St Barbara Limited (OTCPK:STBMF) Q4 2020 Earnings Conference Call July 28, 2020 9:00 PM ET

Company Participants

Craig Jetson – MD, CEO & Director

Garth Campbell-Cowan – CFO

Conference Call Participants

How To Consistency Beat the Market With Over a 90% Success Rate

Whether the market is up, down, or sideways, the Option Strategies Insider membership gives traders the power to consistently beat any market. Spend less than one hour a week and do the same.

Just click the link below to see our full presentation on exactly how we do it.


Alex Barkley – Morgan Stanley

Reg Spencer – Canaccord Genuity

David Radclyffe – Global Mining Research

Nick Herbert – Crédit Suisse

Matthew Frydman – Goldman Sachs Group

Levi Spry – JPMorgan Chase & Co.


Thank you for standing by, and welcome to the St Barbara Briefing on FY ’20, Q4 June Quarterly Report. All participants are in a listen only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]

I’d now like to hand the conference over to Mr. Craig Jetson, CEO. Please go ahead.

Craig Jetson

Thank you, Amanda, and good morning to everybody. And obviously, thank you very much for joining us this morning for St Barbara 2020 quarter report briefing. On the call with me this morning, I have Garth Campbell-Cowan, our Chief Financial Officer; Rowan Cole, Company Secretary; Val Madsen, General Manager, Human Resources and HSEC; and David Cotterell, Manager, Investor Relations.

At a high level, I’ll be going through the presentation pack, and I’ll open up for discussion at the end, but also discuss the quarter that we had and the strong into the financial year. I’d have to say upfront that the core that we’ve had has been very strong in many ways, and I’ll go into all the detail behind that strong performance in the coming presentation.

First and foremost, I’m very pleased with our site performance. And in particular, COVID-19 management that we’ve enjoyed during this call, now different than others in our industry and across the country and both. However, the risk of COVID-19 remains and will maintain discipline, as we evolve our management plan accordingly.

I will have a call out to Val Madsen and her team, at this point in time and congratulate her and the team, all the operations led by our general manager of the organization, in particular, to be able to manage through these challenging and difficult times for us. And as you’ll see in the coming slides and the conversation, we’ll have not only a safety performance certainly improved over this quarter, and a very strong year, but we’ve been able to manage and navigate our way through the current COVID-19 issues that we have globally within the countries of where we operate.

So, moving on, operationally, it was an excellent quarter. For example, Atlantic Gold had a record quarter. Gwalia produced 50,000 ounces for the first time in a year, and Simberi had the best quarter for the year, finishing up very strongly. The cash balance increase in the company were $85 million. The company is in a very healthy position with $405 million in cash, and as a result, we’re planning to repay the $200 million we drew down back in March to bolster the balance sheet at the end of that time.

In terms of, we’d love to go to Slide 4 and discuss some of the management plans and issues that we’ve had around COVID-19. As I’ve talked about previously, our absolute priority during this pandemic is the health and well-being of our people, partners, suppliers, and the communities where we operate. Fortunately, we’ve had no COVID-19 positive cases in any other sites. However, we are very conscious of the risk of maintaining controls by adopting and involving in the changing circumstances of the past and what we have in front of us going forward.

In PNG, for example, we’re seeing flights resume and allowed us to rotate our expense management team. However, with cases on the rise in PNG, we are keeping a watchful eye on the situation. Our exploration program has already commenced under strict procedures and guidelines, given the remoteness of where we operate. We’ve also been conducting a number of mental health webinars for our employees, which we are offering on an ongoing basis, and we will certainly continue to do that and monitor the health and well-being of their people and their partners and providing support in the communities where we operate.

Lastly, in this area, I’d like to maintain a strong commitment to our communities with a number of COVID-19-related programs and donations during this quarter, supporting the areas and the people that live in the areas of where we work.

With that, now I’d like to turn to Slide 5. And on Slide 5 there are highlights of the quarter which some of our have already mentioned. We’ve had our strongest production quarter for two years in line with guidance. The operations generated $126 million in operating cash flow. The cash position increased $85 million after growth CapEx of $11 million income tax of payments of $6 million and exploration of $5 million was spent.

Over the Slide 6, and again just to touch on their safety performance at a very high level. With safety is certainly going in the right direction which I’m pleased about. However, there’s still a lot of work to be done to achieve an injury free workplace.

