Earnings Transcript for GOR.AX - Q2 Fiscal Year 2024

Operator: Thank you for standing by, and welcome to the Gold Road Resources June 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 hand the conference over Mr. Duncan Hughes, General Manager, Corporate Development and Investor Relations. Please go ahead.

Duncan Hughes: Thank you, Darcy, and welcome, everyone, to our June 2024 quarterly analyst call. In the presentation today, we will be referring to the quarterly results slides that can be viewed on the live webcast, our website or the ASX release. Those on the webcast and on the phone are able to submit a question for us address at the end of this call. On the call today, we have Duncan Gibbs, Managing Director and CEO. John Mullumby, Chief Financial Officer; Mark Lindsey, General Manager of Discovery; and Keely Woodward, Joint Company Secretary. Moving to Slide 3 now for a summary of the June quarterly results. Gruyere continues to operate safely, but reported one lost time injury during the quarter. As announced in March and at the beginning of April, Gruyere was severely impacted by a protracted rain event that resulted in the Great Central Road, the main access route to Gruyere, being closed for a total of seven weeks. Operations continue to be suspended for the first half of April and in recovery of most of the remainder the month. Despite a solid recovery whereby mining and processing rates hit record highs in May, gold production for the quarter was still subdued at 62,535 ounces. And the lower ounces obviously resulted in a higher all-in sustaining cost of AUD2,441 per ounce. Gruyere's operating cash flow increased quarter-on-quarter to AUD74 million and cash equivalents ended the quarter at AUD86 million after we invested AUD51 million in the Gruyere equity raise and paid a one-off AUD23 million tax payment on the 2023 tax year. Gold Road continues to make good progress with its Yamarna mine readiness project. And on the regional exploration front, we have some very encouraging rock-chip results from outcropping mineralization at our new Balter and the Galloway project. I'll now hand over to Duncan Gibbs to talk through our quarterly results in more detail.

Duncan Gibbs: Thanks Duncan. And firstly, welcome back from the hallway [ph] of the Turning 50 Cycling Tour of Europe. I'm sure everybody will be very interested in that as well. Okay, and thanks, everybody, today for joining us. As Duncan has noted, the operations at Gruyere were impacted by the protracted road closures with processing and mining operations continuing to be suspended in the first half of April and in recovery mode for the remainder of the month. During the rain events and the seven weeks of closure, mining continued, but with a focus of mining of ore, of course, and a result, mine has fallen behind on waste stripping, particularly putting us to the three months behind on waste movement in the key Stage 4 pit area. After the challenges of April, mining movements stepped up to record rates in May, we mobilized the new 600-tonne face shovel in June, which is now commissioned and fully operating. And as you'll see from the numbers, we achieved the same mining volumes in effectively two months -- the operating part of the quarter versus the -- what we were achieving in four quarters of operation in the second half of 2023. The mine is now fully resourced and staff to recover the best facility in mining and set up the operation for a much stronger performance in 2025. The limited areas available for all mining resulted in mining 1 million tonnes of ore at a grade of 1.33 grams per tonne. And of course, the heavy reliance associated with that on migrating stockpiles to fill the mill. Ore milled for the quarter totaled a respectable 2.08 million tonnes despite the limited operations in April. The plant resumed operations really in the second week of April. However, milling rates were constrained until the end of the month as we shipped about six road trains of mill balls for the long 9,000 kilometers either Northern Territory and effectively got the SAG and ball mill up to normal bill charges and associated with that throughput rate. Putting all of that together resulted in the key numbers that you can read on the slide. So, 100% gold production of 62,535 ounces and all-in sustaining cost of AUD2,441. Attributable gold sales was 31,216 ounces at AUD3,532 an ounce. And of course, all of that is spot with no hedging. Doré and bullion at the end of the quarter totaled -- sorry, 1,879 ounces or approximately another AUD6 million of gold prices at the end of the quarter. Our corporate all-in sustaining cost metric that at least some of the broking fraternity are using, in simple terms, all of the cost divided by the ounces, sat at AUD3,186, quite a lot, given the lower ounce production for the quarter. However, despite the rain gods, we effectively still made a strong operating margin. As I've noted and so diving in a bit more detail and perhaps we would now on the operation, mining, really the critical issue at Gruyere, so I'll give you a bit more color on that. And that's important for the remainder of this year, and more importantly, for 2025 and beyond. So, from the middle of the June quarter, the mine has really made a big step-up in mining rates which relates, I guess, a number of factors. That includes an additional fleet coming to the site. It includes a shiny new 600 tonne face shovel that was commissioned in June. The commissioning and start-up of that seems to have gone very smoothly. Associated with that, we've mobilized additional trucks and other equipment and there's still a couple of more trucks to come into the Gruyere. The mine, pleasingly, is fully staffed for the higher mining rates. And certainly, we're benefiting from the big change in the mining labor market, which reflects the downturn some of the other commodities in Western Australia. Thiess now is the new owner of MACA, of course. They've been very supportive in recapitalizing the fleet, both the mining fleet and of course, the drills, which been done over the last couple of quarters. That also made some quite significant changes to some of the leadership, business processes and systems, consistent with what we'd expect a Tier 1 contract to be able to deliver. So, we're pleased with our things are pressing in that direction. There's still plenty of time. Gruyere is now positioned. We see it's a lift total mining movement rates around about 70 million tonnes. We still got a bit of way to get there. But certainly, that's sort of sort of the level we're looking at getting to, which recovers the current shortfall in waste movement. And as I said, that really starts set us up for a stronger performance in the future. September quarter clearly is going to have some ongoing challenges with ore availability as we recover the face positions in the state book. But ore availability improves strongly in the second quarter. And then now we expect to be positioned for what we foresee at this stage is a very strong delivery in 2025. Okay. I'll now hand over to John to provide the financial summary.

