St Barbara Limited

Thank you for standing by, and welcome to the St. Barbara briefing on full-year 2022 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 the star key followed by the number one on your telephone keypad. I would now like to hand the call over to Mr. Chris Nateland, head of investor relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today. Please note the disclaimers on slide two. On our call today with me is our Managing Director and CEO, Craig Jetson, and our CFO, Lucas Walsh. We will discuss our half-year results after which, as we just said, we'll open the call to questions. With that, I hand the call over to Craig.

Thank you, Chris, and good morning and welcome, everybody, to St Barbara's FY22 half-year results briefing. As always, I would like to begin by recognising the traditional owners and first nations people of the lands of which St Barbara operate in Australia, Canada and Papua New Guinea and pay my respects to the elders past, present and emerging. So today I'll be taking you through our progress for the first half of FY22. I'll celebrate our improved safety performance and progress that we have made improving in the diversity and inclusion in our teams. after which we will discuss our operational results for the first half. I will then hand over to Lucas Welsh, our CFO, who will explain our financial performance. Finally, I will discuss our vision for St Barbara's future and our new aspirational production targets. As always, safety remains number one priority and we are committed to our goal of eliminating fatalities and life-changing injuries. We have continued with our trend in reducing total recordable injury frequency rate, which has dropped to 2.7 injuries per million hours worked. Although this is great to see the improvement, we are mindful of not becoming complacent. To that end, we have made significant advance in our Safety Always Leadership Program, which aims to build a better in-field safety leadership at all levels and encourage regular conversations about finding and fixing any areas of concern. Those that have followed my career will know that gender equality is something amongst a lot I'm very passionate about. So I want to take this opportunity to convey how happy I am that St Barbara being once again included in the Bloomberg Gender Equality Index. This is the company's second year of inclusion, recording significant improvement on performance metrics year on year on all GEI measures. St Barbara has already been recognised in the Australian Workplace Gender Equality Agency as an employer of choice for gender equality for a number of years now. As is the case with safety, we celebrate the great work that has been done to date in this space, but do recognise it's a journey and we have more to do. We have delivered a strong production result of about 133,000 ounces of gold at an oil and sustaining cost of $15.39 per ounce. Our operations delivered $42 million cash contribution after both sustaining and growth capital, a great effort considering all the capital works for the tailings facility at St Berry in this time. For me, the progress we are making within the Leonora Province Plan was our biggest achievement. I'm going to go through that in greater detail shortly. But the work I'm most proud of at this point was the work done by the St Berry team who completed laying of the new deep sea tailings placement pipelines at a time to finish this complex engineering work and deliver the DSTP within six months in the middle of a global pandemic associated with supply disruption issues is nothing short of a great team effort. And with that team effort, our team is able production at Sinbury to commence early in this new year. This demonstrates that we can deliver complex engineering work such as a sulphide project in very trying circumstances. This half we've also moved to reporting our reserves and resources over the calendar year periods. The only changes in the report against the prior one relate to depletion and the change to Tower Hill as an open pit mine which has increased its resource by 600,000 ounces. The first half of this year saw us delivering multiple steps of our Leonora progress plan. The progress we have made on the PFS for Tower Hill led us to select an open pit mining approach to its development. This in turn grew our mineral resource for Tower Hill by 600,000 ounces and added a further 16 million tonnes of ore for processing. This means in a short period of time we will go from having excess capacity in our 1.4 million tonne processing plant to being mill constrained. To accommodate this increase in volume of ore for Leonore, the PFS identified a cost-effective approach, expanded the processing plant to 2.1 million tonnes per annum. A capital outlay of approximately $30 million will see the installation of a new bore mill and other associated de-bottlenecking equipment to expand the throughput of our current facility by 50%. The study also identified a Glencore Albion process as a preferred process for treating refractory ore at harbour lights. This equipment will be cost between $110 and $120 million to install and will uniquely position Leonora to take advantage of other satellite refractory deposits within 200km radius of the plant. We believe we can make the Leonora process plant a hub that could service multiple satellite deposits in the region. On 20 December last year, we announced we had entered into a scheme that will execute an all-script acquisition of Bardock Gold, who own the well-advanced Aphrodite and Zoroastrian deposits. Leonora is uniquely placed to add the value to these deposits as the plant is connected to them via existing road and rail infrastructure. Developing these deposits accelerates our province plan by filling the mill much sooner. We plan to proceed quickly with the development of Zoroastrian. It's a high-grade, free-milling ore body which complements Gwalior as a near-term mill fee. We are initially likely to transport Zoroastrian via road to be treated at Leonora at the rates of around 400 to 500,000 tonnes per annum and aimed to have this production by the second half of FY24 or sooner. Oil produced from a much larger Aphrodite deposit is expected to follow within a few months, coinciding with when we expect the Leonora plant to be ready to process refractory oil. we are getting ready to commence the pre-feasibility studies and construction of both Sarastrum and Aphrodite underground mines. Our exploration team have potentially identified a new mining front at Gualia, which is at significantly shallower depths than our current mining operations. The high-grade intercepts at Old South Gualia are very promising and we are aiming to add them to our mineral resource in the fourth quarter of this financial year. We don't know yet how big this could be or its ultimate ramifications. However, an additional shallower mining front has the potential to increase the rate of ore delivery at Gwalior and add mining flexibility, which can reduce production variability. We have also completed further drilling at Tregobor, where we are targeting a maiden mineral resource in quarter four FY22. Last Friday, we announced the COVID-19 pandemic infection rates across the Daburr group of islands and had significantly increased, impacting both our local community and our workforce in St Berry. The graph on the slide shows how sudden this increase has been. Up until this month, we have been able to manage the case numbers with minimal disruption. We have had in place for some time now a COVID-19 management plan to minimise the risk of infection of individuals. The mine and the processing plant continue to operate, but at reduced rates. The rising of infections is affecting various operational teams and departments in mining, processing and maintenance. These departmental impacts have rippled through the entire operation. Currently we have a third of our workforce in isolation in camp, with a significant proportion of senior management impacted by COVID-19. Cases require constant on-site care, ensuring the wellbeing of our people and community, which also takes considerable management time. COVID-19's effect on the maintenance team has meant we are building a backlog of maintenance issues that will require attention. These will take some time to work through. The mining team has also been hard hit, resulting in a mining ramp-up rate being phased far slower than we expected. At this stage, we do not know when we can get back to full production, full workforce, healthily on the ground. For this reason, it's too early to update some varied guidance that we withdrew last Friday. And with that, I'll now hand over to Lucas Welsh, our CFO, to take you through our financial results. Over to you, Lucas, and thank you.