Pleasingly, FY ‘20, there was a 44% decrease in recordable injuries. And I’ll take the moment to congratulate all of our employees, partners in all our operations and beyond for this achievement, and congratulations to them.

Turning on to areas of focus for us and moving into Slide 7. During the quarter, as I’ve mentioned in the past, we’ve had a review with external technical assistance, and that was under taken at each of our operations. A range of productivity improvements and cost reduction opportunities have been identified, and there are still more being identified, as we speak. We’re also looking at our operating model to enhance our technical expertise to see what we’re going to set ourselves up for success, and how are we going to set ourselves up for success in the future.

At Atlantic Gold, we’re progressing the various environmental impact statements for each of our developments, which I’ll talk a bit more in detail on slides to come. The COVID restrictions are slowing some stakeholder engagement down and in particular community engagement. Work continues to be optimal sequencing the Atlantic Gold projects, and we will still continue to work that in the short period over the remaining part of this calendar year.

At Gwalia, we’re completing the vent shaft as we speak. Currently, it’s sitting at 93% completed, 480 meters, with a further 37 meters to go before that project is finally completed. It certainly has been a challenging program and project over a long period of time. And it will be good to get this one behind us and we can move on to optimize that operation.

Once complete, we will seek to optimize development, maximize ore extraction and production, and ultimately reduce operating costs into the future for that operation. A dedicated project team has been established to drive business improvement opportunities already identified in the operational review, that I mentioned just a moment ago. So Gwalia is becoming a very strong operation again, coming back out of the Gwalia extension project and certainly we were getting ready to optimize that particular asset.

At Simberi, we’re progressing the Simberi sulphide project through the feasibility study. This involves future optimizing work already completed in the past pre-feas study. And I look forward to seeing the improvements in the study come to fruition at the end of this year.

The consolidated June full quarter results on Slide 8, shows the consolidated gold production and all in sustaining cost. This shows, at this quarter since acquiring Atlantic Gold, and with that, I’d love to move into some of the operations in a little bit more detail, moving on to Slide 9 and starting off with Atlantic Gold.

So again, as I previously mentioned, Atlantic Gold had a record quarter. The team completed in this quarter as well the team has completed reline of the ball mill. And the reason I highlight this as a significant factor, it’s the first time the internal team due to COVID restrictions and having people move around the country and within country to come in and do linings as contractors and relaunches contractors, we performed that task ourselves.

I’m pleased to announce that the team not only completed better than budget, but certainly in a shorter time in allocated in Atlantic, congratulations to the Atlantic team. As announced earlier this week, we are seeking to acquire a 100% shares in MRRI for CAD60 million dollars. As you would know, MRRI hold 40% interest in the Touquoy Mine, and 25% interest in certain exploration tenements around the Touquoy operation.

Post this transaction, St Barbara will own 100% of the Touquoy Mine and 100% of surrounding exploration tenements. Completion for this transaction is expected to be done and signed by early September.

FY ‘21 guidance for Atlantic productions, between a 100,000 and 115,000 ounces. All in sustaining costs between AUS955 and AUS1,100 per ounce. Sustaining CapEx range is between AUS15 million and AUS20 million with growth CapEx that the same, which is AUS15 million to AUS20 million. On the Atlantic Gold projects, the COVID-19 restrictions certainly have slowed down in terms of stakeholder management engagement, and particularly in the area of public consultations.

I am pleased to say that the federal agencies have now reopened and engaged with the first nation groups has recommenced. And I myself have had many engagements with the federal and the state government over the last quarter.

The Beaver Dam data collection is progressing well together with the feasibility studies on plant design and haul roads. I am pleased with the progress on that particular project. And we expect to submit a revised environmental impact statement in the December quarter of this year.

At Fifteen Mile Stream, we’re revising the environmental impact statement with scientific studies, and the first national consultation on this project is progressing very well. We expect to submit a revised AIS in the current quarter.

Cochrane Hill, AIS is planned for later this calendar year. On the proposal to designate the Archibald Lake wilderness area would have engaged with the Nova Scotia government and the outcome has been delayed due to COVID-19 restrictions. We are in consultation and we have had meetings with the key stakeholders around Cochrane Hill and that’s progressing very well at the same time.

