Hillgrove Resources Limited (HGO) Earnings Call Transcript & Summary

[Audio Gap] I'd now like to hand the conference over to Mr. Bob Fulker, CEO and Managing Director at Hillgrove Resources. Please go ahead.

Thank you, Harmony. Good morning, everyone, and thanks for joining the Hillgrove Resources September Quarter 2025 Results Webinar. I'm joined on the call today by Luke Anderson in his first full quarter with Hillgrove. September quarter was a pivotal time for Hillgrove. The mine's output is showing improved stability with higher output, which are demonstrating the potential of the operation has from a productivity perspective. This has started to flow through to our all-in sustaining cost, which has reduced from the high of last quarter. The Nugent ramp-up has commenced, and we filed the first stope at the start of October. There are 3 takeaways for me from today. Firstly, record stope production since underground operations started, has seen the biggest quarter since we started mining and is at our annualized rate of 1.5 million tonnes per annum. In September, the mine delivered 1,075 tonnes of copper produced and the quarter's gross all-in sustaining costs have reduced to be the lowest quarter this year. The all-in sustaining cost unit costs were affected by the low copper sold versus production. Secondly, the Nugent project has been delivered ahead of schedule with stoping underway in October. This is the second mine production center online as promised. And finally, our on-site exploration success has given us the potential of a third mining front to further increase our total tonnes from the Emily Star region. The Emily Star exploration incline design has been released and we'll start development activities there this quarter. Operationally, ore mines for the quarter reached a record of 375,000 tonnes, and we finished the September month with ore on the [ ROM ] for the start of October. The underground load and haul improvements have been maintained into October and the commencement of the Nugent stoping will gradually grow our production over the next 6 months. The consistency of the mine delivery has led to the mill operating for longer periods of time, allowing improved stability within the processing plant. Tonnes processed rose to 366,000 tonnes at an average weighted -- at a weighted average grade of 0.81% copper and 94.5% recovery. This is a steady and reliable performance increase -- increasing copper production by 8% from the previous quarter to 2,808 tonnes. During the quarter, we announced the Nugent acceleration project finished ahead of schedule in August. We have developed the 1020 Southern ore drive and are now developing the Northern ore drive. We have set the primary ventilation up. We have got emergency egress to the pit and subsequent to the quarter, refiled and extracted the first stope. The second stope is ready to the fire as we speak. The Nugent decline will break through to the Kavanagh working area before Christmas as planned. And the Emily Star exploration [ tudy ] is now the Emily Star exploration incline and ready for development. When completed, this will allow for improved diamond drilling performance with a top 4 sublevels of the Emily Star resource. On lease exploration and resource drilling continues. We currently have 2 drill rigs underground. Our plan is to increase to 3 drill rigs when we have the locations available. We are on track to deliver the 60,000 meters of drilling within the 2025 year as previously announced. There have been some exceptional holds during the quarter Emily Star's first hole of 19 meters at 1.9% copper and 0.15g/t gold and 5.7 meters at 2.12% copper and 0.36 grams per tonne gold, both in Emily Star are outstanding. More holes are still being assayed, and we'll release these as soon as we have them. Emily Star is a key exploration focus for what I expect to be the third mining front to underpin a further increase in our copper and operational outputs. I'll leave the majority financial report to Luke, but a couple of highlights from myself. Gross all-in sustaining costs have reduced by 10%. Despite shipment timing, we reduced sold -- which reduced sold copper, our all-in sustaining cost unit rate actually reduced by 5%. Our realized price lifted to [ $14,447 ] per tonne as the lower hedges are filled. And we are increasing exposure to the higher spot price. To close, we're building predictability, we are lowering our operating costs and increasing the number of operating levers. The operational improvements have continued into October. And we are moving through the pinch zone. The Nugent ramp-up and the Emily Star potential, combined with the continued operating discipline are the backbone of our plan to improve profitability and our margins. I'll now hand it over to Luke, who will take you through the financials.

