Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record net profits, underlying EBITDA, and earnings per share.
- More than doubling of the final dividend.
- Successful acquisition of Northparkes, exceeding expectations.
- Strong balance sheet with reaffirmed investment-grade rating.
- Significant reduction in carbon emissions by 14.3%.
Negative Points
- Cyber incident experienced, though contained without material impact.
- Potential weather-related disruptions, particularly at Cowal.
- High labor costs with a projected 5% increase.
- Major shutdowns planned at key operations, including Cowal and Ernest Henry.
- Mount Rawdon operations ceasing, impacting future production.
Q & A Highlights
Q: Barry, thanks for clarifying that 50% payout is still the policy for the dividend going forward. At what point do you think you've reached your target gearing or your target net debt? Are you able to spell it out for us as to what that level is? And when we return to that 50% payout?
A: (Lawrie Conway, CEO) We have averaged well above 50% payout over the entire period of this policy. As cash flows continue to increase, there will be further dividend improvement. (Barrie Van Der Merwe, CFO) We are targeting to get gearing down to 20% next, and on a long-term sustainable basis, we believe it should be around 15% or just below.
Q: Can you help me understand how Northparkes has exceeded expectations in the first seven months of ownership?
A: (Jake Klein, Executive Chair) Northparkes has a 30-year reserve life and has been cash generative from day one, contributing $75 million in the first seven months. We are implementing a lower capital-intensive approach to the E48 sublevel cave option and seeing exciting early exploration success.
Q: Where are you seeing the pressures on the cost base into FY25?
A: (Barrie Van Der Merwe, CFO) We have allowed for a total labor movement of 5% for the year, with most other costs around 3%. Labor constitutes 50% of our cost base, resulting in an average increase of about 4% for FY25 over FY24. We expect labor rates to stabilize if the economy slows as predicted.
Q: Could you please remind us about the extension phase at Ernest Henry and its major CapEx?
A: (Lawrie Conway, CEO) The study will finish in March 2025, and we have decided to invest in ventilation, refrigeration, and trucking infrastructure earlier. This capital is included in our major capital for this year, with the main infrastructure investments planned for 2027-2028.
Q: Can you provide more color on the timeline of CapEx spend at Cowal over the coming years?
A: (Lawrie Conway, CEO) For FY25, there is no major CapEx for the open pit at Cowal due to weather impacts and pending regulatory approval. The main CapEx this year includes closing out the IWL and underground surface infrastructure. The $200-$230 million CapEx band over five years remains but is likely pushed out by six to nine months.
Q: What are the non-cash impacts in all-in sustaining cost (AISC) for FY25?
A: (Lawrie Conway, CEO) We expect non-cash impacts to be between $30 million and $50 million, mainly related to stockpile adjustments at Mount Rawdon and Cowal.
Q: Can you provide an update on the cybersecurity incident and its impact?
A: (Lawrie Conway, CEO) The incident had a minor impact on operations for a couple of days. We have contained the incident and do not expect any material impact on our operations. No significant data loss has been reported.
Q: Can you clarify the production guidance for Red Lake and its cash flow expectations?
A: (Lawrie Conway, CEO) The production guidance for Red Lake is 125,000 to 145,000 ounces for FY25. The asset is expected to be cash positive, including the $65-$75 million major project CapEx for tailings dam consolidation over the next 18 months.
Q: How will Mount Rawdon be reported in FY25, and will it be included in underlying earnings?
A: (Lawrie Conway, CEO) Mount Rawdon is excluded from AISC guidance but will be included in underlying earnings. The asset is expected to be cash positive, contributing $15-$20 million in free cash flow.
Q: What are the major drivers that could cause you to be at the most optimistic part of guidance, and what are the risks?
A: (Lawrie Conway, CEO) Weather is a significant risk, particularly at Cowal. Major shutdowns at Cowal and maintaining stability at Red Lake are crucial. On the upside, consistent performance at Ernest Henry and Northparkes and ramping up underground production at Cowal could drive better results.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
