Regis Resources Limited (RRL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Regis Resources Half Year Exploration Update. [Operator Instructions]. I would now like to hand the conference over to Mr. Jim Beyer, Managing Director and CEO. Please go ahead.

Thanks, Darcy, and good morning, everyone, and thanks for joining us here on our half year exploration or biannual update. I'm joined this morning by General Manager of Growth, Wade Evans, who is responsible for both exploration and BD. And I'd also like to introduce Ben Goldbloom, who has started this morning. This is his first day, first minute actually, who -- as the Head of Investor Relations. So welcome, Ben, to the team, and I'm sure a number of you would already know Ben from his time in this IR space with Northern Star. Anyway, Ben, welcome to the team. All right. So look, if I just want to take a step back before handing over to Wade and just remind you all that Regis Resources is following a growth strategy that really has 3 key prongs to it, certainly stabilizing and optimizing the existing Duketon assets and its resources. Something that we did cover in the quarterly. It is a challenging period for us, with COVID, the impacts of labor and skills, some of the operational variability in complex ores. And we're not -- you can see that that's some challenges, particularly from the COVID environment across the resource space at the moment. But we are working on that to stabilize it and optimize it. Our second key area is delivering the increased production value contribution from our recent Tropicana acquisition. And we're still working this through the Havana cutback, the major contributor to the step change that the step-up that we'll see in production, and we're anticipating that, that will kick in, in next year. And the third leg is investing in organic growth that continues to build and extend the positive results of both Duketon and at Tropicana. And today, it's all about discussing that third element, organic growth through exploration and discovery. In the past -- and I'll just point out, in the past, we've really provided exploration updates with our quarterly reports, but it became clear that it would be more appropriate to separately report our progress in these areas. And so broadly, on a biannual basis, we'll present progress in this area. As you'll see, the results of our work supports our view, that our operations will have mine lives well in excess of their current reserves. But just as, if not more importantly, our regional exploration continues to advance early-stage projects showing the significant potential for further discoveries in the areas that we operate. And with that, as a tantalizing introduction, I'd like to hand over to Wade, who will go into a little bit more detail on some of our more pleasing and interesting results. Over to you, Wade.

