Regis Resources Limited

Ladies and gentlemen, thank you for standing by and welcome to the Regis Resources Half-Year Results Conference Call. 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 star key followed by the number one 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, Cezanne, and thanks everybody for joining us this morning. I'd also like to mention that John Latto, our CFO, and Bill Goldbloom, our head of IR, are both on the call as well. All right, so talking through the FY22 first half year results, clearly this has been a challenging first half for us operationally. as I think we've covered a number of times prior to this. But now we're seeing here the impacts of this flowing through into our financial results for the first half of the year. Having said that, some of the results are still quite strong. Our EBITDA, $196 million. I'll just cover off on the highlights and then pass over on to John to run through some of the detail behind these numbers. Our EBITDA margins are still quite strong at 40%. Cash flow from operating activities was $136 million and the cash and bullion at the end of December was $180 million. All of this delivering to us an underlying NPAT of $44 million. Look, while we continue to invest capital in our operations and the recent underperformance of Duketon has put clearly significant pressure on our overall cash flow. And this is reflected in our cash balance at the end of the reporting period. As we look forward, we saw some risks. A continuing cash requirement for these investments, both at Duketon and at Tropicana. We see clear pressures on the cost environment in labour and in some areas on supplies. And certainly in the near term, we see a building risk of COVID here in WA as the board is open and which is an important part of us longer term recovering but it's presenting a near term risk just with the sheer growing numbers of community cases and the potential flow on it that might have into our operations. With these circumstances under consideration and taken into consideration the board has taken a prudent decision on risk and decided to hold off and not declare an interim dividend for the first half of this year. Looking very quickly at slide four, this is primarily a financial discussion, but I'll cover up. Our safety is still pleasingly below the industry average, below being where we want to be. Our COVID management to date, we've had no confirmed cases within our business or on our operating sites. We've got strong managerial positions with diversity. On the environmental front we continue to build on our, catching up on our rehabilitation and we're seeing an increase on that this year, zero non-compliances. So look on the ESG front we feel that our results and our performance here has been quite pleasing. So what I'd like to do now is to get into the meat of this and hand over to John Latto who will talk us through a bit more of the detail on the financial results. Thanks John.

Thanks Jim. If we turn to slide 5 we see a summary of our financial results for H1 and I note the following. Revenue has increased by 22% compared to the comparable prior year period which reflects the new scale of the business with the first full period of reporting with the inclusion of the company's investment in Tropicana. This increase in revenue occurred despite a 6.4% lower spot gold price than the comparable prior year period. and an additional 10,000 ounces were sold into the hedge book with 50,000 ounces sold into the hedge book in the current half compared to 40,000 ounces sold into the hedge book in the comparable prior year period. I note that the impact of selling into the hedges in H1 is approximately $42 million straight to the bottom line. As Jim mentioned we had a strong EBITDA result of $196 million for H1 with a strong EBITDA margin of 40%. We have seen an increase in our cost of goods sold to $427 million from $267 million in the comparable prior year period. A difference of $160 million which I'll talk about more in a moment. We returned an underlying NPAT of $44 million and a statutory NPAT of $26.5 million for H1, with our statutory NPAT being impacted by a write-down of our stockpiles, and I'll also talk more about that in a moment. As Jim mentioned, we are expecting a stronger H2, driven by stronger gold output. I mentioned before that our cost of goods sold has increased approximately $160 million compared to the comparable prior year period. Of this increase, $130 million relates to the addition of Tropicana to our portfolio and $30 million relates to Duketon. At Tropicana we see that a sizeable portion of the $130 million in cost of goods sold is non-cash in nature. I'll talk to three of those non-cash items now. When we completed the purchase price allocation exercise for Tropicana approximately $500 million was allocated to mine properties and this has to be amortised through the profit and loss statement which generated a non-cash amortisation charge of approximately $32 million for H1. We also recognised a depreciation charge of approximately $17 million associated with our 30% interest in the property, plant and equipment at Tropicana and the right of use assets. Finally, we recognised a non-cash write down of our stockpiles at Tropicana of approximately $14 million and that's really arisen because we have to amortise the $500 million component of the purchase price allocated to mine properties through the stockpile calculation. If I look now at Juketon, the $30 million increase in cost of goods sold at Juketon is partly related to increased labour and maintenance costs as well as an increase in reagent unit costs and consumption, particularly at Toohey's Well with its more complex metallurgical material. Moving across to page 6 of the presentation, we see four graphs that show our revenue, cash flow from operations EBITDA and EBITDA margin and they all remain strong despite a challenging half period. Page 7 of the presentation shows a reconciliation of underlying EBITDA for H1 of $221 million to our statutory MPAT result of $26 million. Underlying EBITDA is the EBITDA result of $196 million for H1 with the non-cash inventory adjustments of $25.3 million added back in. The next bar in the waterfall chart shows our depreciation and amortisation charges and you can see that they're sizeable at $149 million for H1. Of our $149 million you can see in the notes to the P&L statement that about $45 million relates to depreciation and $103 million relates to amortisation. If we look first at depreciation, you can see that it's increased to $45 million from $31 million in the comparable prior year period. This increase in depreciation predominantly relates to depreciation on registered share of the property, plant and equipment at Tropicana. Turning to amortisation, you can see that this increased to $103 million in H1 from $44 million in the comparable prior year period. As mentioned previously a significant portion which is approximately $32 million of the