Ramelius Resources Limited (RMS) Earnings Call Transcript

Thank you for standing by, and welcome to the Ramelius Resources FY '25 Financial Results Call. [Operator Instructions] I would now like to turn the conference call over to Mr. Darren Millman, Chief Financial Officer. Please go ahead, sir.

Thank you, and good morning, everyone. Unfortunately, Mark Zeptner has a late withdrawal this morning. He was cheering on his beloved West Coast Eagles this morning or last night. So over to me for today. Thanks for taking the time to dial into our FY '25 results conference call. Alongside me is our General Manager of Finance, Ben Ringrose, who will drill down into the numbers after I've covered off on the highlights. We have uploaded to the ASX platform, along with our website, a number of documents, including our FY '25 financial results summary, our audited statutory financial report and the presentation we'll be speaking to today. Starting on Slide 4, we set out our plans to grow the business on the back of an exceptional FY '25, which you saw us establish a strong platform to build from with the release of our 17-year Mt Magnet Mine Plan, the Rebecca-Roe PFS and significant cash reserves, which were $784 million post the net payment of $71.3 million on the close of the Spartan transaction. Our focus for the coming year is to integrate Dalgaranga into our Mt Magnet hub and enhance our portfolio with aggressive exploration plan that will see us spend between $80 million to $100 million, focusing on defining additional high-grade resources and making new discoveries. We look forward to updating the market in the December quarter with our 5-year plan incorporating Dalgaranga and showing a clear path to becoming a 500,000-ounce producer by 2030. This plan will also incorporate detailed guidance for FY '26. Moving on to Slide 5 and our mining production -- and mining and production highlights for the year. The standout from an operational point of view is our record gold production of 302,000 ounces with the overperformance of Cue open pits, along with improved grades from Penny. This was achieved despite less tonnes being milled in the year with the transition of Edna May to care and maintenance. Without stealing too much of Ben's thunder, I would like to highlight our industry-leading all-in sustaining cost of $1,551 per ounce and our realized gold price of $3,963 per ounce, which leaves us with a margin of $2,400 per ounce sold, the impact of which can be seen with our exceptional cash generation across the year. With that, I'll now hand over to Ben to talk through the numbers in more detail.

