Regis Resources Limited

Thank you for standing by and welcome to the Regis Resources quarterly 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 the 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, Darcy. Good morning, everyone, and thanks for joining us on the Regis Resources September 2023 quarterly update. I'm joined this morning by our CFO, Anthony Rikiki, who just managed to get out of being stuck in the lift this morning, so I'm grateful that he's here to be part of this. Otherwise, I'd be on my own. Although, having said that, Ben Goldbloom, our Head of Investor Relations, is also joining us. So first up, looking at our key safety aspect and our frequency rate, our lost-time injury frequency rate is well below industry average, as reported by Demers here in WA, with a frequency rate of 0.7. I would make a comment that we are seeing a slight increase in the less serious injuries, and I think we see that as a bit of a function of the lifting and skills turnover that we're seeing across the industry, or personnel turnover, I should say. So we're obviously keeping an eye on that to make sure we don't let that get too far ahead of us. We're very pleased to start the year with a reliable quarter of gold production and a modest cash build. This is the third consecutive quarter of cash build for the company. And since the December 22 quarter, our cash and bullion balance has increased by nearly $100 million. Now, we're expecting a modest cash bill for the remainder of FY24, and when the existing hedge book rolls off, our cash bill will accelerate and add more than an additional $170 million a year at current spot price. In fact, a little bit more at $3,150. Progress on our growth plans continues with the completion of the garden well exploration decline. The drilling program is making good progress and is expected to be finished by the end of December this year. or its first phase. We'll provide an update on the drilling results in the biannual exploration update before the end of this calendar year. At Tropicana, the joint venture progressed and the Havana underground project to the next phase. Now, the Havana underground project has the potential to add seven years of life in addition to the current underground production, or seven years of additional production to the underground. On the ESG front, we saw more than just safety improvements. We commissioned the nine-megawatt solar farm at Duketon South, which is now delivering a direct reduction in power costs and also on our carbon emissions, a key element in this period, this time now, of the safeguard mechanism. At Tropicana, the joint venture has commenced the site works for the 62-megawatt solar, wind and battery facility. And overall for the quarter, we produced just over 111,000 ounces of gold for an all-in sustaining cost of a fraction over $2,100 at $2,160 an ounce. The September quarter was the first time all of our operating assets were in commercial production and it was pleasing to see them delivered a plan. Just looking a little bit more closely at our operations, the Dutton Gold production was higher than the prior quarter at just over 76,000 ounces for an all-in sustaining of 2180. And at Tropicana, we were just under 35,000 ounces for an all-in sustaining of 1859. Now, it's important to keep in mind that Dutton's AISC includes $227 per ounce of non-cash inventory adjustments. Duke to North production was just under 18,000 ounces for an all-in sustaining cost of 19.25. Cash margins have improved at Duke to North as waste movements have decreased as planned. The majority of mining at Duke to North will be completed by December 2023 as we get to the end of the Mullart pits. Some mining will continue at the Gloucester pit until the middle of next year in June. and this will represent the end of the current reserves in ground reserves. Following completion of the open pit, mill feed will be sourced solely from lower-grade stockpiles and will continue while they generate cash. Once that ends or we don't deliver that, then we'll put the site on a current maintenance and we'll await further confirmation of the new deposits that we're working up at the moment, potential new deposits. At Duketon South, Production was nearly 59,000 ounces for an all-in cost of $2,258 an ounce AISC. Underground mining progressed well. Good development rates were maintained above 3,000 metres for the quarter. In the open pits, mining was a garden well. Russell Spine and Ben Hur, and this will continue through the remainder of this financial year. At Tropicana, we delivered an improved quarter at approximately 35,000 ounces for an AISC of $1,859 an ounce. Now, we realised an increase in the AISC over last year, and I think we've already highlighted this or identified this before, but this is due to a shift in the classification as we move into commercial production and the capitalised waste stops being classified as growth capital and moves into AISC. Importantly, this is only a change in the inverted commas accounting classification, and the cash margins remain broadly in line quarter on quarter. This can be seen by the corresponding material reduction, of course, in the great capital of Tropicana, where spend for the quarter was nominally about $3 million. Following commercial production of Havana Open Pit in the June quarter, access to ore has improved and is expected to continue in the current period. Underground oil production was the highest since we acquired our share of ownership in that asset and deep bottlenecking activities have had a great impact and we look forward to further improvement as the year progresses. So what I'd like to do now is hand over to Anthony to give us a little bit more insight into the financials for the quarter. Thanks, Anthony.

