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Thank you for standing by, and welcome to the St Barbara Limited FY '22 Q2 June Quarterly Report and Presentation. [Operator Instructions] I would now like to hand the conference over to Chris Maitland, Group Manager, Investor Relations. Please go ahead.
Good morning, everyone, and thank you for joining us today at St Barbara's December 2021 Quarterly Report Briefing. Please note the disclaimers on Slide 2. On today's call, our Manager and CEO, Craig Jetson, will discuss the Q2 performance, after which we'll open the call to questions. Please note that all dollars referred to in this presentation is Australian dollars, unless otherwise noted. With that, I'll hand the call over to Craig.
Thank you, Chris, and welcome, everybody, to St Barbara's Quarterly Report for FY '22 December quarter. As always, I'd like to begin by recognizing the traditional landowners and the First Nations people of the lands on which St Barbara operates in Australia, Canada, Papua New Guinea and pay my respects to elders past, present and emerging. In terms of safety, safety remains our #1 priority, and we are committed to our goal of eliminating fatalities and life-changing injuries. So it was pleasing to see that we have continued with our trend in reducing the total recordable injury frequency rate, which this quarter dropped to 2.7 injuries per million man hours worked. This quarter, we had just 1 recordable injury global, an improvement on the floor that we had in the prior quarter. Although this is great to see this improvement, we are mindful of not becoming complacent. To that end, we have made significant advancement in our Safety Always leadership program, which aims to build a better infield safety leadership at all levels of the organization and encourage regular conversations about finding and fixing areas of concerns. The December quarter was a busy period for St Barbara. We produced just over 65,000 ounces of gold at an all-in sustaining cost of $1,589. And importantly, for our bottom line, we achieved a solid realized gold price with a margin approaching $840 per ounce. For me, the progress that we are making in the Leonora Province was our biggest achievement in the quarter. I'm going to go into greater detail on that shortly, but some of the obvious highlights are: our announcement on the intention to acquire Bardoc Gold via scheme arrangement. Subject to the execution of the scheme, this acquisition significantly accelerates our plans to fill the mill. We also announced plans to increase our processing plant capacity to 2.1 million tonnes per annum and build capability to process refractory ores. This makes great commercial sense given the optionality and the sheer volume of ore the plant has access to. There has been a shift in focus towards drilling in the shallows of the mine. Due to the strategy, we have potentially identified a new mining front at Leonora, which is significantly shallower than our current mining operations. This area is known as Old South Gwalia. But the work I'm most proud of is the work done by the Simberi team who have completed line, a complete new DSTP or the deep-sea tailings placement pipeline. To do so and to finish this complex engineering work and deliver the DSTP within 6 months in the middle of a global pandemic, associated supply disruptions and issues with transport is nothing short of a great team effort. The outstanding dedication shown by our team has enabled production at Simberi to commence early in the new year with the first gold being pulled on site last Friday. This demonstrates we can deliver complex engineering work, such as the up-and-coming Sulfide Project, in very trying circumstances. I also want to call out the hard work by the teams at Leonora and Atlantic as they, through this quarter, continue to improve their businesses quarter unfolded. Also, through their efforts, we have been able to minimize the impact of the pandemic on all of our operations. So as you can see, it's been a busy and a company-changing quarter for us. Leonora, once again, produced a stellar quarter. Despite facing lower grades from the mine, a 14% increase in mill throughput saw the plant produced 49,000 ounces of gold. Mine grade was impacted by the fall of ground event forcing the mining of lower-grade stopes until the blockages could be cleared. To compensate for this, we focused on our mining equipment on delivering ore to the mill. The next half will see us accelerate mine development rates with 3 new jumbo drills having recently arrived at site. We'll also mine the higher-grade stopes left behind due to the fall of ground in the coming quarter. The lower grades for this quarter resulted in a higher all-in sustaining cost for site at $1,653 per ounce. Our Leonora operations are performing well, and we expect a strong performance to continue for the rest of the financial year, meaning our gold production for FY '22 is now expected to be at the top end of our guidance range. Of course, we are looking to make Leonora even better through our Leonora Province Plan, and we took some definitive steps towards that in the December quarter. The progress we have made on the PFS for Tower Hill has led us to select an open pit mining approach to its development. This, in turn, grew our mineral resource for Tower Hill by 600,000 ounces and added a further 16 million tonnes of ore processing. To accommodate this increase in volume of ore for the Leonora PFS identified a cost-effective approach to expand the processing plant to 2.1 million tonnes per annum. The study also identified a Glencore Albion Process as a preferred process for treating refractory ore such as Harbour Lights. This will uniquely position Leonora to take advantage of other satellite refractory deposits within a 200-kilometer radius. On December 20 last year, we announced we entered into a scheme that will execute an all-in scrip acquisition of Bardoc Gold who own a well-advanced Aphrodite and Zoroastrian deposits. Leonora is uniquely placed to add value to these deposits as the plant is connected to them via an existing road and rail infrastructure. Developing these deposits accelerates our province plan by filling the mill much sooner. Our exploration team have done some great work over the past quarter and have potentially identified a new mining front at Gwalia, which has significantly shallower depths than our current mining operations. The high-grade