John Mullumby: Thanks, Duncan. On the screen here is the usual waterfall providing a breakdown of our cash flows for the quarter. As Duncan has already outlined, the solid operating results for the quarter despite the impact of rain translated into gold sales and revenue of AUD110 million and provided Gruyere with AUD74 million of operating cash flows. These results represent an increase of 10% and 30%, respectively, in the prior quarter, which I believe is a good demonstration of the potentially strong financial cash results that would have been delivered in Q2, except for the rain disruptions. As you'll see on the right-hand side, we finished the quarter with AUD86 million of cash and equivalents on hand, which included AUD6.6 million of doré unsold bullion. This reduction of AUD60 million from the end of March to June was primarily a result of AUD51 million invested in the Gruyere equity raise earlier in the quarter and tax payments of AUD29 million, of which AUD23 million was in respect of the record net profit result in 2023. Going forward, as our monthly tax installment rate for the ACO increases, we expect this profile of cash tax installments to be much smoother across the year. When we normalize our asset investment to grow AUD51 million, a net cash outflow of AUD60 million for the quarter, it becomes a marginal free cash outflow of AUD9 million. I would also point out that on the screen right now on the operating cash flow result, we're currently looking at, this includes AUD11 million of costs from the rainfall event that we've excluded from all-in sustaining costs for the quarter. If we were to allow for those costs and normalize further then the free cash flow result becomes positive for the June quarter. I'll just finish up by once again reminding everyone on the screen -- on the call of Gold Road's financial strength as we remain debt-free at almost AUD0.6 billion of liquids assets on hand between AUD86 million of cash and investments that were valued at almost AUD0.5 billion at the end of June and prudent debt facilities in place at a undrawn and available fees at any time going forward. Thanks, and now back to you, Duncan Gibbs.

Duncan Gibbs: Okay. Thanks, John. So, look, as a result of the rain closures and road closures and what have you during the first half and where we see things with costs, we've taken a look at guidance. Our revised production guidance now at 290,000 to 305,000 ounces, of course overlaps with the bottom range of the previous guidance of 300,000 to 335,000 ounces. I'm now going to emphasize that Gruyere is pushing hard to deliver within that original guidance band and certainly, why we see that as possible. It doesn't provide any kind of margin for any unexpected disruptions but that do happen in mining. Clearly, we’re not going to be making multiple downgrades in guidance if any unforeseen issues occurred. On costs, we're seeing some high numbers, and that's probably really what's driving the guidance revision. And clearly, with the outside of guidance, even if we delivered out of the 300,000 ounces that were still come shoot for. But the revised guidance on costs sitting now at AUD2,050 to AUD2,200 per ounce and contributing factors to those higher costs include, I guess, the encouraging it, which is the higher gold price, which is lifting royalty payments to around about AUD30. We're lifting royalty payments by about AUD30 an ounce. And I mean, obviously, the positive of that, of course, is much higher gold revenues. We've got a bit of an increase in sustaining CapEx. The main item there is the TSF. We've had some unexpected costs there in conditioning some of the claim material for the clay liner for the PAM. We shouldn't have that going forward. We put into better controls for the longer term. And then there's quite a few sort of non-cash adjustments, which arise primarily from the renovate and the fact that we've had to change bits of the mine plan around and continue processing all stockpiles, but results in changes of inventory coming in out that wasn't how we were planning to start the year at the beginning. Okay. So, I'll now hand over to Mark Lindsay, who's got a bit to talk about exploration. So, over to you, Mark.

