Regis Resources Limited

Thank you for standing by and welcome to the Regis Resources Limited September quarterly update. 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 Jim Beyer, Managing Director and CEO. Please go ahead.

Thanks, Darcy, and good morning, everyone. Or good afternoon for those on the east coast. Thanks for joining us on the September quarter update. I note the quarterly was released earlier today and I'll make occasional references to some of the diagrams and the figures. Pardon me. Well, it's clearly been a tough quarter for us. Mostly anticipated, but some unexpected items adding to our challenges. But firstly, on the area of safety, I'm very pleased to report our safety metric of lost time injury frequency rates continues to be better than the WA gold industry average. As we saw, the 12-month average moved down just very slightly. In fact, rounded it, held at 1.3. So very pleased with that. On COVID in general, to date we've had no confirmed cases in our business. Regis continues to maintain a range of measures and controls, management plans consistent with advice from state and federal health authorities. and commensurate with what we see as the community risk profile. I would say the company supports the ongoing vaccination rollout programs and sees this as a critical element of the long-term path out of this period of uncertainty and potential health risk. Albeit by doing so we are introducing some short-term risks associated with implementation and acceptance and more on COVID impacts a little bit later. So onto our operations. On the production front, the September quarter we hit about 102,000 ounces at an oil and sustaining cost of $1,521 an ounce Aussie. While the quarter was always expected to be soft due to activity schedules, we did see some unplanned short-term operational issues arise which made it a little bit weaker than expected. While planned scheduling of activity was always understood to impact on our production relative to the prior quarter, we saw increased labour turnover and the requirement to introduce less experienced operators and training also played into our performance and the time to fill. This clearly is a trend across the resources industry, with generally increasing demand for experienced operators, certainly exacerbated by the COVID-related restrictions on labour availability in WA. Looking a bit more at the parts of our business now, Duketon, as I said, was a weak quarter as expected. Mullart produced 14,185 ounces at a cost all in of $1,720 an ounce. We did see an increase in the milk throughput as proportion of softer oxide and transitional material was being fed was a helpful impact. However, this material was also a weakness in the quarter as we saw a short-term variation in actual grade to plan. as the ore was presented. And this variation was associated with mining through near-surface oxides, including laterite depletion zones in the Blenheim pit as we progressed towards fresher material, and this variation impacted on the feed. We had notoriously variable swings as we passed through these ingrades, either way, as we passed through these depletion zones. Now, the variability is expected to continue until the end of this current quarter, but once we're through it, we will see head grades lift and a subsequent increase in production coming out of the Mullard operation in the second half. At Rosemont production was down 24,243 ounces produced for the quarter all in sustaining cost of $18.68 an ounce. The underground pleasingly has settled in and is now continuing to deliver at its planned production rates. Development was strong and gives us confidence that we'll continue at this pace. Open pit performance at Rosemont on the other hand was adversely affected by some relatively minor geotechnical concerns that did require a delay in operations while catchment fences were put in to manage this risk. This work is now considered to be complete. Garden Well produced 34,646 ounces, all in sustaining around $1,400 Aussie an ounce. Again, impacts on this quarter. We did have a major mill shut where we changed out the mill motor and as a result of that we had some subsequent monitoring and adjustment before we could return to full production rates. We did also see some lower recoveries from the high grade zone coming out of Toohey's well. This area is known to be metallurgically more complex and it was more complex than our original testing indicated requiring more oxygen. We have added extra liquid oxygen capacity, or we are at the moment. In fact the bullet was delivered last week. It's being installed and we see that coming online in November to help get on top of this issue of lower recoveries, which will allow us to return to feeding that high grade material in at rates that we planned. Total material movement at Garden Well was down a bit as well, 13%, partly because we rescheduled equipment, reallocated some of it to Rosemont, but also we saw some COVID-related drop in equipment performance, specifically around the drill and blast area. To recover this performance, we mobilised additional personnel, but that took some time. as well as the equipment, earth moving drill and blast and some grade control equipment to get on top of this and they're operational from this month. As I said, labour restrictions also impacted on our surface haulage trucks. These are the trucks that bring the material in from the satellites in the high grade areas. Now maintenance personnel numbers in this area have increased as we've got on top of that and the driver labour shortage has been mitigated but certainly the turnover in this area has been amplified by COVID. The bottom line here is that COVID related issues are an area of ongoing exposure for us while these restrictions are still in place. At Tropicana, safety performance continued to be strong Production came in slightly above our expectations with a full quarter of 28,915 ounces for an all-in sustaining of $1,204 an ounce. Boston Shaker Underground continued to deliver and lifting the feed grade to the mill by