Thanks, Jim. Good morning, all. During the call, I will be stepping through the presentation that we released this morning, and I'll reference the slide so you can come along with me. So just starting off on Slide 3. Regis is in control of a large under-explored greenstone belt, both Tropicana and Duketon in Western Australia. Across these projects, we've discovered 10 million ounces at each belt, making them highly significant, but notably, relatively small in comparison to other greenstone belt in the Yilgarn Craton area, where we -- where there are some very large discoveries have been made over the many years. So we believe this is simply a function of the relatively immature stage of exploration across Duketon and Tropicana belts, and we certainly aim to change that. We have considerable optionality at both projects, with Duketon having 3 mills to deliver reserve growth from existing mines and to deliver new discoveries. Tropicana is the only mill within 100 k -- hundreds of Ks, so both exploration on the large tenement holding owned by the JV and any discovery made in the region only has one home. So our exploration strategy across both areas is to grow existing mineralized systems to extend mine life of both open pit and underground and to turn our major deposits and mines into multimillion ounce systems and, of course, to make plus 1 million-ounce gold discoveries, greenfield discoveries on the belt. If you go to Slide 4, now. You'll see -- you all have seen this slide before, but I just wanted to briefly point that exploration is a key element of our value growth strategy and it's a significant focus for the company. During this presentation, I will update you on our advanced exploration projects at both Duketon and Tropicana, and we'll make some general comments about our regional exploration activities. Moving to Slide 5. The exploration update for Duketon will provide an update on 5 project areas, 2 at Duketon North Operations, or DNO, which is centered around the Moolart Well mill, and 3 at Duketon South Operations, or DSO, which is centered around both the Garden Well and Rosemont Mill. Our exploration budget for Duketon in FY '22 is $35 million, with approximately 2/3 focused on resource extension work in and around the existing mines and the remainder on regional activities to make new discoveries. If you go to Slide 6 now, I'll talk about the individual projects. So there's been an extensive infill drilling program at Moolart Well, specifically the Buckingham-Wellington deposit area to test for resource extensions. This program has successfully returned positive results, which will be incorporated into an updated resource estimate and mining study over the coming months and is currently considered likely to expand the pits. Excitingly, and probably of more significance, this program has identified a shallow south plunging shoot with multiple high-grade results and highly significantly intersected high-grade fresh rock mineralization below the oxide zone. So if you look at that diagram, at Buckingham, there's a result at the bottom, on the southern most point, where it is 19 meters at 5.7. That's most -- that's the whole intersected sort of -- also had, sorry, 10 meters at 13 in it as well as part of the 19 meters at 6. And this is actually the most significant fresh rock mineralization ever received from Moolart. The mineralization is hosted in the biotype shear, which we believe could be the beginnings of unlocking the fresh rock component of Moolart. Moolart commenced operations 10 years ago and has dominantly treated laterite and oxide ore for the entire period, producing over 1 million ounces without really having a bedrock source. So we really think this is highly significant, and we'll be certainly following this up in the short term. Slide 7 is Commonwealth. So the Commonwealth prospect is about 10 kilometers from the Moolart Mill and is right next to the haul road construction -- structure for mining Petra to the south. So this new mineralization is ideally placed for potential delivery to the mill. As you can see in the figure, early drilling has identified a large 2 kilometer by 2 kilometer of mineralization. This mineralization is hosted in a hematite-rich clay at the south rock boundary and the scale of which is giving us great encouragement that the bedrock source to this could be meaningful. Deeper holes are focused in areas where mineralization is interpreted to extend to bedrock. And we see this as another exciting opportunity for around Moolart. On Slide 8, so moving to the Duketon South. I'll give you an update now on Garden Well, Rosemont and Ben Hur. So focusing firstly on Garden Well, which is the largest deposit ever discovered at Duketon. Drilling has focused on a high-grade plunging shoots beneath the main pit and the results returned sort of significant widths and grades, which included approximately 10 at 4.5, 10 at 3.5, 9 at 3 and significantly almost 25 meters at 3.5 grams. So these results really demonstrate the potential for establishing -- a potential for -- yes, establishing new underground resource and potentially an additional underground production area. This potential is encouraging us to also consider establishing an exploration decline, which would enable drilling infill holes and extensions from underground with the added of allowing us to test high-grade results between Garden South and Main. You can see some historical intercepts in gray on the figure, which shows that there are certainly some areas between those 2 zones that have yet to be explored adequately. If we go to Slide 9, which is on Rosemont. The area down plunge of Rosemont South extension has been the focus of continuous drilling and has defined a new shoot of similar scale to the others at Rosemont, with that being South, Central and Main. Drilling has intersected narrow, very high-grade circa ounce per tonne intervals which include visible gold. The best result today was 4 meters at almost an ounce. So this drilling has demonstrated the resource potential we expect will continue at Rosemont for years to come. And certainly underpins our belief that Rosemont could turn into a multimillion ounce system over time. If you go to Slide 10, this is Ben Hur. The drilling for extensions to Ben Hur mineralization, which is the same geology as Rosemont, has returned thick high-grade results down deep and which are expected to grow the open pit resources. The potential for these extensions is evident in the cross-section and the long section, which show an outline of the sort of 2020 open pit reserve design and significant new intercepts just below that design. Some deeper results in that system like 18 meters at 5 grams from the recent program also give us early indications of potential underground loads, which will be followed up in later programs. Ben Hur is certainly showing signs it could be a bigger system and could contribute to Duketon for years to come, which is really exciting. Moving to Slide 11. So we're going to move now to Tropicana, which is 30% owned by Regis, with the mine and exploration managed by our JV partners, AngloGold Ashanti. The total exploration budget is approximately $27 million with, like Duketon, 2/3 of that exploration being focused on extending the underground resources, including Boston Shaker, Tropicana, Havana and Havana South, which are the focus of this presentation. So if we move to Slide 12. The Boston Shaker is the first underground established at Tropicana and remains the focus of exploration and resource definition drilling. Drilling has been multifaceted over the period, with aims to test the margins on the mineralization, both laterally and down plunge, and better define the fault offset zones, which offset the mineralization. And encouragingly, strong results continue to demonstrate the down plunge potential, up to 200 meters below the resource envelope. If you see the 22 meters at 3 grams per tonne on the northern shoot, that's 200 meters below. And we also have results like 35 meters at 4.3 in the bottom of the southwestern load, which are really showing us -- giving us further confidence that the resource is quite robust at depth. Tropicana is currently being developed, and it's part of the Tropicana underground that is currently being developed and it's part of the production base for the operation. Albeit relatively small reserve base, but however, mine development there is allowing us to do extensional drilling from underground. And it's increasing our confidence in the ore body and its potential for extension. We've currently got 6 pre-collars drilled from surface with diamond tails to drill the previously untested down-dip extensions to that mineralization, which you can see on the slide. And obviously, success from that drilling will open up another production front beyond the current reserves. If you go to Slide 13 now, we'll talk about Havana and Havana South. At Havana, infill drilling below the Havana open pit design has commenced to convert inferred resources into indicated in preparation for the underground pre-visibility study that will commence next year. Early drilling is showing strong continuity of mineralization that's being mined in the open pit above. And this continues to affirm our view that this area is a very strong potential to be the third underground operating area at Tropicana. And similarly, at Havana South, underground drill testing has been undertaken to build confidence in the down-dip extensions to high-grade ore shoots. This is very much in its early phases, but it's certainly showing the potential to add to the underground production in future years. And we'll focus on continuing -- it will be a focus of continuing exploration for years to come, I'm sure. Just taking you now to the final slide on Page 14. This slide shows the multiple projects across Duketon, Tropicana and McPhillamys, which contribute to the growth pipeline for the company. I've discussed some of these key projects where significant advances have been made to grow resources and ultimately reserves. But on the regional front, both Duketon and Tropicana are at very similar early stages of exploration progress. For Duketon, that is due to the tripling of the landholding just 2 years ago. And while this ground came with a number of walk-up targets, large sways of the ground we acquired had limited historic exploration activity and required significant early-stage baseload data gathering required for efficient targeting. And it's a similar story at Tropicana, where due to Anglo's -- AngloGold's success in growing the resources in the immediate mine sequence area, regional exploration for new discoveries wasn't as high on the priority list. So at Duketon, just a quick overview. At Duketon, our regional exploration has sort of focused on the collection of necessary early-stage data, geophysics, geochem, that's surface and bottom hole and geological mapping, which all contributes to the mineral systems approach, which is necessary to understand the architecture of the belt. This approach is used as a primary framework to develop an understanding of in the first instance, why the mineral deposit is where it is. And secondly, and probably more importantly, collect and use these datasets to predict where the next new deposit may be. So this work is a very early stage and it's time-consuming, but it needs to be done. Some of the early highlights of this work have been recognizing the Betelgeuse trend, which is about 20 kilometers northwest of Rosemont, where there was little historical exploration data and where our wide space reconnaissance drilling has returned anomalous results over 6 kilometers of strike. Better results here are sort of broadly coincident with arsenic geochemistry in the proximity to a late basin structural contact, which each are on their own positive signs of a large mineralized system. So at the moment, the work we've done, we're doing a comprehensive geological review of that work, just trying to understand its significant to what's been discovered to date and update our geological model. And this will aid our next phase of targeting work. We certainly feel like it's a very strong system, and it's got the highest potential at the moment of discovery of a new multimillion ounce system. So it's certainly one of the most exciting regional areas for us. Regionally, at Tropicana, work has been similar in progressing to unravel the complex stratigraphy away from the immediate mine lease. Understanding the mine sequence geology has been critical to understand the significance or not of historical work on the belt. And this work has allowed a new conceptual geophysical and geochemical model to -- for the emplacement of Tropicana gold to be established. So essentially trying to work out why the gold at Tropicana is where it is. And so that new focus now is being used to utilize the target high-priority areas within 20 kilometers of the Tropicana Mill. And I think, of note, the most significant results to date from this work has been at Angel Eyes, where similar stratigraphy to Tropicana has been recognized and some visible gold and core. So this -- the work has been ongoing and is exciting, and we look forward to great future results. With that, I'll hand back to Jim to -- and to call off.

