Ramelius Resources Limited (RMS) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Ramelius Resources Mt Magnet Updated Mine Plan Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Mark Zeptner, Managing Director. Please go ahead.

Thank you, Darcy. Good morning, everyone. Thank you for taking the time to dial in this morning. In addition to the ASX press release, we have released a presentation that I will speak to largely this morning. Obviously, all documents have been uploaded on the platform and will also be available on our website shortly. This morning, I'm joined by our CFO, Darren Millman. As I mentioned, I'll run through the presentation. And as always, there will be an opportunity for listeners to ask questions at the end. Just introductory-wise, ever since I started with Ramelius in 2012, the challenge for the company has been to demonstrate a meaningful mine life. Well, not anymore -- our new Mt Magnet mine plan keeps the mill full for 17 years, delivering over 2 million ounces in the process. This morning, we released an updated and we call it updated Mt Magnet mine plan, remembering that almost 12 months ago to the day we released a 2024 version. Slide 2, we're not going to skip over this, but I have to give special mention to our CPs, Paul Hucker and Jake Ball for the power of work that has obviously gone into putting the plan together. Slide 3, the corporate summary. I won't dwell on the corporate overview other than to welcome Tim Hewitt, Alan Thom and Kim Boekeman, who have recently joined the executive team as COO, CDO and EGM - HR, respectively. On our Slide 4, project locations for those who aren't aware. Right now, we have 2 production centers and 1 development, Project Mt Magnet, obviously, the subject of today's presentation. Over 2 million ounces, as mentioned, adding to the plus 6 million ounces already mined at that project to date. Whilst I'll mainly talk about Mt Magnet, we will get the chance to see what the combination with Rebecca-Roe looks like on a consolidated basis towards the end. So on to the mine plan itself. If we can go to Slide 6 before we actually get to the plan. On Slide 6, what we see here is a similar chart to what you would have seen before, except this is only projects related to the Mt Magnet hub. The format is the same. We have the capital cost or the price in blue, the cash generated in yellow and the net cash being the red dot. We also have the cash generated in calendar year '24 in the brackets, which I'll point out, totaled $483 million for the year. The 2 projects I highlight, which you may not have seen for some time in the center of the chart, Eridanus and Galaxy, both situated at Mt Magnet itself. The original Eridanus pit was completed in September last year. And you can see from the chart that it's actually made the most cash out of any project at Mt Magnet in the last 8-year period. Galaxy after being developed in FY '24 at a cost of around $50 million is almost in the black with what we believe many years of profitable production ahead. We believe that it's this close monitoring of each project which makes our multi-mine plans work. Over to Slide 7, the mine plan itself, as it was last year, it's prepared using rolling forecasts based on site developed models, which are built on a first principle basis, along with imports from the corporate tech services trend. The result is a 17-year mill full profile with the first 10 years or 10.5 years shown here, total production over 2 million ounces strong at the front as it was last year, but with a stronger back end due to the Eridanus open pit coming in, which is a long-life pit, but has to get through lower-grade material before it really shows its colors. The all-in sustaining cost for the first 2.5 years of $1,600 an ounce is amongst the best in the sector and still very respectable over the 10.5-year period you see here at AUD 1,870 an ounce at the midpoint. Last year, I made a comment that the first 3.5 years of the Magnet mine plan would produce $1 billion in free cash flow, remembering gold price at the time was around $3,000 an ounce. And the current gold price of $4,500 an ounce will go close to generating that figure over the next 18 months. Over to Slide 8, just comparing '25 plan versus the '24 plan. We have over 0.5 million more ounces this year, not surprisingly, largely due to Eridanus, but also to a lesser degree. The Hesperus open pit, which is a cutback on an old pit at Mt Magnet, which is in similar porphyry rocks to Eridanus. To Slide 9, the various ore sources at Mt Magnet from open pits and underground. Open pits will continue to provide the baseload of mill feed, but also provide a percentage of oxide ore that's important for mill throughput, which we'll see on the next slide. Overall, in this 10-year period, there are less ore sources, somewhat simplifying operations. In terms of the open pits, Eridanus essentially fills the entire profile in some form with Cue as an