Boss Energy Limited (BOE) Earnings Call Transcript

Thank you for standing by, and welcome to the Boss Energy Investor Conference Call June Quarter 2. [Operator Instructions] I would now like to hand the conference over to Mr. Matt Dusci, Managing Director and Chief Executive Officer. Please go ahead.

Thanks, Val. Good morning, everyone. Thanks for joining the Boss Energy June quarterly conference call. Joining me on the call is Justin Laird, our CFO. I'll provide an overview of the quarter and the full year results. And at the end of the call, we'll be happy to take questions. Turning to Slide 2. The June quarter was a strong finish to FY '26. We delivered our revised production and cost guidance. We continue to strengthen our financial position, and we further established the operating platform required to support growth. Honeymoon production recovered strongly from the rain affected March quarter with drum production of 362,000 GBP, up 79% from the prior quarter. For the full year, production was 1.41 million GBP of uranium, up 61% on FY '25 and within our revised guidance range. Cost performance was also within revised guidance with full year C1 costs of $39 per GBP and all-in sustaining cost of $61 per GBP. During the quarter, the company completed and commissioned key operating infrastructure, including NIM 6 columns 4 and 5, the associated pumping systems and the East Kalkaroo trunk line. Together with 6 wellfields now in production, this infrastructure is supporting record flow through the operation. Despite FY '26 being a capital-intensive year, the company generated positive cash flow. Cash increased by $13.1 million over the year, while uranium inventory grew by 172,000 GBP to 1.58 million GBP at the 30th of June. We therefore closed FY '26 with $207 million in cash and liquid assets and no debt. We continue to make meaningful progress on our strategic programs of work aimed at unlocking the value of our assets. This included bringing forward the new feasibility study to the end of August as we continue to build confidence in our wide space wellfield design and advancing the permitting pathway for Goulds and Jason. I'd like to take the opportunity to thank the entire Boss team for their commitment and hard work throughout the year. FY '26 presented a number of challenges, but the team remained focused on safely delivering the operation, strengthening our understanding of the honeymoon deposit and establishing a clear pathway forward. Turning to Slide 3, and I'll provide some further detail on the honeymoon operation. Production recovered strongly during the June quarter. We increased by 79% to 362,000 GBP following the rain-affected March quarter. This brought full year production to 1.41 million GBP, up 61% on FY '25. Quarter also marked an important step in strengthening our operational platform at Honeymoon. We commissioned NIM 6 columns 4 and 5, bringing the total number of operating columns to 5. A capital decision on the 6 column is expected in the first quarter of FY '27. We also commissioned the East KalKaroo trunk line and additional pumping infrastructure. Together, this infrastructure supported record solution flow of 3.5 million cubic meters during the quarter, an increase of 83% on Q3. We continue to work through the commissioning of new pumps primary pumps and look at optimizing our performance across the circuit. Looking ahead to the September quarter, we expect a modest reduction in feed grade at similar flows. Turning to Slide 4. During the quarter, we brought online wellfield B6, which is the first production from Far East Kalkaroo. B6 is performing as expected. This is on the closest spacing wellfield design of 30 meters injected to extractor. Our first wide space well fields are now being constructed. EKT1, which is a 165 spot pattern with injector to extractor spacing of 60 meters is scheduled to commence flushing this month with leaching data expected in Q2 FY '27. Construction has also commenced on EKT2, which is again a 16 spot patent with injected to extractor spacing of 50 meters with flushing and data anticipated in Q3 and leaching in Q4 FY '27. All 5 existing honeymoon well fields, B1 through B5 continue to perform in line with our expectations. We have recently applied more proactive management techniques to some of the older well fields, and they continue to demonstrate strong flow and performance. This provides further confidence in our underlying quality and longevity of our wellfield network. Turning to Slide 5 and our cost performance. Honeymoon's C1 cost for the June quarter was $45 per GBP, down from $6 per GBP in the March quarter. All-in sustaining costs were $70 per GBP compared with $93 per GBP in the prior quarter. This substantial reduction primarily reflects the return to uninterrupted operations following the significant rainfall event and associated constraints during the March quarter. For full year, C1 costs were $39 per GBP and all-in sustaining costs was $61 per GBP, both within our revised FY '26 guidance ranges. Total capital expenditure for FY '26 was $66 million, in line with the upper end of our revised guidance range. Within this project and supporting infrastructure expenditure was $42 million, above guidance of $30 million to $33 million associated with completion of the NIM 6 columns. At the average realized price for the quarter, Honeymoon generated an all-in sustaining margin of approximately $37 per GBP demonstrating the operational capacity to generate positive operating cash flow. Turning to Slide 6 and our sales and financial position. BOSS became cash flow positive in FY '26. Cash increased by $13.1 million during this period, which was a capital-intensive period for BOSS. Our balance sheet remains a key strength. We closed the year with $207 million in cash and liquid assets and no debt. At the same time, we grew our drummed uranium inventory by 172,000 GBP through operating activities. Inventory on hand at 30th of June totaled 1.58 million GBP, providing substantial flexibility for sales activities in FY '27 and exposure to an increased positive uranium market. During the June quarter, VS recorded sales revenues of $34.8 million from the sales of the 325,000 GBP. The average realized price was AUD 107 per GBP, equivalent to USD 75 per