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Thank you for standing by, and welcome to the St Barbara Briefing on Q1 September FY '19 Results. [Operator Instructions] I would now like to turn the conference over to Mr. Bob Vassie, CEO. Please go ahead.
Thanks, and good morning to everyone. Thanks for joining us for St Barbara's September 2019 quarterly briefing. As usual, with me, I have Garth, Rowan and Val. It's been a good start to FY '19 with Gwalia performing well and performing at -- pouring its 2 millionth ounce under St Barbara ownership earlier this month. That's only 4 years since we've poured the first millionth ounce and that milestone took a lot longer to achieve, so congratulations to Kous and the team at Gwalia. Some of the photos you can see in the presentation. There's some -- a recent board visit there for the 2 millionth ounce.Simberi continued its financial year '18 performance -- excellent performance, and achieved its second-highest production quarter on record, which translated to a record cash contribution for the quarter of $34 million from Simberi's outstanding. Total cash contribution from both operations was $79 million. The cash balance at the end of September was up to $350 million. That's cash and investments -- or term deposits, I should say. And that was up $7 million from last quarter because, as you probably know, that's after payment of $28 million in dividends, $11 million going into the growth projects, $6 million on taxes and a further $4 million on investments, which was our further investment in Peel in New South Wales. There was also a working capital adjustment associated with gold-in-circuit and creditors at the end of the financial year.On the exploration front, we've had some very significant results, particularly at Gwalia with further deep drilling to the south of what we thought was the edge of the orebody returned some very strong results, and also some -- at Simberi, Sorowar sulphide drilling continues to deliver encouraging results, although it's tough going there, and we're bringing in another drill work to speed up the program. I'll cover those results in a minute. Just moving on to safety. Our TRIFR has started to creep up, which I'm not happy about, but we had 5 recordable injuries for the quarter. We're concerned with the numbers of slips and trips, which have made up 4 of the 5 recordable injuries, including the more severe lost-time injury, resulting in a compound fracture of the ankle. Needless to say, this remains our priority. And while it's good to see that our TRIFR rate is still relatively low and our audit scores improve, the tougher hand, line of fire, and slips and trips incidents, we want to maintain our focus there because they can actually result in higher severity outcomes.Moving on to Slide 6. It summarizes our consolidated quarterly production and all-in sustaining costs, solid start to the year obviously there. Production costs are in line with FY '19 guidance, and we've maintained that guidance after the first quarter.Slide 7 is Gwalia. A good production quarter here, similar to Q1 and Q2 of last year. We've benefited from high-grade sections of South West Branch, which -- with a mined grade of 12.4 grams a tonne. And as expected and as accounted for in our guidance, volume was down compared to the previous quarter as the expansion project activities have really picked up on the ground now, and it's a good thing to have with building stuff underground.As I said before, it's a good time to be doing the extension project as grades are higher where we are in the orebody. And then once we get this project finished and put much-needed ventilation into the mine, we're able to increase volumes in future years as grade declines. At Simberi on Slide 8, we had another fantastic quarter, achieving the second-highest quarter production on record. As I mentioned, Tim Richards and the team continue to do a great job there. The main drivers for the quarterly performance are higher-grade zones at Sorowar, which we know are there, together with recovery, which sort of goes hand in hand with that rock type and that grade. In saying that, I would not necessarily annualize our quarterly numbers as we do have a major overhaul of the Aerial Rope Conveyor, or Ropecon, as we call it, scheduled for early next year. We're replacing the main load bearing support ropes, and expect this -- the Ropecon to be out of action for around 6 weeks. During this period, we expect to use stockpiles and ore from trucking to keep the plant running, so we're not expecting a gap in production. And if all that goes well, it looks like another strong year and contribution of cash from Simberi. Interestingly, this repair was necessitated by the mine life extension, which is a good problem to have, I guess. It also sets us up well for any future sulphide project.Slides 9 and 10 just show our increasing balance -- cash balance over time and how we've been using that cash generation on our own organic growth, returning money to shareholders through increasing our dividend and investments in [ genius ] and the like. So that's all laid out for you there. Our key project time line organically on Slide 11 is similar to what you've seen before. So I'll go straight to the Gwalia Extension Project, which is our main growth project at the moment. It's about 50% complete with $50 million spent to date, so they have $100 million project. The overall project remains on time and on budget. However, as we mentioned before, the PAF, or paste aggregate