important contributor before we start Morning Star in FY '27. On the underground, as we've seen Galaxy is in commercial production, will run through FY '29, although we believe it will go much longer before Hill 50 is restarted. If you need to consider our confidence in the plan, please refer to the bottom part of the chart where indicated resources make up 89%, Inferred Resources less than 10%, and we have a tiny amount in the exploration target category, which is an improvement on last year's plan in terms of confidence categories. Slide 10, a few charts for the analysts on the line should be most of what you need to build models. The ore mining schedule is pretty consistent without building massive stockpiles, remembering that we do have a starting position of close to 3 million tonnes. Indicatively, grades are reasonably consistent, remembering that 2 grams a tonne is always a good target for the Mt Magnet mill. In terms of processing throughput, the top right chart, Eridanus material is hard, and this does affect annual tonnages. We have attempted to do this properly accounting for the various ore hardnesses. And we'll obviously look to increase throughput by accessing softer ores for longer, and I will come back to this when we talk about the Mt Magnet mill upgrade a little later. Operating costs in a total dollar sense gradually decrease as Penny and Cue mined out and we move to the larger bulk tonnage underground operations at Bartus and Eridanus. Lastly, FY '27 is obviously our big CapEx year with Eridanus commencing and the mill upgrade also have been carried out in that year, big in terms of what we've spent on CapEx in the last few years, but not big when compared to our expected cash balance by then. So on to Eridanus, which is obviously the driving force, just jump to Slide 12. Eridanus cutback is going to be a pretty large-scale pit, bearing in mind the original pit, you can see at the bottom left, was almost [ $17 million ] BCM in material moved. We've declared a maiden ore reserve of 680,000 ounces and 18 million tonnes of ore, which is enough to feed the current mill for over 10 years by itself. The potential to have a single large pit and a relatively large underground at Galaxy will simplify the Mt Magnet operations, and the gating the need to jump from deposit-deposit on a regular basis. On Slide 13, we have the PFS numbers. We have the cutback starting in April 2026. We have submitted the mining proposal. And we do need to tender the work and allow for mobilization of a fleet. There's probably the next size up from what we've traditionally used at Ramelius. I would like to think we could start earlier, but again, we've been conservative in this plan. The strip ratio is higher than the original pit. You can see 9:1 versus 5.3:1, which you would expect given that's a cutback. And you can see all the numbers yourself of a pretty robust project at a conservative AUD 3,500 per ounce. Pretax cash flow of $653 million. After tax NPV, $241 million. Internal rate of return, 17%. Obviously, the numbers are considerably higher if you had $1,000 an ounce to the gold price. Slide 14. We still have an underground mine in Eridanus. It simply moved down to the bottom of the cutback, which goes to about 375, 380 meters deep. We are able to mine relatively low-grade material economically here due to the bits of the ore body at this -- these steps around 60 to 65 meters wide and the ability to employ relatively few quite large stopes. The upfront capital for this underground will be small, effectively, a decline loop off the bottom of the pit. And I fully expect the underground to continue below the current 550 meters below surface. It's still relatively shallow, largely driven by the high grades we saw in the deeper drilling, and we can see on the slide there. Slide 15, we have the production schedule for both the cutback in the underground with the cutback particularly showing the increase in grade with depth we have referred to a number of times. On recoveries, they're very good at 93.5%. It's just a pity that the rock is so hard, but I suppose you can't have everything. And we have mentioned that Eridanus is the baseload feed that drives the long life expectation at Mt Magnet. And just a reminder that 5 years ago, Eridanus didn't exist. Onto the mill upgrade, if we can jump to Slide 17, our scoping work, the Scoping Study work, we started some time ago, landed on an upgrade to the existing mill, which covers crushing, grinding, leach tanks and tails pumping capacity to deliver a mill capable up to 3.3 million tonnes per annum. Now the throughput does depend on the ore mix. If you have 75% plus of Eridanus, you get 2.5 million tonnes. If you have, say, 50% of Eridanus and other softer ores, you can get to 2.7 million tonnes, and if you had a majority of softer ores, you can get to 3 million tonnes. Commissioning of the upgrade will take about 20 days, but we'll obviously reduce the operating costs