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Thank you for standing by, and welcome to the Gold Road Resources March 2022 Quarter Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Duncan Hughes, Manager, Corporate Development and Investor Relations. Please go ahead.
Thank you, Kylie, and welcome, everyone, to our March quarterly analyst call. March saw Western Australia finally open its borders. As a result, Western Australia saw rising cases of COVID-19 through March, and continued to experience general labor and supply chain challenges. Happily, there was no material impact on production at Gruyere during this quarter, but the risk remains for the mining sector as a whole.
March quarterly production showed a further increase on the December quarter. Tracking production progress over the last 12 months shows strong and steady quarterly increase in produced ounces and head grades, a trend we expect to continue through 2022. Subsequent to the end of this quarter, Gold Road announced a recommended takeover offer of DGO Gold Limited. This acquisition fully aligns with strategy, and happily to date, we have received strong support from analysts and investors alike.
In the presentation today, we will be referring to the quarterly results slides that can be viewed on the live webcast, our website or the ASX release. Those on the webcast and on the phone are able to submit a question for us to address at the end of this call.
On the call today, we have Duncan Gibbs, Managing Director and CEO; John Mullumby, Chief Financial Officer; Andrew Tyrrell, General Manager of Discovery; and Hayden Bartrop, General Manager, Corporate Development and Company Secretary.
I'll now hand over to Duncan Gibbs to talk through our quarterly results in more detail.
Thanks, Duncan, and thanks to all for joining us. The March quarter saw an increase in production despite a higher-than-usual level of planned downtime on the processing plant. 71,135 ounces were produced at Gruyere, the second highest quarterly production on record. All-in sustaining cost was $1,526 per ounce for the quarter, in line with the previous quarter. And with higher maintenance costs associated with the 2 scheduled mill shutdowns, [ that caused, balance to date increase in ounces. ] Pleasingly, we reported no lost time injuries during the quarter and our 12-month lost time injury frequency rate ended the quarter at 3.3%. Our cash and equivalents was $138 million, and Gold Road continues to carry no debt. We continue to make progress on the exploration front with encouraging signs seen from several targets tested on our 100% owned Southern Project area at Yamarna.
The quarter also saw us release our annual resource and reserve statement, with Gold Road now reporting attributable resources of 4.7 million ounces and attributable reserves of 2.2 million ounces. On the 28th of March, we reduced -- we released our annual results, sustainability report, our dividend announcement and our corporate governance statement. All of these can be reviewed on our website or the ASX platform.
As Duncan has already mentioned, on the 4th of April, we announced a recommended takeover for DGO Gold, and this was fully on strategy and offers significant value to both Gold Road and to DGO shareholders.
Looking at the quarter in a little more detail. Mining continued to advance towards higher-grade areas in the deeper parts of the Stage 2 and now opening up a Stage 3 pit area. And this was reflected with the higher average head grade of 1.17 grams for the quarter. The rate of ore mining continued to be at an annual equivalent rate in excess of 10 million tonnes and places us in a very good position to mitigate labor availability and risk associated with COVID and the current market conditions.
Processing rates remained high despite the 2 scheduled plant shutdowns for relines of both the SAG and the ball mill, both of which were successfully completed during the quarter. Processing costs increased quarter-on-quarter in part related to the increased maintenance costs associated with the shutdowns, and quarterly processing costs are expected to trend lower in the remainder of the year. General and administration costs increased slightly quarter-on-quarter, partly due to the costs associated with managing COVID-19.
As a result, our attributable all-in sustaining costs came in at $1,526, the same as it was for the December quarter. Ounces sold were 35,080 ounces of gold on average price of $2,434 an ounce, reflecting the strong production performance and the higher spot and [ Fitch ] prices. Delivery into the forward sales was approximately 25% of production in the quarter. The hedge book continues to shrink and Gold Road will be hedge-free on December 2022.
Our corporate costs -- all-in costs for the quarter was $1,834 per ounce.
Guidance, we are reiterating our guidance for 2022 and expect an increase in production and lower all-in sustaining cost per ounce in the coming quarters as a result of higher throughput and grade in the remainder of the year.