Thanks, Wade. Look, there's a lot of information and a lot of material that we covered in there. And circling back on our -- the key elements that I talked about, the first of stabilizing and optimizing Duketon assets, and that's in the short term. And as I said, with the challenges around at the moment, both COVID more broadly related and some of the ones that we're working our way through on site, this is still very much a work in progress. Delivering increased production value out of Tropicana, I think, we are progressing the Havana cutback. We will see that contributing to the step-up in production later next year. And of course, this last element here, so many different areas that of interest and quite frankly, in some areas, we think quite exciting information. You consider the Moolart intercept in the fresh, that's really the first little piece, first a little bit of work in that space, and we're starting -- we've seen what we consider to be some very exciting results. So as you start to look and see what Wade has just talked through rather than individually, but start to bundle them together, you can see clearly that Duketon has great potential to extend beyond its existing life as we said at the front. And at Tropicana, well, what we're starting to see there already is some of the things that we were certainly anticipating was going to be the unfolding story. The Boston Shaker extension, Tropicana being more than -- the Tropicana underground being more than just the small element that it was. But we're also very pleased to see that there are some other areas that are opening up that we haven't -- we haven't, I guess, anticipated or considered to be as attractive as they're starting to look. So for us, that's all very exciting. We've dived a little deeper into this third element of exploration. You can see our investments are continuing to build our near-term growth, both at Duketon and at Tropicana. And also potential further increasing our company value by identifying these long-life additions all through this organic growth. It's a very exciting progress that we're making here. Okay. So that really, as I said, is the 3 key elements for us, certainly, that we're touching on the stabilization and work to -- at Duketon, the longer-term growth and step-change in production at Tropicana and also this exciting investment in organic growth and some of the returns that we're starting to see already. We certainly recognize we've got a way to go, but it's very pleasing when the biggest challenge that we probably got is figuring out how to prioritize all these targets. Okay. Look, just before we go on to questions, if there are any. I think we may have 1 or 2. Just a reminder that on Thursday, we've got our AGM, where we'll review the year that was in FY '21 and some further updates. Anyway, I'll pass back to Darcy and see if we've got any questions.

