Regis Resources (OTC:RGRNF) (ASX: RRL) CEO Jim Beyer discussed the company's first-quarter performance for the fiscal year 2025, revealing a mix of strong results and significant challenges. Despite robust production at the Duketon and Tropicana sites, the company faced a setback with its McPhillamys project due to a heritage protection declaration, resulting in a substantial impairment and a reduction in gold reserves. Nevertheless, Regis (NASDAQ:RGS) Resources reported an increase in cash and bullion, with a strong financial outlook and a focus on cash generation and strategic capital management.
Key Takeaways
- Regis Resources reported a lost time injury frequency rate (LTIFR) of 0.4, indicating a slight uptick in workplace incidents.
- The McPhillamys project became unfeasible after a Section 10 declaration, leading to a $192 million impairment and a 1.89 million ounce reserve withdrawal.
- The company produced 94,500 ounces of gold at an all-in sustaining cost of $2,495 per ounce, capitalizing on a record average gold price of $3,717 per ounce.
- Cash and bullion holdings increased to $380 million, with the company maintaining a net cash positive position against $300 million in debt.
- Regis Resources is exploring next steps for McPhillamys while focusing on growth at Duketon and Tropicana.
- Capital expenditures reached $50 million, with exploration costs at $13 million, including $4 million at McPhillamys.
- The company plans to enhance its growth strategy, with ongoing development at Duketon and the Havana Underground project at Tropicana.
Company Outlook
- Regis Resources aims to maintain Duketon production between 200,000 to 250,000 ounces until FY2028.
- The Havana Underground project at Tropicana is expected to yield 55,000 ounces starting in two years.
- The company is considering dividends, share buybacks, and debt repayment as part of its capital management strategies.
Bearish Highlights
- The McPhillamys project's viability was compromised due to heritage protection legislation.
- Increased capital costs have led to a higher depreciation and amortization rate of approximately $1,015 per ounce.
Bullish Highlights
- Record gold prices have contributed to a strong financial performance.
- The company's cash and bullion holdings have more than doubled over six months.
Misses
- The impairment at McPhillamys and the reduction in reserves have been significant setbacks for the company.
Q&A Highlights
- CEO Jim Beyer addressed the elevated bullion levels as a timing issue, with plans to drive sales at the end of Q2 and Q4.
- Beyer confirmed ongoing trials at the Duketon North mill and the company's focus on underground strategies.
- The company acknowledged the complexity of acquisitions at high gold prices, preferring early-stage projects over large-scale investments.
- Mining costs at Duketon South and Tropicana have risen by over 10% due to inflation and deeper pit operations.
- Management emphasized a strategic approach to cash utilization and maximizing shareholder value.
Regis Resources remains optimistic about its future, with a strong cash position and a clear focus on growth and operational efficiency. The company is strategically navigating challenges and opportunities as it continues to develop its mining projects and explore options for capital management.
InvestingPro Insights
Regis Resources' (ASX: RRL) first-quarter performance for fiscal year 2025 reflects a company navigating both challenges and opportunities in the gold mining sector. To complement the detailed operational update, InvestingPro data and tips offer additional financial context for investors.
According to InvestingPro data, Regis Resources has a market capitalization of $1.41 billion USD, indicating its significant presence in the gold mining industry. The company's revenue for the last twelve months as of Q4 2024 stood at $842.33 million USD, with a notable revenue growth of 11.39% over the same period. This aligns with the company's reported strong production figures from Duketon and Tropicana sites.
An InvestingPro Tip suggests that Regis Resources' net income is expected to grow this year, which could be attributed to the record gold prices mentioned in the article and the company's focus on cash generation. This positive outlook is further supported by another InvestingPro Tip indicating that analysts predict the company will be profitable this year, despite not being profitable over the last twelve months.
The company's strong financial performance is reflected in its stock price, with InvestingPro data showing a remarkable 64.25% price total return over the past year. This impressive return aligns with the company's reported increase in cash and bullion holdings, which have more than doubled over six months.
However, investors should note that an InvestingPro Tip suggests the stock may be in overbought territory based on its RSI (Relative Strength Index). This could be a result of the recent strong performance and might warrant caution for potential investors considering entry points.
For those interested in a more comprehensive analysis, InvestingPro offers additional tips and data points that could provide deeper insights into Regis Resources' financial health and market position. Currently, there are 13 additional InvestingPro Tips available for Regis Resources, which could offer valuable perspective for investors looking to make informed decisions.
Full transcript - Regis Resources Ltd (RGRNF) Q1 2025:
Operator: Thank you for standing by, and welcome to the Regis Resources Quarterly Results Briefing. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Mr. Jim Beyer, Managing Director and Chief Executive Officer. Please go ahead.
