forward.

Thanks, Nick. I see a significant opportunity to leverage the potential within the portfolio. First of all, I just wanted to state that I've commenced a strategic review to look at these opportunities and growth initiatives. This review is focused on ensuring that we are well positioned to deliver the mandate to grow the business significantly while maintaining a strong focus on capital discipline and execution. We expect to provide an update on the outcome of the strategic review within the next 3 months. The purpose of this review is twofold. Internally, it's about aligning our people around clear priorities, goals and KPIs so that everyone across the business understands where we're heading and how success will be measured externally it's about improving transparency and disclosure to the market, clearly articulating our growth strategy and being explicit about what we will do and what we won't do as we execute this strategy. Following completion of that process, the company intends to provide annual guidance, including all-in sustaining costs and production profiles as part of a 3-year reporting cycle. I'd like to provide some context as what I see as the future growth opportunities. The company has been exploiting and delivering 2 growth projects. And my observation is there's been little in the way of exploration over the last couple of years. This will change as we go forward. We now have cash on the balance sheet, and there's a clear potential to build on the resource base that we have. The investments will be selective inorganic and near-mine opportunities as well. And there will be pursued in a disciplined manner that focus on supporting the near-term production momentum while building longer-term optionality across the portfolio. We'll only deploy capital if we can demonstrate strong return on investment and value will be created by -- on a debt adjusted per share basis in gold production and reserves in Australia. Across all 4 assets, there is significant opportunity to increase exploration, and I'll update you in the next 3 months as to our plans on that. With that, I'll hand over to Andrew. Andrew, Lai recently joined Black Cat from Fidelity in Japan to manage our investment strategy and corporate development activities. Andrew has significant experience in the investment market and provide an important contact for you all as we expand our investor base and engage more effectively with the market. Andrew, with that, please open the Q&A.

Thank you, James. We will now move to the Q&A session. [Operator Instructions] We'll take our first live question now. Paul, please go ahead.

Can you hear me okay?

Yes. I can, Paul.

Just a couple of housekeeping question first, I guess. So just to be clear, will the conclusion and I guess, update of your strategic review and that sort of longer-term commentary, just to be clear, so prior to your FY '26 result, so ahead of August, James, would be your expectation?

Yes, Paul. I think definitely within the next 3 months.

Yes. Great. And then I know you've spoken about this before, but at the same time or potentially separately, we'll hear a bit more about a framework around your bullion strategy, still intending to sort of flesh that out a little bit more for investors?

Yes, I think it comes as part of that same review.

Great. Okay. And then just a couple of other ones around, I guess, the near term just to close out this fiscal year. So in terms of CapEx, we're all sort of flying blind a little bit here at the moment. And certainly on my numbers, the CapEx for the March Q was a bit higher. I mean you're obviously investing in the business, could we expect a similar kind of run rate into the fourth quarter ahead of that more fulsome guidance, which we'll get at a later date?

So Paul, in this quarter, yes, I think it will be similar. A lot of those activities are the stripping activities, particularly around the Fingals open pit.

And then perhaps maybe a question for Nick, too, just on that in terms of commercial production at Kal East and therefore, when we'll likely see these expenses go from being capitalize potentially to manifesting on the P&L, likely June 30, Nick or maybe later?

Yes, it will likely be in the June quarter, Paul. You can see that we've been building some stockpiles from Fingals, and we are -- that is early stage for development there. But I think going forward, we should be hitting our straps in terms of run rate and mining there. So yes, sometime in the June quarter.

Okay. Great. And just 2 more quick ones, if I may. Early -- I understand you have processed some small amounts of Fingals and Majestic material. I was just curious to get, I guess, an early indication of how that's performed from, I guess, an expectation perspective, both -- or in terms of recoveries, I guess, but throughput and recovery of that new material, everything has gone well?

It's actually gone extremely well and better than our expectations, Paul. Certainly, the throughput rates have been higher than we expected. The recoveries, again, have been very good and reagent use and other consumables have been better than expected. So all around, it's gone extremely well. We're very pleased with how it's going through. And we first started feeding this material through the plant and have been 100% Black Cat material since the 28th of March. So we've had a good couple of weeks since then to really see this performance coming through.

Great. And last question, how far away do you think we might see a revised or refreshed mineral resource or reserve update, James?

I think that we'll go through the year-end process and it will be provided at that point. And I think the expectation is we'll do that every year. As I stated, Paul, we'll also be doing a significant amount of drilling over the next -- in the periods ahead. And obviously, as we do those exploration programs, we'll also be announcing those to the market as relevant results come through.

Yes. So late Q1 F '27, something like that?

Something like that, yes.

Next, we have Janet. Janet, please go ahead with your question.

It's actually Richard at Barrenjoey. Just a quick one, pretty high level from me. Just in terms of the exit run rate that you sort of flagged of 100,000 ounces per annum at the end of this financial year. Obviously, it's a bit hard to predict given the body nature at Paulsens, but are you sort of comfortable with that exit run rate? And I suppose a trajectory that sees you moving into the second half, well above that level?

