Regis Resources Limited

Mark Clark - Executive Chairman Jim Beyer - Managing Director Kim Massey - CFO Myles Ertzen - EGM of Growth Tara French - GM of Exploration Paul Thomas - COO

Michael Slifirski - Credit Suisse Sam Berridge - Perennial Daniel Morgan - UBS David Coates - Bell Potter Securities

Good morning and welcome to Regis' Investor Conference call to cover the Company's September 2018 quarterly report. I'm joined on this call by Managing Director, Jim Beyer.

He has only been with Regis since the start of the week, and pleasingly, he has been up at the mine sites, which is of course why I am presenting today and not Jim. Kim Massey, CFO; and Myles Ertzen, EGM of Growth; and Tara French, GM of Exploration, are also on the call.

Paul Thomas, COO, unfortunately sends an apology as he is on annual leave. I will start the presentation today with an overview of the operating results for the Duketon gold project for Q1.

I note that it was another very strong quarter for the project in terms of production, costs and cash flow generation. Our Q1 gold production was 90,879 ounces, which was in line with Q4.

It was above the midpoint of our production guidance range of 340,000 to 370,000 ounces. Throughput, grade, and recovery were all pretty much in line with Q4.

The Q1 stripping ratio for the project was down significantly from 7 to 4.5 in Q1, now the pre-strip of high-grade Tooheys Well pit was continuing and Dogbolter and Anchor commenced, but the DNO mining returned to ore after significant waste camping in Q4. At Q1, our cash cost was $793 per ounce and all-in sustaining-costs were $923 per ounce.

Our all-in sustaining costs were 6% lower than Q4, due mainly to the lower strip ratio as Duketon North returned to ore mining. The all-in sustaining cost was below the bottom of our FY '19 guidance range of $995 to $1,055 per ounce and that continues a trend that has been the case for some time.

Our Q1 operating cash flow was $78 million, down from record, all-time record in Q4 of $85 million. This difference was almost entirely due to a lower diluted gold price in line with the movement in the spot price across the quarter.

So, very strong continued operating cash flow underpinned the cash build and dividend payment. On the chart on this Slide for the combined Duketon project and show how strongly operation and consistently operation made over the last few years.

In fact, it's remarkable how consistent Duketon has been for some time, you can see the tons mill, grade, recovery, production and cost all fluctuated in a very narrow range on a quarterly basis, which is a great credit for the operating team. I consider the one parameter that does have some variation is the stripping ratio.

The overall stripping ratio Duketon is still relatively high this quarter and next as we complete the bulk of the pre-stripping, mining and our mixed satellite projects Tooheys Well and Dogbolter and Anchor. And the stripping of these over these two quarters will open up -- these open pits to make a significant contribution to production for the next few years.

As I looking now the quarter on a more detailed basis, firstly, the Duketon North operations for produced 27,397 ounces at an all-in sustaining cost of $898 per ounce. I would tend to see the better production in Q4 was largely the results of 9% higher grade in Q4 as mining returned to ore at Gloster whereas in Q4 the mill favored lower grade.

Gloster stockpiles lost we expedited in waste mining at Moolart Well to provide raw material for the now completed tailings dam lift. The strip ratio at the Duketon North increased dramatically from 7.4 in Q4 to 2.2 at the same reason i.e., that the campaign waste mining from Q4 was completed.

Our pre-strip of the satellite pits Dogbolter and Anchor continued in Q1 in preparation for first ore delivery to the mill in Q2. The reversal of the high Q4 stripping ratio saw the project all-in sustaining costs over to $898 per ounce for the quarter, which is more reflective of the long-term run rate for the project, so very strong quarter for the Duketon North operations.

And now looking at the Duketon Southern operations where we produced 63,492 ounces of all-in sustaining costs of $935 per ounce. This production was 5% lower than in Q4 due to the grade of 1.24 grams per ton, and 4% lower than Q4 as less tons of the higher grader Erlistoun ore were mined and processed as the starter pits there narrowed approaching their final depths.

