Regis Resources Limited

Thanks, Ashley, and thanks, everyone, for joining us for the talk-through on the Regis Resources June 2020 quarterly update. Look, I note the quarterly report was released earlier today, and I'll make occasional reference to some of the diagrams, so it wouldn't hurt if you've got it handy.

Firstly, on the safety. I'm very pleased to report our 12-month moving average lost time injury frequency rate has seen a 20% decline over the last quarter as we dropped to 3.6.

This is a great trend, and we will continue to lift the focus on leadership and its role in improving safety across our business. While on safety, I'd like to touch on COVID-19.

Consistent with our values, Regis sees the well-being of our employees, contractors and local communities continuing to be a priority in these challenging times. The company has continued with a range of measures across its business, consistent with the advice from state and federal health authorities, and these measures have helped ensure the health and welfare of our employees and our respective communities, including the following actions which we've been undertaking: health checks prior to check-in for travel to site, ongoing social distancing in accordance with the rules, ongoing auditing and verification, mental health support for both employees and their families, maintenance of adequate inventories with major contractors and suppliers and also donations and supporting times to a number of local charities and community support initiatives.

We also joined the FIFO DETECT research program in its inception, which is supported by resource companies, and it helps to identify the potential asymptomatic cases of COVID within the FIFO workforce. Via this program, we're able to test all people going to our operational sites prior to them going.

As part of our ongoing risk management, we've also looked at various scenarios. We're planning to assess the possible financial outcomes that could result from various scenarios of the COVID virus contraction, either through our people or on our -- across our site.

This process, in turn, assists in developing tactics to mitigate possible detrimental impacts on the company. This work just highlights the company's strong position with multiple production sites, separate camps, existing stockpiles, significant cash reserves and a debt-free balance sheet and hedges that have the flexibility in their delivery schedules.

All of these highlight the current relatively strong position the company is in to manage this prevailing uncertainty and risks. To date, we've had no confirmed cases of COVID-19, and the impact to operations and the business are being controlled and well managed by the team, albeit with a marginal impact on the costs.

On that, COVID-19-related costs have been circa $5 an ounce across the full year. This is basically due to additional medical supplies, travel, logistics costs within the broader ongoing workforce and also our participation in the FIFO DETECT testing, and this is likely to continue in the foreseeable future.

Look, I'd like to take this opportunity to thank all our employees, our contractors and their families in particular for the hard work and efforts and support that they've been providing during these challenging times. Moving on to the business outcomes.

The quarter was a solid performance by the team with gold production at 87,260 ounces, which was up slightly on the prior quarter. This gave us a full year production of 352,042 ounces, which is pretty well in the center of our guidance range, which was 340,000 to 370,000 for the year.

During this quarter, we sold just over 100,000 ounces for an average price of AUD2,381 an ounce. Our cash cost before royalties was AUD1,000 an ounce, giving a full year of AUD914.

And our all-in sustaining costs for the quarter were $1,358 an ounce, giving a full year of $1,246, which brought us in just above -- at the very top end of our guidance after adjustments. On the back of this, our operational cash flow was a record $109 million with subsequent major deductions being $29 million for capitalized mining; $11 million for exploration and feasibility projects; just over $9 million on CapEx projects, including $5 million for the TSF 3; $4 million on corporate costs; and finally, a healthy $15 million on income tax.

This left us with a very solid cash and equivalent increase by $41 million to a total of just around 3 -- sorry, $209 million. Just quickly touching on our hedges over the period.

We continue to work on reducing our hedge book as previously guided. In the June quarter, we lifted our volumes towards the back end into the hedge and delivered just over 19,000 ounces.

We're now sitting at around 399,000 or just over 399,000 of hedge -- $1,000 worth of -- 399,000 ounces in our hedge book, down from the start of the financial year when we had 451,000. Over the full year, the average price of gold sold by Regis was $2,200 compared to the average spot price of $2,333.

Now what this means is it quantifies the impact of our selling to our hedges for the full year of just around 6% of the potential gross revenue. The rate of delivery into these lowest-price contracts will continue to be assessed for adjustment.

Any changes to this rate will consider several factors, including prevailing gold price outlooks, internal cash demands, capital expenditure requirements, dividends and any other changes to the company life-of-mine production plans. Now looking in a little more detail at our sites.

Production at Duketon North, or our Moolart Well mine, was 20,743 ounces during the quarter, a decrease on the March quarter. March was 23,820 ounces.

Ore tonnes milled were up -- well up from the prior quarter, but this was offset by lower grades. The grade decline was due in part to short-term changes in our ore sequencing because of a change -- of the surface haulage contractor we changed over, over the last few months.

And while it's gone relatively smoothly, there was some impacts, and we had to adjust our volumes coming from some of the higher -- high-grade sources, and that had a short-term impact. This lower production, along with the higher strip ratio in the quarter, were the key drivers for the all-in sustained cost lifting for the quarter to AUD1,519.

Duketon South, that's Garden Well and Rosemont, production was 66,516 ounces in the June quarter, which is up 7% on March. The higher production was due to a higher mill throughput across both Garden Well and Rosemont, particularly as the mill issues in the March quarter were now resolved.