So moving on to Gwalia quarter four performance. Gwalia’s quarterly result has been very solid to say the least. Production priority this quarter has absolutely showed the ability of what the Gwalia team can deliver in lifting production levels in that operation. Certainly looking forward to the extension projects being finished. On completion of the Gwalia extension project allows full optimization of the mine. However, we support continued sustainable operations in the midterm, FY ’21 development will remain over production and I’m sure we’ll get some questions on that.

FY ’21 guidance, production between 175,000 ounces and 190,000 ounces. All in sustaining costs guidance is AUS1,435 to AUS1,560 per ounce. Sustaining CapEx is AUS78 million to AUS80 million, and growth CapEx about AUS30 million to AUS32 million. Sustaining CapEx includes a higher mine capital development to increase a number of mining fronts, and that will be the focus of this next coming production year.

Forward planning for FY ’22 and ’23, indicates a production uplift to 190,000 to 200,000 ounces. And I’m happy to take questions on this at some other stage.

So moving on now to Slide 11. The final raisebore has advanced during the quarter. However, we did prioritize on that movement underground. We had significant issues with the rice raisebore, with bad alterated ground and squeezing ground that caused a lot of delays. Thankfully, that is now coming to an end with this last 37 meters currently underway.

Onto Slide 12, in terms of Simberi. Simberi at a high level had another improved quarter, congratulations to the team there. But Botlu and Sorowar’s Central pit had higher grades than anticipated which certainly assisted in that production optic. On the downside, new performance was lower due to reduced availability, in particularly the SAG mill and the RopeCon.

During this quarter, we replaced that 250 meter section of the RopeCon, with the remainder of the original belt of 1,200 meters to be replaced in this current financial year. As announced in May, the Board approved the Simberi sulphide project to proceed to a feasibility study. And this as well, they will progress as we speak. We expect the feasibility study and environmental social impact assessment to be completed in December of this year. The final investment decision has been targeted for the March quarter of 2021.

FY ’21 guidance for Simberi is the production between 95,000 and 105,000 ounces. All-in sustaining costs between AUS1,665 and AUS1,840 per ounce. Sustaining CapEx between AUS12 million to AUS15 million and growth CapEx between AUS4 million to AUS5 million that is directly related to the pre-feasibility study.

If I may now, turning to Slide 13 and on our balance sheet. Our balance sheet is showing clearly on Slide 13, cash increased by AUS85 million during the quarter to AUS405 million and this is after AUS11 million of growth, AUS6 million in tax payments and AUS5 million exploration expenditure in the quarter. The debt is AUS316 million as I mentioned earlier, and we plan to repay the AUS200 million draw down from the syndicated debt facility that we drew down earlier this year.

So, just quickly moving through the exploration update on Slide 14. So again, during the quarter expiration resumed under strict new procedures and particular to COVID-19 management, and due to less working in extremely remote areas.

Activity was focused on the Leonor region and Moose River Corridor. The surrounding area in Gwalia is a particular focus. And we’ve commenced drilling in the shallow portions of the Gwalia system during this quarter. Additionally, in the broader Leonora region, we are testing targets located within a 30-kilometer tracking distance from the operation itself.

Slide 15 shows high level some of their growth pipeline that we have in place. So, we’re focused on building existing growth options, as well as keeping an eye out for external growth opportunities. The future growth potential looks very exciting for us. And I look forward to be able to talking positively about that in the future.

In conclusion on Slide 16, we’ve had a very good quarter to the end of the year, that’s our best production performance in two years. Our safety performance has improved and heading in the right direction. Although, we obviously still have some work to do to be injury free.

Cash at the end of the quarter is increased by $85 million, leaving the company a very strong cash position at AUS405 million. Debt is AUS316 million, and we intend to repay the AUS200 million at the end of the month, which we drew down in March to bolster the balance sheet in case of the COVID operation, the COVID affected our operations in any way.

The feasibility study in Simberi sulphide is just continuing. The operation reviews as I’ve mentioned before, that obviously helped us in a production journey in quarter four. Gwalia is underway and continuing underway and now Atlantic, and then onto that’s progressing very well, I’m pleased to say.

Lastly, we announced on Monday that we have reached an agreement to acquire MRRI and hold the remaining 40% of Touquoy. And I think in terms of the presentation pack, that’s certainly a very quick overview and high-level update to everybody.

And with that, I’d now like to floor open for any questions that people in the audience may have.