as we'll see on the next slide. In terms of the throughput, it is worth remembering that the 2024 plan in the out years where Eridanus was the dominant ore source. The 2 million tonnes was only operating at around 1.6 million tonnes. So we have almost from the 1.6 million tonnes to the 2.5 million tonnes in the out years. We have almost 1 million tonnes of additional throughput that's worth bearing in mind with the upgrade. Over to Slide 18, we estimate the capital cost for the upgrade $95 million, of which $80 million is really the plant itself and $15 million for power and water supply upgrades. You can see where those upgrades occur in relation to the existing mill on the image on the right. The chart on the bottom shows the operating cost reducing from around $28 a tonne FY '24 to about $21 a tonne in FY '28 before coming back up a little. Currently, the longer center average is around $23.50, which is due again to the Eridanus material and the additional softer feed will increase throughput and reduce unit costs, especially from FY '29 onwards. On to a brief update on exploration efforts at our highest grade ore sources. Firstly, with Penny on Slide 20, and we have a long section on the left than a plan on the right. We have received our first results from surface exploration drilling, which effectively started at the south end of the lease and is working its way through to the north. So we've got some results to the south. And we have highlighted there a result about 50 meters down plunge of the high-grade Penny North lode, 0.55 meters at 22.5. From memory, that's the highest grade result that we've received that Penny -- away from the Penny West and Penny North ore bodies. And I suppose the question is have we found the top of a new load potentially. So whilst drilling at the moment has continued further to the north, we will obviously be swinging the rig back to follow up this result deeper down very shortly. Now over to Cue on Slide 21. Cue, almost specifically the Break of Day pit was the star of the show in quarter 2. You have a plan view on the right showing the tenement package with the operations sort of at the very bottom and the larger exploration lease, which was part of an Evolution / Musgrave joint venture, which now Ramelius owns 100% Break of Day style targets existing along strike to the north. We haven't quite got the rig drill rig there yet, but we're endeavoring to get 1 there as soon as possible as there are some more drill targets, which the exploration team actually ranked this project at the top of the list in terms of exploration priority. And then on to Slide 22, Galaxy. You can see Galaxy with the Saturn and Mars ore bodies with the historic Hill 50 decline on the right. As I mentioned earlier, Galaxy has been in production for a little while, but we're just active [Technical Difficulty], you can see that on the right with the orange area showing the complete development. Now given the excellent vertical continuity of the [Technical Difficulty] first example, we expect many years of experience and [Technical Difficulty] brand rig drilling them at the moment. We can see plan drilling, but also the surface rig drilling effectively in new BIF called Saturn East, which you can see very close to surface on the left-hand image. If we move now to the group production profile on 24. In total, the ounces are 3.1 million ounces, we've done 1.6 million ounces over the next 1.5 years. You can see the underlying price of Mt Magnet under the Eridanus shown in orange, which impact probably more obvious there. And Rebecca-Roe is in the largest blue color overlaid over the top. Average annual production rate is just under 250,000 ounces over the 10-year period at an all-in sustaining cost of around AUD 2,150. As we pointed out earlier, the all-in sustaining costs over the next 2.5 years is closer to AUD 1,600. Last but not least, our notional reserve position. Our reserve position does get a lot of commentary. 1.1 million ounces as of June 2024, but we recently banked 850,000 ounces from Rebecca-Roe and today, another 680,000 ounces from Eridanus. Having consideration for mining depletion financial year-to-date, we are looking at something around 2.5 million ounces in notional ore reserves at this point in time. If you have any doubt around our ability to deliver this mine plan, make this 1 comment. We're 1 of the few ASX gold producers that is delivered on both production and all-in sustaining cost guidance every year for the last 4 years. And to finish off on Slide 26, in terms of our focus areas today's announcement ticks a number of boxes, namely Eridanus, the mill and the Mt Magnet mine plan all at once. We'll obviously now turn our attention to concluding more detailed work in making final investment decisions on both the mill expansion and Rebecca-Roe in the September quarter this year. So that completes the presentation. Darcy, if you can open the line up for questions, please.