The higher southern operations' all-in sustaining cost of AUD1,519 for the quarter was driven by higher strip ratio of 30%. That was a higher strip ratio, which was 30% higher than the prior quarter and also higher underground costs in the early stages of production now that we've declared commercial production.

More on that in a minute. Overall, the all-in sustaining cost per year was $1,246 an ounce, which, after adjusting for the impacts of the higher gold price on royalties of $35 an ounce and the cost of COVID which was circa $5 an ounce, is broadly in line with our guidance that we provided back in the March quarter release.

I'd like to turn now to the future and our growth projects. It's great to see Rosemont Underground commence commercial production in June.

And going forward, we'll see this continue to lift as a key contributor to the rising path to get us to 400,000 from the Duketon operations. Ramp-up to full production at the Underground continues and the coming quarter will see the commencement of stope ore from the higher-grade Rosemont Central Zone where the expected life-of-mine grades is circa 20% higher than the South, which is where we're currently producing from.

The South currently averages around 2.9 grams a tonne. At Garden Well, the underground story continues to get pieced together and gain momentum.

The gold shoot currently measures -- or our drilling is showing that it's measuring between 4 and 10 meters true width across strike, 80 to 100 meters high and it dips to the east for about 500 meters and is open at depth. Figure 3 gives you a bit of an indication of that.

Drilling has been focused in this past quarter on providing increased confidence, allowing us to support the estimation of a maiden underground resource and reserve. Some of the attractive hits for the quarter included 10 meters at 16 grams or just over 16 grams a tonne and 14.6 meters at 5 grams a tonne.

Look, also, in the quarterly report, you can see in Figure 4 how -- that's one of the conceptual designs for the underground layout that we're looking at, just to give you an idea of where our thinking is and how far we're progressing here. Work on the PFS is now underway, and we're expecting this to be finished in the December quarter.

At McPhillamys, momentum continues to gather. The assessment phase of the development application is well underway with the response to submissions expected to be completed by us at the end of August.

That's barring any last-minute COVID impacts, but nothing material is expected at this point. After our response to submissions, it gets assessed by the Department of Planning, Industry and Environment.

The guidelines given to us is that this is generally an anticipated 3- to 4-month process. From there, it would be referred to the Independent Planning Commission, which has public hearings and then a decision.

That, we've been told, could be as quick as 3 months, but obviously, that remains to be seen. Look, we recognize and respect the final decision by the government is still to be made, and the process is underway.

And while it's underway, it's more than just wishful thinking, though, that a decision on this development application could be made in the first half of next year, first half of 2021 calendar. Should this occur, based on our current plans, we foresee potential for commissioning of the plan to occur in the second half of 2022.

But as I noted, this is dependent -- highly dependent on the timing of the successful application for approval. Look, stepping back and looking at the bigger picture for Regis, here is when you start to put McPhillamys production potential on top of our targeted 400,000 Duketon operation.

You can see where we're going with McPhillamys being circa, yes, 170,000 to 200,000 ounces per annum when it's in full roll. You can understand where our overall potential annual production is headed.

Look, I'd now like to turn my comments to our organic growth opportunities in exploration, which will take us beyond this production vision. First, the Rosemont Underground where deep drilling is testing the potential for gold mineralization at depth.

And we have got some more results which have been quite encouraging: 2.2 meters at just over 8 grams a tonne, down -- 680 meters downhole; and 3 meters at 8.4 grams a tonne, 571 meters down the hole. This outcome is exciting and seems to support our proposition that Rosemont Underground will continue at depth, certainly below its current planned levels.

And then we are now at Rosemont Underground, we're now in the process of diamond drilling the deep holes -- deeper holes underneath the South, the Central and also the main zone, which we haven't been at before this time. Elsewhere at Baneygo, encouraging results are continuing to be found below the pits, and this is keeping us very encouraged on that opportunity.

Gloster as well is building and looks interesting, and as I said before, it could be a bit of a dark horse. We're seeing some pretty impressive results there: 2 meters at 8.9 grams a tonne, 3 meters at 9, 1.8 meters at 105 grams.

Now it's still complex geology. These appear to be flatline, although there's still quite a bit of work to do there.

So it's still early days on the interpreting front, but all our drill holes are telling us there's definitely something there. And so that's certainly an exciting opportunity that's growing.

On the broader exploration front, overall activity, you can see in table 2 in the report really shows how much we've been stepping up the physical work of exploration across our leases. Notably, the early-stage work, lag and air core is really taking a step-up.

Although I would answer the question of why did lag sampling drop-off in the last quarter. It's simply the -- we had an unsatisfactory safety issues with the service provider, and we had to undergo a change.

And that resulted in a bit of a slowdown, and we've now sped back up again on that front, but it was basically a safety-related change. A high priority of interest here, a high-priority regional target along the Risden Well trend, pardon me, has been tested with air-core drilling on an 800-meter line spacing and defined an anomalous gold zone over 0.1 gram per tonne over a 5-kilometer strike.