Thanks, Jim. On to the financials for the quarter. We sold just over 106,000 ounces of gold and an average price of $2,560 an ounce, that's Aussie dollars, which does include the effective hedges. This delivered $273 million of gold sales revenue for the quarter. Operating cash flows have been solid again. Overall, we generated just under $97 million in operating cash flows, that also includes the hedging, with approximately $67 million coming from Duketon and $30 million coming from Tropicana. On that point, you had a figure three in the quarterly report, which outlines the cash flows for the quarter. Cash from bullion closed at $250 million at 30 September. You can see that operating cash flows were $138 million. Partly offsetting this was $41 million in hedge losses owing to the delivery of a further 30,000 ounces into our hedging program. You can see that over to the right of that waterfall chart at figure three. Furthermore, we spent $64 million on CapEx, $17 million on exploration and McPhelomys, and corporate and finance costs were $9 million. Regarding our debt, as announced yesterday, the company signed an amendment deed with its lenders to extend the maturity date of the existing $300 million loan facility from 31 May 2024 out to 30 June 2025. The extension forms part of the broader funding strategy for the company's McPhillamy's gold project. Following the expected completion of the bankable feasibility study in the March quarter next year, it's likely the existing loan will be incorporated into a new financing package along with operating cash flows of our own to fund the project. Thank you. And back to you, Jim.

Thanks, Anthony. And it is pleasing to see that within 20 minutes you're over the trauma of being stuck in the lift. OK, so coming back to touching on growth again and our near-term growth plans at all of our assets. I mentioned before, garden well exploration, the decline is now finished and we're feverishly drilling out what we think will become a long, continuous millerised system underneath the garden well pit. The initial drilling program will be finished at the end of this year. and we'll at least be able to provide some progress updates on our biannual exploration report or update, which will be in November, so next month. At Havana Open Pit, we see the production hitting its straps, and later in FY25, we'll see total waste movement start to decrease as we break the back of the stripping, while gold production will remain relatively flat. This will result in an uptick in free cash flow generation from that side, all other things being equal price, of course. At Havana Underground, the project has moved into the next phase. The removal into the next phase was approved. The initial view is that the Havana Underground has the potential to add a new production zone for seven years on top of the existing underground plants, and we're very excited to see this progress in the project. The Havana deposit is following a very similar maturity curve as its predecessors at Boston Shaker Underground and also at Tropicana, and really reinforces why the entire asset is one of genuine Tier 1 assets going around. The value of the underground continues to grow well beyond the reserves as they were two and a half years ago, or the reserves as they were two and a half years ago when we bought the thing. And this ongoing growth that we're seeing in the underground is certainly in line with our views on value at the time. I continue to be really pleased with the fact that we acquired that asset and have it in our portfolio. At McPhilemys, we await a response on the Federal Section 10 application. We remain confident this will be cleared and completion of the DFS is expected to be in the March quarter. A final investment decision in the following quarter will likely follow the release of this study. Look, you can count on one hand the number of development projects with the scale of McPhilemys, and we're very excited to own that and have that in our portfolio as well. On a final note here, I'd just like to thank Stuart Guler, who is leaving us after four years. He certainly made some material impacts on our safety and our operations and helped manage that through the COVID era, something that I think we've all put to the dark recesses of our minds. And next week, I'm pleased to say that Michael Holmes will be joining us as the new COO. Some of you may know Michael, of course, from his time at Oceana Gold. So when you sum up the Regis investment case, we have existing assets that are demonstrating great cash-generating capacity. We'll see a major cash flow inflection point in eight months and two days. with the hedging rolling off. And we'll also see this commencement of the decrease in waste movement, that trough. Look, the reality is, I said eight months and two days, it could be less as we're examining and testing options to bring forward the end of the hedge book and to bake her in the benefits earlier, potentially. One of the few growth... And we also, of course, hold in our portfolio one of the few growth development projects with scale being Philomys. So there's still time to get in while the stock's trading at cheap value. With such a relatively simple... We feel that Regis, with such a relatively simple story, clear production future and cash-generating future that the market will see, and we'll see this outlook reflected in the company share price very soon. All right. So what I'd like to do now is hand over to Darcy, and we're happy to take on any questions that you may have.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Andrew Bowler from Macquarie. Please go ahead.

