© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thanks, Melanie, and good day to everybody. I'm pleased to be able to report you today on our sixth consecutive improved quarter on Q1. And at this stage, everything went to plan and as it is right now for Q2.
I'll go through the highlights. I'll give you some color on the operations, and then I'm going to hand over to our new CFO, Chris Eger, who I'd like to welcome to the Company formally on this call. He will take us through the corporate, and then I'll do a quick wrap at the end before handing over to questions.
I think starting with the highlights, in terms of safety, we're starting to have a few medical injuries here so our TRIFR kicked up a little bit. However, I'd like to reassure you, we are still not having LTIs. That's the bottom line on safety. We're not hurting anybody. I remind you that Syama kicked over in February 4 years without a lost time injury, which is a tremendous record. And Mako is coming up to about 20 months now without a lost time injury. And that is the bottom line, we're not hurting people. And obviously, we are focused really hard on improving our safety record at all times.
The gold production, 92,000-plus ounces, slightly more than the Q1 as our last six quarters have demonstrated these slight improvements. I am very happy with that. And this was all underwritten by grade. As you know, over the last 18 months, we've been focusing really hard on getting the mining correct, getting the grades right and the practices right. Now we've managed to do that, and we're focusing on obviously the productivity there to maintain these numbers now. So you're going to see a little bit of flattening out now, I would suggest, over the next few months, next few quarters at these sort of numbers while we're coasting to do our 350,000 ounce plus guidance. Very comfortable with those numbers and before we take off -- start taking off next year with the improvements to the Syama circuit further.
Our all-in costs, I think we're starting to turn the corner now. We've been talking about costs. You remember I've said to you that it's very difficult to focus on the cost side of the equation when we're focusing hard on the revenue side of the equation. The initiatives that we cited out mid next year, they're starting to come through. I'll give you a little bit more color on those in a moment. But we're starting to see improvement in costs. And as a result of that, we're starting to generate cash as we expected this year, which is a big plus for the Company right now.
Chris will give you some more information on debt. Our debt is coming down nicely. And as I said, cash costs, we expect those to start reducing systematically over this year.
In terms of the ore reserves, you've seen that we put out our statement. We had 18% increase in mineral resources, and we had a 15% increase in ore reserves, this all against -- after the depletion. Very excited about our Syama North that project just progressing exceptionally well right now. We are starting to get to the point in the study -- the pre-feasibility study where we're looking at potentially long-lead items. We're getting -- focusing in now on a 4-megawatt mill as an addition to go -- to Syama from 4 mills to 5 mills. And It's only a small increase, but it will have a huge impact on our ability to treat the Syama North material in parallel with the underground mine material. I'll give you a little bit more information on that shortly.
And as I mentioned, guidance, yes, we're comfortable with our guidance. We're slightly ahead on the ounces as we expected to be in the Q1. Essentially, Mako has put in a tremendous quarter, 33,000 ounces. Mako will calm down a little bit to about 29,000 to 30,000 ounces for the rest of the year for the three quarters as we go through the low-grade patch. And then the following year, '24, we'll be back up to the 33,000-plus. It will actually deliver more ounces than the 33,000 it's delivering now once we get through this lower grade patch. So we're looking through to a far better year next year with Mako.
Okay. If I go to the operations overview. As I mentioned, it's all about grade. Our underground grade for the full ops was 2.24 grams per tonne. If you remember, we were sort of just under -- on the 2 grams for most of last year and we finished out at about 2.1 grams. This is just systematic improvement on the underground and in the open pit. All that grade control that we did last year in Q1, Q2 just in front of the rainy season is paying dividends now. We're starting to get the grades through in the oxide plant. So things are coming together. We're not reliant anymore on gold in circuit as we were last year. Now we're in control of our own destiny, and we're very excited by the way it's going forward.
What is very encouraging to me, if we just move into the operations, is that at Syama, on the sulfides, grades of 2.86, record grades coming out from underground. The design was 2.71, if you remember. And that, we're doing over 2.4 million tonnes at that grade. And remember, the design of the underground was 2.1 million tonnes at 2.71. It really shows that these guys are taking control of that operation.
