Ramelius Resources Limited (RMS) Earnings Call Transcript

Thank you for standing by, and welcome to the Ramelius Resources September Quarterly Conference Call. [Operator Instructions]. I'd now like to hand the conference over to Mr. Mark Zeptner, Managing Director and Chief Executive Officer. Please go ahead.

Thank you. Good morning, everyone, and thank you for taking the time to dial in this morning for our September 2026 quarterly results. In addition to the quarterly report, we've released a quarterly results presentation that we'll speak to during this call. Both documents have been uploaded on the ASX platform and will also be available on our website shortly. I'm joined this morning by members of the executive team, our COO, Tim Hewitt; and our CFO, Darren Millman. Initially, I'll be speaking to the highlights for the quarter, which is the first quarter of FY '27, and then I'll pass on to Tim, who will speak to the operating and project highlights, which will include Mt Magnet plant upgrade, Dalgaranga mine development ramp-up and Rebecca-Roe. Darren will then speak to the financial highlights before I sum up at the end. While the presentation is relatively high level, I do note that more detail can be found within the quarterly report released today. As usual, there will be an opportunity for listeners to ask questions at the end, whether that be through the teleconference or the webinar, depending on how you have joined the call. So if we can make a start, I'll be initially speaking to Slide 3. Gold production for the quarter was 48,839 ounces at an all-in sustaining cost of AUD 2,656. In summary, this was a solid start to FY '27 underpinned by the processing of 135,000 tonnes of Never Never underground ore at an average grade of 4.15 grams per tonne, a clear demonstration of the positive impact Dalgaranga is now having on overall production. Importantly, we remain on track to achieve our FY '27 production guidance of 205,000 to 225,000 ounces. Tim will talk further to the mining and milling detail shortly. We finished the quarter with cash and gold of $768 million, up from $650 million at the end of June. The quarter generated operating cash flow of $186 million and underlying free cash flow of $62 million after continued investment in growth capital and exploration. The cash balance was boosted by the completion of the sale of the Edna May Hub to Forrestania Resources, which completed on the 4th of September for a total consideration of $300 million, made up of $210 million in cash and $90 million in Forrestania shares. These proceeds more than offset the $131 million that we paid in Spartan stamp duty during the quarter. On our growth projects, we were pleased to have secured Primero as the EPC contractor for Stage 2 of the Mt Magnet processing plant upgrade being the new Circuit 2. Upgrading the existing circuit, Circuit 1 is underway and the broader upgrade has been focused on plant engineering works and preliminary site establishment. At Dalgaranga, the focus has been on continuing to increase production rates from the Never Never underground mine, and we are now also in the final stages of commissioning the paste plant. At Rebecca-Roe, importantly, we received EPA approval of the Part V works application for Roe, well ahead of schedule. Exploration continues to deliver with exceptional results at virtually all of our projects across the portfolio, focused on extending mine life at our existing operations. We had 8 surface rigs and 4 underground rigs in use and exploration spend, including resource definition, was just under $23 million for the quarter. We won't be getting into the detail today on our reported exploration results as we will provide a more fulsome update in January, but I would encourage you to read the quarterly report, which does include some excellent results, particularly at Galaxy and Gilbey's underground with grades generally above the exploration targets that we have set for those projects. On the corporate front, we completed a further $15 million of share buybacks during the quarter, taking the total since announcement to $156 million or 62% of the $250 million share buyback program. Our growth projects remain fully funded, and we remain focused on increasing our returns to shareholders as we grow cash flows. On to Slide 4, which shows a breakdown of gold production by ore source over the last 4 quarters. What you can clearly see is the growing contribution from Dalgaranga, which was again our largest single source of production in the September quarter following the step change that we saw in the June quarter. The contribution from Dalgaranga will continue to grow quarter-on-quarter. Production of 48,839 ounces was below the 53,466 in the June quarter, largely due to wet weather impacting the processing of high-grade Penny ore and also lower grades from both Penny and Never Never underground, which Tim will expand on shortly. The map on the right shows our 2 high-quality hubs in Western Australia, Mt Magnet, fed by Dalgaranga Cue and Penny, just noting that the Yalgoo, sorry, needs further drilling before being considered for development and also our Rebecca-Roe project east of Kalgoorlie. With that, I'll now hand over to you, Tim.