Now this is in a sediment package adjacent to the western margin of the Greenstone Belt of our ground. But the real highlight in this is the 3-kilometer strike zone where the grade is above 0.5 grams a tonne, so half -- above 0.5 gram a tonne.

The prospect area is now known as Betelgeuse. And a campaign for intense infill drilling will be carried out over the next quarter or so to further determine the continuity, thickness and tenor of gold mineralization along this strike.

So we have a 3-kilometer strike where the air-core drilling has hit anomalies greater than 0.5 gram a tonne, which I think that's pretty good. For now we don't have a 1 million-ounce-plus deposit, but the groundwork is being done to hopefully get us there.

Watch this space. On guidance, coming up to guidance for this current financial year FY '21, we're expecting a strong year of growth with the operations as production continues to lift in line with our targeted growth profile.

FY '21 gold production will step up. Our range is 355,000 to 380,000 ounces for the year.

Our C1 cash costs, including royalty, is $1,030 to $1,091 an ounce. Our all-in sustaining costs, which also included royalties, is $1,230 to $1,300 an ounce, fairly consistent.

Growth capital is down a bit on this year at a range of $50 million to $60 million. Exploration is still holding.

We'll keep that chugging along at around $35 million. And McPhillamys, we're anticipating a $15 million spend there, which is a step-up as we start to engage in more activity and we get closer to the -- pulling the trigger.

I would note that, that's a minimum of $15 million. We will be assessing progress through this approvals process once the RTS is submitted, and we may undertake some additional expenditure on early long-lead items and other early works.

This, for FY '21, could increase that $15 million up to a possible $6 million on McPhillamys, but we'll keep you informed on progress there. So wrapping up the call.

I'd summarize by saying COVID-19 is ever present. It's almost like the new norm.

We continue to work on limiting its impacts on our business. It is a moving beast.

But given our strong cash position, no debt, multiple sites, multiple camps, extensive ore stockpiles and spot deferred hedges, I think we're reasonably well positioned for what may lay ahead. But complacency is a risk, both for the community and our business.

Work is progressing to get on top of our safety with some pleasing results, but it's just the start of where we want to be. A solid quarter on the operational front just gone.

Production for the year came in virtually on our guidance, midpoint. Our full year all-in sustaining after adjustments came in slightly above the top end of guidance, albeit pushed a little bit by some schedule-related increases.

Rosemont Underground is in production and contributing to our plans of growth now with ongoing building and confidence in the potential additional underground source at Duketon with Garden Well. We're making real progress on the formal approval process at McPhillamys with work being done on our response plan.

A range of extremely encouraging results continue at Baneygo and Gloster while very exciting, early-stage exploration of Betelgeuse. Is it awhile?

Well, time will tell on that one, I think. Finally, guidance for the coming year sees us continuing to mine above our life-of-mine strip ratio, which keeps our all-in sustaining costs elevated.

But at the same time, we're building a solid increase in our production levels, and more importantly, this points to our continuing rise to our 400,000 ounces from the Duketon operations and while we creep closer and while, at the same time, we continue to creep closer to that additional step change of 170,000 to 200,000 ounces in potential production profile that would come from McPhillamys. It's an exciting time for us here at Regis as we're on the doorstep of a potential next phase of growth cycle as we continue to look at increasing number of multiple internal growth opportunities.

So I'll pull it up there, and I'll hand it back to you, Ashley, and we're happy to take any questions that people may have.

A question on the costs in the guidance. So costs for the quarter just gone were $1,358 an ounce.

Now that's above guidance for FY '21, which is $1,230 to $1,300. I'm just wondering if you could call out some key drivers as to why you think unit costs are coming down over the next 12 months versus what we've just seen this quarter.

Sure. Look, this quarter was a -- the quarter just gone, we were down on our ounces relative to where we expect to be going forward, and that's a pretty significant driver of unit costs.

We are seeing a lift, so that's first. And so I'd say that's probably the primary one.

The second was the strip ratio during the quarter was probably a little bit higher than what we're anticipating for the full year. So we do see that.

Last quarter was a bit of a -- I wouldn't call it -- it was a challenge for us. With the ounces down, our mill tonnes were up.

Our total material moved was up a bit, certainly relative to where we had been, and that all meant that we had a -- what I'd say is probably an unusually higher quarter than what we might normally have expected. It's sort of rounded out over the year.

And of course, we also had some COVID-related costs sitting in there as well, which are a lot -- a number of them are one-offs. Probably the most significant one that we had in there, which ended up being a slightly bigger impact than we were anticipating, in the early stages of COVID, we went to a 4 and 2 roster, and we also social distanced on our flights, which meant we had to put on twice as many flights.

Now we did that. And that, in that early stages, meant that our costs were pretty neutral because while we increased the number of flights we had to take because of -- you can only sit in every third seat or second seat, the swings were a lot further apart.

However, after a period, I'm just trying to remember, I think it was probably about 2.5 months ago, I think we changed back -- or 2 months ago, 2.5 months ago, we changed back to a steadier roster. We were -- we didn't see the benefits.

We had a stable workforce. We didn't have as many people coming from interstate, and we were getting some degree of concern of fatigue.