intercepts of Old South Gwalia are very promising, and we are aiming to add them to our mineral resources in the fourth quarter of this financial year. We have also completed further drilling at Trevor Bore, and we are targeting a maiden mineral resource in FY '22. As I said earlier, by changing our planned approach to the mining from underground to open pit, we have increased Tower Hill mineral resource by 600,000 ounces to 1.2 million ounces, adding an additional 16 million tonnes for ore processing. All this means in a short period of time we'll go from having excess capacity at our 1.4 million tonne per annum processing plant to being mill-constrained, thanks to a number of high-quality ore sources we have in the region and a change in our business strategy. Now let me quickly take you through a little bit more detail on our plan to create a unique processing hub. The study identified an effective opportunity to expand capacity from 1.4 million to 2.1 million tonnes per annum, with capital estimates in the order of approximately $30 million. This will see the installation of a new ball mill and other associated debottlenecking equipment. This amounts to a 50% increase in processing capacity. We had always planned to install equipment capable of treating refractory ore to process Harbour Lights. To treat these ores, we have selected the Glencore Albion Process technology and estimate that it will cost between $110 million and $120 million to install. The ability to process refractory ore will be unique to the Leonora processing plant within a 200-kilometer radius. So not only will we be able to process the refractory ore we already have, we think this will provide many opportunities for acquisitions and discovery opportunities which are of limited interest and value to other companies. Then, of course, we have Bardoc. By developing well-advanced Aphrodite and Zoroastrian underground deposits, we expect to be able to fill the mill well ahead of our previous province plan schedule. As you can see by these images, Aphrodite and Zoroastrian lie adjacent to rail and road infrastructure, which connect them directly to Leonora plant. This uniquely places us in a position to add value to these ore bodies, which would otherwise need the construction of a new processing facility. The acquisition also comes with substantial mineral resources and ore reserves in addition to the significant land package. The total land package of approximately 447 square kilometers is an exciting proposition, especially considering that many of the tenements are close to the rail and road lines. Combined with our existing exploration tenement packages, this gives our exploration team plenty of scope for further discovery. This acquisition would also allow us to accelerate the delivery of a regional processing hub. The ore from Zoroastrian brings forward the date that we will fill the mill and in turn accelerates the need to increase the plant's processing capacity. Aphrodite ore, which is refractory in nature, will come online sooner than Harbour Lights, accelerating the need for refractory treatment capability. After the completion of the transaction, St Barbara will have one of the largest ore reserve and mineral resource portfolios in the region, accumulating in a multi-decade production profile. Let's take a closer look at the 2 main Bardoc deposits. We are able to quickly create value from these deposits by processing them at Leonora, thanks to the Kalgoorlie and Leonora road and rail lines. We plan to proceed quickly with the development of Zoroastrian underground deposit. It's a high-grade free-milling ore body and complements Gwalia as a near-term mill feed. We are initially likely to transport Zoroastrian ore via road to be treated at Leonora at rates of around 400,000 to 500,000 tonnes per annum. Ore produced from the much larger Aphrodite underground deposit is expected to follow within a few months, coinciding with when we expect the Leonora plant to be ready to process refractory ore. We are getting ready to commence prefeasibility studies on the construction of both Zoroastrian and Aphrodite underground mines. These studies will underpin by the feasibility studies already done by Bardoc though they have been tailored to include portal access through the surface at Aphrodite underground, railing the ore to Leonora processing plant and the production of gold ore by the Albion treatment process instead of production of a concentrate for export. Now the most recent development has great potential for us. I've been talking about testing shallow remnant mining areas of Gwalia some time now. During the December quarter, the drilling program testing and the remnant of the South Gwalia series, which we refer to as Old South Gwalia, intercepted multiple high-grade zones. These intersections between 600 and 1,000 meters below the surface are in the upper historic proportion of the mine and confirm the presence of mineralized loads. We are going to continue to drill in this area between 600 and 750 meters below the surface and are targeting an updated mineral resource estimate in quarter 4 FY '22. Old South Gwalia has the potential to become an additional mining front at significantly shallow depths of the mine. We don't yet know how big this could be or the ultimate ramifications. However, an additional shallower mining front has the potential to increase the rate of ore delivery at Gwalia and add mining flexibility which can reduce production variability. Trevor Bore is another potential ore source, which is a shallow high-grade open pit opportunity just 25 kilometers from Leonora. This quarter, we continued the drill program, and we are still waiting for assay results for holes that we've completed. I'm eager to see what these results could reveal, and I'm looking forward to my next opportunity to share those results with you. Our aspiration is to have a new open pit at Trevor Bore feeding Leonora by 2024. At Simberi, we completed the replacement of the DSTP at the end of December. It was a great achievement by the team. To complete this engineering task in 6 months, particularly given supply issues caused by COVID-19 and shipping, is just a great effort by all. Although there was no production for the quarter, the team were busy preparing so that when we could produce, we would hit the ground running with a maximum production over the remaining half. Mining continued during the quarter and was focused on waste