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Earnings call: Evolution sees strong quarter with cash flow increase

EditorNatashya Angelica
Published 04/17/2024, 02:36 PM
© Reuters.

Evolution Mining Limited (EVN) reported a solid financial performance in its latest earnings call, with CEO Lawrie Conway highlighting a 7.5% increase in group cash flow to $85 million for the March quarter. The company is looking forward to higher production in the coming June quarter and aims to bolster cash flow while reducing its current gearing level of 28%.

Despite these positive developments, Evolution expects production to be at the lower end of their guidance, with copper production projected at the higher end and all-in sustaining costs towards the upper range. The company also announced the appointment of Nancy Guay as Chief Technical Officer and maintains its group guidance with plans to improve operations across all sites.

Key Takeaways

  • Evolution Mining reported a 7.5% increase in group cash flow to $85 million for the March quarter.
  • Production is expected to be at the lower end of guidance, with copper production at the higher end.
  • All-in sustaining costs are anticipated to be towards the higher end of the range.
  • The company aims to increase cash flow and reduce gearing, which currently stands at 28%.
  • Positive drilling results were reported at Ernest Henry and Kundana mines, indicating potential for increased mineral resources.
  • CFO Barrie Van Der Merwe highlighted reduced gearing, increased cash flow, and a focus on margin.
  • Evolution maintains minimal hedging, remaining leveraged to high gold and copper prices.
  • The company plans to continue deleveraging and increase cash generation in the upcoming months.
  • Progress on various projects includes responses to regulators, feasibility studies, and operational ramp-ups.

Company Outlook

  • Evolution maintains group guidance and plans for operational improvements.
  • A focus on generating cash from Red Lake and ramping up production at Cowal Underground.
  • The company is evaluating options for E22 with considerations on payback period and capital intensity.
  • A pumped hydro project is being evaluated with a technical feasibility study due this year and a commercial outcome expected by mid-next year.

Bearish Highlights

  • Production is expected to be at the lower end of the guidance spectrum.
  • All-in sustaining costs are projected to be at the higher end of the range.

Bullish Highlights

  • Strong cash flow from Northparkes and positive results at Ernest Henry and Mungari mines.
  • The company is leveraged to benefit from high gold and copper prices.
  • Cash generation is expected to increase in the coming months.


  • No specific misses were highlighted in the earnings call.

Q&A Highlights

  • The company expects an increase in mining rates to 2 million tonnes in FY '25 and 2.5 million tonnes in FY '26.
  • Mining costs have increased due to inflation but are stabilizing.
  • The Cowal project's paste plant is not a bottleneck, and an increase in mining rates from the underground is expected.
  • No major changes in capital requirements are anticipated over the next few years.

Evolution Mining's earnings call was marked by a strong financial update, with increased cash flow and reduced gearing. The company is poised for continued improvement in its operations and remains focused on leveraging the high gold and copper prices to its advantage. With various projects in progress and an optimistic cash flow outlook, Evolution Mining is actively pursuing growth and efficiency in its operations.

InvestingPro Insights

Evolution Mining Limited (CAHPF) has shown promising financial health and growth potential according to recent data from InvestingPro. Analysts expect net income growth and sales expansion in the current year, which correlates with the company's report of solid financial performance and increased group cash flow. The revenue growth over the last twelve months was 5.88%, underscoring the company's ability to increase its earnings.

InvestingPro Tips suggest that while the stock is trading at a high earnings multiple with a P/E ratio of 47.82, reflecting a premium valuation, it is also trading near its 52-week high, indicating strong investor confidence. The company has maintained dividend payments for 12 consecutive years, which may appeal to income-focused investors.

InvestingPro Data metrics provide further insights:

  • Market Cap (Adjusted): $5.32B USD
  • P/E Ratio (Adjusted) last twelve months as of Q2 2024: 39.87
  • Revenue Growth (Quarterly) Q2 2024: 18.31%

These metrics, combined with the company's operational plans and strategic initiatives, suggest that Evolution Mining is positioned for continued growth. Investors looking to delve deeper into Evolution Mining's prospects can find additional InvestingPro Tips, which currently number 11, by visiting https://www.investing.com/pro/CAHPF. For those considering a subscription, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

Full transcript - Evolution Mining Ltd (CAHPF) Q3 2024:

Lawrie Conway: Thank you, Darcy, and good morning, everyone. Firstly, on behalf of us all here at Evolution, I express our condolences for those impacted by the tragic and senseless event that occurred here in Bondi on Saturday afternoon. The loss of lives and injuries suffered by many people going about their daily life is hard to comprehend. Our thoughts and prayers are with everyone as are our thanks and appreciation to the emergency services response to the event. Today, we released our quarterly report and an exploration update. The exploration results continue to drive the mineral resource growth at Ernest Henry and Mungari. Specifically, at Ernest Henry, we are gaining more confidence around Ernie Junior connecting to the main ore body. This provides potential for additional metal per vertical meter, further enhancing the value of this world-class deposit. At Mungari, the results are really positive for the potential of additional high-grade mineral resource at Kundana to increase the value of the expanded processing plant. The March quarter saw us deliver materially to our plans despite the adverse impact of the wet weather. The improved performance has set us up for a strong June quarter. The momentum and the cash build continued from the December quarter with group cash flow up 7.5% to $85 million at an average price that was $545 per ounce and $1,350 per tonne below the current spot gold and copper prices. With regards to our copper revenue, a key thing to note about the shipments that went in late March will mostly be settled using the average copper price in April, which provides further upside to our cash flow. The planned higher production in the June quarter matched with the current high metal prices will allow us to materially increase our cash flow and further reduce our gearing from the current 28%, which is down nearly 5% from the start of the financial year. We will realize the full benefit of the record gold price with only 10,000 hedged ounces due to be delivered this quarter. Overall, 95% of our production in the next 2 years is unhedged, while we have no copper hedging. The improved cash generation was driven by the 15% increase in production to 185,000 ounces and a 10% reduction in our all-in sustaining cost to $1,464 per ounce. Due to the quarter end, happening over the Easter period, our sales were lower than production, and as such, our all-in sustaining cost would have been about 4% lower at $1,405 per ounce and cash around $25 million higher. These benefits will flow through in the current quarter. Northparkes delivered strong positive cash flow at $37 million in our first full quarter of ownership and post stream obligations. This exceeded our expectations and demonstrates the quality of the asset, as we said on acquisition, that it would be cash generative from day 1. The performance in the March quarter and specifically the way we ended the quarter has enabled us to maintain our group guidance. Production will be at the bottom end of guidance of around 749,000 ounces with the weather across Australia in March adversely impacting production by around 8,000 ounces. Copper production is expected to be at the high end of the guidance range, around 65,000 tonnes. Our all-in sustaining costs will be towards the high end of the range of approximately $14.10 per ounce, reinforcing our position as one of the world's lowest cost gold producers. Group capital guidance remains unchanged. Pleasingly, the performance in the quarter was done in a very safe manner. Our total recordable injury frequency reduced from 9% to 8%, and the real highlight was the performance at Red Lake, where they reduced their trip to its lowest level under our ownership. More importantly, our operations were well controlled to give our people and assets safe during the difficult wet weather conditions experienced during the quarter. There were many highlights and milestones in the quarter. At Cowal, we achieved commercial production in the underground with an annualized mining rate of over 1.5 million tonnes achieved in March. This is a mine which Evolution discovered and will transform Cowal into the future. In the month of March, post the major ship plant shutdown, Cowal exited at a quarterly run rate of around 93,000 ounces. When considering the increased contribution from the underground, Cowal is expected to deliver over 100,000 ounces in the June quarter. Ernest Henry continued its consistent and outstanding performance, generating over $100 million of operating cash flow again. It has now fully repaid all acquisition and subsequent capital investment. This means the $1 billion that we paid to acquire the remaining interest has now been fully repaid in just over 2 years, and the operation has at least 17 years of life remaining. Northparkes had a very good quarter, producing to plan, as mentioned. It delivered $37 million of cash flow. The E22 feasibility study remains on schedule, which will provide us with a good baseline of the physicals, economics and time frame of the project. Having gained a good understanding of the operation and the options of the many ore bodies, we are now confident that E48 sublevel cave will be a viable next source of ore to supplement the E26, given the installed infrastructure and timing to bring E48 into production. We look forward to outlining the plans when we host a site visit on 19 and 20 June. At Mungari, the operation delivered a 15% increase in production at a lower cost despite the regional power outage in January and wet weather in March. Looking at the June quarter, the higher-grade material from Paradigm and an extra campaign of the EKJV material will deliver a further increase in production and lower all-in sustaining costs. The AISC was impacted in March by the need to process lower-grade, higher-cost stockpile inventory due to the wet weather. Good progress was made on the 4.2 project, and it remains on schedule and on budget. Red Lake made good progress towards more consistency during the quarter with a 26% increase in production to over 30,000 ounces. They have now delivered over 10,000 ounces for 4 consecutive quarters. The all-in sustaining cost reduced by 15%. This is a positive shift in the performance of the asset. With the higher tonnes and grade from Balmer and Upper Campbell this quarter, we expect production to increase to 40,000 to 45,000 ounces. I was on site last week and saw firsthand the good work being done and the high level of commitment for the site to maintain that performance at Red Lake. In summary, at a group level, the June quarter performance will deliver a step-up in Cowal underground production, higher grades and additional underground EKJV campaign at Mungari, plan further improvements at Red Lake and consistent performance at the other operations. Lastly, we announced, in the quarter, the appointment of Nancy Guay as the Chief Technical Officer. Nancy is a highly experienced mining executive, who will join us from Agnico, and we look forward to Nancy commencing with us on the 1st of June. I'll now hand over to Glen to provide all the details of the exploration successes for the quarter.

