Evolution Mining Limited

Ladies and gentlemen, thank you for standing by and welcome to the Evolution Mining September 2020 quarterly results call. At this time, all participants are just in a listen-only mode. Following the presentation, there will be a Q&A session today. To ask a question today, you will just need to press star 1 on your telephone. And just please be advised that today's conference is being recorded. But I will now hand the conference over to your first speaker for today, Mr. Brian O'Hara. General Manager at Investor Relations. Thank you and please go ahead.

Thanks, Myles. Good morning and welcome to the Evolution Mining September 2020 quarterly conference call. This morning on the call we have Jake Fine, Executive Chairman, Laurie Conway, CFO and Finance Director, Glenn Marsterman, VP Discovery and Business Development, who are all with me here in the group office in Sydney. We also have Bob Fork as COO who's dialling in from Brisbane. During the September quarter, global macro factors remained supportive of a strong gold price, and new records were set in both US dollar and Aussie dollar terms, with quarterly averages of 1909 US dollars per ounce and 2668 Australian dollars per ounce, respectively. While there's likely to be some volatility in the gold price for the upcoming US election, the longer-term outlook remains constructive. with continued negative real interest rates and record money printing from governments around the globe. Last Friday, we were pleased to release our 2020 annual report and sustainability report. We're looking forward to engaging with our stakeholders in the coming weeks to discuss the great progress we're making in our sustainability performance as outlined in the report, including a healthier and safer and more diverse workforce, an increased focus on climate-related risk in the key areas of energy efficiency, water security and extreme weather and health events, and the ongoing contributions we're making as a trusted partner to provide community benefits beyond the life of our mines.

Thank you, and I'll hand you over to Jake. Thanks, Brian. Good morning, everyone, and thank you for taking the time to join us on the call today. We hope you are doing well and are healthy and navigating through this COVID pandemic successfully. I'm really pleased with our performance this quarter. We've had a strong start to this financial year with the results and progress across our whole business ahead of where we planned. Operationally, our focus continues to be on capturing and banking high margins, safely and reliably converting quality, low-cost bounces in the ground into cash in the bank. This quarter, we are able to capture an all-in cost margin of $871 for every ounce we produced, which is sector-leading. At the same time, we are investing in our growth and have an exciting pipeline ahead of us. Over the next two years, we expect to be able to deliver a 17% increase in production and a 9% reduction in costs on our already low FY21 cost base. At Cal, we are making good progress to grow our production base to 350,000 ounces of low-cost gold from this outstanding asset. In the September quarter, a very important milestone was achieved with the submission of the significant state development application and the modification 16 development application to the New South Wales Department of Planning, Industry and Environment. Support from the local communities and stakeholders for this project has to date been very positive. Reflecting the confidence we have in this underground mine, the board last week approved the development of 2,300 metres of additional deep line, which will be used initially for exploration drilling, but it's also been designed so that it can form part of an operating underground mine in the future. We continue to be encouraged by the size and scale of the underground ore bodies. which was estimated at 2.9 million ounces in the last release, which had a 30th April 2020 drilling cuddle. This quarter drilling has again extended the resource envelope and it remains open a long strike and at depth. We expect this drilling to support an increase in resources and reserves when we release it in the March 2021 quarter. Red Lake continues to exceed our most optimistic expectations, and our confidence is growing about the potential upside for this asset. At 11 million ounces of resource, it is already a very significant mineral inventory, and the six drill rigs operating underground is a reflection of our view on the upside of growing its resource and reserve base. Accessing the 4.3 million ounce resource at 10.5 grams per ton, In the upper Campbell area is a clear and present opportunity, and work has been accelerated to complete a study that will allow us to develop a decline to access this high-grade area. Ernest Henry continues to be a very powerful cash generator, this quarter contributing an outstanding $83.2 million. There are very few gold mines in the world that generate that scale of cash flow. We are very confident that the drilling program currently being undertaken will extend the mine life of this important asset. The team at Mangari has done a fantastic job at transforming the operation. In many ways, it is the same journey that Red Lake is at the start of. They now consistently meet or exceed plan, and this quarter generated their third consecutive quarter of record mine cash flow of just under $45 million. an outstanding achievement by our site team. With this confidence in the operation, we have commenced studies on assessing processing options for the Castle Hill area, which we expect to be able to share with you in the June 2021 quarter. Mount Rawdon delivered largely to plan, whilst Mount Carlton drilling at Crush Creek is providing important optionality for the future of this operation. Evolution is very well positioned to prosper through the cycle. During good times, like we are currently experiencing, we are banking sector-leading returns, rewarding our shareholders with dividends, and investing in our future growth. This is a great position to be in. Combine this with a fantastic team of people who are passionate about both our values and creating value, I'm confident that evolution is in very good shape. With that, I'll hand over to Bob to provide more detail on our operational performance.