increased amortisation charge relates to the amortisation of the $500 million that was allocated to mine properties when the purchase price allocation exercise was completed associated with the company's acquisition of 30% of Tropicana as well as amortisation of deferred waste and some capitalised underground spend. There was also an increase in amortisation charge at the Rosemont Underground at Duketon of approximately $9 million as production increased by almost 80% to 28,000 ounces in H1 compared to about 16,000 ounces in the comparable prior year period. We also saw an increase in our amortisation charge at Duketon of approximately $12 million as we took the opportunity from the 1st of July to amend our amortisation policy to amortising on tonnes mined rather than tonnes milled, which is a policy that is better aligned to the depletion or addition to our ore bodies. The next major bar in the chart shows our income tax expense of $23 million. Now that's been adjusted for the estimated tax impact of the inventory right down for H1 and I'll actually talk about tax more in a moment when we look at the movement in cash and gold on hand across the period. The preceding factors demonstrate how we moved from an underlying EBITDA of $221 million in H1 to an underlying NPAT of $44 million. The final bar in the waterfall chart shows the inventory write-down on an estimated post-tax basis that we have recognised in the current half. Of the $25.3 million inventory adjustment that we have recognised in the P&L statement, approximately $14 million relates to Tropicana That's occurring, as I mentioned, because we need to include the amortisation of the $500 million component of the acquisition cost that was allocated to mine properties through our stockpile calculation. The remaining $11 million relates to Duketon and the majority of that relates to Duketon North where we've undertaken a Duketon North extension. These Duketon North extension ounces are more expensive and although we know they will generate positive cash flow over the life, They do come with a higher strip ratio which impacts the current stockpile cost calculation and requires us to take a non-cash stockpile write down as at 31 December. We will continue to monitor this situation as we move forward. Over on page 8 we have a waterfall chart that shows the movement in our cash and gold on hand balance from 30 June 21 to 31 December 21. Gold on hand is valued at spot at 30 June 21 and also at spot at 31 December 21, so the waterfall chart won't reconcile directly back to the cash flow in the H1 financial report as gold on hand is valued at lower of cost or net realisable value for statutory purposes. The waterfall chart shows that we opened at 1 July with cash and gold on hand balance of approximately $269 million. The second bar in the waterfall chart then shows a strong cash flow from operations of $175 million for H1. This bar is basically revenue from operations, less payments to suppliers and employees other than corporate costs, interest paid and income tax payments which we've broken out in the waterfall to provide some additional detail. The next component of the cash flow waterfall is the capitalised mining costs which started $117 million in H1. and shows that we've made a significant investment in our operations. This expenditure of $117 million includes $22 million in priesthood activities, $32 million in deferred waste costs, $10 million in capitalised underground costs at the Rosemont Underground, $5 million in capitalised underground spend at the Boston Shaker Underground at Tropicana, $13 million in capital costs at the Gardamill Underground as we continue to progress with bringing Duketon's second underground mine online and $29 million towards the significant cutback that's taking place at the Havana Open Cut at Tropicana. The next bar in the Cashlow Waterfall shows our investment in exploration at Duketon and at Tropicana as well as our expenditure at the Macphilemys Gold Project in New South Wales and this has come in at $33 million for H1. Moving on to the next bar in the waterfall chart, we see other capex spend for the hearth, which was $35 million. This includes $8.1 million on fixed asset additions at Tropicana, which includes items like a TSF raise, a bridge repair and a thickener swap upgrade. $6.4 million on underground infrastructure associated with the Garden Well underground. $2 million on land acquisitions associated with the McPhillamy's Gold Project in New $2.5 million on DSO processing upgrades as well as lifters and liners across the Duketon operations and $15.6 million in right of use asset payments across Duketon and Tropicana. Now that's arisen under the recent changes that have taken place for leased assets where we are obliged to recognise some payments that we make to our suppliers as leases where we can direct the use of equipment that's provided by the relevant supplier. The next bar shows corporate costs before general overhead allocations and that's sitting at approximately $14 million for the half. We then show interest and residual transaction costs associated with the company's acquisition of 30% of Tropicana which sat at $12 million and I note that the bulk of that is residual transaction costs that were paid in July 21. We then paid cash dividends of $22 million during H1. And finally, we paid income tax of $31 million during the half, which brings us to our closing cash and gold on hand balance of $180 million at 31 December 21. At this point, I think it's relevant to say a few words about income tax. As I mentioned, we have paid $31 million in H1 for income tax payments. In February, so this month, we received a tax refund of $23 million for income tax paid in FY22 to date and we're expecting to receive a further $12 million refund in H2 associated with the FY21 tax year. These refunds are a combination of the substantial tax benefits that have accrued to the company associated with our investment in Tropicana and our recent lower profitability as shown in our profit and loss statement. Page 9 of the presentation talks to some components of the company's balance sheet. I've just spoken about the tax refunds we received this month and expect also to receive in April, which total approximately $35 million. So I won't go into any further detail on that now. But touching briefly on the debt that we have, as you know Regis took on $300 million in debt associated with its investment in Tropicana. and that had a tenner of three years and so will mature in Q4 FY24. As we look to the capital requirements associated with Macphilemys, we will look at potential options for refinancing this debt. We also continue to make substantial inroads into our hedge book with the balance reducing by a further 50,000 ounces during H1 compared to 40,000 ounces in the comparable prior year period. As at 31 December, the company's hedge book sat at 270,000 ounces, down from its peak of circa 450,000 ounces a few years ago. I'll now hand back to Jim.