Earnings Transcript for EVN.AX - Q2 Fiscal Year 2025

Kate McCutcheon - Citi:

Levi Spry - UBS:

Hugo Nicolaci - Goldman Sachs:

Daniel Morgan - Barrenjoey:

Matthew Frydman - MST Financial:

Paul Kaner - Ord Minnett:

Andrew Bowler - Macquarie:

Al Harvey - JPMorgan:

Operator: Thank you for standing by and welcome to the Evolution Mining December 2024 Quarter Results Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to Mr. Lawrie Conway, Managing Director and Chief Executive Officer. Please go ahead.

Lawrie Conway: Thank you, Armani, and good morning everyone. I hope you had the opportunity to get some downtime during the holiday period and wishing you all the best for a safe, healthy and successful 2025. I'm joined on the call today by Barrie Van Der Merwe, our Chief Financial Officer, Matt O'Neill, our Chief Operating Officer, Glenn Master, our VP Discovery and Peter O'Connor, our GM Investor Relations. The outcomes for the December quarter were excellent, in that we safely delivered to plan which materially increased our cash flow by 54% to $165 million. At the halfway mark of FY ‘25 we are ideally positioned to generate a significant step up in cash flow compared to last year. Our safety performance for the quarter was a real highlight, in that we saw our TRIF reduce aim to 5.44 and all our operations now have single digit TRIFs. We're on track to deliver our production guidance of 710,000 ounces of gold and 70,000 to 80,000 tons of copper at a very low all-in sustaining cost of $1,475 to $1,575 per ounce. Group production was in line with plan at just under 195,000 ounces of gold and 19,000 tons of copper. Our all-in sustaining cost of $1,545 per ounce for continuing operations was slightly higher than planned but this is being driven by timing of sales and a lower achieved copper price. For the quarter, Cowal sales were 8,000 tons lower than production and this will come through in the March quarter. The achieved copper price was slightly below our guidance assumption but the spot price is now above that assumed price. The charts on page one of our report clearly demonstrate how we're tracking in the key production and cash flow. We have 52% of the midpoint of group production gold guidance, while cash flows are about 55% to 56%. Using the current spot prices, our operating mine cash flow for the year is potentially going to be above $2 billion. Two key takeaways are that this would result in a mine operating cash flow margin nearly $2,700 per ounce and the $200 million benefit on that chart only represents a six-month period. So annualized, this is up to $400 million more as compared to where the metal prices were when we released our guidance in August. The material increase in group cash flow to $165 million, further reduced our gearing to 22.6% and our balance sheet continues to strengthen. The performance of our projects was also a standout. At Mungari, the 4.2 processing plant expansion is now scheduled for commissioning in the June quarter which is about nine months ahead of schedule. Total project cost is forecast to be around $235 million which is 6% below the original budget of $250 million. For the project, all things that needed to go right have gone right. The arrival of the mill and the HV substation in early December, the continued good progress by the contractor, the mobilization of the open pit mining and all haulage contractors have all combined to enable the project to advance much better than originally planned. To be delivering a project of this scale and cost in Western Australia early and below budget is a real credit to all who are involved. As we commission the plant in the June quarter, we expect Mungari to move back to being a considerable cash generator for the group. At Cowal in December, we received New South Wales regulatory approval to extend open pit mining by 10 years and the overall operation to 2042. We're grateful for the strong support we received from the local community and all the relevant regulatory bodies. We expect to seek Board approval in the June quarter for the project. Cowal's year-to-date cash generation of $366 million and $268 million in operating and net mine cash flow respectively shows the real value of this asset, both now and going forward. Yes, I will repeat what I said last quarter, this asset is still a cash cow. Lastly, we also released our exploration update today with excellent results. At Ernest Henry on the back of the recent drilling successes at Bert ore body, we have now commenced a pre-feasibility study as an additional ore source at Ernest Henry. At Northparkes, we've seen further positive results at Major Tom and we have identified a potential new ore source at the Cowal underground. We continue to have success at our operations to add into the growth pipeline and Glen will go through these in more detail soon. I'll now hand over to Matt, to provide an update on the operations.

