Regis Resources Limited

Good day and welcome to the Regis Resources half-year results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. I would also like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Jim Beyer, Managing Director and CEO to begin the conference. Jim, over to you.

Thanks, Paulie. Good morning, everyone, and thank you all for joining us for the Regis Resources December 22 half-year financial results. I'm just going to be referring to the slide pack, which I think if you're web-streaming, you'll see on your screen. I do understand it's a little bit delayed, so it probably wouldn't hurt if you've got your own copy sitting in front of you. I draw your attention to the disclaimer on slide two. and now, pardon me, ask for it to be on slide three. Look, the six months to the 31st of December have certainly provided some challenges for us, as not just us but across the industry, and we are pleased with the progress that's been made during the period. We now feel the company is well positioned to realise improved profit and cash flow margins in the second half of FY23. I do apologise. I did mean to say as well that I'm joined this morning by Anthony, with Anthony Rakiki, our Chief Financial Officer. So having said that, I'll now hand over to Anthony, who's going to give a rundown on a little bit more of the detail on the financials, the physicals and the financials. Thanks, Anthony. Over to you.

Good morning, everybody, and thank you, Jim. If you're looking at your slide packs, I'll start by bringing your attention to slide number four, which shows a summary of the key physicals, and we can see that the period delivered record half-year gold production, and that also translated into record gold sales revenue, which we'll see a bit later on. Period on period, our open-pit mine saw a reduction in the stripping ratios, and we expect to see that again going into the second half of FY23. At our underground mines, Rosemont continued to mature, and Garden Well fired its first The mills continue to perform well with stable throughput and recovery. In the second half, we're expecting a further increase in gold production as Garden Well Underground at Duketon and Havana Odin Pit at Tropicana reach commercial production in the coming months. Now turning to slide five. Slide five is a summary of the half-year results comparing to the December 21 half. And it shows the record gold sales revenue resulting from the gold production that we spoke about. Net cash flow from operating activities increased to $148 million despite the inflationary pressures that we're all experiencing. And the underlying EBITDA was $197 million. Additionally, the company made net realisable value write-downs to inventories of $19 million in the period, which is the difference between the underlying and statutory measures. On to slide six for the cash flow movements during the period. This chart highlights the investment being made into the future of the company. $180 million was invested across mine development, exploration and the McPhilemys project, as well as other property plant equipment. These investments are being made to reach the target of a 500,000 ounce per annum producer. The company finished the period with cash and bullion of $151 million. With strip ratios decreasing and gold production increasing, cash flows are expected to look much better in the second half. In addition to the increase in cash flows from operations, we're also expecting a $67 million tax refund in the second half. I now turn you to slide seven, and slide seven shows a reconciliation of the underlying EBITDA of $197 million to the statutory net loss after tax of $30 million. In line with the cash flow expectations, operating profit is also expected to increase in the second half, as we see increased production from Garden Well Underground at Duketon and Havana open bid at Tropicana. Moving on to slide eight. It discusses our balance sheet areas and shows that it's in pretty good shape. As far as debt goes, we've got $300 million of a secured debt facility, which matures in May 2024. Net debt at the end of the half, 31 December 22, was $149 million. We've commenced the process of refinancing our debt and we're in the process of appointing an advisor to assist in this critical piece of work. I'd also note the options for refinancing the debt will consider the funding requirements of the MCFILMS project. In other treasury management, I note that we continue to work down the hedge book and we finished at 31 December with 170,000 ounces outstanding. We'll keep delivering into that program over the next 16 months as they're scheduled. Thank you, and back to you, Jim.