Glen Masterman: Thank you, Lawrie, and good morning, everyone. I'd like to turn your attention to the exploration announcement we released this morning, describing recent exciting drilling results that we expect will continue to drive resource growth at Ernest Henry and underground in the Kundana mine at Mungari. Firstly, at Ernest Henry, where 2 weeks ago, I had the pleasure of spending a few days with our site geologists to see firsthand some of the exciting drill core intercepts that were proudly on display from the recent drilling program. I always know when an exploration drilling program is going well. Our geologists are unable to wipe the smiles from their faces and can't wait to get into the core shed to show me where all the action is happening. It is also one of the easier conversations during the budget cycle with the success of the program speaking for itself, when it comes to asking the business to support continuation of drilling programs that add resources at the rate Ernest Henry has over the last 2 years. Before I describe the significance of the Ernest Henry results announced in this morning's exploration update, I would like to firstly recap on the journey we've been on since assuming full ownership of the asset at the beginning of 2022. As you heard from Lawrie, we have reached a milestone repaying all the investment and acquisition costs for Ernest Henry and have at least a 17-year mine life ahead of us. The long mine life is driven by a large ore reserve, which we have been able to double since taking the keys 2 years ago. The drilling results outlined in Figure 1 on Page 2 of this morning's exploration announcement, reflect additional upside to the recently delivered mineral resource and ore reserve growth. The new results are important because they will be incorporated in a mid-year block model update that will inform the feasibility study and the associated ore reserve update, which we expect will be completed in the March 2025 quarter. The drilling has highlighted that the Ernie Junior ore body is geologically continuing us with and joins into the main ore body. This is significant because it will enable us to maintain constant copper and gold grades in the production profile as the cave progresses through this area of the mine. I'd like to focus your attention on the current mineral resource outlines illustrated by the yellow shapes on the long section illustrated in Figure 1. The more drilling we complete into the areas of open white space, the more the yellow mineralization shapes expand to close our previously modeled waste areas. What's exciting is the potential to convert this growing mineral resource into ore reserves which we will be able to do with further infill drilling. The addition of reserves adjacent to the feasibility study footprint is beneficial as its future potential mining inventory can be conceivably accessed from planned development being designed in the mine extension study. Turning to Mungari, where last year, at Diggers and Dealers, you will recall we revealed the discovery of the Genesis load in the Kundana underground. New drilling has continued to grow the mineral resource. And as I said at the time, I would update our investors as new results come to hand. What we are seeing in the results on the long section in Figure 2 of the exploration announcement are some exceptionally high grades hosted by narrow intercepts through the Genesis load. Rate thickness intervals across these intercepts range from 10 to in excess of 100-gram meters. In my experience, anything exceeding 30 to 40-gram meters has the hallmarks of an exceptional drill result. This range of results is similar to that in historic drilling, which delineated the Christmas low where we are currently mining in an adjacent location 30 to 50 meters into the footfall of Genesis. We are confident that the mineralized geologic corridor our drilling is unearthing at Genesis will continue alongside towards the historically mined Barkers ore body. This new search space spans a large area of prospective geology which was poorly tested by previous drilling. We will continue to explore this area aggressively, which if we succeed, is one of the more exciting opportunities to continue to extend the high-grade life in the Kundana underground. In conclusion, there are 2 key messages I'd like to leave with you from this morning's operation update. Firstly, the Ernest Henry's results are significant in that they are adding more metal per vertical meter in areas adjacent to the mine extension footprint which we are confident have the potential to convert to additional reserves over and above the large increases we have delivered since taking full ownership of the asset. Secondly, I'm excited by the potential at Mungari, where we continue to learn more about the geology that host the high-grade veins that we are mining at Kundana. Application of this new knowledge is driving success with the drill bit where we continue to identify mineralization in areas that have been poorly tested by historic drilling. This leaves open the possibility for new high-grade discoveries in what is generally assumed, but not by us, to be a very mature exploration search space. With that, I will hand over to Barrie.

Barrie Van Der Merwe: Thank you, Glen, and good morning, everyone. During this quarter, we continued to generate cash and deleverage. Gearing reduced from 30% at the end of December to 28%, and we ended the March quarter with $215 million in cash and available liquidity of [$740 million], up $24 million from December. Operating cash flow increased by 14% and to $384 million, with all operations cash positive before major capital. We are very pleased that Northparkes generated strong operating and net mine cash flow during its first full quarter of ownership with a contribution of $37 million. Net mine cash flow for the group was $139 million. Our focus continues to be on margin, and I was especially pleased that the quality of our portfolio was clearly demonstrated by our all-in cost margin per ounce, increasing 40% from $676 per ounce to $947, compared to only a 3% increase in the achieved gold price. Since the September quarter, it is up 82%. The AISC per ounce was down 10% quarter-on-quarter at $1,464, driven by decreases at Ernest Henry, Red Lake, Mt Rawdon at the first full quarter from Northparkes. The quarter ended over the Easter weekend resulting in 7,000 produced ounces not being sold. This would have lowered the AISC by 4%. I'm pleased to confirm that there's no change to our original cost guidance with our AISC expected to be at the top end of the range of $1,410 as the benefits of the final quarter material uplift in gold production is realized. Group cash flow for the quarter was $85 million and $164 million for the last 2 quarters, during which we expected to start deleveraging. We paid $60 million of stamp duty and other transaction costs for Northparkes, paid a $32 million working capital adjustment to CMOC and received $32 million from the share purchase plan. All material transaction costs related to Northparkes have now been settled. We are significantly leveraged to the current high spot gold and copper prices and have only approximately 5% of gold sales hedged over the next 2.5 years. This is aligned with the capital expenditure for the Mungari 4.2 project. We will note that the average realized gold price in the March quarter was $3,171, and the copper price $12,885. With gold and copper currently trading significantly higher and with our production increasing materially, cash generation and deleveraging will build further momentum for the remainder of this financial year. I will now hand you back to Darcy to open the line for questions. Thank you.

Operator: [Operator Instructions] Your first question comes from Rahul Anand from Morgan Stanley.

Rahul Anand: I've got two questions for you. First one is on Red Lake. Obviously, you've been talking about the second half of this fiscal being the baseline for next year's production. And today's result was pretty much in line with consensus. But what I wanted to check on was a couple of things on Red Lake. Firstly, fourth quarter expected rates of 40,000 to 45,000 ounces would indicate a higher run rate than what your second half average is, which equates to $140 million to $150 million for next year. Any particular reason why we shouldn't be using the fourth quarter as your exit rate? And then also, if you can update us on the plans around the asset as well, mainly around obviously the Upper Campbell area, is it still targeted to be 50% by FY '25? And then are you still hoping for 20,000 ounces that you outlined in October last year to be the medium-term run rate for the asset? That's my question on Red Lake. I'll come back with a second on Northparkes.

