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Thank you for standing by, and welcome to the Gold Road Resources, June 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, Harmony. Welcome everyone to our June quarterly analyst call. The June quarter was a record quarter. During the quarter Gruyere hit production head grade, mine grade and throughput recorded. As a result Gold Road reported record gold sales during the quarter and generated record free cash flow ending the quarter with record net cash and equivalents. Lots of records in line with our guidance for 2022. This was achieved in a time when almost every sector, not just the mining sector is experiencing significant challenges and cost pressures.
The quarter also saw the successfully completion of the DGO Gold takeover. Gold Road is excited about the quality of its exploration investment portfolio. This portfolio has exposure to two of the best West Australian gold discoveries this century.
In the presentation today we will be referring to the quarterly result slides that can be viewed on the live webcast, our website or the ASX platform. 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; 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 a little more detail.
Thanks Duncan and thanks everybody for joining us. As Duncan has said, June quarter saw a record gold production result of the higher production, a healthy quarter-on-quarter reduction in all-in sustaining cost per ounce. We produced 85,6761 ounces at Gruyere as pre reported in early July. All-in sustaining costs was $1,250 per ounce in quarter, down from $1,526 in the previous two quarters.
Our cash and equivalents listed $861 million and Gold Road continues to carry no debt. Record production in sales resulted in record free cash flow for the quarter of $43.6 million. The quarter also saw us successfully complete the takeover of DGO Gold. We continue to make progress on the exploration front. We made [ph] 5% delivering and making a full discovery from the expanded exploration portfolio, in-part delivered from the DGO acquisition. Pleasingly we continued to operate safely and reported no Lost Time Injuries during the quarter and a 12 month lost time injury frequency rate of further to 2.6.
Looking at the quarter in a little more detail, mining continued to advance in the into higher grade areas in Stage 2 and 3 pits. This was reflected in the higher mine head grade of 1.19 grams per ton gold for the quarter. Processing rates and head grads were at record highs, throughput benefited from much higher planned availability this quarter due to reduced, but scheduled and unscheduled maintenance downtime. Head grade increased to 1.22 grams per ton.
The total mining cost increased quarter-over-quarter, in fact due to the inflation rate cost pressures, including diesel costs. The processing costs were lower, principally due to lower maintenance costs in the quarter. General administration costs increased quarter-on-quarter, partly due to costs associated with managing COVID-19. As a result of increased gold production, our attributable all-in sustaining cost per ounce, I mean lowered quarter-on-quarter at $1,215 per ounce.
Our corporate all-in costs were $1,600, which I expect is one of the lowest compared to the majority of our fees. Ounces sold were at record highs of 44,526 ounces, an average price of $2,496 per ounce, which reflects a stronger gold production performance and the higher proportion of sale to spot and of course a fairly strong gold price.
The charts on this slide illustrate the continuing and improving trend as we outlined last quarter with impressive improvement in quarterly production over the last 12 months driven by improving grades and improving throughput. The trend for all-in sustaining costs per ounce is moving down as guided on the back of this improved production.
Gruyere year 2022 production guidance remains unchanged at 300,000 to 340,000 ounces or 150,000 to 170,000 ounces attributable, and our all-in sustaining costs remains as guided between $1,270 and $1,470 per ounce.
COVID of course remains a risked operational performance. Like most of the sector we have seen significant impacts on the availability of our work force with COVID case numbers, but pleasingly there’s been no material impact on our gold production.
I’ll now hand over to John to take you through the financial results.
Thanks Duncan. It’s a treat to be on the call with you today to talk to you about our financial results. They were particularly strong for the quarter and as a result the key outcome you will is that our cash and cash equivalents has risen to just over $161 million as at 30th of June.
You will see on the screen the usual cash flow waterfall; some are rising, some are the key movements in our cash flows across the quarter. Duncan has just taken you through the operational drives and outcome, so I won’t go back over that again, but just some key points of note.
Our free cash flow for the quarter was just under $44 million, its rotating. I’d like to bring to your attention in that quarterly result; we flagged on the call last quarter for the Q1 that we’d seen an abnormal build-up in our working capital levels across the quarter of $10 million and that was forecast to unwind beneficially in this quarter. That came today as we saw by 30th of June that our working capital had returned to normal levels.
There was also a dividend payment of under $4 million in the quarter, and then in particular toward the end of this quarter there was just over $12 million worth cash outflows associated with the DGO transaction. It’s going to pay off a debt facility that had been placed at that time and also some other transaction costs.
So, ending the quarter and ending the half year with a very strong balance sheet and a very strong position of liquidity, and as a result we made the call on the 8th of July to retire our Tranche A revolver. We had $100 million that was available to us at the time that was undrawn. So going forward we still have Tranche B in place to the tune of $150 million and that’s in place and puts us at the end of 2024 at the moment.