Thanks, Anthony. Moving on to slide nine. First off, you can see that we've left our production and cost guidance for the year, full year, unchanged. We are expecting, as I think we have noted before, we are expecting that the gold production in the second half will increase. That's part of our plan, and as a consequence, The unit oil and sustaining costs will decrease in the second half, which brings it back into line from where it currently is. Thanks to the very strong inflation that we're experiencing over the last period, we are expecting that the AISC will finish at the very top end of our guidance. Look, whilst on the subject of costs, The company has certainly seen some recent softening in inflationary pressures, primarily I think really with the recent easing of fuel price. However, we note the risk of increasing cost environment remains in other areas. As we've noted already today, we are expecting a stronger second half and this really is setting us off on the next phase of production. and cash flow growth as we target our plus 500,000 ounce per annum target, as you can see on the graph on the right. Moving on to slide 10, I'll just touch on McPhilemys, our Tier 1 asset in New South Wales. It's got the capacity of producing upwards of 200,000 ounces a year over a 10-year mine life. As we note there, the public hearings for the New South Wales Independent Planning Commission, the IPC, were completed between the 6th and 8th of February, just a couple of weeks ago. This process now is in its final stages of determination by the IPC and we are anticipating that they will make that determination in the coming months or so. Looking beyond the permitting approval, the feasibility study and the funding plan is expected from our point of view, we're expecting to release that late in 2023 at this stage. Moving on to slide 11 and wrapping up, you know, the investment case, we have a strong financial platform. We're generating, we will be generating increasing and robust cash flows from our, as our new operations or increasing operations come into play. We have a long life reserve and I would note we've also released the Resource and reserve statement this morning on the full information on Tropicana. There's a full report on the Anglo, that's Anglo Gold, released it overnight. The pleasing observation with that is in line with our expectations and the value proposition that we took on. We have seen that the underground resources there not only replaced depletion, but we added another 50,000 ounces onto the life of that. That's at 100%. Our assets are exclusively in Tier 1 locations. We are progressive and making measured approaches with our ESG as highlighted, for example, in the solar farm that is underway for installation at Duketon South. We're now delivering consistently to our plan and we've got a very dominant position on the exploration position across our prospective gold belts. Looking to the future, the Regis balance sheet is strong with low leverage ratios. The business has a growing operating cash platform, and this cash platform can be used to support our multiple future growth options, including the two assets with projected mine lives of greater than 10 years, all within Australia. We continue to be very optimistic about our growth outlook, and in particular around the progress at McPhillamy's. So I hand it back to you, Paulie, and happy to take on any questions.

Thank you to Jim and Anthony for that presentation. And at this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. And your first question comes from the line of Andrew Bowler from Macquarie. Your line is open.

G'day, gents. Good morning. Just a question on the McPhillamy's feasibility study commentary. I think that sort of late calendar year 2023 commentary is Can you just give us the indication of why that is, why it will take so long? Is that just because you want approvals to be locked and scopes to be locked so you can recross from there, or is there other things you're working through?

Yeah, good question. Look, it's a couple of items. First off, the first one that we'd always been working towards was to make sure that we had our permits and approvals in place before we finalised the estimate and move to FID, and obviously that's because we can't be 100% sure of what the conditions are and the requirements until we've actually got them. And, you know, there could be something there that adds time to our project or costs, so we need to wait and see how that looks. The second is that, as we've been working on the project, I've made absolutely no secret of the fact that the cost of the project is significantly more than the original DFS that came out back in 2017. We've seen that. I think that estimate was around $215 million. It's well in excess of that. The water pipeline alone is going to cost us over $100 million. So we've... And we've been doing a lot of optimisation work on that. What we've also found is that there's been a very... Well, there was over the last probably 12 months or so, as we... Where are we now? 20... You know, during the 2022 year, the cost of contractors and the cost of the availability of parts and inputs, steel, iron ore, all of the copper, everything, everything went up and it was really adding a significant cost to the potential cost of the project. So we've made a very conscious decision to hold off and wait to see how those costs move, expecting that the The contractor market and construction market in New South Wales was extremely tight. You couldn't get people for love nor money. And we were seeing 15% increases, for example, in some areas where it was just nothing changed except things just got tight. So we've decided that it's best to wait and let that market cool a little bit, and we're already seeing that. We have seen things like piping and steel certainly ease. We've also seen equipment become a little bit more available than it was. You know, a year or so ago, everybody, you know, everyone was wanting to do projects, and there was lots of froth and bubble around, and so you couldn't get spots on... on factory construction lines. And when you could, the supply and demand meant that you were paying top dollar. That certainly eased a lot. We're seeing big electric motors and gear like that being more readily available. All of a sudden, where you had to wait two years for something, it's now available in a much shorter period of time because the original purchaser has dropped off the perch. So, yeah, we've made a conscious decision to... to hold off and there's also some more work that we just want to we want to do some more geotech work on the site to make sure that we've got that squared away we've made some assumptions and we think that those assumptions are probably a little bit overly conservative so we want to go back and do some more geotech work on drilling around where the foundations are for plants so you know that's a pretty long-winded answer which they usually are but There's a fair bit going on in the reasoning while we're sort of holding off on finalising that work. All positive reasons, frankly, in the end.

Very useful. Thanks for that, Jim. Just the last one for me, probably more for Anthony. DNA, obviously, you flagged it in your quarterlies and whatnot, but it seems elevated in recent times compared to previous pair-ounce DNA. Can you just Give us some commentary about how you're thinking about that in the second half and potentially over the next couple of years.

Yeah, certainly over the next half, a bit harder to say over the next couple of years at the moment, but over the next half I think we'd see D&A largely continue on the trajectory that it's already on. Part of that amortisation is also, or includes the amortisation of deferred waste in which You know, we do have lower stripping ratios that we expect to get in the second half, so we'll continue to draw down or amortise that previously capitalised waste as well. So expectations at the moment is that for the rest of the financial year, we'll maintain those levels again.

