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Thank you for standing by, and welcome to the Ramelius Resources quarterly teleconference. [Operator Instructions] I would now like to hand the conference over to Mr. Mark Zeptner, Managing Director. Please go ahead.
Thank you, Matt. Good morning, everyone, and thank you for taking the time to dial in this morning. With me as usual is Chief Financial Officer, Tim Manners.Following the standard course of events for a quarterly call, I'll run through the operational highlights before passing over to Tim to delve into the numbers in more detail. After that, we'll open the line for questions.I'm pleased to report that we've started the '22 financial year in typically solid Ramelius fashion, producing 65,686 ounces of gold at an all-in sustaining cost of $1,445 for the quarter. It is important to point out that this result is actually slightly ahead of internal expectations, with Q1 previously flagged as being weaker than Q2. As a result, this certainly sets us up for a bumper quarter 2 with the first half midpoint that we are shooting for of 140,000 ounces produced being maintained.The contributions from each of our production centers were even as they have been for some time. In the end, Mt Magnet slightly edged Edna May producing 33,958 ounces for the period. And with mining at Tampia ramping up significantly following first mining and milling of Mace zone ore at Tampia, Edna May produced 31,728 ounces.Back at Mt Magnet, the focus of mining operations continued to be the Eridanus open pit with production rising significantly following completion of the cutback down to the original Stage 1 pit depth. Shannon and Vivien underground operations also continued to perform strongly.As mentioned, progress at Tampia really kicked things along for Edna May in the quarter. A total of 254,000 tonnes at a grade of 2.64 was mined from the new operation for just over 21,000 ounces. We're able to mine some excellent high-grade mineralization within the Mace paleochannel zone in September, which provided a nice production boost late in the quarter. Other contributions to the Edna May total came from stockpiles, the Edna May Underground, Marda, and the Greenfinch pit, which was completed in August.On project development front, open pit mining commenced at the Magenta open pit at Penny, which, along with delivering a small amount of ounces, will act as the dewatering location for the Penny West cutback and the Penny North underground down the track. We have progressed our mining studies, in particular, the Galaxy underground scoping study, where we have completed an assessment of the upper part of the existing decline and also commenced dewatering activities. Some additional geotechnical drilling is required in an area where we do not have a lot of data, south of the Hill 50 fault. So this is for completeness as much as anything else, but it does mean that we won't complete the scoping study until early in the new year. Regardless, we remain very positive about the financial metrics of this project and are open to an earlier start than that -- what was envisaged in our August mine plan, which was FY '24, I believe.On the Edna May Stage 3 project, we have completed a drill program into the Golden Point area, which is on the eastern end of the potential open pit. Only a few results have been received, and I imagine we'll wait -- need to wait until the end of the year to receive all results and complete remodeling work on this area. Work is ongoing with mining contractor and capital cost estimates, as you can appreciate. We're not being too definitive while we are still waiting for drill results that may change pit optimizations and result in open pit designs.Our investment in exploration continues to be well directed particularly at Mt Magnet, where RC drilling, testing at Eridanus analog called Bartus East, which is about 2 kilometers southeast of Eridanus, has produced some very encouraging if early-stage results. Our best intercepts are included in the report, which are 82 meters at 1.65 from 130 meters and 99 meters at just over 1 gram from 178 meters. As you'd expect, we are following these up with further drilling shortly. There is more on the exploration activities in the report itself, which can be read at your leisure.Finally, before I hand over to Tim, in reference to our takeover offer for Apollo on Monday and this morning's news, we will obviously consider our position and therefore, cannot make any further comments at this stage.On that, let me hand over to Tim.