And then last but not the least, our hedge book is one of the last legs with just under 16,000 ounces to be delivered across the next few months to the end of November or roughly 20% of that forecasted production, and then from December onwards the hedge book is gone and we are fully exposed to these spot gold price going forward.
Thanks for that, and I’m going to hand back to you Duncan to take us through the exploration results for the quarter.
Yes, thanks John, and I’ll note that Andrew Tyrrell who usually joins us on the call is actually out and about looking at some of the DGO properties. And of course during the quarter Gold Road has successfully completed the takeover of DGO Gold. That means Gold Road now owns a portfolio of assets which includes a 14.4% shareholding in De Grey Mining. Of course De Grey is the owner of the 10.6 million ounce Mallina gold project in WA, and that position strengthens that business alignment for high quality [old quarries] [ph] in the low risk jurisdiction in Western Australia.
And we also hold a 6.1% interest in Dacian Gold, who owns the Mt Morgans gold operation, and of course Dacian currently are under a takeover offer from Genesis Minerals. We have a 20% interest in Yandal Resources and a mining – an exploration up in the Yandal Greenstone belt and we have quite a diverse exploration portfolio now spanning the Yilgarn – the Pilbara, Yilgarn, Bryah-Yerrida and Stuart Shelf provinces. As stated previously, we view that this acquisition is on strategy.
If we move to next slide, it gives an overview of what our exploration portfolio now looks like, and obviously we are integrating the DGO part of that. But we’ve also got some quite significant applications up in Northeast Queensland; that’s the properties we call Greenvale and Galloway, and of course the amount of projects remains an exciting opportunity for us, but the new tenement give us additional optionality on making discoveries across the expanded portfolio.
Of course the agreement and strategy really remains unchanged. We are very much focused on discovering mine 2 to transform the business. And our activity, our attrition team [ph], of course we’ll work through that extended portfolio and we’ll look at what we prioritize out of that very large land holding, and as I noted, Andrew Tyrrell is currently out on the ground at the Stuart Shelf property where we are drilling at the moment.
At Yamarna and the Golden Highway joint venture trends, we currently have four rigs operating, which includes two RC rigs, one Diamond rig, one Aircore rig, and in June we completed a shallow-RC program up at the newly acquired Mallina project. It was acquired through the DGO transaction and I’ll talk about it a little later in the presentation.
Another former DGO prospect that I’ve mentioned is the Pernatty project in South Australia and we’re currently looking there for IOCG sign like copper-gold [ph] systems similar to a Carrapateena or you know [inaudible] that kind of style of mineralization with that in a 80% earn-in joint venture. As I said, Andrew is out there on the ground at the moment.
The slide lets me talk greatly to the North Eastern Queensland properties that have been previously drilled by Northern Normandy mining and local prospectors, some of that work dating back to the late 80’s and early 90’s. We think the project represents a walk-up drill test opportunity targeting intrusion-related gold mineralize systems in an area that’s really seen no exploration for a substantial period of time.
The grant of the tenure is expected to occur in the next quarter and then we’d follow it up by land access negotiations with [inaudible] and the like. We’ll be aiming to drilling there next year. And assuming our drilling validates historical exploration work, we expect the property to return past $50,000 major intersections.
If you move onto the next slide at Yamarna, which of course is the major area there of our focus. We are continuing to highlight lots of potential here, notable programs for the quarter that have occurred and many of these are still awaiting results to come through. So Abydos we’ve completed a second phase of RC drilling targeting extensions to the bedrock mineralization that we’ve reported in previous quarters, and like as we’ve got some of those results through to-date, which are generally consistent with those previous intersections.
At the Kingston prospect, we’ve been Aircore drilling to further strengthen and delineate the existing gold-in-regolith anomaly and we’ve been getting narrow high grade mineralization associated with the quartz diorite locally hosted within the Smokebush Shear zone.
At Waffler, we’re doing infill Aircore drilling and that’s been completed over several targets and aiming to delineate specific owns to follow up the diamond ore fleet drilling. The Aircore results that we’ve received have highlighted several areas that work.
At Earls, we’ve done a second Aircore phase, a second Aircore program to the north of the previously identified anomaly and that will recall our follow up with RC and diamond drilling. The results for all that work are still pending.
At Rattlepod we’ve done RC drilling across two targets there that were previously identified from Aircore RC drilling and the results of that program are pending.
And then finally at Gilmour South, we’ve done an RC program with part of the results on that program received and the drilling at the moment provides indication at least that the mineralization extending along the shear corridor further 100 meters – sorry, 800 meters to the south. So you know we’ve got a lot of results to come through there, but you know some recently promising indications I guess is all we can say for the start.