So we backed off to the shorter rosters, back to our normal rosters, but we had to retain our high-frequency flights. And during the quarter, that meant -- I think while the COVID costs over the full year was about $4.50 or $5 an ounce, during the quarter, it was around $18 or $19 an ounce.

And that cost -- a significant chunk of that cost is just gone because we're no longer running with the higher frequency of flights with social distancing on the planes. We've instigated, along with our airlines, other controls.

And we're comfortable with that. That's not to say that, that might not come up again, depending on how this travels around the country.

But of course, everybody can see that, and we'll be giving guidance should that change. So I think the short answer to your question is fourth quarter had a few unusual pieces in it, just scheduling and production-wise, and we're seeing that -- a lot of that sort of smearing away over the full year of this year.

Okay. And a question on Rosemont Underground.

So you've just declared commercial production. Just wondering if you could comment on the grade that you're seeing versus your expectations.

Can you talk about dilution? And then also, what are you expecting in terms of ore and grade contribution for the next 12 months?

Yes. Look, it's a good question.

As we indicated, the Rosemont Underground targeted the south area early, primarily because it was closed by SER. That was the upside.

The downside was, as you want to do with these things, you target the ore body. It was at the very top.

Rosemont tends to pinch and swell on a large scale, and this was -- pardon me, the underground, at the very top where we first came in, it was pinching. So we did see some continuity challenges.

That was also related to the fact that our initial positioning -- spatial positioning was based on some pretty -- some broad-spaced RC drilling that we've done from the surface. So in the early phase, we did -- we saw material was there, but it wasn't -- we were getting more dilution than we were hoping to get because we realized that our development wasn't exactly located where we wanted it to be, and we were still getting into the rhythm of -- and the positioning of wanting to have good access drives for diamond drilling yet and grade control drilling from underground, those sorts of things.

What we've certainly started to see over the last few weeks is getting a better degree of confidence. The connection between our reserves and our grade control and our reconciliation in the mill is becoming much tighter.

We're getting -- we're also over in the central zone now, and we've got some early production starting to come out of there. And even the grade control drilling is much more encouraging for us and giving us confidence that, that area won't be as -- the learning curve isn't anywhere near as steep as it was over in the south.

So a bit long-winded, but it's a long -- it's a question that needs a bit of time. I think we certainly struggled in a couple of areas in the early stages while we just got our heads around how we needed to get ourselves into a cycle and get good-quality grade control drilling from underground to get confidence.

But we are seeing that now starting to be a lot more confident that we're getting what we're predicting. And certainly, as we're heading over into the higher-grade central area, that's giving us a great degree of encouragement.

We're seeing some places where things might give us a little bit more than we were hoping, which is good. And it sort of certainly bodes well for when we head further north to the main mine where the grades are another step change higher again.

So we're looking forward to some -- certainly for the Rosemont Underground to be a bit more consistent in our production profile and, hopefully, even might get a few wins -- additional wins out of it, but we'll keep our powder dry on that one for the moment.

And just the ore expectations you're going to pull out from that underground in rough terms.

Look, we've always said underground will probably produce at around about 0.5 million tonnes per annum, maybe a little bit more, 0.5 million to 0.6 million per annum from here. 45 -- 40,000 to 50,000 tonnes a month really, that order.

But because the mine is still relatively small, it tends to go in spits and spurts, but it's becoming a bit more consistent now.

And the growth capital includes expansion to the camp. What's the requirement for this year?

Look, that's a good pickup there. I wondered if anyone would notice that.

That's probably a reflection of our early-stage position on Garden Well. We haven't -- that's in our guidance.

It's in our budget. It's not due for expenditure for a while yet.

So we're certainly sitting on top of that and won't approve it until we need to. But it's -- I guess it's a bit of a reflection of how confident we are in getting a pleasant story out of the Garden Well PFS.

Okay. And last question -- sorry.

Yes. I guess I'd just add to that, that we're also very cautious of development by stealth strategies whereby before, you now have things built before it's even been approved, and we're very conscious of -- we won't be entering into that phase.

It's just -- the camp tends to be the longest lead item here, and that's why we've sort of circled that one already.

And last question, just McPhillamys. So progressing through approvals and getting nearer and, I guess, a little bit more confidence, it sounds like, that this is progressing.

Just wondering when you might update us on CapEx and OpEx and feasibility study numbers.

Yes. Look, it's a bit of a tricky one because there are a few things that are -- a bunch of moving parts that revolve around our reply to submissions.

There's been -- and the reason for this is that when we had -- when we went out with our EIS, we had a number of submissions coming from -- and questions and queries from the public and from the regulators. And as we've looked through that, we've realized that there's some things that we can do to optimize the design and maybe reduce noise, reduce various emissions, change the visual aspects of it, things like that.

As a result, we've just got to hold off on finalizing those numbers. Look, I'd anticipate that later on this year, we'll certainly -- hopefully, we'll be in a position to give some better guidance or updated guidance.

But now we're still pretty consistent. Life hasn't changed for us.