Question-and-Answer Session


[Operator Instructions] Your first question comes from Alex Barkley from Morgan Stanley. Please go ahead.

Alex Barkley

Hi, Craig. Couple of questions for me. Firstly on guidance, specifically at Gwalia. Previously you had a preliminary guidance for the FY ’21 and ’22 seeing more of that to 230,000 ounces and now it’s like you’re coming in a little bit lower in FY ‘21 and ’22.

Is next year — is that likely, that plan catch up with development tons? And then perhaps are you going through some lower mine grades over that period, in light of some pretty good mine tonnages it just had this quarter? I’m just interested in how that guidance I think it seems to have moved a little bit lower from what was previously you suggested.

Craig Jetson

Yes. Alex, well, thanks for that. That’s a really good question, particularly for people that are focusing on Gwalia performance. Look, I’d have to say, the operation, as I mentioned in the last quarter has gone through all my three years of upgrades and project delivery and all sorts of different interruptions. And I have to suggest that our development rates, because of all that has certainly impacted our production rates.

Where that leaves us is, I guess, coming out of the extension project and particularly when we finish the ventilation early to mid-next month, it’ll give us the opportunity to really getting an optimized that business. What we did and how we managed through the quarter and particularly uptick in production this time was test a lot of methodologies in that improvement program.

As I’ve alluded to, we’ve had some technical people help us look at optimizing Gwalia and other assets, but we’re talking about Gwalia. And clearly if we do get some sort of productivity right, the mine sequencing right, the development right, we’ve asked having to worry about vent shafts and taking that material to the surface. To optimizing that top plan, the other sorts of numbers that we should settle on.

We’re certainly looking at the second part of Gwalia in terms of margin and margins going forward. And I think if we land at a production level life of mine with the best margins it can produce it’s probably the better outcome life of mine for the operation. It’s certainly going through take some troughs over the years, and in recent time as well. My focus will be to level that out, next optimize our margins and certainly be more predictable during the life of mine.

The last technical comment that I’ll make is Gwalia’s grade is dropping off. It is getting deeper. It’s a changing mine from what we’ve had for many, many years. So, the focus now is on many of our operating systems, productivity and certainly cost out of that business with better margins.

Alex Barkley

And just a question on Atlantic Gold. I appreciate studies are ongoing at this point. But I just wanted an idea when you think you got an extra processing CapEx, the Fifteen Mile Stream and Cochrane down the line. Are you thinking about how far that can be delayed? And perhaps would be saying that FY ‘22 because it doesn’t look like it’s coming next year?

Craig Jetson

Yes. Look, again, it certainly won’t be next year. The mechanical and electrical and the civil engineering is going on as the project unfolds, and as we work through the permitting process. But as we mentioned before in the presentation deck in particular, we are looking at complete haul of business optimization and in that way to the Atlantic Group of project shift, what is the right timing, what is the correct sequence. And that will then certainly give us a better window of understanding the capital. In the short-term, for the next 18 months, it won’t be a burden on the organization now.

Alex Barkley

Okay. Thanks.


Your next question comes from Reg Spencer from Canaccord Genuity. Please go ahead.

Reg Spencer

Thanks. Good morning, Craig, good morning, team. I was wondering if you could just give us a bit more of a breakdown of the growth CapEx across Gwalia in some very next year, given that the vent upgrade is approaching completion at Gwalia? Can you give us an indication of what falls into that growth CapEx at Gwalia and likewise, Simberi? Can we look at the growth CapEx here as being a little bit of a head start on sulfides potentially? I am just trying to — hopefully you can touch it out for me, please.

Craig Jetson

Yes. Reg, I certainly can. Look, I think the capital — we will finish off the vent shaft in the next few weeks at Gwalia, I’m very confident that we’re finally getting that out of the way. The next round of major capital Gwalia will be the second stage of cooling and ventilation, which is a small percentage of what we’ve spent in the last three years. But there is a little bit of CapEx on that itself. So that’s quite simple, really, and not a lot of money.

I think the Simberi is even easier to describe. The AUS3 million to AUS4 million that we’ll be spending in growth CapEx in particular, almost focusing on the feasibility study. I’m very excited about that project and trying to fast track as best we can, given the opportunity for investment and payback. It’s certainly over 110,000-ounce sort of project for quite a number of years at a modest investment. So, I don’t think at this point in time, we have a great project internally that could surpass that investment. So I am fast tracking that.