Thanks, Jake, and good morning, everyone. If I start with our safety performance, the September quarter, we've seen a slight increase in our lagging measure, Triff. Pleasingly, though, Mount Rawdon has gone nine months without a recordable injury. This is the longest run under Evolution's ownership. I'd just like to say well done to both Jamie Code and all the team at Mount Rawdon. We continue to actively monitor the impacts of COVID at all our sites, and our people and our business remains unaffected. In the September quarter, we delivered 170,000 ounces at a $1,198 falling sustaining cost, and just over $183 million of net mine cash flow, a great result for more site teams to deliver a strong quarter. If we turn to page six for the Cal and Ernie Fennery results, Cal delivered just shy of 52,000 ounces at an all-in sustaining cost of $1,026 an ounce, generating an operating mine cash flow of $72.5 million and a net mine cash flow of $30.2 million, while still investing over $42 million on the underground study works, stage H stripping and the IWL tail facility. As noted by Jake, the underground state significant development application has been submitted and the feasibility study is progressing well. The board recently approved development of the Galway Declan to further improve our all-body knowledge with additional exploration drilling. A key focus of the feasibility study is to optimise the mine plan and find opportunities to bring grade and goal production forward to further improve project economics. This work is well underway with completion expected in the June quarter. Post the quarter end, CAL's new IWL Stage 1 was commissioned and deposition commenced on the 14th of October. a huge milestone for the operation and the future. Ernest Henry once again made a significant contribution to the group, producing 24,500 ounces at a normal sustaining cost of negative $515 an ounce, whilst generating a record net mine cash flow of $83.2 million. We turn to page 7 for the Red Lake results. Red Lake produced 26,500 ounces at a normal sustaining cost of $2,074 Australian dollars per ounce. with a net mine cash flow of 4.7 million Australian dollars. The underground development advance has been improving month on month. However, the quarter total development was impacted by the forest fires. The good news is that the surface oil stockpile, ready for processing, increased to 15,000 tonnes by the end of the quarter, enabling consistent, steady northward. Natural mine development in Q1 averaged 893 metres per month, 11% down on our original goal of a sustained 1,000 metres per month. The forest fires attributed to a loss of 21 underground shifts, or 11% of the available time in the quarter. Additionally, our path to 1,200 metres per month was hampered by availability issues with underground equipment. A further 16 pieces of equipment were decommissioned during the quarter and still more to come. This is enabling more maintenance time on priority equipment to improve the availability of this It remains an exciting time at Red Lake, and when the team remain on track to deliver our goal of greater than 200,000 ounces below $1,000 US dollars for the sustaining cost. And the study into the future potential has commenced. This study is to define our vision, returning Red Lake to a premier Canadian gold mine at a production rate between 300 and 500,000 ounces per year. This will likely involve construction of a new processing plant alternative access to underground deposits via surface decon, and other options to further increase our production profile while improving our margins. The initial study on the decon is expected to be completed in the March quarter, with studies on the long-term processing options to be completed in the June quarter. Mangiari delivered another strong quarter with 35,000 ounces produced at an all-infrastoning cost of $1,115 an ounce, with another record net mine cash flow of $44.9 million. The Boomer grade control drilling began during the quarter, and I'm pleased to announce development commenced last month, a long strike of the Boomer high-grade vein post-drilling. Cutters Ridge mining has been going well, with a transition starting to occur from oxide to fresh material. The plant continues to run consistently at 2 million tonnes per annum, 25% above its main plate capacity of 1.6 million tonnes per annum. On page 8, Mount Lawton produced 20,000 ounces at an all-interest owning cost of $1,536 an ounce, and a net mine cash flow of $16.8 million was realised. September was impacted by a mining-induced rockfall that prevented ramp access to higher-grade material for about three weeks. This material has already started to present for mill during the December quarter. Mount Tartan delivered 11,500 ounces at an all-in sustaining cost of $2,674 an ounce and an operating mine cash flow of $4.5 million. The geological model performance has improved since recalibration and this is resulting in more predictable grade performance. In summary, our operations have made a strong start to the new financial year and we continue to focus on safe, reliable delivery. Despite the minor setbacks, in the safety performance at a couple of our assets, I'm encouraged by the efforts and focus at Cow and Mount Laudan to keep our people safe and we continue to look ways we can improve our safety performance across our other operations. Thank you for your time and I'll hand over to Grant.