What is also encouraging on the sulfides at Syama is we shut down -- we had a planned shut on the roaster to do some work on our ancillary lines. We took the roaster off downtime five days -- tools on, I would say, five days, a couple of days out of the site for cooldown. We managed to get the work done on schedule, and we managed to recover because of the extra capacity we built in to that unit in Q1 last year. We managed to get the -- recovered that metal that was put into the ponds. We've recovered that in the quarter just to demonstrate we're in full control of that circuitry now.
On the oxide, grade coming up nicely, 1.8 gram a tonne. Remember last year, we battled a bit about 1.35 grams with all the issues we have. We're now in a strong position, 1.8 grams and we're starting to accelerate the A21, which is the top layer of the Syama North, but not necessarily the Syama North ounces that we're recognizing in our PFS. That is the metal that we've always looked at taking off the top of the oxides.
Turning to Mako. Mako has been operating exceptionally well this last quarter, 1.99 grams a tonne. That was a good number. We managed to put -- we managed to mine 775,000 tonnes. We've got a new excavator, we call it excavator five, came in last year. Slightly bigger than usual units, so it's given us ability to excavate a little bit more and be a bit more selective on the grade, as you can see, as we put through the plant 2.26 gram a tonne. However, I will caution that, that's not sustainable. That was this quarter. Those grades will come down to about 1.99 sort of level for the rest of the year. And as I mentioned, we expect Mako going forward to do 28,000, 29,000 ounces rest of this year per quarter before the following year it goes up to 35,000.
Exploration. The drills are still turning. We're getting very excited still about the Syama North. We've been doing quite a lot of work now on the geotech drilling for the large open pit area in A21. Those results will come out shortly. There's no surprises there. As I mentioned, we're starting on the PFS to focus in on long-lead items. The mill looks like we said the way we go to be a 4-megawatt mill, same size as the oxide plant. That will give us the ability to put about 4 million tonnes through the sulfide circuitry and still maintain the oxides. And it also gives us the flexibility we can swing the oxide plant to full sulfides as necessary and then store in the ponds. And then when we switch back to oxide, then we can actually use the smelter -- sorry, the roaster to recover that material.
So the oxide -- sorry, the Syama North, 854,000 ounces, that's -- in our world, that's normally the kickoff. So remember, once you get above 750,000, we just build a stand-alone mine. We're very excited with that. Remember, it's 2.9 grams a tonne, significant number and that's underwriting the PFS. The PFS, we will have a draft internally in May for our Board. We've got an AGM and a Board meeting coming up in May. We will present -- be presenting some numbers there for approval to look at going on long lead items in the mill so we can get this going in early '25. So we're really excited about that.
Pre-feasibility study, I think I've covered that. ESG, all on track. We did the ISO certification. We did the 45001. We've done the 14001. All on track there. We've got against the World Gold Council, RGMPs, we are at 88% as per our audit last year. We've got our audit coming up in this quarter and we are expecting to hit 100% there and achieve exactly what we've told you about two years ago. So we're really excited about that.
And with that, I think that's really the operations. I think it's all about grade at the moment, which is in control of our own destiny fully now. Focus on the operations is on costs. I think we've turned the corner. And I'll hand over to Chris, who will take you through the corporate stuff. And of course, he's been making hay while sunshine, the gold is wood price at the moment. So he'll be able to give you a bit more color on that. Thanks, Chris.
Great. Thank you, Terry, and good morning to all and afternoon. And also I just want to highlight very exciting part of the Resolute team. As Terry mentioned, it's been a very strong quarter and we generated some very strong results across pretty much all of our metrics.
So look, highlighting a few of the key numbers. Obviously, you can see on the documents that our production is at 92,200 ounces and an AISC of $1,453 per ounce, which were for both better numbers versus the prior quarter and also better than our internal budgeted numbers. From a cash flow perspective, we generated good cash flow for the quarter and had a meaningful reduction in our net debt. So operating cash flow was $38.1 million. And then after CapEx, effectively, our cash flow was $25 million from operations.