[Operator Instructions] Your first question comes from Hayden Bairstow from Argonaut.

Thanks for all the detail. Just a question on the ultimate mill expansion size. I mean, when I compare the study to the last one, just for the next sort of through 2034 when the last study went up to your -- when you gold production is up marginally, costs are up -- all-in sustaining costs are up about 14%. But with the CapEx on top, the total annual dollar mining spend over that 9-year period is like 35% higher. I just want to understand what's driving all that and how this delivered the best outcome? Was there anything else you could look at in terms of a blended underground open pit with Eridanus or bringing some other grade forward into this plan to try and get that sort of 3- to 5-year outlook higher than what it is?

Yes. Thanks for the question. It's a valid one. Look, I think 17 years mill full, it probably surprised us to some degree as well. We expected better than 10 years. Whether we go back and reconsider the mill size, you do need to remember that when we did the study, if you go to a larger mill size than 3, 3.5, 4, then you do hit a step change in CapEx. And in terms of sort of the overall focus of underground versus open pit, we obviously take a little bit of a hit in the early years on ounces by pushing the underground out. So 2 things as I mentioned at the outset, Ramelius has always been challenged on mine life. So we are really banking mine life here. And also secondly, rather than taking a short-term win on -- okay, let's go in and dive in on the high-grade parts of Eridanus, sterilize a whole lot of lower-grade material and go for the underground, we've decided the best thing by the ore body is to actually do the cutback. We will spend a bit more upfront in terms of CapEx, but that will -- this will just really consolidate the mine profile at Eridanus for the next 15 to 17 years. If we have another look at that mill size, we may do that over the next little while given -- I think we've got 42 million tonnes now in the plant. It's probably more than we thought. Ideally, we could get closer to 3 million tonnes. So there might be some more work. But the caveat is that you're probably looking at considerably higher CapEx, and we might need to run some more numbers given the tonnages that we're now looking at.

And then I mean, gold production side, I mean, the overall spend is way higher. I mean how much inflation and additional CapEx is there from last year's study? I mean that 9-year period, CapEx, I worked at $800 million, it was less than $300 million last time. That's a fair bit to cutback in mill expansion.

Yes, there's CapEx and then there's, I suppose, pre-commercial production capital or capitalized production and last time around there was really no consideration of a cutback at Eridanus, and I'll let Darren chime in. But -- so there is a small upfront CapEx associated with Eridanus. And then you have -- because you're mining through the lower grade material, there's a fair period of time of mining through lower-grade material where you're producing ounces being not at commercial production levels. And that's that $300 million. And unfortunately, you have to start at the top, work our way through, and you can see that the ounce production is pretty lean in those first couple of years before you get to the good stuff deeper down, and that's just the nature of the base. So I think the large amount of CapEx is associated with that. And obviously, there's $100 million or so associated with the mill at Mt Magnet. I'm not sure whether there's too many other changes in terms of CapEx, it's really related to Eridanus and the Mt Magnet mill unless, you know more, Darren.

Yes, that's right. And obviously, the accounting standards make us classify this preproduction. So it's still mining and the costs were normally incurring as operating, but it's just the accounting that makes us classify as capital. So that's the big change.

Okay. And just a final one, if you just on Break of Day down talking about an underground, is that implied in that, that supergene zone is now pretty well defined, and that's hence you haven't changed the guidance for this year, there's no last kick in the back end of FY '25? Or is there still scope for a better outcome than guidance for this year?

We're still working through that stuff, Hayden. We obviously got a very nice kick in December. We've had stockpiles going through and that still looks to be overperforming. We'll pull those numbers together probably for end of quarter. But look, there is some additional ounces coming from Cue. Once we've got -- we didn't quite have all that together for this mine plan. Obviously, the focus was mine plan rather than Cue. But I think you'll largely see that impact in FY '25. There was always an underground contemplated by Musgrave minerals, and we're basically piggybacked on that work for what we've put into the mine plan here at, albeit I think it was slightly smaller than what they had. They had about 70,000 ounces. We've got 50,000. I think there's potential for extensions to that both at depth and along strike in the leaner direction. But that's not a completely new thing at Break of Day.

[Operator Instructions] Your next question comes from Alex Barkley from RBC.

Mark and Darren. Just trying to look at the impact on your mine plan in the near term from the Cue pit. The change in FY '26 is pretty clear. Just trying to work out what happened in FY '25? Calculate how much you figured goes into the plan in the first half. And now I've found a couple of numbers for the second half, 64,000 and 58,000 ounces. Just if you give it a hand versus the original $90,000 for the whole year, has that number changed?

