Ramelius Resources Ltd

ASX:RMS

Q1-2026 Earnings Call

[Operator]

Thank you for standing by, and welcome to the Ramelius Resources September Quarterly Report. [Operator Instructions]

I would now like to hand the conference over to Mr. Mark Zeptner, Managing Director. Please go ahead.

[Mark Zeptner, executive]

Good morning, everyone. Thank you for taking the time to dial in this morning. In addition to the full quarterly report, we have also released a presentation that we'll speak to during this call. Both documents have been uploaded on the ASX platform and will also be available on our website shortly.

This morning, I'm joined by our COO, Tim Hewitt; and our CFO, Darren Millman. Tim and Darren will provide some detail on the operations and financials after I run through the highlights. Whilst the presentation as a whole is relatively high level, I do note that there is a lot more detail that can be found within the quarterly report itself. As usual, there will be an opportunity for listeners to ask questions at the end, whether that be through the teleconference or the webinar depending on how you have joined the call.

So for those who have the presentation deck handy, I'll initially be speaking to Slide 3. The September quarter for Ramelius has been a period of both operational transition and strategic progress. Our quarterly production of 55,013 ounces at an all-in sustaining cost of $1,836 an ounce was in line with our expectations with grades at Cue reverting back closer to ore reserve estimates following several quarters of overperformance.

Given this and mining at Penny moving more to the Penny West deposit as opposed to Penny North, Mt Magnet production grades will be slightly lower going forward until such time that we see material quantities of Dalgaranga, specifically Never Never ore available in late FY '26.

Tomorrow, we will be issuing full year FY '26 guidance and a 5-year outlook, and we encourage you to dial in for that call as well, noting that we will be a little earlier, 9:00 a.m. Eastern, 6:00 a.m. Western Standard Time.

Our production for the quarter was achieved without any lost time injuries, but unfortunately, there were 5 restricted work injuries recorded, which resulted in a marginally higher 12-month moving average total recordable injury frequency rate or TRIFR. Now whilst the RWIs were minor in nature, this result is still disappointing and our focus continues to be on ensuring a safe environment for all employees and contractors, particularly as our exploration activities ramp up and Dalgaranga increases its development rates.

During the quarter, Ramelius launched its Life Saving Rules, which complement our principal mining hazards as we continue our journey towards improving our proactive safety culture.

The closing cash and gold balance for the quarter was $827.7 million, up from $809.7 million at 30 June, which was after the Spartan acquisition and related costs of $74.3 million, which was net of the cash acquired from Spartan.

During the quarter, we released our 2025 resource and reserve statement with mineral resources of 12 million ounces and ore reserves of 2.4 million ounces, which were up 38% and 118%, respectively, on the 2024 numbers, but also noting that this does not include a Maiden, Never Never, Pepper or Roe underground ore reserve. Stay tuned tomorrow for updates on both of these.

Our exploration and resource definition activities for the quarter focused on drilling at the Galaxy Mine at Mt Magnet, specifically at Perseverance South in Hesperus to further target the BIF mineralization. At Penny, drilling was focused on extending the mine life beyond FY '26. As you're no doubt aware, the Board has approved an increased FY '26 exploration budget of $80 million to $100 million and with $18.8 million spent in the quarter. And Tim will also talk to this a little later also.

Work on the Rebecca-Roe DFS is currently being finalized and is planned to be published tomorrow, along with our Never Never PFS Mt Magnet Dalgaranga integration studies and our 5-year plan.

Our transformational combination with Spartan Resources completed on the 31st of July via a scheme of arrangement. Spartan Simon Lawson and Deanna Carpenter have joined the Ramelius Board as Deputy Chair and Non-Executive Director, respectively, while other members of the Spartan team have crossed over, bringing with them a great deal of enthusiasm and plenty of new ideas. We're grateful to have them on board.

I'm on to Slide 4, where you can see the chart on the left, which breaks down the quarterly production. This sequential decline is not surprising and reflects the gap left by Edna May as that operation is now in care and maintenance and the outperformance of Cue subsides as the pits transition from the oxide and transitional zones into fresh rock.

With that, I'll now hand over to Tim to discuss the operations in more detail.

