Regis Resources Limited (RRL) Earnings Call Transcript & Summary

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

Thanks, Mel, and good morning, everyone, and thank you for joining us for the Regis Resources June Quarter FY '26 results. Joining me on the call today are our CFO, Anthony Rechichi; our COO, Michael Holmes; and our Head of Investor Relations, Matt Collings. Now through this session, we'll refer at times to figures and tables in the quarterly report and the FY '27 guidance that we put out last week. So you may find it useful to have those documents at hand. I'll kick off first with safety. During the June quarter, our operations continued to perform strongly from a safety perspective. The 12-month moving average lost time injury frequency rate finished the quarter a little bit further down at 0.3, which continues to be well below the Western Australian gold industry average, which is always a bit delayed in its timing, but is currently running at around 1, which is from nearly 2 years ago. We continue to focus on leadership, discipline and continuous improvement to support safe and reliable operations across our business. And this is in support of our objective to provide a workplace that's free from serious injury. Turning now to production performance. Delivery to plan through FY '26 has been consistent, and the June quarter was a standout performance for both Duketon and Tropicana. Operationally, the group production for the quarter was 101,500 ounces at an all-in sustaining cost of $3,244 an ounce. And that was carrying a non-cash charge of $181 an ounce. Our annual production hit the top end of guidance at 379, the top of guidance was 380, so pretty well bang on the top. The consistent delivery of production and costs across our operations despite some macro headwinds since March has seen our cash build continue along with our returns to shareholders. During the quarter, Regis increased its cash and bullion by $56 million. And note that, that was after the payment of a $0.15 a share fully franked for $114 million in dividends and also $64 million in tax. And Anthony will talk some more on this in a moment. The Regis cash and bullion balance remains at a competitive advantage for our business at almost $1.2 billion at the end of June, an increase of $667 million for the full year, and that was after paying a total of $151 million in fully franked dividends and $156 million in tax payments. To maintain this momentum, Regis remains unhedged and continues to invest in growth and exploration. And thanks to a strong operational performance has the capacity to balance disciplined investment and reinvestment with our returns to shareholders. Our message and our actions remain consistent. Regis operates quality assets strongly leveraged to the gold price, and we have a disciplined approach to investment and capital returns. And I'd like to think that you've seen some of this disciplined approach in investment reflected in our decision not to continue in the Vault sale process. So back to where I was, Regis operates quality assets with strong leverage to the gold price, as I said, and a disciplined approach to investment and capital returns. When combined with the continued rolling life extensions of our underground mines as demonstrated in the recent exploration update in this year's R&R report, we're extremely well positioned to consistently deliver ounces and cash flow well into the future. With that, I'll now hand over to Michael, who will then subsequently pass to Anthony, and both of them will provide details on our operations and our financial performance. Over to you, Michael.

Thanks, Jim, and good morning, everyone. Operationally, Regis finished the year strongly with safety, focusing on the critical hazards, supervisor interactions and a workforce-led safety program. We will continue these programs striving for further improvements in FY '27. The June quarter for production was in line with expectations across both Duketon and Tropicana. And this meant that we finished at the top end of guidance for the year. In line with our strategic pillars, reliable delivery, our teams continue to consistently execute the plan across the business, and this remains a key strength for Regis. At Duketon, open pit and underground operations produced 62,500 ounces, Open pit mining continued at King of Creation, the Moolart Well Laterites, Ben Hur and some minor pits delivering 25,900 ounces at an average grade of 0.85 grams per tonne, and the performance was in line with plan. Our underground operations at Garden Well and Rosemont continued to perform reliably producing 37,600 ounces at 1.99 grams per tonne. Development rates across both undergrounds are pleasing and supported steady ore delivery through the quarter as well as unlocking future production sources. Total underground development at Duketon was 3,803 meters, with approximately 50% classified as capital development, reflecting investment in Garden Well Main and Rosemont Stage 3. Rosemont Stage 3 development continues and is progressing as planned towards commercial production. During the June quarter, we continued with the advancement of the underground -- Rosemont Stage 3 underground, the construction of the Garden Well paste fill plant, which is commissioning -- planned for commissioning in quarter 2, which is key to increasing the orebody recovery in the future. And spend was also done on the Buckwell open pit. Both sources have the potential to provide gold production for the next 5 years with Rosemont ore body continuing further to the south. At Buckwell, pre-strip mining rates continue to exceed expectations with the addition of a large 3,600-tonne digger to the open pit fleet proving its worth. The higher productivity reduced unit mining rate and allowed for the accelerated development, bringing forward ore exposure. The Duketon mills performed to expectations with open pit and underground ore feeds supported by planned stockpile feed. Now turning to Tropicana. And Tropicana Regis' attributable production for the quarter was 39,100 ounces, a very strong quarter to finish the year. Open pit operations delivered 21,900 ounces at an average grade of 2.02 grams per tonne, with performance in line with expectations. Underground operations delivered 13,200 ounces at 2.97 grams per tonne, again, consistent with plan. Tropicana mill feed was the combination of the open pit, underground and supplemental stockpile feeds. Overall, both Duketon and Tropicana continued to perform reliably during the quarter, delivering consistent production while progressing key underground and near-term growth projects. With that, I'll now hand over to Anthony to take you through the financials.