Thanks, Craig. DeBarbera has delivered a sound financial performance this half, given St Berry was offline for the entirety of the period. We recorded a statutory profit of $13 million and an underlying profit of $15 million for the half, thanks to the strong operating performance of LeanAura offsetting the losses at St Berry. This meant that we were able to deliver an earnings per share of two cents in a period characterised by fairly severe headwinds. Underlying EBITDA and EBITDA margin remained solid at 103 million and 31% respectively, highlighting the strong business profitability and fundamentals underpinning the company. Despite Siberia not producing gold and therefore revenue during the period, a $19 million cash inflow to the business was recorded from operating activities in the half after corporate tax and exploration expenses. The overall cash flow of the business was underpinned by substantial cash contributions from the three operations of $42 million after sustaining and growth capital. The balance sheet remains in good condition with a gearing of 13% which puts us in a strong position to maximise the use of our current debt facilities which will fund all proposed projects with sufficient headroom. In comparing our underlying profit between the first half of FY22 with the first half of FY21, It's easy to see that the significant increase in profit at Leonora has been more than offset by the significant drop at Sunbury and Atlantic. The $68 million profit increase at Leonora is attributed to the great work done by the team over the last year to improve production stability through increased mine development and increasing the number of mining headings at Gwalior, which has more than offset the declining grade as we mine deeper. This enabled increased volumes of ore to be processed compared with the prior period, We were also able to use the excess capacity we currently have in the mill to process all purchase from third parties. With no production at Sunbury, there was an $84 million profit variance compared with the prior period. At Atlantic, the profit variance was driven by reduced production due to lower XPIC grades and rainfall events. This reduced production and gross profit drove the stable variances in depreciation and income tax respectively that you see there. The movement in cash over the last six months resulted in a $39 million reduction in cash and cash equivalents at the end of the period. The waterfall you see is dominated by strong cash inflows by Leonora, been offset by outflows from Sundari. Positively, though, the company retained a cash inflow from operations after sustaining and growth capex of $42 million for the half. A $19 million exploration expenditure was stood evenly between the amount expensed and amount capitalised. The capitalised expenditure related to advancement of the Sunbury Sulphide Feasibility Study and Resource Development Atlantic, while exploration activities in the Leonora Province including Old South Corlea and near mine activities in Sunbury and Nova Scotia were expensed. A $22 million investment outflow consisted of a $25 million acquisition of Kin Mining, offset by the sale of Duketon shares. Approximately $13 million was paid during the half of the $0.02 fully franked dividend relating to FY21. Finally, it was deemed prudent to draw down $50 million from our syndicated debt facility to maintain liquidity in an operating environment continuing with COVID-19 and other possible headwinds. This drove a net $44 million cash increase from financing activities. have organic growth projects in the pipeline. We're committed to funding all of them through a mix of low-cost debt and free cash flow from operations. Now, we just have over half a billion dollars of syndicated debt facilities. We intend to subscribe to the US-denominated accordion facility as we construct the Sunbury Sulphide project. In combination with operating cash flows generated, the debt facilities will be sufficient to fund the expansions for the Leonore Province Plan of ferric sulfide expansion and construction of Beaver Dam in Canada. At this half, we extended the term of these facilities from July 2022 to July 2025. We have done significant balance sheet and project capital modelling and forecasting to be confident of our ability to fund all our projects from future cash flows and debt facilities. In the event of dramatic gold price movements, we have the ability to sequence our capital to ensure we can continue to fund the projects with cash flows and debt facilities. One advantage we have with all our projects is they have short payback periods, meaning that the strong cash flow generated by these projects will mean we don't expect to have extended periods of debt. With that, I'll now hand back to Craig to take us through our aspirations.

