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Edited Transcript of SBM.AX earnings conference call or presentation 21-Aug-19 1:00am GMT

Full Year 2019 St Barbara Ltd Earnings Presentation

West Perth Sep 7, 2019 (Thomson StreetEvents) -- Edited Transcript of St Barbara Ltd earnings conference call or presentation Wednesday, August 21, 2019 at 1:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Garth Campbell-Cowan

St Barbara Limited - CFO

* Robert Scott Vassie

St Barbara Limited - MD, CEO & Director

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Conference Call Participants

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* Matthew Frydman

Goldman Sachs Group Inc., Research Division - Research Analyst

* Michael Slifirski

Crédit Suisse AG, Research Division - MD

* Paul Hissey

RBC Capital Markets, LLC, Research Division - Analyst

* Reg Spencer

Canaccord Genuity Corp., Research Division - Mining Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the SBM Briefing on FY '19 Full Year Results Presentation. (Operator Instructions) Please be advised that today's conference call is being recorded.

I'd now like to hand the conference over to your first speaker today, Mr. Bob Vassie. Thank you. Please go ahead.

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [2]

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Thank you, and good morning, everyone. Thanks for joining us for St Barbara's full year financial briefing. On the call today, Garth, our CFO; Rowan and David Cotterell. As we provided a full company update in the quarterly recently, I won't go into too much detail here before handing over to Garth to take you through the financials. I'll just do a quick overview, Garth will do the financials, and then I'll talk a little bit about resources and reserves.

In the pack, Slide 4, provides our normal overview but now including Atlantic Gold, which we completed the acquisition of a month ago now. We are busily integrating Atlantic Gold, and that's going well. And I look forward to showing the operation to investors and analysts next month. On guidance for Atlantic, we plan to provide that in the September quarter.

Highlights on Slide 5. It's been a solid year for the company with cash flow generation continuing strongly, considering that Gwalia was impacted by limited ventilation for the whole year and peak of construction activities for the Gwalia Extension Project. I'm very pleased with the result. I am especially pleased we've got Simberi stoped up to assist with another year of records for production and cash flow.

This has also been a pivotal year for the company in executing a strategy with the acquisition of Atlantic Gold, which was completed just after the end of the financial year. As such, Atlantic Gold is not included in these results, but obviously, has added low-cost reduction, resources and reserves, a development pipeline of growth projects and grade exploration ground. You can therefore expect this to flow in the results moving forward. And now we have a real great story, which, I guess, was something we've been lacking relative to our peers up until that time.

In financial year '19, St Barbara achieved a net profit after tax of AUD 144 million. This was a very good result considering the challenges at Gwalia for the year. Operational cash contribution remained strong at AUD 294 million or $771 per ounce.

I'm very pleased to announce today the declaration of a final $0.04 per share fully franked dividend. This takes our total for financial year '19 to $0.08 per share fully franked. Having acquired Atlantic Gold in an all-cash deal, I think the maintenance of the dividend at comparable dividend yields is a real achievement. The cash generation and ongoing dividend, along with our growth story, makes for an interesting comparison with some of our peers.

Just on safety, I copied this in the quarterly, noting that our frequency rate had increased as a result of 23 low-severity recordable injuries, mostly hand injuries in -- at Gwalia as we do the underground construction work as well. We remain very focused on addressing this frequency rate trend. Whilst the company continues to operate well below the industry benchmarks on the lost time injury frequency basis, we do believe 0 injuries is possible. I'm pleased to say that we've had a much better start this year on safety.

Some slides there, similar [layout] on Atlantic Gold, which I won't get into too much detail. We presented the -- we completed the acquisition. It's very consistent with our company strategy, as pointed out on those slides. And we'll focus on the full year financials on this call. And we're busy integrating the operation. And as I said, that's going pretty well, and we'll provide updates on our normal reporting cycle.

Slides 10, 11 and 12 cover Gwalia and some varied production cost and grade profiles, which we presented recently in the quarterly. I mentioned also several times that the Gwalia Extension Project, the peak aspects of that in terms of the lateral raisebore waste as we've been doing 3 kilometers of sharp, raise boring and the construction of PAF has also drawn on our ventilation, our limited ventilation resources. So I'm very pleased to say that PAF construction is complete. The power from surface is complete, and we have finished dry commissioning on the crushing level, almost finished dry commissioning on the mixing level. So we'll be doing wet commissioning of the PAF plant later this month, and I'm really pleased about that doing that going, not having to track waste up to surface.

