Regis Resources Limited (RRL) Earnings Call Transcript & Summary

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

Thanks, Lexi. Good morning, everybody, and welcome to the December quarter -- December 2023 quarterly update. I'm joined this morning by our CFO -- joined this morning with our CFO, Anthony Rechichi; and also with our new Chief Operating Officer, Michael Holmes, who I'm very pleased to say has joined our team. Welcome, Michael. It's been a very satisfying quarter across a number of areas in our business. First up, on key safety frequency rate remains well below the industry average as reported by the MERS and WA at -- with an LTIFR, lost time injury frequency rate, of 0.66. And we've continued on with a consistent operating performance. Gold production and all-in sustaining costs are right on guidance. For the December quarter overall, we hit plan and produced just over 109,000 ounces of gold at an all-in sustaining cost of AUD 2,133 per ounce. In fact, all dollars that we talk about today will be Australian dollars. It was another quarter that clearly demonstrates the cash-generating capacity of our operating assets as they continue to transition to a cash harvest phase. This, combined with a very significant step of closing out our hedge book in December, means Regis has now very clearly moved into a much stronger state of cash flow generating at current gold price levels and is also fully exposed to the upside potential that exists for the price of gold. With this major change to our revenue, we're expecting a strong cash build for the remainder of FY '24. Progress on our growth plans continued. And last month, we released our biannual exploration report, which does a fine job illustrating the substantial potential for resources and ultimately, reserves growth. On the ESG front, we saw more than just safety. The 9-megawatt solar farm at Duketon South, which is now delivering direct reduction in our power costs and carbon emissions for the quarter, is online. We saved about $900,000 in fuel and also about 2,500 tonnes of carbon emissions for the quarter. So all up over the year, we expect 10,000 tonnes at least there. All of which are important fuel savings, but also keeping us below our safeguard mechanism threshold, which is another key cost saver. At Tropicana, work on site is well underway with the 62-megawatt wind solar battery facility that's being installed there. And based on progress, we're expecting that to be completed early in the 2025 year. I'd like to now hand over to Michael Holmes, our COO, who's joined our team at the beginning of November. Michael will go through our operational performance in a little bit more detail. Over to you, Michael.

Thanks, Jim. Good morning, everybody. It's great to be on the call today, and I'm really excited to join the Regis team. Looking more closely at the operational performance through the quarter. Duketon gold production was at 70,413 ounces at an all-in sustaining cost of $2,276 per ounce. And our share of the Tropicana gold production was 38,794 ounces at an all-in sustaining cost of $1,795. It is important to keep in mind that the Duketon all-in sustaining cost includes $140 per ounce of noncash inventory adjustments. In more detail, for the Duketon site, Duketon North's gold production was at 9,651 ounces at an all-in sustaining cost of $2,441 an ounce. The open pit mining at Duketon North continued in the Moolart and Gloster pits for the quarter, and we will see mining continue in these areas in the second half of FY '24. All open pit mining at Duketon North will cease at the end of FY '24. And as the mill feed from the open pits reduces, the low-grade stockpiles at Moolart will be used to supplement the tonnage to maintain the throughput rates. Down south at Duketon South, gold production was at 60,763 ounces at a $2,250 per ounce all-in sustaining cost. Underground mining development and production stoping from both underground mines performed well, with development rates lower than last quarter's performance impacted by equipment availability and some water management issues. An action plan was implemented to resolve these issues, and performance will increase over the coming months. Open pit mining continued at Garden Well, Russell's Find and Ben Hur the quarter. Garden Well's stage 6 pit de-stacking was completed during the quarter, opening up the main ore zone. For Ben Hur and Russell's Find, the main ore zones were also accessed following a period of development. The mining of these pits will continue for the remainder of FY '24. Growth capital spend is ahead of plan due to advancing the mining schedules in the underground and open pits, along with some one-off unplanned drilling blasting costs at Ben Hur and Russell's Find open pits. Growth capital spend rates and mining development performance are currently under review, as the company assesses the options of continuing the improved mining schedules versus conserving cash to come in on the original plan. Tropicana delivered an improved quarter at 38,794 ounces and all-in sustaining cost of $1,795 per ounce. The open pits delivered more ounces than the previous quarter as per plan, and the underground mines were slightly up on tonnes and grade, quarter-on-quarter. Underground development did realize some issues with grade control interactions and ventilation restrictions with limited face availability and development meterage performance. Work is underway to address these issues. Mill throughput was consistent quarter-on-quarter, and grade and recovery was improved due to the mill feed grades improving. Forecasted production remains on track with guidance, noting a lower March quarter and a stronger June quarter. I'll now hand over to Anthony for the financials.

