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Welcome, everyone, to our September quarterly analyst call. It's now been a full year since we declared commercial production at Gruyere. In the years since commercial production, Gruyere has produced over 257,000 ounces in what has been a very successful operational start-up. Gold Road has been able to grow a strong balance sheet and liquidity position as we paid down all our debt and built a cash and equivalents balance in excess of $100 million. We also announced a dividend policy in September and continued progress on our push to make another meaningful discovery at Yamarna. My name is Duncan Hughes. I'm Manager of Investor Relations and Corporate Development. In the presentation today, we will be referring to the quarterly analyst call slides that can be viewed on the live webcast and also on our website. Our quarterly activities report has been released on the ASX platform and can also be viewed on our website. With me on the call today, I have Duncan Gibbs, Managing Director and CEO; Justin Osborne, Executive Director, Discovery and Growth; and Tony Muir, our GM of Finance. I'll now hand over to Duncan Gibbs to talk through our production and corporate results.
Thanks, Duncan, and thanks to everybody for joining us. If I can start with Slide 3, which summarizes the highlights for the quarter. We produced 55,919 ounces at Gruyere on 100% basis with Gold Roads attributable all-in sustaining cost of $1,488 an ounce for the quarter. As guided, the costs for the quarter were higher associated with weaker production as the operation transitioned into fresh rock. We also had increased waste stripping associated with the planned mobilization of the second mining fleet, which operated for most of the quarter. Happily, the production was achieved without a single lost time injury. The quarter saw us pay down our remaining debt position and pay -- and build a healthy cash and equivalents balance of $103 million. In September, we announced a dividend policy. And subject to the Board discretion, we would expect to declare an inaugural half year dividend with our 2020 annual results early next year. We continue to make solid progress as we look to make a meaningful discovery in the Southern Project here at Yamarna. We took what we saw was a pricing opportunity in debt markets to extend our debt facilities to $250 million with an additional 4-year $150 million second tranche through our RCF. If I can move on to Slide 4 and outline the key numbers and the key points sitting behind our results. Starting with mining. Total mining material movement in the September quarter increased from 5.7 million to 7.5 million tonnes and reflects the mobilization of the second mining fleet, which operated for most of the quarter. The strip ratio increased a little above the life-of-mine average, which is at 2.7. Ore mining was predominantly from the fresh rock Stage 1 pit, where there is minimal operating waste movement currently required, resulting in capitalized waste movement being predominantly from the Stage 2 pit. That increase in capitalized waste movement contributed to the increase in capital cost per ounce quarter-on-quarter. The mining of ore tonnes dropped quarter-on-quarter to 1.9 million tonnes and aligned with the mill throughput rate achieved through the quarter. Unit mining costs are generally in line with our estimates and essentially unchanged quarter-on-quarter. Mine grades of 1.03 grams were in line with our resource reserve expectation from the Stage 1 pit area. Stockpiles at the end of the quarter remained at healthy 3.2 million tonnes at 0.7 grams, predominantly oxide material, representing ore mine in the early stages of the operation. Processing. Ore tonnes processed were 1.9 million tonnes. It reduced quarter-on-quarter as ore pricing transitioned into fresh rock ore. The head grade of 1.3 -- 1.03 grams aligned to the mine grade. Gold recovery was 91.5% and dropped a little quarter-on-quarter as we mined fresh ore. Recoveries were marginally above BFS test work. However, it's too early to call whether we'll see higher fresh rock recoveries on an ongoing basis. The performance of the plant can be considered as a quarter of 2 halves. Early in the quarter, we had throughput constraints in the SAG mill when we started to process 100% fresh rock ore. With the lower throughput, we made a decision to take the mill off-line for a couple of days to do some reconfiguration to the SAG mill. That involved changes to the discharge grates and screens on the SAG mill, and the circuit throughput improved subsequent to those changes. As announced on the 24th of September, production was interrupted for 7 days later in the quarter following a ball mill motor bearing failure. The bearing failure occurred following the restart of the processing facility after scheduled maintenance. The ball mill is now fully operational, and no further issues are anticipated. The program of mine-to-mill optimization commenced late in the quarter with trials on higher-intensity blasting of fresh rock ore and blending of fresh and oxide ore