Lawrie Conway: Look, I'll try to address all those three subpoints to that question at once. You can't just take 1 quarter as the rate that's going to continue for the next 4 quarters into FY '25. Because at Red Lake, we've got the 3 main mining areas, Balmer, Cochenour, Upper Campbell, mining areas that will finish this year that we won't be mining next year. So when we look at it, as we've said in the report today, we look at the second half of this year, where we're getting some more reliability around development and mining that will give us an average $70 million to $75 million that sets a baseline going into FY '25. And then as the team is working through now, the mine plan for the next few years and specifically FY '25, where the focus has not changed from what we said in January, it is not to chase the ounces. It is to make sure that the ounces we're producing are starting to make money. We've invested a lot in the asset over the last few years, and it's time for it to start to generate cash back to the business. So what John and the team are now working through is what delivers that. So what we see is that $140 million, $150 million is the baseline heading into FY '25. They've got to build on that through '26 and '27. So we're not chasing 200,000 ounces as a target. We're chasing cash out of that asset.

Rahul Anand: Okay. Understood. And then just a bit of color on Upper Campbell, obviously, that's a higher grade part of the ore body, are development rates enough to be able to still get you to 50% of the mix by FY '25? Or is that also under consideration?

Lawrie Conway: Look, it absolutely is under consideration, because we're going to look at what the development costs are to get to there. And if you remember that we're running 2 processing plants and how they get fed, so you do need to be running Balmer, Cochenour and CYD and Upper Campbell. So what John and the team are looking at is what's the optimal way to feed tonnes to both of those plants and keep them running and what's then the mix going into next year. We certainly see, as we go into May and June, a higher contribution from CYD and then what we bring into FY '25 is currently what's under review with John and the team.

Rahul Anand: Okay. All right. Look, second one is, hopefully, a bit of a quicker answer, I guess. Northparkes, you have the keys now. Any initial key takeaways in terms of how the asset's been capitalized in the past? What are you seeing in terms of capital requirements? And where should we think sustaining capital ends up for the asset in the medium term?

Lawrie Conway: I’ll give you part of an answer, and I’d ask you to maybe wait until the Investor Day in June, because we are working through all of those options that I just talked about on the call. I think if you look at it in the first 3.5 months of ownership, well, as of today, it’s 4 months. We’ve seen an asset that has been well built, well capitalized with a highly engaged workforce that is safely going about delivery of the plan. It delivered to plan in the March quarter. It’s doing what it needs to do in April. So in terms of that, we see that it’s going to deliver to the guidance or better for this year. As we go into FY ‘25 and beyond, as I said on the call, we see E48 as the next door source that will supplement E26. It’s a mine that they finished mining in December, but with the installed infrastructure and the minimal amount of development that’s required. The team onsite believes that this is the logical one to bring into production next, which has obviously a lower capital intensity. We’ll work through that plan and outline it in June. In terms of sustaining capital, though, it’s not going to be much different to the assets like Cowal and Ernest Henry in terms of sustaining capital that it requires.

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

Matthew Frydman: Can I ask some questions around the ramp-up of the Cowal underground and perhaps along a similar line to some of those questions that Rahul just asked about Red Lake. Obviously, the Cowal underground's going to be a key part of delivering on your guidance, I guess, not just for the remaining June quarter, but also your production growth into FY '25. So I'm just interested in understanding, I guess, the buffers that you guys have been able to build up through the system now that you've declared commercial production at the Cowal Underground, how you're positioned in terms of development meters, blasted stocks and also, I guess, mined ore. It does appear that you taking all of that mined high-grade material straight to the mill, which makes sense. But is that the case? Do you have sort of blasted mine stocks available from the underground? And then I've got a couple of follow-ups as well.

Lawrie Conway: Thanks, Matt. I mean, if you look at the underground, the mining and the development wasn't the delay in getting to the commercial production. It was the delays in the paste plant starting. So what we've seen is that in terms of being able to mine the underground, it has not been a problem. We've achieved those mining rates. We've been able to get the development meters. As we come into the June quarter, we'll see that 1.5 million tonne annualized rate lift up to the 1.7 million. We'd like to end the year and exit it at around a 1.8 million tonne mining rate. As we go into FY '25, you look at that lifting to 2 million and above and then ultimately moving into FY '26 of achieving a 2.5 million tonne mining rate and staying around those levels. So as I said, the mining hasn't been the problem in terms of the ramp-up. So we'll see that into this June quarter. I think as we always say, not taking the June quarter or the 1 quarter as the reference to FY '25, we do have to consider, as we go over the next 18 months, 2 years that you get to stage H in the E42 pit, starts to wind down. So you're seeing the underground ramp up, those grades offsetting that, and then you'll see E42 coming to the end where you start to then see those grades decline.

Matthew Frydman: Yes. Got it. And you've preempted my follow-up question, which is, I guess, around how you're expecting the ramp-up of volumes from the underground and still clearly guiding to sort of 2.4 million , 2.5 million tonnes per annum by FY '26. Can I just ask in terms of mining cost now that you've declared commercial production. How should we think about that maybe on a dollar per tonne basis? And should we expect that, that cost will decline incrementally as those volumes do creep up to 1.8 million tonnes per annum and beyond?