stripping and placing oxide ore on stockpiles. At the end of the quarter, we had 130,000 tonnes of oxide ore available for processing. A new mine plan has been developed, targeting higher-grade material and ore batching, which is expected to improve gold recoveries and throughput. With all this in place, we expect Simberi's gold production to come in at the bottom end of FY '22 guidance range. Our original all-in sustaining cost guidance range had been calculated on the potential for production in the first half. As such, we based the 12 months cost divided by the production. The production now commencing in January, the all-in sustaining cost guidance has been recalculated based on the production for the 6 months. The AISC cost guidance has been lowered accordingly. We feel this gives a better idea of the cost going forward. The Simberi Sulfide Project is a critical project for us, and it allows us to efficiently process the sulfide ore. We have made some good progress on the project during this quarter. For example, the social and environmental impact study, or the EIS, was reviewed by the Conservation and Environmental Protection Authority known as CEPA. And the procurement of long lead items is well underway. We have also bolstered the size of the execution and planning team to ensure rapid implementation of the project following the anticipated approval for the investment decision. The front-end engineering, the design work is expected to be submitted to the Board for final investment decision in quarter 3 of this financial year, with the first sulfide ore being processed, if things go as expected, in quarter 2 FY '24. Production at Atlantic increased against the previous quarter, driven by an improvement in head grade. The mining block model underperformed in the quarter, which drove the development of a new block model that now better represents the remaining resources and mining sequence in the pit. Despite the quarter-on-quarter increase in production, our gold production for this quarter was impacted by 2 significant rainfall events, which inundated the pit with water. We're focused on processing low-grade stockpiles during this period while the water is being cleared. The higher gold production and lower costs for this quarter drove a reduction in all-in sustaining costs to $1,396 per ounce. As we flagged in the prior quarter, delays in retaining routine waste rock permits forced us to deposit waste material into the pit, which has blocked further access to Phase III. We have now received these permits, but the delay meant that we have to push back on the time line we expected to gain access to the higher-grade Phase III material until next financial year. We, therefore, expect production in Q3 and Q4 to be lower than previously anticipated as we continue to focus on the waste movement and process lower grade Phase II and stockpile material. Although this is disappointing to have further delays obtaining basic permits, this is just a 3-month deferral in the mining of this material. We had developed plans to engage additional contract labor and equipment to avoid this delay. But due to COVID-19 pandemic, it is proving difficult to source sufficient labor and equipment for this to occur. Overall, the delay in obtaining waste rock storage permits, when combined with significant rainfall events in the December quarter and the updated forecast and the improved block model and associated mine plan for FY '22, Atlantic has been revised down, which has, in turn, caused the AISC per ounce guidance to increase. Beaver Dam is a next step in our project pipeline for Atlantic operations. We should see the plant operate in Nova Scotia for many years to come. During the quarter, a submission responding to the information request by our round 2s was made to the Impact Assessment Agency of Canada. We envisage approval for this EIS in September 2022 following the information request rounds. Though it is still early days, we are still moving forward with the engineering work for Fifteen Mile Stream. The feasibility study is due in quarter 1 FY '23, and we are looking to submit our response to the information request on the EIS in the next quarter. We continue to progress through the requirements for permitting on both these projects, working very closely with the government and the regulatory bodies. We view Atlantic Province Plan similar like to Leonora's, where the Atlantic operation is a regional processing hub for servicing multiple satellite mining operations. Beaver Dam and Fifteen Mile Stream are the next steps in that vision. Over a year ago, I set out a strategy focused on uplifting the value and transforming the company through the execution of provisional plans at our operations. I'm pleased to see that we are delivering against that strategy, and we have made real progress during this quarter. Now to put those plans into production is the next task. We have targeted the execution of our scheme of arrangement with Bardoc in April 2022. As I've already outlined today, this will herald the transformative acceleration of our Leonora Province Plan. We've got the potential of new mining fronts in Gwalia Shallows, known as Old Gwalia South. We have more drilling to do, but the shallow mining front offers huge potential and benefits in ore delivery rates and mining flexibility and production consistency from the current mine. The Bardoc acquisition accelerates our plans to extend the capacity of the Leonora processing plant by 50% to 2.1 million tonnes and add capability to process refractory ore. The upgrade will see the processing plant become a large unique processing hub in the region capable of treating both refractory and free mill ore. We've continued to advance other ore sources for Leonora. We have increased the mineral resources at Tower Hill, progressed the drilling in Harbour Lights, Trevor Bore. And I'm looking forward to sharing some of these drilling results within the near future. But last but not least, Simberi is back up and running. I'm very pleased to have all our operations in very strong production position once more. In conclusion, this has been a momentous quarter for St Barbara. Although we have lots to do in the coming half, we are well positioned and are determined to achieve the targets that we have set ourselves by executing the robust plans that we have in place. Thank you for listening. And with that, I will now open up the line for any questions. Thank you.