fill, component is taking more time largely due to the problems of getting a high-voltage cable drop, a hole from surface down to 1,400 meters below surface hitting the right area and getting a cable down there. Basically, drilling had some difficult conditions around 800 meters below surface and the hole had to be duplicated, and we're also using a different drilling method, which is a bit slower, but we'll get there. The PAF chamber development is completed. And as you can see from the photo there, when the board was down last week, we've moved the crushing equipment on the ground and getting it installed, so activities peaking underground at the moment. Raiseboring is going really well with the first surface ventilation shaft, which is the exhaust shaft, complete. And the second shaft reaming upwards, and that's about 1/3 of the way up, 280 meters so far out of 900 meters in total. And we're now underground with the rig doing the pilot hole with the first underground vent shaft. That's only 300 meters and that's 210 meters down, so that's going really well, really pleased with that part of the project and the ventilation is what we need. Ventilation component of Gwalia Extension Project remains on schedule for completion in Q2 December financial year '20.Our mass extraction project, updating now on Slide 13 and 14. As we've mentioned before, we're looking at 2 key pumping technologies. The first perhaps more conventional option is around 2-stage crushing with high-pressure grinding rolls to get the particle size down to 2 to 5 mls and particle size mixing at 50-50 with water and pumping it through positive displacement pumps, which are off-the-shelf technology to surface. The second option is the 3-chamber pipe feeder system, where it's 3-stage crushing underground and potential to go up to 20 millimeters and mixing 25% ore and 75% water and pumping it to the surface through this chamber pipe feeder system. In this case, the pump sits on surface, which is -- and just provides enough pressure to get the stuff up because you've got the -- all the pressure of the water from surface, providing a good head. And it means that you're able to use less comminution energy underground. So that's why there's several advantages there that make it prudent to compare and contrast that in the study.The feasibility study will assess the valuation and the risks of the pumping options along with the base case of continued trucking but at higher volumes. We'll then select the preferred alternative for detailed design and construction.Time-wise, feasibility study on GMX is due to be complete in the March -- in March, sorry, 2019. There's no particular hurry as we can't build it until the Gwalia Extension Project is done and we have the ventilation in place. So with such a key decision, we want to do it down to a fine level of accuracy.I should point out that based on the work that we've done on GMX and the likely version of it, we have decided to future proof the fans and showing that we're installing as part of the Gwalia Extension Project and invest a further $9 million there, which is really GMX capital, rather than do it in 2 steps. And that's a lot more efficient and cost effective with the future proofing there.In exploration, you can see the exploration work on Slides 15 to 18 but also the earn-in and joint venture agreement we recently announced with Australian Potash. The agreement with APC is our first earn-in and joint venture under our current program, where we've invested in equity investments in 4 junior explores. It covers the Lake Wells Gold Project, which is a greenfields project located 150 kilometers northeast of Laverton. So within our district in Western Australia. The initial earn-in is an expenditure of $3.5 million over 12 months. After which, we can elect to spend a further $3.5 million for 70% of the project.Slide 16 and 17 show you the location of 2 daughter holes from Gwalia deep drilling. Now this is quite important. I'll spend a little bit -- a couple minutes on this as well as the new seismic target. The daughter holes were designed to test the southern extensions of the deposit. And on the long section, you can see to the left, that's south, you can see that if the orebody maintained its usual plunge, any hole targeted at the center of the orebody would indeed be at the center. But we started to believe that plunge might be flattening to the south, as indicated in the long section there, and tested that with some daughter holes recently.The results at depth of around 2,000 meters are strong and more like the South West Branch we all know and love, and that's very encouraging. It also may mean that at larger depths, like the 2,600 meter hole we just completed a while back, what we thought was center may, in fact, be on the northern periphery of the orebody. And that's pretty important. So on these results, we've added a further $3 million to our exploration budget to test this further and around 2,000 meters and then further down at depth with the new parent hole.A new seismic target has also been identified, which you can see in those diagrams and -- further south from the previous 2 targets. We're planning to test this new target with a drill hole in the current quarter. At Simberi, we've announced today more results from drilling of shallow sulphide gold targets on the Sorowar Pit. You can see a sample of this on Slides 18 and 19 with more cross-sections on the appendix. Drilling continues to show some high grades at reasonable widths, and this is very promising for