Regis Resources Limited

Thank you for standing by and welcome to the Reduce Resources Limited quarterly update briefing. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. I'd like to turn the conference over to Mr. Jim Ayer, Managing Director and CEO. Please go ahead.

Thanks, Nick. Good morning, everyone, and thanks for joining us on the Regis Resources September 2022 quarterly update. First of all, I'd just like to introduce who else is sitting around the table with me. We've got Ben Goldbloom, Head of Investor Relations, Stuart Goula, who is our Chief Operating Officer, and Anthony Rokicki, who is our newly minted CFO three and a half weeks into the role. Welcome to everyone, and a special welcome to you, Anthony. Thank you. Look, the September quarter was another one of reliable and planned business performance for Regus. First, if we look at safety, a lost-time injury frequency rate reduced to arguably a sector-leading level of 0.6. A pleasing result, but look, as we reflect on the tragic industrial fatalities that have occurred in recent weeks in the mining industry, This is a very clear reminder that as individuals and as an industry, we have to remain vigilant. We can never afford to rest on our laurels. We need to be proactive and even more so now as we see the potential for elevated risks where access to experienced and skilled personnel remains tight. On another front, we released our 2022 sustainability report a few days ago on the 25th. And also on the sustainability front and cost reduction front, we approved a nine megawatt solar farm at Duketon earlier in the September quarter, and we're expecting that to come into service middle of next year. Across the business, we saw gold production and costs delivered to plan as the improvements made in FY22 continue to be realised. For the September quarter overall, we produced 114,831 ounces of gold, at an all-in sustaining cost of $1,782 an ounce. Now, while labour availability and inflationary cost pressures have shown some stabilisation, they do remain at elevated levels and remain an area of risk in our business and the broader industry, of course, as we all know. And we continue hard to work on managing these risks. Notwithstanding these, we've maintained our guidance for the year noting a number of factors that are planned to deliver a stronger second half performance. In line with this outlook, cash generation is forecast to increase in second half, and with this positive outlook and a comfortable balance sheet, the Board was pleased to declare a fully franked dividend of $0.02 per share back in August with our full year accounts, and this will be paid this month. In fact, I think it gets paid tomorrow. Looking more closely at the operations, Duketon was on plan at 78,000 ounces, all in sustaining 1,996, while Tropicana delivered its best quarter since Regis' acquisition of 37,000 ounces at an all-in sustaining of 1,243. Duketon North improved production to 23,000 ounces at an all-in sustaining cost of 2,042. and this was driven off better oil presentation from Coopers, Gloucesters and the Mullart Pits. All things being equal, we expect to see cost decrease at Duketon North through the year as the total waste movement starts to reduce in the second half. Duketon South delivered 55,000 ounces at 1977 oil in sustaining, in line with expectations. Production was lower than the prior June quarter with a couple of factors impacting the short term. one being rosemont underground mining lower grades as it mined through sections of low-grade stopes this is all part of the planned schedule we also experienced consistent not really deluge type but consistent wet weather which caused some delays to surface haulage but this is very short-term impacts however what we did see was that this weather caused some geotechnical instability in oxide transition zones in our rosemont north pit which required some rescheduling of production and moving working around that This has delayed some ounces, but only to later in the year. I would comment, as I think I have in the past, the Rosemont Underground, and in fact Garden Well will see the same when it comes online over this year, will see mine grades move up and down as schedules dictate. However, over the medium to longer term, the grades will revert back to reserve grade, as you'd expect, over the life, and our grade control, which is performing well, is reinforcing this view. Most pleasingly, our drilling to extend the Rosemont underground is returning results that support potential lateral as well as depth growth of that underground mine. Later in November, we will be putting out our biannual exploration report, which will have considerably more discussion on this and some of the other points which I'll touch on today. At Tropicana, as I mentioned before, we delivered our best quarter since Regis acquisition. 37,000 ounces at 12.43 an ounce all in, sustaining. Open pit mining had clean access to high-grade ore at the bottom of the Boston Shaker Pit, and the underground once again delivered to plan. We know Boston Shaker Pit will finish up in the December quarter. The next key ore source from open pits, the Havana area. Havana cutback has continued well and progresses, and we'll see increased gold production ore from Havana with greater presentation of ore as the year progresses. Tropicana just continues to deliver reliable and strong cash flow. We're expecting this to continue for many years and remain excited about its growth prospects, particularly laterally across the Havana underground and down plunge from the existing underground ops. On the financials, We sold roughly 106,000 ounces at an average price of $2,294, and that's after taking into account the impact of hedges. This generated a total of $76 million in operating cash flow with approximately $19 million from Duketon and $57 million at Trott. The reduction in operating cash flow relative to the prior quarter was primarily driven by the lower production. Capital expenditure. was $68 million and we saw 52 of this on growth. Approximately 35% of that 52 was underground development, mostly associated with development at Garden Well South and associated infrastructure. The remainder of the growth capex was predominantly around Havana. If you look at Figure 2, Sorry, I forgot to mention at the start, if you have access to the quarterly report which we released, I'll make reference to some of the diagrams. In Figure 2, the cash waterfall, you'll see that during the September quarter the company paid significant one-off costs equating to $60 million, totaling $60 million. These related to the stamp duty for the Tropicana acquisition of last year and also the purchase of a rural property related to the development of McPhilemys, both of these which were flagged in the June quarter results. It's worth noting that the rural property has since been sold last week for $20.5 million, with funds from the sale expected in the current December quarter to be back into our accounts. The property purchase was undertaken to lock in a key high-voltage line easement required for the McPhilemys project. The rural property came on the market midway through our negotiations for the access easement. So we undertook to purchase and subsequent sale to lock in the easement and avoid what we considered to be a material risk of a costly negotiation for the easement with the new third party owners or alternatively having to go a much more expensive reroute. On growth, growth projects made good progress during the quarter. Garden Well South, our new mine starting up, progress was made with raised boring, raises, ladder ways and level development. First ore from development was delivered to the process plant in the September quarter and pleasingly performed as expected. This new mine is in its very early stages and the experienced team is working through the usual start-up learnings. Gardenwell South has included considerably wet ground requiring well planned dewatering and also we see buggy ground in some areas which just requires some learnings as to how to safely mine through that but the team's getting on top of that and while the team works through these protocols and learnings I'm pleased to say that we're still expecting first stoke production later on in this December quarter with commercial production expected in the second half. Also at Gardenwell Underground, the exploration decline into the Gardenwell Main area, which I previously highlighted as an opportunity, was approved. The prep work commenced and, in fact, mining development of the Stage 1 of that is underway. Figure 4 in our release shows the planned decline, schematic, roughly, approximate design, but it also shows the proposed drilling program. The key thing to note in that is, as you can see, the drilling program extends all the way across. We think that whole area from the underground south area all the way through to the main underneath the deepest part of the pit is all high potential exploration area. This decline will be used to establish drilling platforms and undertake exploration drilling to target these potential areas. The first area we should be getting an assessment of within the next six months. That decline can then be used as the initial access for new mining areas as they get delineated. We view this area as having some of the best, most exciting prospects in the potential to build on our existing underground production plans. At Tropicana, the Havana underground pre-feasibility study and Havana link continued. Figure 5 shows you the general layout of that link drive. The link development will extend from the existing Tropicana undergrounds towards Havana and will be used, one, to access high-grade mineralisation between Tropicana and Havana. It will allow infield drilling, once it gets there, to inform on the Havana PFS and also provides in the future potential additional infrastructure benefits Tropicana underground. Just like Garden Well and Rosemont undergrounds at Duketon, we view the undergrounds at Tropicana as having very exciting potential to grow on the existing plans, both laterally and down plunge. Regis will provide more information and context on this in the biannual exploration update that I mentioned earlier that will be later in November. Finally, at McPhillamy's, I'm pleased to say we've now completed all outstanding requests for information and our application now sits with DPE Planning for final consideration. So pleasing progress there as well. So wrapping up, before I hand it over for Q&A, the September quarter, what did the September quarter bring us? A solid start to the year, reliable production at Duketon, increased production at Tropicana. Look, with inflationary cost pressures have sown some stabilisations. They do remain at elevated levels and, as I mentioned before, remain an area of risk in our business and for the broader industry that we continue working hard on to manage. And whilst costs were elevated in this first quarter, we remain on track to deliver full production and cost guidance in FY23, noting, as I did, a number of factors that are planned to help deliver that stronger second-half performance. Finally, we had good progress on our growth projects at Garden Wall South. Exciting start to Garden Well, Maine. McPhillamy's progress as well. And also, last but not least, very pleased that we approved and installation is underway at the solar farm at Duketon. So on that note, I'll hand it back to Nick and open up for any questions. Thanks, Nick.