Matt O’Neill: Thank you, Lawrie, and good morning to all. As Laurie has already touched on, we've had a strong second quarter on both the production and cash flow front and I'm really pleased with the position we're in. For me, the improvement in our safety performance is perhaps the most satisfying aspect of where we sit today. Over the last six months, we've reduced our recordable injury frequency rate by 24% down from 7.1% to 5.4%, with a special mention here for the Red Lake, Ernest Henry and Mungari teams who have made significant improvements in this area. As I noted at the last quarterly, whilst I'm very happy with the improvements in our safety indicators, we continue to focus on the leading indicators such as critical control verifications and material risk actions, in line with our ongoing commitment to materials [ph]. For the December quarter, we produced just under 195,000 ounces of gold and around 18,500 tonnes of copper, which was again in line with plan. Cowal and Northpark exceeded their plans for the quarter, with Red Lake, Mungari, Ernest Henry and Mount Rawdon all generally in line with plan. As noted earlier, Cowal's production was strong and the operation is in a good position ahead of planned major shutdown in March. This shutdown will reduce Cowal's March quarter by around 25,000 ounces. Ernest Henry's production was in line with plan and for a second quarter in a row, the highlight has been the drilling results, which Glenn will talk to later. Mungari pleasingly is back in line with where it needs to be for the year, with the Rayjax pit in full production and having commenced early works on our new pit at Castle Hill. As noted earlier, the expansion project is tracking very well, running ahead of schedule and below budget, with commissioning targeted in the June quarter. Northparkes had a strong quarter, with the highlights here being the commencement of commissioning of our loader automation in the block cave and the completion of the improvement works in the crushing area. Red Lake really pleasingly was in line with plan, achieving a positive cash flow for a second consecutive quarter. During the quarter here we completed our normal schedule shutdown works in the processing plants and rebuilt our surface stocks in line with plan. Mount Rawdon continues to process stockpiles with a team on site working through this process well. I'm pleased to be able to report once again that the outlook for the operations for the remainder of the year is positive and we're on target to achieve full year guidance. I'll now hand over to Glenn to report on the exploration results for the quarter.

Glen Masterman: Thank you Matt and good morning everyone. I'd like to turn your attention to our exploration announcement which was released this morning alongside the December quarterly report [ph]. As Lawrie alluded earlier, we received further exciting drilling results from Ernest Henry, Northpark and Cowal, all of which highlight the potential to deliver future incremental production growth from various alternative ore sources. At Ernest Henry, recent step out results from drilling at Bert, highlighted in figure one on page two of this morning's announcement, have extended mineralization to at least 160 meters below the previously delineated footprint. We can now start to see how the Bert ore void potentially lines up with other isolated copper [technical difficulty] further down plunge, revealing potential to add future production mine life. Infill drilling results from Bert are also illustrated in figure one. We've received strong gold and associated copper grades high up on the Bert ore body and adjacent to potential access locations from the pit wall. Metal grades confirm continuity of the higher grade gold domain which is an encouraging outcome for Bert. A PFS just commenced to evaluate options for developing the Bert ore body independently of the underground materials handling system. Turning to Pages 3 and 4 of the announcement. We highlight new drilling results from Northparkes which focused on delineating lateral and depth extensions of near surface copper mineralization at the Major Tom and E51 prospects. Results from Major Tom have grown the mineralization footprint and in my view solidified this prospect as a future open pit opportunity. The top of mineralization occurs within 40 to 50 meters of surface and the lateral footprint of mineralization has expanded to a similar scale as the E31 open pits and remains open. Serendipitously, Major Tom is copper dominant, ideally located on the mining lease and is within three kilometers of the processing plant. Drilling has also returned further results at E51 which is situated 500 meters southeast of Major Tom. Our exploration team has done a great job of unravelling the complex geology to advance our understanding of where and why mineralization occurs where it does. These learnings have opened an entire search space along the edge of the monzonite stock which is shown in pink in figure two. This geological relationship is also highlighted very well in figure three. Mineralization hugs this prospective contact and is yet to be effectively tested along its full length. Our exploration team will continue exploring this concept in the short to medium term with the aim of identifying additional near surface open pit opportunities that can be brought into the [indiscernible]. Work is currently underway to model the geology and assay results to determine if open pits can be optimized at Major Tom and E51. This work is expected to complete in the June 2025 quarter. In our last exploration update at the end of the September quarter, we talked about a new and significant exploration target we had identified at Cowal. Just to recap, we drilled a hole into an area situated between the E42 open pit and the Cowal underground where we believe we were exploring a separate repetition of the geological architecture that hosts mineralization in the adjacent underground mine. The target location is shown in the small inset of figure four and page five. The cross section illustrates the key geological relationships controlling mineralization, the contact between the pink colored diorite unit and the surrounding sedimentary rocks is very similar to the geologic setting that hosts gold mineralization in the underground mine. A new hole was completed in the December quarter from the underground which confirmed this geological concept and hit two significant gold insets which are each described on Page 5. I'm excited about this target because of its large scale implications. It is situated in an area that has not been previously explored and by analogy with the adjacent underground mine, we have a solid geological explanation for why the gold is there and we're confident that the favorable architecture will persist a long strike and a debt. In other news, we recently completed an agreement with Rio Tinto Exploration to acquire a 1,200 square kilometer holding of exploration tenements surrounding our Ernest Henry mine. This comes on the back of the Cloncurry North Earnings JV and now cements a significant exploration package prospective for future copper gold discoveries adjacent to Ernest Henry. I look forward to being able to report back next quarter on the ongoing drilling progress we're making at Ernest Henry, Northparkes and Cowal. I'm confident we will continue to grow and unlock resource potential in these well-endowed geological terrains surrounding our mines. With that, I'll hand over to Barry.