I think we've said that the CapEx for the plant and associated infrastructure, the original prefeas was $215 million, plus or minus 30%, which puts the top end at around $270 million. And we're saying that the capital range for the new project will certainly be above that, with the bottom end of the range taking in the top end of the old range.

So i.e., it's got a solid three in front of it. So that's where it sits at the moment.

And as we sort of land closer to the detail and the confidence, and that confidence hinges off our progressing through this approval process, we'll keep the market up to date.

Maybe to start on Garden Well, do you mind just talking through the conceptual timing beyond that PFS and also what scale is being considered in that process?

Yes. Look, obviously, the scale is something that we're -- it's part of what we're looking at the PFS.

But I've said in the past around this, given the scale of these types of deposits, I think a nominal 0.5 million tonnes per annum type arrangement out of them is not too dissimilar to what we get out of Rosemont, both in terms of potential initial setup at this very early stage if I was waving my arms around. The -- timing-wise, look, if we get the -- if we get a PFS, as we're anticipating sometime in the December quarter, yes, we'd be looking to make a decision as quickly as we can.

Probably the -- one of the early factors in the timing of Garden Well was how soon the benching in the pit got to a place where the portal was going to be. But as part of this update, we're looking at coming in off some of the higher benches that have already or just about to be mined.

So that means that we've got the potential to come in a little earlier. Conceivably, we could kick off mining sometime early next year.

But in the same vein as Rosemont, you're probably talking about -- I can't remember, I think it was about 9 months or so before we started seeing any dribble of ounces coming in. Now I'm just doing that off -- drawing a beat off how Rosemont performed.

But yes, look, if we finish the -- if we get the PFS done, and we're happy with it at the end of this year and in December quarter, then there'd be nothing stopping us potentially from pulling the trigger early next year.

Great. So there's no additional permitting or anything required for that one.

We'll need approvals, but it's not as if we've got to build a whole new tailings dam or it involves moving an area that's sensitive. It's all underground, so it's a lot more straightforward.

But you still have to get approvals for a new mine.

Okay. Great.

And then just a couple on guidance to help us out with the modeling next year, if possible. Are you able to split out the production and cost guidance between north and south?

And then just also touch on strip ratios, please.

Yes. Look, we don't provide -- we don't split the guidance out across our operations.

That is -- certainly, not at this point. Although I would highlight that -- or note that going forward, we plan to provide a little bit more detail on that front than we have done in the past, splitting it up across the businesses.

In terms of the strip ratio, I think we identified this time last year in our overall guidance, when we talked about this growth profile to 400, that the year just gone and this coming year will both be strip ratios that are above life-of-mine average. There's a little bit of catch-up we had to do last year, and we'll continue to do that this year.

I think our strip ratio is circa a bit over 6, something like that for the year; and our life-of-mine average is sitting slightly under 4. So this coming year is another high strip period.

But after that, obviously, under our current life-of-mine plans, that starts to drop away pretty quickly, which really sees the all-in sustaining cost drop off because the plain facts of the matter are you can work on the edges of open-cut mining in the unit cost, the cost per tonne moved. But in the end, the thing that really drives your unit costs are, number one, your grade; and number two, your strip ratio, certainly in an open-pit sense.

So we see this year being another elevated, above life-of-mine average year, and then it'll start to drop off, which is really the key driver of our -- keeping our all-in sustaining where it is.

A couple of questions. Just firstly, on the quarter from Moolart Well, you touched on the grade there.

Can you just go into a bit of more detail on the mechanics there in terms of exactly what the impact of changing over the contractors was? Did that result in, I guess, some high-grade pits falling behind in terms of ore transport or ore movement?

Which pits were they? And I guess the extension of that is can we expect to see a bounce-back in terms of grade in the early part of this financial year once those rates pick up again?

Yes. Look, there's a real mixed bag in there, but the short -- to sort of rewind back, first of all -- there's a couple of things, actually.

The quarter's results, and you might see that the prior quarter was actually some pretty good grades coming through from Moolart. And that was while the business went about subtly adjusting, from one quarter to the next, the grades fed to the different mills as -- because we have that major outage at the south.

So we did a little bit of moving around of the grade and pulled some of the grade into the March quarter basically out of the June quarter. So that was part of what was happening because if you have a look, you'll see the prior quarter was elevated relative to the one just gone.

So that was a part. The second part was, yes, as we transition from -- and these are haulage contractors.

So we have a company that does the mining of the pit, waste movement and ore movement. And in particular, at Moolart, those pits are quite remote from our mills.

So we need to use a separate haulage contractor to haul in the material so that it can be processed through the mill. And that's done by these long road train-looking pieces of kit.

The previous contractor that was in there had been struggling for a while. Pardon me, you don't run out of ore, but it means that some of your remote areas, you can't quite keep the grade up that you were planning to.

So we made a decision to consolidate out because we had 2 separate haulage contractors on site, one -- a different one down at south than the north. We decided to consolidate that to make management easier, and the other company was a little bit more consistent.

So just through that transition, you like to think that you've got it all smoothly, but every now and again, these snakes jump out of the wood pile and slow you down a bit. So that did have an impact on us being able to get the grade at the right feed that we really wanted to.