Mark Lindsay: Thanks, Duncan. Discovery, of course, has the potential to create the greatest value at lowest cost. And that's why we're here, to make a discovery and deliver value to shareholders. Our very clear focus as a discovery team is to develop the resources that Gold Road has already discovered within our tenements, for example, the Yamarna mine readiness project. And of course, discover new gold deposits that can be developed as stand-alone operations. This quarter has seen strong results returned to drilling below the Gruyere pit by the Gruyere JV. There's been great progress and results in our Yamarna mine readiness project, and field work is underway across most of our regional projects. And that has delivered some very encouraging up plus rock chip results. Following the rain event, drilling recommenced at Gruyere and is targeting areas below and to the north of the current ore reserve. The first four diamond holes have been completed for approximately 3,000 meters. And during the quarter, assay results for two of the holes were returned, with the notable result being 142 meters at 1.78 grams per tonne gold. The thicknesses in both holes were as anticipated, with whole 2401 returning higher grades than nearby existing reserves. Gold Road is continuing with the development of its 100% owned Yamarna assets currently sitting at about 0.5 million ounces as part of the Yamarna mine readiness projects. The mineral resources are anticipated to be into production by Gold Road and processed at Gruyere via toll treatment provisions under existing agreements with Gold Fields. The Gruyere development option provides a pathway to monetize the 100% owned discoveries and realize value from Gold Road's exploration program. Work this quarter is focused on the 300,000 ounce Gilmour gold deposit. Baseline environmental studies across the project area were undertaken, including flora, fauna, subterranean fauna, short-range endemics, groundwater, surface water, soil and material characterization studies. We have progressed native title grant negotiations with the Yilka and we are targeting mine readiness for Gilmour in 2026. The Gilmour ore reserve definition drilling program is designed to increase the drill density to enable declaration of an updated mineral resource in all reset later this year. Several excellent results have been returned, with the best of two meters at 43 grams per tonne, and that includes 0.36 meters at 238 grams per tonne. The results are in line with expectations and reinforced the continuity of the Main Lode at Gilmour, a very pleasing result. Drilling also tested strike and plunge extensions with encouraging results return at Gilmour North, including seven meters at 6.65 grams per tonne. We think this is encouraging as it demonstrates potential for additional resources along strike from known mineralization at Gilmour. On the slide, note the depth and plunge extensions of the ore shoots remain open. Assay results from the recent drilling are pending and additional drilling is planned for later this year. The field work was undertaken across most of Gold Road's 100% owned exploration projects in the quarter. After the rain event at the start of the year, been really great to see boots on the ground work across most of our projects, including mapping, rock chip sampling and soil sampling. Excellent rock chip results were returned to Balter of 37 grams per tonne or more than an ounce and at Galloway of 53 grams per tonne or almost 2 ounces. This is very exciting as the results validate the potential for both projects to host high-grade gold mineralization. Balter rock chips correspond to [indiscernible]. These are core to [indiscernible] segregations that occur in high-grade metamorphic rocks. This is not the normal host of gold in WA. However, this is the style of mineralization at the world-class Tropicana gold deposit, a deposit well known by several Gold Road geologists, including our Managing Director. I'd also like you to note that the Balter prospect hosts two greater than five-kilometer long gold and soil anomalies, a very encouraging sign. This is an exciting prospect. Exploration on the other side of the country in North Queensland, at Greenvale and Galloway, is focusing on intrusion mine at gold mineralization. Now that includes nearby examples of Kidston 3.7 million ounce deposit and Mount in, a 3.5 million ounce deposit. On the Galloway project, we are applying a new targeting concept the first earlier with anomalous multi-element geochemistry. Sampling during the first field visit returned remarkable rock chip asset results of 3.6 gram per tonne from an outcropping multistage breccia. And this was an outcrop on the side of the road on the way into the main prospects. We are excited to have built programs planned for Mallina Balter and Greenvale, and these are likely commencing in late August or September. I hand back to Duncan Hughes.

