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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you for standing by. and welcome to the Gold Road Resources December 2022 Quarter Results Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [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, Darcy. Welcome, everyone, to our December quarterly analyst call. Despite a few processing interruptions, the December quarter saw us deliver to annual guidance for 2022 with production again increasing in 2023.
The last few months have seen quite a turnaround in gold sentiment with the Aussie gold price now sitting comfortably above $2,700 an ounce. This is not a bad time for a company to be unhedged and selling gold on the spot market.
The quarter saw us continue to support our strategic investments with a placement and SPP in De Grey Mining to maintain a 19.73% interest. As of today, our listed investments are valued at AUD 475 million on the ASX.
On 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. 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, Discovery; and Keely Woodward, Company Secretary.
I'll now hand over to Duncan Gibbs to talk you through our quarterly results in more detail.
Thank you, Duncan. And thank you for joining us today. December quarter saw production from Gruyere of 74,201 ounces produced as pre-reported earlier in the month. The all-in sustaining costs were AUD 1,622 ounce for the quarter, up from AUD 1,426 in the last quarter.
The quarterly results saw us deliver to guidance with annual production of 314,647 ounces produced at Gruyere. Production was delivered in an attributable all-in sustaining cost of AUD 1,447 per ounce for the year.
The cash and equivalents closed the quarter AUD 81 million, up to AUD 26.5 million in investments and Gold Road continues to carry no debt.
As Duncan mentioned, we supported our strategic investments through the quarter where the value of this investment portfolio has grown further since the stated value on this slide.
Pleasingly, we continue to operate safely and reported no lost time injuries over the quarter. At Gruyere, in fact, our lost time injury frequency rate for the company fell to zero. Gruyere is now over 650 days LTI free, a very pleasing performance.
Our annual resource and reserve statement was also released today. It saw Gold Road's attributed provable resources lift slightly to 4.79 million ounces and our attributable ore reserves fall slightly to 2 million ounces after depletion through the year.
We continue to actively explore across the recently expanded exploration portfolio in Australia. Pleasingly, the drilling results has delivered more encouraging results from the Golden Highway and the 100% Khan prospect, which is to the immediate north and outside of the joint venture area.
Looking at the quarter in a little more detail, production costs were a little soft due to lower plant throughput as a consequence of some delayed ore – higher grade ore getting into the plant that was scheduled to be late in the quarter.
Mining continued to advance through the Gruyere stage two and stage three pits and average mine grade of 1.8 grams for the quarter was largely unchanged quarter-on-quarter.
Waste mining slightly lower quarter-on-quarter. Processing rates and head grades were both lower this quarter. That's partly due to slightly higher ore. However, the main contributing issue was lower plant utilization.
We completed a partial reline at the ball mill and had a few unscheduled maintenance issues. However, most of the throughput or availability issues related to the SAG mill. We've been working on basically improvements to the design of the SAG mill liners. Unfortunately, the generation design that we've put in in the previous reline didn't meet our anticipated life expectations or actually optimize the mill grinding performance. As a result of that, we needed to do bring forward a reline on into December rather than as it was planned to be done early in January. And we took that as a proactive measure to avoid sort of premature failures over the Christmas/New Year period when reline contractors are basically on holiday, and that's the last time you want to schedule that kind of work.
But looking forward, we're looking to a new line of design which is really optimized for grinding and milling rate. We anticipate that will have a shorter maintenance life. But we're also looking at changing the maintenance scheduling strategy. So overall, we'll reach a better plant availability than what we've been achieving in current levels, and that will come through the course of 2023.
Lower mill tons in December contributed to delay in processing of higher grade ore blocks scheduled from the stage three pit. These ounces were delivered to the stockpiles rather to the plant. But nevertheless, that contributed a slightly softer ounces than we planned for the quarter. The plant head grade did, however, remain in line with expectations for 2022, delivering an average grade of 1.2 grams for the year.
Processing recoveries in the quarter were good. That in part reflected the lower throughput in the SAG mill, finer grinding in the ball mill and slightly higher CLL resonance time which contributed to the better recovery.