[Operator Instructions] Your first question comes from Matt Greene with Credit Suisse.
Congratulations for getting Simberi back up and running. Look, to start off with I have a bit of a high-level question here just on your growth strategy, if I may. So just given the permitting delays you've seen, it seems now that all 3 of your operations will be entering a growth phase during FY '23 and '24. So I'm just keen to know how you're thinking about this just in terms of timing. Do you feel confident in this current environment that you can execute all 3 if there were some overlap on the timing of CapEx spend there? And -- or has the timing, I guess, you provided to the market sort of try to minimize that?
Yes. Look, really good question. I think the -- so let's talk about the permitting delays and the permitting challenges that we've had for almost 2 years since I've been in this role now. There's been a significant shift in the last quarter, in particular, from provincial government and the federal government. And we've been working very hard with all the regulatory bodies and developing good relationships, developing an understanding of what business continuity would mean and what permitting delays actually do cause in terms of paying for that business. The change of government is certainly in Nova Scotia, I'm talking about here, the change in government in particular has brought a renewed focus on working with the industry to make sure that things progress in a timely manner, and that's been refreshing for us. And we're seeing some of that come through with the basic permitting issues that we've had with waste rock stockpile, for example. So I'm much more optimistic going forward that we will be able to work closely with the regulatory bodies, the new government to be able to have that business continuity mapped out and understood by everybody and everybody working towards that plan. Because at the end of the day, it delivers so much extra value in the region in terms of jobs and benefits and benefits to First Nations people with projects and programs. But nobody wants to see anything detrimental to these sorts of activities. So I'm feeling really confident that we can go to the next stage of permitting and work through those in a much more timely manner than we've been able to do in the past. So I think that's number one. Number two, you're right, we are starting to enter a phase of growth that will need cash to fund that. And we have, I guess, looked deeply into the chest to see where and the cost of what those would be. For example, the sulfide project is around $170 million. I think the Beaver Dam mine construction is about $117 million. I've already mentioned Aphrodite and Zoroastrian as well. So I think with the work that we've done internally with the gold price, look at what we've done there, the cash profile of the business and the debt facilities that we have, we will cover those particular growth projects quite well. I hope that answers your question.
Yes. It does. And I guess just on the debt facilities there. Are you willing to provide us a level of gearing or leverage that you'd feel comfortable reaching? Or I guess a maximum which you would reach during this period of growth.
Look, I think it's a bit early to me to comment on that. I mean, obviously, I've got an internal number that we work through. I don't know if Lucas wants to chime in. But given the level of, I guess, maturity with the projects, the time line, the acquisition of Bardoc, in particular, and I guess, bringing more production online at Gwalia at Leonora and the cash generation from that, we're still working through what that could look like, Matt, to be honest.
Okay. And then I guess just -- I mean, if you were to get the relevant approvals and FID at both Simberi and Beaver Dam this year, do you think you can press ahead straight away with executing on the growth there? Just given some of your comments, I guess, which probably applies more to Canada, just on equipment availability and labor as well.
Sure. Look, I think the delays in Canada was twofold. One is we were relying on getting the permit sooner than we thought. So when we started to look at the waste rock permits, we had access to contractors and equipment. You all know by now that Canada, like Australia on the East Coast, has certainly got its challenges and headwinds with COVID. During the process of being able to achieve -- successfully achieving the permits, the COVID impact on people and equipment in Nova Scotia has been huge. And we no longer can get the resources that we thought would have been available and would have been available 6 months ago. Now having said that, we will mobilize what we can. We'll access the material as soon as we possibly can. Most of the material will move over into next financial year because of those delays. So I think, like Australia, like the -- like Leonora and all other industries, we're struggling to get the resources and the equipment to be able to do the job when we want to do them. So preplanning and future planning is critical for us at the moment.