Duncan Hughes: Thanks, Mark. Final slide to summarize the quarter. Pre-operations have been through a challenging first half, but we showed in May that this operation can deliver a mining and processing rates need to sustain our target of 350,000 ounces per annum. We're very encouraged by what we see in the step-up in mining performance. We have the fleet and the people in place, and we will be working through a period of limited ore availability in the September quarter but anticipate a much stronger December quarter and much better delivery in 2025. Gruyere still has a strong and long life. On the growth front, there were several sources of encouragement including the better-than-anticipated featuring results at Gruyere, which support the potential to grow reserves here for future pit expansions and/or underground mining. Good progress in Gold Road's Yamarna mine readiness project. It was achieved in some exploration upside, obviously, being talked through by Mark at Gilmour and these will be tested in the second half of the year. There are some encouraging rock chip results from our property mineralization of Balter and Galloway. And course, our ongoing strategic interest in the Gruyere continues to provide multiple alternative options to create value for Gold Road shareholders. Gold Road remains in a strong balance sheet position. It's debt-free and unhedged, despite the environmental challenges in the first half of the year, a AUD50 million investment in the Gruyere and a AUD23 million one-off tax bill in the quarter. That brings our results presentation to a close. I'll now hand back to Darcy, for any questions.

Operator: Thank you. [Operator Instructions] Your first question comes from Bradley Watson from Bell Potter Securities. Please go ahead.

Bradley Watson: Good morning, everyone. Thanks for the call. I got sort of three questions. The first question, is there any possibility of getting an idea on the Mill throughput in April, please?

Duncan Gibbs: Look, I don't have that breakdown, but April was strongly -- I mean, effectively, the plant didn't operate for the first half of April. And as I spoke to, we were really getting Ball, and SAG Mill charge back up to normal levels through that month. So, we were well below the normal throughput rates. Pleasingly, once we've recovered all of that, I mean, we saw actually record throughputs through May. We came off a little bit in June, just with some additional schedule maintenance through the month of June, but May was a record month for the site.

Bradley Watson: Okay. Thank you. Second question, you've got in the report sort of 3 million tonnes of stockpiles at the moment. Is it possible to get an idea on, how much the stockpile you think you'll consume throughout the next half? And then perhaps in the forward plan, is the stockpile sort of naturally replenish a little bit, once you get back to getting into that that high-grade ore and fitting first?

Duncan Gibbs: Well, I think you could kind of back calculate that by our guidance numbers, clearly, we're going to be processing a reasonable amount of stockpile material, particularly during the September quarter. We clearly will have one million to two million tonnes of stockpiles left at the end of this year. By the time we get the current focus on mining is in the Stage 4 pit area. And once we get another couple of benches turned over, they've actually been -- which we're anticipating in our position by the end year, we actually get back to the point where we can mine ore at a much higher rate than the plant requires. So, we yet to put the sales in next year's plan and budget together, but I'd anticipate being a position where, because we built some stockpile inventories and then with a lot more robust performance into the future years of the operation.

Bradley Watson: Okay. Thank you. And the last one, you did discuss that you hope to still sort of get into that 300,000 ounces of production for the year. Is it fair to conclude from that, that you've sort of built in the possibility of some disruption -- further disruption into the new guidance?

Duncan Gibbs: Yes. Look, I mean, the size of Gruyere really work the plan and schedule for the second half of the year very hard. We've been through multiple iterations that within the joint venture. We see that getting the 300,000 is entirely possible. And they're striving very hard to get there. So, we're very encouraged about the commitment on the ground. The reality is there's just things that can happen beyond management control and it doesn't take much for us to sort of drop fly back. So, as I’m kind of flag, we don't want to be in a situation where any kind of operational disruptions or lot lose or what have you, means that we've got yet another guidance on growth. So, we're factoring in below 300,000, but it covers reasonable foreseeable events, if you come, I understand what I mean.

Bradley Watson: Okay. Thanks very much.

Operator: Thank you. [Operator Instructions] There are no further phone questions at this time. I'll now hand the conference back to Mr. Hughes for webcast questions.

Duncan Hughes: Thank you very much, Darcy. There a couple of webcast questions. The first one is from Hayden at Arbor Securities. Just asking, can we talk through material movements and how we recover the volumes going forward, along there's a two to three-month delay take catch up, is the 70 million tonne per annum total material movement rate within reach this year? And should we assume similar rate for the year 2025 to 2026?