updating our sulphide gold project PFS. We're looking to mobilize another rig to help accelerate the RC drilling. Currently, we're still on the 60-by-60 meter -- about 24,000-meter program. And we need to increase the drill density to 30 by 30 to feed the study. Now we'll probably start 30 by 30 shortly while we're still doing 60 by 60 with the 2 rigs. Effectively, we should be finished with 60 by 60 around November; the 30 by 30 around February and March and then with a bit of overlapping activity because, really, the orebody is showing up well, but as it is in the pit next door, it consists of high-grade shoots, and we've got to drill at the target density to be confident of those. We then can upgrade our existing PFS, get straight into PFS. And if this orebody spins up, there's a real prospect of some continuity here between oxide, in which life has already been extended, and being able to accelerate the sulphide program, depending on the scope. Strategy and growth, which you've seen before, on Slides 20 and 21. As we've previously said, the key focus is to diversify. I guess most people on the call will know what we're busy trying to achieve. It's not easy, but we're certainly working on it in the organic sense. On the growth pipeline, you'll notice that, during the quarter, we increased our equity interest in Peel Mining in the Cobar region to 17.9%. We're excited with the progress they're making on exploration, particularly at the Southern Nights project, but there is also gold opportunities around there. The other new addition to the slide is the joint venture with APC, which I talked about earlier. So just rounding out, on Slide 22, there's a number of diversity and sustainable development aspect the company has been part of during the quarter. It's very pleasing to be one of the leading mining companies in Australia with respect to diversity, and the awards that the company has been recognized for are a testament to the hard work of Val Madsen and her team. In addition, we recently published our sustainability report, which I'm very proud of the advances the company has made across both of our operations and that we are now members of the UN Global Compact as well as the Extractive Industries Transparency Initiative. Lastly, I'd like to mention the sponsorship program for the Shooting Stars, which is in partnership with our neighbors Saracen and support the Shooting Stars netball program for young aboriginal girls in Leonora to encourage greater outcomes at school. And just finally, on PNG, the company has joined the New Ireland Provincial Malaria Alliance, and we'll be providing funding along with others to that initiative. The alliance is seeking to eliminate malaria from the province where Simberi is located and to leverage off the great work that Newcrest has been doing in the area at their Lihir operation.So in conclusion, we've had a good start to financial year '19 from both mines. Exploration looks very promising in both operations. Cash has increased to $300 million, and we've continued to pay dividends. So with that, I'll be happy to take any questions.
[Operator Instructions] Your first question comes from Matthew Frydman from Goldman Sachs.
First question, I suppose, is on the indicative production split across the year. Obviously, you guys have been giving that split, which has been very helpful. It does imply a circa 20% pullback going into Q2 just in terms of production. Are you able to give an indication as to really what's driving that between the 2 assets? And I suppose, conversely, what are the factors that drive the recovery into the third quarter? I suppose is it a question of grade pulling back and then recovering? Is it maintenance impacts or potentially equipment interactions at the GEP?
Look, in the large sense, our biggest-producing asset is Gwalia. So it's the mining sequence through, as you know, we mine from the center out, so we don't skip around to chase grade. We just have to go through the sequence that we go through. But we are, as I pointed out and as you can see from the photos, the intensity of activity underground increased because we're actually pulling stuff down the decline and installing it. And we're really going somewhat ahead of schedule and raiseboring generating more waste, which we have to get out of the way. So that's probably the big swinger on it. There's probably -- between those 2 quarters, the Ropecon change at Simberi, we had been thinking of whether we'll be able to -- it depends on when we get delivery of stuff, and it will really potentially bridge those 2 quarters. But we'll also step out of the really high-grade area that we picked up in Sorowar. But I wouldn't be worried about that too much, because as you can see from last year, we had a record year at some variance, still had averaged out at the average reserve grade. So it's a combination of sequence activities underground with Gwalia Extension Project and how that grade progression goes at Gwalia.
Yes, sure. That's quite helpful. Maybe just 2 quick follow-ups on that then. Does that kind of imply that you're expecting some of those interactions to have a stuff by the third quarter of the year at Gwalia? And I suppose, secondly, with the Simberi Ropecon, are you expecting any sort of notable cost impact there during that outage? I mean, just broadly, should we be expecting that the increase to execute trucking requirement would be offset by the stockpile drawdown? Or should we be expecting something a bit more material in terms of costs during that period?