Good morning, Andrew. Good morning. Just looking at the commentary for Tropicani talk about the open pits delivering more ounces compared to planned. Is that just due to higher rates of mining than anticipated, or was that a beat in terms of the resource model?

Yeah, no, look, I think the context of what we were talking about there is the underground developing is adding ounces and the like. We're seeing, you know, we've seen... We've seen over the last couple of years that Tropicana has been replacing depletion and adding a little bit more. So we're pleased to see that continue and we're certainly pleased to see the potential with the Havana Underground to continue with that by adding in new ounces that are outside of the potential in new ounces that we haven't finalised just in feasibility study of course. So that's the context of what we're looking at there. Yeah, I guess the other thing is we have seen a lift in back or the production levels at Tropicana are back to where people might have seen them a few years ago, certainly prior to when we bought them, as the Havana cutback has hit commercial production. So we are seeing additional production coming from that, but that's what we expected to see. That was part of the... part of our expected value proposition that we were buying into back when we bought it just over a couple of years ago.

Yeah, apologies. I must have read that sentence wrong. But last one from me, just your final comments there about potential to sort of bring the closing of the hedge book forward. Are you thinking of accelerating deliveries into the hedge book, or are you looking at sort of financial avenues to sort of bring the closure forward? Just a bit more on that would be good, thanks.

Yeah, probably more of the latter than the former. You know, you don't want to... You know, if our idea and the options that we're looking at is really, does it make sense to take the book out completely? You know, have we got the capacity to do that? How does our balance sheet look afterwards? certainly our cash generating on a monthly basis at an annualised $170 million, you're adding $12 to $15 million a month in additional cash flow by doing it. So there are a few things that we look at. I'm not sure whether we'd accelerate them. We'd probably just bite the bullet and take it out. But that's an option that we... That's what we're evaluating at the moment. No worries. Thanks. That's all from me.

Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from David Coates from Bell Potter Securities. Please go ahead.

Morning, gents. Can you hear me?

Morning, Dave. Yep, we can hear you.

Right, yeah, no good. Sorry, my line seems to be dropping in and out this morning. So a couple of quick ones. I mean, let's have the March quarter feasibility update and potentially FID June quarter. Are you able to give us kind of any other, any sort of concrete signs on the Section 10 coming through?

I'd love to be able to, but I can't at the moment. We've just been... We've obviously been putting our inquiries into the department and getting the constant response of, we'll let you know. But we're pushing on. There's plenty that we can do as we work to finalise the feasibility study. So we'll just keep pushing on.

Great, thanks. Yeah, understood, understood. In your commentary, you just mentioned the stockpiles at Duketon North, they'll obviously be coming into the mix. Just from the comments you made, it sort of sounded like that's potentially a little bit of a movable feast with the gold price ticking up a little bit. Is that processing run sort of likely to be extended in a higher gold price environment?

Look, You're right. It is very much a moving feast. You know, we... Pardon me. This low-grade... These low-grade stockpiles are exactly what they... As we described them, they're low-grade. They've been building over many, many years. And... At the current price, this time last year or probably 18 months ago, we thought there was viability in it. I think I've always said, you know, if we make a couple of dollars an ounce, we'll do it. But the inflationary impacts on costs over the last 12 or 18 months have made that much harder and basically impossible. Of course, what we've seen, there's a pretty good gold price that we're sitting on at the moment, so that could influence it. I've Yeah, we've got to wait and see how things look in the middle of next year. Sure. Or, you know, probably by the end of the March quarter before we make a call on that. You know, we... The key things for us is just making sure that we're managing the costs as best as we can, and we'll keep running with that over the next quarter or two. And then with that information, we'll also see whether the inflationary pressures have sort of eased a bit. Does it make sense to continue on, or do we just put it into care and maintenance while we wait for other material?

Right, sure. And finally, just on the... Can you give us a bit of a sense of scale of that operation compared to the existing undergrounds at Tropicana?

