Earnings Transcript for NCM.AX - Q4 Fiscal Year 2021

Tom Dixon: Good morning and welcome to Newcrest Mining's FY'21 Full Year Results Conference Call. This conference call is being recorded today, Thursday, 19 August 2021. This is Good morning and welcome to new Chris mining's FYI 21 full year results conference call. This conference call is being recorded today, Thursday, 19th of August, 2021. This is Tom Dixon, Head of Investor Relations And Media for Newcrest Mining. With me today is our Managing Director and CEO, Sandeep Biswas; and our Finance Director and CFO, Gerard Bond and our Chief Technical and Projects Officer, Suresh Vadnagra. [Operator instructions] Please note the company's disclaimers on these slides. Newcrest is a US dollar reporting entity and all dollar references in this presentation are US dollars unless otherwise specified. I'll now hand over the call to Sandeep.

Sandeep Biswas: Thanks, Tom and good morning, everyone. FY'21 was a very strong year for us at Newcrest and Gerard and I both very excited to take you through the highlights today. We've also got Suresh on the line who will talk through the key findings of Cadia Phase 12 pre-feasibility study that we also released today and as usual at the end of the presentation, we'll be open for questions. So if I were to summarize the key achievements in FY'21, we've delivered record financial performance, that's underpinned a large increase in dividends to our shareholders. We've maintained our relentless focus on safety and managed to avoid any material operational impacts from COVID-19. We've continued to advance our multiple growth options while investing in a more sustainable business. We set several new financial records for FY '21, which were underpinned by our strong operational performance and the benefit of our [indiscernible]. We made excellent progress across our [indiscernible] during the year, and we're now approaching six years free of fatalities and lock changing injuries. We also have achieved industry-leading low injury rates of 2.3 injuries to million hours worked, which is a 12% improvement on the prior year. And it's been more than 18 months now since the start of the COVID-19 pandemic, but we're still witnessing its devastating impacts wide across. Today Newcrest has lot of experience in any material disruption to its operations as a result of COVID-19 and I think this is a great reflection of their commitment and the personal sacrifices of our people, our strong relationships with communities and governments and the effectiveness of the precaution measures we implemented very early and also throughout our business. But this result is not just about safety and profits. It's also about growth and the actions we've taken to be a better and more sustainable business. And over the next few slides I'll take you through some of what we've been focused on. We start with that growth agenda, we've made significant progress this year. The board has approved the Cadia PC1-2 Pre-Feasibility Study to the feasibility stage and that the expansion project remains on track. We're in the process of commissioning the Cadia Molybdenum Plant and expect to achieve first production by the end of September '21. Last week, be announced that we would also proceed with the West Dome Stage 5 cutback, and that's operation underpinning its future potential. So this cutback looks to ensure that the Telfer operation to continue for at least the next two years while we appreciate further mine life explorations both in the open pit and the underground. And of course we are looking forward to bring ore [ph] into the operation. The cutback is expected to cost $182 million, which approximately one third will be capitalized production stripping and the reminder is OpEx. At the half year, we delivered the findings of the Lihir Mine Optimization Study. This included an optimized mine plan that deferred construction of the Seepage Barrier and the identification of an opportunity to unlock additional higher grade mineralization from Phase 14A. Phase 14A represents further upside from the current mine plan and brings forward their aspiration for Lihir to be a 1 million ounce plus producer. The Phase 14 PFS remains on track and targeted for release by the end of September this year. The geotechnical drilling and engineering studies and the viability of the proposed wall steepening has now been confirmed. And we're now in the process of finalizing the scheduling and financial outcomes and progressing the reviews of the study. At both Havieron and Red Chris, the construction of the exploration declines are well underway and we're on track to release the findings of their respective pre-feasibility studies in the coming months and Suresh is going to talk about these later in a bit more detail. And as I walk through [ph] projects, I'm pleased to say, we're in discussions now with this State of Papa New Guinea in relation to the special mine release, which is a key step in completing development of this world-class ore. In February '21, we refreshed our aspirations for the next five years and defined a new company purpose, which is creating a brighter future through safe and responsible mining. To us, this is about making a positive impact for all of our stakeholders, so that they're better off with this operating in the community, having invested in us, having partnered with us, or having worked for us. Life safety sustainability is core to how we run our business and life safety being an environmentally and socially sustainable business is a constant work in progress. In the first half of the year, we signed a landmark 15-year renewable energy power purchase agreement for an amount of energy representing a significant portion of these future projected energy requirements. It's a significant step towards achieving our target at 30% reduction in emissions intensity by 2030. And we continue to work on other energy solutions for Cadia that will help us achieve that goal. We've also developed greenhouse gas management plans for each of our operating sites to understand, define and action, any abatement opportunities. And we've linked our senior executive incentive payments directly to the achievement of these objectives. In December last year, we signed a new compensation, relocation and benefit sharing agreement with the mining lease land holders at Lihir. We expect this milestone achievement will enhance socio-economic development outcomes for landholders and the broader Lihir community and enable benefits to be distributed directly to the intended recipient. Moving forward we'll be devoting even more attention to improvements in water usage, biodiversity management and reducing our carbon emissions. And of course, each day we strive to earn the process numbers. A key part of our forging an even stronger Newcrest is our commitment to developing our people. And this is particularly relevant for us now as you embark on a new and exciting types of growth. Our focus over the past year has been to build a diverse, inclusive and psychologically safe work environment all our people feel heard, empowered and able to speak up. This is a foundation for collaboration and innovation. We also believe this is key to attracting the best talent in the mining sector. Till the time and as a sector we work to do to make people feel safe and value. In terms of operational performance, our world-class caveats have achieved all mine and records and exceeded the top end of its production range. To get strong copper prices, this allows Cadia to deliver a record low of negative, all in sustaining cost of a $100 million plants. We have profitable growth options that every one of our assets and we're looking forward to bringing the [indiscernible] on the ground and the rig block cave into production in the near future. We'll also continue to be active explorers and we'll partner with other companies who have access to ore bodies or districts with great potential so as to sustain and extend our R&D reserve and resource base and finally, we strive to be a leader in innovation and creativity. We're constantly looking to leverage innovative technologies to release the full potential of our ore bodies and those held by others and to realize step change improvements in operating efficiencies. As I previously mentioned, F1'21 has been another period free of fatalities are life changing injuries. While this is particularly pleasing to report, but we've always got to be humble here as the focus required to maintain the workplace is never a pleasant one and I am particularly pleased, extremely pleased, actually, and proud to see the transformation of the safety culture of Red Chris under our leadership. Red Chris delivered a standout safety performance for the financial year with a 48% reduction in injury rates on the prior year. This highlights the success of our new site program in transforming onsite safety behaviors and also the investments that we've made to improve on-site working conditions. Lihir on top, also delivered significant improvements in injury rates, demonstrating how visible safety leadership, proactive hazard reporting, and a workforce committed to improving the safety culture at the workplace can deliver improvements, very low injury rates, such as the Lihir. As I mentioned earlier, we're taking action to reduce our emissions and to manage climate change risks and opportunities. In May this year, we announced an additional goal of producing net zero carbon emissions by 2050. We're confident that we and the resources sector generally have experience in identifying and applying innovative technologies that will support our transition to allow future. If we begin the technology advancements in electric vehicles, battery storage, and other technologies, we can see a way to bring onsite emissions to zero or close to it. We expect that these technologies will also allow us to eliminate diesel particulates underground and reduce by the energy intensity and the cost of ventilation. We're currently pursuing a variety of innovative solutions and we'll consider these new technologies in the long term as we identify and define the roadmap to net zero by 2050. We're also well advanced in assessing the risks and opportunities for the business and selected climate change scenarios in line with the Paris agreement goals and our commitment to progressive TCFD reporting. So with that, I'll now pass over to Gerard to discuss our financial performance for the year and our very strong balance sheet position.