GBP. Looking ahead, we expect to realize an average sales price of approximately USD 80 to USD 82 per GBP in the first quarter of FY '27. This includes contracted sales of approximately 300,000 GBP to 2 utilities under existing sales contracts. Turning to Slide 7. The cash flow bridge summarizes the cash movements during the quarter and across FY '26. During the quarter, BOSS generated a net cash increase of $11.6 million, with cash increasing from $38 million to $49.7 million. Customer receipts were strong at $45.2 million, including collection of $11.1 million of trade receivables. We also continue to invest in the operating platform with capital expenditure, including $6.9 million on sustaining wellfield development and approximately $8 million on project and supporting infrastructure. For the full year, cash increased by $13.1 million. BOSS was cash flow positive in FY '26 despite investing approximately $57 million in sustaining capital and project supporting infrastructure. We closed FY '26 with cash of $49.7 million. Together with the value of our uranium inventory, this contributed to total cash and liquid assets of $207 million, providing a strong financial platform for BOSS. Turning to Slide 8 and our 30% interest in the Alta mesa joint venture operated by Oncor Energy. Alta mesa produced 45,000 GBP during the June quarter with BOSS receiving 13,000 GBP. Quarterly production was impacted by delays in securing state-level regulatory approvals. These permitting delays deferred the commencement of production from new well fields being PAA3 and PAA8 with declining production from the current existing wellfield, PAA. For the full year, Alta mesa produced 491,000 GBP on a 100% basis with BOS receiving 161,000 GBP. The operational priority remains on permitting and advancement of Altamesa East with promising mineralization identified as an extension to known mineralization at Altamesa. Turning to Slide 9 and the new feasibility study. The new feasibility study update to life of mine and mineral resource for honeymoon will be delivered at the end of August, one month earlier than originally planned. Bringing this work forward reflects the significant technical progress made and the encouraging results emerging from the wide space oilfield program. The study draws on substantial body of evidence combining current operational performance, historic production data and the technical work completed since the end of 2025. This work has strengthened our understanding of the deposit and the optimal approach to oilfield design and development. Based on the maturity of this work, we determined that the most effective approach was to proceed directly to a feasibility level outcome rather than release 2 studies within a relatively short period. The study will set out the updated life of mine plan, including production profiles, capital requirement and operating costs associated with the wide space wellfield design. We look forward to presenting the results and a clear pathway forward for honeymoon at the end of August. Turning to Slide 10 and our satellite deposits at Gould Dam and Jason. We continue to advance the development and permitting pathways for both deposits during the quarter. Importantly, the technical findings and operating experience from Honeymoon are now being incorporated into the evaluations of these assets. Our improved understanding of the deposit behavior and white space well design could unlock significant value. Both deposits have the potential to leverage honeymoon's existing processing infrastructure, operating capacity and establishing permitted pathway, providing a low capital cost development opportunity. During the quarter, we completed the preliminary design and proposed frontline connection to Jason to honeymoon processing plant. We advanced the ecological groundwater and radiological baseline studies. We're progressing the underground water modeling and initial impact assessments and also have commenced stakeholder engagements. These activities are now well progressed, and we will support the next stages of the environmental assessment and permitting. Looking ahead, the first of the resource delineation drilling program at adjacent is scheduled to commence during this quarter. The program is intended to improve resource confidence and provide further technical support in the evaluation and development of these deposits. Turning to Slide 11. Before I close, I'll just talk a little bit about changes to the Board. We are pleased to welcome Peter Botten as our incoming Chair effective the 30th of September. Peter brings more than 45 years of experience across the energy and resources sector, including leading Oil Search through the development of the PNG LNG project. His appointment adds significant development, operational and leadership experience to the Board, and I'm looking forward to working closely with Peter to drive long-term value to shareholders. In summary, FY '26 was a year of meaningful progress for BOSS. We delivered record solution flow through June quarter, supported by a strong finish to the year and delivered within our revised production and cost guidance. We became cash flow positive, increasing our uranium inventory closed FY '26 with $207 million in cash and liquid assets and no debt. This provides us the financial capacity to fund our plans and pursue opportunities across our asset base. At honeymoon, the key operating infrastructure is now in place, and we have commenced the transition to wide space oilfield design informed by a growing body of operating and technical data. The new feasibility study will be released at the end of August. It will set out the updated life of mine plan and provide a clear pathway forward for honeymoon. We are also advancing the development and permitting pathways for Gould dam and Jason, which provides further long-term growth potential by leveraging honeymoon's existing infrastructure and operating platform. With the uranium market fundamentals continuing to strengthen, BOS is well positioned to produce uranium into a market facing growing long-term demand. We look forward to presenting the new feasibility study and our updated pathway forward at Honeymoon at the end of August. With that, I'll hand back to the operator to take questions.