Yeah, look, I'm a little bit reluctant to do anything too much. I mean, really, it's a conceptual... Well, it's a little bit more than conceptual, but we're still working on the... ..on, you know, really what the options might be in terms of scale, well, annualised production. But there's still... I mean, it's material enough to make a difference to the underground production, which is why we're excited about it. And once we've got a little bit more information, which I'm hoping will be... later next year, we'll be able to sort of expand a bit more and give an indication on the value that that brings.

All right. Thanks very much, Jim.

Cheers.

Thank you. Your next question comes from Meredith Shorts from Bank of America. Please go ahead.

Good morning, Jim and team. Thanks for the call this morning. Can I just follow on with McFeline's? So I'm just trying to work out, you know, if you get delayed potentially and you don't get the Section 10 until closer to the end of the year, say December, does that mean that you're still going to stick to the March timeline for the DFS? Are you going to be potentially reducing the sort of work that you need to do to feed into the DFS? I'm just trying to think about is that a fix? timeline to deliver or whether that could be pushed out and what other work you may need to do after the DFS if you've kind of cut a few corners there to deliver a timeline?

Yeah, look, I think one of the things that we've been talking about is the Section 10 has limited access for us to get some construction cost-related information. I guess, you know, we've taken a view that we'll continue with the estimations, but at the moment we're evaluating just how wide an allowance do we have to make for what we don't know in terms of some of that geotech. If we... So, you know, I mean, in the end, you can set any date for, if you like, you know, within reason, of course, you can set any date for completing... a study, but the less information that you've got feeding into it, the more variables, the greater the range of confidence. So, you know, we'll make a call as we get closer. Are we sufficiently confident that we could perhaps firm or land on a number that's got a couple of unknowns in it, but they're in an area that the risk is quite minimal? Or is it an area that we'd want to get more information before we finalised it. And of course, the subtle difference there is that we might land on it and publish our DFS, but not make FID until we've tightened up one particular risk area. I mean, there's a lot of moving parts in that, so I hope that sort of answers the question that you're trying to get.

Yeah, yeah, it does. refine some of potentially your cost estimations between the DFS and SID and then make a decision with SID with potentially some updated numbers in the meantime between DFS and SID. So I think that answers my question. Thank you. It's a little bit more clarity just on what I wanted to know there.

Yeah, look, our preferences, of course, you do an FS, a feasibility study. We don't want to have We prefer not to have uncertainty in it and say, oh, yeah, we've finished the study, but we haven't finished, you know, we've still got more work to do to final, to tighten up the numbers. That's actually the least desirable situation because then you've got the sort of the worst of both worlds. You've provided a number and you haven't provided certainty. So that's not really what we want to do. We want to make sure, you know, we have to evaluate it as we go. But, you know, we're thinking that, that as we look at some of the detail we're after, actually that the variability that we might have to provide for as a result of not having all of the information might not be that significant. So we're just doing that work at the moment. So I'm trying to avoid saying we're going to come out with a study and then we're going to do more work and refine the number again. That's not what we want to do. Rather than saying we're coming out with a study and then we're going to do a bit more work and you know what, it might go up. more likely our objective would be come out with a study and with a certain range of confidence, and if we feel it's needed, we might do a bit more work solely intended to limit up the potential contingencies, for example, rather than the absolute number.

Yeah, great. That's clear. Thanks very much, Jim. And a second question on Duke and South. the grades were a little bit lower for the quarter, primarily on that, you know, the open pit and the transition and some extra stockpile material. Are you expecting the grades to bump back up over the next 12 months as production stabilises from those new sources and sort of like looking at sort of similar levels to what you have over the last 12 months?

Look, we'd expect... The... I mean, I think if you look at what our numbers were for our production was for the year... Sorry, for the quarter and how that fits in with our guidance, we might... We'll see, as you always do, the grades shift and move around, but we're pretty well, you know, bang on. We haven't made a comment about guidance, but, you know, we're clearly within guidance... And so we might see movements from, you know, I'd expect that we might see mining grades lift a little bit. The milling grades will shift around depending on the schedule that we've got lined up for each month for the low-grade stockpiles that we might be feeding in. So, you know, we have low-grade stockpiles down at Dukes and South as well, and if we have some spare capacity for a week or a couple of weeks, we'll shove low-grade into it just to help keep the mill full. I think if you look at what our numbers are going to be over the year, we'll just see... They're not going to see a spectacular rise in the grade. It'll probably go up a little bit back in line with the previous quarter. But our production will remain reasonably consistent.

