Regis Resources Limited (RGRNF) CEO Jim Beyer on Full Year 2020 Results – Earnings Call Transcript

Regis Resources Limited (OTCPK:RGRNF) Full Year 2020 Earnings Conference Call August 25, 2020 9:00 PM ET

Company Participants

Jim Beyer – Managing Director and Chief Executive Officer

Jon Latto – Chief Financial Officer

Conference Call Participants

Nick Herbert – Credit Suisse

Daniel Morgan – UBS

David Coates – Bell Potter Securities

Levi Spry – JPM


Thank you for standing by, and welcome to the Regis Resources Limited Full-Year Financial Results Conference Call. All participants are in a listen-only mode. [Operator Instructions]

I would now like to hand the conference over to Mr. Jim Beyer, Managing Director and CEO. Please go ahead.

Jim Beyer

Thanks, Rachel, and I’d also like to mention that I’ve got – good morning everybody. I’ve got Jon Latto, our CFO here; and [indiscernible] on the call. Well, thanks for joining us for the full-year results. I note the Appendix 4E and the report and swag of other accompanying documentation was released earlier this morning and at times we will probably make reference to make some of these. So, certainly the presentation if you’ve got that readily available that would be useful.

As a summary, some of our financial highlights for the year, it shows some healthy metrics, including record net profit after tax of 200 million, earnings per share of $0.39 a share, a return on equity of 24%, EBITDA up of 394 million with a margin of 52%, and cash and bullion up to 209 million at the end of June with no debt, which sees us maintaining a strong balance sheet.

With all of this, we’ve again declared an $0.08 fully franked dividend, which brings our dividends declared for the year to $0.16 per share fully franked, which represents on a grossed up basis to factor in the franking credits a yield of 4.1% based on yesterday’s share price. And we’re also making available for our shareholders to reinvest these dividends into the company by way of a dividend reinvestment plan. Overall, a strong result with another dividend for our shareholders.

Now before I hand over to Jon, to talk through some of the detail, I just like to touch on COVID-19. To date, there have been no confirmed cases at any of our sites or our offices, and the impact to our operations in the business have been controlled and well managed by the team, albeit with a marginal impact on our costs. The company has continued with a range of measures across its business, consistent with advice from state and federal health authorities. These measures help ensure the health and welfare of our employees and their respective communities.

We continue to be part of the FIFO DETECT research program testing for asymptomatic cases of the virus with FIFO workers. And by this program, we test all people go into our operational sites. And to date, we’ve done nearly 6,000 tests. As part of our ongoing risk management, we continue considering various scenarios to assess possible outcomes, and this process in turn assists us in developing tactics to mitigate possible detrimental impacts on the company.

The work continues to highlight the company’s strong position with multiple production side, separate camps, existing stockpile, significant cash reserves, debt free balance sheet and hedges that have flexibility in the delivery schedules. All highlighting the current relatively strong position the company is into managing the prevailing uncertainty and risks and to take advantage of the prevailing significant gold price. But as we’ve seen, the situation can turn quickly and we must remain vigilant and disciplined in our approach to managing the risks of COVID-19.

I would like to take this opportunity to thank our employees and our contractors and all the families for their hard work and support during these challenging times.

On that note, I’d now like to pass over to Jon Latto, who will run through a bit more of the detail on the financial outcomes. Thanks, Jon.

Jon Latto

Thanks, Jim. I’ll just summarize in a bit more detail the FY 2020 metrics that Jim has spoken to. So to start with, as Jim mentioned, record NPAT of 200 million, that’s up 22% on FY 2019. We had a net profit margin of 26%, our return on equity of 24%, and EPS was up 22% to $0.39 per share. We also saw EBITDA of 394 million, that’s up 28% from FY 2019 with a healthy EBITDA margin of 52%.

We saw cash flow from operating activities was up 24% of 343 million, and cash and bullion saw 209 million at 30, June with no debt. So obviously, we continue to have a very strong balance sheet.