demonstrating increased throughput rate, which we see on the early stage results as very encouraging. Implementation of these mine-to-mill optimization practices, design upgrades to the pebble crushing circuit and milling circuit process automation to further enhance plant performance will progress over the coming 6 months. Process costs and general and administrative cost per ounce increased quarter-on-quarter as a result of the lower production and increased maintenance costs, partly offset by lower reagent costs. We expect the maintenance costs to come down over time. During the quarter, we sold 31,480 ounces of gold at an average price of $2,420 per ounce. Despite the lower production this quarter, gold sales included the sale of gold dore and bullion held as inventory at the end of the June quarter, with 100 -- with 1,811 ounces of dore held at quarter end. Approximately 25% of our gold sales were delivered in hedge group -- hedge contracts, and this will be the trend until November 2022. During the quarter, Gold Road reported a strong free cash flow of $48 million -- $48,700,000. This free cash flow represents underlying cash flow of $22.2 million as well as a one-off $26.5 million realized from the sale of listed investments, realizing a pretax profit of approximately $17 million. Our corporate all-in costs, which are generally one of the lowest in the sector, was higher in this quarter, a result of the higher all-in sustaining cost. If I can move on to Slide 5. This slide essentially summarizes in dot points things that I've just spoken to. Sorry, Slide 5, please. We're at Slide 6. To summarize, I would like to say that in the quarter, we faced some headwinds. But overall, the quarter saw an improving trend. 2020 annual guidance remains at 250,000 to 270,000 ounces on a 100% basis. And our all-in sustaining cost guidance remains within the revised range of $1,250 to $1,350 per ounce. As a consequence, you can see that we're anticipating that the December quarter will be higher production and lower cost than the September quarter as some of the improvements that we effected over the last quarter flow through into forward production. The focus on optimizing throughput and efficiencies in the quarter were continued on the 1 point -- [ 2 ]million ounce indicated resources a bit -- that exist below the current resource -- sorry, current reserve shelf, which were put together at $1,600 per ounce and working to convert that into reserves. Happily, Gruyere continues to experience no material impacts from COVID-19. And I would like to thank Gruyere employees, contractors and suppliers and of course, the local community for their continued diligence, excellent performance and support to work through this difficult time. Western Australia has reported no community transmissions of COVID since April 11, and the risk -- while the risk of a second wave of community transmission remains and it could evolve quite rapidly as we've seen elsewhere, Gold Road and Gruyere have contingency plans in place should the need arise. If we move on to Slide 6. Financially, the business continues to get stronger, thanks to the free -- good free cash flow generation from Gruyere. We are now debt free, having repaid the remaining $25 million of debt on the 21st of July 2020. And then we now have cash and equivalents of over $100 million net cash on our balance sheet and strong liquidity buffer. Our hedge position sees us delivering 20% to 25% of our production in hedges between now and November 2022. The breakdown of the hedge book is provided in the quarterly report. During the quarter, we finalized the second tranche of our debt facility. Our RCF now sits at a total of $250 million and is fully undrawn. We consider that there was pricing opportunity to upscale our RCF and extend the tenor with a second tranche, which has a full year term. The cash flow waterfall summarizes the movements in cash and equivalents over the quarter, and I will let you give this a [indiscernible]. Owing to the strong performance of the business and the pay-down of ore debt in July, we were enabled -- we were able to announce a dividend policy in September. As announced on the 16th of September, the policy will target annual aggregate dividend payout of 15% to 30% of free cash flow for each calendar year. It will be paid in 2 half yearly payments. This is subject to retaining a minimum cash balance of $100 million after the payment of any dividend and of course, subject to Board discretion. We have $66 million of franking credits and anticipate the maiden fully franked dividend to be declared for the 6-month period ending the 31st of December 2020. It is worth commenting that Gold Road are keen to return income to shareholders, and our key strategic focus remains on growth. We believe this is the best value for our shareholders. It will be made for making a significant year of discovery while we may consider the options of value-accretive corporate development. I will now hand over to Justin Osborne to update you on the exploration progress at Yamarna and our Yandina joint venture in the southwest of the estate.
