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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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 June 2022 Quarter Results 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, Harmony, and welcome, everyone, to our June quarterly analyst call. The June quarter was a record quarter. During the quarter, Gruyere production head grade, mine grade and throughput records. 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 successful completion of the DGO Gold takeover. Gold Road is excited about the quality of its exploration and investment portfolio. This portfolio has exposure to 2 of the best West Australian gold discoveries this century.
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; 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 record gold production, result of the higher production, a healthy quarter-on-quarter reduction in all-in sustaining cost per ounce. We produced 85,676 ounces at Gruyere as pre-reported in early July. All-in sustaining costs was $1,250 per ounce for the quarter, down from $1,526 in the previous 2 quarters.
Our cash and equivalents lifted to $161 million, and Gold Road continues to carry no debt. The record production and sales resulted in record free cash flow for the quarter of $43.6 million. The quarter also saw us successfully completed the takeover of DGO Gold. We continue to make progress on the exploration front. We remain a focus on delivering a meaningful discovery from the expanded exploration portfolio in part delivered from the DGO acquisition. Pleasingly, we continue to operate safely and reported no lost time injuries during the quarter, and our 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 into the higher-grade areas in Stage 2 and 3 pits, and this was reflected in the higher mine head grade of 1.19 grams per tonne gold for the quarter. Processing rates and head grades were at record highs. Throughput benefited from a trial plant availability this quarter due to reduced both scheduled and unscheduled maintenance downtime.
Head grade increased to 1.22 grams per tonne. The total mining costs increased quarter-on-quarter, in part due to the inflationary cost pressures, including diesel costs. The processing costs were lower, principally due to lower maintenance costs in the quarter.
The general administration (sic) [ general and administrative ] costs increased quarter-on-quarter, partly due to the costs associated with managing COVID-19. As a result of increased gold production, our attributable all-in sustaining cost per ounce came in lower quarter-on-quarter at $1,250 per ounce. Corporate all-in costs were $1,600, which I expect is one of the lowest compared to the majority of our peers. Ounces sold were at record highs of 44,526 ounces, an average price of $2,496 per ounce which reflects our stronger gold production performance and a higher proportion of sales 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 an impressive improvement in quarterly production over the last 12 months, driven by improving grades and improving plant throughput. The trend for all-in sustaining cost per ounce is moving down as guided on the back of this improved reduction.
Gruyere 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 cost remains as guided between $1,270 and $1,470 per ounce. COVID, of course, remains a risk to operational performance. And like most of the sector, we've seen significant impacts on the availability of our workforce with COVID case numbers. But pleasingly, there has 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 thrill to be on the call here today to talk to you about our financial results. They were particularly strong for the quarter. And as a result, the key outcome you'll see is that our cash and cash equivalents has risen to just over $161 million as at 30th of June.
You'll see on this screen, the usual cash flow waterfall, summarizing some of the key movements in our cash flows across the quarter and just taking you through the operational drivers and outcomes, 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. Three key things I'd like to bring to your attention in that quarterly result. We flagged on the call last quarter for the Q1 that we've seen an abnormal buildup in our working capital levels across the quarter at $10 million, and that was forecast to unwind beneficially in this quarter. That came today.
As we saw by 30th of June, our working capital have returned to normal levels. There was also a dividend payment of just under $4 million in the quarter. And then in particular, towards the end of this quarter, there was just over $12 million in cash outflows associated with the DGO transaction, firstly, to pay off a debt facility that had in place at the time and also some of the 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, $100 million that was available to us at the time and was undrawn. And so going forward, we still have Tranche A in place to the tune of $150 million, and that's in place for September 2024 at the moment. And then last but not least, our hedge book is not on its last leg with just under 16,000 ounces to be delivered across next few months to the end of November or roughly 20% of our forecast production. And then from December onwards, the hedge book is gone, and we are fully exposed to the spot gold price going forward.
Thanks for that. And I'll now hand back to you Duncan to take you -- take us through the exploration results for the quarter.
Yes. Thanks, John. 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 successfully completed the takeover of DGO Gold. That means Gold Road right 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 to high-quality ore bodies in the low-risk jurisdiction of 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 under a takeover offer from Genesis Minerals. We have a 20% interest in Yandal Resources, and they're mainly focused on 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 the next slide, it gives an overview of what our exploration portfolio now looks like. And obviously, we're integrating the DGO part of that. But we've also got some quite significant applications up in the Northeast Queensland, the 2 properties we call Greenvale and Galloway. And of course, the Yamarna project remains an exciting opportunity for us, but the new tenements give us additional optionality on making discoveries across that expanded portfolio. Of course, our remit and strategy really remains unchanged. We're very much focused on discovering mine 2 to transform the business. And now our activity -- our exploration team, of course, we'll work through that extended portfolio work what we prioritized out of that very large landholding. And as I noted, Andrew Tyrrell is currently out on the ground at the Stuart Shelf property, where we're drilling at the moment.