Thank you Bob and good morning. Following on from our announcement in mid-August of the 11 million ounce red light resource, We've continued drilling with six underground rigs at Koshner, Lower Red Nut Lake and on the Hanging Wall Corridor. Resource definition drilling at Koshner is delivering to expectations and is on track to convert resources to reserves that will continue building mining inventory in these areas of the mine. Several impressive results including 3.4 metres grading 297 grams per tonne and 11 metres grading 11.4 grams per tonne which is shown on page 11 of this morning's report, illustrate there will be some very healthy grades when we mine these areas at Koshner. Across the property at Lower Red Lake, drilling at Twin Otter returned results better than we were expecting. Examples include 12 metres at 10 grams per tonne, 4.3 metres at 26.8 grams per tonne, and 2 metres at 52.9 grams per tonne, with details also on page 11 of this morning's report. Drawing commenced at the Hangar Wall Corridor, a target we discussed during our investor day in early September. The Hangar Wall Corridor is prospective for high-grade targets along a trend of highly prospective geology that largely escaped the attention of previous exploration. I look forward to reporting on this program over the coming quarters as results come to hand. Turning now to Cal, where we recently wrapped up our first phase of underground drilling at GRE 46. Highlights and results for the quarter are reported on page 12 of the report this morning. Full results of the underground program will be incorporated in a mineral resource update that will inform the current feasibility study and will be included in our annual mineral resource and all reserves statement due for release in February 2021. Infill results are expected to return a higher proportion of indicated resource than previously reported, and we believe step-out drilling should extend resources down plunge at Dalwinnie and at depth at Regal. Diamond drilling is continuing with a single surface rig to step out on the Dalwinnie domain, extending mineralisation where it remains open down plunge to the south. Underground drilling will resume in the June quarter from holes designed in new positions in the gallway decline that open our angle of attack on deeper sections of the ore body for reserve conversion and expansion. At Manggari, drilling south along Strike of the main boomer resource was completed during the quarter. Follow-up drilling will be designed after we receive and evaluate the full results from the program. A second round of drilling is designed north of Boomer to follow up on previously reported encouraging near surface narrow vein intercepts. Drilling at Crush Creek continued during the quarter and returned promising results from the BV7 and Delta targets shown on figures 4 and 5 of this morning's report. We are becoming increasingly confident that drilling at Crush Creek will confirm potential to extend mine life at the nearby Mount Carlton operation. Further drilling is planned through to the start of the wet season in January with the aim of further expanding the potential resource footprint. Lastly, drilling programs continued at our Western Australian Greenfields projects near the town of Kew, 600 kilometres northeast of Perth. At the Kew Joint Venture, our partner, Musgrave Minerals, is managing the ongoing air core drilling program on Lake Austin. We expect to be able to report full results from the program at the end of the December 2020 quarter, 80 kilometres away at our Murchison joint venture. We are awaiting full results from the recently completed air call program, which will inform the next phase of work. That captures our main exploration activities across the portfolio for the September quarter. With that, I'll hand over to Laurie.

Thank you, Glenn, and good morning, everyone. It's a pleasure to update on the financial performance for the September quarter. The summary is outlined on pages 8 and 9 of the report. Evolution continues to be in a great place financially with around $119 million of group cash flow generated before debt, dividends and any business development activities. This equates to $690 per ounce sold being banked and was on the back of over $272 million of operating mine cash flow and $183 million of net mine cash flow. All operations were net mine cash flow positive for the quarter. Sustaining and major capital investment for the group was below plan and remains on track for full year guidance of $113 million to $138 million and $260 million to $290 million respectively. The recently approved Galway exploration decline, which will see between $28 million and $30 million of investment, is included in our original discovery group guidance of $75 to $100 million. Our group AISC and AIC were $11.98 and $16.63 per ounce respectively, with operations on track to deliver within guidance. Focus on margins is evidence for our group EBITDA cash margin remaining very healthy at 53%, while our AISC margin is a strong $871 per ounce. After paying $154 million in dividends, the central debt repayment of $20 million and receiving over $50 million mainly from initial proceeds related to the Krakow investment, our net bank debt reduced to around $180 million. We finished the quarter with just under $370 million in the bank. Our gearing is approximately 7% and we remain on track to be net cash by the end of the financial year. Thank you for your time this morning and Miles, please open the line for questions.