Thanks, Mark. Good morning all. Moving to Slide 5, where I'll discuss the key production metrics. We mined 0.7 million tonnes of ore at a grade of 2.56 grams per tonne for the quarter. Ore tonnes were up 9% on the June quarter with increased ore contribution from Cue and Dalgaranga. The mine grade was lower than the June quarter, reflecting an increased contribution from the open pits, both at Cue and Dalgaranga and lower grades at Penny. At the Mt Magnet processing plant, we milled just over 0.5 million tonnes, consistent with our recent quarters and representing an annualized run rate of 2.1 million tonnes until the plant expansion is complete. Mill grade was 3 grams per tonne, down from 3.59 in the June quarter. And the key contributor to this was haulage from Penny, which was limited in September due to wet weather. This, combined with lower grades from Penny earlier in the quarter and also Never Never reduced the head grade. High-grade material is planned at both Never Never and Cue, resulting in an overall higher processing grade quarter-on-quarter for the rest of the year. Overall, this resulted in gold production of 49,000 ounces for the quarter with a further 4,000 ounces stockpiled at Penny at the end of the quarter, noting that we remain on track to achieve our full year guidance of 205,000 to 225,000 ounces. Moving to Slide 6, Mt Magnet update. The processing plant, bringing that up to 4.3 million tonnes per annum. For those on the call not familiar with the upgrade, the addition of Circuit 2 and the upgrade of Circuit 1 will take the mill capacity to 4.3 million tonnes and increase the recovery of Dalgaranga ore. As we have outlined previously, Circuit 2 is very conventional, a proven flow sheet designed around the Mt Magnet feed blends we have treated for years, and we know well and has the flexibility to potentially take the combined plant to 5 million tonnes per annum in the future by relaxing the Circuit 1 grind size. The key milestone in the quarter was the award of the EPC contract to Primero to deliver the 3 million tonnes per annum circuit 2. On Circuit 1, the new crusher and cyclone were integrated into the circuit in October. The next step is the additional ball mill refurbishment and relocation, which is underway. As a reminder, grinding the Never Never ore finer to improve recovery only requires refurbishing the existing second ball mill, along with some other enhancements such as the new leach feed thickener. The photos on the slide shows some of the progress across the broader site. Of note, all wind turbine sections are now on site with the assembly to commence shortly. The additional camp rooms and associated facilities have all landed at the Mt Magnet camp. Long lead items for the site power infrastructure have been ordered and the ancillary work package is in the final phase of design or out to tender. The table at the bottom of the slide sets out the growth capital for the upgrade, considers how we set up the whole site for success. FY '27 guidance is AUD 195 million to AUD 215 million for the processing expansion, AUD 35 million to AUD 40 million for processing infrastructure and upgrades and an additional $40 million to $50 million for mine infrastructure, including road and power upgrades, water camp and buildings. This is a total of $270 million to $305 million in FY '27 with a further 52 million to 73 million in our FY '28 outlook. Moving to Dalgaranga on Slide 7, where we continue to ramp up the mine. This remains on track. As Mark mentioned, we processed 135,000 tonnes of Never Never ore at an average grade of 4.15 grams per tonne during the quarter. Chart on the right shows monthly ore tonnes mined, which have increased steadily from under 2,000 in October 2025 to a record 46,500 tonnes in September 2026. We are on track to mine 500,000 tonnes in FY '27 and decline development is on track to open up the longer strike of Never Never as we ramp up to 1 million tonnes per annum for FY '28. The chart on the left shows the life of mine profile release of our updated plan in September, incorporating actuals from FY '26 and our FY '27 guidance plus longer-term outlook. Through to FY '26 and beyond, Dalgaranga will continue to produce high-grade tonnes as a globally relevant low-cost asset. On site, the team's focus during the quarter has been on completing and commissioning the paste plant. On to Slide 8 and the Rebecca-Roe, where we continue to make good progress on approvals. During the quarter, we received the Environmental Protection Authority Part V works approval for Roe and planning has commenced to obtain the associated mining approvals. Rebecca is already fully permitted. The DFS is complete and the title agreement has been signed. Rebecca-Roe is a greenfield development that will incorporate a 3.25 million tonne per annum processing plant. We have established most of the project team to build Rebecca-Roe and have been advancing early-stage activities. We remain on target for first gold in the fourth quarter of calendar 2028. And this project hosts a combined mineral resource of 67 million tonnes at 1.5 grams per tonne for 3.2 million ounces. With that, I'll pass over to Darren.