Thank you. If you wish to ask a question, please press star, the one on your telephone, and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're on a speakerphone, please pick up the handset to ask your question. The first question comes from Alexander Papiano of Citi. Please go ahead.

Hi, Jim and team. Two questions from me. Thanks for providing additional color on some of the key metrics. Noting your earlier comments on the variable underground grade at Rosemont and Gardenwell, in what timeframe can we expect underground grades to move towards that reserve grade of 2.8?

We're expecting the grades to improve this quarter.

Perfect. And then second question, can we expect a similar DNA charge of 808 going forward?

Look, I think that's, with what we're looking at at the moment, that's as reasonable as we can, guidance that we can give. I mean, we don't normally give guidance on DNA, but that's what I'd say at the moment. Perfect. Thanks a lot, Pasadena.

Thanks, Alex.

Thank you. Next question. We come from Andrew Bowler from Macquarie.

Please go ahead. G'day, gents. You commented on the $52 million of growth capex in the quarter. That's clearly above the annualised run rate of that Zirka 150 number. I guess that's mainly Tropicana, but can you just provide us a bit of an update on how that capex profile might look for the rest of the year?

Well, we haven't changed the... guidance on our growth. There's definitely, I mean what we'll see at Tropicana as Havana moves, as Havana pit moves into what would be commercial production, which we're expecting at the moment to be very early in the new calendar year, so early in Q3, basically that capital will not be will not be deemed as being growth and will then be deemed as being sustaining and we've already factored that into our all-in sustaining cost guidance for tropicana i mean so basically you know what we'll see is that um the growth capital at trop will drop right away but the all-in sustaining cost will lift um but it won't you can't you can't you've also got to recognize that production will grow as well because as havana comes online that's where we get more tons and more grade. So while there's a, you might say, there's a negative because there's now, you know, it stops being growth and starts to become sustaining, it's also got a larger divisor under it because the production lifts with Havana pit, high grades and tonnages. In terms of other areas, you know, at the moment there is the key area of... of growth capital still sits around Garden Well and that will sort of run off the back of commercial production. We haven't, you know, things that we may end up changing our guidance might be, for example, we're currently considering Commonwealth up in Duketon North to see whether that might be a viable additional pit source and if that came on that would require a little bit of set up cost which we haven't got in any of because those ounces aren't in any of our guidance it's not in any of our costs but you know that'll be a good story for us because it's more production but at the moment as I described it is as it stands yeah no it sounds like it's pretty unchanged from previous commentary

Just back on to McSillamy's, I mean, I sort of have to ask, it seems like there's some pretty decent milestones ticked off during the quarter, you know, the creation of that specific purpose access licence, potentially providing the pathway to get the surface water licensing. Can you add some more colour around that? I mean, I know timing's sort of, you know, been a bit of a dirty word for this project, but is there any more...

information that you have that that may sort of affect our view or is it you know just still wait and see on the films yeah uh good question um uh if i could take you literally and say how could you describe it can i put some more color around it um i would probably six months ago have frustratingly been describing my color around it as being red with a tinge of yellow, but now I'm certainly much more positive on the green side. Look, at the end of the day, timing on the decision and recommendations from the departments is something that's outside of our control. The pleasing part for us and what we consider to be quite a significant step forward is that we have no outstanding queries to respond to uh so um that's not to say that we might not get another one as as um as the department of planning starts to uh come in and finalize its views on its recommendation um we're not aware of anything at this point in time so you know we take that as being positive uh certainly a significant positive and you know as i think i've mentioned you know we're also um pleased with the progress but we're still waiting on the outcome of the uh section 10 as well so i think you know from where we were um on the last call that we had it's definitely become a um more of a grainy tinge than a red tinge but in the end you can't do much and you know i'll be i'll be a pleased pleased md when i've got um something more uh more clearer in my hands, you know, in black and white, but I'm certainly feeling, I'm certainly pleased with the way it's progressed.

No, I certainly appreciate the colour analogy and it sounds like it's, you know, not many roadblocks left. No worries.

Thank you. The next question will be from David Cote. Bell Potter Security. Please go ahead.