The charts on this slide show progressive increased improvement in quarterly production over the last 12 months, driven by the improving grades and throughput rates. Gruyere's annual production guidance is unchanged at 300,000 to 340,000 ounces or 150,000 to 170,000 ounces attributable to Gold Road. And our all-in sustaining cost remains as guided at $1,270 to $1,470 per ounce.
We note that COVID remains a risk to operational performance. However, Gruyere has not been impacted to date, which started this June quarter in a solid position.
Improving production during the remainder of calendar 2022 and of course into 2023 is per our 3-year outlook released early last year. This is driven by increasing grades through the Stage 2 and Stage 3 pits as illustrated in this image, and the grade will continue to pick up through the remainder of the year. This is aligned to our 3-year outlook, and we've successfully completed the 2 shutdowns earlier in the year, which we anticipate will lead to improved reliability and improving utilization and improved throughput as the year progresses.
The quarter saw us commence stripping of the Stage 4 pit area as scheduled. And in 2022, which we'll continue to use -- or continue to opportunistically use our rehandle fleet, which is normally used to relocate ore from ROM stockpiles to the plant, but we're using that to supplement waste movement at the moment, which brings, of course, forward the costs and material movement from future years. And that's all being factored into our all-in sustaining cost guidance for 2022. After bringing forward, that movement allows us for greater processing flexibility and also provides us a buffer to the current industry headwinds, including labor availability, supply chain concerns and potential COVID-relating staffing disruptions to mining activities.
We'll move on to the next slide. It summarizes Gruyere and Gold Road's resources and reserves position. These numbers reflect the 1 million-ounce increase in reserves reported in October 2021 and updated in our annual resource and reserve statement released earlier this quarter. The ore reserve includes 300,000 ounces of reserves at the Golden Highway located 25 kilometers to the west of Gruyere.
The Gruyere JV exploration efforts in 2022 is set to focus on further definition of these reserves on the Golden Highway trend, with a view to optimize the future mine development in this area and incorporate into the Gruyere production plan. Oxide resources in this area provide potential for [ spending ] with the [ higher ] fresh rock ores that we see coming into the mine life at Gruyere.
If we just turn our mind now to the resources and reserves at the Gruyere pits, both these long sections showed the -- the December 2022 ore reserves as a red line on the -- sort of a more solid red line on the figure, which represents a pit that operates until 2032, and extends to a depth of around about 500 meters. The reserve is reported at a gold price of AUD 1,750 per ounce. The long section on the left shows the grid -- shows how the Gruyere joint venture has reported those resources of 6.5 million ounces to push a $2,000 per ounce constrained pit shell down to about 800 meters. And below that is an underground resource estimated by Gold Road with an attributable share to Gold Road of 0.5 million ounces.
On the right-hand side is an alternative way of reporting, which we provided in our statements. It looks at the resources below the base of our reserves as if they were reported into entirely -- as underground resources below the design.
However you look at the longer-term future of Gruyere, either as an expanded and deeper open pit mine from where we are currently sitting or as an underground mine below the reported reserve, there's in excess of 3 million ounces in resources below the current open pit design. Ultimately, we have to work through the future decisions on extending mine life, and that will come down to the economics of the future resource conversion, mining studies and, of course, continued exploration success.
On the 4th of April, Gold Road announced a recommended takeover for DGO Gold Limited. DGO Gold owns a portfolio of prospective exploration and mining assets, which, of course, includes a 14.4% shareholding in ASX-listed De Grey Mining. De Grey is the owner of the 9 million ounce Mallina gold project in Western Australia. They also hold a 6.6% shareholding in Dacian Gold Limited. Dacian, of course, has the Mt Morgans mine near Laverton. Then there's a 20% interest in Yandal Resources, which is an exploration company focused on the Yandal Greenstone Belt and the Gordons project just north of the Kanowna Belle operation. As well as adding a substantial and attractive exploration portfolio, which includes properties in the Pilbara, Yilgarn, Bryah and Stuart Shelf provinces. The offer of 2.16 Gold Road shares for 1 DGO share opened on the 8th of April and was unanimously recommended by the DGO Board.
