West Wits Mining Limited (WWI) Earnings Call Transcript & Summary

Okay. I think we'll just get started as people come through. All right. Good morning, everyone, and thank you so much for joining us. A very warm welcome to our shareholders and also to the investors who are new to the West Wits story. I'm Jess Fertig, and I look after the Investor Relations for the company. I'm delighted to be joined by Rudi Deysel, who is the CEO and Managing Director of the company. So today's session is really about understanding how Qala Shallows ramps up. We've received a lot of very thoughtful questions recently about production. So as we know, and Rudi will chat about during this webinar that building an underground mine isn't a straight line and development comes first, followed by ounces later. So over the next sort of 25 minutes or so, Rudi will explain why the production profile looks the way that it does. So for everyone today, you can submit some questions. We do have an online chat forum. Thank you to everyone who has already submitted questions. We have actually coated those in today's discussion. Rudi welcome. Thank you so much for your time. I know that you are busy and you're in Sydney for the Gold conference this week. We have a lot about -- we've had a lot of questions about production lately. What do you most want investors to understand today?

Yes. Good morning, Jess. Good morning to everybody. Nice to be here in Sydney in Australia. So thank you very much for the opportunity. Look, I think the main thing that everybody needs to understand, we are building an underground gold mine. We are building a mine that will produce at steady state 70,000 ounces per year. The buildup is not a straight line. It's mainly driven by the infrastructure that's required to get to that steady state. We are building, we are developing declines that you use to get from surface to underground workings. And you do open up levels, which will then be the vein that will actually bring out this ore from the stoping blocks that which is the main mining areas. And our focus is to get those developments in good high standard quality so that it can stand up for the life of mine of this project, which is 17 years. So we need to make sure that they are done properly and sustainable. So that's the main focus for us now.

Yes, brilliant, Rudi. And it seems that investors kind of expect that output will climb steadily towards that 70,000 ounce production rate. Why doesn't it work that way?

Yes. Look, once again, I've used it a few times, but mining is not a cheese factory, and it's not just pouring out tonnes. Once again, mining is hard work, and you need to set up these things. In a perfect world, you will have that straight-line buildup. But we do open up the mine as per plan. Everything is as per design as it's been in the feasibility study. And the progress is excellent. I mean we've already developed over a kilometer of tunnels underground. And that's quite a lot of development less than a year. So the project is really going excellent and following the plan that we set out in the beginning of -- when we started with this project in the definitive feasibility study.

Yes, fantastic, really. Now in addition to obviously, all those infrastructure milestones that you have to build in the underground mine, there's also -- it's never just easy going, as you mentioned. And the past few months have tested the operation a little bit from safety -- a couple of safety causes to working through some challenging ground. What has the team learned in this quarter? And how has it strengthened the path forward?

Yes. Look, once again, if you build a new mine, there's so many variables that's got to influence on a mine. You are going into unknown rock areas. Especially if you're close to surface, that upper levels are very oxidized and soft. So you need to put in support in there. And sometimes you get through ground that isn't as great as expected. But once again, there's engineering solutions to those. You go through put in sets, you do concrete support, which do slow down the typical advance rates in those tunnels. But once again, the team dealt with it excellently. And as you go deeper out of that oxidite areas that's close to surface, which is, by the way, also influenced by weather patterns. And we did have a lot of rain during the summer. And that was one of the aspects we had to deal with that had an influence on the unfortunate incident that we had on the mine. And that just got the team to focus much more on safety. We are a company which feels that safety is absolutely first. Our people are more important than anything else. We don't want anybody to get injured at all. So we have an absolute policy of zero harm in terms of safety. And we've got a system where we really encourage the employees to report unsafe conditions as well as do stoppages. If a place is unsafe. And I mean, it's in the law, in the Mine Health and Safety Act of South Africa as well in Section 23, which says that no employee must enter any unsafe areas. And those are, for instance, the stoppages that we encourage them to do. So you stop, you make safe and you proceed further. And that process is through, and that's what we call our leading indicators. Over the time, you would actually see that those stoppages and leading indicators reduces month by month. Which obviously accelerate the productivity in how we operate. And then obviously, your advance rates that also increases.

Yes, fantastic, Rudi. And now just talking about productivity, A lot of investors are asking about ounces produced on a quarterly basis. Will they get any updates on that. But you're talking about we're not looking at ounces, what metrics can investors look at?

Yes. So in a typical mining environment, you would first do the shaft and infrastructure before you actually bring up any metal at all or produce any ounces at all. The great thing about this project is that we actually do a lot of our infrastructure development on reef. So it's diluted gold that we bring out because it's development waste that comes out with the ore. Now once again, the priority and the focus is really that tunnel, that decline, that shaft. It needs to be able to bring in equipment in and out of life of mine. So once again, I don't want to say that because it's designed in the project, but that ounces that comes out is almost accidental. Until you get to that point where you actually got what we call to stop blocks, and that's where you actually produce the ore that you will actually put into the plant, and that is the high-grade material. Now currently, as our plan stands and once again, this is by design as per DFS. The first real stopes, we were able to have a few stopping panels earlier that we saw that opportunity to get quick tonnes and quick ounces out very early. But our real stoping production is planned to be to get it by February 27, which is not far from now. And that is when the first real high-grade ore will start coming out. And that's why we put it out in the public as well that our production profile is for 2027 that 10,000 to 15,000 ounces and that will build up in '28 the 42,500 ounces as per plan and then ultimately hitting that steady state in 2029 at 70,000 ounces.

So, Rudi, just carrying on that, what is in place at the moment at the mine to support that step up once the stoping starts?