There is a small amount of capital at similar sorts of amounts at Simberi. That is also setting us up for a longer life of mine in the next two years. So the investment capital that goes into there now, whether it be sustaining, it’s got a longer window than two to three years life of mine. It’s now out beyond 10. So any investment we do, we’ve certainly put the lens over the life of mine of greater than two years.

Reg Spencer

That’s great. Nice little segue into Simberi sulphide, it’s clearly, you’re looking to complete studies by the end of this year, FID, the start of next year. I know you guys don’t like to dwell on it too much, but there has been, from what I can see, some legislative changes to the PNG Mining Act. We understand that that’s really focusing around what’s happening in Pilbara. But how much those potential changes affect the way you think about the development plans of the sulfides, if you proceed with that project?

Craig Jetson

There’s obviously the changes to the mining at the sitting with the PNG government and not progressing at all for a lot of reasons. So one is the sitting with the whole parliamentary issues in PNG are problematic, particularly with COVID and other things. So that’s still sitting there and going nowhere.

Like, as I mentioned in the last quarter, there is a lot of communication within the Chamber of Mines and Industry within PNG keeping a very close eye on what’s happening, because it will impact the entire investment community and the extraction industry in PNG and not favorably.

What I’m confident about is that mining license to our ML is something like about eight years away before we need to worry about going through relicensing, what we already have which is a bit of a different argument a different position then Pilbara for example.

The other thing for me is in terms of now, we know that the project or sulphides that certainly got a huge benefit to not only just the extension in life of mine, but certainly a lot of ounces of low cost. But going through the next phases will be the return on investment with the engineering that we do.

So, what I’m saying is we are looking at ways of bringing a life of mine for example, even shorter than we were saying 13 years to get a return on investment sooner than later. So, if there are any change to the mining act, then we’re somewhat protected by our license to operate.

The current prime minister has certainly come out in the public and stated that current MLs will be grandfathered, regardless of any mining act changes. So, all that’s political arena that we’re keeping a class on.

Reg Spencer

Based on your comments around potential optimizing of a mine plan, and then maybe shortening that payback period. Can we speculate in thinking that might have something to do with how you’ll approach grade? Is there the opportunity to grade stream or perhaps chase high grades earlier on in the mine plan to deliver that shorter payback?

Craig Jetson

Look, they’d be nice to be able to have those levers. I would suggest that that’s certainly work in progress, and we need to understand a lot more about the ore body knowledge before we even look at what the mine plan could or couldn’t deliver.

One of the pleasing things I have to say is a great control in particular, certainly picking up some more opportunity for the oxide program to extend the current life of mine there, which will help us in a lot of ways. So, I think the transition from one or talk to another is very easy, very smooth. We’ve got a lot of work to do in this feasibility study to understand what the mine plan or what the mine can actually deliver at maximum rates, given the equipment in the area that we work versus what the plan, we’ll have to I guess accept. So we’re looking at all aspects of optimizing that project.

Reg Spencer

Great. That’s fantastic. Thanks, Craig. I’ll pass it on.

Craig Jetson

Thanks, Reg.


Your next question comes from David Radclyffe from Global Mining Research. Please go ahead.

David Radclyffe

Hi, good morning, Craig and team. So, I just wanted a follow up on Gwalia. And if I can push a little bit more on the grade and tonnage kind of profile over that guidance period of ’21 to ’23. And merely because I guess if you look at the numbers, it looks like what it’s implying is that targeted run rate at 1.1 million tonnes per annum could fall outside of that period. Is that the right way to think of it?

And then given your comments on optimization. Does that kind of rate still make sense going forward, if you are going to be focusing more on the margins of the operation?

Craig Jetson

Yes. David, I think what, if you just want the clock back into the quarter, I think you can see what the clearly what the operation can produce. If it’s a bottleneck to a point where, the extension projects run, finish and we can optimize. And I think with the internal business plans that we are currently reviewing, in terms of how we run Gwalia, how we optimize, how we certainly benchmark ourselves against our peers, and a whole range of operating performance.

That was a test run in the last quarter to get the best result we could. And of course, it came out quite well. So that’s giving us the confidence that when we develop, when we optimize, when we get the mine plan right? We will certainly be able to be more productive than what’s in a [Indiscernible] budget and guidance in future years. But we have to do the development, we have to do the optimization, and we have to get our projects right.