Your next question comes from David Radclyffe with Global Mining Research.
Maybe just to start with the question on Gwalia. Just in terms of the Old Gwalia South area you're talking about, just trying to put that in a bit of context. So how soon do you think you can actually start mining from this upper section? And it's obviously early days, but maybe you could give us a bit of color on how much development or ventilation you think that area might need.
Yes. David, there will be some -- obviously, some development there, there always is, but it's minimal. But given this part of the mine is this old workings and it's been developed before, our drilling results would tell us, and we're going to come out and talk about that later in this quarter. But our drilling results would tell us as minimal development needed to access what we've seen as significant, I guess, gold deposits. And for us to be talking about this as a potential new area, a new open area for mining, shows you the confidence that we have to get in there very, very soon and bring that into plan as soon as we can. Now there is some more drilling to be done, and that's why I'm not talking about the internal numbers that we've seen through the drilling results at this point. But it won't be 6 to 9 months down the track. It would be a number of weeks when we'll come out and we'll divulge what we've found in the shallows and how and when we're going to bring that into the mine plan, but it will be a matter of months, not a matter of quarters.
Okay. Perfect. And then maybe just a quick accounting one, the half year results, just thinking if there's any change in the way you'll account for Simberi given that there was no operational production sense for the half and there's quite a significant cash cost there of using the pipeline. So will that still be expensed or will you treat that differently?
No. We -- part of it will be expensed, no doubt. So if I look at the 6 months that was part of that certainly will be expensed, and it's a cost we decided to carry for many reasons. One was continuity of labor force, keeping people employed, making sure the communities were looked after. And we were ready to go mining with the change of mine plan, stockpile of ore, a new mine plan as well plus the extra work that was required around the sulfide project. So we've redeployed all our people into areas that produce, I guess, value in other ways other than producing the gold. Now what that's also done is we've taken the opportunity for when we've replaced the deeps tailings pipe, we haven't just replaced it for like-for-like. So we've increased the diameter, increased the pipe in anticipation that the sulfide project will be up and running and greater throughput rates of tails deposition to the ocean would be required. So we've certainly -- I guess, we'll be calling that growth capital. The upgrades of the salt water tanks, the upgrades of the salt water pumps and the infrastructure on land that has just been upgraded as well is directly related to the upgrades required for the sulfide project that will be capitalized. So there will be a hybrid position that we will take.
Our next question comes from Kate McCutcheon with Citi.
Craig and team, firstly, at Gwalia. So there was a geotechnical event this quarter. So it's a bit tricky for the market to get a sense for how consistently you can deliver those increased TMM movement, and it does feel like there's an operational or geotech issue, which comes up at Gwalia more quarters than not. Are these geotech issues transient rather than reflective of the challenges that come with mining at depth and pushing development up? I guess I'm trying to get a sense for your confidence in getting to that 1.1 million tonnes per annum level.
Yes. Look, I think the 1 million tonne per annum level is extremely high on my confidence level. So I think that given what we know the allocation in our production plans for these types of events certainly encompasses all of those sorts of issues that we may or may not be confronted with. And I think this -- there's about 4 different answers to get your question, Kate, answered correctly. As we go deeper in the mine and we mine at the rates that we currently are, we're going to have more seismic events than we've had in the past. That's just the nature of the geotechnical over time of going deeper into this mine. It's how we control those and how we engineer this and how we prepare 2 fronts. One is potentially preconditioning the ground to take the stresses away before we have such a large seismic event, and that engineering and that thinking is well and truly underway. The second one is the upgrade of the ground control systems and methodology that we currently use to be able to tolerate larger and more frequently seismic events. So we've worked through that and we've upgraded a lot of areas. The other thing that I'm really keen to pursue the shallows, not just because it's another mining front and not because it's high grade, there's evidence of other lives, so these are all good reasons to go after it. But it also allows us to precondition and mine differently at the bottom of the mine, derisking, if anything goes wrong. For example, if we were mining and had these shallows as a mining front now, the impact of the seismic event in the fall of ground would have been much less because we've got different optionality within the mine. So in the next few months, we'll increase our optionality to mitigate the risk of seismicity even more than we are through good engineering work, good mine plan and good development work at this point.
Yes. Okay. That answers my question. And can I ask about portfolio optimization, Craig? So there's a lot going on across 3 countries. How are you feeling about all the assets? If we were -- how do you see St Barbara in the next 3 years? Is it still having an asset in Canada and PNG as well? Can you just comment on that?