And the mill recovery was about 1% lower than the prior quarter mainly due to the fixed tail impact of lower grade. All-in sustaining costs of $935 per ounce were in line with Q4.

Stripping ratio was down marginally from 4.7 to 4.1, as we mined our first ore from the Tooheys Well pit, and also mined more ore from the Rosemont pit. As in Q4, we mined significant pre-strip waste at Tooheys Well about 1.25 million bcm, which is pre-stripping the pit.

That cost is included in growth capital and that will finish in Q2. So, another very strong quarter from Duketon South, and on that note, I’ll turn to our cash flow.

As I mentioned the Duketon project generated an operating cash flow for the quarter of $78 million, which was just $7 million below the all time record of $85 million for the Duketon project in Q4 of 2019. The slightly low operating cash flow for the quarter was almost entirely the result of a lower delivered gold price of 1,660 per ounce compared to 1,731 in Q4.

This reduction was in line with the movement in the average spot price from 1,726 to 1,657 across the period. Cash and bullion holdings at the end of the quarter totaled a $190 million.

During the quarter, we paid $40 million in dividends and we made some significant capital investments at Duketon, where we spent over $15 million of the $40 million FY '19 growth capital budget. This growth capital is heavily weighted to the first half of the year as we completed pre-strips for satellite projects particularly Tooheys Well, which will be delivering high-grade ore from the mill in Q2 and also tailings dam lift, which will be largely completed by the end of Q2.

This will set Duketon up for a very strong second half cash flow. The continued strong cash flow from Duketon underpins the final dividend payment of $0.08 per share, which we paid in September and the full year dividend of 0.16 per share, which represented a dividend metrics of 13.4% of revenue, nearly, 26% of EBITDA, 4% basic dividend yield and a 5.7% of grossed up dividend yield for franking credits.

I think it's worth noting or worth reflecting on the fact that Regis has now paid some $326 million or $0.65 per share in the fully paid dividends over the last 4.5 years, which is a testament for the cash generation power of Duketon operations and sees Regis well established as an industry laid I think in terms of returns to shareholders and capital management. Turning now to exploration and it was not a big quarter for exploration in Q1 where we drilled the excess of 75,000 meters of drilling at Duketon.

Two of the key projects we worked on this quarter were obviously Rosemont and Garden Well underground target, and I'll talk about those in a more detail in a moment, but we also have really encouraging results at a number of other projects during the quarter two. These included Moolart well where we were infill drilling resulted outside our current reserves.

Encouraging results from 23,000 meters of air core and RC drilling included 10 meters of 4.6 grams per ton, from 89 meters 11 at 5.85 grams per ton, from 68 meters and 9 meters at 5.23 grams per ton all of those results being outside reserves. At Baneygo and Idaho which is 15 kilometers South of Rosemont same story.

Drilling outside and below and along strike of our reserves turned up encouraging results including 6 meters of 7.45 grams per ton and 4 meters of 6.5 grams per ton and 6 meters at 4.375 grams per ton, and at a King John which is West of Garden Well and again encouraging results outside our reserve including 4 meters of 2.5 grams per ton and 6 meters at 4.96 grams per ton. So all of those results will be assessed in due course with a view to extending our reserves, inventory and mine loss.

In terms of regional prospects, we drilled a number of those during the quarter and turned-up some enormous regional air core results across five regional targets that will be following up in Q2, so hopefully a fairly news to come on those in the coming quarters. So, I'd like to now look at two of the projects I mentioned above in more detail.

Firstly, starting with Rosemont underground, and the Rosemont project has a number of plunging high-grade zones extending well below the final pit and depths, and the deposit has a strike rate of about 4 kilometers and this is fairly very explore below open pittable depths. As investors following Regis would know, we have been focusing on two discrete areas of underground potential within that system over the last two years.