So to get that steady state, you basically need to have 3 levels. Now we've already broken into the first level. And then the decline will develop downwards and then you open up to second level. We talk about half level. So in effect, it's 6 half levels that we need to create before we can really have that sustainable steady state production. Now that will open up over time. So once again, if you look at the buildup, it's rather than a linear line, it's almost like hockey stick. You've got very little in the beginning and then it starts accelerating an increase in that slope of that buildup. And that's why you see the profile that we actually got out there in the market. And that shows exactly how the profile is. And if you look at the production profile of the life of mine, that's exactly how it's been set up.

Fantastic Rudi. Now just shifting gears a little bit. We've been getting quite a few questions coming through the chat room. And one of them is actually around the Project 200 scoping study, which we sort of semi released to the market. What they're asking is what work is still needed to meet the ASX requirements, in particular, is there any drilling or upgrades to the resource classification of when can shareholders realistically expect the scoping study announcement?

Yes. So the main purpose of a scoping study. And I don't want to really go too much into the view? Or do I agree with the view once again, there's rules that we need to abide by the ASX, but the purpose of the scoping study is to give you the guidance to proceed to the next level of the study, which increases the certainty and the design of the project, which will take you then to the next phase, which is a prefeasibility study or a higher level of feasibility study depending on the type of information that you've got in the engineering that's required to get to that level before you actually start mining. Now the scoping study was completed and it came out with excellent results that we actually do have a blueprint and a pathway to get to that 200,000 ounce production. And it also increases with that increased capacity, the life of mine, which is very positive as well. So that is the only issue once again. And I don't think that's the purpose of a scoping study, but I don't want to go into that detail. Scoping study your level of classifications would normally be less. And that then actually give you the certainty that there is a business case to do more drilling, which will bring more inferred material into your reserve classifications, which is measured and indicated. Now the scoping study and the reason why we didn't bring it out is because we have to have more measured and indicated in -- especially in the initial phases of this project. So currently, there is optimized work being done because there is some work that we can do on the block model and resources itself and even on the scheduling of the project itself, we did add some prospecting rights to the project to the mining right, which actually do have some measured and indicated material. And it wasn't at the time available when we did the scoping study, which we are catching up now on, and that will optimize the schedule that will bring some more indicated measured into this study, which then will enable us because the ratio of measured and indicated has been much higher in terms of the inferred that we have, which will then enable us to actually bring it out to the market. So that's the intention now. That work is currently happening. We will bring out that results in a moment we can because, obviously, it's great news for the company as well. So we would like to bring that information out to everybody so that they can see our great investment, this project is. So this is all part of the process that you need to go through with mines and creating a new project. And it's really -- this project is really constantly showing that how good it is and how good investment it is.

Fantastic Rudi. Now just on that, we have a question from Nick who is a shareholder. He's asking -- and I'm not sure if you can answer this or not Rudi. But he's asking, what is the expected cost of further work to be completed to get that -- the PFS for the Project 200 or the scoping study.

Look, I think in the bigger picture, it's not a lot of money that's required. It's not a lot of cost. We are already spending a lot of money to build this mine and develop this mine. Now we do have a budget in this money that's been approved by our lenders for growth projects, which we intend to spend on exactly that to develop a pathway to grow this project even bigger. 7.24 million ounces is a huge resource, and we're going to add to that as well because there's still a lot of geological work that we can do. But that's the beauty of this project is that, while we are doing this expansion and development, and we actually got now a mine in construction that will operate and produce gold while we can spend time on developing this project further. So this is actually a great situation to be in. You don't get it with other projects. So once again, I said really think this is a much more positive view on the project than really to be worried about it.

Yes, absolutely, Rudi. Just on the funding side of things. So we had another question from a shareholder sort of asking. So management is saying that Qala Shallows is fully funded to steady state, how much contingency -- the question is, is built into the current funding to cover ramp-up delays or cost overruns and what circumstances could more equity be needed before the operations cash flow positive?

Yes. So look, and once again, I just want to reiterate to everybody. We do have a big brother looking over our shoulders to make sure that management actually deliver to what we should do because I mean, the banks are very strict on their money, and they want to make sure that we don't waste it, that we hit our targets and for that reason, we have this whole process of what they call cost to complete test, which includes a lot of audits. We do report monthly to that funders and then obviously, every quarterly, we plan the drawdown. And then you go through a huge process, which is a due diligence process on its own to ensure that, firstly, you hit your development targets, you are producing what is required, you are on track in terms of your employers growth in the project as it gets bigger. And so we are audited the whole time to ensure that we deliver what we said we are delivering. Now in terms of there's always a contingency on top of your funding on top of the project. In this case, we've got a total package with ABSA and Nedbank lenders which is big commercial banks in South Africa. And they also fund the big South African major companies. So the fact that they support us is a great story. Now our total package is about AUD 97 million, all right, of which AUD 76 million is the senior leaders facility. On top of that, we also have a AUD 13 million working capital facility. We're not even planning on touching that. And on top of that, there's also AUD 8 million cost overrun facility. And at this stage, once again, we're not even planning to touch that month. So there is a lot of contingency built up. So the intention is not to go into an equity raise at all. We didn't say there will never be an equity raise, but it wouldn't be to fund this project. It might be to fund any growth plans for the project itself. And again, that's a thing that will be communicated in time through the right channels to everybody so that they understand for what we are using this. But the project is on plan. We just had our second drawdown. So this is the second time that we've got that tick from the banks that they are happy with what we are doing, which should give everybody much more confidence that we are doing the right thing.

Fantastic, Rudi. I've just got a couple of questions from some shareholders on early next year. So one is, will the fab stopes that get sort of mined go through the toll treating plant? And the second question they asked is, what will the expected diesel use be? And are we on main power yet?