Well, look, in short-term thinking this -- to answer to that would be yes, absolutely. Given the -- and I don't know, I [indiscernible] in the province plan because I think there's a lot going on with that. But given that we have the sulfide project, we're up and running at Simberi now, the sulfide project, and it's very, I guess, early stages of coming across my desk, looks like a great project still, it's certainly very cash positive. And we've been mining in PNG for many years, and I've got great relationships there with the government, the landowners and the like. So that will be, once converted into the sulfide project, a stable cash generating business for many years to come, in 10 years, in fact. So not saying it's part of the strategy forever. You never say that in this game and certainly in this particular year of consolidation. As far as Atlantic goes, I think the recent shift in the permitting and the traction we've been able to get with the First Nations and the regulatory people give me a lot of confidence that Beaver Dam, Fifteen Mile Stream will come online as we put that into our time line. So I'm getting more and more confident about where we're sitting with those particular assets in those 2 regions. If I bolt them all together, if I look at what we've done in the last quarter and the last 6 months, in particular, generated the province plan at Leonora, been able to look at the shallows and see that there is a new development just waiting for us there, adding Bardoc potentially to the equation, where we sit with Kin, what we've done with the Tower Hill, Harbour Lights and, in particular, Trevor Bore, high-grade, shallow pit, this is all very exciting future stuff for St Barbara. And it's not 5 to 6 years in the future. It's 3 months to 12 months to 2 years. So, Kate, I think from where I'm sitting, I'm very excited about what we have. It's about now resourcing, structuring the team and the business to be able to deliver and optimize in the right financial way, the priority and what we do.
Yes. Okay. Understood. And can I just ask one last one quickly? So the reconciliation issue that you're talking about at Touquoy, can you just give an indication as to the materiality there and what you expect around mine grade until that peak completes in first half next year?
Yes. Look, unfortunately, we had a significant -- for a couple of quarters now, have had significant issues with mine to mill grade reconciliation. That has driven the teams, both corporate and site, to look at the model and make sure that the model was actually working for us and we could project up that model. We found significant enough issues with the model to change it. And that change now has given us a better predictable model and the reconciliation going forward. And that's part of the reason that we're winding the production guidance back given that has been identified as been a problem for us.
Yes. So should we think about the grade going forward to '23 similar to what was done last quarter?
Yes. Look, I think the next 2 quarters, in particular, because we're lowering guidance, I'm more confident in that number now. We've got the new mine to mill reconciliation model. The mine plan certainly got the waste rock permits. I know in the timing now when we'll get into the high grade in Phase II. So I think for the next 3 months, in particular, it's going to be a challenge because of the mine grade, the lowest grade stockpile that we will have to mine because of the waste rock rehandling and moving is lowering the production by that 3-month period. So I think what we've got in our guidance changes today is fairly accurate of where we'll perform to.
Your next question comes from Matthew Frydman with Goldman Sachs.
Just a few questions, mostly on Gwalia and Leonora, if I can. And firstly, following on from Kate's question on the rock fall during the quarter. I'm interested really in the robustness of the guidance for Leonora, I guess, over FY '22. I mean, clearly, you've called out that you did have a rockfall or seismic incident during the quarter, but it didn't lead to a disappointing production impact in the way that we may have seen in the past. And actually, you're now guiding for the top of the range. So I guess, is that a function of now having multiple working areas developed that maybe you wouldn't have had previously? Or was there some fat in the mine plan in the first half of the year that has now sort of been consumed by this event? Or I guess as you're kind of alluding to, is this what we should expect going forward in terms of Gwalia's ability to, I guess, reprioritize and compensate in other areas and still meet plan?
Yes. Matthew, I think there's -- again, I'll try and answer the best I can. I think the seismic event was larger than normal. So it was quite a large event. And we had some rockfall. So that's not where we want to be. We have done a lot of work in the last 12 to 18 months, in particular, of upgrading ground control. And in all areas, except this one spot again, that certainly stood up to the test of time. I think the biggest thing that we have is exactly what you said is more mining opportunity and flexibility at the bottom of the mine, given we changed that strategy 12 months ago, to declutter the mine, open up more headings and more mining fronts and have some optionality when these things happen. And you've seen the prime example of getting that strategy at mine plan technically correct is when it's happened, it hasn't affected the mine production as much as it may have done 18 months, 2 years ago, which is a great sign. The second part of that is opening up the shallows to give us another mining front and more headings to increase the flexibility of the operation even further. So I think the change of plan 18 months ago, the increase in the design and the work that's gone on by the technical team, both corporate and at site, to upgrade the fall of ground protection systems, the mine plan itself, the decluttering of the mine over the last 6 to 9 months, in particular, has all helped towards that. Now what we need to do is get on top of the larger events from an engineering perspective, how we're going to do that going forward. Because we know in this area, in this geotech zone and region that we work in, we are going to create -- sorry, mining geoseismic events. How we control the size of those and protect our operations is exactly what we're doing through more mining fronts, better fall of ground equipment and, certainly, functionality and flexibility.