At Yamarna and the Golden Highway joint venture trends, we currently have 4 rigs operating, which includes 2 RC rigs, 1 diamond rig, 1 aircore rig. And in June, we completed a shallow-RC program up at the nearly acquired Mallina Gold projects acquired through the DGO transaction, and I'll talk about a little later in the presentation.
Another former DGO prospects that I've mentioned is the Pernatty project in South Australia. And we're currently looking there for IOCG, iron oxide copper gold systems, [ settle ] it to Carrapateena or like the Olympic Dam, that kind of style of mineralization with that in 80% earn-in joint venture. As I said, Andrew is out there on the ground at the moment.
The slide -- let me talk briefly to the Northeast Queensland properties that have been previously drilled by Northern Normandy Mining and local prospects, some of that work dating back to the late '80s and early '90s. And we see the project represents a walk-up drill test opportunity, targeting intrusion-related gold mineralized systems in an area that's really seen no exploration for a substantial period of time.
By the time that the tenure is expected to occur in the next quarter, and then we followed up by land access negotiations with uplifts and the like. We'll be aiming to drilling there next year. And assuming our drilling validates historical exploration work, we expect the property could return [ plus ] 50-gram meter intersections.
And if we move on to the next slide, at Yamarna, which, of course, is the major area of our current focus, we continue to highlight lots of potential here, notable programs for the quarter that have occurred on many of these still we're waiting 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 I guess, 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 doing aircore drilling to further strengthen and delineate the existing gold in regolith anomaly. And we've been getting narrow high-grade mineralization associated with a quartz diorite likely hosted within the Smokebush Shear Zone.
At Waffler, we've been doing infill aircore drilling, and that's been completed over several targets and aiming to eliminate specific items to follow up diamond or RC drilling. The aircore results that we've received have highlighted several areas that need further work.
At Earl, we've done a second aircore phase -- a second aircore program to the north of the previously identified anomaly, and that will require a follow-up with RC and diamond drilling. Results of all that work are still pending. Rattlepod, we've done RC drilling across the targets there that previously identified from aircore or RC drilling. Again, 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 a further 100 meters -- sorry, 800 meters to the south. So we still got a lot of results to come through there, but some reasonably promising indications, I guess, is all we can say at this time.
If we look at Mallina, so this core property, of course, acquired through DGO and have been out on the ground there. So the program has already been worked up by the DGO geologists, and we're continuing with that. And as you can see, the property here is contiguous with the De Grey landholding, and we see very much in a structurally or geologically analogous position, so similar intrusions that we believe are the same sort of suites of intrusions that De Grey have. And I guess the [ green diamond ] there, the [ green star ] there indicates the sort of central way where we've been doing the drill program there. So we built 92 shallow air -- shallow-RC holes. We expect those results to come through in the next quarter.
Okay. So that brings to a close our exploration updates. And hopefully, next quarter, we've got some results and things like that, that we can talk 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 may have, and I'll hand the call back to Harmony.
[Operator Instructions] Your first question comes from Andrew Bowler from Macquarie.
Obviously, just noting the record quarters at Gruyere during -- sorry, for the last quarter. The mill throughputs getting up to that sort of 9 million tonne throughput rate now or beyond that, I should say. How is it tracking compared to the original plan you announced a while back about getting up to close to 10 million tonne per annum over the next couple of years?
Yes. 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 still some opportunities just in the throughput rate. And of course, lifting grade is an important part of us getting up to what we see as a sustainable 350,000 ounce per annum run rate out of per year.
[Operator Instructions] There are no further phone questions at this time. I'll now hand back to your speakers to address any webcast questions.
Thank you. The first one comes from Daniel Morgan from Barrenjoey. The pickup in grade this quarter was a little earlier than I thought. Can you discuss what grade expectations are over the next few quarters? And any maintenance outages scheduled?
I'll take those in reverse order. So maintenance. As we flagged, typically, we are doing a SAG mill reline roughly every 3 to 4 months. So typically, that falls one per quarter. And then the ball mill is on an annual -- roughly annual reline. So that means we double up with 2 relines sometimes in a quarter, and that's likely to be the first or second quarter of next year, just depending on how we're going right there. So nothing unusual. That's kind of normal business as usual.
The grade, well, I think from our point of view, it's tracking in line with what we are sort of nudging internally and expected. And of course, if you look at some of those sections and other collateral we've put out very much, we started in the sort of 1 gram part of the orebody that was near surface. And if you look at the future pit stages and cutbacks and what have you, we're typically getting into 1.3 gram mining areas. So we expect that improving grade trend to continue from here until we kind of get to that average sort of run rate.
Next question comes from [ Donald Pane ]. What's happening in Galloway, Queensland?