Barrie Van Der Merwe : Thank you, Glenn and good morning everyone. During the December quarter, the business generated significant cash flow, setting several new financial records. We are delivering on our deleveraging plan strongly while investing in the business and increasing share returns as evidenced by the final FY ‘24 dividend of $0.05 per share which was paid during this quarter. Delivered all-time record operating and net mine cash flow of $561 million and $263 million respectively. As Lawrie and Matt explained, this was driven by our continued production performance being on plan as well as capturing the benefit of high metal prices. Group cash flow of $165 million was 54% higher than the September quarter. This cash flow included the $27 million tax payment related to the FY ‘24 return which is due each December. Tax payments in the second half will return to $25 million to $30 million. Our cash balance increased by $36 million to $520 million after paying $99 million in dividends and the $15 million scheduled debt repayment. Gearing reduced a further 1.3% to 22.6% which is now the fifth consecutive quarter that we have reduced our net debt while at the same time we are reducing gross debt with a commencement of scheduled debt repayments. Cost performance for the quarter continued to track well with an AISC per ounce of $1,500 [ph] which is slightly improved compared to the September quarter. This is for continuing operations as Mount Rawdon is now processing stockpiles. We are well placed to achieve full year cost guidance for AISC of $1,475 to $1,575 per ounce. Our disciplined approach to capital expenditure continues by only spending capital on projects when it is required. The earlier commissioning of the Mangari 4.2 project will bring forward major project capital from FY ‘26 of approximately $80 million with the overall project expected to come in under budget. In order to meet the accelerated mill ramp up, major mine development capital of approximately $25 million will also be brought forward. Mangari's major project capital will therefore be between $190 million and $210 million and major mine development capital between $55 million and $70 million FY ‘25. The rest of our capital expenditure guidance remains unchanged. We have only $60 million of scheduled debt repayments in the remainder of FY ‘25 of which $28 million falls due in the March quarter. Considering the very good first half to the financial year and continuing cash generation momentum, including the potential upside of a current gold spot price that's about $400 per ounce higher than that achieved for the year to date, we are tracking very well to reduce gearing to 20% or less by the end of FY ‘25, at the same time as investing in the business and continuing to grow shareholder returns. I will now hand back to Harmony to open the line for questions. Thank you.

Operator: [Operator Instructions] Your first question comes from Kate McCutcheon from Citi. Please go ahead.

Kate McCutcheon: Hi. Good morning, Lawrie and Barrie. Well done on Mangari being ahead. Maybe a good market to sell a gold mine in. I see that there's CapEx for the mill and mine that's pulled forward and Barrie just gave us those updated numbers before. Group guidance is the same, I guess. Are there assets to call out that will perhaps be a bit late on their spend this year?