Thanks, Bob, and good morning, everyone. I will now walk you through the financial performance for the quarter. All amounts are referred to are in Australian dollars unless otherwise stated. The quarter showed an improving operating performance. The headline items were copper produced increased 8% to 2,808 tonnes and an average realized price of [ $14,447 ] per tonne. Gross all-in sustaining costs reduced 10% compared to quarter 2. Year-to-date, all-in costs of USD 4.24 per pound remained in line with our average guidance of USD 4.2 to USD 4.45 per pound. And completion of a AUD 28 million placement at AUD 0.035 per share to institutional and sophisticated investors. Now moving to the detail. All-in unit cost metrics are calculated on copper payable tonnes sold, which was lower than copper tonnes produced due to timing of shipments, which negatively impacted unit cost metrics. C1 costs improved to AUD 4.69 from AUD 5.24 per pound quarter-on-quarter. Most pleasingly, our gross all-in sustaining costs reduced by 10%, and and all-in costs by 7% against the prior quarter, partly reflecting the realization of a number of cost reduction initiatives over the last couple of months. Our all-in costs, excluding urgent, was AUD 7.1 per pound or USD 4.54 per pound. Year-to-date, this number is USD 4.24 per pound. Which is tracking within updated FY '25 guidance of USD 4.2 to USD 4.45 per pound. The average realized price for copper sold during the quarter was [ $14,447 ] per tonne despite delivery into a number of lower-priced hedges. The quarter-on-quarter reduction in copper payable tonnes sold from 2,572 to 2,422 tonnes reflects timing only, with unsold concentrate stocks increasing from 502 tonnes to 1,729 tonnes at quarter end. The copper price continues to strengthen on strong demand. with supply also impacted by the recent mud slide and resulting closure of the Grasberg Mine in Indonesia, which is the second biggest copper mine in the world and represents over 3% of global supply. The company's liquidity, which is made up of mainly cash, receivables and unsold concentrate was AUD 15.6 million at 30 September. Post quarter end, AUD 22.9 million was received from Tranche 1 of the capital raise completed at the end of September. High capital expenditure of AUD 12.2 million for the quarter included AUD 9.6 million on mine development, AUD 1.7 million on exploration and AUD 0.9 million on other capital projects. A total of AUD 18 million has been spent on the new capital development thus far with approximately AUD 3 million remaining to be spent. The company maintains a prudent hedging policy covering roughly 30% of forecast production to protect a proportion of fixed costs against the deterioration in copper price. The currently -- the company currently has 4,450 tonnes of copper hedged at a weighted average price of AUD 1,400 tonne -- sorry AUD 14,413 per tonne for delivery from November '25 to September '26. A number of lower price hedges were delivered into during the quarter. A busy quarterly period culminated in the completion of a AUD 28 million placement at AUD 0.035 per share. This was strongly supported by Australian and overseas institutions and sophisticated investors. Replacement will be undertaken in 2 Tranches: Tranche 1 has raised AUD 22.9 million pre-costs, which was received in early October. Tranche 2 will see an additional AUD 5.1 million pre-cost to be received, subject to shareholder approval and an upcoming EGM to be held on 25 November. Now to summarize. We remain on track to deliver FY '25 copper production guidance of 11,000 to 11,500 tonnes. All-in cost guidance, excluding Nugent acceleration CapEx of USD 4.2 to USD 4.45 per pound remains on track. With Nugent stoping underway and inventory available for shipment, we expect improved sales volume and further improvement in unit cost in quarter 4. Finally, with the recent capital raise, we are now well funded to deliver on Nugent and to accelerate Emily Star. Which is an exciting time as the operations start to ramp up over the next quarter and deliver stronger cash flow generation. I'll now hand back to the moderator for questions.

[Operator Instructions] Your first question comes from Nick [indiscernible] from [indiscernible].

Bob and Luke. Just a few quick ones from me. Obviously, with the transition to multiple mining fronts at Kavanagh, Nugent and Emily Star. Can you talk about how you're managing the trade-off between increasing mining rates and maintaining overall mine life at the operation?

Thanks, Nick. I'll try to answer if I don't get exactly where you're wanting just let us now and I'll go there. The increase from where we were last year at around about 900,000 tonnes for the 2024 calendar year. This year was to ramp up to about 1.4 million tonne, we ramped up to 1.5 million tonne rate as of last quarter. That actually is a combination of what we've been doing within the Kavanagh and the Spitfire regions, with increased development as well from ore increases. The opening of Nugent allows us to actually spread the mine out to a second mining front. Emily Star in the future that to become 3, but that's into the future. With that second mining front, we aren't intending to ramp straight up to 1.7 million to 1.8 million tonnes. We're intending to ramp up to that rate over the next 6 to 7 months, so that we can keep our production aligned with our development rates. Development between 600 and 650 meters per month gives us a growth of our stoping areas and allow us to rate the decline from the Nugent working area to the Kavanagh working area, so we can get easy access for trucks and loaders and the drill rigs. So over time, we will slowly ramp our production up to that 1.7 million, 1.8 million rate by June next year or thereabouts.

And then just on the back of that, obviously, with the ore bodies coming online, are there any implications on the current plant configuration?

Nick, there is 0 that we need to do in the plant. Even at 1.8 million tonnes, we're only -- around that 50% of the nameplate capacity or what the plants run it before. We are actually running the plant slower than was run in previous incarnations. So we're running at a rate that gives us a higher recovery and gives us higher residence time so we can get that recovery. As we increase our tonnes, we'll continue to optimize that for the most profitable and most copper effective output.

And just last one for me. Obviously, there's a buildup in concentrate inventory over the quarter. Could you just give us a sense of how much of that has been shipped so far in October and to what extent you expect that to unwind by the year-end?

Yes. Thanks, Nick. Look, yes, that really was just was a timing issue. So we built stocks, I think, by about 1,200 tonnes at the end of the quarter, which really was sold in October. So that would have already been sold. And then that will continue through the quarter. And yes, I'd expect that to reduce, but it depends on the timing of the shipments towards the year-end, but you should see that decrease.

[Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Fulker for closing remarks.

Thank you, everyone, for listening in today. As we enter the last quarter in our reporting calendar, we are seeing improvements in all our operating metrics and a reduction in our cash spend. We are seeing the realization of these improvements being implemented. So all the things that we've been doing over the last 12 months, we've actually seen coming to provision now. If there are any other questions that people would like to ask as I read the report in full, please don't hesitate to call Luke and myself. And thank you very much, and now see you in next one.

It does conclude our conference for today. Thank you for participating. You may now disconnect.