All we've done, Alex, is purely taken a midpoint for FY '25. So there's been no real change from our guidance issued at the start of this financial year. So that's all we've really done for FY '25. There's no real smoker mirrors in there, it's just purely a midpoint for guidance.

Okay. And then FY '26 lifted for the Cue pit. Is that just shifting around the same amount of gold from last year's plan? Or is that some of the positive reconciliation coming through?

Look, there's an element of positive reconciliation at Break of Day. So if you look at -- looking at the detail, we've lost a few ounces at Penny with the bifurcation of the ore body or the splitting of the ore body down the northern -- the bottom section of the Penny North. But we've made some up, and that's why having multiple operations is always handy, but we've made some up at Cue, particularly Break of Day, we're getting our performance. But we've restricted that to FY '26 only, which is probably the first part of FY '26 because we don't see it carrying on into the deep refresher rock and not at all ore bodies at Cue either.

And last question. The Eridanus pit grade, 1.2 for the reserve. It seem to come around the bottom end of your production target ranges. I thought maybe with extra infill drilling, you might capture a little bit more gold and it could be higher than that. And then M&I grades for the pit is higher still, I think, 1.7. Just how did that grade come about? And is there a potential it might lift higher towards the M&I over time?

Yes. Look, the grade -- and obviously, talking about the pit, we did the geotech drilling, we had to lay the ball back in that northern area flatter than the original pit for those who are interested. So there's a section there where we're doing to set the ultramafic. So there's some more material that needs -- more waste that effectively needs to be mined in that area. And so we've accounted for that. Obviously, it's a pretty big and deep pit. So we've got to get that part right. In terms of the overall grade, the original pit, I think mined at about 1.3. So whilst we do mine more of the -- or we mine deeper, so we get some of that high-grade material. We're also mining sort of wider at the top, so more lower grade material, and that's what the numbers come out. And I know the guys -- we had some third-party reviews and modeling of basically a large granite, dolerite with veining that's based both horizontal and vertical, and that was like 4 or 5 months' work. And that's where it's landed. Ideally, the grade is a bit higher. But again, we'd rather be on the conservative side than putting a number in that no 1 really believes we're going to achieve. And -- but that underwent a lot of work and a lot of revisions and reviews, both internally and externally.

Okay. The design change makes sense. And what are the resource grade is that eventually going to drop towards the reserve grade? Or is that cover an area beyond the pit shell?

Well, I think it covers an area beyond the pit shell. For example, if you look at the long section, there is -- might not be the best 1 in the deck, but there's some high-grade material that we drilled 12 months ago that sits outside the pit that's not either in the underground or in the pit, which obviously I'll put a big circle around for the guys to say, well, how do we bring this in, but it would be actually in the resource. So I think there's some features like that with high-grade material, not either -- captured by either at the moment.

Your next question comes from Paul Kaner from Ord Minnett.

Just following on from Alex's question there in relation to Cue. I just want to be 100% clear here. There's obviously less ounces coming out of that in FY '26 to '29 relative to last year's plan. I just want to make sure we've got this right in terms of what's driving that? Is that because you've brought forward some of those tonnes into FY '25?

I think the only answer is that would be less -- would be, as I referred to, the underground, I think there's about a 20,000 ounce delta. Now bringing ounces forward is not what we've talked about, and I think that's the only loss of ounces. In fact, in '25 and as mentioned in '26, I think there's a bit of overall, particularly at Break of Day. So I'd have to get back to you on that in terms of reconciling those individual ounces out of Cue mine plan '24 versus '25, Paul.

I think it's actually -- we are expecting to be generating more ounces out of Cue also in '27. I think it's just a little less in 2028, '29. But once again, we've got a lot more confidence in this category than we did historically as well.

Okay. Great. No, that's clear. And then I guess second part to that is sort of what likelihood do you think there are for extensions here given the drilling you've been doing over the last little while and what you're going to be doing over the next sort of 6 to 12 months?