Jim Beyer: Thanks, Rocco, and good morning, everyone, and thanks for joining us for the Regis Resources September Q1 FY2025 Results. We will be making references to some of the figures and diagrams. So we will be referring to the release that we put out earlier this morning. In the room with me, I'm joined by our CFO, Anthony Rechichi; and our COO, Michael Holmes; and our Head of Investor Relations and External Affairs, Jeff Sansom. All right. Well, to describe our Q1 FY2025, I think I'd have to defer to [Dickens] and say it was the best of times and it was the worst of times or maybe bittersweet. Our team delivered some sweet outcomes at Duketon and Tropicana mixed with the bitterness of a very unexpected outcome at McPhillamys. So to kick off our story today, on the safety performance, it saw us finish the quarter with one lost time injury that resulted in a LTIFR rate of 0.4 for the quarter, up from zero in the past quarters. Our goal has always been and continues to be to provide a workplace that's free from serious injuries and life-changing injuries. Safety is a journey that hasn't an end, and we will keep driving to make those continuous improvements happen. Now, before we get into the main part of our operational business, I'll talk on McPhillamys. All of what I will talk to now has been discussed in some detail over the last couple of months. So I won't go over it too much. But at the end of July, we released the results of the McPhillamys DFS, which confirmed McPhillamys as a long-life, low operating cost open pit mine that delivers robust or delivered – have the capacity to deliver robust financial metrics with significant leverage to the gold price. And if you don't think it's a valuable project, do the math on the current spot environment. The average production for the mine is 187,000 ounces a year. The average all-in sustaining cost is just under $1,600. At spot price, using those average numbers, McPhillamys would be generating over $400 million, $450 million a year at the moment. So it is a clearly valuable project. So back to the DFS release, we put that out and about 25 days later, we were notified the Federal Minister declared a Section 10 over a proportion of the site, that's under the Aboriginal and Torres Strait Islander Heritage Protection Act of 1984. This area encompassed the approved locations of the tailings storage facility, meaning the project was no longer viable in its current form. Consequently, we were forced to withdraw the findings of the DFS, impair the holding value by $192 million and withdrew the 1.89 million ounces of reserves. More recently, two weeks ago, we received the Minister statement of reasons outlining the considerations under which the Section 10 declaration was based. It seems clear that a decision that goes against the views of the locally recognized lands council has not been considered reasonably by many people who have extensive experience in this space. The decision just doesn't seem to pass the pub test. Needless to say, this broader issue of what happens to be or what appears to be an unclear process and a decision-making process that lacks or appears to lack transparency relating to important investment projects is a topic of heated and much discussion at the moment. Taking my Regis hat off, industry cannot function efficiently with the uncertainty. And further to this, the uncertainty builds risk and risk reduces attractiveness for investment. A reduction in attractiveness for investment is something this country cannot afford. Despite our frustration with the process, we are looking forward. And we are following two parts of action, hope for the best and plan for the worst, I guess. We hope by continuing to review and evaluate the Section 10 reasons and working to determine our next legal steps. But we plan and we plan, we pick up the team, we dust them off and we get back to work starting the planning works on identifying an alternative location for the TSF. I note here, as we stated previously, to appropriately evaluate and study these alternatives and develop one that's suitable to meet the extensive list of approval standards and requirements, we believe it could take five to even up to 10 years before a new TSF can be confirmed and approved. So McPhillamys is now sitting in the longer-term project horizon for us for the moment as we work on all these possible angles. And I have to emphasize the button here. Regis is so much more than the story of McPhillamys and a decision by the Minister that rendered a permitted mine unviable. Operationally, it's been somewhat boring, sorry, Michael, as the team has gone about delivering on the plan, and this is what I'd say is nice boring. Financially, the quarter has been about as action-packed as anyone would ever want, actually, driven by the gold price, we'd like it to be even more action-packed in future, which we've got the potential to be. From a group perspective, we produced 94,500 ounces of gold at an all-in sustaining cost of $2,495 an ounce. Now, in that is $132 an ounce of non-cash stockpile costs. As previously noted, this is related to stockpile drawdown and is not a cash cost. Now, with our production at 94,500, an average gold price received of $3,717 an ounce, which was a record, we were well set to deliver, and we did. At this high level, what – at a high level for the business, what does it mean? Well, we made cash and lots of it. At the end of the Q1 FY2025 quarter, we built our cash and bullion position by $85 million, finishing the quarter with a balance of $380 million. And this is off the back of the previous quarter where we added $109 million to the balance sheet. In fact, in just the last six months, we have more than doubled our balance from $186 million to $380 million. Have a look at Figure four in the release, and you can clearly see the cash-generating trend of our business. This shows the significant cash-generating performance of our assets impressive, sure is unexpected. Well, not for us, we've seen this coming for a while. We've long been talking of the cash-generating capacity of Regis and this our third quarter of that could provide comfort and insight into what we can be delivering, assuming the guidance ranges we've provided in current gold price. Now, look, I want to talk a little bit more about our organic growth plans ex McPhillamys. But first, I'll get Michael to provide more insight in the operational performance and Anthony to provide some more details on the financial performance. Over to you, Michael.