Yep, got it. Thank you very much. That's all the questions from me. Thank you very much.

Thanks, Meredith.

Thank you. Your next question comes from Hugo Nicolasi from Goldman Sachs. Please go ahead.

Good morning, Tim. Thanks for the update this morning. I just had a couple of questions on cost but maybe just quickly a follow-up around the hedging piece and closing that out early. If you were going to, as you put it, bite the bullet and close the whole thing out, would that just be simply paying the difference between the hedge price and the forward curve on volumes or is there some extra feed in closing that out early?

I'll answer that one for you, Hugo. Look, it's never quite exactly just the mark-to-market position, because that's always calculated off a midpoint. There's a bit of a spread there that you've got to deal with when you're entering, closing out those transactions, but it's quite immaterial amounts. Insignificant, certainly in the context of the hedge.

Yeah, if you were trying to model the impacts, you'd just take the... whatever the spot price is on today, subtract it off the hedge value of $15.71, multiply it by the ounces, and you're pretty close. You know, so many other things in our business to vary. So, you know, and that's the thing for us that we evaluate. How much does that cost? What's our balance sheet looking like? What's the outlook? And, you know, the value in it. And can we do it without, you know, make a sensible move without putting our... Our near-term liquidity is an issue and we certainly, with eight months and two days and less approaching, it's making the potential for it to be a real option for us is certainly materialising.

Great. Thanks for that, guys. And then just on costs, it looks like relatively low sustaining capex in the quarter. Just remind us of what the timing of that sustaining capex is across both assets for the rest of the year, just with regard to planned maintenance and the like.

Yeah, look, we haven't... There's obviously a weighting in this quarter. I think if you did the simple maths and multiplied Q1 by 4, you'd see we're... but that's obviously impacted by timing and mine schedules and movements to commercial production and those sorts of things. So we're still holding... You know, we're keeping a close eye on whether inflation is pushing any of those unit rates up and whether that's going to have an impact on our growth guidance, and we're certainly not seeing anything to make a decision on that at this point. The other thing that I would add as part of the Havana Underground There'll be a little bit of thought going into what additional extra unplanned development do we need to put in to access that area as part of moving the project into the next phase. Once we've got a bit of a handle on that, if it's material, then we'll let people know, but I'm not expecting that to be anything of substance at all, very low number.

That makes sense. CapEx piece, just shutdowns. I mean, did you have any shutdowns in the September quarter and then broadly what the outlook for the rest of FY24 looks like there?

Oh, yeah, we did. We had shutdowns across the board at Juketon, but I wouldn't see those as being overly material. I mean, they just average out pretty quickly.

I thought the case. And then just this last one from me, just looks like a bit of a step up in mining costs that drop in the quarter. Is that simply just a factor of a step up in underground ore, or are there some other factors there as well?

Are you talking about the oil and sustaining?

Mining costs specifically.

I think, yeah, because we've seen an increase in the proportion of underground production, we're just seeing a bit of an elevation in that. But, of course, we're also seeing You know, the pit, Havana pit, is getting a little deeper and we're moving more material. And, yeah, in terms of... There's no more pre-production at Tropicana that's going off into growth capital or anywhere. It's all reporting into the sustaining costs.

Great. Thanks, Zach. I'll pass it on.

Thank you. Your next question comes from Kate McCutcheon from Citi. Please go ahead.

Hi, Kate. I think the lines might have been mixed up, Alex. Hi, Jim and Tim. Good day, Alex. Can you talk to me if you've seen any further changes in CapEx expectations? At the June quarter, you mentioned that some costs had started to come down.

In where, sorry, Alex?

At McPhillamy's in terms of future cap expectations.

No, I mean, we still, I think we've been saying, you know, this thing's 500, 600 million. It's a little bit too early to make any comment about anything materially coming down. I mean, certainly the pressures that were there 18 months ago have dissipated, but then inflationary impacts have come in through that as well. So... I think we've just got to wait until we see where that number plays out. Great. Thanks.

That's it from me.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Beyer for closing remarks.

Okay. All right. Thank you. Thanks, everybody, for joining us. As always, if you've got any follow-up questions, please give us a call. Contact Ben and we'll do what we can to help you out where we can. Otherwise thanks very much for joining us and have a good day.

Thank you. That does conclude our conference for today.