No worries. That's all from me. Thanks, guys.

Your next question comes from the line of Alex Barkley of RBC. Your line is open.

Thanks. Good morning, guys. Question on the Tropicana resource. Just on the broader opportunity underneath the Tropicana and Havana pits, we perhaps didn't see too much added in this update. When should we be expecting some of the results from that drilling? I mean, even if it's just at an inferred level?

Well, the work's underway. Underneath the barn is probably a little bit more long-dated, but certainly the work underneath Tropicana, I would expect to see some more information on that coming through on the next round of results in terms of, you know, resource addition and potential reserve addition. Of course, that's now a year away. You know, we will no doubt be providing... on how the drilling itself is looking and I guess making some, what would you call it, qualitative commentary around that. But in terms of the next quantitative update on how that all looks, unless all of a sudden it went up tenfold, which it's not going to do, it's going to be a steady, steady roll, I'd expect the next time we get a quantitative update on that area would be this time next year. But as I said, qualitative information will come through. You can rest assured that as we see good information, we'll be letting you know.

Yep, no problem. And just the final one on the cash tax, I think maybe you'd flagged before it could be a refund in the second half and maybe you're not required to pay heading into FY23. Is there an update on that situation?

Yeah, so the $67 million that's coming in is an update of the finalisation of what we'd already reported back at the quarterly. So, you know, we'd already booked 52. It was in the June accounts. We did a bit more work by the time we lodged the... The tax return and with some additional immediate deductions that we can take, the number managed to get up to 67, which is great for our cash flows. Look, what does that mean? Potentially because the temporary full expensing and the lost carryback benefits are still open, that we could have another year where, again, we don't have a tax return payment outflow, we may benefit from taking those immediate deductions and use those tax losses immediately rather than have to kick them down the road.

Yes, okay. So you mean like a year from now or are you talking sort of potentially FY24?

Potentially FY23. So the next tax year that we're moving forward from the refund year, FY23 potentially also will not be a tax payable position. I couldn't tell you now, Alex, if there's a refund, how much the refund would be, but just going off using the temporary full expensing benefits that we're getting, it's likely.

All right, no, that is helpful. Thanks very much, guys. Thanks, Alex. Your next question comes from the line of David Coates of Bill Potter Securities. Your line is open.

Good morning, Jim, everyone. Thanks for the presentation this morning. Just a quick one on the financing. That's currently secured on Tropicana, if I recall correctly, but with refinancing, you're looking at... sort of a corporate facility and how do you envisage McFerrin is potentially tying into that and any thoughts on hedging with that?

Yeah, I'll let Anthony work through that one. It's his project.

Yeah. So, Dave, yeah, look, typically a corporate facility is always the easiest and the best one, I guess, for a company to use. We're looking at the moment through this going through this refinancing process as to how we can accommodate McPhillips through that. So a lot of that's got to do with the timing of when a more solid position is available on that. But it'll certainly be considered as an option that we build into this process, if you know what I mean, from that perspective. Hedging-wise, look, I guess going into a refinance, it's likely that you will have to reassess all of that book. Extending the period even for the same sort of money would likely invite additional hedging requirements, but if that were the case, obviously we'd be participating in what look like pretty good future forward prices on hedging at the moment. So we'll deal with that when that comes.

Okay. Thanks, Anthony. Cheers.

Your next question comes from the line of Matt Green from Credit Suisse. Your line is open.

Hi. Good morning, gents. I have a couple of questions on me. Good morning, Matt. Firstly, the IPC, the public hearings that were completed a couple of weeks ago. I was just wondering if you can give us some high-level feedback as to how that went. What are the main concerns that are feeding into, I guess, the IPC's final determination?