Has some of that slid and rolled into this year? A little bit of it has, and that's reflected in our guidance.

Look, I don't really want to go into the detail of any one of the 7 or 8 pits that we're running all around the place across our site. I think the risk is that we disappear into a vacuum of detail and miss the big picture.

But look, in summary, that particular issue is now being -- we've moved on from it. We're quite happy with our new contract -- or the contractor that's now performing the activity in that part of the world.

We did -- it did have an impact on us. We've just had to wear it and move on.

And I think in the longer term, we'll be very pleased with the change that we made. And any adjustments and any catch-up that we're going to get on that grade that was left on the ground has flown through into this year's guidance, although I wouldn't say there's a huge number of ounces there.

Now if you look at it, there's not -- it's not -- we're not talking tens of thousands of ounces in this.

Yes, I understand. Just secondly, on McPhillamys, the response to submissions.

Clearly, when that process started, I think you've given a fairly short expectation in terms of turnaround time there. So you guys took the decision to push that out to the middle of this year.

Just wondering if you can, I guess, give us a sense of what is taking the time here in formulating that response to the submissions. I know there's a great number that you guys need to respond to.

And also, you touched on some of those kinds of changes in the thinking or modifications around the edges that you're making to improve the project, just wondering if that's what's consuming most of the team's time and whether any of those changes will trigger any kind of more detailed changes to the EIS documents themselves, how you think about that process.

Yes. Okay.

So there are a number -- as I said, there's a number of changes that we've wanted to make. And as we go through the response to submissions, any changes and variations that we make from the original EIS, we have to do it effectively to EIS quality submission.

This may not be strictly correct, and some of the guys and girls in the details might tell me that I've got -- berate me for this. But in the simplest form, as we reply, there's 2 things that occur.

We answer people's questions. And if we haven't got the answers to those questions, we do a bit more work so that we can answer them, and that work takes a little bit of time.

Sometimes, it's just a quick review of raw data. Sometimes it's -- might be a little bit more testing that we want to do to give people some -- the necessary comfort and us, the confidence.

And other things, as I mentioned, it might be a change in the layout. There might be an access road to the site that we want to relocate, and that takes a little bit of time and money as we go and reengineer all of that.

The one thing that you want to make sure that you're doing is when you submit -- when you provide your reply to submission, you want to make sure that you're absolutely putting your best foot forward. It's not to say that you don't get another bite at the cherry, but if you want this thing to run on the best possible time frame, you're better off to spend just a little bit more time getting your response to submissions right or as good as you can make it rather than sort of submitting it, I don't know, a month early, on a bit of a wing and a prayer and then find out that you've actually got to go back, and then the whole thing just gets delayed by several months.

So we've been making those judgments. COVID, while it hasn't caused a major disruption, it does cause delays.

And when you're sort of working over a 3- or a 4-month program, a delay of 2 or 3 weeks because if you can't get out, they can't travel to the site or they can't go out into the field to collect the data or they can't get to the lab or it's just hard or it's just a little bit harder keeping everybody aligned, those things do tend to have a bit of an impact. But I think that basically, what -- the thing that's really -- the focus and the message that I've given the team is for the want of a couple of weeks of getting in an earlier submission, hold back and make sure we get it right and make sure we've considered and we've accommodated the things that we believe or we know we need to consider.

So that's what's driving us on that front.

Yes. Makes sense.

Just finally, quickly, the Risden Well ground and the Betelgeuse prospect, can you remind me, is that ground that you guys picked up as part of the Duketon acquisition? And I guess just further on that, of the $35 million you guys are planning to spend on exploration next year, just how much of that is kind of targeting that kind of -- those new tenements that you've picked up in that acquisition.

Yes. It certainly is in the new ground that we picked up.

If you have a look at -- in our release, I think it's Figure 6. I don't remember what the figure number is.

Hang on a minute. Yes, Figure 6.

It is the -- it's in the red area -- there's red mark there. It's to the sort of northwest of Rosemont Mill for Risden Well, and you can see a bit of the line of drilling sits above it.

That's what we've titled as Betelgeuse and is on the new ground that we bought just under a year ago, which is, I think, reflective of just how our team has been able to turn their efforts to taking our knowledge and our IP, as they call it, from the ground that we've held for years and turned it on to this newer area that we picked up. What proportion of the $34 million is on the new ground?

I think to be honest, I'd be guessing, but I would hazard to say maybe half to -- yes, maybe half, something like that. If that -- yes, don't quote me on that because what tends to happen is the more high-level greenfield exploration tends to be relatively low cost in the early stages.

It's not until you get into the drilling on the Gloster and Garden Well and Rosemont deeps and that sort of diamond drilling that the cost starts to step up. But I'd be estimating it to say circa at least half, at least.

Just moving forward, are we going to get clarity on Rosemont Underground costs? Or will they be grouped into Duketon South?

And is that how you're looking to report it moving forward, as one?

No. As I mentioned before, we'll start to now separate out, at this stage, our 3 operations.

So we will identify Moolart, Garden Well and Rosemont separately with a bit more granularity there. And within that, there'll be sufficient information to be able to identify what is being contributed from open pit and what is being contributed from underground.

