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Ladies and gentlemen, thank you for standing by, and welcome to the investor and analyst conference call. [Operator Instructions] I must advise you that this conference is being recorded today, Wednesday, January 23, 2019.I'd now like to hand the conference over to your speakers today, CEO, Mr. Jim Beyer; CFO, Mr. Kim Massey; and COO, Mr. Paul Thomas. Thank you. Please go ahead.
Thank you. Good morning. I would like to thank you all for joining us on this call, reporting on the performance and status of Regis Resources for the December quarter. I'm very pleased to say that for my first Regis Resources quarterly, I can be confident in the fact that the Regis team has again delivered a very solid set of results not just on the operations front, but also in our future lifeblood, the exploration activities. I know the report was released earlier today, and we'll make occasional references to some of the diagrams, so it probably wouldn't hurt to have that available.The quarter has been a very solid one for us, with gold production of 90,487 ounces compared with 90,879 ounces in the prior quarter. Our all-in sustaining costs were $985 per ounce, up from $923 in the September quarter. And I'll give some more background on the driver of these increases in the all-in sustaining cost shortly. In the quarter, we sold 114,966 ounces of gold, up from the 71,000 that we sold in the prior quarter and the sales were for an average price of AUD 1,718 per ounce. And any of the currencies that I reference to cost are all in Australian dollars. Now this marked increase in sales in the December quarter relative to the prior quarter is simply a result of selling down the higher-than-normal gold on hand that we carried over from the September '18 quarter. Now the net effect of the strong sales and operational performance saw Regis cash and bullion increase by $16.7 million to $206.7 million, up from the $190 million held at the end of September. This increase can be broken down to the following: we received just over $76 million from our operations; and then paying out, our costs were about $11 million for prestripping of new and existing satellite projects; $11 million on exploration and feasibility study projects; we paid just over $18 million on income tax payments; slightly over $2 million on the tailings dam development, TSF development; $1.9 million on long lead items for the Rosemont Underground; and finally, approximately $1.3 million on additional crushing capacity at Gloster. And this is what gave us our net increase of $16.7 million for the quarter. So overall, not a bad performance on the cash generation of the business for the quarter.Well, looking a little bit more detailed on the operations front. At Duketon North, we produced 22,174 ounces of gold at an all-in sustaining cost of $941 an ounce. Gold production was down on the previous quarter as a result of a decrease in the head grade and lower throughput at Moolart Well at the mill. We did experience a slight reduction in the head grade, but nothing unusual or unexpected. It's simply short-term operational variations. The mill throughput has been reducing as a result of the current main ore source from Gloster, making the planned transition into the harder fresh ore. Also, our mining volumes were down on the previous quarter as the mining fleet also carried out preproduction mining activities at our Dogbolter and Anchor deposits that are coming online shortly. We also saw the stripping rate go in the north area or in Duketon North increasing slightly to 2.8. These items lifted -- worked together and combined to lift our all-in sustaining cost by approximately 4.8% to $941 an ounce. At Duketon South, where we have the Garden Well and Rosemont mills, in the quarter, we had a stronger result on production with 68,313 ounces produced with -- for an all-in sustaining cost of knock on -- straight on $1,000 per ounce.Gold production at the south, in Duketon South, was higher than the previous quarter due to an increase in processed grades and also mill recoveries. Improved head grades were driven by Tooheys Well, ore that commenced feed into the Garden Well facility during the quarter; strip ratios in the south increased to 8.4, which was in line with our planned mining sequences; and during the period, we also saw the commencement of the construction of an additional tailings storage facility near Tooheys Well. As a result, the all-in sustaining cost for the southern operations was $1,000 an ounce for the quarter, which was 7% higher than the previous quarter.Now combining the 2, north and south and also the first and second quarter of this year, that means that our first half year production has been 181,366 ounces of gold for an all-in sustaining cost of $954 an ounce.If we look forward, the northern operation, we expect the head grades to lift back up to around 1 gram a tonne for the March quarter, which is in line with the reserve grade of the project. As we noted, the trend of slower milling from -- as a result of the fresh rock at Gloster was expected, but we don't expect this to have any detrimental impact on our production guidance as this was accounted for. The southern operations are expected to maintain their strong performance. And so looking forward, with these outlooks, we expect the performance in the second half of this financial year to be broadly consistent with the first half production.So now our previously indicated production guidance of 340,000 to 370,000 ounces of gold at all-in sustaining cost range of $985 to $1,055 per ounce. If we can look at that outlook in mind, and rather than restating the guidance ranges, I'm simply going to say our guidance remains unchanged, but we do expect production to be in the mid