Lawrie Conway: Morning, Kate. Some of the sites will, but what Barrie saying is that all of the other assets remain for the original guidance and for Mangari we're bringing forward that IT [ph] further project in ‘25 into mine development. I think when you look at where each of those projects are, you wouldn't be assuming that that's offset by the other projects. All those projects remain on track.

Kate McCutcheon: Okay. Got it. Then maybe a question for Barrie with the upcoming financials. Are there any one-offs to call out or exceptional? And then that net debt number that you presented just confirming that's using the end of year FX for your US-denominated debts?

Barrie Van Der Merwe: Kate, so as we said in the quarterly report, there's only that adjustment for the Edna May royalty of about $17 million. That'll be written off because that project has gone on to care and maintenance and the receipt of that all is uncertain. And then with respect to the debt, so the USPP debt is all is hedged. And the debt numbers we report in the quarterly at the hedged, right, of $0.715. So there won't be any revaluations of the debt that will come through in the financial results, that's not already in the quarterly number we reported. So the debt number will stay unchanged, and the gearing will stay unchanged when we report the half year results.

Kate McCutcheon: Excellent. Thank you. I'd missed that on the hedges.

Operator: Your next question comes from Levi Spry from UBS. Please go ahead.

Levi Spry: Hi, good day Lawrie and team and Happy New Year to everyone. Maybe just following on from Kate's question there, sort of, I guess, cash looking forward. Is there anything else you can call out over the next 12 months? And I'm specifically thinking about the stamp duty which we keep asking about, but also contingent payments related to the Northparkes? Anything else there rather than the $60 million debt repayment?

Lawrie Conway: Good morning, Levi. Yes. So in regards to the stamp duty, nothing still on the one for Ernest Henry. So we wait as long as we can to that. And in terms of the contingent, that will be assessed at the end of the financial year with payment in the first quarter of next year. As at the halfway mark, we're probably sitting in between sort of about $1.2 million to $1.5 million contingent payment that would have been earned in the first half.

Levi Spry: Right. Okay. Yes, small numbers. Thank you. And just Mungari, keen to get a bit more detail, I guess, Matt, like. So what's it looks like on site? What happens over FY '26 if you're commissioning in the June quarter? Obviously, we're probably bringing a bit of production forward other mines already. How quickly can you feed the plant? What's the ramp-up expectations look like?

Lawrie Conway: I'll do one bit first Levi, and then I'll hand it over to Matt because they are very good questions. They're the same I've had for Matt recently as the projects [technical difficulty]. When we look at it, we'll go through the commissioning and the ramp-up and therefore, because we're nine months early, you'll expect that production will trend up towards the 200,000 ounces for next [technical difficulty] the time it takes us to commission and fully ramp up to 100% production rate. Matt, do you want to explain what we're seeing on site?

Matt O’Neill: Yes. No, I think Lawrie has covered off the commissioning period in the quarter. On-site in terms of probably the key thing that we're working through is making sure we've got enough material to feed the mill. And so with the pits coming on quite well, Rayjax running quite well, Paradigm was doing well and then Castle Hill, I was there last week. Actually, Castle Hill is starting to look like it should in terms of a long-term pit that we'll continue to produce from. So when we run through all the different numbers in the operations, we've got more than enough material to feed the early start-up. And over that period, over the first couple of years, we were building stocks. So there's not a lot of risk around us running ourselves out of material to feed that mill at the moment. Yes, like I said, we'll work out once we go through the commissioning process, what next year looks like, but it's obviously pretty good news, and we'll see some uplift from that.

Levi Spry: Yes. Thanks. And just a bit more detail on that. Just I assume ramping up the underground, is it a bit of a grade driver? How does that fit into the picture?

Matt O’Neill: Yes, you're right, exactly right. That's probably the key area that we're working on from an improvement point of view. We're on track with where we need to be there, but I do believe there's some opportunities and Scott and the team at Mungari are chasing that, but the underground is the grade sweetener, and that's the area that we're really pushing. Probably the key thing we've worked on in the last quarter has been the development and getting ourselves in front, and the team have done a really good job. Last month was a fantastic result from development, and that's what we need to get going to make sure we get ourselves in front there. So yes, you're right. At the moment, it's in line, but I'd like us to get a bit further in front.