Also very pleasing is that we've finished the kilometer-long drive out to the last shaft hook-up point, and we are piloting the last shaft section. So we've done the 2,000 meter -- well, about 926-meter surface shafts and one of the 400-meter underground shafts, and we're doing the last underground shaft now. Now we can do that in parallel, while the surface infrastructure and plants are being constructed. So we're still on track to double our ventilation in January time. Simberi continues its strong performance, and sulfide drilling continues, and I'll talk a bit more about that sulfide project later.

But now I'll hand over to Garth to discuss the financials in more detail.

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Garth Campbell-Cowan, St Barbara Limited - CFO [3]

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Thanks, Bob. Just turning to Slide 13, which provides the key financial highlights for the year. And these are all on an underlying basis, although I should add, there's not a big difference between our underlying and our reported result.

The company delivered an EBITDA margin for the year of 43%, which is lower than previous years due mainly to the lower margin from Gwalia. Gwalia remains a key asset with 56% EBITDA margin while Simberi's margin was solid at 42%. Earnings per share for FY '19 was $0.27, down on last year due mainly to the lower earnings.

The solid financial performance, as Bob mentioned, enabled the company to pay a final dividend of $0.04 or declare a final dividend of $0.04 per share, which is, again, fully franked. This is in addition to the $0.04 per share fully franked interim dividend that we paid at the half year. This gives a dividend yield on our current share price of around 2.2% and was about a 34% payout of our net profit after tax for the year.

Just turning to Slide 14, the change in reported underlying EBITDA and net profit after tax presented on the slide. The difference between the reported and underlying EBITDA result relates to costs for the acquisition of Atlantic Gold, and in arriving at underlying net profit after tax, the tax expense is adjusted to recognize an additional deferred tax assets in PNG and this is all detailed out in Note 3 to the accounts.

Turning to Slide 15. It shows the key changes to the underlying profit against last year. Gwalia's lower results was partly offset by some various record performance. The result was also impacted by our higher exploration expenditure and a higher income tax expense, which related to Simberi and PNG.

Slide 16 shows the profit and cash contribution from each operation. Gwalia's profit and cash flows were impacted by the lower production in FY '19. However, Simberi's continued performance improvement is clearly highlighted in these graphs.

Slide 17 provides a waterfall of the cash movements in the year. The company generated free cash flows of $68 million, and this is after, as you can see from that waterfall, total exploration expenditure in the year of $31 million, total CapEx of $118 million, comprising sustaining CapEx of $56 million and growth CapEx related to GAAP and Gwalia studies of $62 million, and details of these expenditures are provided in Note 1 to the accounts.

We also paid $42 million in dividends and $61 million in Australian tax, which comprised $41 million relating to FY '18 and $20 million in installments for FY '19. You'll also notice on the balance sheet that there's a provision for a tax payable of $23 million, which represents the balance of the FY '19 tax, which will be paid by December this year.

Slide 18, turning to the balance sheet. Cash balance grew to $410 million at the end of June. As I said earlier, up $68 million from last year before including the net entitlement offer proceeds of $480 million. In July, we then used $780 million of that cash to complete the acquisition of Atlantic Gold, leaving the balance sheet with cash and deposits of $110 million. It's still a very strong cash position. We also assumed, on the acquisition of Atlantic, the debt of CAD 100 million, and St Barbara has a corporate debt facility of $200 million, which is -- remains undrawn at this time.

Slide 19 just gives a bit of the history of our dividends, which we commenced paying in FY '17. We've now paid 5 consecutive dividends amounting to $0.26 in total, all of which have been fully franked. The company's dividend reinvestment plan has been well supported, and we've retained a 1% discount for shares issued in relation to the FY '19 final dividend.

And that's all for me. I'll hand back to Bob.

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [4]

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Okay. Thanks, Garth. Just on resources and reserves. Slide 20 to 22 shows our changes in reserves and resources as of the 30th of June 2019. Obviously, our resources and reserves have now increased significantly with the addition of Atlantic Gold, but I'm pleased to see without Atlantic Gold, both resources and reserves increased net of depletion. The main contributors of reserves was at Gwalia due to drilling on lode strike extensions. For resources, it was oxides at Simberi, which was modeling changes at the low grade and less impact on reserves.