Got it. That makes sense. Secondly, on, I guess, the mine development expense at Gwalia, you mentioned in the quarterly that there was some impact on waste movement due to the rockfall event. And if we look at the spend on operating development in the first half, I think you spent around $25 million. You're still guiding to $65 million to $75 million of development spend. So should we expect that you can make up the difference in the second half of the year, particularly as these additional jumbos come online? And I guess, looking forward, is that the spend rate that's required to continue lifting overall material movement overall ore mining rates and accessing some of these new mining faces like Old South Gwalia, is that the investment run rate that's required?
Yes. Matthew, that's exactly the strategy. All those pieces coming together will certainly yield, I guess, the budget that we've put out and we've guided will certainly chew up a lot of that. And when you look at the extra drills that have just arrived once we put those into the mine, and they're all fully functional, development of the shallows, it will certainly chew through some of that budget that we've guided on. All those pieces you mentioned coming together is exactly the strategy that we're pursuing.
Got it. And then maybe just a couple of quick ones. Any outlook that you can give on the third-party ore purchases? Obviously, that has helped to keep the mill full in the first half of the year. Is there any variability there to call out in terms of the ability of those third-party partners to provide ore over the remainder of the year? Or should we expect much the same rates of third-party ore purchases? And then secondly, I'm interested in the Albion equipment that you might potentially source as part of the plant expansion and conversion. Any indicator there in terms of lead time on, I guess, purchasing and delivery of that equipment? I think previously you called out that potentially you would want to start commissioning that plant expansion in Q3 FY '23. So that gives you sort of 12 months to source and acquire that equipment. Is that a reasonable time frame?
Yes. Look, I think so. So let me talk about the first half of your question. So I'd have to say that Linden, in particular, so the ore purchases from that area have certainly struggled. Been a lot of headwinds, in particular around delivering the grade. We have had people visit their operation, and they're running a very good mine that they're doing a really good mining job, to be honest. They are moving the material that they wanted to move, but the grade has let them down a little bit, which is also impacting on us. But obviously, we've been able to pick up the grade slack there by what's happening at Leonora. So look, I've said a lot that it makes good commercial sense for now to be in these sorts of arrangements of ore purchasing and processing and whatever because we have the capacity. But as you can see, if you map out -- if we're successful and when we are successful with Bardoc, Trevor Bore comes online, the 1 million, 1.1 million tonnes out of Gwalia, that's going to put pressure on our ability to process anything from a third party until we finish mill upgrade of the life. So there's a bit more work to be done about that. And I've always said, I would rather own the ore, control the fee and own the gold that comes out than third-party influences, but that's just a personal preference. In terms of lead times on the equipment, yes, look, I think the 18 months from now is probably the time line that we would be successful, I think, the next 12 months. The Albion circuit, although new in language to a lot of people and it's not understood by a lot, it's not that complicated. It has some complex parts to it and certainly some proprietary secrecy about it, the way that it operates, but it is quite a basic system. And the overall design and the bolt-on would be very simple for us because we already have the plant interface quite well. The systems are compatible. So I'm hoping to move on that very, very soon. Does that make sense?
Yes. Got it. That's helpful.
Your next question comes from Alex Barkley with RBC.
Craig and team, I've got a few questions on Atlantic. Firstly, on that guidance drop [ around 16,000 ounce down to 15,000 ], is it possible to give a bit of a breakdown between those issues at the mine, the waste permitting, the rainfall in the block model? And looking beyond FY '22, is that waste permitting likely to recur as an issue? And also, on the block model sort of downgrade, if you will, is that something that might also have the potential to affect the Beaver Dam?