We then, as highlighted in the documents, made a meaningful reduction in net debt by paying down our term facility as well as our revolver. So today, we have around $155.8 million of free liquidity, which is a very different position to where the Company was last year. We're putting a few more hedges. And so today, we roughly hedged 60% of our material for Q1 of next year at an average price of $1,920 per ounce. But we'll be pausing hedges at this stage as the business continues to prove in its operations and with a focus on driving costs down. So quite happy with where our hedge book is at this stage, but the priority will be really to continue to work with the Company on reducing its cost and delivering on its results.
So like I said, a very strong quarter from operations metrics perspective and also from a financial perspective. Key focus for the business, at least from my perspective in the coming months and quarters; one will be to continue to facilitate the transition from our Perth office to London. I think as Terry highlighted in the past, we're moving the bulk of the operations out of Perth into London to be much more in line with where we operate, which is going very smoothly. And it's allowing us to also change how we operate the business and push a lot more responsibilities down the site, which I think is key.
Another key focus will be able to continue to work with our sites to reduce our costs. You may have seen from our financials that the business has also carried a fairly high inventory value over the past coming years and has grown. So there's great opportunities in reducing our inventory values both on OpEx and CapEx, and that additional free cash will be used to help fund our internal growth activities, namely the Syama North PFS study anticipated coming out in the coming months.
And then finally, look, as I'm new to the business, I see great opportunities in continuing to optimize our balance sheet. We've had very strong quarters here in the past few months. And so we'll be looking to refinance our balance sheet in the coming months/quarters. There's no pressure to do so as we have -- sitting on a fairly well-established level of liquidity. So again, very excited about the business and where we're heading and see great opportunities in the future.
With that, I'll turn it back over to Terry. Thank you.
Thanks, Chris. Thanks very much. And just a couple of more items. If you look at the cost issues, we've got some major initiatives coming down the track. I think the key ones at Syama of the underground, now we've completely refurbished all our mobile equipment, all our equipment underground. And now we're seeing the benefits on that. But we've also just completed an underground workshop. So that will save, on average, two hours per vehicle per day on vehicle availability. So we don't have to truck lease vehicles to be strong pretty slowly on the surface to maintain them. We'll be shortly maintaining all those vehicles underground. That's really exciting for us. That's going to improve our productivity significantly.
And then on the Mako side, you've heard me over the last sort of 18 months, talk about the work we've done on the mill. The software that we've put into the Mako mill to optimize power, that project is going exceptionally well. We're seeing about -- on average, about a 7% increase in throughput there. As a next step, we focused on the classification circuits, the cyclones, and we're looking to gain another 4% there on throughput going over the next year. So huge gains are being made in those operations. We should see the benefits of those over this year. And with the other cost initiatives in place, which there are many, we expect to be able to comfortably improve on our guidance numbers for our costs.
So with that, Melanie, I'll hand over to questions.
[Operator Instructions] Your first question comes from Reg Spencer with Canaccord.
Welcome aboard, Chris. Congratulations on another good quarter. I was just wondering if we could dive into that cost -- let's call it, a cost optimization program that you're about to embark on. And when you mentioned that you would look to improve on your cost guidance numbers, are you in a position to provide a range as to what kind of percentage terms you think you can get your all-in sustaining cost to over the next year or so?
We're hoping to shave at least $100 off. It's as simple as that. We were first talking $1,400s. We want to be in the $1,300s this year and then we want to be in the sort of approaching the $1,200s next year without necessarily increasing our units. Those are our target numbers. Do I think that's reasonable? I think it can be. It's a lot of work, but we do have a lot of initiatives in place. And it's a combination also of cost and productivity. I mean, just to give you an example, the oxygen plant that's coming in on Mako in Q3 is going to give us a 2% improvement in recovery. That's as simple as that. So it's a combination. But I do think our cost, we can get down and start talking in the $1,300s and with a view the following year, we'll be starting to talk about $1,200s.
Okay. So this is not just a temporary thing. So this would be an ongoing cost optimization program.
Yes.
And I guess, in part, that reflects your improving confidence in the way that your operations are now running. Okay. That's useful. Thanks Terry.
My next question is on Syama North. You guys have provided quite a lot of very useful detail there in terms of the shape of it and what it's going to look like, especially cost. But when you talk about CapEx being $30 million to $40 million, that sounds like that's what the preface capital number is going to be. You provided a lot of detail around the configuration of the two process plants and how they're going to come together and the flexibility there. In terms of the oxide and sulfide flexibility there, is that being designed in a way to allow you the optionality given there might be the potential for the discovery of further oxides in and around the place over the course of the -- versus the mine loss there?