As I mentioned, the all-in sustaining costs for the quarter, AUD 1,622 per ounce, obviously up quite significantly from AUD 1,426 in the previous quarter. The dip in the gold production is clearly the main contributor to the increased cost per ounce. And we also saw slightly higher processing costs or more specifically maintenance costs, in part costs related to the SAG mill reline. D&A and sustaining capital were also up slightly, contributing overall to the higher all-in sustaining cost per ounce.
Our corporate all-in costs for the quarter were $1,924 per ounce, clearly higher than we would like.
Ounces sold were lower quarter-on-quarter at 37,295 ounces. The average price for gold sales increased to $2,476 per ounce, reflecting, of course, the higher spot price and the close out of our hedge positions in November.
Our gold held as doré and bullion at the end of the quarter fell slightly and is valued at around AUD 6 million.
As stated previously, Gruyere has delivered to 2022 guidance, with approximately 315,000 ounces. And that, of course, represents a significant improvement from 2021 where we produced 246,000 ounces.
Now, looking ahead to 2023. We've also released our guidance to 2023. Again, that's up quite significantly from 2022, reflecting largely an increasing head grade. So guidance range of 340,00 ounces to 370,000 ounces for 2023.
The increase in operational performance, as I said, largely driven by grade, we're not banking a lot in terms of increases in throughput really until the pebble crusher and stuff comes in late in the year.
All-in sustaining guidance, we're guiding at AUD 1,540 to AUD 1,660 per ounce. Key reasons for that, increases in cost guidance. Really, we've modeled in the higher cost, high inflationary environment that the whole sector is seeing.
The costs include sustaining capital for pebble crusher, which we've provided details on previously, but that equates to approximately AUD 100 per ounce, unlike some of our peers who probably treat that as one-off growth capital. So, I ask you that you consider the way we're treating that and providing full transparency in our all-in sustaining costs. Other major capital items for the year [indiscernible], which is likely to commence around about the middle of the year.
I guess it's important to note, outside of that, we have no other growth capital outside of the all-in sustaining cost for Gruyere.
Okay. Turning so the next slide, just looking at some of their exploration activities and focusing, start with on the Golden Highway within the joint venture. So, Gold Road here have been managing the RC and diamond drill programs. We did a little bit of extra drilling late through the quarter. Of course, all this area is located out to about 25 kilometers to the east of the processing plant.
Results continue to show prospects increasing resources and the reserve at Golden Highway and will be an ongoing focus of drilling within the joint venture in 2023. And I guess if you look at the edge of the slide here, you can see prospect which is on Gold Road 100% ground, immediately outside of the joint venture area, and suggests that there's a continuation of the mineralization into that current prospect area.
I guess just turning to resources and reserves, which has also been updated today. Really not substantive changes. It's really just the routine reporting cycle that we're in. I guess firstly, the ore reserves are constraint at a AUD 1,750 gold price. For the Gruyere joint venture, mineral resources are constrained at AUD 2,000 per ounce. I guess both of those are considered as quite conservative, with the gold price which is north of AUD 2,700 an ounce. What that means in practical terms is Gold Road reporting robust high margin ounces.
Gold Road's attributable mineral resources of 4.79 million ounces have increased slightly by 0.08 million ounces, or 2%, really as a result of the further extensions to the underground resource. That's really related to drilling completed in late 2021, offset, of course, by depletion from mining in the Gruyere pit and some minor changes to the Golden Highway, mainly reflecting changes in cost assumptions, with no change to our gold price. And obviously, if you have a higher gold price, that will offset each other.
Our 100% Yamarna resources remain unchanged at 0.5 million ounces. Gold Road's attributable ore reserves have decreased by 0.21 million ounces to 2.02 million ounces. And really that just reflects mining completion through the year.
This slide provides basically an update of the seven stages that sit within the mine life and the type of access they form at Gruyere. And that extends the mine life as we're seeing now, out to 2023. Slide shows the progress of where we are with mining and where we are within the stage two, three and four pits, which are all active mining areas at the moment.
The colors of the grades here talk to my points, earlier on grade increasing at Gruyere through the year. And if you compare back to historic slides, you'd have seen a lot more greens [indiscernible]. So we're now really starting to into the sweet spot of the ore body where we're consistently seeing grades at the 1.2 to 1.3 on a grand range within the active areas of the operation.
Turning to the slide. Next year, if you look at the detail of how we're grading resources and reserves, we've done that by two tentative methods. I guess more conventional approach are companies that apply constraining shelves to resources on the left and on the right is really looking at if you mined everything below the final pit design by underground methods.