These are the areas immediately below the main and south open pits. In March, we estimated a maiden underground resource at Rosemont of 1.4 million tons at 5.1 grams per ton for 230,000 ounces just in those two discrete areas.

In case, listeners are not familiar with the projects, the geology at Rosemont has gold hosted in steeply dipping quartz-dolerite unit intruding into the surrounding ultramafics. The quartz-dolerite unit varies in width up to 80 meters, and as you can see from these two cross-sections where we see the quartz-dolerite unit, we tend to get high-grade intersects.

Pleasingly early in August, the Regis board approved the development of the first stage in underground mining at Rosemont. The inventory for this Stage 1 development used 1.8 million tons and a fully diluted mining grade of 3.7 grams per ton of 212,000 ounces.

We started progressing development in Q1 with the ordering of long lead capital items and we commencement of the mining tendering process. We expect to be kind of a quarter in the March 2009 quarter, picking up development ore in the September quarter and then getting into main production ore in the December 2019 quarter.

Bear in mind that we see this Stage 1 development as very much the start of the eventual full scale underground business at Rosemont and an exploration from within the drive type of opportunity, that's really pleasing that the Stage 1 business in that context still has very competitive operating and capital cost. And the operating cost we expected to be in order of $1,150 per ounce and the preproduction capital is a pretty modest $29 million.

We expect the Stage 1 mine to be able to deliver between 480,000 to 600,000 of ore per annum, once its fully operational, this should generate a 120,000 to 130,000 ounces of production, representing approximately 35,000 to 45,000 ounces per annum of additional production relative to the current open pit all0in business that we have at Rosemont at the current time. Looking at an underground long section for Rosemont and knowing the continuity of the quartz-dolerite unit along strike, it's obviously there will be a significant opportunity to conduct exploration and resource drilling from the underground development between the two zones in the current resource.

Now, obviously, it will be much easier to hit targets within those workings and then from surface or within the open pit and much cheaper and quicker to those sides. We just reiterates the logic of establishing a viable underground mine on the current two positions and then growing the scale of mining in between operations from that cat fold.

We believe that area is Jaime and Scott to this ultimately to become a much larger underground position. With this goal in mind, it is also very important to match that the geometry on the current stock designed and the cross proximity to the open pit means that there is excellent optionality to cost effectively add access wise and ventilation beyond the current mine design to significantly increase mine production rate in the event that as we expect the mining inventory grow substantially overtime.

This slide really demonstrates the large scale opportunity at Rosemont. The long section shows that the current resource covers only that 1 kilometer of more than 4 kilometers of track at Rosemont and only extends a 150 meter below the car pick design.

On the journey that we completed from surface at Rosemont in Q1 continues to build on the results that we saw in Q4 and I think is demonstrating the early signs of these expansion opportunities starting to come to fruition. Some of the very strong results in Q1 below the Rosemont South resource and between two resource areas include 6 meters and 56 grams per ton, 6 meter 5 grams per ton, 4 meters of 18.8 grams per ton, 17 meters of 6.3 grams per ton, and 7 meters at 5.9 grams per ton, so very strong results and infill and extensional drilling is continuing and into Q2 and beyond.

This will be parallel with mine development with the view to extending the resource, and ultimately, the mine below and between the current underground resource areas. As I mentioned last quarter, the ongoing success in that drilling of underground target that Rosemont has given us the confidence to apply this strategy to the next logical target for underground resource at Duketon, which is the Southern end of the Garden Well deposit.

To-date, we identified at least four high-grade zones in this area. These present very significant underground targets with its zones of mineralization between 4 to 10 meters of true width, at least 300 meters of strike, and we’ve haven’t found the strike extension of this year, and down to a maximum depth so far of only 300 meters below surplus.

We drilled 20 holes into this targeted areas in Q1. We'll be encouraging resource returned from this drilling included 17 meters at 5 grams per ton, 40 meters at 2.5 grams per ton, 11 meters at 38.9 grams per ton, and 4 meters at 8 grams per ton.