We look at Mallina, so this core property of course to go out through DGO and been out on the ground there, so the program was already being worked up by the DGO geologists and we continued with that. And as you can see, the property here is contiguous with the De Grey’s land holding and we’ve seen very much in a structurally or geologically analogues position, so similar intrusions that we believe the [inaudible] intrusions, but De Grey has and I guess the grade in diamond there or rig style there indicates that’s a sort of central order of where we’ve been doing the drill program there. So we drilled 92 shallow-RC holes and we expect those results to come through by the next quarter.
Okay, so that brings to a close our exploration updates and hopefully next quarter we have got some results and things like that that we’re looking forward to and I’ll now hand back to Duncan Hughes.
Thanks Duncan. So that brings our results presentation to a close. We’re now very happy to answer any questions you might have and I’ll hand the call back to Harmony.
Thank you. [Operator Instructions] Your first question comes from Andrew Bowler from Macquarie. Please go ahead.
Good day gents! Obviously just noting the record quarters at Gruyere during – sorry, for the last quarter. The new throughput is getting up to that sort of 9 million ton throughput right now or be on that I should say. How is it tracking compared to the original plan? You announced a while back of that getting out to, you know close to 10 million tons per annum over the next couple of years? Cheers!
Yeah, I think it’s pretty well on target with that Andrew. I mean, I think we hit availability plus 90% in this quarter, so there’s still a bit of space for us to get that up to some industry leading standards and you know still some opportunities just in the throughput rate, and of course listing grade is an important part of us getting up to what we see as a sustainable, some 350,000 ounce per annum run rate out of Gruyere.
No worries. That’s all for me gents. Thanks.
Thank you. [Operator Instructions] There are no further phone questions at this time. I’ll now hand back to the speakers to address any webcast questions.
Thank you. The first one comes from Daniel Morgan from Barrenjoey. The pick-up in grade this quarter was a little earlier than I had thought. Can you discuss what grade the expectations are over the next few quarters? Any maintenance outages scheduled?
Maybe I’ll take those in reverse order. So maintenance, you know as we reflect typically we are doing a SAG mill rate line roughly every three to four months and typically that bodes well for the quarter, and then the ball mill is on a annual – roughly annual rate line. So that means we double up with two rate lines sometimes in the quarter and that’s likely to be the first or second quarter of next year just depending on how we are and kind of where in right there. So nothing unusual, but that’s kind of normal, business as usual.
De Grey, well I think from our point of view its tracking in line with what we sort of budgeted internally and expected and of course if you look at some of those sections and all the collateral we’ve put out, very much we started in the sort of 1 gram part of the old quarry that was near surface. If you look up at future pit stages and CapEx and what have you, you know we’re typically getting into 1.3 grade mining areas. So we expect you know that proven grade trend to continue from here until we kind of get to that average sort of run rate.
The next question comes from Donald Payne [ph]. What’s happening in Galloway, Queensland?
Galloway, so as I mentioned that’s very much early sized properties. We picked the ground out there, so they are under application. Those tenements will need to come through to grant. Once they are granted to the Queensland system, we can negotiate access agreements. So at the moment you know we’re doing the work that we can do without getting on the property and targeting [inaudible] quite – I guess we got some corporate data sets to build direct targets and you know the intention is we will be up on the ground there in the sort of first half of next year, hopefully after the North Queensland wet season has finished.
Next question comes from Ryan Bodman. Do we see a growth in the dividend in the coming years?
Well, I guess we got a fairly clear dividend policy and obviously you know a strong cash flow you know fades into that, so you know I guess as a corporate we have to be a bit cautious in preempting what dividend payouts will be. The regulator is like you called it, plus interest on that, and of course it’s subject to you know board decisions rather than just that all of management.
The next question comes from Larry Hugh. Can you explain the reason for cancelling the Tranche A facility at this time? Does this influence your thinking around the dividend?
Yeah, so do you want to take that one up John?
Yeah, sure I’ll comment. At this stage Trench A was due to expire early next year. As you’ll see at the results at the end of the half year, $161 million in net cash reserves. We’re going to see that thing landing on the horizon that would require us to use either our Trench A or Trench B. So in the interest of adding some financing cost, we made the call to terminate Trench A. It was quite a simple one and there should be no impact in the future around dividends or other – or cash requirements going forward as a result of that decision.
That looks like it for questions. I’ll hand back to Duncan.
Yeah, thanks. Hey, then look, I’ll just hand back to Harmony to see if there’s any more questions from the phone.
Thank you. You have a question from Levi Spry from UBS. Please go ahead.
