Regis Resources Limited (RRL) Earnings Call Transcript & Summary

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

Thank you, Ryan, and good morning, everyone, and thanks for joining us for the Regis Resources December 2024 Half Year Financial Results. I'm joined this morning by our CFO -- with our CFO, Anthony Rechichi; and our Head of Investor Relations, Jeff Sansom. On this call, we'll be referring to various slides that are in the pack that was released earlier this morning. And if you don't have it, the document can be downloaded from our website or from the ASX. But firstly, looking at safety, Regis has continued to deliver safe and profitable ounces. And in the first half of the year, our lost time injury frequency rate, a key safety outcome measure, was 0.4 and remained well below the industry averages reported by the MERS of the Department of Mines here in WA. Now if we look at Slide 3, this is a great slide that highlights the significant financial turnaround that we've made since this time last year. What a difference 12 mates can make with a great team. Running down the list of financial results, we're very pleased with the significant step-up in earnings, profitability and cash generation. Across our assets, we've seen solid and consistent operational performance, which we expect to continue into the second half of the year. Gold production and all-in sustaining costs for the first half of FY '25 were in line with expectations at nearly 196,000 ounces of gold for an all-in sustaining cost of just over AUD 2,400 an ounce, and that included nearly $90 an ounce of noncash stockpile inventory drawdowns. We sold our gold into another period of record spot gold prices. And at the end of December, we finished with $529 million of cash and bullion. That's after a build of $234 million in just 6 months. At the end of the half or sorry, after the end of that half, we repaid our $300 million corporate debt facility, and we also established a $300 million revolving credit facility. This was struck on very competitive terms with a number of leading banks with significant experience in the resource space being part of that group. Our balance sheet is in a very strong position. And given the cash-generating capacity of our assets, it will continue to strengthen each day, which positions us well to capitalize on growth opportunities. Now with that, I'll hand over to Anthony, who will take us through some more details on the half year results.

Thank you, Jim, and good morning, everyone. I'll start by having you all turn to Slide #4 in that presentation. And as we discussed in the recent quarterly report, our physical and unit cost performance saw a solid half year, well on track to meet our full year guidance expectations. We sold 198,000 ounces of gold in an increasing spot market, and our clean results enabled this strong performance to translate into high earnings, cash flows and profitability. In the first half of FY '25, we delivered a $348 million of statutory cash flows from operations. Impressively, we also delivered a $180 million turnaround in profitability from an after-tax loss of $92 million in the December '23 period to an after-tax profit of $88 million this half. Slide 5 shows the -- so if you move to Slide 5 now, that shows the cash and bullion movement during the period. You may be familiar with this chart from our recent December quarterly report, and it includes our bullion on hand, which is valued at market rather than at cost like it is in our statutory balance sheet. If you have any questions on the difference in the presentation of these cash flows versus our statutory cash flow statement in the half year report, please feel free to ask. I think it's pretty straightforward. Our operations generated $364 million. We spent $78 million on capital, inclusive of our growth projects, $26 million on exploration and a further $5 million at McPhillamys during the half year. Additionally, $20 million of expenditure is related to corporate costs, interest and facility fees. With the repayment of $300 million of debt in January '25, just recently, we'll no longer be incurring the high interest costs that we've been paying in recent years. Moving on to Slide 6 now. You can see a simple yet effective representation of the ability of our assets to generate significant cash. As you can see, over the past 6 months, the business has generated $234 million of cash and bullion. And over the last 12 months, it has generated $374 million. Importantly, this is not by doing anything extraordinary. It's by being unhedged and being -- and by delivering what we said we would do and doing so in a healthy spot gold price environment. Now moving on to our income statement on Slide 7. The layout of this slide shows our income statement in a simplistic transparent flow-through from our sales revenue down to our statutory net profit. With our hedge book gone and no significant one-off items, the profitability of our business is really very clear. During the half, gold sales were up 23% on record spot gold prices, which was partly offset by slightly lower gold sold ounces. The cost of sales were up 8%, and the increase is due to general cost inflation and the impact of deeper pits, longer haulage and increased production from underground ore. Furthermore, the cost of sales in the first half of FY '24, the corresponding period include a significant credit to costs for the increase in bullion on hand. And that's the timing difference only relating to that period, and it's a timing difference relating to gold sales. I'll also add that, as we mentioned in the quarterly report, depreciation and amortization was up, and this is a lot to do with the amortization of preproduction costs at our Russell's Find and Ben Hur open pits. All up, looking at the results here, we produced a great net profit figure, and we are working to ensure our ongoing performance is not impacted by one-off items, and we expect that the second half of the year to be as simple to follow as what we've seen here in the first half. Finally, on to our balance sheet on Slide 8. At the end of the half year, we had a net cash and bullion position of $229 million, which included our $300 million loan. In January, we paid that loan off well ahead of its maturity date in order to reduce interest costs. In the weeks following that, we announced the establishment of a $300 million revolving credit facility, which will provide us with flexibility and liquidity to pursue our growth objectives. Overall, our balance sheet is in a fantastic position. And should spot gold prices remain similar to today, we expect our balance sheet to continue to strengthen at this rate over the coming months. Thank you all, and back to you, Jim.