Gerard Bond: Thank you, Sandeep and good morning, everyone and for the financial year, we produced 2.1 million ounces of gold and record copper production, 142.7 thousand tonnes. When combined with the higher gold and copper prices, it's delivered a record statutory underlying profit of $1.2 billion, a 71% increase in earnings per share, and a record free cash flow of $1.1 billion. Pleasingly, this was achieved in the context of challenges and additional costs associated with managing COVID-19 risks. We estimate that the COVID preventative and mitigating measures cost us an additional $17 million in FY'21, but this was money well spent given the protection and support it gave our people and local communities and it enabled to continue all of our operations. Containing costs in a strong market is always challenging with the single largest negative impact on our OpEx year on year, being from a rising Australian dollar. FX impacts aside, we were generally able to keep costs increases to moderate levels other than we expect to still making related products and the global shipping charter market. We note that the Australian dollar has softened somewhat from its 2021 page. We continue to apply in mindset procuring smartly and spending wisely as the best means of helping us maximize the conversion of strong production and metal prices to the bottom line. Given the strong financial performance and balance sheet strength and able for the future, the boulders determined final fully franked dividend to be paid of US$0.40 per share. This takes total dividends for FY'21 to us, US$0.55 per share, which is a record amount for Newcrest and locks our sixth consecutive year of increasing dividends to shareholders. Our record free cash flow was achieved in our investments in growth opportunities over the financial year. We invest around $700 million on major capital projects and exploration, including the Cadia expansion project and our early works and extensive growth drilling programs at Havieron and Red Chris and this investment in growth continues in the year ahead. We are very well-placed to fund our pipeline of growth projects from our expected future free cash flow generation and if necessary our strong balance sheet. At 30 June, 2021, we were in a net cash position very comfortably inside our financial policy targets and had no near term debt maturities. As this slide shows, our focus on safely maximizing cash generation, seeing Newcrest generate a total of $4.3 billion of free cash flow since FU'14 and this amount shown is after the large investments we've made over that period in a number of growth options, including the Cadia expansion projects, the acquisition of Red Chris, our investments in [indiscernible] and acquiring Fruta del Norte finance facilities, and just worth noting that in our FY'21 free cash flow results that we've just gone, we received totally $92 million on those Fruta del Norte finance facilities that we acquired in April last year. This has proven to be a very good investment for us. This slide depicts our strong balance sheet and our long dated debt maturity profile. In the second half of FY'21, we made a number of enhancements to further strengthen our balance sheet. We renewed and extended the maturities of our existing bank debt facilities, and we repaid the remaining 2022 corporate bonds. As you can see from the slide, it's almost a decade until the next bond repayment is due. Our strong free cash flow and debt reduction of many years has placed us well within our financial policy metrics. Our leverage ratio is a negative 0.01 times. Gearing of negative 1.8% was a 6.8% decrease in the prior year and is well below our target of less than 25%. Our strong cash position sees our liquidity coverage of $3.9 billion, of which $2 billion is in the form of committed and undrawn bank facilities with a remainder in cash. And we continue to retain our investment grade credit rating, which gives us good access to all capital market. Our dividends for FY'21 represents a free cash flow payout ratio of 41%. Free cash flow can vary from year to year for many reasons, but we remain committed to our policy of paying out 30% to 60% all free cash flow for the year in dividends with a minimum annual dividend of $0.15 per share. With that, I'll now hand back to Sandeep.