The acquisition of DGO aligns with Gold Road's strategy to invest in high-quality gold projects in Tier 1 jurisdictions. In particular, Gold Road views the substantial holding in -- shareholding and the owner of a high-quality Hemi gold discovery, combined with our 50% ownership of the Gruyere Gold Mine, as an exciting opportunity to participate in 2 of the most significant gold discoveries in Western Australia this century.
I'll now hand over to John, who will take you through the quarterly financial results.
Thanks, Duncan. For those of you on the call I haven't met yet, I started as the CFO middle of December last year, and I look forward to meeting hopefully as many of you as possible over the course of this year as the border and travel restrictions continue to ease.
It's a pleasure to present today the quarterly financial results, particularly as our cash and cash equivalents has grown to $138 million over the course of the last 3 months. What was historically and has always been a very clean and strong balance sheet has strengthened again over the last 3 months.
On this slide, you are seeing a movement in our cash and cash equivalents, which has grown $138 million over the last 3 months. It's pretty self-explanatory. But what I will draw into your attention is that in the quarter, we saw a number of significant cash outflows related to prior periods, and also adverse capital movements as well quarter-on-quarter. In particular, we saw $6.5 million of income tax paid in the quarter, which relates to the last financial year. This was flagged in our December quarterly release. And we also saw $10 million of working capital movements, which occurred late in March, which we expect to unwind beneficially in this quarter as well. In particular, we saw almost $3.5 million of gold revenue booked as sales in March, which translated to cash in our accounts in early April, and we saw prepayments to suppliers of almost $5 million again late in March, which we won't see again over the course of this year.
So all up, we expect to see about $10 million of cash flow unwind beneficially in this quarter, giving a nice kick to what's expected to be a healthy cash flow result. That healthy cash flow is expected to persist across the rest of the year in line with our growing production profile that Duncan outlined earlier.
Just 2 other minor points that I'll bring to your attention. Our hedge book is in its final stage, it's just under 25,000 ounces. Expect that to be fully extinguished by November. As a result, by December, Gold Road will be fully exposed to the spot gold price. And also on the 28th of March, we were pleased to announce our final dividend for the 6 months ended December 31 last year. This will be paid on the fifth of May. I bring your attention to the fact that Gold Road's been a dividend payer consistently since we declared our maiden dividend in 2020, which occurred just 1.5 years after Gruyere reported its first gold.
Thank you, and I'll now hand you over to Andrew Tyrrell, who will walk you through our quarterly exploration results.
Thanks, John. The Discovery team recommenced their exploration activities across the Southern project area of the Yamarna project during the quarter, with an emphasis on progressing the priority targets delineated through their work in 2021. On site, we currently have an RC, a diamond rig and an aircore rig, and operation has completed just over 18,000 meters for the quarter. The exploration schedule will see an increased number of priority targets tested with RC and diamond as the company increasingly focuses on deeper drill testing at these numerous regolith gold anomalies and mineralized trends defined by aircore and RC in the last 6 to 12 months.
Aircore drill testing will also continue across the belt, defining the mineralized structural corridors and providing supports for target prioritization and advanced RC diamond drill testing. This approach is consistent with the company's focus on systematic and targeted exploration and is supported by an exploration budget of $30 million allocated to the discovery projects in 2022. As is the case for the exploration sector as a whole, we are seeing increased delays in assay turnaround, with assay turnaround now at about 8 weeks. So whilst we have completed a fair bit of drilling during this quarter, we are still awaiting most of the assay results, making it a relatively quiet reporting period for us.
In 2021, exploration activities throughout the Southern Project area highlighted several very encouraging and large areas of regolith anomalies and favorable geology. During the first quarter of 2022, we completed follow-up drilling across several priority prospects, completing a total of 18,149 meters. Notable programs for the quarter include, at Gilmour South, we completed an RC program along strike to the south of the 300,000 ounce Gilmour resource. Drilling intersected encouraging geology and alteration. However, assay results from this program are yet to be returned.
At Abydos, follow-up RC and diamond drilling was completed, which continue to test at 4-kilometer long regolith anomaly. And the bulk of those assays for the March quarter are still pending. However, further results received from drilling completed in late 2021 include 2 meters at 5.07 grams per tonne gold from 180 meters, and 1 meter at 7.94 grams per tonne from 151 meters.