Galloway, so as I've mentioned, that's very much early-stage properties. We've picked the ground up there. So they're under application. Those tenements will need to come through to grant. Once they're granted under the Queensland system, we can negotiate access agreements. So at the moment, we're doing the work that we can do without getting on the property and targeting and what have you, and there's quite -- I guess we've got some quite good data sets to build direct targets. And yes, the intention is we will be out on the ground there in the sort of first half of next year, probably after the North Queensland wet season is finished.
Next question comes from [ Ryan Goodman ]. Will we see growth in the dividend in the coming years?
Well, I guess we've got a fairly clear dividend policy, and obviously, strong cash flow feeds into that. So I guess as a corporate, we have to be a bit cautious in preempting what dividend payouts will be. The regulators take quite a close interest on that. And of course, it's subject to Board decisions rather than just at all management.
The next question comes from [ Larry Hill ]. Can you explain the reason for canceling the Tranche A facility at this time? Does this influence your thinking around the dividend?
Yes. So do you want to pick that one up, John?
Yes. Sure. Look, I mean at this stage, Tranche A was due to expire early next year. As you'll see in our results at the end of the half year, $161 million in our cash reserves. We didn't see anything looming on the horizon that would require us to use either our Tranche A or Tranche B. So in the interest of saving some financing costs, we made the call to terminate Tranche A. That was quite a simple one, and there should be no impact in the future around dividends or rather -- or cash requirements going forward as a result of that decision.
That looks like it for questions. I hand back to Duncan.
Yes. Thanks, Hayden. Look, I'll just hand back to Harmony to see if there's any more questions from the phone.
You have a question from Levi Spry from UBS.
The question, I guess, was just on now the DGO transaction is complete, if you could share anything on how you plan to engage with De Grey and what that might look like? Is that helping add value to the next study? And maybe remind me what that is. Is it a prefeasibility study? Are you expecting to have input into that? What can we expect from you to add value to that stake you have?
Thanks, Levi. It's Hayden 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 knowledge that we've had from Gruyere and happily pass those learnings on, which will help ultimately optimize our holding in De Grey, 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.
Your next question comes from Michael Scantlebury from Euroz Hartleys.
Great quarter. My questions around throughput have already been kind of asked, but is that one on the solar plants. I just wanted to know how the operations, I mean, of the solar facility there was tracking?
Yes. So I guess we're in the sort of final stages of commissioning that. I guess the current indications is it will be up and going to plan. We're going to get a few more tests and things done on it to have confidence in that. But of course, that's quite timely with the big step-up in energy costs at the moment. So once it's coming along, it's generating about 10% of the power supply for Gruyere.
Your next question comes from Paul Kaner from Ord Minnett.
Just in the quarterly, you mentioned you're 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 for? Or is it just to get a sufficient stockpile buffer there?
Yes. Thanks, Paul. So what we've been doing is basically there's a rehandled fleet. So that gives us a bit of extra capacity. Normally, that's used for managing ROM ore stockpiles to the primary 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 potential volumes that we can achieve. And what we're trying to do is manage some of the headwinds that everybody is seeing with COVID. We've had case numbers on the site, similar to population statistics in WA as a whole.
So I think it's going like 40% of the population there had COVID. And of course, you have the impacts with people being away for cares leave and isolation requirements, et cetera. So everybody's had those things. So really, what we're trying to do strategically is to make sure that we kick the runback full, and that's pretty much where we are, and it's worked quite well for us to date. Obviously, where we end up through the year depends on if we're suffering any production lost time as a result of COVID or for other factors. But what it does mean is we're in quite a robust position at Gruyere to both manage the ore supply to the plant. That's not to say that there's no COVID risk. Of course, we've got to staff up all of the plant side of things as well.
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 1 webcast question coming from Brad from Bell Potter. So we might just address that very quickly.
No problem.
So Brad, his question is, with the growth in exploration tenure, what are your thoughts on the direction of the exploration budget?
We'll obviously work that through according to quality of targets and stuff like that. But I think the general mindset that we've got is hold exploration expenditure at similar levels. So we've been kind of in that $25 million, $30 million range in recent years. So obviously, [ pallets that equates ] to the quality of targets we've got at [ Humana ] versus elsewhere. And we've got a very large land package with the DGO acquisition. We're always certainly going to look at opportunities for funding some of that out or bringing in partners and what have you. And we're working through that at the moment. So I guess probably the bottom line is there just -- because we've got a big land package and don't see us stepping up the level of exploration spend in totality, the key driver of where we look at running at a higher rate for exploration will be driven by results in clearly having a sort of resource drill out if we need to accelerate.
Thanks for your question, Brad, and thanks, everyone, for their questions. That brings a close to our quarterly call. June quarter was a great quarter for us. Obviously, record production, low all-in sustaining costs. And the all-important 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, we're obviously well on track for growing to a sustainable 350,000 ounces in 2023. The quarter saw us successfully complete the DGO Gold takeover, and we're 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 felt comfortable to reduce our undrawn debt position.
I thank you again for your interest and continuing to follow the company. And I look forward to talking again in another quarter. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.