Lawrie Conway: Yes. Look, we'll come back to you specifically on that. But what we would see is exactly that matter. As we go through the next 18 months, and we ramp up to full production, you absorb those fixed costs underground. I think it's fair to say, though, that from when the mining started to today, that has happened through a period of high levels of inflation. So those mining costs have trended up over the last 12 to 16 months. We've seen those stabilize, obviously, in the last few months. And then, yes, that will be partly offsetting some of that benefit we'll get from the fixed, but we'll certainly be able to provide just some information on the unit mining rates. I just don't have off-hand with me right now.

Matthew Frydman: Yes. I can't recall off the top of my head what the assumed unit cost was in the PFS either, but it sounds like, subjectively, you're saying that with inflation, et cetera, that's probably crept up over time.

Lawrie Conway: It has crept, and in some quarters, it leapt.

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

Hugo Nicolaci: I just wanted to follow on from Matt's question around Cowal and specifically looking at the fourth quarter and the rest of this calendar year. And if I back out the affirmation of guidance, it looks like you're still embedding a pretty good uplift in feed grade to hit that. So are you able to just provide some color around how much of that uplift in feed grades coming from drawing down underground stockpiles that you've already mined versus, I guess, where you see the grade going to the underground for this quarter and the rest of the year?

Lawrie Conway: Yes. Hugo, I mean, we don't have a large stockpile there. I mean, obviously, the mining of those types has been predicated on having the paste plant running and being able to fill those stopes. So it's not really about the building of the stockpile. We will build some of the stockpile as we go into this quarter and into the rest of the calendar year. What we mined from the underground is what we will see getting processed. So, essentially, what we see is in the June quarter, we see that lift up in mining rate in the underground that I was talking about. No shutdown, so we actually will see at least 150,000 tonnes more going through the processing plant with a lot of that coming from the underground. The E42 is also into a good mining area where we see a tick up in the grade. So you saw it go from 1.21 to 1.34, I think, in this quarter, and you're going to see it go over about [Technical Difficulty] and then depending, as I said, into FY -- the rest of this calendar year and starting into FY '25, we ramp up towards that 2 million tonnes, obviously, at the higher grade of 2.5 grams coming from the underground, displacing the lower-grade E42 material.

Hugo Nicolaci: Great. That's helpful. And then maybe just 1 on Northparkes, I appreciate the study is progressing and no doubt, a focus for the site visit in June. But maybe just build on your initial comments earlier around the preference for the sublevel cave still being what you're targeting. And any kind of updates working through the study that's reaffirmed that preference?

Lawrie Conway: Yes. Look, Hugo, that was actually on the E48. So the E22 feasibility study will be finished on a block cave. That’s what it started out as the chosen path of a feasibility study. What the study team is doing at the exact same time or in parallel is looking at what the sublevel cave option would be. They also believe there is a viable path for that, but we did not want to distract them from finishing the feasibility study to get that baseline, whereby then we look at the options between the block and the sublevel cave, which we’ll talk about on the visit in June because they’ve not finished that study yet. And the E48, which finished mining as a block cave in December, has a number of levels below that, that we believe can be the next door source as a sublevel cave, and that’s something that the site team is recommending. [Technical Difficulty] That’s a way to move forward with the asset.

Operator: Your next question comes from Andrew Bowler from Macquarie.

Andrew Bowler: I think a lot of the fourth quarter operational questions have been answered. I might just add on to Matt's previous question, just talking about the underground volumes in the fourth quarter at Cowal. You sort of comment in the core, the paste plant does continue to ramp up. And I think you alluded to it in your previous answer there as well. But is there any risk that a slower paste plant ramp up in the fourth quarter sort of not hitting those targets in the fourth quarter could impact underground volumes? Or are most of the stopes still primary and there's not really that much of a backlog to fill?

Lawrie Conway: Our short answer there, Andrew, is no. The paste plant is not the bottleneck. It's enabled us to get to those mining rates by being able to keep up with the mine during the quarter. It performed well particularly through March and has further improved in early April to be able to match those mining rates. We don't see that as a bottleneck to the underground for the fourth quarter.

Operator: Your next question comes from Jon Bishop from Jarden.

Jon Bishop: Can you just get me through where you're sort of seeing as the upside levers for your full year guidance? Obviously, Red Lake is a big one, so 40,000 to 45,000 ounces, but if I look through the rest of the assets, you've alluded to $100 million from Cowal. Then Ernest Henry should be relatively flat at 20,000; Mungari, at sort of 30,000 to 35,000 ; and Rawdon in around 20,000. I'm still sort of only pulling $215 million arithmetically for the June quarter under that basis versus sort of the $245 million to get to the low end. So I guess it's probably all to do with the Cowal underground, but can you give me a bit more color as to where you sort of see the major swing factors to deliver on that low end of guidance?