[Timothy Hewitt, executive]

Thanks, Mark, and good morning to everyone on the call. I'll start on Slide 5 of the presentation, where we'll discuss the mining and production metrics. The September quarter saw us mine 560,000 tonnes of ore, an increase of 63% on the prior quarter, contributed by the mobilization of the third fleet at Cue and a lower mine strip ratio. As Mark previously mentioned, the mine grade of 2.74 grams per tonne has decreased, and this is in line with Cue mine performance now being closer to the model predictions and lower grade mining locations at both Penny West and Galaxy.

Total tonnes processed for the quarter was comparable to the prior quarter at a grade of 3.3 grams per tonne and an excellent recovery of 97.1%. Whilst mill throughput was comparable to the prior quarter, lower grades, as mentioned, resulted in lower gold production in the quarter compared to the previous.

On to Slide 6, we take a more detailed look at the Mt Magnet operations for the quarter. As Mark mentioned, safety is still not where we want it to be with the 3 restricted work injuries at Mt Magnet. We continue to focus on our critical controls and our leadership responsibility around our highest risks in the business.

Open pit mining is solely focused on Cue. The Break of Day and White Heat pits recorded an average mine grade of 3.63 grams per tonne and 3.47, respectively, during the quarter. We have now progressed past the weather zones of the ore body and are now mining in the fresh rock of Cue.

As flagged in prior quarters, we had expected the ore body outperformance to reduce as fresh rock is reached, and there are detailed tables on Pages 7 and 8 of the quarterly report, which show the performance of the Break of Day and White Heat ore bodies since commencement.

Haulage at Cue was uninterrupted in the quarter with tonnages increasing 36% on the prior quarter.

At Galaxy, total mine tonnes are up on the prior quarter with additional stoping fronts available now we've seen the benefit of the second jumbo that we added last year.

The mine grade increased from the prior quarter with higher grading stopes making up the majority of the schedule from Mars. And the team's focus on operational excellence and cost control continues to deliver strong results, positioning us well for the quarters ahead.

Now on to Slide 7 and Penny. Both mined ore tonnes and grade were down the prior quarter. Ore body reconciliation performance was excellent, though, and we achieved an average grade of 8.21 grams per tonne. Gold production totaled 11,109 ounces at an all-in sustaining cost of $1,928 per ounce, generating cash flow of just over -- or just under $21 million.

Despite the lower production, Penny continues to generate strong cash flows and our underground drilling campaign is aimed at extending the mine's life and unlocking further value, noting that this drilling has just commenced in the target area, which is just below Penny North.

Moving on to Slide 8 and Cue. A total of 399,000 tonnes at a grade of 2.4 grams per tonne were mined across Cue in the quarter. Mine tonnes are up 95% on the prior quarter. As stated before, we've mobilized the third fleet at Cue and with a declining strip ratio, we're able to access more ore.

Selective stockpiling and processing allowed us to mill 202,000 tonnes of Cue ore at 4.4 grams per tonne, which while down the prior quarter is still remarkable grade to be mined from an open pit.

Gold production totaled 30,625 ounces at all-in sustaining cost of $1,365 per ounce, generating an operational cash flow of $73.1 million. It's hard not to mention the cash flow that this asset has generated since mining commenced with that amount now up to $420 million.

Slide 9 takes us to Dalgaranga, where we've really hit the ground running, the mine being successfully integrated into the release group during the quarter. Just like to shout out the team, both in Perth and at site for the successful transition. A lot of hard work has gone into it, and we're really hitting the ground.

During the quarter, 920 meters of lateral development was undertaken in the Never Never underground mine with 628 meters of this done under Ramelius from 31st of July. The planned addition of the second jumbo will accelerate development in the upcoming quarter, including the start of ore driving to set up the first production levels. As noted in the quarterly report, Barminco was successful in the mining tender with a 4-year contract executed in the quarter also.

We're making rapid progress of key infrastructure items, including installation of the interim primary vent system and extension of the electrical supply underground. And we look forward to releasing our Never Never PFS and integration studies tomorrow and taking you through those.

Now on to exploration. So Slides 10 through to 13 talk through our exploration activities. At Dalgaranga, we drilled across Never Never, Pepper and Four Pillars. Never Never and Pepper drilling were focused on infill drilling with the results continuing to reinforce our geological model. Results for the quarter at Never Never included 25.4 meters at 11.4, 3.5 at 11.7 and 27.6 meters at 14.4 grams per tonne. While at Pepper, drilling intercepted 13.5 meters at 6.22 grams per tonne.