Yes. No, absolutely, Richard. That's correct. That's the way I see it. And maybe if I can just put some color around all of that. There's a couple of things. Firstly, the Majestic underground mine is ramping up. And that we blasted our first stope yesterday. And so that's an important milestone for the company, the stoping grades will be well over 3 grams a tonne. So whereas the development material is sort of more around the 2 grams a tonne. So Majestic over the next month will significantly increase its grade profile and over the next 4, 5 months, it will ramp up to full production at Majestic. Secondly, the Majestic as a percentage of the mill feed will obviously increase through those months going forward. So the grade profile for the Lakewood mill will therefore increase. I also just want to point out, Paulsens, well, we had great throughput, the run rate at Paulsens is 410,000 tonnes per annum in the last quarter. We expect that to continue into this quarter. In the last quarter, we were mining through a low-grade part of the mine plan. And progressively, month-on-month, we expect those grades to increase going forward. And then my final point on all of this is that regardless of the production profile, which you've pointed out, for us, it's very much about as we transition to 100% of Black Cat feed through the Lakewood mill, that's a really important milestone for the company in terms of the change in profitability that we are seeing right now and will continue as we go forward. We've got mine plans for both Majestic and Fingals that run out 4 years. So it's a profile that -- of cash flow and production that set us up well for significant cash flow going forward.

Thank you, Richard. [Operator Instructions] We'll move to written questions first in the meantime. We're getting a number of questions on Mt Clement. So could you -- James, could you please update us on the latest with the Mt Clement and also any feedback from your trip to the U.S.

Yes. Thanks, Andrew. So Mt Clement, we announced in the quarterly, some significant exploration results, and we've increased the resource base to just over 25,000 tonnes of antinomy, at the same time, that drilling campaign was to provide us data -- metallurgical data for met test work. So study is going on around the met test work and what the project scale can be and options around that. We expect that study to be completed by the year-end. In addition to that, there's another exploration program that will continue. The ore body is open at depth and along strike. So in the months ahead, we will continue drilling out the ore body and all of that information will go into the study. In terms of the market itself, antinomy is a critical mineral, and there's a significant opportunity. Our ore body is a lead silver antinomy deposit and that means it could be processed outside of China very effectively and ultimately could feed either the U.S. or European markets. So there's an opportunity for us to explore offtake agreements with various parties. We'll consider that over the next 6 months or so and hopefully, come out with an updated study by the end of the year.

Thank you, James. Next question from [indiscernible]. Can you comment on why the quarterly guidance was not provided for the June quarter? Obviously, we're working towards providing a full year FY '27 guidance, but just some explanation on why it was not kept consistent.

Firstly, Blair, we're -- I'm new to the role, and we've got a year-end budgeting process that's commenced. Full guidance will be provided once this is complete, including all-in sustaining. I think I've talked to -- we expect this next quarter to be similar to the quarter that we've just had. There will be compositionally some variable changes that we've talked about in terms of feeding 100% of our own material and what that means for cash flow. So I think as we ramp up production at Majestic, as I've already talked about, as we get into better grades at Paulsens, I think we'll see the outcome of that and that will be reflected in the forward guidance that we gave in the June quarter. So yes, hopefully, that answers the question for you.

Next, we have a question from Keith Goode. What's the production target for Paulsens? And when do you expect to achieve it?

So look, we've continued to operate Paulsens very well. My observations are the cost structure of Paulsens is extremely well managed. It's a very stable cost structure. We've got production that we've reported over the last few quarters, that's in the third quarter of 2026, we did 7,100 ounces. In the December quarter, we did 9,300 ounces. And in this last quarter, we did 7,700 ounces. The production rate will be a reflection of the grade of the stopes as they -- as we go through the mine plan, the grade of this ore body is very high, but it's also very nuggety. So at any one time, we do go through some quarters through lower grade material, and then other quarters, it's higher grade. So it's -- the grade does vary quite significantly. And we -- if I talked about what we have in some of our drives right now, it's extremely high grades and that we will mine those stopes in the next few months. So we do expect over this quarter, the grade will pick up month-on-month.

Thank you, James. Next, we are getting a number of questions on CapEx and exploration. Could you run us through on the plan for CapEx across all 4 sites?

Yes. Thanks, Andrew. I think with regard to that, I want to be really clear about our expectations for capital for the returns that we expect to get from that capital investment and I expect to do that when we come out with our updated strategy and growth objectives for the next year. So -- but the way I think about it, as a mining -- as a gold mining company, we have significant opportunities to expand our existing portfolio of assets to develop 2 new assets and more broadly, to reinvest in the business. The way I think about things is about cash-on-cash returns and return on invested capital that needs to be significantly higher than 15%. They are the sorts of returns that I expect to generate. And as we come out with those plans, we'll give you more detail so that you can determine our success or not of being able to achieve that capital deployment.

Great. Thank you, James, and thank you, everyone, for the questions. There were some good ones today. I'll now hand back to James for any closing remarks.

Well, thank you all very much. It's a pleasure to present to you for the first time. To wrap up the March quarter was one of investment and transition. The underlying fundamentals of the business remains strong. We're investing in the right areas and have a strong balance sheet. We're working the portfolio for near-term production growth and the strong inflection in cash flow generation in the coming quarter and over the year ahead and a meaningful longer-term opportunity. I'd like to thank the Black Cat team across all our operations for their efforts during the quarter, and thank you as well for your continued support and interest in Black Cat. With that, we'll close up. Thank you very much.