Operator: Your next question comes from Hugo Nicolaci from Goldman Sachs. Please go ahead.

Hugo Nicolaci: Hi, Lawrie, Barrie, Matt and Glen. Happy New Year. A few quick questions for me, please. Firstly, on Northparkes, just observing the lower underground volumes in the quarter. You noted the haulage was down for 8 days. The production impact looks bigger than just that disruption. Can you just clarify if that's the deliberate decision to take high-grade open pit material or whether there are any other issues there in the quarter?

Matt O’Neill: Yes. That was the major interruption, which was the winder and the transformer just we had at Northparkes. We did take a lot more open pit, which is obviously where the gold grade has originated from. So there's nothing else material there. The only minor impact, and you wouldn't see it in the numbers that we say was around the commissioning of the automation fleet. We had a couple of teething issues in the first few weeks. But outside of that, there's nothing material there impacting that number for the quarter.

Hugo Nicolaci: Excellent. Thanks for clarifying that. And then just one on Mungari. Maybe obviously. Congrats to the team for tracking ahead of the schedule and budget there. You've historically talked to the potential of divesting that asset. Does the performance improvement there make you more inclined to keep that in the portfolio? Or does it potentially mean you can look to start a process on that sooner?

Lawrie Conway: I'll take that on behalf of Matt. I don't think Matt wants to sell an asset that he has just built a new plant ahead of schedule and under budget. I think he wants to operate it a bit. But from our perspective, we've talked about this over the last six months. Selling an asset when you're partway through a project, you wouldn't get value. I think the other thing that we've also said is that when we commission this plant, a brand-new plan at 4.2 million tonnes right in the half of the Eastern Goldfields, it's a great asset to own. It goes to 200,000 ounces, generating a lot of cash for us. I think there's a lot more opportunity there. The only thing you'd add is that someone wants to walk in and give us a large check that gives us something that we can't resist, we'll always look at that, but we're not actively looking to sell the asset.

Hugo Nicolaci: Great. Good to know. And the current gold pricing environment, obviously supportive there. And then just last one quickly, like the addition of the project summary table in the release, just noting Mt Rawdon pumped hydro not on there. Can you just give us an update on where the prospect of the pumped hydro piece is following the change of government there and what options you have to continue to process there and defer starting the rehab work ahead of any decision on the pumped hydro piece?

Lawrie Conway: Yes. Thanks, Hugo. Jake will be glad you asked the question. There is a small bit in the actual Mt Rawdon section. We haven't sort of deemed it as a project. But the change of government has worked well for us. Jake and the team have engaged with the new government and it's continuing to progress. With the completion of mining there, that's allowed some works to be done on site in terms of drilling and everything that would need to be done to finalize the technical study. And then the ongoing negotiation with the government agent that's been appointed to own renewable projects is progressing and we'd like to see an outcome through the course of this year, but it still remains very positive there. And in terms of then that closure and rehab, I mean that remains unchanged in terms of the way the project would be structured that [technical difficulty] closure and rehabilitation costs as the first part of that divestment of the project, and we still manage and maintain that actual closure and rehabilitation obligations.

Hugo Nicolaci: Great. Thanks for clarifying. I’ll pass it on.

Operator: Your next question comes from Daniel Morgan from Barrenjoey. Please go ahead.

Daniel Morgan: Hi, Lawrie, Barry, Matt and team. First question just on Northparkes, Major Tom, E51. It looks like -- can you just clarify, are you looking to declare a resource in June '25? And if these open pits hang together, when could that potentially be brought into the mine plan? And just a comment about does that -- ideally, does that push out the decision for the E22 block cave, which I thought you might need to make circa 2027? Thank you.

Lawrie Conway: Thanks, Dan. I'll hand that over to Glen to talk about the Major Tom where it all fits in. I think what -- the second part of your question, you wouldn't see that Major Tom pushes E22 out because you need -- we need that bulk tonnage. Ultimately, at some point, Major Tom doesn’t fill that void. It obviously would supplement like we've got with E31 now. So maybe you...