Great, and thanks for that, Lucas. As we've just outlined, St Barbara has gone through a fair amount of change in the last half. In fact, this has been a process of change which we commenced back in late 2020 when I outlined a three-step uplift strategy for growing St Barbara via the province plans set out by each of our assets. Due to the sheer number of these changes, I believe it has been difficult for us to articulate the net impact as we've had to communicate the changes on a standalone basis. That's why today I am pleased to release our aspirational production profile for St Barbara, which looks to bring everything together. As suggested by the title, the profile is certainly aspirational and requires a project pipeline to go accordingly to plan. But in essence, this is what we're shooting for. There is further upside to this profile, of course, as it excludes, for now, Gualia Sal, old Gualia Sal, which we're still diligently drilling out, and any mill capacity increase beyond the 2.1 million tonnes capacity of Leonora will be subject to ongoing studies. In broad strokes, it sees St Barbara going from 300,000 to 400,000 ounces per juice of where we are today, to a producer that averages around 600,000 ounces from FY25 or sooner. About half of this average production is through Leonora, where we aspire to produce approximately 270,000 ounces per annum through an expanded mill. Of this, 180,000 ounces is made up from production from Valia, with the remaining 90,000 ounces consisting of production from a multitude of oil sources and options available to Leonora. Upon completion of the saltwater project for which we are currently working on the front end engineering and design work, we expect to average approximately 180,000 ounces from Simberry. At Atlantic, we are aspiring to produce 150,000 ounces once we see production from Beaver Dam and 15 Milestream together. We have a large mineral endowment at each site, which underpins our aspiration to have an asset operate for at least the next 10 years. Over the last 18 months, our Building Brilliance team has been working hard at Gwalior to increase production and improve production robustness. Between FY16 to 19, we experienced a decline in mining performance, limited by haulage capacity to the surface. Production was maintained by prioritising high-grade ore to be hauled to the surface, with waste material being stored underground, regularly where future mining fronts would actually have to be developed. At the time, the theory was that the waste would be stored underground, would eventually be used in the path plant when the path plant became operational. During this period, we also saw a significant drop in development metres. For example, in FY16, 971 metres were developed for the entire year. To put this into perspective, to maintain today's rates and increasing rates, this year we are targeting 3,300 metres of development and look to increase that to 4,000 metres for next year. When I arrived at St Barbara, it became obvious to me that the path plant was not capable of clearing the extensive backlogs of stored waste from underground. It was clear to me that the lack of investment development metres had created significant bottleneck for Gwalior and limited the mine's ability to deal with unforeseen events. So, in FY20, we overhauled our operating strategy at Gwalior. With the future production robustness and capacity in mind, we began increasing the amount of underground development and turned our attention to removing historical stored waste. We needed to access future stoves, which were being blocked by this waste at the time. As a result, for the two years, we have been hauling more waste to the surface, reducing our ability to deliver ore to the pricing plant. As this work progressed, we started to declutter the underground. We've opened up new areas from where we could mine. This work done by our Building Brilliance team led at the time, at this time in particular, by Lucas. Drive improvements in the fleet, how we operate. The combined effort of this can be seen in the total material moved to the surface of beginning to increase of FY20 and FY21. FY21 was impacted by the September FY2020 fall of ground. This event at the time reinforced the need to open up new areas for development, both at depth and higher up in the mine. I was determined that we would not find ourselves constrained by such events in the future. Despite this setback, we managed to clear the remaining store waste in FY21. The hard work done by the team at site has paid off. In November last year, we had another fall of ground event, but unlike what happened in 2020, we had invested in enough development metres that we were able to quickly change our mine plans and continue to mine while we remediated the affected area. In the future, I want to have more options and to further improve Gwalior's resilience. In particular, the identification of old Gwalior South as a new potential mining front, I believe, will provide us with more optionality. Thanks to all this hard work, we are now in a position to be able to target 900,000 tonnes of ore to be delivered to the plant this year. We have sustainably increased the number of development headings of our haulage fleet once we have changed our focus to delivery on this ore. While not storing waste underground, we already have three additional new jumbos on site, giving us greater development flexibility, and we're expecting another two on site this financial year. With this additional equipment, we will be able to open more development headings in FY23, and we're aiming to reach 1.1 million tonnes of oil delivered to the surface from Gwalior underground. This has been a long road to return Gwalior to a robust business and was achieved in the middle of a global pandemic which has made access to labour in particular, access to supplies extremely difficult. With hopefully the impacts of the pandemic receding somewhat to the future, Gwalior's future certainly looks strong. In summary, we are focused on the near future term. We are targeting execution of our scheme of arrangement with Bardock in April. As I've already outlined today, this will herald a transformative acceleration of our Leonora progress plan. Where we've got the potential of new mining fronts in Gwalior shallows, we will have more drilling to do, but the shallow mining front offers huge potential benefits for us in all delivery rates, mining flexibility and production consistency. The Barlach acquisition accelerates our plans to extend the capacity of the Leonora processing plant by 50% to 2.1 million tonnes or greater and adds the capability to process refractory ore. The upgrade will see processing plants become a large, unique processing hub in a region for treating both refractory and free milling ore. We've continued to advance other ore sources for Leonora as well. We have increased the mineral resource at Tower Hill and progressed drilling at Harbour, Lykes and Trevor Boer, and I'm looking forward to sharing more about those drilling results in the very near future. With Simberi back up and running, although at this point severely restricted by issues previously mentioned, I'm very pleased to have all three operations in production once more. We are now focused on delivering on our production also finding ways to bring production and growth opportunities as laid out today forward. So with that, I will now open the line for any questions that the listeners may have. Thank you very much.