I guess really in a nutshell, it doesn't matter really how you do it. Outside of the reserve is in excess of 3 million ounces below the current ore reserve and we've got to work out the best way to look at extracting that future value.
Just turning to exploration now and I guess the sort of overview. Of course, partly as a result of the DGO acquisition last year and, of course, our own tenement beginning in Northeast Queensland, at Galloway in Greenvale, and we now really hold a nationwide land package. Some of this, we're looking at bringing in joint venture partners, particularly Stuart Shelf and Yerrida-Bryah. Really, that's partly around their commodity focus here. Copper and other base metals are not necessarily our core technical expertise. So, we're really looking at partners that can bring that to the table. And we've got a number of interested and, I guess, some of the global majors really looking at those opportunities for the joint venture.
So, really, if you look at the more gold focused exploration activities, obviously, continuing focus on Yamarna, Mallina, which is obviously next to the De Grey's ground up in the Pilbara [indiscernible] Galloway and Greenvale up in northeast Queensland.
Really, our strategy, of course, remains unchanged. We're trying to find mine two out of our exploration activities and budget levels similar to previous years of around AUD 30 million. In fact, it's probably slightly lower than we've had in the last couple of years.
Okay, thank you. And I'll now hand it over to John to talk through our quarterly financial results.
Thanks, Duncan. So, a solid quarter. And I think just those key themes and drivers Duncan has talked you through over the last few minutes resulted in another AUD 47 million of operating cash flow for the quarter. And that in turn translated to AUD 16.5 million of free cash flow. And we have on hand at the end of December over AUD 6 million in unsold bullion and doré.
One key point I'd like to just call out is ounces sold in the December quarter were lower than the September quarter, but we didn't receive, obviously, a better price environment as a result of two key things. One, obviously, is the gold spot price over the quarter. And also the fact that we closed out our hedge book in November. And December, for the first time in a while, our sales were 100% exposed to the spot environment.
Looking at the usual cash flow waterfall here on the screen. Again, Duncan has talked through most of those. I would just point out that, in the quarter, we did invest almost AUD 27 million in investments in De Grey and Yandell [ph]. And as at the end of December, our listed investments were valued at over AUD 400 million, which is a great uptick from that purchase price back in August in 2022.
So, if I looked at closing out 2022 and starting 2023, financially, our position is very, very strong, with AUD 80 million in cash and equivalents on hand. We had AUD 400 million in December in investments, now valued at close to AUD 0.5 billion. We have no debt and a revolver Tranche B of AUD 160 million is sitting there untapped and ready to go whenever we decide to call on them. So, a great position to start 2023.
Thanks. And back to you, Duncan.
Thanks, John. That brings our results presentation to a close. We're now very happy to answer any questions you may have. So I'll hand the call back to Darcy to see whether we have any questions on the phone.
[Operator Instructions]. The first question comes from Alex Barkley from RBC.
You called out there's going to be a new SAG liner designed in 2023. Confirming if that was what you just put in in December with the reline. And I think you mentioned earlier, it's got a shorter maintenance life. So, should we be expecting a few more shuts through the year, but otherwise better milling rates? Is that sort of what 2023 looks like?
I guess to change the design of the liner, lead time on these things is typically five to six months. So the design that's gone back in is basically the previous design. Obviously, we've learned a bit about how that performs, so we won't get any kind of surprises as to where we do those change outs.
I guess what we're doing is typically what you have to do with any mill. Your metallurgical team is always looking to [indiscernible] line of designs and get to better performance outcomes. It's always a trade-off between sort of service life, if you like, and performance. So we're certainly still on that journey and there's still plenty kind of untapped potential, I guess is the best way I can see, in the sag mill.
Part of that will come through ultimately when we get the pebble crusher we're scrambling to get commissioned late in the second half of the year. So those are kind of all the moving parts.
Broadly, where we're working to on a maintenance strategy is somewhere around about a 17-week change-out cycle, which is not down significantly from where we have been. But we are looking at trying to move all of the maintenance basically into that reline downtime period, which is why I made the comment that, overall, we expect the total mill availability, there's still opportunities to improve on where we are. I guess, broadly, what we're factoring in for 2023 is similar performance in terms of throughput and utilization as we achieved in 2022. So we're confident on that kind of thing. And the main driver being on the uptick in gold production is really driven by the grade coming through from the mine.