What I’ll do now is move over to Page 4 of the presentation, and on that page, we see a summary of our financial results. We sold 353,182 ounces across FY 2020 at an average price of $2,200 per ounce. And that’s the average price we secured after we sold into approximately 52,000 of our most out of the money hedges, and I’ll expand upon that a little bit later on.

We had sales revenue of approximately $757 million in FY 2020, and that’s net of approximately $21 million in revenue that was capitalized to pre-production assets. And that’s primarily at the Rosemont Underground with a small amount from Baneygo. We generated a gross profit of $305 million in FY 2020, and that’s up 20% from FY 2019. And as you can see on that page, our admin expenses are broadly similar to FY 2019, with only a very small increase.

We have spoken about our AISC in our recent Q4 briefing, so I don’t intend to discuss both further here at this point. Over on Page 5 of the presentation, you’ll see there’s four graphs that show the performance of the business going back to 2015. And pleasingly, what we see across each of these graphs is a positive trend going back to that date. So, that’s obviously pleasing to see.

Turning to Page 6, you can see a waterfall chart, and what that shows you is the movement in NPAT across FY 2019 to FY 2020. And what we’ve done is pull out some of the key components of NPAT, so you can see how it’s moved year-on-year. What you can see there is a healthy jump in gross profit before royalties of $61 million from FY 2019 to FY 2020. And that result is after our D&A charges increased by 34 million in FY 2020 as a result of the significant investment [in site assets] that we’ve made, and increased amortization charges associated with bringing three new open pits online at Dogbolter, Petra, and Baneygo, as well as the Rosemont Underground in June this year.

Also on that chart, you can see that royalties increased $9 million as a result of the higher gold prices in FY 2020 and income tax payments increased as well by $50 million in-line with our increased profits.

What I’ll do now is move over to Page 7, and Page 7 talks to dividends. And as Jim mentioned, Regis has again declared an $0.08 per share dividend, totaling around about $41 million. So, total dividends for FY 2020 were $81 million and this represents 11% of revenue and 21% of EBITDA. This is a basic dividend yield of 3.9% and a grossed up dividend yield of 4.1% based on the closing share price of $5.55 that we saw yesterday.

The total dividends that Regis has paid or declared since 2013 is now approaching $0.5 billion. It actually stands at $488 million today. So, I around up to half a billion. Regis has introduced a dividend reinvestment plan today and that allows shareholders to invest dividends back into the company if they so choose.

The day out pay will be at a 1% discount to the five day [waive off] from the relevant date and shareholders will also benefit from no transaction or brokerage fees. Obviously, we will continue to assess and review dividends against factors such as operational requirements, planned CapEx, and the gold price.

Finally, I’ll turn to Page 8 and that provides the cash flow waterfall that plots our movement in cash and gold on hand across FY 2020. And what I like to do is, just talk to a few of the categories that you see in that waterfall chart.

Firstly, we say record cash flow from operations of $424 million for FY 2020 and that number is basically cash flows from operating activities shown in the cash flow statement, adjusted for income tax and other costs with other costs being primarily head office expenditure, and those two categories are shown separately in the waterfall.

We see mine development costs of 135 million, and to give a bit of information about what that comprises what we see there is, that includes expenditure on pre-production open pit assets, which in FY 2020 included Petra, Baneygo, and Dogbolter. It includes capital expenditure associated with bringing the Rosemont Underground online. It includes capitalized preferred waste and capitalized pre-ship costs, primarily at Garden Well, Tooheys Well, Erlistoun, and Baneygo.

The next component of the waterfall chart that you see is exploration costs and we see a very healthy spend of $37 million for the year. And then we see other CapEx of $65 million for the year and that includes the TSF 3 expansion at Garden Well. The new [indiscernible] aerodrome construction and expansion, which now allows us to land hundreds of [these jets] aside. It includes Rosemont Underground assets, full roads for Baneygo and Petra, CAT expansions at Garden Well and Moolart Well, new lifters and liners, as well as land purchases in New South Wales associated with the McPhillamys Gold Project, and also includes some lease payments for some right of use assets.

