Ramelius Resources Limited

Thank you for standing by and welcome to the Remelius Resources half-year results briefing teleconference. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Mark Zeppner, Managing Director. Please go ahead.

Good morning, everyone. Thank you for taking the time to dial into our half-year results call. As usual, joining me this morning is Chief Financial Officer Tim Manners. In terms of the order of events for the call, we will refer to the half-year results presentation released this morning, amongst other documents. I'll start with an overview of the highlights, and then Tim will take over to delve into the numbers in a bit more detail, and after the presentation, we'll open the line for questions. So if we turn to slide number three of the presentation, the half year to 31 December was another very strong period for the company, driven by better than forecast production of 144, 240 ounces at an all-in sustaining cost at the lower end of the guidance range at 1,261 an ounce. Essentially, you'll find that Ramirez has set new records pretty much across the board, with many of the key financial metrics comparing very favourably with our ASX peers. Net profit after tax for the half was a record $81.3 million, an increase of 297% on the previous corresponding period, whilst we finished the half with net cash and gold of $213.4 million, a 32% increase from the end of financial year 2020. The improvement in net cash and gold came despite significant investment in capital projects and exploration, plus the $16 million payment of a 40-franc 2-cent dividend and $14 million stamp duty payment that fell due on the Spectrum, Explorum and MARTA acquisition. It is fair to say we have set ourselves up very well for another excellent full-year result. As you would have seen, there were no dividends recommended on the back of the half-year result, but in keeping with recent practice, we will assess dividends at the end of the full-year results for FY 2021. During the half, we completed the penny feasibility study with the project delivering a pre-tax NPV of $301 million using a 5% discount at a $2,300 Aussie gold price, giving the board confidence to proceed with its development. Mineral resources at Edna May were upgraded and topped 1 million ounces with a pre-feasibility study on Stage 3 open pit, moving towards completion by the end of the current financial year. The Eridanus Deep Scoping Study is scheduled for completion at around the same time, after being pushed back to allow for the consideration of potential upside from adjacent targets and alternate portal positions that may result from the development of deposits such as Orion. Development commenced at Tampere where last month we bought out our minority partner as well as purchasing the farmland on which the project is situated. Highlights on the corporate side during the half included the company's admission to the ASX 200 and the appointment of Bob Bassey as non-executive chair. Given that it was announced on Christmas Eve, Bob's appointment didn't meet with a great deal of fanfare, but I can assure you we're very pleased to have a director of his caliber on board. On that note, I will now pass over to Tim.

Thank you, Mike, and thank you all again for joining us for the presentation of Romelius' financial results for the half year ended 31 December 2020. As most will recall, we finished the second half of FY20 very strongly, and I'm pleased to be able to sit here and report that the strength of the business continued into the first half of the FY21 financial year, with Romelius posting another set of record physical and financial results. As Mark noted, both our gold production and gold sales were up markedly over the same period last year. Coupled with the gold price being stronger, the increased gold sales led to some spectacular financial results when compared to the prior corresponding period, as slide five shows. Our sales revenue more than doubled to $342 million. Our EBITDA nearly trebled to $193 million, and our impact was just shy of a fourfold increase to $81.3 million. Pleasingly, our EBITDA margin, which provides an indication of the amount of sales revenue we managed to retain as operating cash flow, was a record at 56.3%. This even beat FY20's result of 55.6%, which was, at the time, an industry-leading measure. The cash from operations was up 196% to $161 million. After investment into both sustaining and growth capital projects, our net mine cash flow increased to $84.6 million. And we finished the year, as Mark said, with $213 million in cash and gold, in net cash and gold, primed for the second half of this year. Lastly, our earnings per share for the six months was $0.101 per share. Doubling this gives you a notional full-year EPS of $0.201 per share, meaning that at present RMS is trading at less than 7.5 times earnings. which is way below our peers average of 21 times earnings. Moving to slide six, the waterfall chart on slide six explains at its most basic level what has driven the earnings before interest and tax from 30.5 in H1 2019 to 118.3 this reporting period. As mentioned at its basic level, we produced and sold more gold and we did so at a much better average price. We have a slide coming up which shows how consistent our cost profiles have been. So this slide is largely a reflection on price and the margin achieved from the higher sales volume. The main driver behind the increased volume was HEC rate at Mount Magnet through a higher proportion of underground feed in the blend and a six-month period from Edna May, which was at full capacity with all from Greenfinch, Marta and the Edna May undergrounds. The higher price was achieved from simply a higher spot price environment coupled with the settlement of hedge contracts that had a higher average price. On the subject of hedging, at the end of December, a hedge would total 229,750 ounces at an average price of $2,288. Moving to slide seven, I mentioned earlier that our costs have been very consistent over the six months. results period. In fact, they've been incredibly consistent over the past six and a half years, varying less than 4% over that time. With the increasing price and the increasing production, our margins are improving year on year. The margin over all interstating costs has risen from 20% to 42%, and if we meet guidance for the FY21 year, then this will improve even further. Our teams on site have a commitment to safe and responsible cost control and a clear focus on maximising cash flow. On slide eight, we shift to cash flow, which some would argue is the only metric that really counts. One of the key and obvious takeaways from this slide is that the operations generated a substantial amount of cash. The gold sales revenue was $149 million more than the sustaining production cost of the business, and that was just for the six-monthly period. Some of this surplus was reinvested in the future growth of the company, like project development and exploration activities, and as Mike mentioned, into the trailing M&A transaction costs such as stamp duty for Penny and Tampia, which was $14.3 million for the six-monthly period. And the other large item was, of course, the $0.02 fully-franked dividend paid to shareholders of $16.1 million in October. The increase in net cash and gold over the period was $52.3 million. Slide nine will be familiar to some. We always monitor the growths and net cash flows for the major business decisions and investments that we have made over the past years. This chart shows just that. Dating all the way back to some more humble beginnings with Coogee in 2012, where a $1 million investment returned $9 million back to the company, to now where if you look at the three assets we have in production, Vivian, Edna May and Marta, where we have invested $64 million and returned over $202 million so far. Keep in mind, they're obviously still operating too. What's more is that we hope that there's even better to come, as we've only just started the development of Tampia and Penny, both of which are expected to generate significant cash flow for our shareholders in their own right. Moving to slide 10, it looks at the balance sheet status of Remelius and how well we are positioned for growth, both organic and external to the business, if the right assets can be found. We have over $312 million in current assets. We have shareholders' equity of $582 million. We have approximately 80,000 ounces in inventories ready to be monetized. We have minimal debt, but importantly, we have a large debt carrying capacity if we need it to support organic development or a strategic acquisition. We're extremely well positioned to fund the growth of Remedios when required to do so. At the bottom left on this slide, you can see a couple of financial metrics to capture how effective the company is managing the capital entrusted to it. Return on equity annualized for the six-month period was 29.6%, and return on capital employed was 25.8%. Indeed, the returns Romelius has attained in the last 18 months have been a frontrunner in our industry. The last slide shows how our EBITDA margin and our NPAT margin compared to our peers over the last 12 months to June 2020 and the six months to December 31. We're top of the class or very near to the top in both measures. I'd now like to hand back to the operator to begin the Q&A.