Rox Resources Limited (RXL) Earnings Call Transcript & Summary

[Audio Gap] to the usual disclaimers and regarding forward-looking statements and JORC compliance. So turning to the snapshot of Rox. So we have a fully high-grade resource which we reported this morning -- an update this morning at our flagship Youanmi Gold Project. That currently stands at 3.2 million ounces at 3.6 grams. But importantly, this includes a high grade underground component of 2.2 million ounces at almost 7 grams. The resource is open along strike and down dip, with further growth likely with ongoing exploration. 41% of the resource sits in the indicated category as at April, and this is a key area of focus for us, growing that indicated category to underpin a reserve. So resource reserve definition drilling is ongoing. And we look forward to providing further updates on that in due course. The Albion process is the preferred method for treating out sulphide ore bodies, and we've managed in early test work to get 92.2% average gold extraction from the underground sulphide material. So our feasibility studies into development of the Youanmi Gold Project are well advanced, and we'll look forward to putting out our scoping study in the middle of this year. We're also active more regionally, so with our Mt. Fisher gold project, where we're likely to put an update out in coming weeks as our sites are flowing in, but we're liking what we're seeing there so far. Rox trades on around $29 per attributable resource ounce, following this resource update -- upgrade, which is, we believe, is a compelling valuation. So Rox's strategy is to add value through exploration success and resource growth, developing Youanmi and also delivering early cash flow opportunities through capital-light developments at Youanmi. So we've laid out here our time line. These things are subject to change sometimes, but broadly, the strategy remains the same. So just on Rox's vital corporate information. So we trade under the code RXL, a market cap of $72 million currently, $6.9 million in cash. So we're well funded to meet our short-term objectives. And we're well supported by a strong group of shareholders. We have around 23% institutional ownership, and that's a key area of focus for us going forward to build that out. In terms of the team at Rox, so the Board is made up by Stephen Dennis, myself and John Mair. And then we've built out the management team over the last couple of years. So Chris Hunt, CFO; Matt Antill, General Manager - Operations; and Gregor Bennett, our Exploration Manager. The management team have experience in building mines and running mines and financing mines. So we've got the right people for our stage of development. So turning to the sector and where Rox sits at the moment. So as I mentioned previously, we're trading at around $29 per resource ounce, and looking across our peer comparisons and our peer gold producers, and it is a crowded space with the gold price having been elevated for some time. However, we believe that we're trading at that compelling valuation, and that is likely to change as we move the Youanmi project further towards development. So just a little bit more detail on Youanmi. So Rox holds a 70% interest in the Youanmi Gold Mine for the OYG Joint Venture with Venus Metals, an ASX-listed company, holding the other 30%. Youanmi was a previous producer, producing 670,000 ounces at 5.4 grams through a series of open pits and underground operation. And the operation closed in 1997 when the gold price was around AUD 450 an ounce. So looking through a lens of today's gold price of AUD 2,700 an ounce, the economics of the project are vastly improved. In addition to just the broad economics, we've also added substantial ounces to the resource inventory there, having grown the resource from 1.2 million ounces to 3.2 million ounces since we've been involved since 2019. Interesting that the last parcel of ore that was mined underground at Youanmi 1997 came out at an average grade of 14.6 grams. So that would be a very, very high margin proposition at today's prices. We have an existing decline in place. We have substantial infrastructure around the site, so roads, borefields, the village, all which gives us a good head start in terms of development. So this morning's mineral resource update was in relation to the near-surface resource. So that's the resource that sits between surface and 160 meters below ground level. And that's a resource that is likely to be exploited by open pit, with our underground resource being accessed off a decline separately. And the current conceptual study see those being developed at the same time. So with this resource increase of 204,000 ounces in the near-surface resource, that brings our resource increase to 2022 to 1.5 million ounces, bringing the total to 3.2 million ounces. And so, we're happy with that resource growth but it's not finished yet, and exploration is ongoing. In terms of benchmarking the exploration team and how much it's costing to discover these ounces. So as a rolling average, we're tracking at about $7 per ounce in terms of discovery cost. For this near-surface resource increase, the numbers are around $10 per ounce, which is well below industry averages. So just looking at the resource in a little bit more detail and just offering a few observations. So there are multiple mineralized lodes at Youanmi across around 2.2 kilometers of strike. These lodes sit along the margin of a granite and greenstone, and the typical Archean lode gold structurally controlled and sulphide replacement style ore body. We modeled the resource in 2 key categories, so near-surface, which is 0 to 160; and then below that in the underground position. We use a cutoff grade of 0.5 grams per tonne for the near-surface resource and a cutoff grade of 3 grams per tonne for the underground resource. So that gives you a tighter, higher grade resource for the underground, and that's reflected in this image on Slide 11. So you can see here, this is shaded by grade and block grade, resource block grade, with much of the near-surface resource being in the 0.5 to 1.5 grams per tonne category, with some high-grade zones in there going up to up to 4 grams. And then the underground resource being for between -- at a cutoff of 3 grams per tonne being around 7 grams per tonne on average, but you can see there's exceptionally high-grade zones in there with large areas that are over 10 grams per tonne. So that's where the stope optimizer heads to first in terms of the mining schedule. The resource extends down to around 1,000 meters below the natural surface. Our focus is to drill out the top 500 meters. It's very expensive to drill out the deeper parts of the mine on a close-enough spacing to getting to indicated and measured resources. So we will very much start with the top 500 meters and then drill the rest from underground. Just in terms of the near-surface resource, a couple of observations that a lot of that resource starts at surface. And in some areas, it's very high grade, no need for expensive cutbacks or -- and there are capital-light type opportunities there in terms of the early production. We have published the new