RC and diamond drilling continue in Q2, focusing obviously on infill drilling, and the currently fairly cost 40-by-40 meter drill pattern, and also focusing on step-out and depth extensional drilling where those opportunities exist with a view to establish a maiden underground resources at Garden Well later in FY '19. So, we’re very positive about this opportunity and the earnings results and of drilling that we'll see at Garden Well so far.

Moving onto our organic growth project at McPhillamys in New South Wales and this project located in Central West and New South Wales in the same region at Cadia, Cowal and Northparkes. In September last year, we quoted a maiden reserve at McPhillamys of 2 million ton per annum, which was accompanied by a clear PFS level study, which shows we've got a high quality in large scale project.

We're contemplating a 7 million ton per annum operation here, which is very big player and delivering about a 192,000 ounces per annum over a 9.5 to 10 year mine less, so a very significant organic growth opportunity for the Company. So, turning to our ongoing work and completing our EIS and DFS on McPhillamys.

Pleasingly in Q1, I would submit the preliminary environment assessment to the New South Wales DPE. This was a really important submission for us that tip our attentions as to development of the project and that required management of environmental and other matters.

This submission saw the DPE issue maybe with the environmental assessment require for years of the projects. We’re now reviewing status of all of our EIS works streams against those requirements and expect to complete the EIS and submitted for formal assessment early in Q3.

We believe that getting the EARs and now as a result we're able to finalize the EIS and DFS, we'll generate significantly mentioned towards the project development of McPhillamys. This was the momentum that we've been trying to build in last couple of quarters as we worked to get resolution on the number of infrastructure variables to a level of confidence that would allow us to complete the PEA and get the EARs issued by the regulator.

So it's really pleasing now to have a clear path forward. We also expect to complete the DFS in Q3 now that we have the clear path on the EIS requirements.

Whilst all of the McPhillamys project parameters are being advanced and remained subject to the number of variables. It’s encouraging that we expect the project development capital to come in within towards the upper end of the September 2017 DFS range of $215 million plus or minus 25%.

This would be a very competitive cost for 7 million ton per annum plant with significant offsite infrastructure including a 19-kilometer water supply pipeline. This was particularly the case when this development is benchmarked against recent Australian gold project development.

And we’re also pleased to advise that the exciting Discovery Ridge project will now be included in that study, and we expect it to deliver a significant value to the project. It will be subject to its own EIS and approvals process, but this should be a simpler exercise than the one from the McPhillamys given that it will be a mining only operation.

They won't need to address any of the processing chemicals of discharge issues that the McPhillamys EIS covers. This process should be able to be completed whilst the McPhillamys main project is in development and maybe reserved for discovery early in Q3 is expect to kick this process off.

So, we’re really pleased that we can now move forward towards completion of the study which will allow full permitting assessment of the project and will see Regis move to an investment decision on development of the project in Q3 and then be able to develop a development timeline as a result of that process. As I mentioned earlier, we’re also very positive about the potential of the Discovery Ridge project our other key New South Wales asset.

This project is 33 kilometers away from McPhillamys and has a resource of 501,000 ounces, and we’ve been drilling for a number of quarters now, infill drilling that resource and the result to-date appear to be in line with historic results for both location and grade. Q1 drilling actually targeted depth extensions at the project and I'm pleased to say turned out some really strong results including 129 meters at over 2 grams per ton from 159 meters including 40 meters at 3.5 grams per ton, 101 meters at 2.17 grams per ton from 222 meters, including 39 meters at 4.27 grams per ton, 65 meters at 2.05 grams per ton, and 162 meters at 2.03 grams per ton including 54 meters at 3.93 grams per ton.

So fantastic results you need to see why we’re getting so excited about this project. As I mentioned earlier, we do expect to update the resource and quite the mining reserve on the project only in Q3, and also as I mentioned, Discovery Ridge will now be studied as part of the DFS for McPhillamys.