Thanks, Michael. Good morning, everybody. As Jim outlined earlier, the June quarter was a fitting end to a very strong financial year with consistent operational delivery of high margins, which converted into significant cash generation. Gold sales for the quarter were just over 102,000 ounces for an average realized price of $6,241 an ounce, generating $639 million in revenue. Operating cash flow for the quarter was $376 million, with $194 million generated at Duketon and $182 million coming from Tropicana. Also in cash and bullion and referring to Figure 2 in the ASX release, the piggy bank grew in size by $56 million during the quarter, taking the total balance to $1.2 billion as at the 30th of June. Now that cash build might not look quite as much as we've delivered in previous quarters, but importantly, the $56 million increase was achieved after the payment of $114 million in dividends and $64 million of tax installments. The growth in sustaining capital, we spent $131 million in the quarter. At Duketon, this included underground development, preproduction mining activities and waste removal as well as investment in plants and equipment. A significant portion of this spend related to the mine development of Garden Well Main, Rosemont Stage 3 and Buckwell. At Tropicana, expenditure related mostly to underground development at Boston Shaker, preproduction costs at the Havana Underground and sustaining capital across the operation. Exploration expenditure during the quarter was $18 million, reflecting the continuing high levels of activity across both Duketon and Tropicana. And $9 million was spent during the quarter at McPhillamys, remembering McPhillamys costs are expensed through our profit and loss account. Now jumping back to my earlier mention of tax installments. There was $64 million of that in the June quarter whereby we commenced monthly installment payments in April. These payments have been approximately $20 million per month and are forecast to remain at that level for the rest of this calendar year '26. A final catch-up tax payment is forecast for the December quarter this year, the value of which is being estimated and will be included in our 30 June '26 annual financial report, which will be released next month. And as a final point, I note that we received the Vault transaction break fee earlier this week, amounting to just over $50 million. So that's most of the headline results from me, and I look forward to providing you with our full suite of financial results in August. Thank you, and now I'll hand back to Jim.