[Operator Instructions] Your first question comes from Alistair Rankin with RBC.

Just the first one on the delineation drilling, congrats on completing that program. Can I just ask, I guess, what you've learned so far and how your understanding of the ore body has changed as a result of the drilling program so far?

Yes. So that provides -- Alistair, thanks for the question. So that provides us with more confidence of what we're seeing. In terms of our understanding of the ore body, what we've seen and what we've articulated prior is that at higher cutoffs, we don't see the same level of continuity. When you look at lower cutoff grades, the ore body hangs together very well. And it's just a matter of finding the right mining method and the cost structure to exploit that significant resource, and that's what we're pursuing as part of that white space wellfield design.

So it sort of confirms your prior views about the cutoff grades and the continuity.

Correct. And then with that, we'll update that with the August update, including an updated mineral resource estimate.

Okay. That's good. And then just secondly, on honeymoon, I know you've got a couple of well fields that you're bringing on next year, ET1 and EKT2. They're on in the second quarter and the fourth quarter, respectively. Are those the only 2 well fields you're planning to bring online next year?

No. That's just in the immediate construction pipeline.

Your next question comes from Daniel Roden with Jefferies.

Just wanted to build on, I guess, the wells that we're bringing on next year. How should we think about, I guess, the change in residence time as we go into those wide space well fields kind of noting that we're going from a 30-meter spacing to, I think you mentioned 60 is the last kind of data point we have. But I guess the residence time in those wider space patents has a longer residence time. I guess, should we expect a bit of a lag in production midyear as we kind of do transition into those patents as well? Or how do you, I guess, bridge that, if at all?