At the same time, our internal review has seen quite a few optimistic areas to take cost out of that business as well that we will pursue. So, at the end of period, and pick a number we will certainly look to have very, very strong margins for a longer period of time and a stable operation instead of up and down and for poor choice of words, a boom and bust.

So, yes, optimizing the mine, I think we will develop very and focus heavily on the development. And keeping in mind, we’re still producing more ounces than we did this year into next year. We will optimize for the years to come and certainly set the mine up for success into the third year. I don’t have enough information to give you any more guidance on year two, than what we’ve guided on today.

David Radclyffe

Okay, thanks. And then just in terms of past, I also wanted to get a bit of an update there of how that’s performing? And are you reaching targeted levels of waste that you’re managing to keep underground, because I think there was a comment before that that also would be optimized?

Craig Jetson

Yes, correct. And we’ve just finished the first program of that optimization, which was a reliability review, typical of major assets like that during commissioning sites, particularly that you’ve never operated before and that’s certainly a unique design. And during the quarter, I was lucky enough to be allowed into Western Australia and spend almost a week and a half, nearly two weeks at the operation, saw that asset myself.

But the team have certainly been struggling to commission and have it reliable. But there’s been a significant amount of work done during this quarter and before this quarter started. And typical of timing, we have had consultants there working on the reliability program and certainly any engineering changes we may or may not need to stabilize that plant and make it a reliable piece of equipment that we not will be.

In the white space between me leading a month ago and now the team on site have been able to get it running and certainly commissioning it as we go. And the production rates in the last two weeks during the review have been higher than they ever have been. And commissioning is going very well and reliability seems to have picked up a lot. So, I think we will certainly get the design criteria, design rates out of that piece of equipment in the very near future. But there is a bit of work to do with some minor design changes. But it’s certainly over the next 12 months will play a critical part in what the future will be.

David Radclyffe

Okay. Thank you.


Your next question comes from Nick Herbert from Credit Suisse. Please go ahead.

Nick Herbert

Thank you. Good morning, Craig. Thanks for the details so far. I might just continue with a couple of those actually on Gwalia, if that’s okay. And do you mind just drilling down into the FY ‘21 guidance a bit more in terms of what those assumptions are on throughputs and grade, sort of phasing this for the first half and second half.

And then I completely understand you still to do your optimization work, but if we just look at that, FY ‘21 guidance for sustaining CapEx and development rates. And I hated that optimization, you do have to play with the development catch up and want to increase that mining rate. Is that a I guess at this point, a fair rate that we could assume that continues over the next couple of years until we get some greater detail there?

Craig Jetson

Okay. In terms of guidance, Nick, I’ll say, yes, but with the caveat and you’ll see it in the first two quarters of FY ’21, in terms of production, how it would be below expectations of a lot of people. And the reason for that is strategic. And as you’ll see, the total quantum of guidance is more than what it is this year in terms of ounces produced. That means, we’re having a slow first-half here, that is deliberate. It’s in a mine plan specifically to be able to deliver optimization in the second-half and years coming after that.

So, at some stage, because of the extension project being finished, at some stage, we will optimize to where it should be, and I kept using that word. But I think the strategy, given that we’ve got to make sure that the mine design is right, the mine-induced seismic — is controlled. We understand the geotech issues that accelerated rates will deliver. Ground control is safe. So the business interruption and we can run the operation safely at higher rates has certainly been managed well and it has been and it is.

Post, I guess the ventilation work that we will do over the next six or seven months in particular, waiting for the ground to break through and the [Indiscernible] to be completed. We will optimize ventilation. So in the second-half of the year, we’ll set ourselves up very, very well. The advanced — and you can see that in some of their CapEx spend.

The advanced development over the first six months, however, ore is certainly slowed the first six months production down. The second-half would be indicative, I would imagine of the next year and then any optimization of future opportunities will be guided at an appropriate time. But I’m really excited about the future of Gwalia, even though it’s getting deeper. The grade is certainly we’re not seeing and won’t see the grade of yesteryear, but it will be achieving its best margins for a long time in the coming years and certainly stable.