to upper end of the range, and we expect the all-in sustaining costs for the full year to be at the mid to lower end of the range. And when you write that down, can you please make sure you get the order right? Our production will be in the mid to upper range and our costs will be in the mid to lower range of our guidance.Look, if I can turn now to our comments on the growth story of our business. And Regis has been on the path of increasing its overall production and life by working in 2 key areas: the Duketon Belt and McPhillamys in New South Wales. So let me start first with Duketon. And firstly, let's have a look at the Rosemont Underground, which has a maiden resource of 1.4 million tonnes at a grade of 5.1 grams per tonne for 230,000 ounces of gold that will be produced over the -- over a 3-year mine life. Look, I tend to call Rosemont Underground as a solid starter mine project because it's got lots more to offer than just the numbers I stated before. In terms of getting the underground project work started, good progress has continued with the installation of offices, changerooms and the expanded camp facilities happening -- or occurring during the quarter. And all of this is expected to be completed in this current quarter. Importantly, earlier this week, as you may have seen, we awarded the underground mining contract, which is worth around $113 million, to the world-regarded contractors, Barminco. Very pleased to have them onboard. On our current schedules, we are expecting development to start this quarter. And this identified high-grade ore source from the underground will be increasing our gold production range by the end of this calendar year, and it will continue to do so for at least the following 3 years.Of itself, Rosemont Underground project is very robust, but really it's quite conservative when we consider the upside potential. The long-term opportunity for Rosemont Underground is to grow the mine through ongoing exploration and development using that established underground footprint. And our exploration results at Rosemont are starting to support this view. The focus recently has been to look between the 2 already planned mining areas, that is looking in this area we call central zone and also down dip of the existing planned areas. And if you have a look at Figure 5 in the release, it might help you visualize what I'm talking about.Now the telltales of success in extending the life of the underground are already starting to appear with exciting results from the recently targeted zones. These include some exceptional high-grade intercepts such as 4 meters at 26 grams a tonne, 12 meters at just under 7 grams, 8 meters at just under 28 grams a tonne and 16 meters at just under 7 grams a tonne. As you can finally see, these are with sufficient thickness and tenor for the potential underground development. What makes the results really exciting is not just the high-grade nature, but the fact that this is in an area outside the current underground resource envelope, as you can see in Figure 5. Now these results confirm continuity of the gold mineralization over a strike length of at least 2 kilometers and, importantly, it's still open down plunge. And this is why I call our Rosemont Underground project the starter pack mine project. What we've identified in the proof-of-development production is only the beginning. It's always going to be risky to say this, but I think it can only get better from here. It's a great project. But look, the high-grade underground potential doesn't stop at Rosemont. Regis controls a significant tenement package across the Duketon Greenstone Belt. The tenement holding encompasses over 1,000 square kilometers in relatively close proximity to our existing 3 mills, and our exploration team has worked to prioritize both open pit and underground targets in this area. Another example of the underground high potential is Garden Well, and we've been getting some very good drilling results continuing from there in the December quarter, with the results including 5 meters at 15 grams a tonne and 11 meters at just under 4 grams a tonne. Figure 6 gives a picture of how the results are looking and also shows the deposit is still open down dip. Look, we've got other areas such as Moolart Well and Baneygo, for example, that have large, untested fresh rock targets, both underground and open pittable that currently present highly prospective targets.Look, if we just consider Baneygo, a deposit with a current resource of 11 million tonnes at 0.96 grams a tonne, that's about 340,000 ounces. And in that is a reserve of 4 million tonnes at 1.22 grams. But we've obtained more encouraging drilling results immediately to the north and, importantly, outside the existing resource shell. And you'll see the results in the release, but some of them: 5 meters at 6 grams; 9 meters at just over 7 grams; 3 meters at 3.5; 7 meters at 2.5. What we're seeing is mineralization continue at depth. So we're potentially adding solid open pittable resource and potentially reserve that already exists around the existing resources. And we're also generating pits that support the concept of extension at depth. And we're seeing similar results for other early-stage projects, including Crown, Russells Find and Ventnor. All these areas are presenting grade and scale that Regis has demonstrated a consistent ability in the past to convert into very profitable production sources. So we're really looking forward to getting our teeth into them. And this, of course, doesn't include the greenfield exploration of our remaining ground across the Duketon Greenstone Belt. Here, we're working on programs utilizing and leveraging of the knowledge and experience, these days known as IP, that we've developed from within our exploration