Sandeep Biswas: Thanks Gerard. Now turning to growth, this slide summarizes the progress we're presenting our growth options over the past year and outlines our upcoming milestones at Lihir. We remain on track to release several pre-feasibility studies over the next few months. We believe that these studies will greatly help to articulate the future potential of that business and also provides the key information that just timing, production, capital, costs and returns. We remain on track to complete commissioning of Cadia Moly plant and achieve first production by the end of September '21. This is expected to provide an additional revenue stream for Cadia for the estimated $50 benefit all in sustaining cost. Today we also announced the board's approval to put the Cadia Phase 12 pre-feasibility study for feasibility. What I'll now do is just hand over to Suresh, who will talk us through the findings of this pre-feasibility study as well as the Hebron Havieron and Red Chris projects.

Suresh Vadnagra: Thanks Sandeep. Good morning, everyone. The development of PC1-2 is the next step in Cadia. As you may recall, Cadia one and two are currently in production and is currently in construction. The next PC1-2 represents around percent of Cadia current orders and once developed will help sustain Cadia's position as a tier one low cost golden copper producer for decades to come. The PC1-2 study identifies mine plan design, which we expect will deliver higher gold and copper grades to the mill sooner. It will also enable the deferral of capital expenditures in the medium term. The study estimates very attractive returns with a real after-tax internal rate of return of 21.5% and fee rate of $1.5 billion. We estimate that our total capital investment in PC1-2 will be around $900 million into a very number of players which we plan to fund from our cash flow generation over the development period from our strong balance sheet. We also have board approval to commence the PC1 Early Works program. This will allow critical infrastructure to be established in parallel with the feasibility study and prior to the commencement of the PC1 works program in the second half of calendar year 2022. The Havieron project, which is located 45 kilometers east of our Telfer operation in the highly prospective Paterson Province is also progressing extremely well. In February we announced investment of the Early Works program, which included the construction of the box cup, exploration declines and associated surface and infrastructure. In May we commenced construction of the exploration decline, which is critical to us achieving our goal of first production project within the next two to three years. We're finalizing pre-feasibility our Havieron pre-feasibility study and expect to release its findings in the second half of this year. Now just some expression activity in Havieron that's in progress. In the center of 2020, we announced our initially mineral resource estimate for Havieron of 3.4 million ounces of gold and 160,000 tonnes of copper. Mineralization remains open in multiple directions outside of the initial estimate, which indicates the possibility for the resource continue to grow over time with our additional plan drilling activities. We have extensive growth drilling program at Havieron, which is delivering some really exciting results. we have discovered a higher grade, contain some of the highest grade we have seen so far, which highlights the potential to add higher grade ounces to the resource. We're also retaining high grade intercepts from the Northern Russia Northwest drilling vertical extents, extensive designs ongoing. In addition we're trying to determine whether the Northern Russia [ph], in the same mineralized cargo which could represent both targets. At Red Chris, we commend construction and exploration design in June. Like Havieron this critical project milestone underpins our objective of having a block cave in operation at Red Chris within the next five to six years. During FY'21, we reported existence of multiple discreet, positive, higher grade mineralization and we are currently evaluating options to early mining these province with the aim of generating cash flows prior to the completion of a block cave. We're currently finalizing Red Chris pre-feasibility study and expect to release its findings by the end of September this year. In March, we released our initial mineral resource estimate for Red Chris, which is an important step along the road to the development of an underground block cave. Exploration over the last six months, has been successful in extending the appropriate cargo to 500 meters to the east? In the second half, we announced our East Ridge Discovery, which is a new zone of high grade mineralization at Red Chris. In our June quarterly exploration report, we reported our highest grade design, which supports the capital for resource growth over time. Cargo [ph] is still open to the east and we have more drilling we can unccover more high grade designs. We've also found a smaller high grade zone in Southwest of the main zone and follow-up drilling is planned to determine if this is a high great target for the mine. Over the remainder of the calendar year, we've planned approximately 50,000 meters of drilling and increased drill rates in the June quarter. We've also identified further targets on the appropriate corridor and neighboring GJ property intended to conduct drilling to test these targets in the future. Back to Sandeep.