Duncan Gibbs: Look, so the 70 million tonnes expected to be kind of traveling at that rate as we come out of the year. If we do that, I mean, this year, we'll be up around 60 or so million in total for the year given the shortfalls with rain and everything in the first half of the year. In terms of what we do beyond that, we're still looking at that. There is potentially motivation to hold a higher throughput rate. And I mean that sort of guarantees that we can fill the mill longer term, but there may be some value in how we schedule Gruyere versus Golden Highway by running at a higher rate. We're really working within the joint venture to have both of those options alive. So, we're still very much focused on having Golden Highway ready to mine by 2026. But there's, I guess, a bit of detail there as to where that lands. And with the fleet we've got now, we've got the optionality to move it up or down a bit. I guess in terms of recovering those volumes, I mean, we're pretty confident we're going to recover the volumes by year-end in effect. We're well on track to recover that kind of delay. I mean, that's really where we sat once we kind of got through the rain event going up into operation. They're working very aggressively to minor turnover bench rates in Stage 4. It's clearly going to continue into the September quarter, but December quarter, I mean I expect to be by end of the year really in a very good ore supply position.

Duncan Hughes: Okay. And the next one is from Bruce at Life Capital. How much of the increase in all-in sustained cost is due to lower ounces? And how much is general inflation affecting these costs? What is the underlying inflation rate in the industry generally in Western Australia?

Duncan Gibbs: Yes. Look, I mean, I think the inflation has really come off a lot in mining. The inflation rates we're seeing of big technical with sort of general in CPI type of inflation in the sector. And importantly, things like labor availability that John spoke to has eased up a lot now. I mean, wages don't tend to go backwards, but they're going to level off quite a bit. The encouraging sign there, of course, just at our people being available, which helps drive productivity, of course. I think, if we -- I mean, the way we kind of look at it is we're still striving to do 300,000 ounces of production. But even if we did that, we'd be overall cost guidance a motivation of accounting guidance, it's been the cost issue. And as I've called out, really, that's driven by some one-off kind of issues with tail stand higher CapEx, gold royalties and there's not much a non-cash kind of adjustments flowing through there. So, it's really those issues rather than inflation or say kind of driving the revision.

Duncan Hughes: Thanks Duncan. One here from Peter, he's just asking, there's been quite a change of leadership with Gold Fields over the last few years you’ve have joint venture partner. Any comments on how that's been felt at Gruyere?

Duncan Gibbs: Yes. Look, I mean, this is true. I think it's Gold Fields -- got to talk about gold fields, but new CEO, Mike Fraser of course, and Martin Preece, new Chief Operating Officer, they've implemented a new operating model across their business. And that includes some cost substantial changes to the Australian region and how that's managed. And at the site level, we've got a new general manager up there, Russell Cole, is doing a better job. So, look, I mean, I think it's pretty [Indiscernible] to talk to the detail of all of that, but I mean, we're very supportive of the changes that have been made and we see that as quite positive for Gruyere and for the future.

Duncan Hughes: Thanks, Duncan. This one, probably for John, and I'm not sure how much you'll be able to say on this. But Garrett from the ABC is just asking a little more on the cost of reestablishing road access and how much that may or may not be recoverable from insurance, and if you could give any detail on the likelihood of receiving that and when we mine?

John Mullumby: Sure. Thanks, Duncan. So, that AUD11.3 million was 100% property damage increase of cost operations experience in the remediation from the rain event and the road repairs. The claim is in progress being managed by our JV partner over in London. We will keep the market updated if there are any material developments over the next -- over the quarter this year. There is the potential for some interim cash settlements rather than a lump-sum.

Duncan Gibbs: Thank you. Perhaps I can just add to that one. So, I mean, we work very closely with Laverton Shire. So, part of that cost relates to roads. So, we work closely with the Shire to kind of sort out some -- and look at the insurance claim, I mean, obviously, there's a component there that's a deductible I mean normally, these things are subject to kind of commercial negotiation with the insurers.

Duncan Hughes: Thanks for that. And the last one on the webcast is from Linda. She's commented on the good circuits results from Balter. And just wanted to clarify with Mark when we might be on the ground there drilling some holes.

Mark Lindsay: On the ground at the moment, Linda, not drilling yet. Hopefully, drilling in the latter part of the year, perhaps September onwards.

Duncan Hughes: Thanks very much for that. At this stage, no further questions from the webcast. I'll hand back to you, Darcy.

Operator: Thank you. There are no further questions on the phone at this time.

Duncan Hughes: Brilliant. Thanks, Darcy. Thanks, everyone, for tuning in. I look forward to seeing a number of analysts and investors on our [Indiscernible] site visit tomorrow. Thanks a lot.

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