Thank you, ladies and gentlemen. We will now begin that Q&A session. So once again, if you did wish to ask a question, you can just press star 1 on your telephone keypad and then just wait for your name to be announced. Okay, our first question on the queue is from Nick Herbert from Credit Suisse. Please ask your question, Nick.

Thank you. Good morning, gents. A few from there, please. I might just start with Ernest Henry. Are you able to give a bit more detail on the exploration work going on there at those lower levels, what that's revealing, and how much of that will be included in the February reserve resource update, and also when we could expect any sort of formal updates or mine plan there? That's number one. Thanks.

Yeah. Good morning, Nick. Thanks for the question. Look, the program is progressing. It's an 18,000-meter drilling program. We're onto the fourth drilling platform, and we're confident that that will ensure that the resource is extended and the mine life is extended. Results of the program will be delivered when Glencore released the updated MRR, which I think is scheduled for February next year, and that will inform the change to the mine plan. a high degree of confidence that the program is progressing to plan.

Okay, great. Thank you. And then just on your production guidance for the group for this year, are you able to just provide your, I guess, general phasing in terms of how you're seeing that contribution, say, first half versus second half? And then just any, I guess... thoughts around where the key variables on that for your production number are, whether that's, you know, potential for Red Lake to sort of improve back into the year or just more broadly how you're thinking about that.

I'll hand over to Laurie and let him answer that question, but just make an introductory comment that, you know, our guidance is based on our budget and as at the end of the first quarter we were ahead of where we expected to be on production and lower than we expected to be on cost.

Yeah. Morning, Nick. I think in terms of the split, half on half, you're only going to see about the second half being 5% to 8% higher than the first half. So there's not a lot of movement. And then if you look at it on an asset-by-asset basis, Cow will trend up over the course of the year, particularly the second half, as we get back into some higher grade and then certainly access interstate case material as opposed to stockpile material. We are trying to put some more oxide through in the first half just to de-risk some of the second half. Red Lake, you will see a... heavily weighted second half of the year as we get more development done through the first half of the year and then allow us to process more material into the second half of the year. So you're probably going to see that being probably 30% higher in the second half versus first half. As opposed to Mangari, we would expect to see the first half seeing higher second half dropping away as the grade will come off from the underground and more open pitch material coming through there. And both Jordan and Carlton, you'll see them pretty well in line, half one, half two. And the same Ernest Henry, you'll probably see a slightly lower... maybe 5% lower in the second half than the first half, just as that grade in the case comes down a little. So, you know, it's really, if you look at it on asset by asset, it's going to be depending on where they are in their mine plan and sequencing. You're not going to see a lot of difference in terms of cost-sustaining capital that's going to impact their AIS.

Great, Larry. That detail's really helpful. Thanks for that. And then, Keith, you just remind me, what's the copper price that you have assumed in the full year cost guidance?

We've assumed 8,400 Australian per tonne.

Okay, great. Thanks very much.

Once again, it is star one to ask a question. But your next question in queue comes from Reg Spencer from Canaccord. Please ask your question, Reg.

Thanks. Good morning, guys. Just a question for the cowl underground. The second decline going in, clearly if you proceed with the development there, then that would double as a production decline, as you said. Having those two declines there, could that be indicative of the potential to take underground ore production above the top end of that 2 million tonne per annum range that you guys had previously suggested?

Morning, Reg. We don't want to get ahead of ourselves. No, it's not anticipated that that will lead to higher than 2 million tonne per annum production base at this stage. We're still sticking with the 1.5 to 2 million tonnes per annum.

Okay, fabulous.

Thanks, guys. Okay, our next question comes from Luke Smith from Australian Super. Please ask your question, Luke.