Thanks, Anthony. Now we've gone through the quarter in a bit of detail, but let me pull the year together for you. The first point is capital management. Alongside our half-year results earlier this year, we introduced our new dividend policy, whereby Regis expects to pay fully franked ordinary dividends on a semiannual basis, having regards to its prevailing cash and bullion balances, of course, business cash flows, the available franking credits and capital allocation priorities. But in particular, the ordinary dividend payments are expected to represent between 25% and 50% of the group cash increase over the preceding half financial year. This quarter, we paid a fully franked interim dividend of $0.15 a share, as I mentioned before, for a total of $114 million returned to our shareholders. I think the policy makes our intention clear to be a reliable but responsible dividend payer. I would note that with that estimation modeling with regular tax installments now a fact of life for us, the adjustment for tax accruals should become less material over time and the forecast is much more simpler. Importantly, our dividend payments have resumed all the while remaining unhedged, investing in growth and exploration and still building our balance sheet, up $667 million this year, and that's even after dividends and tax. Now the second point that's worth noting is our growing resources and reserves. Our group update this year showed mineral resources up 10% year-on-year to 8.3 million ounces, while our ore reserves were also up nearly 20% to 2 million ounces. And this is for the -- to the end of December -- 31 December 2025 before we reinstated the 1.9 million ounces of ore reserves from McPhillamys. Our underground mines continue to deliver with increasing reserves and also are showing their potential. The sections in the release of Garden Well and Rosemont, and I think their Figure 4 and 5, the Garden Well -- for Garden Well, I think, and 5 for Rosemont really illustrate the growth in both volume and confidence and the midyear exploration update only reinforces it. What is particularly important to observe are the holes that are down-plunge that show good intercepts. Garden Well Main has a hole 10.4 meters thick at 2.9 grams a tonne, and that is 500 meters down-plunge from the nearest resource modeling. And this is really pointing to the sort of continuity that we likely see at Tropicana. Garden Well South is similar. It's got an intercept 3.9 meters at 4 grams per tonne, about 300 meters or so down-plunge from nearest resource modeling. These are exciting and telling results and anyone who thinks our undergrounds are short in life, I would ask that they carefully consider these results. In addition to the underground, we have the initial 270,000 ounces of resource or mineral resource declared to the new discovery at Beamish South with drilling still continuing. We're seeing great progress at Ben Hur where the step-out drilling has shown mineralization continues well outside the current resource shapes. A key point to note here is that at Beamish South, that 270,000 ounces, that is a new or a fresh greenfield type discovery. It's nearby -- the interesting thing is it's nearby existing pits and infrastructure, but it's not an extension. It's greenfield-like. The valuable outcome illustrates how our refreshed exploration strategy confirms that opportunities still exist at Duketon in areas previously considered to be unprospective. And what it does is it validates the decision to lift our exploration spend at Duketon back in December last year in the December quarter. So despite what some might say about the mine life at Duketon, the reality is we keep adding life year-on-year. In fact, if you look at the Duketon reserves at the end of 2025, they are essentially unchanged from 2021. So they're sitting at the same level, which I think is just around about 1.4 million ounces. And in that time, we pulled out 1.2 million ounces of production. And the great thing is that our exploration team and our Res/Dev team have got a pipeline of targets at Duketon, and we intend to chase them. At Tropicana, the good news keeps on coming, too. The operation has delivered extensions to known mineralization at Boston Shaker, the Tropicana Underground and the Havana Underground and also in the Swizzler area. This is building the underground pipeline and reinforcing the long value that we see at that asset. On McPhillamys, as previously flagged, the judicial review of the Section 10 declaration has been heard and the court's decision -- the court has reserved the decision and we sit and wait. In parallel, we made real progress on the alternative permitting pathways during the quarter. We released the PFS back in June, and that supported the reinstatement of ore reserves at 1.9 million ounces and it confirms a robust project with the Integrated Waste Landform, the electrical transmission line and the water pipeline being granted State Significant Infrastructure status in New South Wales. So should the judicial review succeed, the DFS pathway from the 2024, DFS remains our preferred option at this point. But either way, we have a permitting pathway and we're pushing ahead and we're targeting a final investment decision in the first half of 2028. The work at McPhillamys continues methodically, broadly speaking, on plan and on budget. Now finally, some comments on guidance. FY '26 landed where we said it would, production at the top end, while all-in sustaining cost was also towards the top end, impacted, of course, by the diesel prices, as everybody understands. But also impacted by a decision which we flagged and telegraphed clearly to pursue opportunistic production ounces through the idled Moolart Well mill, something that I hope everybody sees and understands is sensible in the current gold price environment. And these factors, of course, carry us through into FY '27 guidance, which we released last week. Pursuing these opportunistic ounces has allowed us to declare a production growth in a range of 360,000 to 400,000 ounces for the group. Now also with our all-in sustaining costs guided up, driven by factors that I mentioned before, the fuel, as I said, the diesel and also the proportion -- increasing proportion of the Buckwell ounces. And we're also seeing a different proportion of ounces coming from Duketon and Tropicana compared to FY '26. In conclusion, to summarize, Regis has developed another quarter of consistent production, capping in FY '26 that hit the top end of guidance at 379,000 ounces. We continue to generate strong reliable cash underpinning a competitive balance sheet and our commitment to responsible capital returns. Our resources and reserves keep growing at both Duketon and Tropicana giving us an ongoing pathway to extensions well into the '30s. At McPhillamys, we continue our dual-path process, progressing the IWL technical work while we wait for the outcome of the judicial review. And FY '27 guidance points to higher production for the group, underpinned by Duketon and the fantastic work of the operations and the exploration team at the site. Overall, Regis remains very well positioned to keep delivering long-term value to our shareholders. So with that, thanks for listening and your time. I'll hand back to Mel who will open the floor up for Q&A.