Lawrie Conway: Yes, sure, John. So if I start with Cowal, it will get at least 100,000 ounces. It's tracking above that. It's got to get 102,000 to get to its guidance, and that's where they're staying at the moment. And that is predicated as which we've talked a few times on this call is getting that more material coming from the underground. And as I said, if you look at the March performance when we finished the shutdown, the rate that it exited March, it was around 93,000 ounces. If you then take that we had wet weather in March, which hampered the open pit, you're, essentially, looking at a 10,000-ounce lift in that run rate into the June quarter, which then is provided through the E42 material and that ramp-up in the underground. So that's, that first thing. Mungari moved from 32,000 ounces to over 40,000 ounces coming from the EKJV; an extra campaign, Paradigm, which we couldn't bring that high-grade material down from Paradigm because of the wet weather in March. So we'll see that lift at Mungari to over 40,000 ounces. Red Lake, which we've talked about, getting more material coming from CYD. Consistency at Cochenour, we're actually getting more tonnes and higher grade at Balmer that puts it into that $40 million to $45 million range. Ernest Henry, yes, will be consistent around the 20,000. Northparkes, you'll see a tick up, not material given the size of the asset, but it will have more material coming from the 2 open pits, the E42, but we obviously do have that major shutdown in the quarter as well, but you will see a few thousand ounces coming in there. And Mt Rawdon will be over that 20,000 ounce mark. As we look at it, Mt Rawdon, right now is into an area of the pit where it's actually only mining ore. There's very little waste, so we see that. So that's what gives us that ability to get to the bottom of guidance, Jon. Jon Bishop Jarden Limited, Research Division – Director of Equity Research & Analyst Great. That's really helpful. And just on the Cowal OPC project, you're still under public consultation. Is there anything else outstanding in terms of permitting? Have you sort of seen any real shift in government department engagement from that perspective? Or is it really just under the public consultation process? And what's the time line therein?

Lawrie Conway: So Jon, we're not in public consultation. That's closed. We've responded to the regulator, whereby now they will come back with their responses to our responses and what those consent conditions would look like and which one then we'd go through and respond to that. So if we look at it, we're basically now sitting in the hands of the [Technical Difficulty]. Can you hear me, Jon?

Jon Bishop: Sorry. Just dropped out. Beg your pardon. I missed the back end, you're waiting on the responses to the responses.

Lawrie Conway: Yes, so as I said, the public closed. We've then responded to those submissions, the regulator, and it now sits with the regulator, they will then come back to us with what -- any additional information they need or what consent conditions they would want to apply for us then to respond. So we're now through that process that in the coming months, we wait for the regulator to respond, and then we're ready to go from there.

Operator: Your next question comes from Levi Spry from UBS.

Levi Spry: You can hear me okay?

A - Lawrie Conway: Yes, it did drop out a bit there, Levi, but we've got you now.

Levi Spry: Looking forward to the site visits. I guess, just passing our mind forward a little bit to what FY '25 might look like. Can you sort of just recap on the 3-year CapEx guidance you gave a little while back and the levers that may have changed into that and just sort of confirming that the capital at Northparkes is a couple of years out, which I think has been a bit of a concern of some guys in the market?

Lawrie Conway: Yes. We just finished the March quarter, Levi, and you want to talk about next year, but that’s okay. I think the things there, we’re going through each of these, the projects, there’s been no material change in terms of that capital profile over the next 3 years other than obviously introducing Northparkes, which will lift that sustaining capital. They obviously have an amount of major capital that they have to do. And then there’s going to be the sequencing through E48 and E22, and then E22 either as a block or a sublevel cave. So we’re working through that to be able to give an outline in June at Northparkes as to what that profile will start to look like. I think then as we look at each of the other operations, Cowal, the OPC will depend on when we get that regulatory approval and board approval for it. The overall capital for that project has not changed from what we talked about at the Investor Day. Similarly, the Ernest Henry study is ongoing and due for completion in the March quarter next year, but a lot of that capital is into ‘27 and beyond. And as Glen has outlined, the successes we’re having give us the optionality as to when we time that versus trucking and installed infrastructure. So look, in short, it’s a little bit early as we go through each of these studies that are progressing in terms of what the capital is. But in terms of that profile over the next few years, it [Technical Difficulty] Northparkes, and we don’t see that Northparkes is going to see a major shift in that major capital that’s required in the next few years because we see [Technical Difficulty] after E48.

Operator: Your next question comes from Daniel Morgan from Barrenjoey.

Daniel Morgan: Thanks, Lawrie. First question is just the Cowal continuation studies. If you do get permitting approval, is it your expectation to push that to FID? Or might you look to perhaps not advance it and come back a while later and just get a lot more cash from processing stockpiles or cash flow if competing against the other projects in your portfolio?

Lawrie Conway: Yes, Dan. Look, I mean, I think it's fair to say the OPC or the open pit continuation study is well advanced as a feasibility study, so there wouldn't be a lot on that. It's a really good question and it aligns to what we've said for a while that we do have some timing optionality around Cowal with the large stockpiles that we do have. We do have to take into consideration, though, that losing a mining crew and then bringing them back into Cowal and West Wyalong is something to take into consideration. I think it's fair to say, until we get further advanced on the permitting approvals, we won't be making that call on it. We've done studies with the team as we're going through our life-of-mine plans now as to what does it look like as a base case, if it starts at the start of calendar year '25. What does it look like if it's delayed beyond that and we process stockpiles in terms of production versus cash. So we do have a lot of those scenarios, but we're going to wait for the regulatory piece first.

Daniel Morgan: Is the other overlay on that decision weather related? Like, I imagine Lake Cowal is pretty full. And it's my understanding, is it not that it would be better to execute on this project when its empty.

Lawrie Conway: Yes. Look, it is, Dan. I think one of the things that we've seen as we've been progressing the study is that the way the open pits would sequence is there is an option for us to start that bund wall move in the northern end of the operation, because it's certainly -- the water is lower there. And then as we move that and start the pit and waste dumps, by the time we then need it at the southern end, we would be hoping that the water may have receded. But having read the report today in The Australian where the El Nino is finished and La Nina is on its way back, we might be getting a lot more rain in the second half of this year. So it will have an impact on what we do there at Cowal. I think the team isn't working on the basis that we'll be doing a dry late bund move.