And clearly, we targeting a substantial satellite project to McPhillamys with minimal CapEx high-grade and lower strip than the early years of the McPhillamys project, and we really do expect this project to deliver significant value to the broader McPhillamys development. And the final matter that I’d like to touch on in this presentation is the management and the board succession plan that we announced in September.

And after 10 years as Managing Director and more recently Executive Chairman, I thought it was the right time for me and for Regis for me to transition out and to hand over to a new Managing Director, who has the skills and the drive to take Regis on hopefully the next 10 years on its journey. To that end and after a very considerable recruiting process, we offered the role to Jim Beyer, and we are very pleased that he has agreed to join the Company.

And Jim, for those of you who don't know him, was mostly recently the CEO of WA iron ore producer, explorer at Mount Gibson. But prior to that, he has a very big DNA in gold mining and gold mining management.

He was previously the General Manager of the Boddington Gold Mine, one of Australia's largest gold operations, and prior to that, the general manager of the very high-grade Pajingo underground mine in Queensland. So, clearly, very good gold experience and most importantly after spending a little time with Jim, we believe that he is an excellent cultural fit for the Company.

In terms of the Chairmanship, James Mactier, one of our incumbents non-executive directors will be taking over from me as Chairman at the conclusion of the AGM on the 23rd of November. James was 15 years the Joint Head of the Metals and Energy Capital division of Macquarie Bank, and we've had a long relationship with James as our banker at both Equigold and Regis.

James retired from that role in April 2015 and become the non-executive director of Regis in February 2016. And since, he is a very respective WA business leader and I think a very good fit as Chairman of the Company.

So I have complete confidence in the board and the team led by Jim to continue the strong operational performance for which Regis is very well known and also to grow the Company to the advantage of shareholders when the opportunities arise. So that concludes the data of the quarterly presentation.

So just a recap to the key points for the quarter, our Q1 production is just under 99,000 ounces of gold and in order in sustaining cost of $923 per ounce which was not a very strong operational quarter for the Duketon project. That production was above the midpoint of FY19 guidance -- and well below the bottom of all-in sustaining cost side.

Another strong cash flow at quarter with 78 million of operating cash flow and cash on bullion holdings at the end of the quarter were $190 million, and we expect over $15 million of our growth capital budget of $40 million a year on satellite pre-strips and tariffs and lifts and as I mentioned earlier that growth capital budget of $40 million is very much front ended through the first half of the financial year. And the board approves the development of the Rosemont underground operation, we expect to be cutting a portal in Q3, picking up development ore in the September quarter -- September '19 quarter and then full production ore in December '19 or in the December '19 quarter.

Exploration results at Rosemont also continue to indicate expansion opportunities beyond the current supporting and resources. And the broader exploration at Duketon continues to deliver great results and particularly done well where high-grade underground targets.

The results there returning very positive and suggest that Garden Well is going to follow the same half towards an underground resource at Rosemont. In New South Wales, extension of a very extensional results of the Discovery Ridge project and clearly that's an exciting addition to the broader McPhillamys project.

At McPhillamys itself the EIS and DFS work was continuing. And with the submission of the PEA and the receipt of the environmental requirements from that submission now allows us to move forward and complete the EIS and DFS in Q3, and we expect to maintain investment decision later in Q3.

So, on that note, thanks very much for listening and that concludes the formal part of the conference call.

Yes, thanks very much. I have got a few.

First of all, my congratulations on building a terrific company, it's been a pleasure working with you over the years and before for Regis as well. So thanks very much and all the best in the future.

And Jim, to you the same. Great to have you.

If there had to be someone to succeed Mark, I'm glad it's you. So best of luck to both of you.

Having buttered you up, I will start with a question. So first of all, with respect to Moolart Well, not a lot of discussion there, but those holes look really, really interesting.

What are you sort of seeing there in terms of the opportunity? Is there potential for another cutback or does the strip ratio start to hurt?