Glen Masterman: Yes, that's right. And that's the way we're looking at both Major Tom and E51, Dan. I think just back to the beginning of your question around sort of are we running resource models, et cetera., well, look, I make -- I'm going to make the site very nervous by answering this they rightfully say to me, we need to see -- we need to do the modeling work to understand whether open pits were optimized. And that's really the stage that we're at. We've got sufficient amount of drilling [technical difficulty] to start sort of connecting the dots between drill holes and putting shapes around the mineralization footprint. We'll build resource models. And then, of course, we need to optimize them and see if they will et cetera. What I'm liking is the scale that we're seeing. They're not super large, but we're talking in the range of millions of tonnes, but the grades are pretty healthy, and we're looking at sort of in some areas, particularly at Major Tom of 1% copper grades quite low on the gold side. And pleasingly, these both Major Tom and E51 are pretty close to the processing plant. So that's the work that's going to happen in the next six months, and we'll have more of an understanding of where these things [technical difficulty] by way of resources towards the end of the June quarter.

Daniel Morgan: Okay. Moving to Cowal. Good to see the OPC approval. Could you just maybe update us on whether the timing of approval has led to any disruption at all to open pit operations continuing like is there a potential higher hiatus at all? What do you need is? Or is it seamlessly going to move from Stage H? And the trucks and the people keep working, is there anything outstanding you need for the Board to make FID?

Lawrie Conway: Yes, Dan, on that one, there's nothing outstanding really to take that to the Board. We will get the final federal consent conditions in February is what's expected, then we'll take it to the Board. When we look at it in terms of the actual open pit at E42, we've been fortunate that the weather that we've had over the last 18 months has meant we've had to process stockpiles for probably extended periods more than we had planned. And therefore, we'd expect that as Stage H finishes through FY '26, we roll straight into Stage I with no hiatus in mining in E42.

Daniel Morgan: Okay. That's good news. Just last question for -- probably for Matt. Red Lake, good to see free cash flow for two quarters, but more interested in just the operations, which seem to have achieved some stability. Can you just talk through what is working there and just maybe an update on what's expected for the rest of what you can see in front of you?

Matt O’Neill: Yes. Thanks, Dan. The stability is really coming from sticking to a plan and getting a little bit in front of ourselves with some of the development. We've had some challenges around the pace which the team have overcome. And so the next two quarters look pretty much the same in terms of going forward. There's nothing materially different that comes forward. But it's really around operational discipline and sticking to the plan and not springing surprises on ourselves every now and then, so that's probably been the key thing that John and the team have been working on. That said, they do have some areas where they've got some contingency that if something does go wrong, we can go and get it, whereas I think that was probably one of the key areas that we were short on previously. It's not to say we've got 100% contingency. But at this point, I'm comfortable with where that sits. So yes, it's more of the same for the next couple of quarters is what we're expecting. And then we're doing some work around really understanding what that looks like longer term and the primary driver for us and that's going to be cash in terms of making sure we're getting a good margin and generating some good cash out of that business. That's probably the key aspect of what we look for in our long-term plans.

Daniel Morgan: Okay, thank you very much for your teams' perspectives.

Operator: Your next question comes from Matthew Frydman from MST Financial. Please go ahead.

Matthew Frydman : Sure, thanks. Morning, Lawrie and team and Matt, maybe. Just continuing on from that discussion and that question from. Obviously, good mining and cash performance at Red Lake, but grade does appear to continue to be a little bit variable. Obviously, some of that's just sort of quarterly noise. But is there anything you can tell us specifically about the grade profile in future quarters? I guess, presumably, you're bringing in more Upper Campbell material into the mix. And then, I guess, bigger picture, is grade tracking as you are expecting versus the reserve and versus the grade control drilling that you're doing? Or is there some further rethinking to be done there around, I guess, what actual mine grades look like under the more productive sort of mining methods that you're implementing at the moment?

