Vault Minerals Limited

Thank you for standing by and welcome to the Red 5 September 2023 Quarterly Activities Report and Vesca. There will be a presentation followed by a question session. First for teleconference participants followed by online questions from webcast participants. For teleconference participants, if you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. For webcast expense, if you wish to ask a question, please type this in the live Q&A section located at the right-hand side of your webcast. I would now like to hand the conference over to Mr. Matthew Collings, Corporate Development Officer. Please go ahead, Matt.

Thank you, and good morning to everyone on the call. We're doing things a little bit differently today on our end, dialing in from the Darla Goldmine, where management have been presenting results to the options teams, both here and also at King of the Hills. On the call today, we have Mark Williams, Red 5's Managing Director, along with Corporate Development Officer Patrick Duffy and Chief Operating Officer Richard Hayden. We're also joined by our new Chief Finance Officer, David Coyne. Patrick will speak to the results from the last quarter of the financials. We'll present Red's first quarter results for FY24, referencing the slide deck that was released to market this morning alongside the quarterly report. As explained by the operator, there will be time for Q&A at the end of the presentation. And now I hand over to Red 5's Managing Director, Mark Williams, for opening remarks and our Q1 results. Over to you, Mark.

Thank you, Matt, and good morning, everyone. Firstly, I'd like to say we're very pleased with the company's overall performance during the September quarter. This has been the second solid quarter we've delivered since we've hit the prime, in the King of the Hills open pit in February of this year, which was the key inflection point for the project. As a consequence, the Red 5 share price has continued to strengthen as we continue on our focus for the share to be able to deliver safe, cost effective and efficient ounces quarter on quarter. The company's market cap and enterprise value have currently held firm at over a billion dollars, which is a which is a watershed for the company and our employees as we continue to generate cash and accelerate debt payments. I would also like to welcome Silver Lake as a new significant shareholder to Red 5. We see this as great validation of what we've created at the King of the Hills hub.

Moving on to the next slide.

The September quarter has been a busy period for us with Russell Clarke and Peter Johnson joining the Red 5 board as chair of the board and non-executive director respectively. Whilst long-serving non-executive directors Colin Loosemore and Steve Toombs have confirmed their intention to retire from the board at the company's upcoming AGM in November. I would like to acknowledge The significant contribution that both Colin and Steve have made to the company over many years of service, as well as the exceptional service of our former company secretary, Frank Companion, who retired during the quarter. This will leave the board with five directors, which we believe represent a good fit for the company, given our size and status, and concludes the board renewal process. I welcome David Coyne as CFO and Joint Company Secretary and Lisa Wynne as Joint Company Secretary who joined Red 5 during the quarter. And I'd also like to give my heartfelt thanks to Patrick for his contribution whilst in the CFO role. Moving to the next slide, a key feature of the quarter has been that in parallel, to our improved operational and financial performance has been our continued improvement in safety performance. This is seeing the TRIFA rate continue to reduce quarter on quarter, which is great to see and is, of course, an ongoing focus forever. We produced over 55,000 ounces for the quarter and an all-in sustaining cost of $1696 per ounce at an all-in cost of just over $2000 per ounce. This continued strong gold production has enabled us to make good progress on our core strategy for the year, which is to accelerate our debt payment and strengthen our balance sheet. We paid $15 million of bank debt we paid during the quarter and improved our net debt position by $13.7 million. Moving on to the next slide, I will now hand over to Richard who will take us through the operational performance in more details.