[Operator Instructions]. Your first question comes from Peter O'Connor from Shaw and Partners.

Of course, there's going to be questions, you know that. And thanks Wade, and welcome, Ben. Jim, you've mentioned this a couple of times [indiscernible] the AGM, but you've talked about stability in Duketon operations? Today may not be the right forum to talk about that, but can you add any more to how you're tracking from the call we had a month ago?

Yes. Look, I think as we said at the time, there was -- and I can touch on it. It's obviously today was to talk exploration. But the impacts of the labor and skills availability and the challenges there, they haven't dissipated. I think you spend time and you can see that it's a pretty common theme that's running through the resources area. And we also talked about complex ores, where there is another challenge in there. But we see our way out of it, but it's just part of the element of stabilizing and transitioning Duketon. As Wade said, for example, at Moolart Well, all -- little fresh rock there is great opportunities for us to pursue, but they all come with -- as we transition our business, it all comes with challenges, and we just continue to work on it. So it's really -- I don't have a lot more to add on what we're dealing with that we covered at the quarterly. We just continue to monitor it and look to see how we will perform over the full year.

Okay. And on Slide 15, I look at that and notice there's an enormous amount of opportunity in that middle category, advanced exploration/development. How do you work your budget on? Do you have a number from the Board that's guides 35 mill? Or Wade, do you drill the bottom-up -- it sounds like you got so much to drill, you could even do more than 35. Why is 35 the right number?