Matt O’Neill: Yes. I'll probably answer a couple of those questions in one. The grade is the key focus for us at the moment. And for me, that's around the predictability of where we're operating. So we're not seeing material variances between what we thought was going to be there and what is there. A lot of times previously, the grade variance was driven by where we were mining. So it wasn't necessarily a model discussion. It was more of an operational issue. In terms of going forward, probably the key thing for us will be grade and some of the aspects that go with that, which everyone is aware of, around dilution and mining practices, but also looking to make sure we're targeting the higher-grade areas. Obviously, that's what's going to be generating us the most cash. So a lot of those discussions around cutoff grades and where we are and discipline are happening now in life of mine process. So my expectation is, I'd like to see the grades start to go up and that's what we're working towards. We're obviously generating cash at this point with these prices. But I'd like to see us trying to work through that, that starts to go up a little bit from where it is today, but we'll see how we go with the planning process.

Lawrie Conway: Yes, just to add one thing to, Matt, though, that when we look at it as a combined operation and when we get material through from Cochenour, which is lower grade and gives us a base feed that does bring the overall grade down. So you do see periods where the grades are in the 5.5 to 7 grams. But when you then also got that base feed for Cochenour that is bringing [technical difficulty] perhaps saying is right, we want to get more material from the higher grades and then reduce the reliance on the Cochenour to keep the plants filled.

Matthew Frydman: No, that makes sense. And then maybe another quick one for Matt. Might be a bit of nitpicking, but I did think that Ernest Henry could do a little better in the December quarter with, obviously, throughput in production were basically flat quarter-on-quarter. But thinking back to the September quarter that did include some scheduled maintenance that was called out. So anything in particular to highlight there for Ernest Henry during the quarter? Or is that just sort of business as usual? And obviously, you've got another sort of round of scheduled shutdowns in the March quarter.

Matt O’Neill: Yes. There's probably minor issues there. Probably the key thing for us, I'm looking for a bit of a step-up at Ernest Henry over the next half. And one of the key drivers of that will be the ventilation works that are ongoing now. They've delayed a little bit from where we wanted them to be, but looking to complete in the quarter -- in the next quarter, that should open up a couple of other areas. Obviously, it's a pretty hot part of the country. And through the summer periods, there are some areas where in areas where we couldn't continue to work. So looking for a step up over the second half and that ventilation work is probably the key to that.

Matthew Frydman: Right. So the December quarter from a mining perspective might have been a little bit constrained by that sort of like a pressure?

Matt O’Neill: Yes, to a degree that we were able to do works in other areas, but there were some areas that were in withdrawal that we couldn't work in them. So that's where I'm looking to see the step up. So yes, we'll have all the areas available once we get that network running.

Matthew Frydman: Okay. Thank you very much for the detail Matt.

Operator: Your next question comes from Paul Kaner from Ord Minnett. Please go ahead.

Paul Kaner: Hi, Lawrie and team. Thanks for taking my questions. First one, just on Cowal and following on from Dan's line of questioning. How should we, I guess, think about that grade profile as you transition from Stage H to Stage I? And the use of those lower-grade stockpiles, I guess, given there's no production hiatus, should we just assume it's similar to, I guess, previous stage transitions?

Lawrie Conway: Yes. So what happens, it is fairly similar. So as we came to the end of Stage G, the grade we got to the good grade, then we went back on to the stockpiles. We'd expect the same as we go through Stage H and then into Stage I processing those stockpiles. I think the one difference here for Cowal now versus that last cutback is that we've got the underground in place. We move up to 2.4 million tonnes in FY '26 at sort of 2, 2.5 times the grade that we will mine out of Stage H. So that's what we sort of see as we go into next year. I think the thing as we finalize the plans for FY '26 and the sign off on OPC is looking at that sequence in FY '26. When do we finish that? When does the underground ramp up to that 2.4 million tonnes that will drive the production. But what you'll still see is production in similar ranges this year to next year, probably a little bit lower as you get some lower grade stockpile material coming through in the second half of FY '26 that can't be completely offset by the underground.

Paul Kaner: Yes, no understood. Thanks for that. And then…

Lawrie Conway: And as we -- just as we take the OPC through to the Board and get approvals, that's when we'll be able to outline exactly what you'll see going forward.

Paul Kaner: Yes, perfect. And then just, I guess, another one on Mungari. That being brought forward now when, I guess, should we expect commercial production from that asset just for capitalization and accounting purposes?