about 8%. In addition, the mill had a strong quarter increasing by 11% tonnes throughput on the prior quarter. Now part of this is because in the June quarter we had a large shutdown But this improvement is also a reflection of increased capacity that we've seen in that plan, driven by changes to the thickness circuit that was made in the June quarter, all of which is very pleasing. Overall gold production at Tropicana is travelling to plan. One aspect of Tropicana I did want to discuss was a dip in the performance of waste movement associated with the Havana cutback. Much like garden well really, off the back of inadequate DMV performance, specifically rig performance, and this was impacted by spare parts availability and shortage of skilled operators. Spare parts availability obviously impacting on availability of equipment, operators impacting on utilisation, and both of these are seen as being COVID related. Tightness in the supply chain, tightness in labour availability and time to fill. To date, actions to address the issues indicate that there will be limited impact on this year's production. However, this is an area of future production risk on timing and it's expected to continue while COVID restrictions impact on labour availability. I would say the time on site have been working very hard with the contractors to deal with these issues and certainly good progress is being made. Notwithstanding these short-term COVID-related risks, overall, We're seeing what we wanted to see from Tropicana and our guidance for Tropicana is maintained for the year. I reiterate Tropicana is a great addition to our portfolio and is providing some key strategic elements, not the least of which is the expansion in diversification on our existing production rate as reflected by its contribution both production and cash flow this quarter or last in the September quarter and clear potential future growth through life extension beyond current reserves. On the financials front, the September quarter, Regus sold just over 82,000 ounces for an average price of $2,170 an ounce. That's after adjustments for hedging. This generated a total operating cash flow of $93 million, 51 from Duketon and 42 from Tropicana. The reduction in operating cash flows relative to the prior quarter are really primarily driven by the reduction in ounces at Duketon. Now drawing against this cash generation was capital expenditure which saw an increase over the prior quarter. CapEx was approximately $77 million. 33 of deferred waste to Duketon in the open pits. About 11 was underground development at Rosemont but mostly at Garden Well and a bit over $5.5 million in plant and equipment. At Tropicana we spent $19 million and this is at 30% in deferred waste. Probably about three quarters of that was Havana cutback, the rest was Boston Shaker pit because it's still in operation. We also saw some capital development at Boston Shaker underground at $2.5 or $2.4 million, $2.7 in plant and equipment. Now this is a significant increase in the prior quarter of $47 million. but obviously what we're seeing now is three full months whereas the prior quarter we settled part way through the quarter and it wasn't a full quarter. Now in addition to the operating or the CapEx we saw other quite significant outflows during the quarter, $22 million in dividend payment, income tax of $21 million, expiration of 10 and 6 respectively and $7 million associated with some residual payments of the Tropicana deal. Now this resulted in our overall cash balance reducing from about $269 to $209 million at the end of the September quarter. Now figure 1 illustrates the inflows and outflows quite clearly quarter on quarter. While the September quarter was weak, as anticipated, we have maintained our full year guidance across the business. This is off the back of shifting mine grades that we're expecting, along with the actions that we've taken to address other pinch points that occurred during the September quarter. While maintaining this guidance, we do note further lockdowns in WA and border restrictions have the potential to cause more issues, which right now are clearly causing pressure on businesses including this extended period to fill vacancies and labour cost pressures. The potential impacts of the requirement for mandatory vaccine for mine workers in WA is specifically adding another potential level of personnel turnover and availability and that's quite real, although at this stage it's not clear exactly what that's going to cause and to what degree we're going to see any falling away if any of labour but it's certainly a risk. The situation remains fluid and we do what we can to monitor the potential impacts and take actions where appropriate. I'd also note that certainly we think in this quarter or it could be in the second half of the year the stamp duty associated with the Tropicana which we've now estimated to be down to $38 million is quite possible, although that's in the hands of government timing. Looking to the future, we see some really interesting opportunities continuing to materialise, particularly at Duketon. The Gardenwell South underground is progressing well. Our metres underground development has ramped up to 765 from 434 in the prior quarter. Figure 2, you can see where we've been adding that development in. And we've also just put an underground ring in to start the grade control drilling in the upper areas for targeting these first production zones. Just a reminder, this is about 1.85 million tonnes in the mining inventory, a grade of about 3.2 for circa 190,000 ounces. We are expecting to hit first ore later in this current quarter. I'd also note that the underground is open at depth. of the existing development, presenting with clear intercepts further at depth, presenting an exciting prospect for future life extension there, much like we're seeing at Rosemont as well. I think we're just getting started at both of those. This mine underground, the Garden Well South, will be a valuable addition to our production portfolio. At McPhillomys, we continue to