We certainly do a bottom-up approach to looking at all the targets we have. Some of those targets are about extending resources, which are work that can never stop. Essentially, when you're looking at drilling underground at places like Rosemont or Garden Well, that it takes a lot of time, so you've just got to prioritize that, and that's where we will necessarily add resources and reserves. So that's part of that budget. And then really, it's been working out the quality of the extra targets that are outside of that. And what's justified within a 12-month period to determine how much we should spend on those targets to ensure the longevity of the operation in short.

Look, it's a key area, Rocky. As you know, you've led exploration, there's always plenty of targets. We do use a target estimated scale and a probability analysis. You got to be careful you don't disappear into difficult analysis too hard. But it's -- in reality, the landscape here has shifted quite a bit for us just in the last 6 to 12 months because, as Wade said, all of this ground that we looked up Duketon, there's very limited -- while we had walk-up targets that existed from -- that have previously been identified by other parties, there's also this huge amount of baseline work that we needed to do. And quite frankly, that's starting to identify targets that appear to be more attractive than the ones that we're already looking at. So we sit down, we review them regularly. We have some great experience on the board on the exploration front and Lynda participates in that as well. And you just got to be really careful and not running into [indiscernible] budget of everything. But it's a great problem to have. We've got so many targets that the challenge for us is making sure that we're disciplined and we target that, which we think will -- will leverage the most value for us balancing against risk. And that's basically what we do. Part of it is, I guess, qualitative. And of course, the other part is quantitative where the exploration team sits around, talks about how attractive the targets are, and we make judgment call. That's what we do.

And Wade, during your presentation, PFS came up a lot. There's a lot coming. Could you wrap what those key dates or milestones are really different PFS or studies? Or is it just the next mineral resource update in May or thereabout since more towards...

We think -- I mean the only PFS sort of mentioned was Havana underground, and that's been scheduled for calendar year '22 by Anglo. So that's -- so the necessary drilling that needs to do to contribute to that PFS is -- will be an ongoing focus there.

Yes. I think the other one that we mentioned maybe not using the term PFS, but was the Garden Well Main. And where we just -- we're evaluating that at the moment. I'd be surprised if there's anything that comes out of that certainly this half, but I would expect we will have some kind of an answer in the financial year.

And last question, Jim. Camp size, you talked about 10 million ounces each camp at the moment for underexplored. There is conception. how do you think about camp size?

Look, I mean, I think on one of the diagrams in the preso, you can see -- there's lots of different magical formulas, Rocky. At the highest level, some people just take square kilometers and say that there's a prospectivity ranking of gold, how many gold on a greenstone belt area, how many ounces you're going to find per square kilometer. It's all fascinating conversation. The bottom line is, we think there's significantly more to be found at Duketon. And the reason that we think that is, it's not because of hope. It's because when we look at how much ground has actually been explored, what you would consider to be a well-structured scientific approach. It's quite limited and therefore, the opportunity is there. So do we think it's 20, I think it is 30, I don't know. But we certainly think that it's significantly [indiscernible].

Your next question comes from Alex Barkley from RBC.

I was just trying to sort of make sense of the drilling that you've done at Tropicana, some good intercepts, Boston Shaker extension underneath the other pits. Obviously, you came into the asset with certain expectations around underground development and growth. So just sort of comparing how those results have come in versus your original expectations? And has anything been a pleasant surprise or maybe a disappointment so far?

Thanks for the question. Look, I think when you look at Boston Shaker, for instance, there was a lot of inferred resource in the bottom end of Boston Shaker, which what do you want to see, you want to see infill drilling staying to continue to demonstrate to that system is as robust as you hope it would be. That's certainly proving to be the case. And I think beyond that, those -- the intercepts certainly on the Northwest shoot at Boston Shaker, 200 meters down plunge, still 20 meters wide, still 3.5 to 4 grams. That's perfect to demonstrate that, that system has -- is going to have the life beyond what we even thought it was. So that's been highly encouraging in itself. I mean really, the Havana work is -- it's really infilling the resource and getting similar results, which is kind of what you expect. But really, I suppose the other significant part is that the Tropicana underground, which was quite small, was -- is really, really instead of shaping up well, they've infill drilled from underground, that's a development. It's showing that to be a lot more there than we thought it was going to be. Starting to see the geology, show the same potential for down plunge extensions that we're seeing at Havana South and Boston Shaker. So that would really unlock somewhere that we put no value on because ultimately, there was nothing to see because there's no drilling there. So we're pretty excited about that.