Sandeep Biswas: Thanks Suresh. As a gold company, the contribution of copper to Newcrest's results Copper comprise almost 22% of our revenue in FY'21, which is an increase from 15% in FY'I9 and 17% in FY'20. Cadia represented their largest copper reserve and mineral resource and with all other things being equal, we expect the relative contribution of copper to Cadia's revenue to increase over the coming years in line with the estimated growth of gold and copper. We also have significant copper potential at Red Chris, Havieron and [indiscernible] which may become economical if sustained high copper prices or through the improved extract technology. I've always seen copper as an excellent compliment to our gold portfolio. Both gold and copper are metals of the future. The copper is key to the world and the copper exposure also provides us with good earnings diversification. I think the best gold company to, I don't know, I've said this many times is one also has meaningful copper exposure and there's a search for gold who has anyone new deposits will increase, may be a combination of gold and copper. So expect the strong copper exposure to continue although we do remind primarily a gold company. This slide provides our guidance for FY'22. You'll see the gold production in total is expected to grow by FY'21 primarily as a result of no mode change in Cadia, which will take around 20 weeks. All other assets are expected to produce a similar kind of gold is delivered in FY'21. All-in assigning cost is in line with last year, primarily due to the benefit of high copper prices offset by high stripping sustaining CapEx. Production shipping is a little higher than the coming in, due to the west dome at Telfer and a live cutback. Sustaining capital overall is pretty much consistent with the prior year except at Cadia where we're taking the opportunity with the stag no motor change to do a number of other maintenance projects. The biggest increase in expense year-on-year in relation to growth projects. The Cadia expansion project continues along with PC1-2. At Lihir we're investing more in the front end recovery project and power studies which we believe will have a good payback. At Red Chris and Havieron, we're investing in the declines in early works books program that's covered early by Suresh. I'm excited about the many growth options that we do have ahead of us and pleased to see that we have the financial capacity to fund. So in conclusion, I think a solid operational performance for FY'21 was supported by a strong gold copper price, which contributed to our record profits and cash outcomes. We're able to suspend all this in the form of a significantly high dividend, reflecting our strong financial position and expect future appraisal. We maintained a strong focus on keeping our people and their community safe, both in the workplace generally and in relation to COVID-19. We also took a number of important steps to create even more sustainable business and options for advancing and through the remainder of the year, we look forward to updating on many studies we different projects. Now, before we move to questions, I just wanted to flag a significant milestone. Gerard will be retiring at the end of this calendar year. So he will be around for quite a while yet. However, this one will be his 10th and his last full year presentation for Newcrest and I wanted to take the opportunity to acknowledge and thanks Gerard for his outstanding contribution at Newcrest. In his last 10 years, we've seen many challenges and opportunities at Newcrest. Gerard has been right there doing his bit and seeing us in some very typical time right through to the strong position that we now find ourselves. He was instrumental in the transformation of Newcrest over the years. He has steed our balance sheets of the company from a precarious position to an outstanding and strong one that positions us so well for the next phase of the company. He's negotiated excellent financing facilities with long dated tenures years to match our long dated asset life and is also a world-class procurement organization which has kept on delivering substantial improvements to our business, as well as leading highly professional and competent Investor Relations team. And these are just a few examples and lastly, I want to thank him for being an asset and contributed to exceptional asset for me in leading Newcrest over the years. But he is leaving this year in another six or seven months. So with that, I think we're ready for questions.

Operator: Your first question comes from Sophie Spartalis from Bank of America. Please go ahead.

Sophie Spartalis: Good morning, Sandy, Gerard and team. I've got a couple of questions. Firstly, on Red Chris you were saying that the block cave is now five to six years away. I know that Royal Gold who's just bought a 1% NSR on Red Chris on their recent quarterly call, they said the block cave would not be in production for six years from now. That was based on their data but they also said that they're assuming only the open pit production for the next six years before moving underground. I guess that's a little different to what we've heard from you in the past around these high grade pods. I just want to understand sort of, I appreciate that the PFS is coming out in due course, but just understand whether the thinking has changed since you last updated the market around sort of going for those high grade pods first and then going into the underground and obviously seen the push back in timing now.