At Warbler, results from RC drilling completed along strike to the northwest of the maiden resource in 2021 were also returned. Drilling intersected an intersect -- an extension of the mineralized horizon to the north where the resource -- and results include 4 meters at 3.79 grams per tonne gold from 175 meters and which also includes internally 2 meters at 7.15 grams per tonne gold.
And finally, at Kingston, we completed a diamond drilling program. The holes were designed to test for additional mineralization as well as controls to gold mineralization previously reported in aircore hole YMAC02577, which returned 15 meters at 1.76 grams per tonne gold from 28 meters last year. Receipt of these assay results are expected in the June quarter.
That brings to close the exploration update, and I look forward to any additional questions you may have, and I'll now hand back to Duncan Hughes.
Thanks, Andrew. Well, that brings our results presentation to a close. We'd now be very happy to answer any questions, and I'll hand the call back to Kylie.
[Operator Instructions] Your first question comes from Michael Scantlebury with Euroz Hartleys.
And just a quick one for me. I was just wondering around about how many days were lost in both the mill relines during the quarter. Obviously, just trying to do the back calculation, just trying to get your kind of run rate and what you're going to be throughputting in the quarters to come. So yes, I appreciate the information on that.
Yes. Look, each major mill reline is about 5 days.
Sure. And then maybe just a follow up one. I appreciate the sensitivity around it -- I appreciate any kind of information you can give us. But are you able to disclose whether you were in discussion with De Grey management prior to your DGO bid? And are you currently in any discussions with De Grey management?
No, no discussions, and we haven't had a look at any of their data. So there's no intent at this point to have any discussions, and we'll see how the bid goes.
[Operator Instructions] I'll now hand over for online questions.
So in terms of the question, first one comes from Michael. On exploration, of your 100% owned ground, where are you most excited about?
Thanks. I can answer that one. So we see the Smokebush Shear Zone as a very prospective corridor and trends from the Gilmour prospect through to Smokebush and down to Earl, Kingston. For us, this corridor demonstrates good evidence for mineralization and potential, and this is where we're focusing the bulk of our activities, at least during the first half of 2022.
Thanks, Andrew. I have a question from Levi. Can you please update us on the timing of the DGO process and strategy of the De Grey holding thereafter? And secondly, what did your due diligence on De Grey show? And how is it different to De Grey's life study?
I'm happy to answer the first question. So in terms of the timing of the DGO process, the offer is currently outstanding. It's got a couple of weeks before it closes. We expect, subject to no superior proposal, that we'll receive the directors' acceptances on Friday. But we obviously have the ability to extend the offer at Gold Road's discretion. At this current stage, we've received no bid acceptances, but we expect that to pick up subject to no superior proposal once we receive the directors' acceptances. In terms of the strategy for De Grey, I'll probably pass that over to...
Look, in terms of De Grey, we've had no BD -- as [ Hayden ] indicated -- of De Grey, and we've been not in conversation with De Grey. We Obviously have our own internal view of the valuation of their major properties. I'm not going to get into commenting on the detail of that. But I think if you look at where De Grey is trading, the price that we've offered is in line with see through value of the current market price, and the market price sits below consensus guidance of the majority of analysts who follow that position.
So in terms of our investment for Gold Road, we look at it as an attractive opportunity to gain a position into that asset. And obviously, where that goes to in the future depends very much on the offer that we have on the table, which is for DGO Gold.
Okay. The next question comes from Ron. At what pit stage does staking the pit walls have to be done before it's too late as the pit deepens?
Well, there's now a total of 7 stages in the pit design per that illustration that we put out through the slide deck. Stages 1 to 3 were designed on the old parameters. The remaining pit stages have all had elements of redesign. And most particularly, of course, the stages 6 and 7 really represent the elements that's deepening. So we are adopting new pit design parameters. Some of those have actually slight flattening in the oxide to get a bit more stability. And partly, that relates to going deeper on the pit. I mean the dominant factors were about 4 degrees steeper overall in the fresh rock slopes. That's part of what helped us drive a deeper pit without significant step-up in strip ratio.