I should point out that we cut off resource and reserve estimation at the end of April. So we cut off all the drilling inputs at that time. So at that stage, we have only done the some of the 60 x 60 meter drilling at Sorowar for sulfides, and therefore, the program has yet to find its way into reserves and has had only limited impact on resources at the time of the cut-off. Obviously, since then, we'll continue to drill and we went to infill drilling at 30 x 30, which we'll be able to get to the right classification for reserves.

We also have remodeled existing Pigiput sulfide reserves. As you know, where -- large majority of our sulfide reserves where in Pigiput until we can add what we're seeing in the drill from Sorowar. We remodeled this and what we've done actually at Pigiput, not Sorowar yet because we haven't added anything there. But at Pigiput, we added 6.4 million tonnes at near cut-off grade materials, so the cut-off grade for sulfide is 1.2 grams a tonne. So it was a big basket of material at very close to cut-off grade. So adding that added about 240,000 ounces to the Pigiput sulfide, but it obviously had an impact of lowering the overall grade of that particular deposit to 2.8 grams per tonne. So then when you combine everything we've got together, adjust for depletion, model changes and drilling results, the overall sulfide reserve as it stands now until we finish the drilling program is 2.4 grams per tonne. So that added more low-grade material, but that also has the effect of changing some waste into ore, and therefore, reducing the stripping ratio. The pit shells in our models remain pretty much the same.

Just on Slide 23, mine life. You can see with the addition of Atlantic Gold, the company now has 2 operations with more than 10-year mine life. On Simberi life, as many of you know, the oxide mine was due to finish up a year ago. This time last year, we said we had 3 years to go: 2 normal production years, which are quite cash generative, especially with the price these days; and 1 year of low-grade stockpile processing.

So as we sit today, that means 2 years left. However, as we finish our drilling program in Sorowar, we'll be able to add to an update on that, which we're expecting to finish drilling this quarter and update in the following quarter towards the end of the calendar year. We're also finding that a fair bit of transitional material that we classify as sulfides in our resource and reserve models will find its way, and has actually been finding its way, to the mill as we take opportunities through grade control to trade grade and recovery on this material. And this, to say, I think to the grade control we see some double the grade, but that's transitional material with a drop-off of a few percent of recovery, then obviously, it's going to make sense to put it through the mill.

So with drilling and that opportunity in mind, I'm not promising anything yet, but we are looking for incremental extensions to oxide life, as we have been able to deliver in previous years.

On exploration, our capital exploration in the quarterly, we are gearing up to work on our new joint venture at Horn Island in Queensland, the far north Queensland. We are busy in the Australian partnerships: Lake Wells Gold ground; and we're preparing to get back into Back Creek in New South Wales.

I am very interested in the work we're doing stoping out from Gwalia, which is in the regional program, which is already showing results, and we're going back into some of those areas now. I would note also that Newcrest have recently advised us that they do not wish to exercise their option on the joint venture in Papua New Guinea and are withdrawing from the option and farm-in agreement we had with them over the last couple of years on Tatau and Big Tabar Island.

Now that's been a good program to use Newcrest's knowledge and also funds to drill out largely 3 main porphyry targets. So we are now taking over that program ourselves, and we are, in fact, continuing to drill at the Banesa target on Big Tabar Island.

Some other slides there just for consistency. But as it's the financial briefing, in conclusion, it's been a solid year. Despite Gwalia being impacted by limited ventilation and constraints around construction, a very solid year of cash generation and a pivotal year for us, completing the acquisition of Atlantic Gold, which gave us the diversity we badly needed, but also gave us our growth story. The company remains in a strong financial position, which enables us to pay a $0.04 a share fully franked final dividend, $0.08 total, a good dividend yield, even considering we did an all-cash acquisition for $780 million for Atlantic.

Finally, I'd like to thank St Barbara's employees and contractors for their contributions in a very successful but challenging year and a big year of change for us but changed for good with our new addition of Atlantic Gold.

With that, I'll be happy to take any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) But our next questioner is from Reg Spencer from Canaccord.

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Reg Spencer, Canaccord Genuity Corp., Research Division - Mining Analyst [2]

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Just a quick question from me at Simberi. Obviously, you haven't finished the drilling yet at Sorowar yet. But with the lower grades at Pigiput, is it too early to say whether or not that lower grade there might have an impact on the sulfide project that you're working on?