At Four Pillars, we are resource definition drilling as we look to add to the inventory of the mine and results for the quarter include 6.92 meters at 4.85 and 2.26 meters at 4.51 grams per tonne.

At Mt Magnet, Slide 11. Perseverance South, we continue to follow up after encouraging results in the June quarter, and we're targeting the prospective Banded Iron formation or the BIF. This is immediately east of the Galaxy underground mine. Results for the quarter include 9.44 meters at 8.8 and 3.2 meters at 10.1. These high-grade intercepts reinforce the potential for further resource expansion in the Mt Magnet area.

On Slide 12, we talk to Hesperus pit, which sits a few hundred meters from Saturn and was historically mined solely on the granodiorite geology. We continue to test for the granodiorite posted mineralization with deeper drilling extensions of mineralization and a biff in the footwall of the main granodiorite. Results for the quarter include 42.5 meters at 3.54 grams per tonne and 25 meters at 3. These results again support our strategy of targeting near-mine opportunities to extend mine life and enhance value.

Mt Magnet has huge potential, and we just need to continue drilling. Our commitment to this is reflected in our increased exploration guidance for FY '26 of $80 million to $100.

Slide 13 talks to Rebecca-Roe, where we continue RC drilling of the near mine targets T1, T1 North, T4, Cleo and Rebecca Footwall. The Rebecca footwall drilling has also validated the previously defined Jennifer Lode in the process of reaching the target footwall position. Recent results there include 51 meters at 2.91 and 37 meters at 1.78.

With that, I'll now hand over to Gareth.

[Darren Millman, executive]

Thank you, Tim, and I'm glad to be joining everyone today. I will be initially speaking to Slide 14. On Slide 14, we show our M&A scorecard, which many of you will be familiar with. This is an important slide for us as it clearly illustrates that our disciplined approach to M&A continues to pay off.

The figures in the square brackets represents the cash and gold generated by our operations over the quarter. As Tim touched on, Cue has been a remarkable investment for Ramelius with $420 million generated in free cash flow since commencement in early FY '25. That investment contributed $100 million over the quarter. We look forward to discussing our Rebecca-Roe DFS and plans for Dalgaranga at Mt Magnet tomorrow and watch our cash bars grow over time.

Moving on, let's turn to the financial highlights for the quarter on Slide 15. The September quarter has been another strong quarter for Ramelius with $129 million of free cash flow being generated. What is really pleasing about this is that despite our lower production in Q1, which was in line with our expectation, cash flow remains very strong, demonstrating the high margins being generated by the business.

During the quarter, we sold 54,773 ounces at an average realized price of $4,528 per ounce, which includes a mix of spot and committed forward sales. This results in total revenue for the quarter of $248 million. The realized price for the quarter was up 2% on improving spot price and less hedging commitments. The Australian dollar gold price improved 15% over the quarter.

The all-in sustaining for the quarter was $1,836 per ounce, which was impacted by the lower grades as previously discussed. The resulting all-in sustaining margin, which was the average realized gold price less the all-in sustaining cost was $2,692 per ounce and represents an all-in sustaining margin of 59%.

On Slide 16, we show a breakdown of the quarterly movements in cash and gold. Operational cash flow was $159.1 million. The operational cash flow funded growth capital investments for the quarter of $19 million, which mainly relates to the underground development at Never Never and at the camp expansion at Mt Magnet.

Our investment in exploration resource definition for the quarter totaled $18.8 million and focused on Dalgaranga, Mt Magnet, Cue and Penny. Resulting underlying free cash flow for the quarter was $129 million. From this, a net amount of $74.3 million was paid for the acquisition of Spartan and transaction-related costs. This is net of $199 million of cash held by Spartan on the date of the scheme implementation. We also paid $4.4 million to Dalgaranga royalty holders in the quarter to reduce these royalties in aggregate from 2.5% to 2%.

Lastly, we paid total income tax of $20 million with $12 million of this related to FY '25, and the balance being income tax installments made in advance for FY '26. We expect to pay the final FY '25 income tax payment of approximately $118 million in the December quarter. As we are now paying income tax in advance and have been for some months, we do not foresee these large one-off tax payments to continue. The resulting closing cash and gold was $827.7 million.