Michael Holmes: Yes. Thanks, Jim, and good morning, everyone. Operationally, we were pleased with our performance in the quarter as we delivered in line with our expectations. At Duketon, our open pits and undergrounds produced 57,000 ounces at an all-in sustaining cost of $2,650 per ounce. Our open pits were responsible for 52% of the production or 30,100 ounces with mining occurring at Garden Well, Ben Hur, Tooheys Well and Russell's Find pits. Operationally, our open pits are stable and performed well. Our Duketon underground, Garden Well South and Rosemont undergrounds performed well and delivered 24,200 ounces. As Jim mentioned, we did draw on stockpiles during the quarter, and this is reflected in the non-cash charge of $163 per ounce. We expect the stockpile draw will continue through FY2025. We progressed the development of the Garden Well Main and Rosemont Stage 3. In our release, you will see that in the last few days, we opened the Rosemont Stage 3 ventilation portal. Duketon mills, both Garden Well and Rosemont performed to expectations with no unplanned downtime. Low-grade stockpile material supplemented the Duketon mills throughout the quarter, as mentioned, and will continue for the remainder of the FY2025. Through the quarter, Regis identified the opportunity of low-grade material processing through the Moolart Well Mill. This is currently being tested as a project to determine its viability as a short-term opportunity. As for Tropicana, their production was 37,000 ounces at an all-in sustaining cost of $2,173 per ounce. Open pits performed well following two quarters that were significantly impacted by ongoing rain events and disruptions associated with roads and other infrastructure. The open pits delivered 20,100 ounces at 1.22 grams per ton and in line with expectations. However, equipment availability do still continue to remain a challenge. The undergrounds delivered 16,000 ounces, which was again in line with expectations. And as announced on the 9th of September, the Havana Underground development was approved, and this was commenced and progressing during the quarter. The Tropicana mill performed to expectations with no unplanned downtime and the low-grade stockpile material supplemented their throughput as well, which will continue in FY2025. I'll now hand over to Anthony, who will discuss the quarterly financials.
Anthony Rechichi: Thank you, Michael, and good morning, everyone. As Jim mentioned, this has been another quarter of terrific operational performance with our gold being sold into, quite frankly, an outstanding spot price market. We sold nearly 80,000 ounces of gold during the quarter at an average price of $3,717 an ounce, receiving $296 million of gold sales revenue. These revenues resulted in operating cash flows of $150 million with $79 million from Duketon and $71 million from Tropicana. Now on to Figure three in the ASX announcement and the changes in cash and bullion for the period. The cash figure was released earlier in the month. And as many of you are aware, we are very pleased to be net cash and bullion positive. We received an average gold price of over $3,700 an ounce, like I said, which is fantastic. And looking at some of our more recent sales receipts in this new quarter, for example, some of our sales at more than $4,000 an ounce. Well, if this keeps up, then we are definitely going to have more great cash generation. On the capital expenditure front, we spent $50 million all up in the quarter. Included in that, $12 million was spent on our developing underground mines, Garden Well Main and Rosemont Stage 3 and $10 million in other underground development at the operating mines of Garden Well South, Rosemont and Tropicana. Plant and equipment expenditure was $6 million, mostly at Tropicana in the quarter. Exploration expenditure, that was $13 million for the quarter. Now, at McPhillamys, we spent a little under $4 million, which included the project work prior to the Section 10 declaration. We are reviewing the next steps on the McPhillamys project and its expenditure requirements for the year, as Jim mentioned, and we'll adjust the spend accordingly. Current indications are in the order of $10 million to $15 million for the year, down from our original guidance range of $15 million to $20 million. At this stage, we are expensing those costs through the profit and loss account, so expect to see that treatment in this year's results unless something certain changes before the year is out. Talking profit and loss, I'll make a point of one item you might have noticed back on Table 1 of the ASX announcement. The depreciation and amortization rate of $1,015 an ounce is higher than the prior quarter's $842 an ounce and the prior year average of $758 an ounce. In addition to the current quarter's lower production number as the denominator, the reason the D&A per ounce rate is up is that, we are now seeing higher capital cost mining areas, for example, Ben Hur and Russell's Find open pits being amortized into the numbers. Note as well that for a lot of last year, the likes of Ben Hur and Russell's Find were in pre-production and were not being amortized. So they weren't in that number. A lot of capital development work like pre-strip waste removal has to be done to mine these higher strip ratio areas. Nonetheless, they are still very profitable. The D&A is not straight line – it's not a straight line number over FY2025. So be mindful of that when you're projecting estimates. We expect the D&A expense per ounce to reduce over the balance of the year versus Q1, but we are still forecasting the annual depreciation and amortization expense per ounce to be in the mid to high-800s. Now, turning to our debt. Well, with $380 million of cash and bullion and $300 million of debt, we are net cash and bullion positive. And if this first quarter is a signal of what is to come for the year, we are expecting to be building cash at a rate of knots from here on in. So that begs the question. What do we do with our cash and our debt? And we are looking at those options now. We can make earlier repayments. We are looking at alternative facilities, capital management, you name it. We are considering it at the moment. So those are the main messages on the financials. And back to you, Jim.