The next category on the waterfall is other costs. As I mentioned, really, these are just primarily our head office costs. And as I mentioned before, they really haven’t moved much between FY 2019 and FY 2020. So that then shows you that the net cash build went from 205 million at June 19 to 376 million at June 20. Now that’s before tax payments of $64 million, and the acquisition of additional tenure Duketon Greenstone Belt for $20 million, which allowed us to triple our land holding to approximately 90% of that belt.

And the last component of the waterfall is the dividends, and as I mentioned, that’s $81 million across FY 2020. And that then brings us back to our closing cash and gold balance of $209 million at 30 June, and you know, with the gold bullion being valued at [$2,576] per ounce, which was the spot price we used at 30 June.

Now, before I pass back to Jim, I’ll just make a couple of closing comments about our hedging. As we’ve said before, our [hedged ounces] are spot deferred, and that gives us a lot of flexibility about when we sell into them. At the beginning of FY 2020, we started selling into those hedges at a rate of about 10,000 ounces per quarter of the most out of the money hedges.

Late in Q4, we lifted that rate to approximately 20,000 ounces per quarter. Consequently, by 30 June, we had reduced our hedging from approximately 452,000 ounces at the start of FY 2020 to 399,000 ounces at the end of FY 2020. So, we dropped it by about 52,000 ounces. At this stage, the plan is to continue showing into those hedges at the current rate of 20,000 ounces per quarter. However, obviously, as we said before we continue to monitor these.

I’ll now hand back to Jim.

Jim Beyer

Thanks, Jon. Well done. Great outcome. Look, I just want to cover off on a couple of items before we close out. Firstly, I’d note that earlier this week, we released our resource and reserve statements or report, and it was in-line with our expectations and with expectations I think people had. What I would note that it did include in the releases an excellent summary of Regis internal organic exploration growth opportunities and what we’re pursuing, and there are a number of them. I’m not going to go into them now, but I would certainly encourage you to review them if you haven’t already.

Look, while we’re on the topic of growth, I’ll just touch again on the guidance for this year. We’re expecting a solid year in line with our growth, targeted growth profile. Gold production, we’re expecting between sorry, 355,000 and 380,000 ounces with an all-in sustaining cost between 1,230 and 1,300. We see growth capital in the range of 50 million to 60 million.

Exploration has been stepped up as we’ve mentioned earlier to 35 million. And McPhillamys now is starting to move on spend with guidance of 15 million. A couple of points on that guidance tonight, I would note that our production rate is playing to lift in the second half of this year. The first half we will see it be running at more of the historic analyzed rates and we will be lifting in the second half.

I also note that the spin for FY 2021 is a minimum of 15 million. We’re assessing how the planning approval process goes, and we’ll continue to do that as I think I’ve mentioned before the reply to submissions, the RTS is due to be submitted in the next couple of weeks. We’ll monitor how that travels through the planning process in the next three or four months with the Department of Planning, and then we are anticipating that that would be put forward as a recommendation to the independent planning commission, the IPC New South Wales lighting the year for review early in the in the new calendar year.

As that progresses we’ll be watching that and we’ll be making some assessments on whether to undertake some additional expenditure, specifically around the detailed engineering and also on long lead items. If this played out, the way that it could do, we could see the expenditure lifting from 15 million for the year to somewhere in the order of 60 million. And obviously, that’s going to depend on how we see things progressing.

So overall, in the words of our – one of our illustrious Ex-Prime Minister’s, Mr. Keating, what a lovely set of numbers. The impact was up a record of 200 million, up 22% on last year, net profits up earnings per share [indiscernible], EBITDA is up, return on equity is up. Cash and equivalents increased to 209 million and that was while paying $81 million in dividends over the year. And we continue to have a debt free strong balance sheet.

And all of this while steadily dealing with our legacy hedge book, a book which seems to perturb some people. I think our very strong financial outcomes clearly demonstrate this hedge position can be managed down while still delivering rewarding outcomes. And speaking of rewarding outcomes, we’ve again declared, and I’d say fully franked dividend, which brings a full-year to $0.16 fully franked, which represents on a grossed-up basis, an impressive yield of 4.1%.