Thank you, Darren. For those following on the presentation, I will initially be speaking to Slide 6 and our earnings for the year. Now at the risk of standing too repetitive this morning, I'm going to say from the outset that these financial results are record returns for the business on pretty much every metric reported. This is even more impressive considering we sat here 12 months ago saying the same thing. Revenue from the sale of 303,000 ounces surpassed $1.2 billion and was up 36% on the prior year. Revenue not only benefited from a strong gold price, but also reducing hedge book commitments at a higher average price. The gross profit for the year was $695 million, which was a 122% increase and is reflective of not only the higher gold price, but also the lower cost per ounce that high-grade ore brings. At the group level, the milled grade increased 23% with the 2 operations telling very different stories. At Mt Magnet, the mill grade increased 53% to 4.48 grams per tonne, whilst at Edna May, the mill grade dropped 41% to 1.19 grams per tonne as that operation transitioned to care and maintenance. As the old adage goes, grade is king and even more so when it comes from a shallow open pit like those at Cue. Below the gross profit line, other items were largely in line with the prior year, with the exception being the $4.1 million in care and maintenance costs at Edna May. These costs include the cost of employee redundancies and should not be considered reflective of the ongoing care and maintenance costs for that operation. Group EBITDA, which adds back depreciation and amortization charges, was $819 million and represented an impressive margin of 68%. This reported EBITDA was an 81% increase on the prior year, whilst the margin was a 33% increase. The income tax expense for the year was $196 million with an effective tax rate of 29%. The actual income tax paid and payable in relation to FY '25 was $158 million, which equates to a cash tax rate of 23%. At June 30, there remained $130 million in tax outstanding on FY '25 earnings with the bulk of this being due in December this year. Now as we are required now to make monthly tax installments, we do not foresee these large one-off tax payments continuing in the future. The resulting NPAT for the group of $474 million was more than double that of the prior year and represented a net profit margin of 39%. This equated to earnings per share of $0.41. Moving on to Slide 7 now and the EBITDA by operation. This is an important slide as it shows the superior margins at Mt Magnet. In isolation, the EBITDA for Mt Magnet was a phenomenal 80% or $3,159 per every ounce sold. Whilst the earnings from Edna May were respectable and cash generative, they do bring down group earnings metrics. Indeed, you will be hard-pressed to find a production center in Australia with better returns in FY '25 than those of Mt Magnet. This powerhouse will only be further bolstered with the addition of Dalgaranga ore into the feed. Now moving on to Slide 8 and 9. We have given a bit more detail on the operations at Mt Magnet and then Edna May. I won't dwell on these too much, but there are a couple of key highlights to point out. Firstly, at Mt Magnet, the grade of the Cue material milled for the year was 10.66 grams per tonne. Now that grade is pretty good for an underground mine, let alone from an open pit mine and the impact of this on FY '25 earnings is clear to see. Secondly, at Edna May, the operation generated $123 million in cash earnings for the year with the stockpiles performing above expectations. Given the prevailing gold price in the year, we squeezed every little bit out we could from Edna May. And whilst, yes, this did decrease the group margins as a percentage, the cash generated made it more than worthwhile. Whilst there remains 940,000 ounce resource associated with Stage 3 cutback at Edna May, our immediate priorities are with Mt Magnet, Dalgaranga and Rebecca-Roe. We intend to revisit our options at Edna May early in '26 calendar year. Turning our attention now to what it's all really about, cash, which is discussed on Slide 10. There are undoubtedly some impressive numbers here, starting with the underlying free cash flow of $694.9 million, which equates to $2,304 per an ounce produced and puts Ramelius well out in front of our peer group. The total cash flow for the year was $359.4 million and was more than double that of last year, resulting in a closing cash and gold position of $809.7 million. On Slide 7 (sic) [ Slide 11 ], we've highlighted a few key cash items, including total cash returned to shareholders for the year by way of the FY '24 dividend and the maiden FY '25 interim dividend of $70.3 million. If we include the dividend reinvestments in this, the total return to shareholders increases to $92 million. Our total capital investment for the year of $328 million was 36% up on the prior year and includes mine development, exploration and our 19.9% stake in Spartan. And finally, just referring you to the chart on the bottom left of the slide, since the introduction of Cue in the December quarter, we have consistently delivered strong cash flows averaging above $200 million per quarter. Moving now on to Slide 12 and our balance sheet. The working capital position of Ramelius, which takes into account the current stockpiles and current payables, increased 70% to $689 million, whilst the net asset position increased to $1.9 billion or 43% on the prior year. This increase was on the back of the strong earnings for the year as well as the fair value increase in our investment in Spartan. Our total liquidity of just under $1 billion, which includes our undrawn but committed $175 million finance facility leaves us fully funded for future development of Roe-Rebecca, integration of Dalgaranga and continued returns to our shareholders. The transformational combination with Spartan will materially change our balance sheet in FY '26. Whilst valuation work on the acquisition is progressing, I will draw your attention to Note 26 of our financial report, which provides some provisional detail on the purchase consideration and the fair value of assets and liabilities acquired. The $2.8 billion purchase consideration will be allocated over the assets and liabilities acquired with the bulk of the value expected to sit within the mill infrastructure, mine development and exploration assets. At the date of completion and after considering the cash payment to Spartan shareholders, the total cash and gold of the combined group was $784 million. And whilst the valuation works are still progressing, we do expect a stamp duty on the transaction to be between $130 million and $140 million, which we assume will be due sometime in the second half of FY '26 and will have an impact on earnings that year. It is expected these works will be completed by the end of this calendar year with our half year financial report, including all relevant information on the acquisition and fair values. We do look forward to providing the market with our 5-year plan in December quarter. This will not only detail our path to becoming 500,000 ounces per annum by FY '30, but also the synergies available to the combined group, which includes tax synergies, which are real and immediate with our tax installments already being reduced as a result. This will all be quantified with the release of the 5-year plan, which, as Darren has mentioned, will also include detailed guidance for FY '26. Before handing back to Darren, I will just highlight that the appendices to the presentation include detailed information and reconciliations, along with the 5-year history of our operations, earnings and cash generation. I trust you will find these useful. With that, back to you, Darren.