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [3]

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Yes, Reg, it is probably a bit early to say because that's a remodeling. I think if you go back a few couple of years ago, I think the grade for that material was 2.1, and it's just really how you look at those -- the high-grade shoots and how much they smear. As we've been mining through that area, in Pigiput at least, we see that those high grades can be quite high-grade but they don't smear across to the next drill hole necessarily. So we've remodeled that. But largely, it was just adding some near cut-off grade material in Pigiput that made the major change, which made more ounces and dropped the strip ratio. So the shale still holds together as it had been before that shale.

The big thing that will be the point for us is completing the drilling program because the 60 x 60 looks good, but the infill 30 x 30 that'll be able to allow us to make a proper pit shell for Sorowar and then run everything through the prefeasibility study, which we're busy updating in parallel at the moment as well. And we've still got the EIS work that we never stopped there. So that's the permitting stage that we didn't want to stop in case we wanted to move forward. So I think it's too early to say yet, but we'll be finishing the program this quarter and then drilling it up in the following quarter. So not long now for a bit of a strategic view on Simberi.

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Operator [4]

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Our next question is Michael from Crédit Suisse.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [5]

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Just 3 quick ones from me, please. First of all, the -- again, the Simberi sulfide. I'm a bit confused, when you add 240,000 ounces of new low-grade material, you end up with less than what you started. So what else has changed there that we could see the grade decline because of the additional tonnes, but the ounces haven't actually changed, where's the offsetting balance?

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [6]

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It's a couple of things. So we added 6.4 million tonnes at post the cut-off grade, which, for sulfides 1.2. That translated to just 2 40 extra. There's been some depletion because as we've mined through areas, as you know, it's not a flat interface. So some sulfide material that presents in the pit may go to waste. That's not too soon. The rest is remodeling of the influence of some of the higher-grade shoots at -- in and around Pigiput and not much as -- in fact, no reserves have come in from Sorowar drilling yet. So all those things combine to -- the change of adding the low-grade dropped the grade of the Pigiput from 3.5 to 2.8. The drop from 2.8 to 2.4 is just remodeling on those high grades.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [7]

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Okay. Secondly, with the Gwalia reserve. Again, the grade decline of 7.5 to 6.4, how much of that is attributable to depletion of high-grade material that you've completed mining in the FY '19 year versus bringing into reserve low-grade material there? I'm really trying to understand what the addition was. What drove the new material actually is in that reserve?

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [8]

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Yes. It's pretty much as you said. The markets -- we're getting through the Pigiput patch in the high-grade swarms of positive reconciliation. So as you deplete out the high grade and add more depth through the deep drilling, it just lowers the overall grade because at the bottom of the ore -- and I think we've produced information on that before that we're sort of going from doing years at 12, towards doing years at 8, and then at the -- towards the end of mine life, doing years around 6. So it's going to have that averaging effect as you go down.

The one thing we haven't done yet, which we're busy starting with, with some external parties, is to run some optimization on our lode extraction sequence, especially as we gain more orebody knowledge at depth. We've got a trade-off of looking at which lode further after sequence, which we've talked about before, and I think you visited recently. There's even sort of stranded main lode stuff that would be a bit narrower. So we're going to be doing that work starting next month and just to actually try and optimize our lode extraction sequence now that we've got the ventilation coming in.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [9]

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Okay. And then finally, with respect to dividends, I don't think you've got a policy, at least I can't find one that's written anywhere. How do you think about dividends, particularly with the larger shareholder? And sorry, in terms of the changed distribution of earnings, with Gwalia declining, at least, well, maybe not on spot gold, but Gwalia is a contribution, and more earnings offshore that don't generate franking credit. So I'm just trying to understand how you think about that distribution going forward?

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [10]

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Yes. Look, we do have a dividend policy, which is a sort of broad one that says, look, we'll look at our cash generation and the use of that cash, whether it be acquisitions, exploration or whatever. And I guess, to a certain extent, in my mind, we've exceeded our dividend policy given that we didn't do a paper deal for Atlantic. We did a cash deal, which I think is why it was -- that acquisition came to us. When we actually said -- when we actually draw at the board looks at what we've spent, which is a considerable amount of money on growth and our bank balance and moving forward.

Now one of the things moving forward is, whilst there's money required at Atlantic, as less money is starting to be required at -- in terms of get, to start and to finish the ventilation project. So as we model that out, we came up with a number, and usefully, on our current share price, aligned with a yield of 2.2% or...

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Garth Campbell-Cowan, St Barbara Limited - CFO [11]

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Yes.

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [12]

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Yes, 2.2%, which we think is pretty fair in comparison to our peers, some of which don't pay dividends, and also the industry in general, given that we did that cash deal.