Or is that similarly perhaps an underground opportunity? How are you seeing those early holes, please?

Mike, it's the full not the lag. I think what we are trying to do there is drill out a 2,000 both resource shell and area where it's most amenable to CapEx and pushing the pits in some areas beyond those shells.

It's about sort of assessing the shells that we are mining and the finger resource shells to fit around that and trying to get in middle of that or into the best of those areas that gives us the great opportunity to push the shells out and extend the mine life as much as we can.

Secondly, with respect to McPhillamys and permitting, is there now a sort of statutory timeframe that can be more predictive than what you have been working against? You sounded a lot more confident around the timing of completing, approving, and commencing development than perhaps before.

Look it is not a statutory time period, but now that we have got the environmental requirement even -- at least it gives us prime work efficient to study where it oppose sort of punching in the dark because all the EIS work had got to a certain point and then was really on hold. Because until we until had the requirements that we were ultimately going to be tested and assessed against, we couldn't progress that work because we didn’t know what we will try to change if you like.

So really the process now is that we submit the full application in Q3 and then hopefully something in the order of three to six months for permitting. You know something in that sort of range would be the target.

But it's not question that we are still to a degree at the whims of the bureaucrats in the process. But that would certainly be our hope.

And with respect to the guidance for environmental work that needs to be completed, was that within the range of what you would've thought was reasonable? Or is there any sort of timeline support?

We certainly didn’t have anything in there and that sort of shocked us all or that we thought was outside of the rounds of what we had expected. It was more just around getting the definitive requirements so that we did to the popping like EIS to the exact requirements and what were benefit against, there is 79 actually surprises in the May in the requirements that will give it.

Flicking back to Rosemont, great to see all those additional holes. When you sort of think in an arm-waving way about it, the opportunity to get bigger, do you see that as sort of life extension or sort of multiple mining areas?

So perhaps a higher tonnage that could be extracted if you can define more than those two mining areas?

Look important that mine, one of the cultures that said just as a preliminary to the comment, I think a little bit of above. If we can keep adding shapes to those starts along strike and it’s been the 70 long strike given the fact that these -- those workings going to be very positive to the already existing open pit.

We’re already starting to sort of brainstorming in terms of where we put in other access ways and ventilation. So I think it will be bit of both, Mike.

And if we can get to the critical mass that says, okay, well, let's justify the cost of putting in more access and that gives you capacity to produce more from the workings. But in the bigger picture, I think ultimately we like to target that sort of a total inventory and we may mitigate into results as we discussed on a number of those call.

What we like to target something in order up from million ounces in that division, but it’s going to take us on and effort to get there and that’s going to be continued project with an already underlying operation, but we certainly see a scope for it to been there which we will clearly add loss to the project and every ton that we add to the output from underground main set. We’re pushing lives that out by the same amount, so we move situation if we can add mine life but also once we add scale to it and then of course we would love to ultimately from that 400,000 to 600,000 tons per annum at the high grade to little bit out of underground if we can increase that than of course it has substantial implication for us in terms of both production and the overall unit costs.

So I think the answer is subject to the drill bit, I think that is above. Myles, do you want to add anything to that?

Mike, not really. The study was done at 400,000 to 600,000 ton per annum production, and again from the development that we been showing on long sections.

And we’re getting really the hit from central zone. We are filling that in that.

So, we can get sort of result in that and then we can probably also say little bit have a look at that. Because the assets is pretty size and the grade is pretty good to that central zone.

But really we say the next question will be asking ourselves based on success and bringing more areas into resource where they tend to be 500,000 or 600,000 ton per annum from the underground and extend mine while. So, it’s probably prices at 5 to 6.

Good, thank you. That's very useful.

And very finally, just interested in a quick comment on the Capricorn Minerals Karlawinda opportunity that presented and unfortunately didn't get executed, how should we think about it? It looked in terms of a resource something that was made for you and your experience and your operating expertise.