team. It's an exciting story and a great one, and we'll continue to keep you informed as the exciting results continue to come in.Now last, but by no means least, I just want to discuss our work in McPhillamys in New South Wales. And for those of you who came in late, McPhillamys is a 2 million ounce reserve. It's got a 10-year mine life and it also has a very interesting satellite deposit called Discovery Ridge, which is just down the road. I'm pleased to say the team there has continued to make good progress working on the complex and detailed requirements for the Environmental Impact Statement, the EIS, which is required for the development approval application, and also the Definitive Feasibility Study. As noted previously, the company received what's called the Environmental Assessment Requirements, the EARs, which are issued by the Department of Planning & Environment. And we got those late -- we got them in the September quarter. Now look, after consideration of these requirements that are detailed in the assessment requirements and considering the work required to satisfy these, it's currently expected that the company will be in a position to submit the final EIS to the Department of Planning in the June 2019 quarter. Of course, as we make progress on the EIS, we're also making progress on the DFS. And whilst the DFS work is continuing and finalizing, it is still subject to numerous variables. At this stage, it has been noted a few times now that we are expecting the development capital cost will be pushing the upper limits of the PFS -- of the previously stated PFS tolerances. But also as flagged previously, the DFS will consider the very exciting Discovery Ridge satellite project. And this is located about 32k away from the McPhillamys, where recent drilling is continuing to confirm the significant potential of this project. A reminder that the Discovery Ridge project is an indicated and inferred MRE of around 500,000 ounces with grades that are higher than McPhillamys. And I'll point you to the release back in February 2017 when this came into the fold. Discovery Ridge is certainly shaping into a significant satellite project to the main McPhillamys project. And in particular, it represents a significant additional high-grade production source, and hence, has the potential to be a real project enhancer. Regis is targeting Discovery Ridge to contribute a JORC 2012 compliant resource and potentially a reserve estimate for the annual reserve statement released later this year, which is expected to be more positive news.So wrapping up on this very positive note. It's a good start to our year. The good start from the first quarter has continued, and I'd summarize by saying a solid cash and equivalent generation during the December quarter of $16.7 million. We see future -- the full year production guidance in the mid to top end range, about 340,000 to 370,000 range we've indicated. We see the full year forecast of our all-in sustaining cost at the low end of the guidance range of $985 to $1,055. We're on plan for progress for our Rosemont Underground start-up with first gold expected by the end of this calendar year. We're continuing to get excellent results from extensional drilling for the Rosemont Underground, and we continue with very encouraging results from other exploration activity. And we're making good progress on the EIS and the DFS of the McPhillamys project.So thanks for listening. I will now pass back to our operator, and we are happy to go through and answer any questions that you may have. Thank you.
[Operator Instructions] And our first question in queue is from Cathy Moises from Patersons Securities.
Just on the Rosemont Underground contribution in the current calendar year. Wondering if you can give us any feel for how many sort of ounce range we could be predicting in the second half of this year.
Look, I think we've -- our -- if you look at the -- good morning, Cathy, and thanks for joining us. Sorry about that. It's Jim here. Look, I think at this stage, what -- if we look at what we released, which was saying that, that operation was going to run for -- it will recover about 207,000 ounces over a 3-year period, I think at the moment, it's probably safe to say that, if you divide that by 3 and then took that -- divided that first number by 4, I think we'll get -- what does that mean? It probably means somewhere between -- look, it's a broad range, maybe 20 to 40. We haven't really finalized that yet. We've -- that's -- we're working through our budget at the moment. And the reason that I'm being a little bit evasive about it or unclear is because this drilling that we're doing at the moment is bringing in additional -- potentially bringing in additional material in a different proximity to where we're originally planning to mine. So we're rapidly sort of processing that information there in the central zone, and that may change the profile, particularly at the early stages. So we're just assessing that. I mean, at the end of the day, we will give -- we will have some production in this calendar year, as I've said. But exactly where it comes from and exactly the timing of it, we're still working through. So we'll be able to give some better guidance on that when we -- probably on the next call, probably in the next quarterly.
[Operator Instructions] And our next question is from Steuart McIntyre from Blue Ocean Equities.
Jim, just a couple of questions. Congratulations on a good quarter end, and particularly those exploration results outside the resource envelope at the Rosemont Underground. Just wondering, just trying to get a feel for, I guess, how things are going there. Are you guys planning on releasing an updated resource -- underground resource for Rosemont? And if so, what's the likely timing?