Now on Slide 17, we show our track record of generating significant cash flows. This underpins our ability to reward our shareholders with dividends and investments in growth, all while remaining -- while maintaining a robust balance sheet. As you will see, we have over $1 billion in available liquidity, which is made up of cash and gold at September and our available undrawn debt facility.

With that, I'll now hand back to Mark.

[Mark Zeptner, executive]

Thanks, Darren and team. On Slide 18, we have summarized our key focus areas for the remainder of the calendar year. We continue to look to improve our safety performance. We have work to do in this area. completion of the Rebecca-Roe DFS, which is to be delivered tomorrow, significantly increase our exploration activities, leveraging off the Spartan exploration D&A, which is evidenced by our increased guidance and our almost $20 million spend in the first quarter, noting that we are ramping up from a lower level previously.

And finally, complete the integration studies and 5-year outlook, which is also scheduled to be released tomorrow. The study will include our selected processing option at Mt Magnet/Dalgaranga, our 5-year growth plan for the company, which include Dalgaranga and Rebecca-Roe as well as detailed guidance for FY '26. These key focus areas will drive our next phase of growth and value creation. If we can now open up the line for questions, please, Harmony.

[Operator]

[Operator Instructions] Your first phone question comes from Knox O'Neil, a private investor. Your next question comes from Alex Barkley from RBC.

[Alexander Barkley, analyst]

A question around the costs for this quarter. They were maybe a little bit higher than what you flagged in your outlook in March, and I appreciate that does change tomorrow. Was there any one-off costs to call out this quarter, maybe around the Spartan deal integration, redundancy, something like that?

[Darren Millman, executive]

Alex, it's Darren. Nothing sort of that's material for mine. As you know, looking to target or the previous guidance for the March 2025 subsequent to the acquisition of Spartan, I think we're targeting around the $1,800 all-in sustaining cost sort of space at $1,900. So for us, we're not seeing anything sort of coming out of the blue in the context of the Spartan transaction. We've obviously paid that $74 million for all the costs that came through. So nothing that's coming out. It's really just the grade that we saw process in the quarter versus that of Q4 that has sort of largely just increased that cost. So nothing of material substance.

[Mark Zeptner, executive]

Yes. If I may, Alex, it's Mark. The $0.25 per share as part of the transaction represented about pretty close to $270 million. And remembering that Spartan had about $200 million in cash reserves at the time. So there was that delta, which there may have been a feeling in the market that the cash required to pay out that $0.25 as part of the transaction was matched by the cash balance, and it wasn't quite the case. And that's the large really, the transaction costs on top of that were pretty minimal. It was really the balance of that $0.25 a share.

And just a comment on cost inflation. I think there's a little bit of inflation in the market from when we put our mine plan out in March, you're probably seeing sort of 5% -- between 5% and 10% inflation with wages and things like that, just bumping up our costs a little bit. Obviously, the lower ounces also played into it.

[Darren Millman, executive]

Yes. And obviously, paying a higher royalty connected with a higher gold price compared to March 2025, too.

[Alexander Barkley, analyst]

Sure. And I think at the time you had that -- you said the outlook Penny reserve grade was maybe 14 grams per tonne and since it's kind of come down to 8. Was that -- was a higher number in your thinking when you gave that outlook? Or did you have an idea that it might be coming down pretty soon?

[Mark Zeptner, executive]

14 -- thanks, Alex. 14 is pretty close to the Penny West ore reserve grade -- sorry, the Penny North ore reserve grade. Penny West is pretty much half that, around 7. So if you assume that we're mining for argument 50% of each going forward, then you should get a combined grade closer to 10. So no, that wasn't unexpected. 14 is Penny North, but obviously a lower grade at Penny West, which is high grade but narrower than Penny North. So yes, we expected those grades to be coming down as we mine what's left currently at Penny.

[Alexander Barkley, analyst]

Okay. Last question for me, another one around Penny. The exploration, have you learned anything new about when the mine life ends? It's still sort of end of FY '26? Is there a chance that pushes on? Or are you more looking for repeat [ lenders ] that could add meaningful life down the track?

[Timothy Hewitt, executive]

The drilling -- we still have to complete the underground drilling. The surface drilling certainly looks like there's potential there, but we need to finish that drilling off. And we're trying to get that done as quick as we can. So we can, I guess, visualize that and hope that it does add life there, but we can't really comment on that yet until we get those results.