Thanks, Michael. On to the financials for the quarter, which are quite consistent with the prior quarter, except for the hedge book, which I'll come to a bit later on. On revenue, we sold just over 104,000 ounces of gold at an average price of $2,671 an ounce, which include the effect of the hedges. This delivered $279 million of sales revenue. Operating cash flows have been very strong again. Overall, we generated $97 million in operating cash flows, which includes the delivery of 27,000 ounces of gold into the hedge program. Approximately $47 million of the operating cash flows came from Duketon, with Tropicana chipping in a solid quarter with $50 million. I'll now point you to Figure 3 of our release, which outlines the quarter's cash flows. Cash and bullion closed at $155 million at 31 December. And you can see that operating cash flow before any hedging was actually $136 million. Partly offsetting this, we spent $60 million on CapEx, $15 million on exploration, $6 million on McPhillamys, and corporate and finance costs were $13 million. This time, those corporate and finance costs had some once-annual and one-off type costs included in them. Now the hedge book impacts for the quarter. And might I say, I look forward to not talking about this in the next quarterly report. You can see the hedge book impacts over to the right of our waterfall chart that I was just talking about, Figure 3. Firstly, there were $40 million in hedge losses, owing to the delivery of the 27,000 ounces that we delivered into during the quarter. And secondly, the big one-off was the buyout of the remaining 63,000 ounces in December at a cost of $98 million. Regarding our debt, as announced earlier in the quarter, we extended the maturity date of the existing $300 million loan facility from 31 May '24 to 30 June 2025. The extension forms part of the broader funding strategy for the company's McPhillamys Gold Project, which we spoke about in December -- in the September quarterly report call. That's all for me, and thanks. Over to you, Jim.