Yeah, it was a good part. It was an important part of the process, I should say. It was an opportunity for people to from all sectors to voice their opinion on the project, both the proponents and the supporters and the opponents. We took it as for the opportunity to again highlight the benefits that the project gives to the area and also to highlight the fact that the surveys that have been run through the area have you know, greater than 70-odd per cent supporting of the project. I think the last survey was. And support the project, we all strongly support it. 65 per cent. And the... So the key themes that really came through was how are we managing the impacts on the very close Kings Plains community? What are we doing to make sure that we manage water? There are other issues that are afoot in that particular region, so we had some questions, for example, on why our tailings dam was better than other tailings dams that were in the area that had had some issues. Of course, the reason is that ours are downstream construction and the others weren't. It was a chance for people to express their concerns. Some of them were very emotional, some of them were factual, and it gave us an opportunity to respond to those with the IPC and provide our expert opinions on them. It's all part of the process and the balance of things. We were quite pleased with the way that it went over the three days. You've got to understand you're putting a big project in. There are people with different views and that's where they're expressed. The piece that was important for us was everybody understanding that the majority of the local people support the project, and a number of them came out to express that support as well, which we're pretty happy with. DPE opens and closes, Department of Planning opens and closes the presentations, and the key thing that we noted was that they believe that the project is approvable. So...and that's after reviewing the thousands of pages and reports, which the IPC now goes off and considers all of the reports that we've done, prepared, DPEs submitted, and also other submissions that have been made by people who took the time to do it. It was interesting. If you go on the IPC website, you can see, I think, the number of opponent opposing... who were against the project was about 200, but the number online that was supporting the project was 420, which is very unusual to have such a significant number of supporters for the project. So we come out of it. The process has still got to run. It is the IPC commissioners make the determination, but We like to feel that we've done everything that we need to do to demonstrate that this project can be responsibly constructed and takes into account all the number of technical concerns that people raised. So we came out feeling okay, feeling good.

That's good to hear. Thanks, Jim. And I guess you did touch on it in terms of the feasibility study and optimising and you know, obviously costs are going up. But I guess just if we look at the scope of the projects into the PFS, you know, in terms of flow sheet, throughput rates, has there been much change or do you anticipate much change into the feasibility study? Or is it just a case of just trying to optimise updates and obviously update costs and capex to reflect the current market?

No, there's been quite a... The original plant design really... As we started to do over the years, extensive test work, hardness, you know, bond indexes, the front end of the plant was just significantly inadequate. The plant's got a large crusher, HPGR. This material is quite hard. There's two main zones. One zone's hard, the other zone's even harder. So we had to make sure we put in the right hardware in front. As I said, the pipeline alone is probably at least three times what the initial estimate was in that DFS. The power line is quite substantial, although we're pleased to say that we've been able to lock in the shortest pathway. but you know there is substantial at least a doubling of that cost that was estimated back in 2017 at least you know and then you've got the or a doubling of that cost plus the 100 million for the pipeline you know so there's a it has the scope the size of the plant is still the same it's still nominally up to seven million ton per annum But the tiling dams is more substantial for a start. These things are all downstream construction, very large and expensive. The other thing that's also added to the project is there's an extensive amount of surface water management infrastructure that's required on that site, which wasn't previously considered. way back in 2017. So there's multiple dams, collection pumps and infrastructure just to manage flow because we're a zero discharge site unlike a similar plant that might have been built in WA. So even the rainwater has to be managed that hits the site. So that's all added to the cost and it's also added to the time. Current estimate is that with all the extra time required to establish discharge management or ensure that there's zero discharge on the site, means that the project, which normally we'd look at and probably say takes about 18 to 20 months, will take us 24 months to build from first sod to first bar. So there's a lot going on there, but it's still a great project, right? It's still 2 million ounces and it's a... largest undeveloped gold deposit currently sitting in Australia. But we've got to make sure that we get it right. Yeah, thanks, Jim.

And yeah, so it sounds like nominal scope has not changed a great deal. It sounds like CapEx could be, I suppose what you just said there, perhaps 500, 600 million. How are you weighing this up, just given the risks and I guess the current environment we're in How are you weighing up the potential to buy other struggling assets out there versus building this asset?

First thing, I'll just go back. The scope has changed a bit. That was my point. There's quite a few things that have been added in that's added to that cost. that wasn't there before. It's just the overall size of the plant is still about the same. The wet end of the plant and the dry end of the plant has certainly changed significantly. Coming back to your question, look, you know, we think that the McPhillamy's project is a very solid one. You know, I mean, in this inflationary environment, everything's become a little bit more expensive, as it has across the board, but we still think that the project is certainly viable. Do we measure that up against other investments? I mean, it's part of corporate life, right? You're always looking at other opportunities that might be around you. We like the project. It's a great one to be measuring everything against, but we just continue to look at our options and make sure that when we do, as we move our way through the determination phase of the project and then come into finalising the estimate and FID, that we're confident that we've got all the right costs and we're not going to find that this thing blows out halfway through. That's the most important thing for us.

I understand. I appreciate the answers, Jim. Thanks very much.

If there are any further questions, please press star 1 on your telephone keypad now, and we will hold for a moment for final questions. There are no further questions at this time. I would like to turn the call back over to Jim for closing remarks.

Okay, thanks very much, Paulie, and thanks, everybody, for joining us. As always, if you've got any questions, please feel free to follow up. Drop us a line, either myself or Ben. And I hope everybody has a good day. Thanks for joining us. See you next time.

This concludes today's conference call. You may now disconnect.