Morning Jim, morning team. Thanks very much for the call this morning. Hope you're all well. Just quickly, I just wanted to touch on the costs at Duketon. You've got a 25% reduction to bring them back into the guidance range. If I picked it up correctly earlier, Jim, it's a reduced stripping ratio, improved underground grades, Are they the kind of key drivers of bringing those costs into the guidance range?

Yeah, so if we look at it in two parts, because if we look at Duke to north, our plans see a very clear reduction in the total material moved, which is a key contributor to oil and sustaining costs. The biggest lever of sustaining costs is waste movement for an open pit anyway. If I look at if i look at what we moved as total material moved in um at juked north in the first quarter relative to what we'll be moving in the in q4 it's um it's less than half but basically uh at the moment you know we started to run run down to the end of that uh waste movement phase and you know uh as i've the same um you know it will we will see the gold production still stays at its current level, but the cost burden of carrying that extra, whatever it is, 3.5 million BCMs that we moved last quarter will be significantly less than that. Now, that's on the basis that that remains our plan. As I said, the thing that we would look at there would be... if there's an additional pit that we bring in, but that's a completely separate justification, right? Certainly on Duketon North, the costs are expected to be driven coming down by way of that lower TMM. In the south, it's all off the back of increasing production. We'll see Garden Well South come in We will also see some of that high-grade material from the pit that was impacted by that geotech issues with the wet weather, we'll see that material starting to come back into the feed as well. That'll lift our production and that drops the divisor. Duketon North is about reducing the overall cost because the TMMs come down. Duketon South is more around production levels increasing and reducing unit costs from that point of view.

Okay and you mentioned getting back to the 2.8 gram reserve grade. Reading the commentary it sounded like that was going to be a bit more variable as you sort of got the underground ramped up and high grade and low grade stoves but just from what you've was saying a minute ago to Andrew, I think, but that 2.8 gram reserve grade is going to remain pretty steady once you hit it. Is that correct or still going to... No, no, no.

It won't stay steady once we hit it. I guess the point that I was trying to make on that is that these mines... I mean, we're yet to really get into any kind of rhythm at all with garden well... because we haven't even started production. You know, we've got the drilling on 8 and 9 level, which will be our first production area, which are pretty, you know, a couple of scratchy stoves here and there. We don't get down into the meat of the ore body until next year, next calendar year, where it's a lot more consistent. But, you know, our experience tells us that at Rosemont, just because of the way we tend to manage... ..the schedule is managed... It goes in surges, you know, for a couple of months we'll be producing out of the high-grade area while we're over in the Duketon South area developing stopes and then we'll flip and we'll move, you know, we'll finish production in the high-grade area and then we'll move back to the lower-grade area. And so what that means is that you tend to, you know, can go for a couple of months where things don't look great but, you know, they average out overall. I mean one of the interesting things that we're seeing at Rosemont is this area called Rosemont South which has got some pretty decent grades in it so that if that starts to hang together like we hope it will that might help us do a little bit more of getting a more steady feed grade to the mill. But at the end of the day it's what's best for the schedule so we just manage it that way.

Cool, understood. And again, I guess sort of just on that sort of the variability of that outlook, you know, big uplift in production at Tropicana this quarter. And from what you're saying, we should expect some of those capital costs to go more from growth to sustaining in the second half of this financial year. But that production rate, it's obviously, you know, great to see that up. Is that sort of still in a bit of a bumpy kind of, ramp up phase as well, or are we starting to get to that, see that sort of steady state in between that 450, 500,000 ounce annualised run rate on a 100% basis coming out of Tropicana from now on?

Yeah, I think what we're expecting to see as we transition from the Boston Shaker open pit to the Havana open pit, there'll be a quarter or so where we just see some volatility. or some variability and then we'll be much steadier towards the back end of this year.

Alright, I'll pass it on. Thanks very much Jim. Thanks Dave. Thanks for your questions.

Thank you. The next question will be from Patrick Collier, Credit Suisse Limited. Please go ahead.

G'day Patrick.

You might be on mute.

Patrick, your line is open, and you're next to ask a question. Is your line on mute?

Sorry, can you hear me now? Yeah. Tech issues. Just saying, yeah, morning, and just following on from Dave's first question on the costs, specifically focusing on the numerator, so you called out a reduction in mining costs at Duketon North. But how does that compare to the additional costs that come in? You talked about Tropicana growth capital converting into sustaining capital in the back half of the year and then I guess Garden Well Underground also potentially increased absolute costs. So just weighing those two together and whether there's anything else to consider that might fall out of the absolute cost base across the remainder of FY23?