Jim Beyer: Yes. Thanks, Anthony. Great set of numbers there. Looking now at growth within Regis. From a growth perspective, the quarter, as I said before, was a mixed bag. We saw progress in our growth strategy at Duketon and Trop, but we lost ground at the highly – in a highly publicized way at McPhillamys, but I've already covered that. So what is the growth strategy of Regis ex McPhillamys? And I'm hoping this is not a surprise to anyone. But on the West Coast, we progressed the development of our three underground projects, Garden Well Main, Rosemont Stage 3 and more recently commenced work at the Havana Underground at Tropicana. On Havana, what a great starter project for the fourth mining area underground at the operation is it. We already have Boston Shaker areas – sort of these discrete mining areas at Trop in Boston Shaker 3, Boston Shaker 4 and the actual Tropicana underground mine as well. So there is three really quite separate mine areas operating there, and Havana Underground will be the fourth. It is a modest initial plan as they usually all are with these start-ups. We see a current production of – in total of 55,000 ounces. That's our share, and that starts about two years out. Like our other underground mines, we think this is only the beginning as it's open at depth and has clear potential for more life. But even this modest initial size still packs a good return, if we look at the spot price of $4,100, just a little bit off that at the moment, I think this thing has an NPV at a 5.5% discount rate of $100 million. It has an all-in sustaining cost of just under $1,000 an ounce and a pretax internal rate of return of 92%. What is not to like about those numbers? At Duketon, we see stable production out until FY2028, sitting in this 200,000 to 250,000 ounce range. And currently, we see that coming from three undergrounds and from a number of satellite pits and stockpiles. So the next question is, how long can we produce at that level and how can we sustain that beyond that FY2028? Well, two things that we are driving. It's life extension of those undergrounds and the number of underground mines that we have. If we look at the life extension piece first, we look at the typical West Aussie underground gold mine in the Greenstone Belts. Generally speaking, the more you drill, the more you find and at Duketon, this isn't any different. We've got a track record of demonstrating year-on-year reserve replacement and growth since 2018 when we commenced or 2019, when we commenced Rosemont underground with an initial reserve of 123,000 ounces in the early stages. Since then, we've increased our reserves underground to 330,000, and we've mined nearly 0.25 million ounces, demonstration that the initial reserves are not usually a fair indication of what the future holds. Exploration drilling has not identified any structures that would cut mineralization off. So we continue to drill and prove up more years in advance straight out of the WA underground gold mine playbook, as I said before. Now, the other way is to look at the number of underground mines that we've got, and we look at each of our underground mines generally and think, look, they can produce on an annual basis in the order of 40,000 to 70,000 ounces of gold each year. It does tend to move up and down with wherever they are in their operational cycle, I guess. So realistically, we'd like to have at least one more, one more underground mine to maintain this profile beyond FY2028. So we do have options there. The current new underground mine options that we are investigating is underneath the historic open pits that we've got, Tooheys Well, which is doing a little bit of remnant mining there and Ben Hur, both of which have demonstrated significant potential. And you can see those in the recent presentations that we've released. Merlin also is another interesting more greenfields opportunity with both open pit and underground potential, but a little bit further out time line. So you can see our target of operating at least four underground mines is not unrealistic. In fact, it's quite achievable, and we've got the time to do it. In fact, more than four could be seen as being quite doable. Our teams are focused on this, and we are working towards delivering on this objective. As for the extra upside, any open pit material discovery represents further value and is – will be nice to put that on top of those undergrounds. We have plenty of encouraging results across the Duketon Belt, but these things can take time. So we make sure we have the right people on the job, which we do. And we make sure that the money is available when clear objectives and opportunities are met, which they are. And the same can now be said also for Tropicana. The underground potential of that asset is fantastic, and this is reflected in the recently announced commencement of the Havana Underground mine at Trop, which I just went through before. Exploration for open pits is looking at near-mine targets, but underground drilling has also identified some really interesting intercepts in areas that have not been previously drilled. Our growth at both Duketon and Tropicana is really exciting, and we look forward to progressing on this strategy. So looking at FY2025 and the rest of it, our cost and production guidance remains unchanged. We've shown what our assets are capable of delivering from a cash perspective. So the question is, Anthony covered off, what do we intend to do with our cash? Well, we've got a range of options. And broadly speaking, there are five that we are looking that we