Thanks, Ben. So if I can refer you now to Slide 13, our declared final dividend for FY '25. We are proud of our track record on dividends. And today, we are declaring our seventh consecutive final dividend, this time, $0.05 per share, fully franked. This, coupled with our maiden interim dividend paid in April, takes the total dividend for FY '25 to $0.08 per share, a 60% increase on the prior year. It is pleasing to be able to offer this growth in returns to our shareholders, even more so considering our increased share count with the addition of Spartan. The total dividend for FY '25 represents a payout of 29% of free cash flow, keeping true to our targeted return of 30% of free cash flow to shareholders. In approving the final dividend, the Board gave consideration to future capital commitments, along with the doubling of our exploration budget to $80 million to $100 million in the FY '26. The total dividend representing a 3.2% yield based on the 30 June 2025 share price and a total return over the last 5 years of 9.5% per annum. It represents a total return to shareholders of $430 per ounce sold, more than double the $195 per ounce noted last year. Our dividend reinvestment plan is now well established with a participation rate of 23% for the FY '25 interim dividend the opportunity for shareholders to be participant that will be available again this year with the price of shares to be calculated at a 2% discount to 10-day VWAP from the date of election. Last year's dividend payment amounted to $57.2 million in cash and reinvestment. This year, including the maiden interim dividend, we will be returning up to a total of $130.3 million, which is a 128% increase. The final dividend will be paid in October. In closing, I'd like to highlight the investment case for Ramelius’ on Slide 14. We are reliable operator, doing what we say we will do, having met guidance on both production and costs for the last past 5 years. We consistently paid dividends and have done so for the past 7 years. Our transformational combination with Spartan could see us enter the ASX100 this calendar year. We are sector-leading on cash flow generation per ounce and have a long-life asset in Mt Magnet and Rebecca-Roe. We have a credible pathway to 500,000 ounces per annum, which will make us the third largest Australian gold producer. And we have doubled our exploration with a range of quality brownfield targets in our portfolio. It will be an exciting and busy end to the end of the calendar year for Ramelius’ with the upcoming Rebecca-Roe DFS as well as the integration study and 5-year plan for the Mt Magnet and Dalgaranga. So plenty of exciting news to come. In the coming weeks, we'll look to provide progress update on our integration studies and associated activities, mine development progress and an exploration update on Dalgaranga, from my perspective, all progressing to plan. With that, that concludes our presentation. I will hand it back to the operator to open the line for questions.

[Operator Instructions] The first question we have will come from Al Harvey with JPMorgan.

Just a clarification. So FY '26 guidance, I think at the quarterly, you flagged that might come around 6 weeks post figures, so mid-September. Just wanted to clarify your opening remarks that FY '26 guide will come with the integration study in December quarter. So both of those expected in the next couple of months?

Yes. Thanks, Al. Yes. So basically, we're looking to give that 5-year plan coming in the December quarter. So in an ideal world, sort of late October, early November, but the studies will be finished when they're finished. Network has been coming in, starting to zero in on some of those 8 options under review. So yes, we'll be sort of targeting probably in ideal world, late October, but mid-November would probably be that range. But yes, that's when we want to put out that full picture to demonstrate both capital needs as we go forward just so that all shareholders got the full picture.

Sure. And I think we're still expecting an update on Rebecca-Roe DFS outcomes in the September quarter. So how is that study tracking?

Yes. So what we want to do, that's still sort of tracking well. Once again, we may sort of hold back a little bit just to see that full capital picture when we look at what Mt Magnet hub will need as the capital needs and obviously then also overlay that with the needs of Rebecca-Roe. So there's more likely a scenario where they're both coming out at that same time. And from there, we'll make those decisions on capital outlays over the next sort of several years.

Next, we have Alex Barkley of RBC.