Lawrie Conway: Yes, I'll hand that to Barrie. But essentially, what we need to see is we'll be running through on lower grade material through that [technical difficulty] phase. So we've just got to see it to be able to get up to a production -- processing rate, see those recoveries come in. And through that period, there will be some costs that we have to look at in terms of commissioning. Barrie?

Barrie Van Der Merwe: Yes. I mean just confirming that. So we will follow the usual practice with ramp-up of any mining assets. So we'd probably look at our throughput of 80% and getting to kind of a high level of recoveries is where it should be. And then depending on when it actually starts ramping up in the quarter, we'll then kind of see where we are and look at putting some of those processing costs on the balance sheet and look at the ounces going into the AIC calc as well. So I don't have the details of that yet because it's not happened. But the usual principles will be applied for.

Lawrie Conway: In short, Paul, we're allowing a three-to-four-month commissioning phase, and that's sort of the base load and then we'll just see how it ramps up.

Paul Kaner: Yes. Thanks Lawrie, thanks Barrie. Appreciate the color. I’ll pass it on.

Operator: Your next question comes from Andrew Bowler from Macquarie. Please go ahead.

Andrew Bowler: Good day, Lawrie and Team. Sorry, to harp on about Mungari, but noted the bringing forward the CapEx of 8 from next year into this year, is there any CapEx that will be brought forward from '27 into '26, like, for example, an open pit you need to bring forward to obviously feed the Hungry mill that starts 9 months’ sooner than expected.

Lawrie Conway: No, see, Andrew, as Barrie outlined, we've got to accelerate that mine development. And fortunately, with the award of the contract and the mobilization is allowing us to time that with the plant. So what you would see is that next year, we would have been ramping up the mining anyway and getting ready for the plant visiting. So '27 versus '26 doesn't look much different. We've got to be mining at a 4.2 million tonne rate in '26 as we would have had to in '27. So we don't expect there to be anything extra coming into '26 from '27 because the project capital for construction will be finished.

Andrew Bowler: Yes, copy that. I was more referring to sort of new pits that you need to bring forward. From memory, I think it was sort of 8 pits across the mine plan. I thought maybe there might be some coming from 27% to 26% [indiscernible]. All good. Thanks.

Lawrie Conway: Well, Castle Hill gives us the base there, Andrew. So that's the one that Matt said, we're ramping up the others in the other mining centers. So of the 3 mining centers, the other 1 provides additional material and then you've got the underground.

Andrew Bowler: Thanks.

Operator: [Operator Instructions] Your next question comes from Al Harvey from JPMorgan. Please go ahead.

Al Harvey : Yes, morning, team. Apologies unrelated to quarterly, but just wanted to get a better understanding of the release you put out in mid-December around the class action filed by Echo Law. Just any incremental info there on timing and the impact that you're potentially looking out for?

Lawrie Conway: Al, look, I mean, what we put out on the 12th of December outlines the case. We believe we've met our continuous disclosure obligations going to defend that case. It will run through the courts in the next few months, and it's not appropriate to make any further comment other than that we believe we've met our obligations and we're going to defend it.

Al Harvey: Yes, understood. Thanks, Lawrie, that’s all for me.

Operator: There are no further questions at this time. I'll now hand back to Mr. Conway for closing remarks.

Lawrie Conway: Thank you, Armani. Look, the results for the December quarter really were built off what we've been trying to do over the last 6 to 9 months in becoming more reliable. That's now given us four consecutive very good quarters, and we're very focused on maintaining that as we go [technical difficulty]. A few things just to leave you with, what you can take away from it is that we are safely delivering to our plan. The cash generation is building with $273 million [technical difficulty] further upside in the second half as spot price is around 400 above what we've achieved year-to-date and also noting that we are very limited hedging that we have to deliver in the second half at around 25,000 ounces. So our achieved price is going to be fairly close to the spot price. We're maintaining the discipline on operating costs and capital investments so that actually bank and capture the benefits of the metal prices. And these projects are delivering better than we had planned, and we're getting excellent drill results that really can support sustainable incremental growth and deliver upside for the portfolio. So thanks for your time today and look forward to updating you in a few weeks with our half year results.

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