Ramelius Resources Limited

Thank you for standing by and welcome to the Remelius Resources Full Year Financials 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 1 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 full year 2022 results conference call. Alongside is Chief Financial Officer Tim Manners, who will drill down into the numbers after I've covered off on the highlights. Now there have been a number of releases related to the full year results loaded onto the ASX platform this morning, but Tim and I will be talking more broadly to the results presentation itself. Hopefully you do have that handy. Once we've done that, there will be an opportunity for listeners to ask questions. So if we go to the presentation and start with slide three, that mainly shows you the flexibility that we've built into our Western Australian operations over recent years, with six mining operations now feeding into our two processing hubs at Mount Magnet and Edna May. Production was evenly split between the two hubs in FY22, but Mount Magnet looks to resume the flagship mantle in FY23 where we will see the first contribution from the Penny underground mine which will be one of the highest grade mines in the country. Turning to slide 4 which shows that in terms of mining in FY22 we actually moved a record 4.5 million tonnes of ore and given the slightly higher grade this also translated into a record 312,000 ounces mined. These figures are both significant increases on the previous financial year and an excellent outcome, not only given the challenges that COVID posed in terms of workforce availability, particularly in the second half of the year, but also the fact that FY21 was a record year for the company in many respects. This over mining, if you like, has led to an increase in stockpiles generally, which Tim will no doubt go into more detail on. Turn to slide 5 now, where we have our key production figures. As we have discussed previously, the closure of the WA border created difficulties for our trucking contractor in terms of finding drivers, and those difficulties weren't entirely alleviated once the border opened in early March. It is partly for this reason there was a gap in contained gold mined, as per the previous slide, and our final production number of 258,625 ounces. It needs to be noted that this value is not lost. The golden stockpiles will be worked through as we expect to see a gradual return to normal levels of trucking activity over the financial year. Like many of our peers, we saw an increase in oil and sustaining costs to $15.23 an ounce as the effects of inflation filtered through, noting that we were one of only few to come inside our original cost guidance for the year. A 5% increase in our average realised gold price up to $23.99 AUD per ounce offset this somewhat and helped ensure that our all-in-sustaining cost margin remained high at 37%. Now maintaining all-in-sustaining cost margin and EBITDA margins that are among the best in our peer group continues to be a focus for the company and it is pleasing we've been able to achieve that despite a pretty challenging environment. Before I hand over to Tim, I'd just like to comment on the dividend. In light of ongoing uncertainty around cost inflation, the Board deemed it appropriate to reduce the full-year payout this year. As our cost base has been reset, there has been a flow-on effect into other areas such as dividends. We are proud of our TREC record on dividends since we set in place an official policy four years ago and we will continue to seek to strike a balance between providing sustainable returns to shareholders and prudent capital management. You'll also note this year we have established a dividend reinvestment plan for the first time. Tim will provide more detail. There is a slide on dividends as we move through his part of the presentation and with that I'll now hand over to him.

Thank you Mark. So moving to slide 6, if you do have the presentation in front of you, we see a snapshot of the key underlying results. for the last financial year. To be clear, when we refer to underlying, we are essentially backing out the large non-recurring items, both favourable and unfavourable, in an attempt to communicate what we believe to be a more reflective result from the operations for the year. I will of course discuss those one-off items shortly. Also, and for reference, we have provided an appendix that compares both statutory and underlying results with those of last year, which you can refer to as needed. So we achieved a top line revenue of $604 million from gold sales of 251,355 ounces. Despite achieving a higher gold price, the slight drop in gold sales led to a 5% drop in revenue over the same period last year. The underlying EBITDA of 292.8 represents a margin of 49% which still compares very highly in our peer group. The underlying NPAT of $73 million also represents an excellent return in what was a very challenging year. I will discuss cash flow and our balance sheet in later slides, but importantly, the operating cash flow of $36.2 million was after $150 million in capital and mine development, but also an approximate $70 million cash investment in the build-up of inventory, which will likely all be monetised in the coming one to two years. Moving to slide seven, this puts those underlying results into the context of a five-year time horizon. Whilst a number of our financial metrics this year were down on FY21, it needs to be viewed on the back of a very tough year for the industry by way of COVID, people and cost challenges. And at least from RMS's perspective, we are also coming off an FY21 that broke almost all physical and financial records since the company was established. So yes, the results are down on last year, but when looked at over a five-year period, we continue to see year-on-year sales growth running at over 15% per annum, and a total shareholder return that has reached over 20% per annum over that same timeframe. Moving to slide eight, for those who want to get a little bit more into the detail, what this chart seeks to illustrate is how the statutory EBITDA reconciles all the way through to the underlying MPAT. The first four steps in this waterfall chart represent those one-off items I mentioned earlier. And when you notionally back these out of the statutory results, you get to an underlying EBITDA of 292.8 million, as noted earlier. After then adjusting for DNA and tax, we come to the underlying NPAT of $73 million. In slide nine, I'll now discuss those material one-off items that were recorded this financial year. The biggest item was the non-cache impairment to the Edna May CGU. Now briefly, the CGU, or Cache Generating Unit, comprises the Edna May underground, all plant and infrastructure on site, and also the satellites that feed that mill, being Tampia and Marta, and of course the mining and administrative infrastructure at each of those sites. The other CGU held by Remelius is Mount Magnet, which includes the mines and infrastructure on site, plus Vivian and Penny. I don't plan on going into the details