Sandeep Biswas: I think so. Our view and our approach to change, the earlier you get cash in the door, the better. So in order to do that in parallel, which I've said many times before, in parallel with the block cave, we're also studying, bringing forward tones through the extraction of one of the high grade products which sits within the current footprint of the block cave. And that is part of the step and I really hope we can bring that in. The exciting thing about the rig also is that we've found other zones one of the one would flag, which would actually even just outside of the resource shell which we currently use it. Now we're like crazy drilling that thing ever. We've got five drill rig zone to determine whether is that another high grade source of ore or a high grade pod perspective, or is it potentially even another block, another block which sits off to the side with the proposed declines. So our strategy has not changed and our focus has not changed.

Sophie Spartalis: Are you finding though that, given COVID border restrictions, that the timing of being able to do the necessary work has prolonged and hence the push back in timing,

Sandeep Biswas: I think we're pretty much on track. In fact, the decline the exploration decline in Red Chris is progressing really well. If you think that we only bought into this asset a couple of years ago back to we've taken over the operation, we've invested all that in the surface ops, the work in the open pit on the safety work and got approvals right through regulators and from the support of the nation to actually be doing this exploration decline. We've going at a lot of speed and the decline is going pretty well. So here, we're managing and there's issues here and there and delays on some projects across our business. But this one's been relatively unaffected.

Sophie Spartalis: Okay. I just wanted to move to Telfer obviously you sold the Stage 5 cutback announcement CapEx seems pretty punchy just given what we've seen with the previous mini cutbacks that you've done there over the last few years. Can you just talk around the material movement or on a dollar per cubic meter for that Stage 5 cutback versus what you have done before? Or is this just a case of we're in a very heightened CapEx environment?

Sandeep Biswas: The first thing to point out is that $182 million is CapEx. It's not just the CapEx or the production. Those it'll be the same contractor doing the work as currently is doing the open pit in Telfer. So the unit cost are expected to be totally in line with what we're currently seeing?

Sophie Spartalis: So just to provide that color then on that split between CapEx and OpEx then Sandeep, please?

Sandeep Biswas: Look, I think I'll do in surface manner, but I think CapEx and two thirds OpEx.

Gerard Bond: That's correct, Sandeep. Sp the number we quoted Sophie was a total spend number and of course the one third goes to stripping and the other two-thirds were a lot of time being the form of what you see in the OpEx line.

Sandeep Biswas: Okay. That's great. And then just in terms of Gerard's replacement, congratulations on Gerard on such a successful career. You're retiring at the end of the year, Sandeep, just in terms of that smooth transition to the new CFO, and then also we're hearing a lot around the industry, around turnover being high and or enough people to feel sort of jobs retaining talent. I noticed that you now seem to be putting in a new culture initiative there. Is this in response to all of that?

Sandeep Biswas: Yeah. So to tackle the first question, so the search, but external and we have internal applicants for Gerard as well underway. So that's happening and we see make an appointment in due course. In terms of the way we think pinches on staff, there were two levels. One is obviously we're conducting a lot of active work, so we are seeing a bit of tightening in New South Wales because of all the infrastructure work that's happening in and around Sydney. So it is getting tighter there. We are seeing some escalation in wages particularly over in Western Australia as well, and nothing I've registered this day, but we just go everyone's going to keep their eye on with, as a lot of CapEx projects and growth is announced across the industry. I've been in terms of talent, I think where we're at now and with all the challenges and opportunities, but for my physical perspective and also the ESG challenge, I think these are great opportunity to differentiate ourselves as a place where we balance all of these things. I don't know, at the forefront of the culture that we want or that focus on ESG. And that helps the right element to it. I mean, that's kind of what the full we're looking for is all about doing.

Sophie Spartalis: Okay. That's right. Thanks Sandeep and congrats again Gerard.

Operator: Thank you. Your next question comes from David Radcliff from Global Mining Research. Please go ahead.

David Radcliff : Hi, good morning Sandeep and team. So I had a question about the mid-term production profile. If we take the mid-point of your guidance for '22.Yeah. You're expected to be on the $ 2 million ounce mark for the first time in a long wall. And that'll include the, the attribution you've got there from low type. Your peers have been pretty good at putting out like the term profiles for their businesses. Obviously, I understand that you've got a number of studies underway. What do you see as that timeframe to return to the $2 million ounce mark and exceed that? That's my first question.

Sandeep Biswas: Over the next six months, A lot of that is because if you think about it, he is going to become a million plus producer for quite some time. It's just a matter of when point comes, which will become very clear for us study was done, which is all the end of September. We'll have a good picture of it for the fall I'm in Cadia. I mean, there's the great decliners before flags, which is one of the reasons we're expanding the plant, but we'll see that it's lower than otherwise would be because of the mill outage, which is the best one weeks long. And then we've got the Hebron study, the extra work that we're doing over and above West Dome Stage 5 to see what else is in Telfer. There's some very interesting intercepts in between West Dome 2 and West Dome 5 stage, which could prolong compared to the, on West Dome 5 cutbacks and continue to find more underground. So that the Telferprofile will become cleaner also in another next six months. And of course Red Chrisbroadcast study will also give a much better picture of its, go forward production; all bearing in mind, I mean, you ought to know where each region is going, but if that, if that comes in as a -- as a valuable resource for us, then yeah, we'll, have a base plan, but we'll have to stop. Having a look at, we pull something like that into the mix, for example, all that really improves up. So again, over the next six months, we should know a lot more.