Now to your point, yes, as production comes more online overseas, that does have an impact on franking credits. But it's right up there with the growth profile we have there and also the low-cost production. We are looking at other opportunities to strengthen Gwalia, as you know. When we get double the ventilation, we'll be looking at our development rates and then reproducing our life of mine plans, but we're also looking regionally around Gwalia, and we haven't given up looking at an organic growth in Australia.

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Michael Slifirski, Crédit Suisse AG, Research Division - MD [13]

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Okay. The Atlantic debt, what's your sort of attitude to that? Is that flexible? Can you repay it? Or do you intend to hold it? What are -- are there any sort of conditions that prevent you from repayment? And just I'm interested in how you think about that.

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [14]

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Yes, I'll get Garth to answer that.

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Garth Campbell-Cowan, St Barbara Limited - CFO [15]

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Yes. Michael, there's no restrictions in terms of repaying. And in fact, it's currently in a structure that sort of rolls every 3 months. And so we're actually going through and evaluating that debt at the moment and the hedge portfolio to look at how we can use our leverage as a bigger group now to improve the economics around that. But we'll certainly look at that debt as a part of the broader capital management plan for the group. Currently, it is still in place with the counterparties in Canada that we're originating -- originators of that debt.

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [16]

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We paid a bit down on the acquisition.

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Garth Campbell-Cowan, St Barbara Limited - CFO [17]

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Yes, it was paid down on acquisition to $100 million. But the -- it's complete flexibility in terms of paying it down.

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Operator [18]

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Okay. Our next question in queue is from Matthew Frydman from Goldman Sachs.

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Matthew Frydman, Goldman Sachs Group Inc., Research Division - Research Analyst [19]

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Just firstly, on the Gwalia reserve update, you've added around 85,000 ounces of lower-grade stopes. Just wondering how much more of that is potentially possible in your view? And then how should we think about the margin of these incremental stopes given that there are no development requirements? I mean is it simply just the spot price of the day, less your cut off-price assumption, which I think is AUD 1,400 an ounce? It seems like that's a reasonable driver behind, I suppose, the grade difference that Michael highlighted, but also potentially a pretty healthy margin approach.

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [20]

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Yes. Look, there's a lot of things in that and some of them you pointed out. We've gone in the most recent resource and reserve run to a variable cut-off grade, which has a bit of an impact in terms of -- if you've got development there, and you're looking at the next step, you're not going to take the same view as cut-off grade of the overall leverage of around 4 grams a tonne, which is pretty high compared to some other places, but we are a deep mine. It's -- sometimes, as I mentioned before, it can be quite sharp a contrast lithologically.

So the stopes that's [slate for next ore], there might be nothing. So it's not like a gradual decline in grade at all points in the orebody. I think the real -- the opportunity is that we're still drilling. So we're currently putting another pilot hole down to that area of about 2,200 meters below surface and out to the south, where the plunge is going more that way. So it's a bit -- and we're starting up our grade control drilling. We got about 3 years ahead of our grade control drilling. So we paused it for about a year, and we'll get into that.

So that will help us in some of those areas, although we will have to put out an extension drive to get the right angle. So there's a lot in that. But really, for us, it's about getting our fixed costs down. Essentially, I'd liken it to the transition we're going through and the payment we will go through this year that we've talked about before. It's really setting up a new mine below the existing mine in the sense that we're putting a whole ventilation district down to there with splitting to double decline, we're adjusting our mining methods, and we're looking to really work as -- to develop a lot more as a developer miner, like other miners around us, than a straight stoping miner who is relying on tracks, we're relying on development.

So when we recast our -- when we double our ventilation and look at our performance, and to be honest, our performance is expected to get very well on development when we look at what our mining contractor is doing next door, then we can recast that into our mine plans. And at the same time, we would have developed optimization models with some specialist consultants to do this and do this in underground mines to make sure that we're not developing at high-speed in the wrong strategic direction, that we're making the stopes for margin, and we're getting our cutoff grade policy right. But there is some upside there, but I'd say the upside has largely to do with performance and the drill.

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Matthew Frydman, Goldman Sachs Group Inc., Research Division - Research Analyst [21]

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Sure, I understand. But just on this -- I guess, the specific stopes that you've added this year. Are they -- am I right in saying they're adjacent to recently-mined stopes potentially in adjacent lodes, so outside of the South West Branch [South Gwalia Series]?