Daniel Morgan: Yes, it's been a hell of an El Nino. Such a drought that we've had.

Lawrie Conway: It lasted all of 5 minutes, I think.

Daniel Morgan: Separately, just pivoting to Red Lake and the follow-up on the $140 million to $150 million, which is sort of flagged as the base until further notice. I mean, is that intrinsic in that is, is that shutting down, potentially feed from Cochenour and maybe a plant, one of the plants? Or is all of the mining areas contributing to that $140 million to $150 million?

Lawrie Conway: Excellent point there, Dan, in that, really, what John and the team are looking at is what development and mining is needed to keep both those plants full for the whole year, not just next year. And then if it wasn't, what are the mining areas. And do you go back to Red Lake as a campaign milling, because what we've said is that the first priority is to make cash out of the asset. As it stands at the moment and the life of mine plans that John and the team are working through isn't finished. They believe they can come up with a plan that does allow us to keep both plants operating for the whole year or full time. And because if you look at it, Cochenour is that base feed into the asset, Balmer is that next piece and then you've got to work out how much of the Campbell mine and development you do to keep the plants full, or do you wind back some of the Balmer. So they're looking at all those scenarios right now with a focus on what ounce profile can they deliver that generates a better cash outcome than what we've achieved in the last couple of years.

Daniel Morgan: Thank you. I appreciate this is not the most material of your assets now, but Rawdon, it's entering its last year. Typically, when mining operations are entering that period, it's not the best operational performance necessarily, because you've taken the high-grade ore. And just wondering what you can say about the performance you'd expect in the last year of its life.

Lawrie Conway: Yes. Look, I think a credit to the Rawdon team, Dan. It's 25 years' operating. We will go to dayshift-only at the end of this month. That team, the mining team has remained committed and we will see that change at the end of this month. We'll, then through the September quarter, finish mining out the pit. Now the wet weather we've had this year has actually meant we've been drawing down on a lot of that low-grade stockpile material. So as we look into the June quarter and then the September quarter is when we'll finish mining out that pit. The grades for Mt Rawdon, in terms of their assets, are very good and there are not a lot of stripping that's needed. Then from September through to the end of FY '25, we'll be processing only the stockpile. So we won't be mining into the second or the last 3 quarters of FY '25. And that's when the operational finish generally at the end of FY '25.

Daniel Morgan: And I would imagine, probably, a better cash flow contributor than an earnings contributor because I imagine you've got some costs that go through that are noncash in nature.

Lawrie Conway: Yes. And that'll be the anomaly when you look at Rawdon into FY '25, it'll have an elevated AISC because as you build up the stockpiles, they go on a net realized valuable basis, and therefore, you're holding them at a higher cost. When we bring those off, you don't use the cash other than the rehandle and processing. So yes, we'll see higher AISC, but a lot stronger cash flow out of that asset as it finishes the operation.

Daniel Morgan: And sorry, last question, just Northparkes, I mean, the choice to go sublevel rather than block, and I appreciate we'll explore this more, much more thoroughly on the site visit. I imagine in part, that's the competition for capital within the broader group. But given the strong uplift in both of your key commodity prices, your cash outlook looks a lot stronger than it did before. Does that change anything about the competition for capital in the portfolio?

Lawrie Conway: From my perspective, Dan, the competition gets harder because we need the money for other things like dividends and debt. So what we see is in the first 4 months working with Rob and the team on site, there is a very clear understanding that both a sublevel cave and a block cave works. So it’s not just purely on the capital. So what the team wants – what we need the team to do finish that feasibility study. That gives us the baseline on which to compare the sublevel cave option, and they’ll finish that work in the second half of this calendar year to then make that decision. And when we look at it, it will be on an NPV, IRR payback period, capital intensity, all of those metrics will be looked at. We want to make sure we get the right outcome for that – for E22 rather than saying, well, prices are up, let’s just go with the block cave option, which obviously is capital upfront generally will give you a greater NPV. But if the sublevel cave can give a very similar NPV and change that capital intensity, it’s something we definitely have to look at. And through this pathway of bringing E48 forward, that gives us some time to do that comparison between the 2.

Operator: Your next question comes from Al Harvey from JPMorgan.

Al Harvey: Lawrie, just a very quick one. Can you just give us an update on the pump hydro study, just key timing for milestones on that and how you're thinking about what that could impact for your gearing levels going forward if you're thinking that, that could deliver a value uplift?

Lawrie Conway: Yes. Al, look, I mean the pumped hydro in the last quarter has progressed similar to what we said in January and in February with the half year results where the engagement continues to actually increase with the government, and the government entities that they’ve put in place for renewable energy projects. So there’s a lot more frequency and discussions around it. I think it’s still on the same time lines of finishing the technical feasibility study through this year and getting a commercial outcome in the middle of – by the middle of next calendar year. And at the moment, Jake won’t give me a commitment on how much money we’re going to get for it. But it is fair to say, as we’ve always said, the monetization of that will go towards the – either the deleveraging of the balance sheet or dividends into the mix.

Operator: Your next question comes from Mitch Ryan from Jefferies.

Mitch Ryan: Just a quick one. I'm just wondering if you could talk to the tonnes and grade that are in your forecast for the Cowal underground in your 4Q numbers and how that compares to the month of March volumes that came out of the underground.

Lawrie Conway: Yes. So Mitch, we exited in March at a 1.5 million tonne annualized rate. We saw the grade is at or above the average, which is the 2.5 grams per tonne. We will see into this quarter. As I said, we move up towards that 1.7 million, we'd like to exit at 1.8 million tonnes. And there is certainly some higher-grade material that will come through in that quarter based on the stopes that are planned to be mined. I don't know off the top of my head what the uplift in the grade is for it, but we can follow that up for you.