If you wish to ask a question, please press star then 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 are on a speakerphone, please pick up your handset to ask your question. And the first question will come from David Radcliffe with Global Mining Research. Please go ahead.

Hi, good morning Craig and team. I'd like to start with first off with an accounting question and just looking at Zimbari and just trying to understand the treatment there of costs. I think you talked about a cash flow outflow of nearly 70 million, but recorded costs of 25. Maybe talk about how you treat that because it sounds like costs were capitalised. Is that correct?

Nice there. I'll pass over to Lucas to answer that detail. David?

Thanks, Dave. That's correct. So you'll note in the financial statements, we note that $28 million of those costs were capitalised. It's all stockpiles and it's a third-way stripping.

Okay, perfect. Thank you. Then in terms of the dividend, maybe could you give some more colour around the decision not to pay the interim? How we should think about the potential for a final dividend given the future capital requirements you've laid out for us? You talked about modelling the cash profile there. Does that actually include dividends? And if so, what sort of level? How should we think about that?

Yeah, first and foremost, we are going through our position on dividend payments. And we're certainly reviewing and creating a dividend policy within that we will publish so people will then see how we calculate and when we pay our dividends, et cetera. I think given the headwinds of the organisations faced over the last six months in particular, with COVID now affecting some very, some very coming online later than what we would like, the permitting challenges we still have at Atlantic, although strong performance out of Gualia, and with some of the projects that we have certainly got in our pipeline to deliver, and Lucas spelled out quite clearly how we believe we're going to fund those, the timing still remains a bit of a question. The overall performance of the cash performance in particular of the company should have been much stronger than what it was, given the issues that... It's very affected those. Cash management I think at this point in time was probably prudent not to commit to paying an interim dividend. The full year dividend is still up for question and certainly will be based on the full year's performance at the time and will be reviewed by the board. Knowing the shareholder's view on dividends, it certainly would be in our best interest to get the bottom line and performance where it's obvious where dividends can be in the affordability of the business.

Great, thanks. Then maybe just one last one, just on Gualia, just to check something there. You talked about improving the underground and clearing the waste, which is great, and then getting the ore hoisted back to 1.1 million tonnes. I think that was right. And I'm just wondering, does that include Old Gwalior at all in that 1.1 million tonne target, or is that potential upside to the performance of Gwalior?