Thank you. Morning, everyone. Morning, Jake. I was just interested in the first minute of your presentation, you spoke to the growth in ounces. And I just wanted to clarify, is the focus for evolution still very much on margin and free cash flow generation rather than production growth? Because I think where I'm coming from, where probably most people want to call, remember April 2013 when everyone was focused on growth and all of a sudden everyone got caught with their hands down. Yeah.

Thanks, Luke. Morning. I did mention the increase in production and reduction in cost just after I mentioned that $871 of oil in cash margin. But let me just take a step back and explain our philosophy because I think it is appropriate and I think it is where evolution is positioning itself. We don't want to be focused on the top line of sales or production. If we could remove it from this quarterly report and our reports, we would happily do that. We are focused and want to remain focused on the bottom line. To us that means cash flow per ounce that we produce, cash flow per share and resources and reserves per share and those resources and reserves continue to be calculated and will continue to be calculated at very conservative prices of at the moment $1,450 Australian dollars an ounce for reserves and $2,000 an ounce for resource for the very reason to protect those margins and that's I think hopefully something that investors have become used to hearing from evolution, but there is absolutely no deviation, largely because the people in this room are old enough to remember 2013 and the decimation which occurred as a result of that, and really believe that margin and sustainability of that margin is much more important than top-line growth. Thanks for the question, Luke.

Yeah, thanks, Jack. I'm not done by any way hinting that we're just about to go through April 2013 again, but good to hear that production growth is a result of your strategy focused on margin. Thank you. Thanks.

Okay, your next question comes from the line of Matthew Friedman from Goldman Sachs. Please ask your question, Matthew. Thank you.

Sure. Thanks. Morning, Jake and team. Just one for me on Ernest Henry, again, rounding back to that discussion on the drilling program there and potential resource extension. Can you talk through, I guess, your understanding of any mine planning constraints around extending the life of that asset? I guess in terms of what do you think could easily be added incrementally to the life of that asset and what might require a bit of a rethink in terms of infrastructure, whether that's additional underground crushing or moving of underground crushing, additional ore haulage capacity, et cetera, et cetera. Effectively, what might we think can be added incrementally and what, I guess, requires a more detailed study? And then secondly, maybe if you could give some colour around Glencore's thinking on this drill program, is it to incrementally extend life or is it to feed into a more detailed study that might address some of those constraints in terms of their strategy for the asset and more broadly across their portfolio in the region. Thanks.

Thanks for the questions. Look, I think it's a bit early to speculate on that. We want to see all the results of the drilling program and then sit down with Glencore and define what it all means. I will... reference the point that there are already, I think, an additional one and a half to two years of reserve life that has been added to below the 1200 level already. That was in February last year. So there are clearly going to need to be discussions around how far it extends at depth and then what it means for the infrastructure. But I think it's premature to speculate on that until we have all the drill data, which will be early next year.

Okay, thanks, Jake. Okay, once again, if you do wish to ask a question, it's by pressing star 1 on your telephone. But we do have a question from David Radcliffe from Global Mining Research. Please ask your question, David.

Hi, good morning, Jake and team. Just a question from me on Red Lake. Could you maybe just talk in a little bit more detail about where you actually pulled the ore from this quarter to deliver that sort of hit grade of 6.4 grams I'm just trying to think about, obviously, you're going to be lifting throughput, but also maybe how that grade profile looks over the year. Bob, can you take this question?

Yes, no problem. Thanks, David. The predominant ore from last quarter was from Lower Red Lake and Koshner. We did have some coming from Upper Red Lake, but none coming from Campbell or the upper left of the airbodies. The profile over the year, is pretty stable from a grey perspective. But the last quarter, the plan is to build stockpiles, as I talked about, and then open up the Red Lake mill, because we've got the Red Lake mill shut at the moment, so we're only running Campbell mill up until probably that last three to four months of the year. And that's where we'll get a bit of a kick-up in production as well.

OK, thank you.

Okay, we have a follow-up question from Matthew from Goldman Sachs. Please ask your question, Matthew.

Yeah, sure. Thanks, gents. Sorry for jumping in with another one, but I thought it might be a bit of extra time to ask a few more questions. But maybe just firstly on Mount Carlton, and I know I guess Bob touched on this during the call, but obviously a bit of a disappointing quarter on cost there for that asset. Can you, I guess, talk a bit, through how that looks going forward. Are we expecting things to improve given a better understanding of the ore body and I guess working our way further into the underground mine? And I guess where do you start to, I guess, rethink the role of that asset in the portfolio? At what point does that become a bigger question given the soft cost performance? Thanks.