Just one more from me on the resource update. Wasn't much movement, I guess, on your 100% owned Yamarna tenements. Is that a little disappointing? And how does that influence your thinking around the budget going forward versus that opportunity?
Look, Yamarna has got still some legs, I guess is the way we see it. One thing I guess we put in the quarterly is we've signed a new heritage agreement, which basically covers all of the Yilka claimant area. Historically, we had numerous agreements in some areas that lacked agreements. We've now put all of them together into a consistent basis. They're in line, I guess, in commercial terms with what we've had historically. But the big thing for us is it gives us access to some new areas, including some fairly high priority targets fairly close to Gruyere, probably south of Gruyere [indiscernible]. So, still stuff for us to shake down at Yamarna. And I think GOs [ph] (20:29) are still quite excited about some of the opportunities that are there. But I guess, overall, we're still holding an exploration budget around the AUD 30 million mark. As I said, slightly lower than the AUD 22 million budget. But within that, of course, we're taking some of the funds and putting them into Mallina and Greenvale. Mallina, of course, very little exploration up in that part of the world from the ground holdings that we've got. So, it's early days there. Of course, everybody's aware of the discovery over the fence. And Greenvale, interestingly, up there, we've picked up a number of new tenements. Some of it have just been granted with the historical kind of economic intersections. So there's some fairly obvious sort of drill ready targets once we've worked through all ground access considerations, which we expect to get through this year.
Your next question comes from Bradley Watson from Bell Potter Securities.
A couple of questions place. Around Golden Highway and the drilling there, there's already some resources and reserves to find there. But what's your thinking about how those might increase and extend mine life and things like that?
Obviously, you can see our published resources and reserves there at the moment. I see the opportunity as more for what I would see incremental growth. And that's pretty much what we're doing. And the drilling is quite targeted around tracing up where we can see growth ounces within sort of economically constrained pit shelves. We've got at least another year to kind of get things out to reserves. And we're in the throes of starting to put together the parameters around feasibility study work, permitting and the like for Golden Highway. And part of the driver of doing all this work now is really there's an opportunity within the Gruyere life of mine plan to blend in Golden Highway. And we want to make sure that we've got everything done there to hit the optimal time for blending in those reserves.
Just thinking about the grade for Gruyere going forward. Looking at sort of stages three and four, obviously, have that high grade, like you had mentioned this morning. Six and seven seem to be of a similar average grade. Stage five is a little bit lower. What's your expectation going forward? Will 1.3 be a new sort of average floor grade or will it still vary up and down a little bit?
We've provided a reasonable level of disclosure there. So, typically, of course, we're mining ore from two stages at any point in time. We may be mining – it's normally, you need to think of it – we're stripping waste from a stage that [indiscernible] ore supply. Before that's depleted, we've stripped the next cut back. So we may have two or three waste mining areas. And typically, we've got two ore mining areas operating concurrently. Obviously, that's where we're at at the moment. So obviously, stage five a bit lower grade. But I think just need to think of modeling that as being blended with stages four and six.
Just one final question, please. Probably a while ago, now, you revised the pit wall angles on the final pit when you updated yours [indiscernible]? What's been the observation of pit wall conditions in the last sort of year? And are there any sort of walls at that final angle and how the pit walls performing in general?
I think we've got confidence in those decisions. We did two things. If you read that announcement in detail, we flattened out the offside slopes where we've had some small scale failures. And we steepened up the fresh rock stopes. Those slopes have been adopted within the stages that we're mining at the moment. And I guess the results at the moment indicate that they're performing to expectations. So I don't really see there's likely to be any kind of change to those overall slope angles moving forward.
Your next question comes from Paul Kaner from Ord Minnett.
Just on guidance, specifically cost guidance there, just trying to get a sense of the input and metrics and how you've accounted for the current inflationary environment. Let's just say, for example, diesel and gas costs, have you just taken spot prices and dragged that out a year? And is this going to change compared to say Gold Fields' guidance that they've put out?
I can't comment, I guess, on detail on Gold Fields' guidance and how they do their maths on ore stockpiles and stuff. Always leads to some differences in how the two companies report. I think how we do it is in line with Aussie kind of peers.