Okay. Got it.

And just remind me again, when do we get to that main zone at Rosemont Underground?

Look, that will be later -- late this year and into next year.

Okay. That makes sense.

We still -- you can see -- let me see. So if you have a look at figure -- the Rosemont Underground figure, which I think is 3 -- Figure 1, you can see the green and the red.

The green development on that Figure 1 is what we've done up to the prior quarter. The green -- the red is what we did during the prior quarter.

The main zone is that area over to the right of the ramp. And we're not going to be there in the next couple of months, but we'll certainly start to be heading there and touching it over -- later on this year.

the primary production will come from South and Central this year.

Yes. Okay.

That makes sense. And then just finally, I guess, as McPhillamys CapEx commitments kind of come a bit closer, have you thought about kind of your funding preferences there for that?

I mean you're obviously sitting on a fair bit of cash, but interested in your thoughts around that.

Yes. We're just working on that at the moment.

Obviously, we've got a number of options. We can consider debt.

We can consider bonds. We could consider equity.

And all of that is being thrown into the mix as to what we think might be the best. If the gold price stays where it is, we've got pretty good cash generation alone.

But yes, we're certainly looking at those. We don't have a clear, preferred, specific one at the moment.

Suffice to say that we have options in front of us. And also, suffice to say that there is no shortage of people knocking on our doors wanting to talk to us about it.

They can see we've got an excellent base of our business and a fantastic project to boot that -- so plenty of people coming forward. So I think we'll have lots of options on that front and competitive.

So just confirming, are we expecting a reserve and resource update soon? And I guess the guidance is sort of -- are there any big moving parts that we should be focused on?

Guidance must be focused -- must be based on that pending announcement, is it?

Well, okay. The question was what's the timing on the resource and reserve statements.

Yes, that's not too far away, probably in the next handful of weeks. We've put our full year accounts, which will be released in -- we haven't got a date for it.

It's probably going to be this time at the end of August. So I'd expect that between now and then, our resource and reserves go out.

I've made no secret of the fact that, historically, we've been pretty good at replacing resource and reserves, but our pipeline of new mineral inventory converted into resources hasn't been fantastic and that things have become very skinny. I think last year was our -- really scraping the bottom of the barrel of converting from resource to reserves.

So -- and this year is going to be very, very, very light on in terms of resource/reserve replacement. In fact, I think that's -- unless we make some significant change to our modifying factors, i.e., our gold price assumptions, which we're not intending to do at the moment.

So we are now in what I would view as being the flat space of a bit of history catching up with us. But nonetheless, we've started spending money, and we'll -- we can see a clear path beyond this next report where we'll be able to start adding material back in.

But this one is probably not going to be particularly exciting.

Yes. I was getting to that price, and whether those strips were on a different price or not.

On that -- yes. Okay.

Yes. We are looking at some of those longer-term options of can we lock in some of the some of the material that's never been in our resources but sitting right out on the edge of our -- sorry, never been in our reserves but have been right out on the edges of our resources.

But we're kind of talking some pretty significant $2,000-plus per ounce assumptions in that space. So a little bit of thought planning needs to go into that yet.

Yes. And the hedge book, so I get asked about this a lot.

One scenario is that McPhillamys gets -- goes ahead, and you can basically amortize more reserves, amortize it over more reserves and push out the volume limit. So can you just step me through the strategy behind doubling the amount that you sold in this quarter and how we should think about that over the next 24 months?

Yes. Look, I think, certainly, we have -- and I think you can see in the past releases, we've got a volume schedule that we're working to.

And so we continue to work to that schedule. So that -- in part, you can see the logic of why we've changed what we've changed and stepped it up.

But you're absolutely on the money. The thing -- the #1 thing that would put a whole new perspective on that will be the approval of McPhillamys.

So that will be one significant catalyst. And another, of course, is as we continue to bring on new reserves and new opportunities, new life at Duketon itself, which is also what we're working on over the next year or so.

So they are 2 of the big things that might change that volume strategy. The other part is we've looked at it and can see that we can undertake some of that.

We may look at what we're doing with our capital requirements and whether we can speed it up or slow it down. There's a number of things.

As I mentioned, there's a -- we're heading into a phase where we've got to consider not just our cash flow-generating capability, but we've got McPhillamys coming up which pretty significant thing, how do we fund it, what are the implications for dividends. There's a whole series of things that sort of rotate around this decision of capital management and our hedge book management.

But you have doubled it. So is that a good run rate going forward?

Yes. Look, I think we have doubled it.

That's certainly where we're thinking at the moment. There's nothing to -- it still means that we generate some reasonable cash flow.

You saw -- we still had a pretty good -- an excellent quarter last quarter of $40 million, which when we look at some of our cash-generating capacity relative to some of our compatriots, it's not too bad despite the significantly lower production profile that we have. So we'll -- the plan is we'll keep following this updated plan but the plan is also that we will continue to monitor that and see whether we modify it.

But for now, it's what it is.

Yes. A couple of my questions being picked up on there.

Hedging is one for sure and just winding back to Rosemont. Kate asked a question about now getting to Rosemont Central.

