Gold Road Resources Ltd

ASX:GOR

Earnings Call Transcript 2021-Q3

[Operator]

Thank you for standing by. Welcome to the Gold Road Resources ore reserve growth in September 2021 quarterly results. [Operator Instructions] I would now like to hand the conference over to Mr. Duncan Hughes, Managing Corporate Development and Investor Relations. Please go ahead.

[Duncan Hughes]

Thank you, Rachel, and welcome, everyone, to our ore reserve update and September quarterly analyst call. This is a substantial reserve update, but we have added almost another 1/3 to the Gruyere ore reserve. This ties in nicely with our mine outlook for gross production to a sustainable 350,000 ounces per annum. This further positions Gruyere as a Tier 1 ore body. September quarterly production was shy of expectations as announced previously. This is something Gold Road and our JV partner, Gold Fields, are taking very seriously. Happily, the ball mill realignment was successfully completed in early October, and we look ahead to a better December quarter. On the 21st of October, we held a conference call on our takeover offer for Apollo consolidated. The webcast can be viewed on our website and we are not intending to present any slides on that today. In the presentation today, we will be referring to the reserve update and quarterly results slides that can be viewed on the live webcast, our website or the ASX release. On the call today, we have Duncan Gibbs, Managing Director and CEO; Andrew Terrell, General Manager, Discovery; and Hayden Batrop, our General Manager of Corporate Development. I'll now hand over to Duncan Gibbs to talk you through our ore reserve update.

[Duncan Gibbs, MD, CEO & Director]

Thanks, Duncan, and thank you for joining us today. The Gruyere JV ore reserve has grown substantially by over 1 million ounces or 31% to 4.54 million ounces on a 100% basis. This growth comes from an increase in the great open pit or reserve to 4.24 million ounces. The Golden Highway satellite reserves remain unchanged at 0.31 million ounces. The key drivers of this ore reserve growth arises from the addition of 1.2 million ounces of indicated resources below the previous ore reserve as reported in our previous resource statement. The technical studies have allowed us to steepen up the pit walls in the fresh rock by up to 4 degrees. And we've done that work along with comprehensive studies, including metallurgy, new designs for the life of mine pit waste and plan forms and tailing storage options. The chart here shows the increase since the December 2020 reserves. They include an increase of 1.3 million ounces of reserve, offset by depletion of 0.21 million ounces for the 9 months to the 30th of September 2021. The chart below the table shows the breakdown of the reserve. It's worth noting that the grade of the probable reserve includes 4.3 million ounces of low-grade stockpiles. Portion of measured resources and results prudent reserves will increase after a recent round of grade control and will be incorporated into our annual statement later in the year. If you look at this long section, it quite neatly illustrates where we've been able to push the reserve pit with the debt increasing from 385 meters by surface for approximately 500 meters of live surface, and illustrates where we have incorporated most of the indicated resources at shining green into the new design and also the depth increases arising from the fresher slope angles. Move on to the next slide. It shows the mine plan now consists of 7 pit stages. We're fully mined out stage 1, of course, and we're currently mining from the Stage 2 and 3 areas. Stages 4 and 5 have been modified from the previous mine plan and stages 6 and 7 represent most of the new [ 1. million ] ounces of reserves. Mine plant takes Gruyere's open pit mine life out to 2032. Low grades in the middle -- last quarter, shown in the greener areas towards the edge of the Stage 2 pit. And you can also see from this slide, we're moving, when we've exposed the high-grade oxide pinches. And Stage 3 is, of course, relevant as we move into talking to the stage to the September quarterly results and the outlook going forward. Just an overview of our September quarterly as we preannounced early in the month associated with our mill downtime issues, we've produced 59,371 ounces for the year on a 100% basis for the quarter. All-in sustaining cost was $16.97 per ounce for the quarter, higher as a consequence of the lower-than-planned gold production. A 12-month lost time injury frequent rate remains low at 4%. The balance sheet remains strong, and we continue to carry debt. We continue to make good progress on the exploration front. We're seeing encouraging signs down dips per year as well as a number of new targets on our 100% owned the Southern project area at Yamarna. Moving to the next slide and just talk to the quarterly in a little more detail. Our fatal material movement increased 5. 4 million ounces quarter-on-quarter with mining of ore from both the Stage 2 and 3 areas. Mine grade remained relatively low, partly due to special variances and timing delays in getting to some of the higher grade areas. We've also been negatively impacted by mining the interface between the Stage 1 and 2 pit areas. And I think the Stage 1 area is now mined out. Mine grade is expected to lift into the semi quarter and importantly, into next year as the mining vacs with state pit, and we opened up the higher grade zones in the northern and [ deeper ] section of pit. And as I noted earlier, we've now exposed the first higher-grade softer oxide ore in the Stage 3 pit [indiscernible]. Processing was impacted by plant utilization, including the previously announced unscheduled board mill maintenance issues late in the quarter, improving plant at utilization really remains a core of our focus to lift production. The former realignments that was required to address the opinion the permian bearing issues have now been completed, and that enables the mill to now operate with increased power and therefore, throughput rate. Turning to our cost and guidance. As a result of the lower-than-anticipated gold production through the last quarter all-in sustaining cost per ounce for the September quarter was higher, as I indicated, at a total of $16.97 per ounce. Our revised annual guidance now remains on from the recent uptake of 250,000 to 260,000 ounces for the year. All-in sustaining costs for the 2021 calendar year are now anticipated to be between $14.50 and $15.25 per ounce with the lower September quarterly production, the primary reason for the increased previous guidance of between $13.25 to $14.25 per attributable ounce. During the quarter, Gold Road sold 28,350 ounces of gold at an average price of $22.31 per ounce. As with last quarter, the delivery into forward sales was a higher level than our typical level of hedging of approximately 25% in the quarter, which, of course, dampen the average gold price received and therefore, our revenue. Our corporate all-in costs was [ $2,194 ] per ounce coming to the lower production and higher exploration expenditure during the quarter. We turn to the next slide, just to talk to the drilling underneath the Gruyere pit and the slide illustrates the potential further economic opportunities from mineralization. And we've got 2 holes that remain to be drilled out of the program. a number of holes illustrated here without results, where we're still working through logging and assaying and we anticipate getting those results through the next quarter. Results received to date have delineated approximately 1.5 kilometers of continuous mineralization with grades and we can ensure with our expectations up to 500 meters below the new 2021 ore reserve. You'll note there are substantial exclusive resources that remain below the new reserve pit design. And between that and the $2,000 per ounce resource shell as well as the inaugural underground resource that we reported earlier in the year. Financially, the business remains strong. We remain debt free and stronger older strong cash and equivalents of approximately $124 million. We'll pay our interim dividend tomorrow. And that was fully franked and determined for the 6 months to the 30th of June 2021. And we also announced the dividend reinvestment plan. Cash flow waterfall will summarize the movements in cash and equivalents over the quarter. Free cash flow was obviously impacted by the lower than anticipated production revenue, an increase in corporate and exploration costs quarter-on-quarter is partly a result of timing payments with some June quarter costs paid in the September quarter. I now hand over to Andrew, and he can run you through an update on our quarterly exploration activities.