No, not really. I mean, all that cost is in our guidance. It's all sustaining capital, so it's not growth or anything like that. And we've built quite a stockpile already, so we've already made that investment. So we're not expecting -- it's all being laid out in our plans. The return after that quarter, and I think there will be potentially a bit of blending between those 2 quarters, once we find the schedules. It's really pivotal on the fact that we wanted to have PAF installed already and actually getting rid of the raisebore waste and mixing it in our paste and keeping it away rather than trucking it to surface. And trucking costs have been also displaces ore production up to shoot there. So -- because we're looking at having PAF installed and commissioned in the next quarter, we're expecting the benefits of that after and in the following quarter. And at least, the construction activities there, just wrapping things, would have been finished.
[Operator Instructions] Your next question comes from Michael Slifirski from Crédit Suisse.
Bob, great to see those deep Gwalia results. I'm just struggling to get my mind around what it all means. I can see there are significant grades, significant widths. But in terms of then an extrapolation from the last sort of known information above, can you sort of just fill it out for me? Because it's not quite clear in my mind what information gap that I could have extrapolate that over to some change of what you might be seeing.
Look, and I'm not a geologist either, but the way I sort of look at it is if you look down in-depth at this things knife-edge straight. So we know exactly where it's going to be in depth and the long section on Slide 16, where you see the open pit, in effect, we're in the plan view that the pull around to the south that we're interpreting now is only really sort of come in about where we're mining now. And we will target these holes, as you know, the parent holes, over $1 million a piece. And we've been targeting them at the center of what we thought the orebody continued if you keep that plumb straight. And we've started, I think, working on -- we didn't really test to the south here. And further up, we knew we had Northern Extension's further up intermediately, or is around 1,100. So it's only really now that you've seen and commented on, and as I've noticed myself, is that we were getting good gold in those drill holes down 2,000, 2,200 meters. And as we've increased our resources in those 200-meter segments, we're getting 1 million ounces of resource additional each time we did it. But that was in the sections in lower grade. Going off to the south there is really -- and getting those 2 results, we're about to stick another 2 holes in, really sort of firmed up our idea that it might be plunging a bit more to the south. And also, if you look at the pink section there -- actually, it's not really represented here. When we look at the gram meters and modeled that in our block models, we're seeing a bit of a trend of the high grade pushing south as well. So it's probably something we can step analysts through in visits or other meetings of how those trends are looking. Now we haven't -- I've cautioned you, 2 holes don't make a resource, of course. But what I'm seeing as very encouraging and also might explain when we did the 2,600-meter hole, which you can sort of see on Slide 17, that's the orebodies really swung around to the south. That could be quite north of the orebody where it spins off. So early days yet but very encouraging from those 2 holes.
Yes. Looks terrific. So in terms of -- that's a broad tenor of the orebody where you've seen that gyration of grade from some high grade to low grade to high grade. Is that sort of consistent with that sort of flexure of grade that you've experienced throughout mining?
Yes, we do get pinch and swell. But this is more -- the pinch and swell can happen as the orebody -- in the main center of the orebody. Here, it's just -- are we actually seeing -- because this is a Shear, what pinches -- what dictates the northern extent and the southern extent? Now when you're further up the mine, we thought the northern extent had stopped. But through drilling, we realized that we've started again through that sort of dilation or whatever. The southern thing's quite significant at depth. And we -- so what we're going to do is 2 more daughter holes at further south just to see how far that goes, 2 infill holes because we're going to add it into resource for GMX. And then further down, we'll do another pilot holes, so that we can assist the depth further down to 2,200, which is sort of the base of our model for GMX.
Yes, great. And moving to Sorowar. Again, terrific to see all those really good results there. So with what you're learning about the endowment, the revisiting of the study, has anything else changed in your thinking towards what that project could look like other than having more potential materials put through a mill that improves the returns? Does anything else around the project scope change in terms of -- I know it's early days, in terms of scale or in terms of processing of that sulphide, how far downstream you'd go because of the potential grade of material you have to look at?