Nick Herbert

That’s really helpful, thank you. And sort of just to go back on the sustaining CapEx this year and not after guidance but just sort of what you talked to into the expectations for development rates. Is it a fair assumption for us to go with that for now, subject to sort of what comes into the optimization study?

Craig Jetson

Look, I would and that’s the reason we put it out there as a real number until we go through the optimization. But it’s like all, I guess, reviews that you do, you benchmark yourself against best in class and well operations similar to ours. And we’ve got some work to do. The issue with those rates and not because we’re not capable, we showed that we were in the last quarter. What the issue will be is getting the sequencing absolutely spot on to make sure that a short-term control and other most opportunities that we roll into that mine increase the productivity safely.

Nick Herbert

Thanks, Craig.


Your next question comes from Matthew Frydman from Goldman Sachs. Please go ahead.

Matthew Frydman

Sure. Thanks very much. Good morning, Craig and team. Couple of questions from me. Firstly, I guess just following on there for Nick’s question on the mine development CapEx. You’ve made it quite clear what the goal is for FY ’21 in terms of really focusing on development. But, looking further ahead and obviously pending the optimization work you’re doing.

But do you think that that rate of sustaining CapEx of around AUS70 million to AUS80 million? Is that the number that’s required to achieve the productivity you’re hoping to achieve going forward in FY ’22 and beyond?

Craig Jetson

Look, it would be way too early to guide other than, if we’re spending and focusing a lot of effort and a lot of that CapEx on development to get in front of the mine plan. And really what we’re achieving there is opening up more headings and stopes that we currently have, that we can go to if we run into issues that one, we’re not bottlenecking ourselves. Some of that cost will disappear at the end of this program, but other opportunities will come out of the optimization, I’m sure.

Matthew Frydman

Yes, sure. That’s a pretty clear answer. I guess what you’re getting at is that you view it as a bit of a catch up or a bit of an overspend in FY ‘21 versus what’s required on a sustaining basis.

Craig Jetson

Yes. Correct, Matthew.

Matthew Frydman

Yes. Thanks. Secondly, expanding on Reg’s question on the growth CapEx there. And that’s really adding additional cooling and ventilation capacity. If I look back to some prior guidance, which may be a bit dated now, I think you pointed to additional cooling and ventilation capacity of around AUS70 million over the life of the mine. So, is the AUS30 million that you are spending in FY ’21 give or take what’s required to finish the vent rates?

Can we assume that that will come off, that AUS70 million requirement over the life of the mine?

Craig Jetson

Look, the cooling in particular is going to be life of mine issues and so will ventilation. I mean, we certainly have the infrastructure at the surface now and other infrastructure on the ground that as we go deeper, we’re going to need more. This is certainly the stage 2 of the major I guess component. And the ventilation work in itself is still undetermined and not defined. But I think what you’ll see would be a little bit high, we are preparing ourselves for maxing production and develop over the coming periods of time.

We are advanced purchasing some equipment this year, that would kind of help us to do that, just in time. And some of the long lead items that we’ll need two years out from now. So, it’s all about bringing the balance of capital flow in line with production and productivity. And that’s where we’ve landed at this point.

Matthew Frydman

Sure. Thanks, Craig. Then I guess, secondly, moving on to Atlantic and thank you very much for the update there on your various submissions. Maybe just focusing on Beaver Dam, can you remind us what you’re expecting in terms of the decline of the depletion at Touquoy? And I guess working backwards from that point for Beaver Dam, when would you need to start production from Beaver Dam? And therefore would you hope to get approved — when would you hope to get approvals in order to achieve that?

And whether you can give an indication on how that might compare to the time line that you’re expecting, once you’ve submitted the revised AIS later this year? So, I guess, to just think backwards from when Touquoy start to play? And what that means for when you have Beaver Dam up and running?

Craig Jetson

Look, Matthew I think Beaver Dam is certainly — let me talk about throughput first. So I think we’ve certainly got some opportunity to extend the life of mine at Touquoy and we’re looking for that at the moment. We’re certainly drilling and ensuring up I guess, a great control in particular, but also drilling out more Touquoy.

I think Beaver Dam itself is obviously, as I said we’ll submit the revised AIS in the December quarter this year. We’re certainly engaged with the regional and federal government in terms of permitting, permitting timelines. We really would like to see that permitted sooner than later so we can get on with development. So, I think about two years from now is when we would like to have Beaver Dam online, but we’re still doing some development work in Touquoy to extend life of mine there as well.