If we can move to Slide 8, please. Thanks, Duncan, and thank you all for joining us on the call today. This quarter saw a solid progress at Yamarna on 100% tenure. As we look to make a meaningful discovery that can support a stand-alone operation for Gold Road on this Yamarna tenement holding. The best opportunity, we believe, continues to be on our Southern Project area, where we spent most of our exploration activity and funding this year. As slide 8 shows, we have a defined area of interest that we believe hosts all the right ingredients for a major discovery. It's easy to get the scale of the project. This box highlighted on the map here measures almost 800 square kilometers of interest, which up until now has received very little exploration focus. To put that into context, 800 square kilometers is about the size of the St. Ives land holding, which has been explored for over 40 years by WMC and Gold Fields and delivered over 20 million ounces of gold endowment. And we are hoping to identify high levels of endowment in the same field. This area hosts the right geology with complex folding and faulting, cut by second and third order space off the main Yamarna Shear Zone. The rock types are favorable with dolerites equivalent to the main [indiscernible] dolerites. Basalt and porphyry is present. And the area is overlain by a relatively shallow depth of cover, somewhere between 15 to 35 meters on average. We currently have 5 rigs operating at Yamarna. There's 2 diamond rigs, 2 aircore rigs and 1 RC rig out in the field right as we speak. Our exploration activities this quarter have been largely focused on aircore program and some complementary diamond stratigraphic drilling targeting our highest-rank targets in the Southern Project area. The projects of interest include Savoie and Beefwood, where we have large 15-kilometer-long regolith anomalism, which has been defined by first-pass aircore drilling. And we've completed our first-pass programs over both those targets just recently. Multiple anomalies have also been defined at Hirono that needs further follow-up, and we've got aircore operating right now and filling those. The first diamond hole drilled at the Kingston project following up aircore and others and returned in the section of 1 meter at 10.4 grams per tonne within a 7-meter wide shear zone and close to major [ fold notes ] intersected by the fertile [indiscernible], and this Kingston target is one of our primary targets going forward into 2021. Two additional holes -- diamond holes are drilled at Gilmour in the June quarter and assay returns this quarter, which included 4 meters at 17-gram per tonne from 244 meters and 6.8 meters at 5.3 grams per tonne from 229 meters. These were 2 diamond holes to the north of the existing resource and show the potential for the exhaust to extend further. This December quarter, we'll see further drilling at Gilmour, and we've got RC drilling ongoing at the moment looking to extend the resource to the north. That will be followed by further resource -- potential resource drilling on some other targets. We're also looking to test for additional shoot at depth below the current resource at Gilmour, with diamond drilling planned for this quarter. We'll also see follow-up work at Hirono and Kingston as well as some RC drilling down at Smokebush to test new geological model at this prospect, which was discovered 3 or 4 years ago. Moving on to our Yandina project, which is a joint venture with Cygnus in the Southwest of West Australia. We now hold almost 90% of those 2 joint ventures at Lake Grace and Yandina. We took over management of the project in October. And during the quarter, assay results from RC drilling at the Gunsmoke prospect were returned. Test results included 8 meters at a gram from 35 meters and 2 meters at 2.1 grams from 107 meters. These results were intersected in felsic rocks, potentially porphyry hosted within ultramafic [ style ] rocks. And we have a number of other anomalies that we will follow-up with us -- or diamond drilling and aircore drilling in this quarter. Gold mineralization intervals occur within wide zones of anomalism, and follow-up drilling towards gravity surveys will be completed going into next year as well. I'll be happy to answer any additional questions later in the call, and I'll hand back to Duncan Hughes now. Thank you.
Thanks, Justin. Slide 9 closes our presentation with a summary of how we believe we currently deliver and will continue to deliver shareholder value. Gold Road is a strong business with a strong and growing balance sheet. This is underpinned by a long and robust mine life of low-cost production for at least another 11 years. We see considerable opportunities to grow from here as we optimize Gruyere, continue to explore and look for growth opportunities. We have a healthy track record of shareholder returns and we would expect this to continue, and this now includes a dividend policy. That brings our results presentation to a close. We're now very happy to answer any questions, and we'll hand back to the operator for any questions.
[Operator Instructions] Our first question is from the line of Levi Spry at JPMorgan.
Yes. Got it. A couple of questions, please. Firstly, on material movement and the second fleet. So is that fully ramped up now? Can you sort of talk us through what happens there over the next -- over this quarter and the course of '21?
Yes. So the second fleet is now fully operational, pretty much was that way from early in the quarter. So the total volumes you're seeing now move are really what you can expect into future quarters.
Okay. So already there. Yes, cool. And can you maybe just remind me on the timing of the work to convert some of the resource below the bottom of the pit to reserves? Can you just step us through that process again?
Look, so the work remaining, we've essentially done all the drilling, of course, in 2019. We've completed some metallurgical drilling and geotechnical drilling. There's still some work to be done off both of those bits of data sets. The other key piece really from geotechnical data is making the fresh rock pit. And we're looking to get a bit more exposure on fresh rock and in part from also the Stage 2 mining area, where we're starting to move to pressure material, particularly down the southern end of the pit. Probably see that data collection and studies flowing through to about the end of March and then from [indiscernible] as we get into the mine design and work to convert that through ultimately into reserves. But we'd be looking at the second half of next year, maybe early -- and even early into 2022 by the time we actually get all of that reported out. Importantly, we got the geotech side of right -- things right, in particular, because we're potentially talking of a pit that goes down in excess of 450 meters by surface, which would make it one of the deeper, I can say, gold mines in Western Australia.
