MGX Resources Limited (MTGRF) Q1 FY2026 Earnings Call Transcript & Summary

Thank you for joining today's teleconference for the release of Mount Gibson Iron's September quarter activities report. Mount Gibson Chief Executive Officer, Peter Kerr, will be leading the discussion and is joined by Chief Financial Officer, Gill Dobson; and External Relations Manager, John Phaceas. Mr. Kerr will provide a brief overview, after which there will be an opportunity to ask questions. Due to time constraints, only institutional participants will be invited to ask questions at that time. A recording of the call also be available via the Mount Gibson website shortly after the completion of today's teleconference. Thank you, and go ahead, please, Peter.

Thanks, Lisa. Good morning, everyone, and thank you for joining us to discuss Mount Gibson's September '25 quarterly report. As usual, I'll give a brief overview before handing back to Lisa for any questions. And just as a reminder, all currency we mentioned on the call is denominated in Australian dollars unless otherwise stated. So the September quarter was much as we flagged. Our shipments were steady while we completed the last phase of bulk stripping and [indiscernible] set the mine up for increased production in the coming 12 months, its final 12 months of operation. As expected, we drew down marginally on the group's cash reserves during -- and we now expect to reverse that situation as production is progressively and cash costs reduce. Operationally, we remain focused on safely maximizing shipments and cash flow from Koolan Island over the next 12 months. In addition to this, we're also excited about completing and moving ahead with our $50 million acquisition of the Central Tanami Gold project. As we said on our last call, we view this transaction as an attractive opportunity to advance one of Australia's larger and highest grade undeveloped gold projects on precision within 12. It also represents a critical step in our broader strategy to reposition the company as a diversified long-life minerals producer. Firstly, in relation to safety, while our positive safety performance generally continued, we did unfortunately incur a small number of avoidable restricted work and medically treated injuries during the quarter. Reporting practices are very good on the site. Importantly, the lost time injury frequency rate remains at 0, incidents per 1 million man-hours worked. And our total recordable injury frequency rate increased from 2.3 to 4.8 injuries per 1 million man-hours worked. Overall, safety performance remains favorable when compared with any of the available industry benchmarks. But of course, any increase is unwelcomed for us and all of our teams are applying significant effort to maintain our broader long-standing trend of continuous improvement. At Koolan Island, as I noted in my intro, the quarter was largely as we expected, while we completed the final phase of box stripping in the eastern end of the pit. We also finished the remedial ground support work in rockwall zone on the central footwall, and that's allowed us to start extracting the high-grade iron ore below that area. Consequently, total material movement increased by 20% to 2.6 million tonnes in the quarter, while ore production reduced to 540,000 tonnes and the waste to ore strip ratio increased by 30% compared with last financial year and has averaged 3.9 tonnes of waste to 1 tonne of ore in the quarter. With that overburden stripping now complete, the strip ratio will progressively reduce to average around 1:1 over the remaining life from here onwards, while iron ore production will build over that time. That should result in a substantial corresponding reduction in unit cash costs over that period. Processing for the quarter was in line with mining production. We completed 7 shipments totaling 550,000 tonnes, grading 64.3% Fe. Three shipments were completed in each of July and August and then three in September as we started to step up rates. Three of those 7 shipments were medium grade, which is actually a bit of a misnomer for us because our medium grade is around 63% to 63.5% Fe, which is still very high for us. And that's because we had some stockpile blend available in this market. Going forward, we expect mine grades to remain around 65% Fe with the occasional sale of a 63% or 63.5% cargo to take advantage of available stockpiles. Our remaining ore reserves of 4.1 million tonnes are 65% Fe at 30 June, which we announced to the market on the 6th of October. We'll see mining and sales conclude a year or so from now, subject to any [indiscernible] coming from Northern Australian [ wet season ]. We continue to track the sales target for this financial year fiscal '26 of 3 million to 3.2 million tonnes at an average cash operating cost of AUD 80 to 85 per tonne equivalent to roughly USD 50 to 55 per tonne, FOB before royalties. In terms of pricing, it was good to see a modest uplift in the quarter. The benchmark index for 62% Fe iron ore fines rebounded to average USD 102 per tonne CFR, and that was up from $98 per tonne in the prior quarter. And the benchmark high-grade 65% Fe index averaged USD 117 per tonne CFR compared with USD 108 in the prior quarter. The grade adjusted premium when you compare to 65% Fe price and 62 Fe price averaged 9.8% in the quarter, which was welcome, and that was up from 5.7% previously. A shipping cost of approximately USD 12 per tonne on the journey from Koolan to Northern China and normal penalties for impurities, which are primarily silica related for us, we realized an average price for the quarter of USD 92 per dry metric tonne FOB, and that compared with USD 68 in the prior quarter, which back then was affected by substantial downward provisional pricing adjustments. Encouragingly, iron ore prices are proving resilient at current levels, and we look forward to increasing the mine's production and cash flow in future quarters. Reflecting the temporary lower sales and increased waste mining movements, Koolan Island incurred a modest cash outflow of $4 million in the quarter, comprising sales revenue of $75 million, less cash operating costs of $61 million, and that equated to an average of $111 per tonne sold FOB before royalties. We also incurred capitalized waste mining costs of $9 