Yeah. Laurie, please end up time for this question.

I wouldn't say that, Matt. So I think the thing that we look at is in this quarter versus Q4 last year, you saw a drop-off in the grade in the order of about 24%. And that's obviously had an effect on the AISC. But at the same time, with that drop-off in grade was the drop-off in copper as well. So we end up at about 190%. less tons of copper, so that added, you know, to $70 an ounce to the AISC. So, you know, in terms of quarter on quarter, that's really what's happening. As the years then go to pan out, we will see the grade should lift each quarter through to the end of the year. We get an uplift in recovery through the course of the year as well. And then obviously we'll get some additional byproducts, copper, with that lift up in production and grade. And so that's how we see the year panning out. As Bob mentioned on the call, production was in line with plan and therefore we're expecting the cost to be high in this quarter.

As to the question of where it fits in the portfolio, I think the approach there is to finish off this drilling at Crush Creek to evaluate that and then to make some assessments in the first half of next year.

Sure. Thanks for that, James. And then maybe just quickly again on Mangari, you talked about how that asset has really cemented some much more consistent performance. I guess the next phase of investigation there is obviously looking at your milling options, particularly through Castle Hill. And I hate to be the one to ask the question, but obviously some of your big peers in the sector are looking at the potential synergies in that region that they can achieve in terms of mining and milling capacity. So how do you think about potentially building another mill in that region that you know, to exploit a relatively, I guess, low-grade deposit, whereas, you know, potentially that set of assets or that, you know, that deposit might have more value for others in the region that already have, you know, established milling capacity, I guess, and, again, the role of Mangari in your portfolio in that context. Thanks.

Yeah, thanks, Matt. That's a good question and one which we're happy to take. I'm glad someone's rounded back to Mangari because... A cash generation of close to $45 million this last quarter is fantastic for the asset and I suspect very good for the region. So we're looking at optimizing Mangari still further. We're open to synergies where they exist. And Castle Hill, we mentioned previously that we're investigating either a heap leach over there and tracking to Mangari We're investigating a standalone plant. We're investigating and are very open to regional synergies if they make sense for all parties, not only exclusively with our larger neighbour, but all neighbours around us.

Yeah, fantastic. That's good to hear. Thanks very much for the detail, Jake.

Okay, we do have one other question, I believe, from the line of Sophie Spartalis from Bank of America. Sophie, please ask your question.

Good morning, Jake and team. Just wanted to come back to Red Lake, if I can. You talked around the potential for the decline there and you're working on that. Can you just talk through your intentions there and potential timing in that Upper Campbell area, please? Sure.

Yeah, thanks, Sophie. Morning. I'll start off and then if Bob wants to add something, he can. But, I mean, obviously the resource estimates, you know, shaped a view that upper Camel area at 4.3 million ounces, 10.5 grams is a real opportunity. There is an area which is already permitted to commence a decline. So we've accelerated that study to assess where and what that decline could do We articulated the view that at the moment Red Lake is mine constrained and we want to ultimately shift it to a mill constrained operation and the studies are commencing around milling options. So we expect to make a decision in the next six months, well before the end of the March quarter, maybe sooner, on where to put that decline, what it could do and how much more it could access. Obviously it will also be informed somewhat by our view on reserves. The last reserve estimate which was calculated at Red Lake was around 1.3 million ounces. We're expecting that to be significantly increased through this new resource estimate. So all of these pieces are coming together and that sort of objective of 300,000 to 500,000 ounces is starting to get some flesh around it and over the next six to nine months we'll be articulating exactly how we intend to get there. Bob, do you want to add anything to that?

I think you covered 90% of it, Jake. Sophie, it's a great question. What I said in the investigation about it being the new riddle for Red Lake I think is still valid. As Jake said, that upper level of Campbell with $4.3 million the location of the portal, the fairly short distance to HG Young, the potential of Upper Red Lake or the Red Lake all bodies, all brings in what is the sort of best option for that decline and how do we actually get in there. The real challenge is getting the orientation right to get the best outcome for all those as well as not detracting from what I call, I'm going to stress the word potential, of, you know, mining something from the surface as well from an open pit sort of style of mining, potentially, because they all come into the mix. We are doing all that work at the moment and we're trying to figure out what the best solution is. And that March quarter, you know, we're pretty confident, I'm pretty confident that we'll have an answer for that.