The next one is from Andrew. What are the condition precedents in order to draw on the undrawn debt facility? I imagine there has to be a specific purpose.
So I'm happy to talk to that. At this point, the condition precedent for a drawdown is really that we're in compliance with the agreement. We've already met the other existing condition precedents, and we've already previously drawn down on the undrawn debt facility when we were finalizing the construction of Gruyere.
In terms of any specific purpose, there's no specific purpose. It's a general corporate facility, and we can use that for multiple purposes, and the main purposes that we put in place the facility were for either an acquisition or project development.
So next question is from Levi for Andrew. And I assume this is in relation to DGO. Have you had time to review the projects and targets? And if so, what really caught your eye?
Yes, we have had a look at the -- obviously, the DGO portfolio. We're obviously in the process of continuing to look at it, and we'll assess it against our portfolio as a whole. They do have some encouraging projects. However, it's -- we obviously won't make a call or comment on that just yet. However, we do see potential in their project portfolio.
Thanks, Andrew. A question from Bradley. Are you able to provide any guidance on any further currently planned mill shutdowns for the remainder of the year?
Yes. So we do a reline of the SAG mill at every 3 months. So we expect one of those every quarter approximately. And the ball mill is setting out at about 12 month lead shutdowns. So the next one depending on, obviously, where rates would be early next year.
Thanks, Duncan. Got one from Steve. How are you coping with labor cost pressures? Have you got any contingencies in place?
Look, I think we've got it fairly well factored into guidance, and there's been various strategies put in place partly around retention to mitigate high levels of staff turnover. But I guess the industry is [ setting ] as a whole. Some of that flows into costs, but that's built into our guidance parameters.
Thanks, Duncan. And another follow-on from Levi sort of in relation to the gold projects you've had a chance to review and what's caught your eye in terms of looking?
Our existing Gold Road projects, obviously, the Southern Project area, in my eyes, is a very highly prospective area. Within that area, the Smokebush Shear Zone -- and we identified that as a really favorable structural corridor. There are a number of prospects that sit within that and along the hanging-wall to that regional shear zone. So everything between Kingston -- or Abydos, which is a third order structure that sits off of that, I think, is very prospective as well. So all the targets that we've been hitting this last quarter as well as what we'll be testing in the coming quarter are targets that I see as being our priority ones and some of our best targets that we have.
Okay. Thanks, everyone, for those questions. I'll now just hand back to Kylie to see if there's anything else on the phones.
We do have a question from Paul Kaner with Ord Minnett.
Just a quick one for me. You touched on it before on the mill relines. Obviously, you had an issue last year when you realized the ball mill wasn't lined properly. Now you've just completed some routine relines. I mean, how many times a year do these relines need to occur considering the hardness of your rock and the power requirement? And is this higher than other similar operations?
So yes, I think I'll kind of pick that up. So relines of mills are routine practice. So the SAG mill, the wear rates we are observing means that we're going to do the reline about every 3 months, and the reline on the ball mill about every 12 months. Over time, we may be able to do some tuning and optimization of the liner packages, which could extend those out. But you've got that opportunity to do refinement of your liner designs, the lead time on that obviously is driven by the frequency of the reline. So if you look at where the operation is in 5 years' time, it could have a longer line of life than where we are now. In terms of Gruyere, the liners are not particularly abnormal life in terms of the duration they're lasting for.
We are showing no further questions at this time. I'll now hand back for closing remarks.
Thanks very much, Kylie, and to all for your questions and for listening in. I'll just close out with a summary of the quarter. The quarter showed a nice 12-month trend of increases in throughputs and grades. We expect that trend to continue through 2022. So we're well on track for our 2-year guidance -- or 2-year outlook, I should say, of growing production to 350,000 ounces per annum. The quarter saw us build a solid attributable resource base and attributable reserve base. We're seeing encouraging signs from Yamarna exploration ground, but unfortunately, delays in assays mean those results have not yet been received. We're very excited about our takeover offer of DGO Gold and optimistic of success there. We continue to be paying dividends. Our balance sheet continues to grow. We look forward to talking to you again on the back of next quarter's results. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.