I start to say no. And let me explain the reason I say no, particularly around Beaver Dam and the remaining life of mine at Touquoy. I think the redesigning the block model and getting a better, I guess, level of confidence in our mine to mill reconciliation is certainly going to prevent any future errors in that space that can hurt you very, very quickly without you knowing it. That's now been dealt with, and we'll take that learning forward for many months and years to come and particularly as we start developing Beaver Dam. So that -- I'll come back to the percentages -- and that will be gut feel percentages, not accurate. The second part was the rain event and the third part is given the permitting delays have been in the previous 6 months and how we've resolved those permitting delays, in particular in the last 1 month, is very encouraging about how we can work together with the regulators to be able to get permits in a timely manner in the future. So I think some of that's gone away. Now of course, we -- so we do have the permits now. So the waste rock permit issue from a temporary perspective is permitted through to the end of the year with no more problems associated with temporary waste rock permits. So that now has been dealt with. But of course, the holy grail in this is the permitting solution, which is the permitting of the pit as soon as we finish mining in Touquoy. And that process continues on and it will continue on during the remaining part of this year. So if I look at the percentages in terms of the downgrade in guidance, it's probably 50% in permit delays and 25%, 20% a round sort of number, in mine to mill reconciliation and weather events. But the weather events is something we're going to have to learn to operate through, plan for and deal with because it's normal. It's a normal way of doing business there. So we missed that somewhat 12 months ago, and we're putting out -- 8, 9 months ago, and we're putting our plan together. So I think probably 50% was the permit delay and the rest was mine to mill reconciliation, the rehandling of material and the delays in getting the high-grade Phase II material.
Yes. When you say learnings you've had with regard to the block model should sort of prevent that problem resurfacing, is the reserve and the resource in the block model at Beaver Dam, is that something you've inherited? So when you apply these learnings upon that, it might match your expectations, but is it possible that the numbers on paper do drop in a similar fashion?
Look, I don't think so at this stage. I don't have enough information to -- I see what the block model is in the project pipeline as saying what it will be, and they are the numbers that we're using. I haven't yet overlaid what our learnings here into that project, but I would suggest probably not at this early stage. And the drilling that's going on for Beaver Dam is significantly more intense than what was ever done for Touquoy. So the gaps in the drilling knowledge versus how we built that strategy over a period of time is significantly and technically different.
Okay. And just a final one. On the Beaver Dam time line, if you do get that EIS approval in September, I think, with the time you flagged, when could you get first production out of that mine, obviously, including any labor sourcing problems which are going on right now?
Yes. Look, all -- if we had enough tailwinds and we've prepared ourselves for it, which we will do over the next 6 to 9 months in particular, it's probably 3 to 5 months' worth of cutbacks to get into the ore.
Okay. So from that approval and your investment decision, 3 to 5 months after that.
Around the sort of number, yes. Thanks, Alex.
[Operator Instructions] Your next question comes from Peter O'Connor with Shaw and Partners.
Craig, 2 questions. The Leonora area, third-party purchases, the nature of those supply agreements, how flexible are they? Are they quarter-to-quarter, month-to-month, year-to-year? And what flex you have in those? And I'll come back for a second.
Yes, they've been commercially set up where we have good flexibility. So it's not like they are buried forever in a day. I mean, we've got a commercial agreement with the people who've got offtake agreements with. We'd like to stick with that and honor those contracts, but we can make changes to them if we need to in a timely way.
Okay. And can I circle back to the questions about the portfolio optimization? And just picking up on a comment you said about -- now it's about restructuring the team, and I think it was reorganizing priorities. That sounds like quite a big deal. So you've effectively been a producer across 3 different jurisdictions for some time and obviously doing well. You're now going through a major development phase. How significant is that pivot in personnel? And can you just walk us through the granularity of who you need at each of the sites? And from a corporate to each of the 3 areas, how extensive do you have to go in that recruitment to cover those [indiscernible] cover that requirement?
Yes, sure, Peter. So I think if you look -- if you -- I'm not sure whether you were covering us back then. But if you look at that a year ago, I made some, I guess, calls in the market that we were certainly underbaked technically across the organization from a technical perspective in many different fronts. And that was hurting us in terms of being able to reliably deliver our production plans that we've committed to. And there are a lot of reasons for that. Don't get me wrong. So that's the position we were 18 months ago. In that 18 months, we've recruited strongly a technical team and Head of Technical in Perth -- a technical hub in Perth to help the sites deliver the technical requirements to deliver their strategies and their plans on a regular basis. We've also had significant restructures at the sites over the last 12 months. So from a restructuring perspective, we've, I guess, done the lion's share of what I would see we need to do going forward with one gap, and that is now execution of significant projects. And as recently as this month, in January, we've appointed a Head of Projects, and he's now started with us in the last probably, I guess, 3 weeks. Although we've had used consultants over the last 18 months since I've been in the business to bring our project portfolio together as one and then strategically prioritize that project portfolio into active projects and then outsource some of the engineering work and so forth into that, we're now building out our muscle internally to own these projects and deliver them. So with the project management group that we've put together and the technical team put together, I think that's this restructure that needs to start working together to deliver the Bardocs of the world and the Trevor Bores and the Beaver Dams. So I think we are ready for that, and we've been setting ourselves up for the last 12 months in preparation for it.
There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Thanks, everyone.