and the Board will work on: dividends; potential share buybacks; M&A, of course, internal growth projects; and of course, repayment of our debt facility. Safe to say that this stage, we are looking at all opportunities within all of these options, and none of them are mutually exclusive. The key point is, we will be disciplined in our approach, and we will do what is in the best interest of our shareholders as we continue to build the long-term value of the company. So to summarize the September quarter, while struggling with the surprising and disappointing Section 10 on McPhillamys, our mines delivered and underpinned by a record gold price, we achieved another quarter of very strong cash build of $85 million. We are now net positive $80 million on the balance sheet. We continue to deliver into our growth strategy by growing the underground footprint with the development of the third underground mining areas, Garden Well Main, Rosemont Stage 3 and Havana Underground. As we look to the future, the immediate actions and focus for the team are pursue our legal options on the Section 10, start the long process of developing alternative tailings storage solutions, continue to deliver into our underground growth strategy and identify the next approvable underground mining area at Duketon, continue to grow the balance sheet strength with unplanned operational delivery and using that strength of the balance sheet to develop options for our next stages of growth. The team here at Regis should be very proud of what they've undertaken over the last number of years and the resulting strong financial outcomes that are now being delivered. It's also pleasing to see the market starting to recognize the value of this performance. Okay. So what I'll do is, throw it back to you, Rocco, and open it up for questions.
Operator: Thank you. [Operator Instructions] Today's first question comes from Alex Barkley at RBC. Please go ahead.
Alexander Barkley: Thanks. Good morning, Jim and team. A question on the increase that quarter of your bullion on hand. Do you expect next quarter you can sell most of that down? It does seem like you started the quarter maybe at a slightly lower than normal level. Does that whole sales process reverse next quarter?
Jim Beyer: They're already gone. They go within days. It really – that I wouldn't read anything at all into those elevated gold balances. It's just the timing. We don't tend to pay too much focus on that at the end of the odd-numbered quarters, but we do try to drive the bullion sales hard at the end of Q2 and Q4 to make sure because that drives the profit. But the reality is, those gold bars that we had sitting in the – wherever they were, be they in the safes on where they sit, they would have been sold within days.
Alexander Barkley: Yes, sure. That's quite clear. And a question on the debt facility. I appreciate your comments on that already. But is there a reason why you wouldn't imminently pay that down just as liquidity allows and then sort of cross whatever funding bridge you need your capital management later on? Should we expect that to start getting paid down pretty soon?
Jim Beyer: Well, that debt is probably costing us about $20 million a year. So yes, there's pretty good motivation for us now to be considering what to do with it, which is what we're doing.
Alexander Barkley: Yes. Okay, sure. All right. Thanks very much.
Operator: And our next question today comes from Andrew Bowler at Macquarie. Please go ahead.
Andrew Bowler: Good day, Jim and team. First question from me is just on gold price sensitivity at Duketon. Have you got a rough number where restarted the Duketon North mill and processing of those stockpiles, a number in terms of gold price that will be required to get that up and running, get those stockpiles through the mill?
Jim Beyer: Well, maybe we – look, yes, there is, and it's where we are at the moment. We're actually running some preliminary trials up there on some stockpiles that we've got to see how they perform. They've been around for a long time. So there's a little bit of uncertainty in the confidence of the grades that they've been assigned. So we've got a project underway now just running some of that material through the Duketon North to see basically is what we think is there. And if it is, then yes, we'll exercise ongoing agility and keep processing it. But it's – at the moment, we're just assessing it to make sure that what we think might be there is there, [indiscernible] I mean.
Andrew Bowler: Yes, cheers. And also in terms of gold price, I mean, gold price being where it is, would it induce any further cutbacks of the sort of historic pits at Duketon? Or are you firmly focused on an underground strategy still? I mean, obviously, Merlin is a fresh start, but the old pits, would you consider cutbacks?
Jim Beyer: No, we're definitely looking at cutbacks. Yes, if we've got spare mill capacity, then we look at whatever we've got around to fill it. The thing with the cutbacks, particularly is that, well, by definition, they're cutbacks. If they're cutbacks in pits that are currently not producing, it usually means that they've got – it could be upwards of a year or two years of waste movement before we get to the next blocks of ore, right? So number one, we need to understand what that profile might look like, how long that takes, how much does that cost in terms of money out of the balance sheet and the risks involved with that. And we're working on those at the moment. So yes, we're pursuing those options, but we haven't made any decisions on those yet.