[Operator Instructions] Your first question comes from Jon Sharp with JPMorgan.

I have 2 questions. First one, just on costs. Group all-in sustaining costs came in within guidance, but at the top end and 4Q was much higher. So I'm just trying to understand, I know you said there was some diesel impact there, but just how much of that is diesel impact? And are there any productivity impacts over in WA with maybe contractors? And how should we sort of think about this? Is it temporary or structural?

Well, I certainly wouldn't say that the pressure on the costs came from productivity issues, per se. I don't think that was a key point for us. Certainly, the costs in the fourth quarter were significantly impacted by diesel. I think in the prior 9 months, we were paying about $1 a liter. And in the last 3 months of the year for the last -- for April and May, we were paying $2 a liter. And I think we were paying about $1.60 or something like that or $1.30 in June. And as a result, for that quarter, at Duketon, the costs were an additional $300 an ounce off the back of that diesel price. And for the group, it was $220. So there wasn't much we could do. There were no restrictions with our availability of diesel. It was well supplied, and our suppliers have been doing a great job keeping us topped up, but it was expensive. But of course, we have, as everybody has seen that come off. I think we've assumed about $1.35 for diesel price for this year. So that year-on-year, that alone accounts for about $135 an ounce increase if everything else was unchanged from one year to the next. Diesel was a big impact. Yes, up $100 an ounce for this year, all things unchanged, but the productivity piece is not quite so material.

Okay. Great. Now I didn't think -- I just had heard in WA, there had been high turnover contractors that may be not impacting you guys. And then just second question, now with Vault no longer happening, how do you think about the strategic plan from here? You're sitting on quite a bit of cash, strong free cash flow. McPhillamys is some time away from FID. So what are your priorities, Jim? Are you looking elsewhere or focusing on accelerating organic growth? And how do you think about that sort of buy versus build?

Yes. Good question. Certainly, we look at McPhillamys as being something that's close, but not so close to be sitting around and waiting for it. And in any event, our job is not to assume that McPhillamys is the best investment opportunity that we've got. Our goal is to go out and continue to look. It's not as if we've just started, but continue to look for the capital opportunities that might be a better return. And we'll continue to do that. Obviously, Vault was disappointing, but frankly, not a real surprise for us that the things played out the way that they did. But we understood that risk, and we felt that it warranted it, but we weren't going to get involved in any kind of bidding war. You talk about how do we think about things. The #1 thing that we consider in anything external is, is it value accretive for our shareholders? If it isn't -- if we can't see a way that through an acquisition, be it an operation that's underway or be it a new construction project that we could put in front of McPhillamys, it's got to be value accretive for our shareholders, not really we think about the others, but that's not our responsibility. And if we think that it's value accretive, then that's something that we give serious thought to. If it isn't, and it's destroying value for our shareholders, then we can't see any way of it making any sense. We just won't do it. And are we looking? We were looking before and we're looking again. Obviously, a little bit of disappointment, but as I said, not a huge shock, just disappointing. We think we've made the right decision. We've demonstrated over the years. I think we've demonstrated to the market. Tropicana, we've got a lot of criticism that we invested in that. And look at it now, I think we've got all our money back and we still got years of life left in it or pretty close to it. So that was a critiqued investment that actually has turned out to be an absolute cracker. And now we exercised sort of similar discipline and understanding. We like the assets, but not enough to pay any more than we already had on the table. And so we exercised discipline and not going off like irresponsibly. The reality there was we just couldn't match the synergies that were real. So we'll continue to look. We'll continue to apply that discipline and see what we can engage with.