[Unknown Executive]

Thanks, Duncan. The discovery team continued to prioritize activities over the Southern Project area with systematic and targeted exploration over our key prospective targets. A significant amount of drilling has already been completed to date. And at the end of the quarter, over 118,000 meters of aircore, 30,000 meters of RC and 5,000 meters of diamond have been drilled. As previously announced, we have increased our exploration budget to $33 million with the additional expenditure primarily intended to accelerate aircore and RC drill testing for promising new exploration targets where drilling has begun to delineate encouraging trends of gold mineralization within regular and in petro. We currently have 4 rigs active on site and have received promising results that I'll talk to you through the next 2 slides. Looking at targets within the Southern Project area in a little more detail now. So [indiscernible] is a new target that was initially defined through aircore drilling, where Golden Regard and encouraging alteration was intersected previously. This target has subsequently been followed up with RC and diamond drilling as reported in September. Results have also been returned for the remaining holes and continue to deliver anomalous gold intersections that include 26 meters at 1.2 grams per tonne gold from 126 meters and 15 meters at 3.1 grams gold from 201 meters. These results have confirmed and extended the anomalous gold in regular to over 3 kilometers in strike land. Our second phase of RC drilling has been planned and is anticipated to be completed in the December quarter. Activities completed along the Smoke we shear-zone and Ceramic area beginning to demonstrate the potential of the greater than 30-kilometer structural corridor regional aircore has delineated encouraging multi-kilometer trends of anomalous gold in regular with supporting results in the underlying pedro. At Waffle, a 6,000-meter maiden RC drill program is currently in progress and follows up on encouraging regular anomism, to fine through aircore drilling across the hanging wall to the regional Smokebush Shear. This program targets key local structural targets coincident with the anomalous results. Follow up RC drilling is also planned to kill more south with the same geology and alteration as Gruyere has been intersected in aircore drilling as well as associated regulations. At the El target located southeast of Smokebush along the Smokebush Shear Zone, a program of RC and aircore follow-up drilling was completed. This tested favorable lithological and structural positions around the diamond hole that previously returned 3.8 meters at 2.35 grams per tonne gold, within a broader envelope of 40 meters at 0.45 grams as the results from this program are still awaited. At Smokebush, all assay results have now been returned for the RC and diamond drilling previously completed drilling intersected some high-grade mineralization, including 17 meters of 5.74 grams per tonne and 4 meters of 13.7 grams per tonne gold. This data is now being compiled and the maiden mineral resource is expected in early of 2022. That brings a close to the exploration update, and I look forward to any additional questions you may have at the end of this call, and I'll now hand back to Duncan Hughes.

[Duncan Hughes]

Thanks, Andrew. So that brings our presentation to a close. We're now very happy to answer any questions, and I'll hand the call back to Rachel to take any questions.

[Operator]

[Operator Instructions] There are no questions at this time. I'll now hand back to Mr. Hughes for closing remarks.

[Duncan Hughes]

Thanks, Rachel. Well, thank you very much, everyone, for listening to our call. We look forward to a strong December quarter. And beyond that, we look forward to years of reserve life as we continue ramping up to 350,000 ounces per annum. Thanks, everyone, for listening in. We'll speak again next time.