Thanks, Anthony. Great set of numbers there. Look, I'll just deviate slightly from the half year results and touch on Tropicana now. This morning, you would have also seen that we released our reserves and resources update for Trop, which supports our confidence in the underground growth prospects. We think it's a very strong result as we see the trend continuing to support our long-term view that the mine has much more value to offer than just the current reserves would indicate. Just look at the last couple of years. In calendar '24, the underground reserves growth of 178,000 ounces after depletion of 198,000 ounces. Now it's a bit shy of full replacement, but that was following the prior year where we replaced 260% of depletion. You cannot deny that, that is a good performance of underground reserve replacements and additions in the last couple of years. But that isn't just a recent flash in the pan. In fact, since declaring an initial underground ore reserves of 317,000 ounces in 2018, at Tropicana, we've produced 648,000 ounces from underground and currently sitting on 640,000 ounces of reserves. If you do the simple math, it tells us that since the maiden reserves were announced, we've added or discovered an additional 970,000 in underground reserves in just 6 years. That's nearly 1 million ounces of reserves being added from underground. The undergrounds are a real powerhouse of value creation. Now with our ever-growing geological understanding and our improved confidence in extension of mineralization at depth, and that's across several of the underground locations, we see all the indicators that support growth -- ongoing growth of underground reserves. Now back to the other beautiful set of numbers, our half year results. On Slide 9, you can see pleasingly, this year's production and cost guidance remains unchanged as we continue to deliver on our plan. So this year is looking solid. Looking at our overall growth perspective, I'm pleased with the progress where we see the underground at Trop continue to grow at Tropicana, delivering reserves growth, which I just talked about. And also at Duketon, our underground development projects are on track. Now to close off, in relation to capital management and our allocation priorities, the Board decided to not pay a dividend for the first half, but rather prioritize debt repayment, and Anthony covered on that -- covered off on that well earlier. Looking to the near future and our thinking, with ongoing delivery of our plans and continuation of the current buoyant gold price environment, the conditions supporting the decision to restart dividend will be strong. For this reason, capital management, including the restart of [ divis ], is expected to be a key consideration by the Board when the full year accounts are being finalized in August. So I'll wrap up by saying that it's pleasing to see our solid operating performance, the great gold price environment and of course, how can I not mention it, the company's fully unhedged position. These are all resulting in strong cash build and solid profit outcomes that we're delivering, clearly, with more to come. So look, on that note, thanks all for listening, and I'll now pass it back to Ryan and open it up for questions.

[Operator Instructions] Your first question comes from Andrew Bowler from Macquarie.

Just a quick one probably for you, Anthony, noting obviously that you're sort of indicating there's potential to restart dividends. Can you just remind us of your franking credit balance? So remembering last year, I think you had a tax refund. So I assume at the end of last year, they were almost 0. So it's just literally this half that will add to your franking credit balance. Is that correct?

Yes, Andrew. So we don't have any franking credits available to us at the moment. We used -- well, all that came to an end with the last of the receipts, refunds that we were getting. So our franking credits will begin again once we start paying tax. And you'll note in the half year accounts, we did record a roughly $8 million tax payable already for the half year. So that will obviously grow over the next -- the rest of the financial year. But at this stage, no franking credits available until we take that.

Okay. And just following up, I remember some comments saying that you might expect some cash tax in the -- like late this financial year. So I assume that's still the case to build that.

Yes. So like I was saying, we recorded that small payable at the half year. Typically, that's payable upon the lodgement of our tax return. We lodge those tax returns around February each year. So that would -- all things being equal, that would start us making a tax payment in cash in around February '26.