Andrew Bowler: All right. And last quick one maybe for Anthony. Just if you could give us some timing on when we might hear about those sort of trade-off thoughts on capital returns versus early debt repayment. Can we expect that with maybe the first year result or maybe a bit after that? The first half year result, I should say?
Anthony Rechichi: Yes. Look, I think we're definitely – it's in the thick of all of our discussions at the moment. So certainly, for the half year results, there will be a pretty solid update on that one.
Andrew Bowler: No worries. That's all for me. Thanks guys.
Operator: Thank you. And our next question comes from Matthew Frydman with MST Financial. Please go ahead.
Matthew Frydman: Sure. Thanks. Good morning, Jim and team. Can I ask the really uninspired question on M&A? Obviously, both you and Anthony made some pretty extensive comments on the cash-generating capacity of the business and, I guess, the capital allocation decisions that flow from that. Clearly, external growth will come into the mix over time. But I'm sure on the flip side, you're probably questioning internally whether AUD$4,000 an ounce gold is the right time to be a buyer of assets. So, I guess, can you maybe give us a bit more detail on how you're thinking currently about the timing of any external growth? Where would you want to see the balance sheet get to before maybe you start wanting to pull the trigger on that? And, I guess, secondly, the scope. So what's in the mix for consideration? What's not in the mix? Yes, how do you limit your options? Thanks.
Jim Beyer: Yes, it's a good question, Matthew. Maybe you should come and sit in on our strategy meetings to get clarity on that. Look, they're pretty detailed questions.
Matthew Frydman: Just put in my diary, Jim.
Jim Beyer: Yes, yes. They're pretty detailed questions. Look, the – and they're good questions and the right questions, ones that we ask ourselves, right? Look, at the end of the day, what you – it is – you do need to consider the current price environment. Does it make sense to acquire something when the price appears is at record levels, whether this is today's record level could be – last six months ago, we felt we were at record levels and look where we are. So, there's some pretty interesting environment for us to consider. But that's certainly one thing to play. Do you want to buy when things might be at there or perceived to be at their peak? But then the alternative is, what size scale, when you ask what position might we like the balance sheet to be in? Really, that's probably going to depend on the scale of the opportunity that we might be considering. So there's many things at play in that. Incremental – with McPhillamys now as a project for us pushed well out into the future, we expect, does that mean we might take on an early-stage project for us to apply ourselves to? And sorry, I just lost my train of thought there. That might be something that we consider early-stage projects and operating assets. So everything is in the mix at the moment. It's pretty difficult to sort of try and say it's one area over another. And, of course, as our value continues to rise and starts to more closely reflect our true value, that in itself is something that we take into account. So I'm afraid that's probably the best answer you're going to get from me, yes.
Matthew Frydman: Yes. No, I appreciate it, Jim. And it's obviously a very broad question. Maybe another kind of lens to think about it is, if things have gone differently, potentially you would have been ready to start construction on McPhillamys with a sort of circa $1 billion price tag. Obviously, the business is arguably in an even better position than maybe what you thought six or 12 months ago given the sort of cash generation and the spot gold price. So should the market be thinking about something of a similar – potentially something of a similar size or a similar ticket size in terms of the business is able to support a $1 billion kind of project? Is that feasible?
Jim Beyer: Well, first off, the project even before the Section 10 decision, FID was at least a year away still – there was still actually quite a bit of work that we need to do in the field, which we couldn't do because of the Section 10 application. We needed to do some final geotech work and the likes to be satisfied, we understood and we could arguably tighten up our variance provisions. So – and complete some of the other permitting requirements that – and designs that we were still wanting to finalize in more detail. So we weren't in a – that wasn't something that we were immediately going to kick off. As I said, you can see go back and review some of our past statements, it was – FID was late next year or early 2026. Would we consider something of a similar scale? Look, that's an interesting question. We've already got something. McPhillamys hasn't disappeared completely. It's still on our – it's still in our investment portfolio. It's a little bit further down the track. If we were going to do that, then ideally, and it was on the timeframe that we think it is, then ideally, we might have something that's got more production earlier to allow us to more comfortably undertake $1 billion project. It's a great project, but it was also – it's also quite a significant one, and we were going to make sure we were well and truly organized well and funded to execute that project. We've now got the time to undertake other activities in preparation. I mean, McPhillamys is not dead. It's just pushed back a long way in time while we look to reestablish engineering solutions there. So that remains a significant project for us. I'm not sure whether we would sort of run too quickly towards another project of that scale. At this point in time, we'd be sort of more likely looking at other things.