In terms of cost assumptions, clearly, we've pegged things to known prices in the market. We have allowed for some areas in an inflationary creep continuing on. Everybody's got transparency, of course, on diesel prices. They've come off a bit in recent months. But I think everybody's seeing – and in fact, I've seen commentary from other gold CEOs, which I think is in line with what we're seeing where other areas such as explosives and labor and stuff are still sticking up. So, I think we're probably past the peak in kind of rampant inflation in the mining sector, but everybody can see it, the economic – recent RBA numbers coming out. Now, we're sitting in the high 7s in terms of inflation rate at the moment.
There are no further fine questions at this time. I'll now hand over for webcast questions.
There's a few come through on the webcast. I'll start with one from Andrew Bowler from Macquarie. And he says you mentioned throughput improvement over CY 2023. Can you update us on your thinking on the ultimate throughput rate? Is 10 million tonnes per annum achievable with the third pebble crusher in place?
Look, I think it's still a reasonable target because we've always expressed it as a target rather than kind of a concrete guarantee, but it certainly what we see as scuttling towards. Clearly, we've learned just from the viability and serviceability of the pebble crusher. We needed to put another one in. So, we've made that commitment. That's now in construction. Should have been in place late in the year. And there's a bit of tuning up of SAG mill that will be required related for that.
So, really, I see the benefit of that really coming in, perhaps late in the year, but more into 2024. And that's probably the main bit that we need to kind of unlock the capacity of the comminution circuit associated. And I guess, as I've talked to before, there's still incremental improvements to get around the SAG liner and, call it, maintenance strategies that we've got deployed at Gruyere.
And follow-up from Andrew was essentially around the alternate underground resource. Is there a chance of a trade-off study in the next couple of years? Or will this be something you'll be looking at a little further down the track?
Look, I think we're going to have to start evaluating underground versus open pit potential. The big macro way I look at Gruyere is the inventory is about 10,000 ounces per vertical meter. And if you start to think of mining depths that you're seeing in WA, you're getting potentially a kilometer below where our pit could land. There's a lot of gold sitting down there. We've got to be smarter than the average peer to work out how to get it out and make money out of it. So, irrespective, I think of where the ultimate pit lands up, there's always going to be an opportunity for large scale resource at depths of Gruyere.
In terms of pit [indiscernible], obviously, we're working through the final designs we've got now. Potentially or conceptually, at least, there's an opportunity for the cutbacks beyond that. Or perhaps incrementally, slightly larger cutbacks than where we are to evaluate any of those – we've got to have line of sight on all the cost structure. And we'd need to do some more drilling at depth to bring it up to a reserve level of [indiscernible].
Duncan, one from Tyson at Canaccord. Can you give us a rough cost guide for the TSF lift?
I think, in total, it's around AUD 20 million. And I guess the detail is the exact split of where that lands up between this year and next year. We don't need to get it completed until middle of 2024. Obviously, we're going out with tenders and stuff like that early. Because there's a bit of squeeze in contractor availability in kind of anything to do with mining at the moment. So a way of getting reasonable pricing is not to leave it till the last minute.
And just to clarify that, pricing is on 100% basis to the joint venture.
That's correct.
Tyson's next question was, is CY 2023 guidance in any way weighted towards the first or second half with respect to production and all-in sustaining costs?
Look, I don't think there's anything in particular to really call out and, certainly, we haven't given any color on a profile in the quarterly report in our guidance statement.
There are just a few other questions on here, but I think they've been answered previously by questions that were posed to us. So I'll just hand back to Darcy to see if there's anything else on the phone.
There are no further phone questions at this time.
Well, that brings a close to our quarterly results call. Thank you, everyone, for your continued interest and support. I'll just close out on the last slide that I think sums up the quarter. We met our 2022 guidance and 2023 sees production increasing towards that sustainable 350,000 ounces. In terms of growth, we've got a pretty exciting investment portfolio that's currently valued, as John said, at almost AUD 0.5 billion.
Our greenfields portfolio is exciting to us. It's going to be focused this year on Mallina, Greenvale and Yamarna.
Balance sheet is strong. We're debt free. We're a dividend payer. Cash and equivalents at strong position, and we're currently unhedged.
So thanks again for tuning in.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.