At Regis, we’ve got a solid history of growth over time and a history of paying dividends when appropriate. In fact, as Jon mentioned, the total dividends declared over the past seven years is almost half a billion dollars. So, it’s been appropriate a lot. Today, we’ve got a clean internal growth plan that we believe has a clear capability of continuing to deliver future value. So, great set of results.

I’ll hand back now to Rachel for us to answer any questions that you might have. Thanks, Rachel.

Question-and-Answer Session


Thank you. [Operator Instructions] Your first question comes from Nick Herbert from Credit Suisse. Please go ahead.

Nick Herbert

Thank you. Good morning, Jim and Jon.

Jim Beyer

Hi, Nick.

Nick Herbert

A couple of a [gun point] questions [feeding in] a couple of operating ones. So start with the gun, could you just provide an estimate for or range for D&A for FY 2021 whether it’s a fair assumption that we just take that second half, right, that you’re portable let’s say for the next year and then also just around that corporate expense, whether that would be similar reasons that would be?

Jim Beyer

Yeah. Corporate expenses are not going to change too much. We haven’t given guidance around D&A charges. You know, I guess we tend to focus more on cash providing help for people to understand their cash by giving the all-in sustaining costs. What I would say is that in-line with our increase in our strip ratio, and also some of the smaller pits, we’re going to see a charge increase while we’re bringing in things like, you know, things that we’ve been building over the last couple of years – last 18 months to two years, rise and the like. So, we will see D&A increase, but we are not giving specific guidance on that.

Nick Herbert

Okay, thank you. And then just want to comment, just regarding the substantial loan life opportunity at Moolart Well, looking at different gold prices. Can you just expand on your thinking there and provide some sensitivity around what a reserve could look like, on a higher gold price and whether implicit in that comment, we take from that said, you know, that reserve price of 1,600 next time that gets updated, we’ll see that move higher?

Jim Beyer

Yeah, look, the descriptor around what we’re doing it and what we’re looking at it at our options at Moolart certainly does play into this, you know what can we do with our gold price, but one of the things that we see there is that, for it to become efficient, you need to assume a fairly high gold price because of the patchy nature of those, those deposits up there, you know, trying to get it all to hang together and what we would call a super pit.

I think we’ve sort of, we wouldn’t, bench it to suggest that it should be compared to the super pit. But, you know, it requires a fairly healthy assumption on the gold price. And you know, and this is part of the work that we’re doing to understand that sensitivity. I think things like, yeah, I think to make those numbers work, we’ve got to talk of gold prices well in excess of $2,100, $2,300 an ounce.

Now for us, and this is just part of our evaluation, for us to look at that, and that’s got the potential to add maybe another couple of years of throughput up at Moolart, but you’ve got to stop. There’s a fair bit of stripping to do. And we need to make sure we understand the timing of all of that, and what the implications are because one thing I don’t want to do is, you know, I don’t want to start the company starting to take today’s cash flow, spending it on strip ratio on the presumption that the gold price is going to stay up at $2,700 an ounce, and then find in two or two and a half years time when we start to hidden processes or pardon me that it’s actually dropped back to lower levels and then what it’s actually costing us overall, you know we don’t want to use today’s cash flow to decide tomorrow’s production.

Otherwise we’re just recreational miners, you know, you spend lots of money but make no cash and can’t return anything to shareholders, sooner or later you’ve got to pay the piper there. So, you know, I can’t give specifics. It’s something that we’re evaluating, you know, we sort of, I guess in the release on the resource and the reserve statements we do, do talk about it as a broad picture, just probably just to give people a bit of a sense as to what it is that we’re considering, but as I said, some of those high gold prices that we’ve assumed in there could give us another couple of years of production. So that sort of gives you a bit of a feel as to what we could be looking at, but it’s still very early days as to what we would walk-in and declare.