behind the impairment calculation itself, but in short, the calculation is done to compare the present value of future after-tax cash flows from each CGU to the carrying value of that CGU. In circumstances where the carrying value materially exceeds the cash flows, then an impairment is required. And there's some important things to note here. The adjustment is non-cash. The adjustment does not mean that there are no future cash flows from the CGU. Indeed, for assets such as MARTA and TAMPIA, where a lot of capital has been sunk, the future cash flows are still very reasonable. The calculation is generally conservative in its nature, given it's a requirement to ensure your assets are not overstated. Typically, conservative assumptions are applied around items like conversion of mineral resources and key inputs like gold price. The calculation environment for unit costs was also projected forward in the calculation, and continued inflation is also applied by the use of a declining real gold price. The practical issues behind the impairment were largely twofold. Firstly, the Tampere deposit has not performed as expected, as shown in the table. Now this table incorporates our current view of the remaining life, having factored in the actual performance of the mine so far. As noted, we expect positive cash flows from the Tampere project. However, what this impairment tells us is that the original return on investment may not be as high as we had originally projected. You may recall that Tampere was acquired via the takeover of Explorum. Cash flows, therefore, must support not just the direct capital cost of the Tampere project development, but also the acquisition cost of Explorum. Without any notable exploration success at Tampere thus far, The mine cash flows have to cover the majority of the approximately 65 million acquisition cost of Explorum as well. The second part of the impairment relates purely to Edna May itself. Given we are not able at this juncture to include the stage three cutback in our recoverable amount tests, the plot and infrastructure at Edna May needs to be supported by the underground mine only. Whilst the underground is a cash positive asset It is not sufficiently positive to cover the full value of sunk capital at Edna May and the full rehab provision, so an adjustment was required. This impairment calculation will need to be reassessed once a decision around stage three has been made later this year. The other material impairment item was around exploration carrying values, where we recognised $16.7 million in a further non-cash impairment. In short, the majority related to some of the Tampere prospects. that we now feel have limited potential to produce an economic project. The last point on this slide, which was recognised in the half-year December 2021 accounts, was the cash we received for the cancellation of the lithium royalty we owned over Liontown's Kathleen Valley project. The $30.2 million in cash was received in the first half of this year and has also been recognised as a one-off item. The lithium royalty had no value in the accounts So the full cash receipt has been recognised in our statutory pre-tax profits. Lastly, but very importantly, all of the same impairment tests were carried out on the Mount Magnet CGU and there were no issues. The impairment issue is isolated to the Edna May CGU only. Moving to slide 10, we look at cash flow, which we still believe is the most important measure of any business. While our cash flow was not as strong as it was in the previous record year, there are some points that need to be highlighted. Cash from operations pre-tax was 184 million. After capital and expiration, the operations generated 36.2 million in free cash flow. However, and I'll illustrate this shortly, there was a cash investment of over 68 million in inventories during the year. So another way to view this is that from 100 million cash generated by the operations, nearly 70 million has been reinvested and will be recovered in the next 12 to 24 months as stockpiles are processed, timing issue only. The built-in stocks came about at three main sites, being Tampia, Marta and Mount Magnet. Also, we made a long-term investment during the year in the Rebecca Expiration Project by the acquisition of Apollo Consolidated. We view Rebecca as one of, if not the most exciting exploration assets in our portfolio. And the $71 million outlay was a big reason behind the cash flow profile shown on the slide. We also paid $50 million in tax, which was basically for one and a half years. This can happen as you transition away from being a tax loss company to one that is a taxpayer, as we did in FY22. We don't expect that level of tax payments looking forward. Lastly, there was a $20 million return to shareholders in the form of a 2.5% fully franked dividend. We finished the year with cash of 147.8 and 25.1 million in gold, giving a cash and gold balance of 172.9 million. Moving to slide 11, we show the impact that those investments in gold and in all stockpiles have had on the cash flow for the year. When you look at the FY21 operating cash flow as a starting point, we certainly had some real reductions in cash flow through lower sales volume and higher cash operating costs. But as you can see, there was also the $68 million investment into ROM stockpiles and bullion that reside on the balance sheet for monetising in coming periods. Our contained gold in stocks rose 83% to nearly 121,000 ounces. Indeed, our entire inventory of gold in a currently unsaleable form rose 88% to 135,000 ounces. This goes some way to protecting the business against unforeseeable events that may impact mining operations. with over 3.5 million tonnes of ore available for processing at year end. On slide 12, we show some balance sheet extracts, which I won't dwell on. Suffice to say that we remain well funded, debt free, with significant gold inventories on hand. While debt free, we have established the option to expand our financial capacity through an undrawn, fully committed facility of $100 million. This is available for use if and when we see the opportunity to utilise either for organic growth or M&A opportunities. One point I will make in relation to the working capital position is that given the size of our stockpiles, we have, for the first time, we have reclassified 66 million of ROM stocks from a current to a non-current asset, which is a large reason for the drop in working capital from FY21 to FY22. Our hedge book sits at 196,000 ounces at an average price of 2,512 per ounce. That was as at 30 June. Currently, those ounce levels are similar. The price remains higher. In short, we are very comfortable with our balance sheet and believe that it can provide the platform for our next step in our growth aspirations. Lastly for me is the dividend slide 13. All I will add to Mark's comments is that capital management is front of mind with the Board and the Executive and our commitment to maintaining a dividend return as part of the investment proposition has not changed. With that, I will hand you back to Mark. Thank you.