Matthew Frydman

Yes. Sure. Maybe to think of it in a slightly different way. The previous plan kind of had this overlap between Touquoy and Beaver Dam in terms of fading the Touquoy mill. Is it possible that we’ll see a scenario where there is no overlap? Or there is a minimal overlap? Or in other words, Beaver Dam is ramped up at the tail end of the Touquoy? Or is that just conceptually and not likely to happen?

Craig Jetson

Well, I’d have to say that, I’m certainly looking for the longest overlap and the biggest overlap that I can get, so I can maximize the facility at Touquoy, first and foremost. Worst case scenario is that we go to low grade and we’re waiting for whatever the wait reason would be, whether it’s permitting.

Now, having said that, the local government in particular the First Nations are very engaging, thus supporting what we’re doing. And I certainly hope to have the permitting approvals sooner than later. So, the overlap is longer, not shorter. The exact targets on those, I wouldn’t like to commit to in these sorts of conversations. But we certainly have an internal target to optimize to and get going in that facility as soon as we can.

Matthew Frydman

Now that’s helpful in terms of your thinking. Thanks very much, Craig.


Your next question comes from Levi Spry from JP Morgan. Please go ahead.

Levi Spry

Hi, Craig. Thanks. Couple here. So just continuing that on. So the AUS60 million bucks at Touquoy. Just remind me, any CPs or outstanding approvals. So when does the cash go the door?

Craig Jetson

We have Garth, exactly the cash flow that we hope to have signatures on paper and finalized on early next month.

Garth Campbell-Cowan

Yes. Levi, look, the cash flow should be in the end of August, which again, subject to the shareholder meeting and also court approval, but that’s what we’re targeting end of August.

Levi Spry

Okay, thanks. And just continuing on Matt’s question there. So, I mean, we’re all still working to 43-101, which was like a long time ago. So, just to put it out there when do you update the last month plan for the whole asset?

Craig Jetson

Look for the entire asset, I think, it would be before the end of calendar year. I think there’s a lot of work to do to understand, a, the ore body. And by keeping in mind, we’ve got some very exciting ground that we’re doing exploration and not only near Touquoy, but in that Moose River Corridor. That could change a whole range of things, but as we know it now, I’d certainly like to be able to talk about the life of province as we know it now later this year.

Levi Spry

Thank you. And then just back to Gwalia, it feels like you got off there a little bit easy with the ‘22 ‘23 guidance. 190,000 to 210,000 ounces is fairly tight range. So, what tonnage and grade is that based on? Is it based on 1.1 million tonnes at 6 grams?

Craig Jetson

It’s based on the 6, 6.5 grams. Levi, yes, and the tonnage is about a million but we have to get there first.

Levi Spry

Yes, okay. So what’s the delta between the 230 that was out there previously? Is it grade or is it throughput?

Craig Jetson

No, it’s certainly throughput, and that’s driven by the development work that we are talking about, but also the productivity and the reliability of the Perth plant. So if we can join all those things together and optimize, we will certainly break through that million-ton mark and beyond. But it’s way too early to give you a number on that.

Levi Spry

Thanks. And so I’m just trying to work out what’s in and what’s out of it. So this optimization process that’s ongoing, can you give us some timing around that?

Craig Jetson

Yes, I think the optimization itself is I guess, mainly focusing on management, operating systems, productivity, things like automation. And we don’t talk about automation, big data and how we use that information very well at St Barbara and we certainly got some opportunities at Gwalia on that. And it’s just debottlenecking that operation. And the mining team there in particular for three years have taken every component for the Perth plant and materials down one decline, including some of the waste material, not only from development, but from the vent shafts. And it’s been three major levels of work around those vent shafts would all have to come to the surface pretty much, that all has to disappear and is disappearing for us to be able to get in a mine like we did in quarter four.

The enablers for that will be good systems, processes, good optimization, short-term order control and certainly, management operating systems. And that’s where we will head for productivity.

What I’m also trying to paint the picture here is longer-term, the margins at Gwalia will be very strong and very stable. Our costs are too high. We certainly understand that. And we’ve got some opportunity identified through the review to have a look at some of those costs. And when it comes together, the productivity will be in the order of what we’re guiding on and the costs are out and the margins would be much better.

Levi Spry

Thanks, Craig.


Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.