Nick Herbert

Got it. That’s helpful Jim. And then finally, just the Ben Hur acquisition, and you can see the sort of the 1.6 gram resource there, can you just clarify that that’s based on an open pit show and doesn’t include any potential underground, because it’s also a potential mention of an underground opportunity there as well? And then just sort of broadly a high grade, how do you think about that in terms of the potential to bring that into the mine plan?

Jim Beyer

Yeah, I mean, it’s a resource, so it’s got a shell around it. So, it’s certainly only open pitiable resource material. The comment that we make on underground is because we believe that there’s a clear indicator that the mineralization continues the depth, but there hasn’t been any drilling of any materiality depth. So, it’s an open opportunity. And timing wise, look, we’ve got a, you know, the grade is certainly attractive. How it looks after we’ve done the usual machinations that converting from resource to reserves looks, is the first step and then figuring out the timing of where that fits in, whether that’s something we’d bring forward or whether we just have it as part of our, you know, scheduling because we still have to construct a ride down there and get access to it. But it’s certainly a great little deposit at the moment.

Really, I guess, we want to make sure that we’re confident in its scale before we start talking about developing it. We don’t need it straightaway. So, we’ve got a little bit of time to do more drilling and see whether there’s more in it than was currently identified, but it certainly it looks perspective, and that’s fundamentally part of the reason why we bought it.

Nick Herbert

Great. Thank you.


Thank you. Your next question comes from Daniel Morgan from UBS. Please go ahead.

Daniel Morgan

Hi Jim and [Jon]. Just wondering, firstly, the announcement of a dividend reinvestment plan, I find that curious given that you are net cash, and the gold price is materially higher now than what we might have thought it was a little while ago. So cash flow would be good. Just wondering why the dividend reinvestment plan; why now?

Jim Beyer

Yeah, good question. Look, we think of couple of things. First of all, we, you know, obviously, that’s a sign that we consider ourselves to be undervalued foremost and front of mine, and we see it as being a, you know, in terms of – it’s a modest discount that the shareholders would enjoy, but there’s also other benefits for in terms of brokerage fees and the like which are significant, but these days, it all adds up.

So, we see it as being an opportunity to highlight the fact that we see ourselves being undervalued. We see it as a way of potentially bringing, you know, allowing our existing shareholders to return to build their position in our company while returning some funds for our use. So, basically that’s the reason behind that.

Daniel Morgan

But if you consider yourself undervalued, aren’t you issuing shares at a lower price? I appreciate it is two your existing shareholders, but isn’t that dilutive to your views of value? Otherwise, why not consider buy back?

Jim Beyer

But it is through our existing shareholders and it is allowing us to return, you know, we’re looking at how we manage our capital funds overall, throughout. You know, we’ve got McPhillamys coming up. It’s an opportunity for people to participate in that, you know, we know it’s not significant in terms of the overall quantum and we just felt that it was something that we would make available to them.

Daniel Morgan

Okay. Thank you. And then it appears you have now formalized the acceleration of delivering into the hedge book from 10,000 to 20,000 a quarter, I know you did sort of flag that on the quarterly, but just it seems like it’s now been formalized as a policy. Can you just run through why this level? Why this quantum? What was contemplated? Thank you.

Jon Latto

Yeah, it’s not so much policy. It’s just what we’re doing at the moment based on, you know, you got to look at the hedge book in the context of what proportion of our revenue it actually represents when we action it. It’s seen as being an issue, but frankly, the only reason that is the underlying reason is an issue is because the gold price is up so high. So, you know, it represents I think, when we ran the numbers last year represented about 3% to 5% of our gross revenue and if we step it up, it’s going to represent a reduction of 8% to 9%.

You know, we continue to get to – quite frustrated with the perspectives of some, not everybody, some that have a view that it’s a sort of Damocles hanging over our head whereas in reality, the reason that it’s there of any noteworthy is because the gold price is up. So, while some of our ounces are being sold at a discount into the hedge, there is a significant amount that is still being sold full price. And I think, I haven’t, you know I haven’t seen the lightest, but I think when you run some of our numbers, even when we do run at these rates, we’re still relatively speaking, selling it up, you know, on a weighted average, some of the best prices of our piece.