million, some project work of $2 million, which was mainly related to the footwall remediation finish and [ WA ] government and third-party mineral royalties of $7 million. At a group level, cash outflow totaled $3 million, and that comprised the $4 million outflow that I just mentioned from Koolan Corporate and exploration costs of $4 million, and that was all offset by $5 million in interest and other income. On top of all that, we also had a $12 million increase in the market value of the company's strategic investment portfolio. And when combined with our working capital outflows, reflecting the timing of receipts and payments, the company's cash and investments balance at the end of the quarter remained a robust $473 million, that's the equivalent of about $0.40 per share, and Mount Gibson has no bank debt. Turning now to our growth strategy and the recent announcement of our acquisition of 50% of the Central Tanami Gold project from Northern Star Resources. We've spoken about this important move previously, so I'll avoid being repetitive here, other than to say we're really excited about the opportunity. The timing of the transaction looks very good. It looks like compelling value and is an attractively priced entry point to the gold sector, particularly given recent gold price movements, which, of course, many people had not foreseen. And with substantial resource upside at that project, we can leverage our operating experience and our strength in remote site operations from our team. As many of you will know, we need to satisfy three key conditions by the end of March next year for the transaction. And ideally, we do that much sooner. And they are the non-exercise by the remaining joint venture partner, that's Tanami Gold, and that was already done some time ago. A Foreign Investment Review Board approval, which is well underway, and we will update the market as and when we receive a communication from the third team in Canberra and a further extension of existing infrastructure arrangements on one tenement by the Central Land Council in the Northern Territory. Once the acquisition settles, we intend to work closely with Tanami Gold to position within the joint venture for a development decision within 12 to 18 months. It's also important to note that pursuant to our agreement with Northern Star, the existing joint venture partners continue to progress resource definition and technical study work, and that's resulted in Tanami Gold itself releasing a number of positive drilling results since we announced our transaction. So we're very much looking forward to getting the keys, so we can get to work using our existing funding capacity and our existing strong supportive relationship for both Tanami Gold and Mount Gibson of a common major shareholder. In relation to our other investments, the portfolio value has continued to build, increasing to approximately $31 million at quarter end, of which roughly half reflects our near 5% interest in Queensland copper producer, AIC mines. Subsequent to quarter end, we also contributed $1.5 million to an equity placement by Queensland-based metals mine developer, Maronan Metals, and that lifted our holding in that company to 5.1%. These investments are in addition to the 9.7% shareholding held in Midwest iron ore producer, Fenix Resources. That shareholding arose from our Midwest asset divestment transaction back in 2023 and the value of that shareholding at quarter end was approximately $35 million. We've also expanded our regional exploration portfolio, notably in the Edmund Basin in Western Australia's Gascoyne region, an area that's highly prospective for precious and base metals, but has been largely unexplored, due to its remoteness. So we defend the land position there covering over 1,600 square kilometers in which we've already undertaken extensive reconnaissance mapping, sampling and airborne magnetics, and we have a airborne gravity survey scheduled to commence shortly in order to help us plan for drilling in 2026. Corporately, our on-market share buyback program of up to 10% of the company's issued shares was necessarily paused back in April while our negotiations with Northern Star on the Tanami transaction advanced. And at that point in time, we have bought back 38.8 million shares or approximately 3.2% of the company's issued shares at a little over $0.31 per share. So this has obviously proved to be an accretive investment for shareholders. And since that time, we've extended the program by a further 12 months to 30 September 2026. And before I wrap up, I'd also like to highlight an important item on the agenda of our upcoming AGM on the 12th of November, which underlines our new direction. At that meeting, we'll be asking shareholders to approve a change of name to MGX Resources Limited. We think it's an opportune time for the change and it better reflects our new direction with Koolan Islands due to come to an end later next year and our center of gravity moving into gold and base metals. Importantly, by lining our name and ticker code we've had since we listed back in 2002, we've retained recognition with investors as well as continuity with the organization's history. So in summary, operationally, we remain focused on safely maximizing production over Koolan's remaining 12 months, and we're targeting to contribute substantial cash flow to our business over that period. And secondly, of course, we're working to close out the Central Tanami Gold Project acquisition as quickly as we can, and that will enable us to get to work with our joint venture partner and accelerate the activities necessary for a development decision. So this is in an environment where structural investment changes are occurring in precious metals and gold prices are expected to remain strong. Finally, we look forward to forging an exciting path as MGX Resources to build a high-quality Australian precious and base metals business. So with that, Lisa, if I could hand back to you for any questions that may arise.

Thank you Peter. [Operator Instructions] Thanks Peter. We have no questions.

Okay. Thanks, Lisa, and thank you for all of you on the call. If you do have questions or queries in relation to our outputs, please don't hesitate to call. The numbers are in the release, and have a good day. Thank you.