Thanks, Mark. The September quarter saw all three mines produced consistently to supply the King of the Hills mill with the best quality ore available. which in turn allowed the mill to achieve another very solid quarter of production of 55,009 ounces that led to operational cash flows of $44.8 million. The King of the Hills open pit mined 792,000 tonnes of high-grade ore above a 0.5 gram per tonne cut-off for a grade of 1 gram per tonne. Whilst the open pit was producing sufficient baseload ore to fill the mill for the quarter, The company took the opportunity to realign the work areas of the Stage 1 open pit to improve mining efficiencies in the future. Mining of Stage 2A and B starter pits progressed well during the quarter, providing some very valuable high-grade oxide ore, which is blended at 5-10% to assist with viscosity and throughput in the mill. The King of the Hills Underground continued its very strong performance mining some 258,000 tonnes at 1.98 grams per tonne. Excellent grades from development ore in addition to solid stoping tonnages contributed to the highest quarter of grade mined since the restart of the underground. Development continues to focus on opening up new areas, including the east and regal declines. Moving on to the Darlow mine, The Darlow mine has continued its turnaround success with very, very consistent production at much lower costs. Mining produced 190,000 tonnes at 2.65 grams per tonne in the quarter, including the commencement of a new low-cost bulk sloping area located in the Pedersen area of the shallow Darlow workings. The lower cost turnaround of Dylo has allowed the company to plan for additional development metres and resource definition drilling in the second half of the financial year, aimed at extending the current mine life, which is now looking very positive for Dylo. The King of the Hills mill operated for long periods at a run rate of 5.5 million tonnes per annum, significantly higher than the design of 4 million tonnes per annum. With tons per operating hour through these periods ranging between 680 to 720 tons per operating hour. Overall mill tons for the quarter was 1.23 million tons at a very good 93.3% overall recovery. Reduced tonnage was as a result of crusher performance, which was primarily impacted by crusher feed operations. During the quarter, management has focused on improving this aspect with the ROM pad and Skyway reconfigured to improve efficiencies as well as a third standby loader to maximise time with two litres loaders feeding the crusher. The first 10 days of October have seen a marked improvement as a result of this focus and will remain so moving forward.

Moving to the next slide.

The growth potential of the King and Hills is starting to look very exciting in both the open pit and underground with multiple targets presenting. Recent grade control drilling in the stage 2A pit included a hole that resulted in an intersection of 26 meters at a whopping 168 grams per tonne. Importantly, this zone was previously unidentified by the wider spaced original resource definition drilling. Other resource definition drilling intercepts were very encouraging during the quarter, including one extension hole intersecting 16.5 metres at 16.5 grams per tonne, targeting the Regal Imperial downed plunge area. These results demonstrate that there is a strong potential to extend the underground mine life along the Regal and eastern flanks of the ore body. In the zone beneath the southern open pit design, in blue on the slide, located on the left of the long section, there is very strong potential to deepen the pit below the current design. If successful, it should have a very positive impact on the two to three year medium term open pit mine schedule, as well as extending mine life. Targeted deeper drilling from surface will commence in the December quarter to identify zones that can be brought into the open pit mine plan. In addition, as you can see on that long section, there are a number of underground targets below the south pit that will be tested in the future. Finally of note, approximately 85% of the FY24 mine plan is underpinned by grey control drilling. This has increased the confidence level of achieving our production forecast in the current financial year and beyond.

Now over to Patrick. Yeah, thanks, Richard. Well done.

Just on to the cash flow slide, slide eight. So in the past six months, we've paid off $22 million in the June quarter and another $15 million in the September quarter. and in an excellent position where we've been generating positive cash flow since March and the company, as the company and King & Hills hits its stress. Importantly, since April, when we were able to normalise our creditor payments and since that point in time, we are able to pay our creditors within the normal credit terms and it's a simple story of generating positive cash and repaying debt. uh it's pleasingly we're now at a point in time where at end of september the net debt was down to 68.2 million dollars and importantly going forward we will look to prioritize all excess cash flow to accelerate the repayment of debt over the next 6 to 12 months with the objective of refinancing our project finance facility into a corporate facility in calendar year 2024.

Onto the next slide, slide nine.