[Mark Zeptner, executive]

The underground drill rig has only just started drilling, as Tim mentioned. I think currently, even on the mine plan that we currently have, I think it goes into the first quarter of FY '27, not by much. And the surface rig is continuing to do drilling to the north. We're following up some of the drilling there with some geophysics as well. So no, we're still working on that, Alex.

[Operator]

[Operator Instructions] Your next question comes from Paul Kaner from Ord Minnett.

[Paul Kaner, analyst]

Just obviously, we're going to get a better understanding of this tomorrow. But just your thinking at the moment around sort of capital allocation, capital returns, noting you're going to go through a more capital-heavy phase over the next 5 years, so dividends coming down. Just thoughts on buyback, considering how strong your balance sheet is and noting your dividend policy is linked to free cash flow.

[Darren Millman, executive]

Yes. Thanks, Paul. It's Darren. Yes, our Board is very conscious. We are -- on two things. One, we are in an investment period for FY '26 as the market is aware of. We are having consideration to capital allocation and timing around Rebecca-Roe, and that will all come out tomorrow. But we're also -- our Board is also recognizing this free cash flow will significantly grow very, very quickly.

So we did have a chat, the Board. I've had a full Board meeting up at site last week and very much the mantra of we want to maintain and grow in the context of shareholder returns. So we'll sort of speak to a little bit of that tomorrow. But the decision will probably the first half of next year is when we'll really dive in. We are both looking at dividends and also buybacks, but it's just something probably for the first half of next year, and we'll get that clarity to you.

[Operator]

There are no further phone questions at this time. I'll now hand the conference back to your speakers.

[Mark Zeptner, executive]

Yes. We do have one question on the webinar from Paul Davidson. What is the current hedging position? And when does that hedging end? I'll let you take that one, Darren.

[Darren Millman, executive]

Yes. So we no longer put in place forwards. We're basically just running that book off. We actually even repaid some of that hedge book early. There's about 8,000 ounces. And so basically, the forward is largely done at the end of FY '26. We are probably 8,000 ounces left there. So there's that component. We have some 0 cost collars in place, 22,500. I think the top end of the price is $5,900, 2,500 ounces that's FY '27. And we are just considering whether to potentially look at some puts or 0 cost collars in FY '28. But that's sort of -- once again, that will be put out there in tomorrow's release. But once again, nothing significant and probably the clear message is that our Board and our shareholders want to have full gold price participation. So we're taking that into consideration as we move forward.

[Mark Zeptner, executive]

That's all the webinar questions that we can see. There might be one more question, Harmony, that's come on the audio.

[Operator]

We do have another audio question from Michael Scantlebury from Euroz Hartleys.

[Michael Scantlebury, analyst]

Just a quick one from me. timing on the stamp duty payment, just when that would likely fall given -- I know it's up to the state government and when they give that termination to you. And then just maybe some quick comments on Edna May, given kind of lack of value in the market for the asset. What's your kind of current thinking around that asset at the moment?

[Darren Millman, executive]

It's Darren. So we estimate approximately $135 million due on the stamp duty. Our kind of working estimate is somewhere between 6 to 9 months post-transaction close. So sometimes they'll sort of look for it earlier, but we've actually still got some stamp duty outstanding on previous transactions. But given the quantum, we're kind of estimating either December quarter or the March quarter in this financial year.

I guess on Edna May, basically, we are getting a lot of incoming interest, but our focus has been to deliver the Rebecca-Roe DFS, the Never Never PFS/Mt Magnet, Dalgaranga integration study in a 5-year outlook. So we've been pretty busy, and you'll see that tomorrow. But I think the BD team here, I think, will then turn their mind to Edna May and look to respond to some of these incoming interests probably in the first half of next year and look to really recognize that value in some way, shape or form. So it's a probably job for that first half of next year in Edna May.

[Operator]

There are no further phone questions at this time. I'll now hand the conference back to Mr. Zeptner for closing remarks.

[Mark Zeptner, executive]

Yes, nothing more to add. Obviously, tomorrow is a big day. We've actually decided to split the calls because there's a lot of information to come tomorrow. I look forward to talking to you then. Have a good day. Thank you.

[Operator]

That does conclude our conference for today. Thank you for participating. You may now disconnect.