Yes. Excellent. And so just in that context, the next update comes -- based on the end of December, there won't be -- there's nothing that you can call out there in particular that could be material?
So the resource reserve reporting, normally when we do an update, of course, that goes into annual reporting, so you'll see that with the annual report. We'd expect that to the current pit design, obviously, with depletion resource reporting. I guess we're debating about whether currently an $1,850 shell is appropriate, particularly as many others in the market are reporting higher gold prices than that. We obviously need to be consistent with the industry as a whole. Otherwise, we're undercooking ourselves. We're doing a bit of work at the moment just on revising some of the resources and reserves out of the Golden Highway trend. We anticipate significant changes out in those resource reserve areas.
[Operator Instructions] Okay. We have a question from the line of Paul Kaner with RBC.
Yes. Could you maybe just quickly outline how you sort of see utilization rates improving going forward in the near term?
Yes. Obviously, this quarter -- and we've had a couple of detractors. One is, as I've indicated, we made the decision to take the SAG mill down and do some reconfiguration. That gave us throughput benefit. So certainly, it was the right decision at the time. And then we've had the unexpected event with the motor bearing failure. I think without those, we'd have been basically in the low 90% utilization rates. We've certainly addressed a lot of the issues that we saw in previous quarters. So I'd expect the next quarter or 2 to be probably in that low 90s. We've identified -- and we mentioned it in the quarterly, we think there's a bit of work we need [ to do in ] pebble crusher. That's to improve the operability and reliability of that part of the circuit. And effectively, the linked maintenance requirements on the pebble crusher from the main milling circuit, which means if we've got to do any work on that, the SAG mill can keep -- and ball mill can keep operating. And ultimately, we see the game plan is to get us up to what we see is good industry benchmarks around the 94%, 95% utilization. Getting the last few percent, of course, is hard work. So it's not going to happen instantly, but I'd see that -- the journey over the next year or so.
Okay. Our next question is from the line of Tim McCormack of Canaccord Genuity.
I was just thinking about the BFS and all-in sustaining cost profile outlined there of [ $1,025 ]. Like are we, in reality, ever going to see that? Or are we going to see that the pit shell optimizations change? And if we are going to see it, how quick is the step-down going to be from the sort of $1,250-ish that you're tracking on now?
Yes. So of course, the BFS numbers were put out into...
2016.
2016. So you've really got to be adding escalation through that period. Typically, taking -- in that kind of 2% range or -- on a base of about $1,000, it's about $50 a year. So the first point I'd make is you've got to index that cost base forward. I think if you do that, we're not far off of that run rate. Obviously, the last quarter we felt disappointing as well as based on the lower production. But I mean the outlook going forward, we don't see a fundamental change to what was delivered out of the BFS. I guess the second part of the question there was really around extension of mine life and deeper pits. I mean what we're trying to push there is if we can get the throughput and efficiency of the milling circuit up, it obviously helps to reduce costs. And we think there's some opportunities, which is part of why we're taking our time with the pit design and geotech to steepen up the pit wall. And if we can successfully put those together, then the life-of-mine pit just gets deeper without it. Simply being chasing higher cost ounces, it delivers at a similar life-of-mine all-in sustaining cost.
Yes. Cool. That makes sense. And just on the payout ratio of 15% to 25%, how you arrived at that number or that range.
Look, I guess, that had quite a bit of discussion around the Board and, I guess, another 15% to 30% of free cash flow. We thought that was kind of prudent to where the business is at the moment and certainly in line with a lot of other gold mining businesses are doing. Obviously, if we were to accumulate that in cash, then we can obviously look at other mechanisms or changes to that policy in due course. But certainly, for where the business is at the moment, we felt that was an appropriate guidance to the market.
At this stage, there are no further questions in the queue. So can I please pass it back to you for any closing comments at this stage?
Thanks, Hugh. So that brings a close to our quarterly results call. We thank you for your continued interest and support. We now look forward to a stronger fourth quarter of production, continued strong cash generation and exploration progress. Thank you.
This now concludes today's call. So thank you all very much for attending, and you can now disconnect your lines.
Thank you.