So, yeah, is it a policy to step it up? No, but I guess we’ve made a judgment at this price. We continue to generate at this gold price. We continue to generate some excellent cash flows. It’s setting us up wealth for considering future investment at McPhillamys, which is clearly coming at us very quickly, but it also, as we look at our various modeling and scenarios, it still puts us in a position to be able to give consideration the next time the question of dividends comes up.

So, we see it as being something that we can deal with. You can’t leave it there forever, obviously. So, we do need to deal with it, but we can do that in a manner that doesn’t have an impact on basically what it is that we’re trying to do with our business from an investment perspective, and also keeping this flexible to be able to do what I think people invest in us for, which is, you know, do the best that we can to return to provide returns to our shareholders.

Daniel Morgan

Thank you, and just on the guidance comments. I think in your opening remarks, you did flag that production is going to be second halfway weighted, just wondering if you could talk to the drivers behind that and somewhat related, just an update on the Rosemont Underground productivity, how that’s tracking, you know, is it – are the answers or the higher grade coming through? Is that going to be later in the fiscal year? Thank you.

Jim Beyer

Yeah, you probably answered your question with your second question. You know, the business – the site, you do, you always get the ebb and flow from month-to-month and even quarter-to-quarter just as particularly with now that you know, we move to a number of multiple sites, number of multiple pits, so we manage the ups and downs of grades as best we can, but ultimately, you know Rosemont Underground is a – will be a great producer for us. It is – our target has always been at the lower grades, and the – where we enter the ore body, pardon me, that ore body tends to pinch and swell as you go vertically, which is one of the reasons why the open pit closes out, you know, the ore bodies effectively pinches out down the bottom and doesn’t, it’s not payable on over pit basis.

We come in and mining, in, where it’s – the underground where it’s pinched. And we’ve also come into the area that was closest on the schedule where the grades are lower and we just, you know, we’re working our way through that. You know, it’s, I wouldn’t say in this southern areas, the results have been spectacular, they’ve been consistent, and we’re certainly getting into the rhythm of development and start firing, but we see ourselves getting into the, the media high grade areas towards the back-end of this first half and into next half. So, that’s tending to be part of what’s having the influence on that production profile.

Daniel Morgan

Okay, thank you very much.


Thank you. Your next question comes from David Coates from Bell Potter Securities. Please go ahead.

David Coates

Good morning, Jim. Good morning, Jon, thanks for the presentation and well done on the results. Just a quick one, you highlighted, you know, quite justifiably the improvement in performance on a whole, you know, pretty much all of your financial metrics there and I appreciate this question sort of [indiscernible] subjectively bored, but your earnings impact, EBITDA of gross dividend relatively flat if you look at 2017, you’ve got 40% plus growth in earnings, but sort of 6% growth in dividend. Can you just, sort of, I guess give us a bit of background as to how that’s – what’s into that decision?

Jim Beyer

Yeah, look, there’s probably a few things in there, you know, obviously, and you pointed out, we’ve been a, you know, dividends for Regis is not just a recent flash in the pan. We’ve been doing this for a number of years and over the past seven years, we’ve paid out, you know, nearly half a billion dollars. So, it’s not as if it’s something new to us. And we did contemplate there are a number of things that you know, as part of the as the board we sit and we consider increases in the dividend that’s obviously a strong price environment, the generation, the capability of the business is quite strong, matched against that was the, you know, what, clearly the near-term – how would you describe it, the near-term obligation or the near term funding that’s going to be required for McPhillamys.

And as a result, we made a decision to – there was certainly no case at this point to reduce it. And because, yeah, we’ve done our projections into the gold price stay where it is, things are looking quite strong for funding of McPhillamys. We will also – we’ve already started engaging in conversations around financing of McPhillamys, which is really important. And as a result, we thought, well, it’s certainly a strong case, very strong case to consider paying a dividend, but if we increase it, maybe that is something that’s – it’s a little bit more prudent and sensible to hold the value where it is and keep our powder dry for one of a better description as we enter, we start to get closer to the demands that McPhillamys is going to make.