Thank you, Tim, and good morning all. For the September quarter, we sold 51,000 ounces of gold comparable to the prior quarter at an average realized price of AUD 6,019 per ounce. The realized price was down 3% on the prior quarter with 3,750 ounces settled on Zero Premium Collars at $5,906 per ounce. The all-in sustaining cost for the quarter was $2,656 per ounce, slightly higher than the plan, reflecting less Penny ore processed due to weather interruptions, resulting in 4,000 ounces of unprocessed high-grade Penny ore at quarter end. The resulting all-in sustaining margin, which is the average realized price less the all-in sustaining cost was AUD 3,363 per ounce, representing an all-in sustaining margin of 56%, which remains sector-leading. Underlying free cash flow for the quarter was $62 million after reinvesting $76 million in growth capital and exploration and sustaining capital of $31 million during the quarter. Moving on to Slide 10 and the cash flow for the business in the quarter, starting from an opening cash and gold balance of $649.6 million. The operating cash flow was $186.4 million from gold production of 48,839 ounces at an all-in sustaining cost of $2,656 per ounce. This operating cash flow funded growth capital investment for the quarter of $53.5 million being $52.3 million at Mt Magnet and $1.2 million at Rebecca-Roe. Our investment in exploration and resource definition studies for the quarter totaled $22.7 million. We also paid $3.1 million in working capital and other movements and prepayment of $13.6 million for FY '27 income tax. The resulting underlying free cash flow for the quarter was $62.1 million. Below the line, we spent $17.6 million on share buybacks and treasury shares, which included the $15 million returned to shareholders through on-market buybacks. We also paid $131.1 million in Spartan stamp duty, which is -- was more than offset by the receipt of the $205 million in sales proceeds from the Edna May sale. The resulting closing cash and gold position was $768 million. As you know, we released our 4-year plan in September, which sets out our free cash flow outlook over the next 4 years. As you can see on Slide 11, even whilst we're investing back in the business, we continue to generate free cash flow. In FY '29, we expect between $140 million and $200 million in free cash flow with a focus on the Mt Magnet plant upgrade and early works at Rebecca-Roe. In FY '28, as we focus on Rebecca-Roe development, the upgraded plant -- the upgraded Mt Magnet plant will be ramping up to the target of 4.3 million tonne run rate by December 2027. And throughout this period, we'll continue to be cash flow positive and deliver returns to shareholders. And for FY '30, we'll be generating up to almost $1.8 billion in cash flow at current gold prices. In our mine planning, we have a line of sight from FY '31 to FY '35, the story even gets better with both growth and sustaining capital reducing significantly. This is why we feel the description of a free cash flow machine is appropriate and why we believe our forward cash generation screens strongly against our larger caps relative to our valuation. With that, I'll now pass it back to Mark.

Thanks, Darren. So on Slide 12, I'm not going to speak to every box on this slide, but I just want to emphasize, as I have in the quarterly report that we are systematically executing and derisking our business to become a 600,000 ounce producer, the highest production growth profile in the sector. We have the balance sheet that can not only fund our development pipeline, invest $100 million into exploration and execute on our $250 million share buyback program, plus pay a dividend yield that generally outperforms our peers with a track record of doing so consistently. We remain focused on internal growth and shareholder returns. That concludes the presentation. And with that, I'll now hand back to you, Darcy, to open the line for questions, please.

[Operator Instructions]. Your first question today comes from Jonathon Sharp from JPMorgan.

Just first question on costs. So the first quarter was about $136 million in absolute all-in sustaining costs. Just as you ramp up through the year, should we think about the cost base is broadly flat? Or are there items that come out? Or does it lift slightly with volumes?

I think that one is yours, Darren.

Yes. So as we highlighted in the quarterly report, we're going to be seeing grades come up significantly quarter-on-quarter, especially at Dalgaranga, but also at Cue. So with that occurring, you'll be seeing the cost profile steadily decline quarter-on-quarter as well as our production comes up quarter-on-quarter. So you won't see a significant drop come Q2 and then it flatlines at that level. Every quarter, you'll be seeing that general decrease in cost increase in production quarter-on-quarter with Cue and Dalgaranga being the reason.

Yes. That's on a unit cost basis, the absolute dollars.

Yes. Absolute, Yes. pretty flat, yes. No big increases in any underlying physicals in that context, just more grade.

Okay. Great. That's good. And just a follow-up on that site admin cost, they almost doubled in absolute terms. Should we just think of that as that's what it will be moving forward?

Let me get into that one, but it should be relatively consistent. There might have been some catch-up from the June quarter. But yes, let me just be 100% clear on that one. We have got guidance out there. We do expect to stay within that. But let me follow-up on that one, Jon.

Yes. No worries. And just yes, second question on Never Never. You said on the call that you're on track to 500,000 tonnes for the year, which looks like you are. I think previously, you said you'd average 6.2 grams per tonne this year. Is -- should we just think about the next 3 quarters, you're averaging 6.2 grams per tonne? Or is it over a year? Just wondering how we think about that.

I'll take that one, Jon. Look, in the budget, Q1 was always lower grade just where we're mining in the Never Never essentially. So the next 3 quarters, that grade does lift. So the 6.2 for the year is representative. So yes, it's just where we were in the mine at that time.

Your next question comes from Richard Knights from Barrenjoey.

I just wanted to push you a little bit more on the Never Never volumes. In the release, I think you mentioned 1 million tonnes since it commenced from the Never Never underground by the end of this financial year. I just want to understand if that's correct. I'm just trying to reconcile that with Tim's 500,000 tonne number that you just mentioned. That's the run rate.

Yes. Richard, yes, essentially, we want to exit the year at a higher run rate. So yes, we'll mine 500,000. We want that to steadily increase during the year. So we're at that essentially the run rate by the start of the next financial year quarter.