Mitch Ryan: No, that's fine. It was more just the direction of change in understanding. And just sort of on the back of Levi's (NYSE:LEVI) question with regards to thinking about FY '25, you'll be pushing the assets hard in the June quarter. How do we think about sort of the quarter-by-quarter moves inside FY '25? I'd assume that September, obviously, the assets take a breather. Can you give us any color about how we should be thinking of that profile?

Lawrie Conway: Look, it was a little bit early, but the context is that if you look at it, Cowal continues to mine E42 and the underground ramps up, so I wouldn’t say they’re getting a breather in September. Ernest Henry is consistent quarter in, quarter out, the 2 major shutdowns in the year. Then when you look at Northparkes, it’s ramping up the E31 North, so you get those pits will operate through FY ‘25. Mungari, nothing materially changes for Mungari until you get into FY ‘26 in the process plant coming on stream. Rawdon, as I explained, to Dan, finishes mining in September and then processes stockpiles for the rest of the financial year. Red Lake, as we’ve also talked about, exits at the $140 million to $150 million range, and John and the team then work out what that looks like going into next year and obviously still an asset. That’s a good class. [indiscernible]

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

Matthew Frydman: Sure. Just a quick follow-up. Great to see the appointment of the CTO over the quarter, but can you give us an update on where the COO search is at currently, please?

Lawrie Conway: Yes. Matt, look, it's well advanced. We're down the short list, and we expect to have something in due course within this quarter.

Matthew Frydman: Okay. Any thoughts on, I guess -- without being prejudicial, but any thoughts on sort of whether you like to push for an internal or an external candidate? Or we'll wait and see?

Lawrie Conway: I’m going to guess the latter, Matt. We’ll wait and see.

Operator: Your next question comes from Jarrod Lucas from ABC News.

Jarrod Lucas: Just on Mungari. I wonder if you could give us a bit more color on how that expansion ramp-up is going now that the contract is mobilized on site sort of key milestones when the workforce might peak, that sort of thing?

Lawrie Conway: Yes, Jarrod, Look, I mean, it's certainly been pleasing for us in -- since we approved the project that -- so GR Engineering Services are now on the ground, the civil works. We had our largest pour of concrete slabs there last week, and so the civils are progressing well. So where we are, right now is through the course of the next 12 months is we'll see that ramp up in the workforce that's required. We're actually in tender as we speak to a point for the mining village that needs to be installed for Castle Hill. So that tenders in the final stages that allow us to then commence the installation of that village later this year. And then in terms of the actual mining contract for the mining of those areas is also where we're into the market. So as we stand today, the actual project for the plant and the expansion is tracking very well. The surface and civils are on track and all the long lead items have been ordered and should come in so that we meet that time line for the project in FY '26.

Jarrod Lucas: And just at Kundana, obviously, Glen talked about those pretty positive drilling results there. What's the current mine life based on the current reserves and resources there? And sort of how -- what's your sort of view? And how bullish are you?

Glen Masterman: It's Glen here. I'll take that question. So the underground mine life at Kundana is we're currently sort of tracking in that sort of 5- to 7-year range. What we're doing here is looking at options based on sort of developing a geological understanding that's driving us into new areas that haven't previously been considered. So a lot of the work previously was done sort of around the known existing locations. And what we've been able to do is understand or develop an understanding of new areas to explore, which is what we're seeing in Genesis, so a brand-new line in a brand-new location, not previously known before. And so exploring these things along-strike in the areas that have not been previously drilled. We think there's a real opportunity to sort of continue to extend that underground mine life, which, as Lawrie mentioned earlier, enables us to sort of keep that high-grade production sort of up for many more years to come as we transition or to commission the 4.2 plant that will come online in the future.

Jarrod Lucas: If I can just ask one quick one just on the 4-day power outage you had at Mungari during the quarter, and obviously, you had the wet weather challenge there as well, so you still had a good result. But being at the edge of the state power grid, obviously it's notoriously unreliable. Now that the plant expansion is going ahead there, is that -- are there some alternatives in terms of renewable energy solution that the team are looking at there on the ground in Mungari? Obviously, a lot of other miners in the Gulf-wards region here of going down that road?

Lawrie Conway: Yes, Jarrod, I think it’s part of the expansion project the team is looking at all the different alternatives [Technical Difficulty] to make sure we’ve got sufficient power for when we commission the plant. And as a part of it, over time, we want to transition into that renewable piece as well. You’d understand from where you’re base that you are reliant on Western Power and therefore, you’re relying on the government to provide the infrastructure and connections into the grid.

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

Lawrie Conway: Thank you, Darcy. Thank you, everyone, for joining us today. We really do appreciate you making the time. March was a quarter where we clearly delivered to our plan. We generate some cash. I think it’s fair to note, if you look at the gold price that averaged in the quarter was around $3,100, and $50 an ounce. The spot price is above that. We’ve got a large quarter in June quarter. We’ve got a plan where each of the operations have got very clear pathways to what they have to deliver for this quarter. So with that uplift in production and the high gold and copper prices, we expect that material increase in cash flow to occur this year, which allows [Technical Difficulty] us up moving into FY ‘25. We certainly look forward to hosting those of you that can make it to the Northparkes and Cowal investor visit in June where we can showcase those two high quality and valuable assets. Thank you again for your time.

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