Thanks, Anthony, and good to see that you didn't get stuck on the lift for this quarterly report. On the growth front, look, we're turning back to the growth section, our work on the future plans, and I just want to talk through the work on our -- across all our assets. The Garden Well exploration decline is now finished, and we're feverishly drilling away. If you look at Figure 5 in the release, just to -- I'll refer to that in a couple of the points. In fact, if you have the quarterly release handy, I'll refer to a couple more drawings in that -- figures in that a little bit later on. The drill results are confirming -- this is at Garden Well. The drill results are confirming our belief that a continuous mineralization system does extend from the existing Garden Well South mine for at least 1 kilometer to the North underneath the existing Garden Well open pit. This work and the results that we're doing continues to reinforce our exploration target in the area, which is 800,000 to 1.3 million ounces in potential. The initial drilling program has already delivered some early success immediately to the North of the current reserve. So immediately to the North of the Garden Well South area, we're drilling off the decline. And if you can zoom in, you'll see that the DP1, which is Drilling Point 1 on the figure, we did some drilling from there. And we've been able to add some stopes already into the mine plan for Garden Well South, so getting some returns there already. But just covering up on some of the 2 or 3 of the highlight drilling intercepts to point out in that drawing here. We've got intercepts of 36 meters at 5 grams, 10 meters at 3.7, 24 meters at 3.7. Now these are all good, good intercepts that put us in good standing for that area, both immediately to the North of the South area. A bit confusing there, but also over -- right up in the main area, which was our primary target. Moving on to Rosemont in Figure 6. This illustrates some of the recent high-grade drill hole intercepts from significant grade and gold grades that we've been achieving -- drilling up to 700 meters below the Southernmost currently planned underground area. The drilling continues to infill and extend the high-grade load that we've been -- or loads that we've been pursuing. Examples of intercepts, 7.4 meters at 6.7, 3.4 meters at 45, 1.3 meters at 30, 1.4 meters at 40. Some pretty impressive intercepts that we've been hitting there. And while we're still waiting on all of the results, all the holes that we've put into this target area have intersected mineralized quartz dolerite with fine disseminated sulphides, quartz veining, and quartz-albite-sericite alteration. It's occurring in multiple meter-scale zones, common feature of the Rosemont gold-bearing geology. Now for the non-geos that are on the call, all of that's technical -- highly technical speak of what from my perspective is this is the really juicy stuff. So I'm very excited about some of the results and the drilling that we're getting in this area as well. Resource modeling and economic evaluation of both the Garden Well and the Rosemont Underground is underway with this new information that we're getting and still coming in with an update expected to be provided at the FY '24 June quarter resource and reserve statement. At Tropicana, work continues at the Havana Underground project with more drilling. And as can be seen in Figure 6, some good supportive intercepts were had as we moved to increase the confidence category there. A feasibility study focusing on operational readiness and detailed designs is now underway. The Havana Underground has the potential to add a new production zone for 6 -- for 7 years on top of the existing plans. We're very excited about the progress of this project. I'd add here that the Havana deposit is following the same maturity curve as its predecessors at Boston Shaker and Tropicana in the undergrounds and really reinforces why the entire asset is one of a genuine Tier 1 -- one of the few genuine Tier 1 assets going around. The value of the underground continues to grow well beyond the reserves as they are -- as they were or the reserves that they were 2.5 years ago when we bought the thing. And I draw your attention now to Figures 7 and 8, and how exciting are these pictures. Figure 7 is a long section that shows all of the mineralization across the Tropicana site in gray. And the joint venture is -- we have a view that significant potential exists for confirming extensions to mineralization down plunge of the existing resource areas. To test this potential, drilling has begun consisting of a series of deep diamond drill holes, as marked in Figure 7. Testing of these deep holes is looking at high-grade plunge extensions at Boston Shaker, fault offset locations for Havana Underground and Northern -- and repeats of the Havana Underground beneath a fault called the Swizzler fault. Our first results -- and these are the first results in that, the down plunge of Boston Shaker. And they're pretty exciting because it shows or indicates that mineralization extends another 650 meters down plunge from the existing -- in mineral resource. So further infill drilling has high potential down that plunge to add significant resource. Now I think you can see that it's illustrated in what I think is Figure 8 in that diagram just how much further down plunge those intercepts are heading. Blind Freddy can see the potential that exists here for a long underground life. How can you not be pleased that we acquired this asset? At McPhillamys, we await a response on the Federal Section 10 application. We remain confident this will be cleared, but are just growing increasingly frustrated with the process. And in addition, we're working on completion of the DFS, which we expect to be done by the end of the March quarter. Things are pretty busy on that front, and it is tight for timing. We should be there as long as there's no delays in some of the external information we're chasing. Now a decision on the timing for FID will be in the following quarter, which will, of course, follow the release of the DFS. So in summary, the December quarter for Regis has been quite a significant one for the company. Another quarter of safe, consistent production, production that was on cost, a cash flow that is now free of the hedging shackles. I can actually hold a glass of water and talk about hedging without shaking. And we've been free of the hedging now, which we've had for nearly -- we've been dealing with for now for nearly 4 years. This will clearly drive a strengthening of our balance sheet from here. So Regis is a producer of well over 400,000 ounces of gold a year, a great outlook, fully unhedged, all in a global economic environment that just continues to point to a higher gold price scenario. Along with that, plenty of future reserve growth potential exists across all our assets. What a great foundation for the future. And the team here is really looking forward to doing more of the same. So with that, I'll hand it back to you, Lexi, and we're happy to take any questions that may come.

[Operator Instructions] Your first question comes from Alex Papaioanou from Citi.