Yes. We'd always -- I sort of certainly agree, Boston Shaker is what we thought might be a bit more, but that's out in time. What's really exciting is -- or really interesting from our perspective is the gap filling that we're seeing in Tropicana, which kind of we knew had to be there, but I couldn't value it, didn't want to value it. Havana underground is definitely -- I mean that's got great potential, and that was part of thinking Havana South is an interesting one that might be -- is shaping up to be a little bit more than we thought. But the exciting one for us, I think, in the near term, is the potential at Tropicana underground to actually be additional production source in the near term rather than something that's extending life. So yes, we're pleased. We're seeing work. The summary to your question, Alex, is we're seeing information that confirms what we were factoring into our valuation. And we're also seeing some data and some information and results that are outside the envelope of our assumptions, which we're really quite pleased about.

Your next question is a follow-up from Peter O'Connor from Shaw and Partners.

Greenfield versus brownfield 35 million [ a tonne ], Duketon area 27 million, 100% base of Tropicana versus McPhillamys. How do you view those 2 competing or 3 competing alternatives?

Well, the first thing you got to do is if you're looking at our expenditure at Duketon, there's a significant chunk of that, and I'd be -- it's around about 2/3 of it is actually in resource reserve drilling. That's around about the number that it will be this year, I think. If I look at McPhillamys, we actually think the region around McPhillamys is very exciting. We've got significant ground holding there. And we have that Lachlan fold belt, the Lachlan belt through there, there's some pretty interesting results that are coming up, and we know that we've got some good ground. But our focus in that part of the world is more around the immediate future and working our way through the permitting process and the approval stages. So once we're clear of that, we'll then start turning our mind to how that -- and we've got the project underway. We'll start turning our mind on to how the opportunity and the targets at -- in New South Wales ranking priority against work at the moment. We've got bigger fish to fry there, and that's what we're chasing.

And back on Duketon, the relative value of cost of equity versus the drill bit ounce? Is it broad, tight?

Say that again, please, Rocky?

I'm looking to buy ounces in the ground, in the Duketon area as opposed to drilling for ounces. Is that quite a disparity in value at the moment?

Buying answers in...

Yes. Well, I mean the reality is that Duketon has not really any ounces left to buy that we don't own. So the best result for us is only exploration because that's all we've got in front of us there.

But we'll keep track of what's going on. Obviously, I think as Wade said at the start, we are the natural owners or the natural processes, but owning the significant chunk of the greenstone belt that we do, we think the best attractiveness for us is to find it ourselves. However, we stay in touch with what's around, but it's pretty limited. It's not like we're sitting on some of the other belts where we just -- we own 10% and other parties own the other 90%. It's broadly, it's the other way around for us. So our efforts are into self-discovery, if you like, better way to describe it. But having said that, we do stay in touch with what's going on, but it's pretty limited in scale, in number.

So things like Ben Hur that was not one-off, but there's not many of those around in that area?

No.

The Greenstone belt certainly slightly isolated sort of if you look at it, Garden Well's 100 kilometers north of Laverton. So that's a long way. And then if you go east and west, there's not much to see until you get to [ Dallow ] or you get to nowhere when you go east. So yes, it's an isolated belt, sorry, but it's highly prospective, and we've got most of it, and we really need to focus there.

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

All right. Well, look, thanks very much, everybody, for joining us. We'll wrap it up there. Anybody got any follow-up questions, of course, please let us know. And we look forward to catching up with you some time in the future. Thanks for joining us. Have a good day.