Thanks, Mark. As you pointed out, the quarter was a solid one for Ramelius with slightly better than expectations in both ounces produced and in all-in sustaining cost per ounce. As you note, we do expect a slight improvement in quarter 2, which will leave our guidance unchanged for the half and for the full year periods.We finished the quarter with $273.9 million in cash and bullion, which in this quarter did include an unusually high level of unsold gold on hand. In short, we had a very solid month in September, particularly at Edna May, which culminated in very high gold pours near the end of the quarter. The bullion on hand was therefore quite high; and as Table 1 shows, it meant that across the group we produced nearly 66,000 ounces. However, we sold only a little over 55,000 ounces. This is clearly only a timing issue. Indeed, all this excess gold was sold in early October.So cash from the operations, including the value of this gold on hand was $37 million for the quarter. Approximately $19 million of that was spent on mine and project development split between Tampia, approximately $8 million and Penny, which was approximately $9 million. The remainder was spent on some small items across the group.The only other items of note regarding cash flow is the $8.3 million paid to the tax man and income tax installments. And of course, our coffers were boosted by the sale of the Kathleen Valley royalty in the quarter of $30.2 million.I must point out that we get a few who comment that one of the risks of owning Ramelius shares is that of being unable to integrate new operations like Tampia into the Ramelius business. The Edna May processing facility fed a combination of high-grade ore from Edna May underground, the remaining ROM stocks from Greenfinch and high-grade feeds from both Tampia and Marda.With the challenge we face in the industry right now around availability of people, equipment and in our case, haulage capacity, the September quarter was a testament to the leadership and the teamwork across the group but in particular, at Edna May and the surrounding mines. I'd like to think that the efforts from our respective teams at those operations put to bed any misconception that exists around the risks of bringing multiple operations together at any of our Ramelius ops.On the cost front, our all-in sustaining costs are higher than they were last year, which we flagged would be the case. Whilst we're looking into every area, we can around costs. We're not immune to the cost pressures that exist in the industry right now.A quick update on the hedge book. During the quarter, we delivered into 46,000 ounces at an average price of $2,309 and added 36,000 ounces at an average of $2,457. The average hedge book at the end of September is now down to 196,000 ounces at an average price of $2,363 per ounce.I'll now hand back to Mark and to Matt to open to questions.
Yes. Thanks, Tim. Matt, if we could go ahead and open the line for questions, please.
[Operator Instructions] Your first question will come from Andrew Hines with Shaw and Partners.
And Mark, look, I will ask you a question about Apollo in a minute and see what you can say about it. But first of all, just a couple of operational questions. The Tampia result looks really good. You've -- that high-grade zone that you've got in that Mace paleochannel giving you that boost. How long does that high-grade stuff last for? Is that going to boost the December quarter as well? And was that slightly better than you were expecting to see from your original drilling?
Thanks, Andrew. In terms of Mace, it's not a 1-quarter wonder. We expect to be back into that zone in the December quarter as well. It actually lasts for, I think, the best part of the first 12 to 18 months of the project. We mine it sort of progressively. And in terms of the processing of the ore, it's good to mix some of that pretty much free milling, high nugget percentage, paleochannel material with the rest of the Tampia. And also, we do spread out the Mace as far as we can over the project life.
Got it. And a question for Tim on the hedge book. Tim, you've been winding that back now really for 12 months. And if you look at the forward book now, you're pretty lightly covered out in 2024, I think it is, or '23, so you're covered for the next 12 months really. Yes. Is that a deliberate or a change in policy from you guys that you just want to run a smaller hedge book in the future than what you've run historically? Or you still -- I think historically, you've said around 1/3 of your production hedged going forward.
Andrew, at the moment, what we're doing is sticking to, I suppose, the strategy that's been in place for probably 6 to 9 months, and that's basically we still replace those contracts that are out of the money, which are obviously getting fewer and further between contracts that we are in the money on. We don't typically replace, but we are, I guess, always looking at the environment. We're looking at short-, medium-, longer-term time buckets to make sure we're comfortable with the risk profile.And I guess, particularly where we sit now, if you look out into those years that you referred to, a big chunk of our production and a huge chunk of our cash flow comes from Penny. Penny, obviously, is a very low-cost operation or will be; and if you like, its risk and its sensitivity to gold price is less in that regard.So I would -- can't predict the future in terms of exactly what this position will look like over time. But at this point, I would expect to see just a gradual decline in cover. And we'll assess it, as I say, as we go.
Yes. And Mark, on Apollo, obviously, surprising news or new news this morning, and I respect that you can't really sort of say too much given how recent that news is. But just a bit of background, I mean your bid for Apollo was a combination, cash and shares. And clearly, with the cash position that you just released today, I mean you could make an all-cash bid if you wanted to.In the background of your discussions with Apollo, did they request Ramelius shares? Or is that something that you wanted to sort of keep some cash in reserve? And what was the background to doing a cash combination with scrip offer?
It was based on feedback. But look, I probably can't go into too much detail around that because every shareholder has different preferences. And I've got no doubt that that's the case with the 800 or so shareholders that are Apollo shareholders. So probably it's a bit sensitive at this point in time to go into any more detail than that, Andrew, obviously.
[Operator Instructions] Our next question will come from Paul Kaner with Ord Minnett.
Firstly, on Edna May Stage 3 study, could you maybe comment on how you've seen those contractor costs change? What sort of increases are you seeing there compared to what you first envisaged and then maybe how you can offset this using some other levers?