So, there’s a couple of things in there, you know, the messaging out of that. We’ll always take quite prudent and careful consideration of what we think should be done with dividend distributions. We are carefully considering what our cash flow generation is looking like and the price scenarios going forward and some of them quite frankly are pretty good. As part of that, we’re also that equation, we’re looking at how we should finance and pay for McPhillamys, you know, we could, options include not paying a dividend and paying it all out of cash, the gold price dies up high, paid all that cash or, you know, put out our balance sheet to work a little bit and put a bit of debt on and leveraged the project a little bit.

So, we sort of put all of that into the mix. [David], decided that it was certainly appropriate to continue to pay a dividend, monitor the situation, and they basically keep some of their powder dry for the demand that McPhillamys is some we’re anticipating will be, you know, potentially within the next 12 months.

David Coates

Great. Thanks, Jim. Thanks very much.

Jim Beyer

No worries. Thanks, David.


Thank you. Your final question comes from Levi Spry from JPM. Please go ahead. Levi, your line is live. Please go ahead.

Levi Spry

Sorry, schoolboy error. Thanks, Jim. Thanks for the call. Question following on from the McPhillamys sort of funding, so, I think you said at the start that CapEx at [15 could grow to 60] later this year, is that right, as you do get the permit and commence the spend?

Jim Beyer

Yeah, it could top out at 60. That’s 6-0. And really that’s a pretty aggressive number in there. But you know what we’ve got at the moment, we’ve got provision for our ongoing team to keep doing what they’re doing to progress the permitting process, the RTS, and then they’ll be, you know, engaging with the Department of Planning continuing that engagement, community work, more studies, optimization studies.

We also have some provisions in there for early engineering and I think we had about 4 million or 5 million foot property, similar property purchases, which are going through at the moment, or one of them is. The additional funding over and above that would be for long, laid items. And we’ve got a, you know, we’ve got to make an assessment on that and it’s a little bit early for us to say it’s, you know, we’re prepared to put some money down on a new bull meal and [indiscernible] and the like, but we’ll monitor that certainly will get a good sense of potential timing as we start to get the feedback, and this kicks from the Department of Planning, with their recommendations and conditions in regards to the IPC.

You know that’s a, you know, we’ve seen some pretty good outcomes. I think it was just in the last couple of weeks that [indiscernible] was approved by the IPC within the 12 weeks that have been designated by the Minister recently to deal with that, you know, so that’s given us added encouragement that McPhillamys will certainly follow a tighter timeline than perhaps other projects and other – the approval processes followed in past years. You know, the unfortunate circumstance of COVID is that, you know, people are looking for, you know, that it’s difficult economic times. We all know that mining is a, you know, is a primary industry and does a great job in employing lots of people and providing lots of employment opportunities coming out of what is clearly a pretty difficult time across the country and quite frankly, around the world.

So, you know, we combine our enthusiasm from McPhillamys pragmatically looking at what’s going on, and how we’re starting to progress through. And yeah, it could be $50 million or $60 million, not in addition to the [15], but up to that much, but we’ll be very carefully. You know, we’re not going to go out and basically blow a whole lot of money on a wish and a prayer. It’ll be carefully and carefully risk-managed, but that’s what it potentially could be, which we will, quite frankly, if we get to that point will be a pretty damn good sign, I think.

Levi Spry

Yep, definitely. Thanks, Jim. And so, but just continuing on, if that is the timeline, so when would you update the CapEx number and just remind me when first ore could be from that?

Jim Beyer

Yeah, look the CapEx number, I think, you know, the historic number was way back before it really – the estimates are taken into account, planning requirements, and more conventional requirements of New South Wales was 250 million plus or minus 25%, which I think put it at the top end of about 270. And basically, we’ve said, look, if you’re doing that estimates today that would certainly that top end of that range would be the bottom end of the current range. And that’s still where we’re seeing, you know, clearly we’re going to have a number with a very solid three in front of it for the cost of the plant and water pipeline.