Well, thanks. Yes, we're excited about those results as well. Look, we're working on that at the moment. With those drilling results, we're going to be releasing our resource and reserves in the middle of the year, as we normally do. We're working to see whether we can get that included. We're trying to run these things in parallel, keeping in mind that Rosemont was only ever a resource when we committed to go to it. So the short answer is yes. We're working to see whether we can get that information included in the resource statement. But given the timing, it might end up being a separate note earlier in the second half.
Okay, okay, understood. Now just at McPhillamys. Is that DFS still on track to be completed by the end of this quarter?
No. Sorry, which quarter are we in? We're in the March quarter. No, it isn't because the DFS -- as I've mentioned, the EIS will be submitted during the June quarter. And yes, that was -- that's delayed a bit from where we indicated on previously. And the reason for that is, as I mentioned, the detailed work is actually -- it's one thing that has been a learning for me that New South Wales is a pretty complex place. We commented about Western Australia, but New South Wales is -- are experts. But that's going to take us -- it takes us a little bit more time to complete the EIS. Now the EIS is a key feeder into the definitive study. No point completing the definitive study if we're not exactly sure what the environmental statement commits to. So first, EIS; second, DFS. And we're driving those...
Perhaps the DFS in the June quarter or maybe even the September quarter this year will...
Yes, that's what we're driving for. We want to get that done as quickly as possible. But ultimately, really, the key for us is getting the feedback on the EIS, which is really the -- will give us the timing on when we can actually put it to the board for approval, which, I suspect, would be a while yet.
Okay. Understood. And look, just finally, I noticed in the quarterly, you talked about the DFS will consider the Discovery Ridge satellite project. But then subsequent to that, you mentioned that there's been a lot of drilling there and there's subsequently a resource update probably due in the second half of the year. How does that sort of fit into the EIS and the DFS timing?
Yes, good question. It's -- and that's part of the complication. That's why the DFS can consider it. When we say consider it, at the least, what we start to do is look at -- or we're confident that this can be brought in. Maybe we haven't got enough information and enough confidence to include the requirements in the EIS to deal with -- to include Discovery Ridge into the EIS. But as we go through and do our engineering works, and considering the infrastructure requirements for McPhillamys, we make sure that we keep in mind what may be required for including Discovery Ridge. What we don't want to do is finalize McPhillamys, approve it, get started and then decide, "Ah, yes, that's right, we've got Discovery Ridge, let's include that. Ah, no, we need all this extra -- yes, maybe we need extra power capacity or..."
Understood. So you're sort of catering for it. But I guess my question was more around that existing resource at Discovery Ridge is pre-JORC 2012, and so including any cash flow and production and things is a bit tricky under the ASX rules these days with EAR until you get that updated resource out. So I was just sort of wondering how that fits together.
Yes. And that's the driver. At the least, it's -- it'll be updated to the current JORC, getting a JORC resource. Getting it into the reserve is the piece that we'll work at it. But we'll do the best -- we will do what makes sense. And then if we can't quite get the work done in time, then we'll just do it subsequent to that.
And our next question is from Michael Slifirski from Crédit édit Suisse.
A couple more on the McPhillamys, if I may. The EAR that's been defined for McPhillamys, does that also incorporate Discovery Ridge? Or do you have to get a second EAR for Discovery Ridge? And just I guess my understanding was historically the concept was that Discovery Ridge would be the grade source early while the prestripping of McPhillamys proceeded. So has that sort of changed? Or does it still mesh together? And the capital that's been talked about being at the upper end of the DFS range for McPhillamys, does that capture what's required at Discovery Ridge? Or is there another increment over and above that for Discovery Ridge incorporation?