Was that just an opportunistic thing because it fits or certainly fits well? How should we think about how corporately active you might be in future?

Look I think, it's difficult for us to say too much of that Mark given actually know the way it came out. We never had the opportunity under on a great deal to actually articulate that basis for the project going forward.

But clearly, we like represent in WA and it's open pit, it's got some optionality to hope to get a little bit bigger and is now safer that we’ve got a mill that sits at Moolart well that perhaps in a sort of a sensible period of timeline be looking further to some stability, so that was sort of broadly the phases. And look, we just have to continue looking and looking for similar types of opportunities who know that might come back on the radar.

But for the time being we move on and we’re conscious that we as we have always said and I am sure Jim will be the same that to be successful in this business you want to pay to your strength. And our strengths have historically being -- we’re very good operators of low grade, we’ve always said we love high grade one as well but low grade open pits and very good at developing CIO projects at a very-very competitive cost competitive to an industry benchmark.

So I suppose it's no secret capital sort of fitted that metric of opportunity compared to the still set that we think the Company has.

Yes, Sam Berridge from Perennial. Congratulations on an outstanding career over 15 years.

It's -- on a personal note, I certainly appreciated you always making yourself available to tell me when I was wrong. And I think in Jim, you have done very well in managing to find someone who's -- to sustain for the fine managers and brokers as sort of assuming as bold as your own, which is obviously intended with a bit of tongue-in-cheek.

But I will certainly be…

That sustained is for you personally, Sam.

I will look forward to directing my suggestions for how you should run the Company, Jim, to you going forward. But I think as usual, Mike has asked most of the questions.

But just on the cash flow there, pretty big gap between the sales and production, which I would've thought was a little bit unusual for a gold company. Was that intentional just looking at the gold price or just a function of the way the flights went?

I’ll let Kim answer.

Yes, a little bit around timing Sam, so we had -- sales were are largely, so at the end of June, it was just timing around that and then some of the shipments towards the end of the quarter as well [indiscernible] flushed out in next quarter but it’s all value that adds to [indiscernible]

So touch with a little bit of positive mark to market perhaps?

Yes, it’s right, we -- I guess a few years [indiscernible] got the facility around. So we can write for good values across the mill.

Hi, Mark and Kim. Apologies, I missed the start of the call, so this might have been covered a little bit.

But the costs, as you outlined, were very much below the guidance. And you are doing the heavy lifting in terms of your stripping for Tooheys Well and whatnot.

Is this an accounting thing where in the next couple of quarters we are going to see cash that was spent start to come through in the expenses and get through to guidance? Or have you guys outperformed what you thought you were actually going to do this quarter and costs are tracking potentially below the guidance?

Costs are under a little bit below guidance, but also bear in mind that the pre-strip at Tooheys Well is included in the growth CapEx number. We honestly understand that means we only have our adjustments that there will be -- there's a small amount of all that remind at Tooheys Well is now -- at the end of the quarter theoretically sitting with stock haul, and that mine and cost will come through to the all-in sustaining costs in that material gets milled.

So, that's not a substantial amount at all, but that's just that's the only sort of accounting by various -- for the all-in sustaining costs in the quarter.

So it's been the reason once that gets milled in the next few quarters, costs from [Multiple Speakers] will come through?

The mining cost contributed to those tons does milled come -- sorry those mine tons from these well when they go through the milled that mine is possibly comes through the all-in sustaining costs.

Good morning, gents. So, just a bit of a helicopter view.

One, with the good underground drilling you guys are getting, there's clearly some pretty strong underground potential emerging across the tenements. And if we have a look at the current reserves on sort of the Duketon mine deposits about three years there, how are you starting to view a potential transition from open pit mill feed to underground mining -- underground feed over the next sort a few years?

How are you seeing that mining mix evolve? And I understand, you know, it's not in your guidance and all that, but just from a high level, how you are seeing that transition over the next sort of 3 to 5 years.