I think just a general comment about contractor pricing pre-COVID to now, and it's still a moving target at the moment. And it's obviously a flow-through of labor costs going up, fuel prices going up and then input costs from the likes of WesTrac. But I think every time you get a price at the moment, it seems to be still moving, and it won't probably settle down until our borders opening and some sort of normality in the market.But look, I'd be guessing on numbers, Paul, but I'd say it's in the region of -- you're talking 15% to 20% type changes. Like I said, that's a little bit of a guesstimate, but there's significant pre-COVID to sort of post-COVID contracted pricing. And you'll see that in probably one of the best examples that we've seen recently in the market, is the commentary from Bardoc around their project and how the prices have really impacted on that project. And that would have been the same scenario pre-COVID, post-COVID.
Yes. No worries. I mean are there any sort of other levers that you've been able to pull to sort of offset this cost increase with the study?
Look, at the moment, it's -- we're -- on a project that's a 7-year milling project that's -- potentially adds life to Edna May out to 10 years, it's not something where you want to pick a high point in the contractor market and say, yes, let's lock that in.So we're wary about whether this is a short-term volatility in the market. Other levers that we're always working on our tweaks in the mine design, obviously, the Golden Point area that we're drilling, backfilling of the Greenfinch pit and then backfilling of the Golden Point area itself. So we're looking at all that stuff. But at the moment, you'd probably be a bit reluctant to lock in a price that you'd like to think is short term in terms of its volatility. So we're probably wary about accepting prices that we recognize are out of the normal.
Yes. That's great. And then just on the Bartus East prospect, I mean, how many more holes do you have planned there? And have you sort of relocated any of your exploration budget following those recent half year results?
Not really. We had $14 million or so for the year at Mt Magnet, and so we have drilling ongoing pretty consistently there. There'd probably be a little bit of a change in focus from Eridanus down to Bartus, and we'll continue to drill there with one rig and reassess what's happening within the Granodiorite. It looks quite interesting. It looks like potentially a smaller version at this stage. Anyway, hopefully, it's something similar. But if I'm honest, it looks like a smaller version of Eridanus. But Bartus is not in our mine plans. It's not in any of our thinking. It's a new project, and it just goes to show the prospectivity -- the ongoing prospectivity of Mt Magnet.
The next question will come from [ Richard Hart ] with [ Top Wheel ].
But my first comment is congratulations on making guidance because although I'm a great fan, I did have my doubts in the current environment, so well done. I have about 46 questions about the takeover, but unfortunately, apparently, I can't ask those. So I'm left with the one -- my little favorite project, Mace, which I know is relatively small, but it seemed like it might have saved the guidance at the last minute. Just out of interest, any idea what the best grades out of Mace were?
Yes. I don't think it's quite a matter of saving guidance, [ Richard ]. And thanks for the congrats. Yes. Look, it's not easy for anyone to be producing at levels that they predicted some months before given the moving fees, especially on people and equipment. I think what Mace has enabled us to do is to give us some late -- some good grades late in the quarter, which has enabled us to slightly outperform rather than saving our bacon as you alluded to.And the grades, look, I've seen numbers 4 to 5 grams, and that obviously then combines with the rest of the material from the main pit to come up with that 2.6. So that's -- I think actually, Andrew Hines asked whether that's better. I think it's in line. And it's nice to see when it goes in the mill, the mill grades kick and the gravity kick as you would hope for. And until you actually see that when you're putting ore body through for the first time, you're not sure until it happens. It's great to actually see those gold bars come through. And the purities in terms of the Edna May gold bars has picked up as a result as well. So everything looks really positive for Tampia but specifically Mace.
Well done again. One last thing, what sort of depths are you at in Mace?
Mace is only an ore body that goes down, I think, maximum 20 meters. So we just mined the first part, which is directly to the south of the main pit. And then as you know, that -- it heads towards the west, towards the edge of the farm. So we've only really mined the first section, which is directly adjacent to the south part of the Tampia pit.
Right. So if I'm that way, I could bring my shovel in there?
If we catch you on the property, we'll have to shoo you off, [ Richard ]. Come through to the office as a preference.
All right. Sorry to take your time, but thanks very much again. As a shareholder, you performed very consistently for a long time, so thanks again.
Thanks, Richard.
Thanks, Richard.
[Operator Instructions] There are no further questions at this time. And that does conclude our conference for today. Thank you for participating. You may now disconnect.