resource this morning. That near-surface resource is 4,000 ounces per vertical meter on average, just the near-surface. The deeps run at 2,900 ounces per vertical meter. So that is a good ounce endowment for an underground mine if you're benchmarking that against other West Australian operations. So we're very happy with how that's sitting, 4,000 ounces per vertical meter in the shallow part. Obviously, there's more ounces there because they're easier to drill and easier to get to. But we would -- we don't see -- we can potentially see that 4,000 ounce endowment continuing at depth. So in terms of metallurgy of these resources. There are 2 principal ore types at Youanmi, non-sulphide where nature has essentially done our work for us and oxidized the ore, and that goes through the standard CIL plant. And the near-surface resource is non-sulphide and oxide. There's small amounts of transitional material in the deeper parts of that resource, but not a material amount of that number -- of that overall resource number. Then in the underground resource, we classify all of that as sulphide. And around 75% of the gold in that sulphide ore body is associated -- it's fine gold associated with pyrite, but doesn't sit in arsenopyrite. So it's not refractory in the traditional sense of the word. Around 25% of the gold in the underground resource is associated with arsenopyrite and that requires additional oxidation. However, with our recent metallurgical test work, what we're seeing is that we can get 92.2% extraction of that gold with an Albion leach. So fast leach kinetics, the gold is not too hard to get out, but does require additional oxidation. So just further to that, concept, this is how we see the gold deportment. So near-surface resource, free milling; underground resource, sulphide associated. So looking at a conceptual flowsheet, and these -- this flowsheet will be built out as part of our scoping study and feasibility studies, but we see a dual-purpose plant on site at Youanmi with an oxide circuit and a sulphide circuit. The sulphides are floated with around a 20% mass pool. So we're dealing with a high-grade sulphide concentrate that then goes into the Albion leach circuit. The oxide material from the near-surface resource goes straight through to standard CIL. In terms of the infrastructure that's on site and the head start that we've got, we've got a well-equipped can core farm, borefield and that is a real head start. We've got an outstrip that we're using at present. And so all of that gives us CapEx saving. But importantly, the history of mining at Youanmi adds to our technical understanding of dewatering, geotechnical pitwall angles that are required, what we're likely to see underground when we go underground and that sort of things. So it's been done before here, and that substantially derisks the development. So just in terms of progress to date at Youanmi. So we've delivered a 93% increase in the resource to 3.2 million ounces. We've built out the management team. We've been actively drilling all through 2021 and 2022. We're actually at feasibility level understanding of many aspects of the project, with the scoping study to be released in the middle of this year and a feasibility study thereafter. And we're also not just studying the near mining environment, we're also looking further afield and regionally as well. So as we progress the project this year, one of the key areas of focus is resource development drilling. And you can see on this slide, the key areas that we need to convert inferred into indicated material. And importantly, the resource remains open down dip and along strike. Just turning to the regional picture at Youanmi. So on this image, this is an aeromagnetic image that pulls out the rocks that are richer in iron, and it's a very good way to see the structural picture in the greenstone belt. So you can see this image is around 40 kilometers from north to south. And we can see the Youanmi Gold Project in the northern part of this image. And around 25 kilometers to the south of Youanmi, you've got the Penny Gold Project, which is owned by Ramelius. And all the way along that structural corridor in the Youanmi greenstone belt, there are good targets and strong targets that Rox has picked up in its recent Aircore drilling. So Target Area 1 is a key area to watch, and we're actively drilling out there now. So in terms of next steps for us following this resource upgrade, we will have a scoping study out in the middle of the year. We expect the project economics to be very robust. And certainly, the early numbers are telling us that. And so we're very confident about our development pathway for the Youanmi Gold Project. We're at feasibility study level, we're at feasibility confidence level for a lot of the mining aspects of the projects with metallurgy yet to catch up, and that's an area of focus for us from here. We're not just studying the economics and the technical aspects of the project. We're also staying very active in terms of exploration out at Youanmi. So just turning to Rox's second project, Mt. Fisher, which is on the north eastern edge of the Yilgarn Craton. I've included it in this presentation as a brief mention, but this is actually one of Rox's -- well, Rox's has had this project since the mid-2000s. We discovered nickel there in 2012, and the focus shifted from gold to nickel, and Rox has only recently come back and started looking very seriously at the gold potential of this belt. And so we'll have more to say on our exploration up at Mt. Fisher shortly. But fair to say, we've had a large Aircore program out there followed by an RC program, and we're very much liking what we're seeing out there. It's a big belt, 850 square kilometer ground position, prospective for both orogenic gold mineralization and VMS style mineralization, and we are active out there. So just to demonstrate some of the potential at Mt Fisher. You can see here I've included a long section of the historic Mt Fisher mine. You can see some of the grades that were pulled out of -- that were intersected in that near-mine environment. 9 meters at 35, 8 meters at 14, I mean these are pretty amazing grades. And the gold at Mt Fisher is associated with pyrrhotite. That means that we can use EM conductors to pick up the most important structures hosting gold. And so we're testing those EM pads now. So just as a recap, we're very happy with progress at our flagship Youanmi Gold Project with the resource upgrade announced this morning. We're focused -- we're focused both on the open pit and the underground positions as development scenarios. The resources are open. There's 41% of the resource is indicated, which will grow over the coming months. And we're actively working through the metallurgical pathways to production with Albion being -- showing very impressive metallurgical returns. We note that we are trading on a compelling valuation and the reasons for that gap to close are really development progress at Youanmi, potential early cash flow opportunities, which we're looking at and ongoing exploration success. So with that, I thank you for your time, and I encourage you to keep following the Rox story. Thank you.