I'll just correct you a little bit there, but bear in mind that the two key southern assets, we've still got sort of 5 or 6 years between the Rosemont and Garden Well. I think Garden Well wanted to had a little bit more and that's been that $1,400 shells, and I make these points over and over again.

Remember that our reserves is not according $100 own price some of that peers were up around $1,600. And just remember that all of the pits that we have Garden Well and Rosemont, they that all has optionality to go deeper because the drilling data is -- extends well below the current pits zones and the geometry of those ore bodies, both of these sort of 45% deep ore bodies.

They are very amenable to CapEx, and we've always said that at some point we will push those pits deeper through cutback to chase those I'm not sure CapEx that takes $1,600 under James management, if the gold price goes up, we might chase $1,700 to $1,800 pits. Who know what they are, but we are very much -- whilst, we don't talk about it under the constraints of JORC, we're very cognizant of the fact at some point we want to be chasing those ounces.

So as part of that why we look at it is a result of 5 or 6 years of mine loss at those pits with the option and the internal thinking that at some point, we will push those pits data and chase that additional amount that we would see as profitable metal that loss to that shareholders. So, the way we think about it is 5 or 6 years plus and some extension at the time of our choosing.

And then that clearly in that context where as anxious as anyone to get both Garden Well and Rosemont firstly and then Tooheys Well, Baneygo and others into an underground setting as soon as possible can because those as I've said earlier, every time that we can add to the mill from underground pushes the open pit mine life by the same amount. And the mills are more efficient when they are full.

So what we don’t want to do is have an underground mine producing small tonnage so how we mill. So we are conscious that we want to push ahead and develop these underground opportunities as quickly as we can, but the flip side to that is that we can't be everywhere.

We can't have 22 rigs on site. We have got camps that are already pretty close to full and we have always been a Company I think that's prided itself on getting the best bang for our buck.

And that goes not just from operations but exploration as well. And we want to make sure we do this work in coherent both the way and get the best results for the dollars and the maintenance that we drill.

So, yes, we are very anxious to bring this stuff forward as quickly as we can, but we also are building the context that we don’t want to waste money, we don’t want to fill silly holes. We want to do it in a coherent, thoughtful way.

So, you should take from that where it came to push those projects and make the best of that opportunity because we understand don’t have forever, but we shouldn’t think that we have already got some 4 or 5 years. We do have longer time because first of all it’s as long as the gold price holds up.

At some point, we will chase those cutbacks stand up pits and push those mine lives. So we could have some optionality up our sleeves, but definitely came to make those opportunities.

We will turn those opportunities into mine as quickly as we possibly can.

No, that's great. Thanks Mark.

So you've got a real kind of an opportunity to have a very considered sort of transition to optimize that underground versus open pit mill feed over a previous period of time.

I think the first thing to put here is what we have got on Rosemont. As I stated, what I'm saying around when we win saw shareholders Jim a few weeks ago.

There was always an argument that we could have set or set the Rosemont for another 2 to 3 years drilling the protection. But it's very costly.

It's logistically challenging around waste dumps and mining activities. And at some point you say if you are going to go and spend another $20 million from surface where is the right time to say well let's make a sensible risk-weighted decision to get down onto this geological structure, knowing what we know, knowing that it's a good and it’s a business that generates a sensible return.

But the bigger picture is the much more important picture then get down onto that unit and then exploring both 50 to 60 meter holes with the working as opposed to 600 meters holes from surface, yes, almost trying to hit a needle in a haystack. So, we are very conscious of that and we will always weigh up the flipside between saying, we don’t want to be silly there, we don’t want to sort of start going underground when we don’t have the level of data that gives us the confidence that we are going to make a buck and turn it into something better.

But equally, we don't have forever. So, there is that clear picking point when you said on the risk related basis structure from surface and getting to it.

And I think that will be the same decision that these guys will make at hopefully Garden Well in 12 to 18 months from now.