Yeah, Doug, I mean, there's two ways to answer that. I would use it as 1.1 with the Old South Gwalior, absolutely making that 1.1 a robust metrodome delivery to the plant. And why I say that, as Gwalior deeps, it gets deeper and the grade drops off. it becomes more and more and more difficult to be able to target 1.1 million tonnes from the deeps in particular. So for now, until we understand the mine plan a bit more, the impact, optimise the mine with that mine plan, I would model it around a stable 1.1 for a significant amount of time coming forward because that 1.1 that was stated some time ago was always going to be a problem in the future years, probably no more than 18 months from now. As we went deeper, the challenge to deliver 1.1 out of that one decline was going to be very, very difficult, if at all possible. And I don't think the mind plan or the work had been done at the time to make that call. So what I'm saying here now, as I know it, before I see what the intermediates can deliver, I would calculate it in the 1.1, but that could be conservative.

Okay, thanks, Craig. I'll pause it on.

Once again, if you wish to ask a question, please press star then 1 on your telephone and wait for your name to be announced. Again, that is star then 1. And the next question will come from Matt Green with Credit Suisse. Please go ahead.

Hi, good morning, Craig and team. Craig, your comment just on Wiley hitting 260 by FY25 or earlier, is there anything in particular that could accelerate you reaching that production level sooner than FY25?

Yeah, look, really good question, Matt. And it comes back off, I think, the back of David's question about where do all the sum of the pieces actually fit once you've got a mine plan and you can optimise? And we're not quite there yet. And we don't know how significant the intermediates or Gualia South could actually be. So I think for now, you know, the 270 certainly could be brought forward depending on the, I guess, Bardock acquisitions of what we do there and how soon we can bring that on, how soon we can develop the shallows and bring that online and then how that interfaces with any traffic trucks or any issues from the deeps. So I think not fully optimised and modelled yet, it could be brought forward somewhat and then it has to line up with plant expansions and some other bits and pieces as well. So I think when I look at the opportunity, there is still growth left in that production tank, yes, and sooner.

That's great. Thanks. That's helpful. And then thanks for providing the capex up there on your growth. So it's about 470, give or take, from FY22 to 25. My first question there is just 170 on severity. It shows from FY22. I presume that's from the second half and none of that's been spent in the first half? And then more broadly across that CapEx profile, are you able to give us a sense of which year you will see peak CapEx spend and how much that may be?

Yeah, look, I'll let the quantums to Lucas to answer because we've done quite a bit of work, obviously, on forward cash production as you would imagine we were doing. It does rely on a couple of things, really, and it One of the major unknowns at this stage is the permitting for Atlantic. Now, I guess the situation at the moment is certainly improving and we're progressing with the permitting, but it still needs those permits to be approved. I think the timing of those permits approval will determine when we forecast accurate cash flows in the right year. So we have to call it as we see it at the moment. The other piece to this will be as we're about to finish the feasibility study on the sulphide project, the pieces of that puzzle will come together in terms of the mine plan in particular of how much oxides do we have left, how does that affect the business moving forward, if at all, and then when do we start construction. of the Sulfide project. And we're still working through that. But the timelines that we've been given are indicative of when the cash will flow. I think the big, I guess, selling point here from a cash perspective is between now and the next 12 months to when we start really spending some of the growth capital money. We've got 12 months of cash income. We've got debt facilities to be able to cover that if we so choose. And the debt is very long lived. It's only two, three odd years in most cases of our projects before payback. Lucas, I'll hand over to you for any other comments.

Thanks, Craig. So, Matt, I think if you think about Sundari and I think taking on the comments that Craig has made, you're probably looking at, for that particular project, assuming we get approval in the the coming months and the mine plans are worked out. You're probably talking about FY23, that capital is starting to come on place, but the bulk of it in FY24. Now, there is some expenditure that hasn't been done at the moment, but you're probably looking at a reasonable split over those two years. We've probably skewed a bit more to FY24. In terms of the Atlantic capital, again, there have been but currently our timeline has all been delivered around December 23, so you've got the ramp-up capital heading into that period for there. And then with Leonora, assuming the Bardock process goes through, capital will probably start to be spent during this year, but probably the bulk of it during FY23.

Thanks, that's helpful. That's all for me.

Thanks, Matt.

Again, to ask a question, please press star then 1. There are no further questions at this time. I would now like to hand the call back over to Mr. Jensen for closing remarks.

Thank you very much. for dialing in and listening, everybody, but also thank you for the questions and the interest shining us in doing so. So with that, I'll now end the call and we'll talk again soon. Thank you very much.

This concludes today's conference call. Thank you for your participation. You may now disconnect.