Yes. It's a very good question there, and it's about how we sequence and change from those existing wellfield designs into these larger space ones. And I think I can't -- I won't talk to this in detail because I won't actually do it justice and the idea about when we talk to it in August is provide all that clarity. But there has been a bit of a challenge for us, too, because we've been very reluctant to spend capital in old wellfield designs that don't give us a good return. So we're going to -- we have to manage that transition, and that's part of what we'll talk to in August and then how we build that profile back up.

Okay. So you're not spending on old...

We stopped spending on that existing wellfield design as soon as we work through that review, it made no sense to continue putting capital into something that wasn't going to give us a good return.

Okay. Okay. And as you bring AKP1 online in the next month or 2 and start going into that, maybe can you remind us like what are some of the key indicators you're looking for? And I suppose I suppose myself, I'm really interested in understanding, I guess, the sweep efficiency of the well fields and how that's going to be measured. And I guess, just noting that wider space drilling, you're potentially going to have -- I think we spoke about this before the channeling into, I guess, parts of the ore body or potential asset consumption on organics. So how are you going to measure that? And what are some of the performance indicators you're looking for?

Yes. And a lot of that -- a lot of what you were talking about has been very significantly derisked through all of this work we've done. and including modeling historic production because we're not in actually a greenfield site. We're in an operating site. And that's largely addressed through these reactive transport models where we're modeling specifically each well filled and well at a time, including all the chemistry and the fume and the asset consumption and how that assets will perform. When we're looking at -- we're looking at continue to refine that, and we'll always have an opportunity through that, including when we bring on EKT1. In terms of what that would deliver to us, some of those measures, some of those criteria will be things like flushing time, like typically, we'll do a first flush just to get rid of chloride and calcium. That provides a very good indication of permeability and flow. But that's a relatively early thing. We can get that understanding pretty quick. And then you've got continued performance of well fields associated with leaching and performance. But we feel comfortable with all the work we've done to date that it will just be a continued refinement rather than any sort of major material deviation.

Your next question comes from Branko Scotic with JPMorgan.

Just first question on the grade or tenor decline, which you flagged in the release. I just wanted to understand what's driving the additional decline into the first quarter of FY '27 and also what tenor was assumed when you provided those indicative production numbers for FY '27, I think it was in December last year and just how that compares to what you're seeing in the first quarter?

Yes. Okay. A lot has happened since we provided those nice numbers. I think it was this time last year. So I won't go back to that one. In terms of what we tried to do there is because we didn't issue FY '27 guidance, we just tried to provide a little bit of direction of what next quarter will be. We'll issue FY '27 guidance with the August release of the new feasibility study. So tenor in ISRs will fluctuate. And why they fluctuate is because of wellfield timing on well fields. So when you bring new wellfields in, you'll basically get higher well field performance and higher tenor and then they'll typically have a tail. It all depends on the sequencing of well fields and where you are sequencing new well field, bringing in new well fields versus existing operations from older wellfields. And that tenor is just associated with all that sequencing. But it gives you a bit of a guide for what that production profile will be for Q1 next financial year.

I appreciate that. And then just looking to Alta Gas, I was just hoping to understand the permitting delays a little bit better and I guess the time line to resolve because I look at the production profile from that asset has been declining for the last couple of quarters. So I'm just thinking into FY '27, what we should be modeling here.

Yes. It's a good question. And I won't -- I don't want to -- look, I can't talk too much forward-looking statements because it's actually under a joint venture. But fair to say, look, it is disappointing that quarter of production. largely dictated by timing. So as PAA, which has been the main producing well field alta mesa is depleted and coming off similar to what we just talked about with only having one well field in production. They haven't been able to bring in PAA8AA3,ich is ready to go because of permitting delays. In conversations with the team, they expect to have that resolved shortly. shortly. We continue to engage with the management team at Oncor. There's a new management team there, Rich got a good relationship with Rich and to try and work through some of the challenges that we've seen in Alta mesa.