Okay, so just to be clear, so March quarter you'll deliver to the market your intentions around the decline. And then in terms of if that was to proceed when we could see mining in the Upper Campbell area?

Yeah, so what I'm saying is we're trying to figure out which is the best area to go for first, whether it's the Upper Campbell, whether it's Ho Chi Young, whether it's something, a combination of Upper Campbell and a bit of the Upper Red Lake. So some of those are... the things that we're looking for. And it changes the orientation and the route the decline takes slightly. So that's what we're trying to figure out, certainly. Suffice to say, you know, the way that I look at it, and this is not predicated on any study work at Red Lake, but a decline, you know, down to 1,000 metres should give us circa 800 to a million tonnes from that decline. So that's the sort of thing I'm looking for.

Okay. And just to confirm, there won't be any need to move any infrastructure. You said here the challenge is the orientation. So is that challenge to ensure that you don't need to move the infrastructure?

So that's what we're looking at. There is no need to move any of the surface infrastructure for the decline. But what we're trying to do is sort it out so that we don't have to move the decline in the future as well.

Okay, so that's clear. Thanks, Bob and Jake. And then just the second one on Mangari, I know we've talked about that already quite a bit, but just in terms of 1Q performance, it was relatively strong and we talked around sort of one-half, second-half splits. So in terms just of where it's sitting versus the guidance, it's sort of tracking to come above or at the upper end of the gardens. Is that sort of the best way to think about Mungari, like in terms of the sustainability of what we've seen so far in the year?

No, Sophie, as I said, their second half, their production... I'm assuming when you're talking guidance, production guidance, that will be lower as the grade will come off. The plant throughput won't be dropping below that 2 million tonne per annum, and that's going to be the driver that will bring it back into that guidance range.

Okay, clear. Thank you very much, Larry. Thanks, that's all for me.

We're only one quarter into four quarter going. Thanks, Sophie.

Okay. We do have one other question on the line. It's just a follow-up question from Nick Herbert from Credit Suisse. So please ask your question, Nick.

Okay. Thanks again. Jake, just your comments and your focus on margin, which is always good to hear, just sort of on that theme, just interested in your thoughts on how you weigh up your competitiveness in the M&A landscape then at this point in the cycle and given this conservative approach to reserve pricing and gold price is perhaps more conservative than many of your peers out there. Do you think that gives you sort of less opportunity to be competitive for sort of bids and whether then sort of conversely that gives you a greater competitive advantage at a lower point in the cycle, which perhaps... you know, is positive for a longer term value of the charity. Just give some thoughts on that. Sure. I'd be interested in that, thanks.

Yeah, absolutely. I mean, I think, you know, the notion that we haven't been active in the M&A space is not right. I mean, we've done seven deals in the last five years. We've acquired three assets or four assets and in our history we've sold three. Yeah, we're all about value and margins and improving the quality of our portfolio. So the challenge we have is that we've actually done a great job at improving the quality of our portfolio to the point where the threshold is higher now to get into the portfolio. That doesn't mean that we're not very active and looking for opportunities, but we are going to be disciplined and we're not going to chase growth in production and answers We're going to chase things which are accretive to our shareholders and which improve the quality of our portfolio. We think that's just a very rational and logical way of running a business. Just because the gold price is higher or our share price is higher doesn't necessarily mean that we should be doing more. I think we've got to wait for opportunities which are accretive, and I'm sure they will come. The current momentum on consolidation and growth and things, let's see how long that lasts and how that goes through the cycle. But this is way more than a 2020 game. It's a five-day test match.

Yep, understood.

Thanks, Jake. Okay, just a final reminder, if you do wish to ask a question, it's just by pressing star one on your telephone. Okay, there appears to be no further questions at this stage, so I'll hand back to your presenters for any closing remarks.

Yeah, thanks, everyone. I appreciate it. And that was a really good and engaged conversation. We enjoyed it. We look forward to updating you at our virtual AGM on the 26th of November. Stay safe and healthy and look forward to speaking to you soon.

Ladies and gentlemen, that does conclude today's conference call. Again, thank you all for participating today, but you may now all disconnect.