No worries. And maybe one for you, Jim. Just the Tropicana reserve and resource out today, obviously, noting some pretty heavy growth in underground reserves over the last couple of years, but largely a replacement this year. Is that 600,000 ounces of underground reserves roughly where you expect to remain for the next couple of years from those 3 underground areas? Or are there -- is there another wave of drill platforms coming that will allow you to have better clarity deeper and again, outstrip depletion in the near term?

Yes. Look, I mean, I think the -- one of the points from this year is, as you identified, Andrew, that we didn't quite replace depletion. Of course, that was last year, we more than doubled depletion. I think you're going to see variation from 1 year to the next, but there is absolutely nothing that we're seeing at the moment that tells us that the solid trend of replacing depletion is going to stop in the medium to long term. There might be some years where we jump ahead like we did last year, and there might be some years where it's sort of just basic replacement like the year just gone, like the year that's just been reported. So we're still confident that there will be continuing growth in reserves. How that sort of presents itself is just -- there's just going to be some variation around that.

The next question comes from the line of David Coates from Bell Potter Securities.

Just a quick one, Anthony. I'll put the offer out there mate, so I'll take the bait. And the operating cash flow [ statutory ] versus what you got in the presentation. Can you reconcile that for us?

Yes. I mean there's a couple of main differences there, David. One is the cash and bullion chart that we provide. So if I go back to that presentation, that cash and bullion chart that you see on what is it there, Slide 5. So that is presented in the way that we presented our quarterly reports. It includes cash and bullion and bullion in that instance is measured at market value. So we're showing cash and bullion movements there. The statutory cash flow statement doesn't include bullion as a revenue item. It's still treated in the accounts as cash. So that's a pure cash flow statutory style statement. There are some other -- so that's one of the key differences. There are some other differences as well in classification between how we typically present it for quarterly reports, which I think is sort of market consistent and how it's done for the statutory. So for example, operating cash flows and the statutory accounts will include, for example, corporate and interest costs. And in our case, now McPhillamys because we're no longer capitalizing those costs. So corporate interest costs there for the half year, $20 million ordinarily in the statutory cash flows, that will be up in operating cash flows. So there are some classification differences there. But we break down a bit different just so you can understand what our underlying business shows versus some of our nonoperating costs that we incur.

Understood. Understood. And just on the corporate interest of $20 million there with the repayment of sort of project facility or the Tropicana facility rather and being a revolving corporate facility. What does that number look like going forward?

Significantly lower, David. We've got a small holding fee on that, a couple of million -- $2 million to $3 million a year is the difference. So basically, not material. It will be a lot harder to find in our results basically.

Okay. So that $20 million sort of drops down to sort of [ $6 million or $7 million ] or something or...

Well, I can help you out. If you got the financial -- half year financial report there in front of you, you go to Note #5, and that actually lays out how -- sorry, is it Note #5 or Note # -- yes, [ 5B ] is where you want to go. That actually lays out what the individual finance costs were, so you can work it out exactly from there.

The next question comes from the line of Shannon Sinha from Morgan Stanley.

I just had a question around how you guys think about returns versus potential acquisitions. I guess there's been some rumors in certain articles that you may be looking at a certain asset in Queensland. So maybe how you think about acquisitions as well in the current gold price environment?

Well, I'd love to make a comment about the certain rumors, but I don't think it would be appropriate. But in terms of generally, we just -- how do we look at it? We have to look at what the opportunities are that might be presenting themselves, but at the same time, recognizing that our capacity to pay a dividend is building. I'm not too sure whether they're mutually exclusive. So that will all form -- definitely forms part of the conversation. I mean it's, 12 months ago, it wasn't really part of any conversation we weren't building cash. Where we're sitting now is we're clearly making profit. As Anthony mentioned earlier, we're moving back into a point where we're actually paying tax again, which gives franking credits, which is not a primary reason to be or not paying -- to be or not paying -- to pay or not pay dividends, but it's a factor that's considered there as well. And so we look at it combined. I don't necessarily -- I guess, what's my point there. The point is, you shouldn't consider anything along those lines to be mutually exclusive.

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

All right. Thanks, Ryan. Thanks, everybody. We'll pull it up there. We do appreciate it's a very busy morning for everyone with a number of results coming out. We thank those that have joined the call. And as always, if there are any follow-up questions that people will have, please get in touch with us, and we'll do our best to answer them. Thanks very much, and have a good day.

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