Matthew Frydman: Yes. No, that makes sense. And I appreciate the color there and also the specifics on the timing in terms of when you're actually going to FID McPhillamys. Thanks, Jim.
Operator: And our next question today comes from Hugo Nicolaci with Goldman Sachs (NYSE:GS). Please go ahead.
Hugo Nicolaci: Hi, Jim and team. Thanks for the update this morning. I was just hoping to dig into the mining costs across both assets a little bit more. Just looking at Duketon South first, open pit and underground material movements were both down quarter-on-quarter. Their absolute mining costs are up a bit over 10%. So I was hoping you could give a little bit more color there. And then similarly, at Tropicana, I guess, how much of the mining cost increase came from the step-up in volume?
Jim Beyer: Well, I mean, the step-up in – there's two things that are obviously driving our costs at the moment. The inflation is still out there. It's not as aggressive as it was. So we're seeing that happen. In terms of the Tropicana, the volumes, the pits – all our pits, both Trop and at Duketon, they're getting deeper. So even if the volumes were the same, the cost would be escalating through both inflation and longer hauls coming out. So that's just sort of naturally occurring in mature they’re all cost increases that we expect to occur across a maturing business, maturing open pits, I should say.
Hugo Nicolaci: Got it. Thanks.
Michael Holmes: I'll add to that as well. Just one of the things you see at Tropicana there, Hugo is the mining costs that you're looking at, they're also net of the capitalized cost, which is the likes of your deferrals for the underground, your open pit deferrals, that sort of stuff. So you can get timing differences there as well, just depending on where you are in the ore bodies. And that's an important one for driving that. I mean, at Duketon in aggregate, we've actually largely gone down. And the main reason for that is because of the lesser costs being incurred at Duketon North.
Hugo Nicolaci: Got it. That's clear. So, I guess, if I think about it from an underground versus open pit on a dollar per ton basis going forward, are you able to give a sense on where you expect those to be heading over the rest of the year across both assets?
Jim Beyer: I wouldn't see too much variation from where it is.
Hugo Nicolaci: Got it. Thanks. I'll pass it on.
Jim Beyer: Thanks, Hugo.
Operator: Thank you. And our next question today comes from Hayden Bairstow with Argonaut. Please go ahead.
Hayden Bairstow: Good morning, Jim. Just a couple on Tropicana. Is there scope, do you think from what Anglo is thinking about there? Or are they sort of heavily focused on sentiment at the moment? Is this going to be business as usual sort of regardless of what the gold price does? Or can we start looking at Havana South and a potential underground? I presume the open pits have less potential there?
Jim Beyer: Well, I don't think there's any – I mean, we had one of our numerous meetings with the team – with the Anglo team yesterday, and I don't think there's any taking the foot off, chasing the options and the opportunities there. We're all pretty – we're pretty pleased with the way that Havana has kicked off. I mean, the portal has been cut now and they're off and running. They continue to look at other options, and they, in fact, continue to look at alternatives within the existing area. One of the things we were talking about was the potential to use filter in some of the high-grade areas to improve mining recoveries. So there – what's happening corporately is not – for that group is not having any kind of impact on the way they're approaching driving Tropicana is certainly not that we see.
Hayden Bairstow: Okay. And just a bit of a follow-up on Andy's question around, I mean, Duketon North, one thing, even Duketon South is going in the Garden Well Main and the sort of two big undergrounds below the pit. Does that sort of remove the potential to do another cutback and get some of those open pit resources into the Garden Well pit?
Jim Beyer: No. Yes, it has removed the potential. They're right up – they're right on it. We couldn't do another cutback. There's – okay. Well, there's some areas there maybe in the center where we're not mining underneath. So there's opportunities…
Michael Holmes: We're looking at a trade-off of another cutback or getting some of the material from underground. Of course, the underground is a lot narrower, so you're not getting the total amount of ounces as an open cutback would give you, but it's certainly a trade-off that we're having to look at the moment. But it's a high strip ratio cutback. So we're just looking at our trade-off options at Garden Well.
Hayden Bairstow: Okay. And then the rest of the resource ounces at Duketon South, are they – is there other pit options around sort of 500,000, 600,000 ounces I think in resources outside your current reserve plan?
Jim Beyer: Well, there's lots of options in the open – there's lots of resources still sitting in the open pits. So as we said, but more generally now, the resources that sit around that are sitting around are high-cost ounces. So we need to make the decision as to whether there are investments that we want to make that take a while to start to pay back.
Hayden Bairstow: Okay. Perfect. And then just finally, Jim, just on the sort of the next mining front at Duketon, when do you think we'll have – be able to plug something in with a name on it sort of know which one is going to be and start putting some sort of scenario through?
Jim Beyer: Well, we'd like to have a view on that by this year for sure.
Hayden Bairstow: Yes. Okay, great. Thanks guys.