You've popped in the quarterly there that the average grade is 2.9 grams. Is that reserve grade or kind of what you've got out there so far?

Because obviously, it looks like it's mostly development grade so far and a comparison with the reserve grade, I think, of between 6 and 7 grams. So look, as you guys start to presumably increase the production volumes out of the south zone, should we be seeing that grade come up?

Or is the high-grade sort of concentrated over the central zone? That's my first question.

Yes. I think the grade that you are -- that 6 or 7 was the early-stage resources that we were quoting on that.

So obviously, there's a little -- there's some modifying factors on that. But notwithstanding that, that grade that is mentioned in the quarterly is only the grade of the southern area.

It's not the grade of the other areas. So as you go north, the grade gets -- it significantly improves.

So we will see a -- and so that 2.9 is the average for south across both the stopes in the development. So we're seeing it -- we haven't averaged that because, as you pointed out, as you noted, a lot of our tonnes in the look-back period has been coming from development, proportionally more than will come in future.

The central area sees a step-up to whatever 20% is, 3.5 grams a tonne. And then as we head over to the mine, there's another step-up again, and I think that's 5 or 6.

That is our view on that at the moment. So yes, it definitely improves.

2.9 is not the average across the whole of the underground. And that's why these costs that we're seeing coming through from Rosemont Underground will just improve with time now because we get the benefit of the more productive and lower costs bench stope tonnes, and we also get the benefit of the higher grade over the next couple of years.

Okay. And just on the organic stuff, you clearly -- some good prospects emerging.

And how are you guys prioritizing your exploration at Duketon as these targets are emerging?

Yes. Good question.

Well, we don't use darts on a wall. But the -- we've got a series of gates.

And we've got some pretty -- sitting in the background, we've got a few sort of -- got to be careful how I frame this in this period of work. But more very experienced, and many years of experience, people with gray hair sitting in the background looking at everything from structure to overlying material, aeromag, surveys, all of the high-level information, which is targeting -- it helps us to identify potential zones.

We then go in and do -- basically, that ground that we picked up last year, it had exploration on it, but it really wasn't structured in a manner that was approaching it from the way that we had done or leveraging off the experience and the success that we, Regis, have had on the tenements that we currently hold. So we've been taking that -- everything from regional structural knowledge, overlying lithology, various nonintrusive data collection methods, and that helps us to identify the preliminary targets.

Once you've done that, you're back into the realms of having to drive around, get -- grab soil samples, tens of thousands of soil samples, looking for the anomalies, not just for gold but for other trace elements. Sometimes it's not the gold that's going to be there.

It might be zinc. Could be a vector, they call it, that tells you that you're in the close proximity.

It's interesting. We know, for example, that Garden Well, which was covered -- the deposit that was discovered, it was fully covered.

Well, we understand the telltales around the geology that tells us that it's there. So we're using that sort of information to help.

We gather the soil samples. We identify where we think the targets might be.

We then go in air core, which is cheap and fast and doesn't go down very far, but it tells you what's basically down to over -- you drill through the softer overburden oxide and get to the base of the hard rock, and that is -- you get samples on the way through, and you get samples at the top of the hard rock. And all of that starts to combine to tell you where you're going to be fortunate and find something and where you might not be.

So we use multiple prioritization approaches, and we actually have a grading system that you end up with a whole series of different factors that are considered. And it ranks over, I think, just over a qualitative and quantitative ranking system that we've been developing over the years.

Okay. And would you hazard to share with us perhaps your top 3 at the moment or what you think might be dominating news for over the next 6 months?

Well, I'm hoping that Betelgeuse will. The rest of them will keep our powder dry.

Betelgeuse is a really interesting one. This is really early -- there's nothing there to indicate.

This was one that really flowed from the ground that we knew, we really wanted to get our hands on. We've gone and soil-sampled it.

We've gone and air-cored it. And it's coming up -- it's starting to come up trumps.

You've got to be careful about how far you go with this. But this is an anomaly over a 5-kilometer strike length where we've got higher than 0.1 gram per tonne.

That doesn't sound like much, but sitting within that is what appears to be a 3-kilometer strike along strike zone where it's above 0.5 gram per tonne of dirt. And this is just in the drilling that we've picked up with air core.

This is not going to be a surface expression. This is going to be under cover.

We've done some diamond. We've just put in a -- we've advanced this by putting in an early-stage diamond drill hole, which we're just getting the core on now.

And we've also got an accelerated reverse RC program that will kick off probably in about 2 or 3 weeks' time. So we're not putting all our eggs into this basket, but we're certainly starting to push it along to make sure that we find out sooner rather than later just how this thing is starting to shape up.

And that -- and that's the priority at the moment in this sort of greenfield space.

Thank, Ashley. And we'll just wrap it up there.

Thanks again, everybody. I guess our message is it's been a quite a solid year that's just gone.

We've got a year of growth, certainly on the production front ahead of us. But more than that, we've got some real growth projects that we're starting to kick into that will add to our future production beyond just the next year, both in on-site at Duketon and at McPhillamys.

So thanks again for joining us, and have a nice day.