Good day guys! Thanks for the call. The question I guess was just on, now with the DGO transactions complete, if you could share anything on how you plan to engage De Grey and what that might look like? Is that helping add value to the next day and maybe remind me what that is. Is that a pre-feasibility study? Are you expecting having including to that. What can we expect from you to add value to that stake you have?
Thanks Levi. Hey, this is Bartrop, General Manager of Corporate Development. I think it’s inappropriate for us to comment on any specific business development or corporate development opportunities as I think most companies do, so we won’t comment further on that. I think as we’ve mentioned, we see the strategic stake as something valuable. We’ll help out where we can in terms of the noise that we’ve had from Gruyere and hopefully pass those leanings on, which will help ultimately optimize our holding in De Gray, and we’ll provide whatever other learnings or support we can do. I think that’s kind of it with the position that we have at this time.
Roger, okay, thank you. Thanks a lot.
Thank you. Your next question comes from Michael Scantlebury from Euroz Hartleys. Please go ahead.
Hi guys! Great quarter. My question is around throughput already being kind of asked, but instead of one – on the [inaudible] I was just wondering how the operation side of the solo facility there was tracking.
Yeah, so I guess we are in the sort of final stages of commission that. I guess the current indications is it will be up and according to plan. We’re going to get a few more test and things done on it to have confidence in that. But of course that is quite timely with the big step up in energy costs at the moment. So once it’s coming along its generating about 10% of the power supply for Gruyere.
All right then, yeah great quarter guys. Cheers!
Thank you. Your next question comes from Paul Kaner from Ord Minnett. Please go ahead.
Yeah, Hi gents! Thanks for taking my question. Just in the quarterly you mentioned your accelerating mining to deliver ore to the plant and mitigate sort of ore supply risks. Could you maybe talk to the magnitude of this and how long you’ll sort of expect this to continue forward just to get a efficiently stock hold offer there.
Yeah, thanks Paul. So what we have been doing is basically there is a rate handle fleet, so that gives us a bit of extra capacity. Normally that’s used you know in managing ROM stockpiles to the appropriate crusher. So we’ve been using that opportunistically to give us a bit more throughput or a bit more mining rate. I guess the last couple of quarters are reflective of potentially volumes that we can achieve and what we are trying to do is manage some of the headwinds that we’re already seeing with COVID.
We’ve had case numbers on the side similar to population on the statistics in WA as a whole. So I think it’s about 40% of the population there had COVID, and of course you know you have the impacts of people being away for carers leave and isolation requirements, etc. So everybody has had those things, so really what we are trying to do strategically is to make sure that we keep the ROM pack full and that’s very much where we are and its worked quite well for us to-date.
Obviously you know where we end up through the year depends on if we are suffering any production loss time as a result of COVID or from other factors. But what it does mean is we are in quite a robust position at Gruyere to manage the ore supply to the plant. That’s not to say that there’s no COVID risk. Of course we got to staff up all of it and that sort of things as well.
Yeah, no dramas, understood. Thanks for that. Cheers!
Thank you. There are no further phone questions at this time. I’ll now hand the conference back to your speakers.
Thanks Harmony. We’ve just had one webcast question come in from Brad from Bell Potter. So we might just address that very quickly.
No problem. So Bradley’s question is with the growth in exploration tenure, what are your thoughts on the direction of the exploration budget?
Yeah, we’ll obviously work that through according to you know our quality of targets and stuff like that. I don’t think the general mindset that we’ve got is hold exploration expenditure at similar levels, so you know with the economy in that fleet by $30 million range in recent years. So you know obviously that against the quality of targets we got at Yamarna versus elsewhere and you know we’ve got a very large land package. So with the DGO acquisition, we are almost certainly going to look at opportunities. We’ll be founding some of that out or bringing in partners and what have you, and we are working through that at the moment.
So I guess probably the bottom line is, just because we got a big land package and I don’t see us you know stepping up the level of exploration spend in totality. You know to take drive of where we look at running at a high rate for exploration will be driven by our results in clearly having our sort of results dry out and need to accelerate.
Thanks for your question Brad and thanks everyone for their questions. That brings a close to our quarterly call. The June quarter was a great quarter for us, obviously record production, low all-in sustain costs, and the all importation corporate all-in costs was $1,600 an ounce and as Duncan suggested, probably one of the lowest in our peer group.
With the quarter obviously well on track, we are growing to a sustainable 350,000 ounces in 2023. The quarter saw us successfully complete the DGO Gold takeover and we are pretty excited about our portfolio of investments and exploration assets. As a result of the great production, we saw record free cash flow, record cash positions and we’ve felt comfortable to reduce our undrawn debt position.
Thank you again for your interest and continuing to follow the company and I look forward to talking again in against quarter. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.