As Richard highlighted on slide seven, we have seen a huge turnaround in the King of the Hills Underground, and now it's generating very good cash flow. After a difficult first 12 months of ramping up, we've put in a strong management team led by Graham Burns, and we are now 100% confident in the future of the King of the Hills Underground mine. Similarly, at Darlow, it's had two outstanding quarters and generating excellent cash for the business. We've been able to strip 30% to 40% of the cost base out of Darlow to reposition it as a lean underground satellite mine feeding the King of the Hills process plant. And without that process plant at King of the Hills, it's difficult to see how Darlow would have continued as a standalone operating asset. Later in this quarter, we anticipate putting out more drilling results and a broader story about Darlow. Currently, it has a two- to three-year reserve life, but we anticipate that it's got a much longer mine life as a result of the rebase cost base plus the processing costs at King of the Hills and also at today's gold price results in it being a very profitable mine. I would note that a number of analysts only put minimal value on Darlo. However, we see it as a very strategic, profitable mine into the future. It highlights the capacity of the King of the Hills process plan to turn marginal gold mines into a very profitable, having very profitable future lives. I think it's a nice segue into this graph. So we've just done 55,000 ounces at sub $1,700 costs for the quarter. And we're very confident on the guidance that we've set for this year. I feel it's cautious and conservative and confident that we can come in at the top end of guidance, if not above that. Relative to our peers, on an EV to all reserve basis, we've now valued at just over $400 per ounce. But given the 14-year mine life, the fact that it's a brand-new gold mine, large open pit with two additional profitable underground gold mines, we don't see any reason why Red 5 would not be valued in line with some of our peers, in particular Gold Road and Capricorn. We're also confident, given the recent momentum in our share price, that we are approaching sort of ASX 200 inclusion over the next couple of months. And there's excellent potential for further uplift in the gold price if and when we are put into the ASX 200. On that note, I'll hand it back to Matthew for questions.

Thank you, Patrick. That's the final slide for today. Before I hand over to the operator for our Q&A section of the call, I just want to remind everyone that you can subscribe to our mailing list via our website or follow us on LinkedIn or Twitter to get regular insights as to what is happening within the company. I'd now like to hand back to the operator for the Q&A section of the call. Thank you.

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 Start 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Paul Keener with Ord Minute. Please go ahead.

Hi, Jen. Yeah, thanks for taking my question. Group quarter, it looks like you're on track to deliver at the top end of guidance for F424. Could you maybe just provide a bit more colour on how you expect processed grades to change through the year? I mean, will this come down with lower grades out of the open field?

Yeah, thanks, Paul. Richard here. The grades will be slightly down on where we have been in the past as the mill tonnes go up to... hit our 5.5 million tonne per annum run rate targets. However, we will be maximising grade wherever possible from Darlow, from the King of the Hills Underground and in the open pit as well. We don't see the grades declining in any great manner, but it will be in line with the mil tonnes. Yeah, no, I understood. Yep.

That's it for me. Thank you.

Okay. Thank you. And if you wish to ask a question, press star 1. We'll now pause a moment to allow for any final phone questions to register.

While we wait on the phone questions, we have one question from the webcast line. It's another one for Richard Hale from Brett at Petra. Can you outline the issues experienced with the crusher and what the likely maximum capacity is for the crushing circuit?

Yeah, thanks, Brett. The challenges we've had in the last quarter have mainly been around the loader feed mechanics at the front end of the crusher. We regularly see instantaneous rates of up to 1,200 tonne hour through that crusher. So we know that the crusher designed at 6 million ton per annum. We know that we can exceed that significantly. What we're doing is working at the front end of the crusher to make sure that we can feed it consistently and efficiently, and that's been the main focus in the last quarter. Hence the third standby loader to ensure that we always have two loaders to feed. And also we're working on the abilities of the loader operators to ensure that the material is the right size and reduce the number of blockages that we have incurred.

A follow-up question from the line.

Is there any more detail on the plant maintenance through the quarter and what our plant maintenance is for the second quarter of the year?

So we have a mill realign shutdown next week. It's the full shell. Approximately four and a half days for that one on the mill. And then the next one, the next shutdown is in February next year. And we anticipate that February shutdown should extend us through to the very end of the financial year and aiming to try and get it into the next financial year.

Operator, unless there's any more on the Q&A line?

There are no questions on the teleconference currently. I'll now hand back to Matt to address the webcast questions.

Thank you. I think we've addressed the two webcast questions that we've received during the call as well now, so we'll finish the Q&A section. On that note, on behalf of the management team, I'd like to thank everyone who's dialled in for today's results and for the questions asked, and we look forward to updating the market on our half-year results and quarter two results in due course. Thank you, and operator, that ends today's call. Thanks, everyone. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.