Yes, okay. So the answer to your first question is, do the EAR address Discovery Ridge, no, they don't. And this is part of the -- I guess the coordination and the timing effort for us is whether we proceed with the EIS for McPhillamys and then subsequently come in afterwards with an EIS and approval process for Discovery Ridge. Keep in mind that Discovery Ridge requirements are a lot less because it won't have a processing plant, cyanide, tailings dams, all the things that sort of generate emotion and require detailed work. Discovery Ridge is a pit. It may have a crushing facility there and that's it. So the plan is to continue working -- on an EIS front, we will continue to submit on the basis of McPhillamys alone, and then we will come up later once we've got that approved or in process and putting an adjunct, if you like, I'm not sure exactly what the term is for, but an additional EIS to cover Discovery Ridge. Now coming to the second part of your question, that means that our -- that means that what we would likely proceed with is something that's on the basis of McPhillamys only and then Discovery would come in and get approved subsequent to that. That doesn't mean that by the time we get everything -- by the time we get the EIS approved and by the time we get the plant built and by the time we actually get started, Discovery Ridge may well be in a position to be able to come in, in that early stage and supplement McPhillamys' production. But that's the detail we've been working on at the moment and we don't have a -- it's really the unknown. It's the -- in terms of getting that mission right is the EIS. But the short answer -- the summary is that the EIS there will be separate. The -- at the moment, we have to proceed on the DFS basis on -- from a production and mine point of view on McPhillamys as stand-alone. But we are, as I mentioned before, looking at elements of the infrastructure, which comes then to your question as to why the price -- why did we see the capital pushing up. And we haven't -- just some -- you'll see there's words to say that we still got -- a fair bit of work in motion here, there are a lot of balls in the air with this. In short, yes, Discovery Ridge is potentially pushing up some of that capital. But that's something that we're working to make sure we're not overdoing it and overcooking the plan to something that hasn't even got approval. We've got to keep focused -- keep one eye on what may -- what's required. You might leave a little bit of concrete space for extra grinding capacity or something like that, but you sure as hell don't -- you should certainly don't put it in. You might make sure there's room in the switchyard for extra power, things like that, because you don't want to light up one project with some other element's capital. So a bit of a long-winded answer there, but this is sort of a reasonably complex set of questions you're asking me.
[Operator Instructions] But our next question is from David Coates from Bell Potter Securities.
Maybe just following on the McPhillamys, just probably a high-level question. Just how are you guys now sort of seeing the time line for it?
Yes, [ held the purse strings ]. Look, our expectation is that the EIS, as we've said, will go in by the end of this financial year. We're -- part of the reason we're spending a lot of time, making sure we get it right up front, is to ensure that it doesn't -- it happens as quickly as possible. It happening, meaning the approvals process. The historical performance of EIS assessments in New South Wales on projects similar to this is of the order of 400 days. On average, it is known that some can come in earlier than that. And the reason it takes so long is there is a public consultation process. You've got to accommodate -- you've got to consider and give due consideration in response to queries that arise, and that all takes time. There's a triple -- there's a formal consultative committee. So it wouldn't be unrealistic to think that it could be 12 months for that process to occur, and then you've got construction after that.
So I guess just right -- so from that, when will it kind of get to FID or button-pushing stage?
When?
Yes. So like, is that straight after EIS approval? And if that's right through, is that basically the last sort of hurdle?
Yes. Look, this is -- take a step back. This is a project that's a great project. It's highly valuable. It's a key economic benefit to the region, but there is a process, particularly in that part of Australia, where you just need to work it through. Now as -- we already understand that the areas of concern around the impact -- the potential impact that the project has on the environment and the community and we're working on those. So as we submit and as we work our way through that formal review and a modified approval process, we will also be doing the detailed engineering and get everything ready. And towards the back end, we'll be making decisions about long lead items and things like that already. So we won't be sitting around the table receiving the EIS and saying, "Oh, okay, we better start doing some work now." We'll be ready to punch the button as soon as we get it. And depending on how it's progressing, we may even look to make sure that we've got the long lead items covered off prior to that.
Okay. No, yes, that's great. And just quickly on Duketon North -- sorry, Duketon South. The high strip ratio and TSF work that's going on there this quarter and sort of helped with the cost up a little bit, how should we see it? Also within guidance, I understand that -- are they going to be -- those extra costs going to be maintained through the current quarter and next quarter? Or will we sort of start to see those sort of falling away, sort of just level set it in September quarter perhaps?
Yes. Look, I think this -- like any operation, some activity will drop off and other activities will lift up that will contribute to the all-in sustaining cost. I think the best thing to keep it simple and high-level is to say it's -- the all-in sustaining is going to come in where we believe. It's going to come in where we've given guidance to. That might mean that where the money is spent might be in a different location or even a different title. But at the end of the day, it'll be that -- it's still catching up with all -- at that similar level that we've been doing and coming in, in line with the -- with guidance. So we could go into the ABC and the XYZ of detail, but I think broadly in the end, when you come out and run the numbers, they're still going to be -- they're going to be coming in on the guidance, which is...
Yes, low half of the cost guidance range, arguably.
Yes, yes.
There's no more further questions at this time. I'd like to hand the call back to Jim for any closing remarks. Please continue.
No. Thanks, Kevin, and thanks, everybody, for joining us and I look forward to keeping you updated on the progress at Rosemont in particular, but also where we're at with McPhillamys. And I think the next time we'll be chatting will be probably in about a month's time when we've got the half year results being released. So thanks, Kevin, back to you.
Ladies and gentlemen, that does conclude the call for today. Thank you to all participating. You may all disconnect. Goodbye.