Yes. Look, I think, as I said -- I mean, this all depends on completing this drilling because of the shooting nature. We know we've got shoots. We know we've got high grade but how thick are they and how many in the gaps of the orebody, really, and what we're seeing is potential similarity to Pigiput. And Pigiput's got 1.4 million ounces at 3.5 grams. And so if we double up, you just got a better endowment to make the investment in the projects. And you either use that to go up in scale or to go longer life potentially. My gut feel, and that's why we'll brush off the PFS, is I'm still not convinced that we need to make immediately Lihir out of this and try and put in pox and other more complicated downstream processes for the size orebody. What I think the better orebody would lead us to do is to put in more milling capacity upfront, get the throughput up but to grind down to the true liberation size and flow the better comm because the comm we had in the last PFS, it was really on the low end of the grade scale, about 32 grams a tonne. You can sell that, but it's not necessarily a popular brand. So if we can do just straight far-right flight and get up to 42, 44, something along those lines, I think that would be a worthy investment and putting some more grinding in the front. The other thing is the benefit of this [ header. ] As you can see from the diagram, this stuff is just sitting under our oxide pit floor. So we can get to it really quick, and that gives us a much better cash flow and NPV of the project because previously, just with Pigiput, you had to push the pit back, you had to get down to the better stuff. And ultimately, you took out the Ropecon power line. Now you can slow the sink rates by fetching and getting to good ore really quick and you can keep the Ropecon going. We're even looking at speeding up the Ropecon with a major change and a few upgrades. And if we can get that to where it is now, we used to run at 2.1. We're sort of getting it to about 2.5 million tonnes a year and trucking the list on down that if you could do -- get it up to, for argument's sake, 3 and just use a Ropecon and no supplement for the haulage and then configure your [ plant ] on that rate, you'd still be able to make a good production rate out of the mine in terms of -- like we've previously targeted 120,000 ounces a year in concentrate. So there's a lot of things we can do there, but having another pit and the stuff near the pit floor is very value accretive to the project overall.
Your next question comes from David Radclyffe from Global Mining Research.
So my questions -- if we look now, you sort of got 5 equity interest in JVs and juniors. And that looks like it's about a $40 million sort of investment to that current market cap. So how -- can you sort of run through how you guys rank these internally, these [ 5-odd ] projects, and then maybe what's really the criteria for this portfolio now in terms of how you enter or exit these interests? And what are the key criteria in terms of things like scale you're looking for and time horizon?
Yes. Look, it's a good question, and I think it's -- because it's on the early staging with the exploration, it's like a box of chocolates. You never know what you're going to get. I had to just throw that in. But it is early stage. Some of these are fairly greenfield areas. So what we're looking at is we had a process which has existed in St Barbara in earlier years that got curtailed. But when we saw we're paying off all our debt and actually starting to mount some money up in the bank and given that our current ground position, we're pretty happy with what we've got in PNG, and we're doing the joint venture with Newcrest on the other island, but we're -- and we like the ground we've got around the Gwalia. But other than that, we only had Pinjin. So we thought we needed to add more exploration opportunities to the front end of our pipeline. When we started looking at that, we ran the roll live, all the ground we like, so good gold belts that we thought were prospective or have already proved to be prospective that were tied up by the majors or something like that, that were held with juniors that needed an injection, where we like the geology and we like the management teams that were doing it. When we started out, though, at that time in the cycle, these juniors didn't necessarily need to give away joint ventures for a few million to end up with only -- giving away 70% of the project. They needed -- they could go to market. So we ended up participating in equity, which is a bit different. I mean, effectively, you're giving them -- funding them through equity to get holes in the ground. So it's another way of funding exploration. But as you point out, you got to be careful that you don't necessarily get stranded in the stock or become the person that always has to prop them up. So that's a bit of more strategic choices that we look at as we go on. Although having said that, the ones that we're in we like and we think there's a way to go, especially the first 2 Catalyst and Peel, are really spinning up quite well. With scale and everything like that, we're looking to bounce some opportunities that will be meaningful scale for us, and we're not necessarily picky, but we'd like 100,000-ounce operations. Everyone, would like 200,000-ounce operations. But it's more about the geology and the teams there and the fact that it's early stage. Early stage means you might not find anything, you might be lucky. But the size and investment is commensurate with that.
There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Thank you.