Jim Beyer: I mean, these things just take a bit of time, Hayden, you got to drill them, you got to assess them. And sometimes you got to go back and drill some holes in to fill them in, but we'd like to have a view on that by the end of this year.
Hayden Bairstow: None of us have any patience, mate. You know that.
Jim Beyer: Yes, the virtue, mate.
Operator: Thank you. [Operator Instructions] Our next question comes from David Coates with Bell Potter Securities. Please go ahead.
David Coates: Questions is indeed a virtue, Jim. We're getting there in the end. A couple of questions from me. So you talked about the stockpile options up at Duketon North. Any indications on timing of a decision on those?
Jim Beyer: Well, we're assessing it at the moment. So, we'll have a clearer picture on that probably over the coming months.
David Coates: Okay. So maybe with the December quarter or something like that?
Jim Beyer: Yes.
David Coates: And on those cash – I mean, obviously, I like sort of non-cash stockpile costs and that kind of thing, but actual cash cost, is it just sort of like what's involved just to re-handle and what kind of a dollar per ton number would we be looking at for those?
Jim Beyer: What, for the stockpile treatments?
David Coates: Yes.
Jim Beyer: Yes. Well, I suppose there's a couple of dollars a ton to pick it up and truck it to the mill and then the milling costs are running $25 a ton, $30 a ton.
Michael Holmes: Yes, circa that. Easiest way to pick that up, David, just take a look at the milling costs in the last couple of quarters there and for the tons milled, and that will give you the decent numbers on the throughput cost there.
Jim Beyer: That would be reasonably priced.
David Coates: Yes. Great. And I appreciate you've talked a lot about the uses of cash and M&A and that kind of stuff. But in terms of the use of cash, what do you think the sort of the top couple of factors in your mind at the moment in relation to sort of all those various options? What are sort of the key kind of considerations at the moment?
Jim Beyer: Yes, it's a question, I guess, the first one, you just want to make sure you're getting what you're paying for and that there's potential there for more value. And that relates to the price environment. You just need to make sure that you'd like to think that you're not buying something that's fully valued already. So, which is code for saying depends how much it is, what's the cost? And then after that, it's – well, what are the – are there any other risks around it? Is there a construction risk? Is there an ease of bringing it into the business? Does it give a bit of a short-term hit, but then there's medium-term problems within a period of time that you've got to start dealing with, which means that you've got to be a little bit picky. The flip side of that is that, you also might be looking for something where others can't see the value, and that's what you really hope that you see. But that way, you can get something of value and realize that value without paying for it. But we're not the only ones looking to do that. So it just be patient and takes time.
David Coates: And just kind of flipping that around a little bit. You guys could possibly be in a position like that yourselves with the option value of McPhillamys probably quite subjective. But as you point out, stacking up pretty – making a lot of cash at current spot prices. How do you guys – does the use of cash like maybe a share buyback or something factor into maybe trying to defend from someone who does sort of put a lot of weight on the option value of McPhillamys and the cash generation that you guys are demonstrating at the moment, but is maybe not being recognized in the share price?
Jim Beyer: Well, I guess, I'm just trying to peel away the question there, but...
David Coates: So if you guys – if someone sort of sees you as a target, they sort of see a lot of potential value in McPhillamys. Does the share buyback perhaps come into consideration to sort of, I guess, sort of try and defend your share price value from someone who sees you as...
Jim Beyer: Yes. Look, I mean – okay. All right. So I think there's a couple of things. I think certainly, with the movement in our share price recently, I mean, part of our job is to make sure that people understand what the value of the business is and communicate that. And hopefully, the theory is that, that starts to reflect in people buying shares because they see the value that's there. We actually think that, that's certainly something that's occurring now and the market is clearly starting to recognize the value. We're out front of the cloud or the haziness that the hedge book provided. We're probably at least we've – so we've got some clarity on our cash-making position there. At the end of the day, our job is not so much to – and the idea of what we do with our capital, I know it was just sort of semantics, but our job is not to defend the company. Our job is to – in the sense that it was being described, our job is to make sure we're maximizing the value for our shareholders. And so, when the time – right now and whenever – if a time ever came, we're just making sure – our focus is on making sure that we continue to do what is ever in the best long-term interest of our shareholders.
David Coates: Excellent. Great mind set. Thanks, Jim.
Jim Beyer: Thanks, Dave.
Operator: There are no further questions at this time. I'll now hand back to Mr. Beyer for closing remarks.
Jim Beyer: All right. Well, that's it. Thanks very much. Thanks all for your questions. We appreciate it. As always, if there's any follow-ups or anything that you'd like to do or we'll do our best to answer them, but please get in touch with Jeff. And otherwise, thanks for joining us, and have a good day.
Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
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