So, we expect the timing on that and you know there’s a lot that still moves around on our capital, which is why we’ve been holding off that depends on this reengineering that we’ve been doing as part of the DIS. We get the submissions, we have been making some, in some cases, some quite material design changes to improve things around things like the tailings dam and the waste dumps to give sound barriers and these sorts of things. And once we’ve got all of that settled, I’m expecting in the back end of this year, certainly in the December quarter sometime, that we would be able to give a bit more of a decent update on what we see the CapEx and the pre-mining would likely [entitle].

Timing wise, it was the other question you asked, if this follows what it could do, which is, you know, we submit our RTS within the next couple of weeks, which is we’re right on track to that, we see the Department of Planning could take three or four months. That means that there’s potential and that the recommendation from The Department of Planning could come up before Christmas. Now, normally, you know, Australia shuts down over Christmas for a month, as we all know, which would be a delay in this, but, you know, we don’t know, frankly, you know, COVID – what does COVID mean for Christmas holidays?

I get them, but I’m not sure what it really needs and whether things will be quite as conventional over January, but, you know, the minister has indicated to the IPC. So, they want the decisions out of them within 12 weeks. And this is a very, very good ground agreed with the – I think it’s the secretary of the department of the [indiscernible]. The senior bureaucrats in the Department of Planning that would approve an extension on that, but again, I’m very encouraged by the fact that the [indiscernible], so it’s approvals come through within that 12 week period. And we all know how topical that commodity is.

So, if that comes in, then we could get IPC, you know, it’s possible that we get IPC approval in early in the June quarter. Even with IPC approval, there still are a number of other, more routine approvals that are required and you can’t make traction on those until you’ve got IPC. So, you can sit there staring – everybody sits around staring at each other, saying yes or no, you want to apply, but you can’t until you get IPC. Once you’ve got it, you can go – that probably takes three months.

So, you know, there’s a conceptual timeline where we could be commencing construction early in the new financial year. You know, early – sometime in the – what would be the September – early in the September quarter. If that was the case, 14, 16 month construction, we could see commissioning of the plant in the back end in the – in rough numbers I’d say the December quarter of 2022.

Obviously, all very dependent on this approval process, but clearly we’re a lot more confident in how that might look now than we were probably six months ago. But that’s, maybe I have that gives a bit of color, you know, if we can get approval after April, we could be turning dirt in early in the new financial year, and we could be producing gold on that basis like in calendar 2022.

Levi Spry

Yep. Perfect. Thanks, Jim. And just last one, for like Garden Well Underground, can you just give me the timing and potential for the CapEx there as well? Thank you.

Jim Beyer

Yeah, look, we’re still working on that. That hasn’t gone. That hasn’t gone yet to final investment decision to the board. We are expecting that we’ll be later this calendar year, later in the – where are we? What is the month? August [indiscernible] having fun. So, sometime in the December quarter, we’d see, you know if we can get it there, we’ll see approval. We’re obviously optimistic at this point. CapEx is still a work in progress, but we’ve, you know, we’ve indicated that these tiles of underground they will probably, you know, broadly speaking, fairly similar. So, the initial setup is not going to be too different to what Rosemont was – Rosemont Underground. That’s a pretty good number to is a, you know, back of the envelope number at the moment on the assumption that we can get it approved. And then obviously, once we do, we’ll be out with a lot more detail on CapEx and also production profile then unit costs, obviously.

Levi Spry

Right. Thanks, Jim. Thank you.


Thank you. There are no further questions at this time. I’ll now hand back to Mr. Beyer for closing remarks.

Jim Beyer

Thanks, Rachel. And thanks everybody for joining us on the call. As always, if you’ve got any follow up questions or if anybody else on the line, please give us a contact. Our contact details are on the release. Thanks for joining us and have a nice day.

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