For Duketon South Underground, can you remind me again, when do you expect to be at a run rate closer towards the 1.5 million tonnes per annum?

Across both the assets, we're probably sitting reasonably close to that, yes. We're probably sitting reasonably close to that now, maybe between 1.2 million, 1.5 million. That's the range that we're running. Some quarters, it will be strong. Some quarters, it will be weak just because of the cyclical nature of the assets. This is why we'd like to get more production zones in so we can be more consistent.

And can you remind me again, is there a planned 1H FY '24 tax refund?

Anthony?

Yes. We mentioned it once or twice, I think, Alex, and we mentioned at the AGM as well. Expectation won't be as big as last year. Last year was $67 million. We mentioned at the AGM, that it could be up to around $20 million in cash this year.

And just one final question. On Duketon North, the negative sustaining CapEx of $3.1 million, can you give a bit more color on that?

The what? The negative sustaining CapEx, did you say?

Yes.

Yes. So just working through it now on the table, actually.

I think that's stock movement.

Yes. Are you looking at...

[ $3 million ] number.

We've just got a -- yes, no -- we've just got a year-to-date adjustment coming through in this quarter. But we just didn't want to make a change to the corresponding quarter there, Alex.

Your next question comes from Andrew Bowler from Macquarie.

Just continuing on with Duketon North, obviously, due to close at the end of this financial year. Is there anything more we should know about that in terms of environmental liabilities that you'll be undertaking sort of in the near term? And also, if you have any plans with that process plant, whether there's any sort of used parts, scrap value or something you can get from that plant? Or are you happy to keep it as a bit of a spare mill for now?

Look, Andrew, it's a good question. I think, to be fair, you've probably taken that a little bit further than what we will. Our plan is not to close it. Our plan is to put it on care and maintenance, and -- because we're still highly confident that we'll find more. Our exploration will deliver some additional material in that space that we can process, so we have no plans of putting it into closure. We'll just put it on care and maintenance, same with the camp. We don't plan to do anything with that. Obviously, we're looking for other opportunities as to what we might do with that more corporately. Is there a deposit somewhere where we can move it? But I think right now, it would want to be pretty, pretty -- a very clear good value opportunity for us to decide to decommission that and move it somewhere else because we think that area has still got potential, significant exploration potential. It's just that the timing hasn't worked out for us with the cost of processing a lot of those low-grade stockpiles that we've had there for quite some time. But in the current cost environment, it's just not worth it. So I hope that answers your question.

Yes. And on those low-grade stockpiles, I mean, you're clearly quite sensitive to the cost environment. Also, that the current gold price -- what would the gold price have to be to keep that mill spinning and processing those stockpiles? Is that -- is it well above where we are now, spot wise?

Well above where we are now, yes. I mean, the grades are sitting 0.3-ish, something like that. So it's not conducive.

And last one for me, I have to ask about McPhillamys. Can you just remind us sort of when this Section 10 needs to come through to not impact your current time line? Are you still thinking you can get things done to the old timeline or deciding to push things down a little bit?

Look, we think that we can still meet the time line. It might have a little bit of an impact on it, but we think that we can keep delivering into the -- completing the DFS by the end of March. What it may mean is that there's a couple of things in there that in terms of cost estimate accuracy, it might have a little bit more of a wider confidence range on it. So we have to make a slightly higher provision because we haven't been able to do some extra geo tech drilling that we wanted to do. But we've made a decision to keep moving with that. And we just keep responding to the queries coming from the Feds and doing what we can now to try and get this to closure. It's -- so short answer to your question is, no, I don't see anything immediate. It just has an impact on the confidence level on this. Therefore, maybe some -- on some -- in some areas, not a lot, but in some areas, we just need to make sure we take that into account when we make confidence predictions or contingency.

Your next question comes from Alex Barkley from RBC.

Just a question on Duketon South, those open pits. You've called out what you're expecting to be producing in the second half this year. Are those the same pits you'll be running FY '25? And sort of what's the production trajectory over that year?