I'm getting impatient in terms of getting the rig or getting our rig up to those northern Break of Day targets. I think the rig is finishing 1 of our other projects and it's ready to move up there but I couldn't get up there soon enough as far as I'm concerned. So we haven't actually drilled 1 hole to the north on that old Evolution joint venture ground, but we're very keen to. So it's exploration, but the guys are pretty excited about those targets. In terms of extensions around the ore bodies, I think at depth, there's potential Break of Day. The rest of the pits we've largely drilled and we've got designs on them, albeit they may be anywhere between $3,000 an ounce and $3,500 an ounce pit shells, whether we need to revisit those, we'll consider in the fullness of time.

Yes, that's great. And then just looking at your production profile from sort of FY '27 to FY '31, is there any other sort of higher grade material in the portfolio? I know you've sort of just spoken there about the JV material. But is there anything else there that could sort of displace some of the lower-grade material going through the mill and maybe reduce the overall sort of production decline?

It's really -- the focus on exploration is on our highest grade projects: Penny, Cue and then Galaxy in that order. And we're pretty optimistic of extensions of those projects. Obviously, Penny is the biggest prize and to get a result, 22.5 grams is pretty encouraging. But they -- and so these ore bodies and these loads can be pretty small. Let's follow that up and let's say, but it's the best result that I've seen, like I said, away from those main ore bodies that we currently have.

[Operator Instructions] Your next question comes from Tim McCormack from Canaccord.

I just got a couple of ones. I think you mentioned that there might be a few levers to pull to potentially bring the Eridanus cut back forward, 1 of those is my first question.

Thanks, Tim. In terms of both the Eridanus cutback and the mill upgrade, I think in terms of Eridanus, we've got April '26. So you could potentially get started there a little earlier because the mining proposal has already been submitted. We'll get that back this year. It's, again, just our guys has been a bit conservative on okay, tendering process, which will happen shortly. And then mobilization of a fleet that's slightly large -- while the next side are from what we're used to. So again, we could pull that. I think we could pull that back a little earlier. And in terms of the mill upgrade, that's potentially -- in some people's eyes a little bit later, but we've assumed from, let's say, an FID in the September quarter. We've got 70 weeks in there for delivery time frame. So there potentially is upside on some of that depending on what bid to keep your ordering whether available on a shorter time frame than that. So I think there's potential to bring -- and ideally we can because the mine plan could do with a larger mill and getting into Eridanus in our mine earlier. But again, we haven't set ourselves up for failure in terms of this plan.

Okay. And just another question around hedging. Obviously, the Eridanus PFS has pretty crazy sensitivity spot to base case on NPV and IRRs and stuff like that, like -- I know there is a comment around hedging, but could you just flesh out a little bit around is it worth putting some more hedging in to sort of protect the absolute downside of that project if gold price sort of fall away?

Yes. So we -- as we put in the press release, Page 4, we put in place 22,000 -- 22,500 0 cost collars at AUD 4,200 and ceiling of AUD 5,906, but that's basically largely just covering the mill expansion. And I think we'll look at it again in the context when we make the decision, the timing around Eridanus, I think that's probably the next decision point when we book for the Board FID on that, that would be the probably the timing around on the -- if we do hedge further to, once again, step up the economics around that. But yes, that's -- we don't put in place for economic purposes, but we do like the pricing at the moment.

And when we talk about hedging, Tim, we haven't put any more traditional forwards in for some time. We've made the point in the release, we would be looking at this stage anyway at 0 cost collars to provide some certainty, especially around the larger CapEx years FY '27, so '28.

Yes. And those economics haven't been factored into the 3,500 base case we put in for Eridanus. So there's -- we've already baked in additional upside with those hedges.

And just finally on the -- I mean, how the DFS is tracking on Rebecca-Roe, you're seeing tolerance level is much the same as the PFS on all the key inputs there as you track to as kind of FID in the September quarter?

No, earth shattering changes there, Tim, working through on the hydrology, geotech drilling, working with the native title group, talking to the environmental regulators. We've got some more project management people involved now that our new COO has started. We've pulled -- able to pull Peter Ganza as GM - Projects to oversee that project and push things alongside. No changes really, just continuing on in terms of the plan that we've put in place.

There are no further questions at this time. I'll now hand back to Mr. Zeptner for closing remarks.

Not much more to add. Thanks for joining the call, and thanks for the questions, guys. Have a good day. Bye for now.

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