work with New South Wales DPIE in relation to permitting the project. The rate of progress, we are making progress but it is frustrating. Surprising at a time when new projects and the associated benefits that flow to regional and state economies are what we need coming out of this major COVID impacted economy. However, we do know that senior state representatives can see the clear value as well and are working to help move the project along. The Regents is continuing to work with a number of departments, DPIE planning, which is responsible for making the recommendation to the IPC. The department of MEG which is the mining exploration geoscience for working on aspects of our mining lease application. The feds are involved as well, the department of agriculture, water and environment are also a key part of the approvals that will continue to flow. As I said, progress has been made to close out outstanding elements of these approvals As we close in on getting a clear pathway for all the required approvals we do anticipate at this stage a recommendation with IPC, certainly potential in the first half of calendar 22. But at the end of the day we don't have guaranteed visibility on that timing and the actual timing of any decision is largely outside the company's immediate control. Garden well main underground. Now this is a new area. We have been talking about this in the past. Figure 3 shows this key initial zone of interest that's marked as a potential underground area. This is certainly taking shape as potential production zone. The mineralisation extends down plunge of the existing open pit, the garden well pit as you can see, and drilling results continue to firm up this high-grade plunging chute underneath the main pit. Some of the examples of intercepts, 9.6 metres at 4.4 grams, 10.8 at 2.3 grams, 24.5 metres at 3.2, 9.6 metres at 3.7. These are strong results and they're demonstrating the potential value that we're looking at of establishing an early access to this zone via a decline between Garden World South underground mine, the existing area, and the growing new area. You can see it on the diagram. where we've marked that conceptual decline. The key here is that the broadly spaced, while the drilling is broadly spaced in that area, the data collected from that drilling along with the open pit provides enough confidence that a potential small production area could deliver enough ounces to at least pay back the potential decline in establishments cost and may provide a modest return. So we're working on that at the moment to evaluate that potential. The real extra spicy sauce that comes from this decline is not only does it give us the access to this certainly quite significant garden wall main area, but it also allows us to follow up on the high-grade results that we've seen in this prospective area between the gardens of south and the main. And you can see that area clearly marked in the diagram, I think it's in Figure 3, as the under-drilled area with a couple of intercepts that we've got, we see there's great potential in this. So we're working to evaluate and hopefully we'll be in a position to make a decision on this in the current quarter. As you can see, this is clearly a production zone that reinforces the broader strategy at Duketon to use underground extensions from the open pits to stop the inevitable production decline from our pits. and maintain our production levels from these multiple underground sources. I would say we haven't included any update in this report of the Rosemont extensions but we're also seeing some of the extra opportunities there and it's also too as exciting with this new potential production zone to the south along with down plunge extensions that are crystallising. And what we will be doing is we'll provide more details on that and more generally our expiration update across the Duketon belt, Greenstone belt, in a couple of weeks' time when we provide the biannual expiration update to the market. In summary, the quarter was difficult. We experienced the variation in performance we were expecting, plus we experienced other operational variations, as I mentioned. This, along with the impacts of COVID that gathered a bit more steam in the form of turnover and time to fill roles, made it a challenging quarter. But in the quarter, we did make some progress on McPhilemys, albeit slow, but progress nonetheless in the formal approvals process. We're still confident there's a pathway to get our project approved. It's just taking time. Our first full quarter from Tropicana, which was delivered as planned, We made progress at the Gardenwell South underground project and that's clearly gathering momentum to be more than we thought. Excitement is certainly building around the Gardenwell main potential area as a whole new potential high-grade production zone. It's been a tough operating quarter for Regis and we and the WA industry in general, I think, and certainly resources. isn't out of the COVID woods yet, but at least we are on a planned path forward. Hopefully we'll see some clear air on this in the new year as the government strategies to open up borders gather traction and we can start to access and rely again on the very important element of our industry's workforce that comes from interstate. But despite the near-term challenges, the company's bones are solid and they're growing. That's just talking through some of these growth potential illustrates. If we look beyond a single quarter or two, we can still follow in our plan of growth and growing our life as a potential profitable business producing at a rate of half a million ounces a year with an oil and sustaining of under $1,000 US, almost 5 million ounces of reserves and over 10 million ounces of resources. So a challenging quarter. it's still clear we have a great future in front of us with more potential being opened up. Alright, so look on that note, I'll hand it back to Darcy and we will look to deal with any questions that people would like to ask. Thanks Darcy.

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