David Radcliff : Okay. And it might just pulling up in, on Telfer mill. What does that two for years for the post production from Hebron? What does that two, three year potentially look like from the existing ops? You've obviously talked to the cutbacks, but I can't remember the last update on the underground. I thought that was nearly finished and they continue for the next two, three years?

Sandeep Biswas: Well, that's your aspiration. What would -- what would the philosophy be underground. What we've done is moved by from we've -- we've looked for next big block of four and one, what have you. And we've just that, although there are some, there it's the grades aren't quite there this side to look at something, but what we are doing and we're very successful at is chasing the narrow and incremental answers that you do, particularly higher up in the mine in the, embrace and then elsewhere in the ore body. And we're finding a lot of, it's not kind of your big blocks of all, but we continue to find all with good grades and, and we'll continue that experimental exploration and recovery, a pedal as long as.

David Radcliff : Okay, brilliant. I'll pass it on.

Operator: Thank you. The next question comes Simon Molany [ph]. Please go ahead.

Unidentified Analyst: Hi, good morning everyone. Just two quick things. Firstly, thank you for the dividend or be it modest it's much appreciated and then share out or for just to thank you for your stewardship over the years. Less, less modest, much, much greater than the dividend. Thank you. And then just on my question on your FY '22 guidance slide in other column, other there's this $135million-$145million, which is footnoted to suggest that it includes major project expenditure in brackets, non-sustaining in relation to what the goal too. And I'm just wondering how we should think about your decision to include, to include that in your all in sustaining cost guidance?

Sandeep Biswas: Gerard, on my hand, that one too.

Gerard Bond: All right. So yeah, no, that, that isn't that -- that isn't no, sorry. It relates on the working Gold capital at $6millionto $8 million. That's the other and that relates to corporate costs. So, it's probably a footnote that we could have made clear. So the capital is six to $8 million and the other is, is non-site costs such as corporate costs.

Unidentified Analyst: Okay. I understand. Thank you. What would that include exploration or somewhere else?

Sandeep Biswas: No ex -- expert, well expiration, you can see there on the1.40, 1.30

Unidentified Analyst: Okay. Thank you very much then the rest I can take offline, but thank you again Gerard for your sure Chip.

Operator: Thank you. Your next question comes from [indiscernible]. Please go ahead.

Unidentified Analyst : And so you have outlined in your guidance for F1 '22, some COVID related costs. I imagine those are direct costs. I'm just wondering if you could touch on some of the indirect costs you're facing basically productivity. If we want living in a COVID world with all these border closures and restrictions and things can you talk to your productivity on production and costs that you might otherwise be looking for?

Gerard Bond: Yeah. So look, I mean, that's a, this is a very good question now, although we've been very successful in avoiding any stoppages of any of our businesses. I mean, there's no question that there has been a cost impact and all the juggling of rosters and all the things, and this is particularly around here, but not only the ear certainly with Red Chris also has had an impact on some of those productivity things that you're talking about. Mainly being around the mine, this is in relation to getting the what number and me, and then when you get delayed and the changing rules of getting people into Australia and the P&G will have you being the operation, that's been depicted the most from a product probably followed by Red Chris and then very much less so Havieron and Telfer?

Sandeep Biswas: So maybe just sticking with Ligia for the moment. I mean, there was a goal of sustaining throughput about $15 million tons per annum, which was looking good for a while, but more recently you haven't been near the throughput levels. Should I view this as possibly because of possibly these climate issues. I mean, broadly, the question is, can you sustain for $10 million times.

Gerard Bond: I think we can. The clay issues have referred to, yes, that was an issue. But I think there was definitely a kind of a component over the last year in terms of, in terms of that. And in the years coming obviously there's an impact from the people shut shutdowns that we had to bring forward to the end of the year and do more work in it than we were originally. But obviously we put all the other shuts work for so we've done the shot in September. And but there's no question that as, as we March forward that that's 15 is very much achievable and that's largely realize it to the oil quality which we've done a lot of work on. And we were there that allowed me to get better as we treated the, a proportion from our existing move into the carpet. But also if we do retain that better quality of work, and then also some of the right asset management work we've been doing, even the recovery, finding recovery work, that'll open up some options in the flotation and broadening area to give us a bit more utilization. So I think that that's very much within our capability. We've just got to work our way to that over the next sort of, yeah. Talk about two months.

Unidentified Analyst: Thank you. And just shifting to Cadia. I'm just looking at the releases today from the feasibility study plus briefing book and comparing it to previous iterations. It looks like, forgive me if I'm wrong that the production profile is shaved off somewhat in the backend. I used boss in the 2016 has been shaved a little bit and the over the we've lost a little bit of times. Is this the case? And if so, what, what has driven this?