Correct. I mean, if you look at that 824,000 ounces, 8% of that oxide -- sorry, 8% of that is oxide, and it's patchy, though the key would be as you're mining in there, you stockpile your oxide until you've got to a -- again, it's high grade, it's 2.9 gram a tonne. So it represents the highest grade oxides we've got on the mine. We'd stockpile that material. And once we've got a significant amount, six to eight weeks of material, then you switch from sulfide to oxide.
And that switch, we are focusing on that design. We can do that switch cleanly within eight hours. It's not -- but you don't want to do that every week. You want to do a campaign of six weeks of oxides, and that gives the roaster of the opportunity to recover any concentrates in the -- that we've built up in these sulfides -- sorry, in the ponds, again, because we're running the front end faster than the roaster. And so we're going to -- it will be a systematic look at the economics. Okay, we've got the plant here, should be running on oxides, have we got enough material? Have we got enough material in the ponds ready for the roaster enough to slow down while we're doing the oxides?
And so that's the cleverness, I think, of the operation. That's why it's taking a little bit of time to make sure we get all that engineering right, because once we get there -- and this is not uncommon in the industry, to have a plant that you can flip over from one to the other and in such a short time. But it gives us the flexibility of attacking some of the best oxides we've got on site once we've got them into a stockpile.
Okay. That's understood. Well, is it safe to say then, Terry, that -- end of our day the Board level is almost a fait accompli? It does look like it's quite robust in terms of the plan. You've got a solid resource there now, and this is just a matter of process more than anything else.
Correct.
And then we can expect you to be potentially opening the outside the North in near 2025?
Correct. And we are -- we're stripping the existing old oxide areas in Syama North with a view that this is going to be a larger pit. So we're not sort of messing it up. So we have to go reclaim the areas and then -- before we carry on. So we're already starting to think of that as our key design now. So it's all -- we've got the pit shells on site. We're looking at them. We're just confirming with the geotechs, we've done 20 out of 24 geotech holes. When we did the original scope study and, in fact, the ore reserve, we were very, very conservative because we had no geotech work. So we actually had pit angles as low as 30%. And I haven't seen a 30% pit in this type of material for a long time. It should be between 45% and 60%. So I think with the PFS work, that 854 will also get a kick up as well.
Okay. Very good. Last question, just contracted on churn [indiscernible]. The one last piece of the puzzle there at Syama North that you guys haven't helped us with today is just around the OpEx, but it seems pretty straightforward. We shouldn't -- can we -- is it safe to say that we should see some overall improvement in the Syama North cost profile as a benefit of Syama North coming in?
Definitely, It's going to be cheaper than our existing operations on oxides and -- because the strip ratio is sort of between five and six, I would say -- and I'm not giving cost out at the moment because I don't believe that we'd be mining a pit at 33 angles at the top. Once we've got those accurate numbers and all the geotech holes are showing that we've got competent rock there, we confirm those angles, we can reduce those strips to where we think it should be. That's obviously the major cost.
But the boon on this is you're going to get the grade. The grade is going to be over 2 gram a tonne. Whereas we're -- even with the -- of the smaller pits, we're mining it particularly well. Now we've got the grade control in control. But we're sort of -- we're coming up at 1.8 gram a tonne feed in the mill. We're going to be replacing that with over 2 gram a tonne. So yes, the overall costs are going to come down. It's just what is the correct ratio, that's going to be the fun part of it.
We're going to be looking at each area and saying, "Well, that's the best economic area. That's the one we need to focus on now." But then if you've got an issue with that area, some problems, what's the number two swing to that, so we'll have a lot of flexibility until we can build more plants. And I do think this modification we're doing is Phase 1. This is really to prove that there is a bigger plant project coming down the track at some stage.
Excellent. That's fabulous. Thanks Terry, I appreciate it. Congratulations again on the results.
Thanks, Reg. Good to talk to you again.
[Operator Instructions] Your next question comes from Richard Hatch with Berenberg.