Your next question comes from Matthew Frydman with MST Financial.

Firstly, can I dig into the FY '27 cost guidance at the asset level in a little bit more detail? If I look at your Tropicana guidance, the midpoint is about 10% higher than what you just delivered in Q4. And then conversely, if I look at your Duketon guidance midpoint, it's about 10% lower than what you just delivered. So Obviously, across the group, diesel is a pretty significant driver there to that sort of elevated Q4 base, as you've just discussed with Jon. But maybe can you expand on the differing drivers between the 2 assets looking into FY '27? Is that predominantly a denominator effect of production and the mix of production sources across the 2 sites, as I think maybe you mentioned? Or is there anything else in particular in terms of mining sequence or differing cost inflation effects between the 2 sites going on there?

Yes. Thanks, Matt. I will keep it pretty high level, right. Tropicana is reasonably straightforward. You've got a lower denominator. It's just -- it's lower production, similar cost base, that's just a nuance of the year. We're not producing as much from the pits this year, which means we're taking more from the stockpiles. It's just a sequence in the pits that sort of starts to swing the other way in subsequent years. So there's -- we're not running around in circles, panicking about it. It's just one of those scheduling things that we got to live with, but nothing there that's causing any dramatic trends that we worry about unnecessarily. In terms of Duketon, yes, look, I guess, certainly relative to last quarter, the big difference, as I said, is the fuel. The fuel has had a significant impact at Duketon alone. I think we're pushing it up $130 an ounce. But the other thing to recognize, too, is that as a proportion of our production, we take a step back. And if you -- we actually think Duketon is a good story because we'd always envisage it being somewhere between 200,000 to 250,000 ounces per annum. And this year, it will be above that, and that will be thanks to Buckwell. Of course, Buckwell comes with higher costs as we've all -- as we sort of belabor the point. So that's dragged up Duketon a little bit as well. So it's not the -- if we wanted to reduce our costs, we just shut down Buckwell, and we'd see our all-in sustaining costs dropping, but why in the blazes would we do that because those ounces at today's price still make good money. So we'll just keep running that plan. Yes, we think that Duketon continues to play out with, I think, the Buckwell investment. You have a look at it. You can see in one of our releases, even at a pretty modest gold price, it's 121% internal rate of return on a project. So we like it. We're prepared to sort of answer the questions on why the costs at Duketon going up and it's quite sensible. We're utilizing a plant that was underutilized. We're putting through lower-grade, high-cost ounces, but we still make good money on it and why wouldn't we? So they're really the key things that are driving up FY '27 or driving the FY '27 cost -- unit costs.

Yes. Got it. Maybe a quick follow-up then on your comments on Tropicana. You talked about the lower denominator in FY '27 or the lower production, I should say, in FY '27 being a function of, I guess, the sequence of the open pits and swinging the other way in future years. Is it right to say in terms of our thinking that potentially that kind of lower open pit production, that's maybe a sort of 12- or 18-month story. And then as you said, it swings the other way for, again, maybe another sort of 12 or 18 months as that final sort of open pit life depletes? Or yes, is that the sort of 3-year journey? Or is there anything I'm missing there?

Yes, it's probably not that long for the open pits without us finding more material. It's definitely just in this 12 months, we're seeing the -- it's a cycle scheduling thing and I am anticipating that in subsequent years, we'll see it swing. It's not going to be a wild swing and we're not going to see twice as many ounces out of it, of course, but it will be back to similar levels that we've seen in the past, while the pits Havana 5 and 6, the other stages will start to run out and run through.

Yes. Got it. Okay. Maybe finally, second question on McPhillamys, the FID decision that you've kind of penciled in for the first half of 2028. Again, at a high level, can you talk through, I guess, what work needs to be done to, I guess, complete that DFS and bring the project to an FID point. What are the key work streams? I guess, given that really most of the study, as I understand it, it is fairly well unchanged from the 2024 DFS. So I guess the question is, could that FID decision or could those work streams be accelerated in the event that you've got some kind of early resolution on the judicial review?