Sandeep Biswas: So what, what did you say in the 2016, did you say in relation to it you do see this times, because we've kind of split it into PC1-2 and PC1-3, which has given us much better capital intensity; we've managed to bring some ounces forward in terms of 2065 or 2060. Jim, is that something that you can talk to?

Gerard Bond: I haven't, I'm not for the school. That might be one. We just have to take offline because I can't answer it.

Unidentified Analyst: Okay. That's fine. And then just my last question is the have around study, that's coming up the scoping study. Can you just talk to the scope that you're considering will this consider multiple mining methods and we'll also include information on how you're going to about?

Gerard Bond: I think you have the think about that heavily. I mean, as well, and truly on the fast track, because we just literally do it on that, the size of everyone that the study will be looking at, how the mind, the initial, a reasonable flight, that's what studies not only focus on. However we do know as we are drilling more and more to get the other iterations of how on among teams that thinking about what other options there might be for mining outside of the existing resource play. I mean, there's no question that I probably need more than just one mining method. You can look at the questions done to kind of kindly said, that's where the initial results is, and we'll be focusing on more selective monuments. We've released some bill halls which I, that that Telfer go a lot deeper than the county, they gaps. So out of every resource, which would be quite useful if it does, because what it means is all the capital that we're installing, they’re now applying it over a bigger resource, should that be proved up the account. Look at the other areas, which are yet to fully drilled out, you'll see that there are different shapes and also different grad profiles by if they prove to be contiguous, open up to some other more bulk type monuments. So it's very much work in progress. It's really exciting. So we've kind of, but the focus is get those high grade times from the questions done into Telfer, as soon as we possibly can, while we're working on what the entire positive looks like. It's really exciting. It's work in progress get the cash flowing as soon as you can. That's always my principle.

Unidentified Analyst : Yeah. And I imagine Telfer data, is that going to come in and study as well?

Sandeep Biswas: I don't think there's a lot more data on that. Mine. I mean, that's pretty much established, you've got Western five and even when we on more material in the US and pits or underground as well, we'll obviously we'll update the, to the two, the two mines on necessarily linked in that way. The linkage will be is how long can we keep Telfer going and until Havieron comes in and then how long he ever left period and, and Telfer long ago not, but the first thing is to make sure because there's no kind of dip or hiatus between the two. And then it's how do we make the most money but I don't think we're going to uptight Telfer in that timeframe. We just did that.

Unidentified Analyst : Okay. Thank you very much Sandeep okay.

Operator: Thank you. Your next question comes from Tanya Jakusconek from Scotiabank. Please. Go ahead.

Tanya Jakusconek: Good morning, everybody. And Gerard congrats on the move. I've got three questions if I may. The first one I'd like to talk about just Cadia thank you, Sandy, for sharing the PC1-2 and PC1-3 is sort of the same case. Just wanted to ask $900 million for PC1-2 combined when we had it as a bigger cave originally about 400 million tons, we had a capital of about $1.4 billion. Is that still something very feasible for PC1-2 and now PC1-3?

Sandeep Biswas: We just did the final work on PC1-3, but the reason and if you look at the timetable that we've given to the various guys, you'll see that PC1-3 is a pretty short time span from when we started going up to start producing oil, because it's essentially just a footprint extension from where we are now. The secret to the CapEx and productivity of PC1-2. We're kind of introduced a central corridor, which gives us the opportunity to pull attention close to double the productivity by having lots of both, what previous would have been one extraction drawn. Now that's where the split into. So you can literally have two partners working in extraction, in principle although they are in excess of 100% of that simple corridor. So as we move on and it's being designed and the layout and the crusher position, all that's been layered out as we move into one, three, all that becomes extremely cost-effective and it's just to put wind expansion. So we'll do the work and put the capital cost out, but no doubt we'll be expecting a pretty capital extension.

Tanya Jakusconek: Okay. So, so what I'm getting from you is that probably that total 1.4 billion that I had for the initial 408 million ton bigger cave is probably conservative.

Sandeep Biswas: I'll just draw that conclusion if you choose. Okay.

Tanya Jakusconek: Can I ask just on Pena, you had initially 1.1 billion tons being mined of the whole of these 7Ks today, it looks like it's 1.3 billion ore mined. And initially you had AUD10.5 billion to have the sustaining and development capital for all of these 7Ks. So it's a bit more tons now. Is that still a good number for us to think about over the 7Ks?

Sandeep Biswas: Look again, I haven't looked at the long term. You can answer that.

Tanya Jakusconek: Can you hear me now or…

Sandeep Biswas: Yes, we can hear you now.

Tanya Jakusconek: Sorry. I had some technical problems a little bit earlier. Look, I think in terms of the overall life of mine, capital for Cadia, that's constantly under review and it's constantly being evaluated and optimized.

Sandeep Biswas: The moment, we'll continue to revise that and report that, but I think that the current thinking in terms of overall capital cost of the development sites that wasn't their focus for us as part of PC12 study the PC12 study focused on PC12, and the capital costs that are reported in the areas related PC12?