Yeah, look, I think if you look at our guidance, broadly speaking, looking at Duketon North, our all-in-sustaining costs are obviously sitting above our guidance range for the quarter. And we're anticipating that that will come down because, you know, a key driver of all-in-sustaining, the total material movement, will just sort of start to fall away. So that's one that's coming...brings it down. I think if you look at the oil and sustaining costs for for Tropicana which was $12.43 that's actually I think sitting below the guidance range and so we're as we're anticipating that the oil and sustaining costs for TROC will start to lift so they're both actually doing I suppose what we were expecting them to do in this first quarter, reflecting the sort of very short-term nature of three months of activity. Yeah, certainly a key element of the Duketon South costs coming down is the elevated production. You're right, there's certainly... That will come with costs from the underground, although... you know garden world south is a little bit uh a little bit more of a bulky approach than um than rosemont so we're anticipating that will be a bit better uh costing on a cost per ton basis um but we're also factoring anticipating that there'll be some uh softening while we don't see softening in the inflationary costs as we are assuming in that there's a bit of a drop down in um in fuel prices as well which we'll see some flow through and if that doesn't eventuate then obviously we'll keep the market informed as to as to what impact that might have okay thank you yeah so it sounds like the fuel price might be uh pivotal so i suppose can you remind us what um firstly what percentage of cost broadly is exposed to that and then also what you're assuming over the remainder of the year yeah so um What I've done is I've talked about the prior cost for last year. So last year we used about 100 million litres of fuel across the Duketon business. And probably half of that was in power generation and half of that was in earth movement. And, you know, you can do the maths and figure out that if the fuel price goes down by 10 cents, You know, well, there's, what, $10 million less cost per ounce for the year over what, I don't know, you know, so 350,000 ounces, whatever number we want to put in there. You can see that that's, you know, what is that, $40 an ounce, something like that. It is, I think, in round numbers, it's probably around 12% to 15% of our overall costs. um i have to check that don't quote me on that one um unfortunately it's moved a bit uh up since um but um and our current assumptions on uh the fuel price going forward i think we average what is it 47 and a half that's that's our average assumed for the rest of the year

Okay, that's very helpful. Thanks for that. I'll pass it on.

Thanks. Thanks, Patrick.

Thank you. The next question will be from Alex Barkley, RBC. Please go ahead.

Thanks. Morning, Jim and team. You mentioned you don't expect to pay any corporate tax this year, and you're also looking at... your tax position FY21-22. Can you talk us through why you're not expecting that tax payment and what the potential extra refund might be?

Okay, so I'm going to put him into the limelight and hand that over to Anthony for him to answer that question. Over to you, Anthony.

Thanks, Jim. G'day, Alex. Look, we've got... There's a couple of benefits that potentially will come our way from... Mainly, we'll be taking advantages of the allowances that we're getting now. For predominantly the FY22 year just gone, there'll be some benefits from the temporary full expensing allowances that we can capitalise on, where we get to take... quite a significant amount of immediate deductions for that window that's been open for that sort of couple of years or so. Look, more importantly as well, we're focusing on the benefit we'll get with cash refunds via the lost carryback allowances as well. so that's moved us from looking at that now with the types of capital costs that will be immediately deductible in fy 22 that's moved us to a position where we're reasonably confident that we'll be able to take a cash refund through those allowances which is and also as well removes our provisional tax payments that we would have ordinarily made over the course of this financial year.

Okay, so you're saying you might actually get some refunds during the course of this year, but still determining what that might be?

That's right, yeah, we're working through that now.

I think that's what we've... We noted that in the report, Alex. We think that it's a reasonable opportunity for us. So we're taking advantage of the shadow that we get as well from the Tropicana acquisition, which is helpful. All right. Thanks very much, guys. Thanks, Alex.

Once again, if you wish to ask a question, please press farther than one on your telephone and wait for your name to be announced.

no further questions at this time i'll now send the call back to mr mayer for closing remarks okay uh thanks nick um i just like thanks everybody for uh joining us on the call and uh once again welcome anthony to the team and if anybody's got any follow-up questions or anything that they'd like to ask as you know we'll do our best to answer them um as we can with disclosure etc please give us a call get in touch with ben and we'll do what we can all right thanks everybody have a good day that does conclude our conference today thank you for attending you may now disconnect

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