Well done on another good quarter. Just a couple of questions. Just firstly, just on the -- on North again. You've talked here about potentially looking to expand the roaster capacity as well a bit further down the path. So can you just sort of talk a little bit about kind of your thoughts on that and where you think you might be able to get that to and the ore feeds that would then feed into the front end to support that, that's the first one.
Yes. Thanks, Richard. You're probably aware, I know because you've just been outside. We just had our fundee, our expert, Alexandros, from the University of Frankfurt on site with the team, and we've just done a quite a study on the roaster. At this point in time, it has that 30% extra capacity. We've always said if we put oxygen on there, we could double the throughput on that. We've confirmed over this last two weeks that we could double it in terms of sulfur oxidation.
And there is a bit of an issue. Still, however, we wouldn't get necessarily the high burn of the carbon. So we are sort of -- we burn about 90% carbon. It would come off to about 85%, which is not acceptable. So we would -- we're looking at that as part of the longer-term modification. We think we could do somewhere between 60% to 100% step-up still, above the 30% extra capacity we've got at the moment. But we'd have to do some refinements probably on the grinding and we'd have to do a bit more of a pregrind to liberate more of the carbon and open it up so we can actually burn it.
There is another option that we're looking at. The roaster doesn't look at -- it does operate at 710 degrees centigrade. The integrity of the equipment can handle up to 900 but you don't want to go there. You want to keep a lot of ballast on that system. But we are thinking -- Alexandros is saying we could still get that carbon burn at 90 -- sorry, at 745 degrees centigrade, and that could double the size of the roaster. But we just need a little bit of test work to confirm that. But that is firmly for the Phase 2. It's ongoing and it's quite exciting. I think there is some -- a lot of good options coming out after that workshop this last month.
Yes. Okay. Got you. And then just on North -- just on the cost on North, I mean, just kind of looking at it on a back of an overlay sort of standpoint, You've got good grades that you're pushing through the mill, that's going to help you on an once basis and absorb some of those costs. So last -- this quarter, we've just done were sort of 1,600, 1,700 on the oxide circuit. I mean, would it be -- I mean, is it too early for us to start chucking numbers around like 1,200 below for the -- for North? Or do you think that, that's a bit optimistic or is it too early and we got to wait?
I think it's too early, but I'm sort of looking 1,400 less. It all depends on the patchiness of the oxides, and we're getting all that information now. It is -- they are -- when I say it's patchy, it's not a little bits here and there. They are significant-sized blocks, and I'm just waiting for the engineers to give me those numbers now. I'm not quite there yet. I would suggest I'll be there within a month or so.
Yes. Okay. Cool. And then last one, Chris, just on the hedge. I mean, gold price is up at $2,000. You got 216,000 ounces hedged at $1,920 and you just put in another one a little bit below that. Just give us an update on your thoughts around the hedge book, how you see that with debt refinancing potential over the next sort of couple of years. Do you still think there's merit in having a hedge in there? Or would you like to see it ease down over time, what should be?
Sure. So look, the hedges were put in place historically, as you know, because of our significant debt facility that required hedging. And so we've been maintaining the levels required for that book. We put a little bit more hedges in this year, actually at around the $2,000 mark when those levels hit in, just to ensure kind of our profitability for the next 12 months. So I think we're very comfortable with what we have at this stage.
Yes, we would like to ease out of the hedges over time. I don't know -- we have not landed on our plans post Q1 of next year. That's something we will discuss in our next Board meeting. But look, the reason the hedges were put in place is obviously, at the time, the business is focusing on stability of operations and we had a high cash cost. Now that we stabilized operations, working down the cash costs, as Terry highlighted, we see real strong opportunities to reduce our cash cost by over 10%. The reliance on hedges won't be as needed.
So I think, like I said, we're not going to put any more hedges on at this stage for the rest of the next 12 months, and then we would reassess what we do long term in the coming quarters. But that's kind of how we're thinking about it at this stage.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Holohan for closing remarks.
Once again, thanks for taking the time. And I think if you've heard what we've had to say today, I think it's very clear that we're focusing this year on consolidation of the operations further, hitting those grades, hitting those tunnels consistently. And we're very comfortable we're in that place right now, focus on cash and growth. So it's operations, cash and growth are the recipe for the rest of the year. Thank you very much.