Tanya Jakusconek: Maybe I'll leave that and then move on to look back in the next few months, you'll have quite a number of studies out with some visibility. So Sandy, when will you be ready to provide more than one year guidance?

Sandeep Biswas: So that's something that we're working in a way towards drilling and I think having this stuff over the next six months we've been waiting for a while to get to this point. We'll give much more, much clarity on all the assets and better position to maybe answer that question for you.

Tanya Jakusconek: Maybe can I, this is my last question is just on inflationary pressures. You can I talk a little bit about what you are seeing occurring in both your operating your cost structure and your capital structure in terms of maybe some numbers in terms of, are you seeing overall inflation in your cost structure in the 3% to 5% similar to your peers, or how is your labor looking, how your consumables, you mentioned steel energy, explosive, maybe some more details on those.

Gerard Bond: We actually did really well on the cost front Tanya, and I'll cover the year ahead, but our operating costs went up, $209 million, $124 million of that was FX and overwhelmingly that was the Australian dollar, $125 million of it was the Australian dollar. So the underlying increase only went up by $85 million on that total cost base. And $59 million of that was higher COVID management costs, the direct costs and $24 million of that was higher royalties off the back of higher copper production and stronger prices. So putting that simpler we actually were able to keep our costs flat to marginally lower year on year. As I said in my really comments where we are seeing the pressures that anything as it relates to steel making materials, is we're seeing price rises there. We have recently concluded some grinding media contracts that has had the effect to just specifications adjustments and a bit of science moderated the impact of that on our cost space. You'll see, the consumables only represent about 10% of our total cost base. So there were a little bit of pressure there on one part of it. Energy costs are rising perhaps, but for us at Cadia, they are fixed and at Telfer they are also fixed. So we're kind of insulated. They're heavy fuel oil is a large part of our cost base at Lihir you have 30%. So that's a meaningful exposure, but again, last year that was a little softer and we say softening going low, sorry, the headline prices softening, and a reminder that we hedged heavy fuel oil at Telfer on a rolling, sorry, I would say Telfer, on Lihir on a rolling quarterly basis, 12 months out. So that's for the -- that exposure in our guidance is largely fixed. The single biggest price pressures outside of that is the seaborne freight, but you'll see that in the revenue line rather than the cost line. And then as Sandeep mentioned earlier, it's probably in labor. Labor is 40% of the cost base. There are inflationary pressures as a result of good times in industry generally. And then we've got internal border closures inside of Australia that makes the mobility of labor and moving to people with more complicated. But again, we're seeing pressure there both in terms of a little bit in terms of rate, but also time to fill. So that's how it will manifest itself, but the best indication as to how we see our costs being in the year ahead using the guidance number, which is inclusive of all those,

Tanya Jakusconek: And then maybe just on your -- on the capital cost side, where you think pressure is there?

Sandeep Biswas: Suresh, should we take that one from a capital projects perspective.

Unidentified Company Representative: We're seeing quite a bit of activity in the project space not just nationally, but internationally as well. That's not necessarily translating through to some costs yet, but it's an area that we're monitoring very, very carefully, and we expected that activity might put some pressure on materials as well as on labor, but I'll highlight that at this point in time, we're not seeing that pressure coming through. And we're trying to factor that into our thinking in terms of projects as well.

Operator: Thank you. Your next question comes from [indiscernible] from Macquarie. Please go ahead.

Unidentified Analyst: Just a couple for me. Firstly on, on Red Chris, you seem to design a standard east ridge project. At what point do you think that can be we can get a better understanding of that and sort of when it could be considering putting into the production portfolio, because it's looking pretty impressive cycle?

Sandeep Biswas: I think it's just a question of how we can get the drill holes. How soon can we get these five rigs to come up with a resource that we can stop putting the watch shells around plan around in terms of ease of getting it in the business, obviously subject to any GSA from a construction perspective is just adjacent to our baseline so we don’t have another. We can leave this branch off the current projected base line that's under construction, and then it'll be about how does that fit which will come down to ultimate fall, or is it going to be an opportunity to get a high grade and then come back the rest of his life. All those things, it's a problem to have. So the first step is to put up when we can have the resource around, it's hard to say now, because literally on the fast track.

Gerard Bond: I was just going to say too that, that PFS free Red Chris will come out by the end of September this year. So, in less than six weeks or so, we'll be able to color that in great detail.

Unidentified Analyst: Yeah. But Gerard but these are not in the shell. So it's not part of that PFS.

Gerard Bond: That is correct. Sorry. Yeah. The sign is that exciting thing too but we're working as fast as we can. That's a simple thing. And so and if you can give a bit of timeframe on that in the future, but right now I can't actually tell you when we can have a resource around that. If that's the case,

Operator: Thank you. There are no further questions at this time. I'll now hand back to Mr. Bissell, the closing.

Sandeep Biswas: Well, thank you everyone for participating in the call and thank you so much for all the questions and look forward to updating you on our projects over the coming six months. And thank you and have a very safe time.

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