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [22]

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Yes. Look, I'd say the majority of it is at that depth between 2,000 and 2,200 meters, but there are some strike extensions used in existing levels. I'd have to get the split, but I would set -- possibly half-half, but I'd say the majority is on new levels. Now having said that, we would have had planned new levels last year and may have added a stope on the south end of a couple of those. So lode extensions in existing mining areas as well as new.

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Matthew Frydman, Goldman Sachs Group Inc., Research Division - Research Analyst [23]

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Yes, okay. So I guess, you'd expect that as you develop -- continue to develop the depth, develop more areas over time and also, as you say, conduct additional grade control drilling, that you may continue to pick up some of these adjacent economic stopes, which sit outside of (inaudible).

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [24]

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Yes. Indeed. And the other thing to remember that some of our other lodes aren't in reserves, they're in resources. So and we're not -- I think I've described this before, where -- because, say, West Lode is 80 meters away from our main mining lodes, we pop a whole through on grade control through South West Branch. So we do all the grade control. And we let the occasional [1 to 3] or 80 meters into West Lode, but we don't have it close enough to classify those reserves all the time. But we know it's there. And we actually started mining West Lode at the start of the financial year, but we had to stop to prioritize South West Branch because of our ventilation restrictions. So there's a real opportunity, especially in West Lode.

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Matthew Frydman, Goldman Sachs Group Inc., Research Division - Research Analyst [25]

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Understand. Moving to Atlantic. Just wondering if you can maybe give us just a brief, I suppose, update on the ground from how that transition is going in terms of integrating into the St Barbara systems, the St Barbara technical teams, et cetera. In particular, I noticed you've obviously added a number of orange Canadian boxes into the growth pipeline. Just wondering how these are being managed in terms of, I guess, the St Barbara, the head office and deploying your existing internal technical teams relative to, obviously, up until now, relatively independently managed Atlantic Gold.

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [26]

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Yes. Look, I guess, it's -- I'd say a couple of things. It's still largely operating as it has done before. They had done a good job of getting the ground patch together, developing the mine and bidding guidance on the first year. So there's a confident team there, and we're leaving that in place. So we haven't parachuted in a whole bunch of people. What we have done is focused on the first stanza and, as you know from getting the keys a month ago, on the systems, being the financial systems, treasury, bank accounts, things like that, and IT, legal structures and everything. So those classic integration aspects that you do from day 1. Lucas Welsh, our GM, Finance, has been leading that effort and spending a lot of time over there.

We are, as I think we announced, moving out of Vancouver. So we don't need a Vancouver office, especially so -- some of the staff is relocating, as we speak, to the mine at Nova Scotia and other staff to, of course, some of the normal finance and HR functions, the way we operate, managed back in Melbourne. So all that sort of classic integration work has gone exceedingly well. And the mine just continues with the same, with the General Manager and their team on an uninterrupted exploration, which I had to look at before getting the keys, is moving forward on the agreed targets.

The point you're alluding to in terms of the growth pipeline, all that activity continues. So the study's aspect on the feasibility study of Fifteen Mile Stream is ongoing, land swaps that happened for the road from Beaver Dam, I can finally say Beaver Creek this Beaver Dam -- so we contract through to Touquoy's all underway. And the permitting process, which we outlined in the Atlantic presentations being the 365-day process with pauses for your request for information, is still tracking as we would expect, and is being managed by the people that were managing it. The big -- other than the financial and systems and legal component aspect of transitioning a business, we -- and the fact that the operations, exploration and projects are just continuing as they were. Another key aspect is HR integration, obviously, in terms of some new contracts for people transitioning into our incentive schemes and the like, which I think has been very well received. But that's something you're really going to keep the focus on. I'm going to be popping over there with the full board next month ahead of Denver Gold. So there'll be a full Board at Nova Scotia and also an analyst and investor visit there at the same -- at a similar time.

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Operator [27]

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Our next question is from Paul Hissey from RBC.

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Paul Hissey, RBC Capital Markets, LLC, Research Division - Analyst [28]

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Yes, I think I might have -- I think you might have sort of broadly answered it with the first question, Bob, but just -- it seems to me like PNG is already kind of critical from a time perspective, a lot of work to do between kind of where you are now and then being able to get to a point to make a decision on the -- or sorry, rather being able to execute on whatever the next phase of that project looks like. You mentioned that, obviously, you're still drilling there. You've got a decision, potentially, about a sulfide operation. Is -- I mean it does look it's crunch time now at PNG. Have you got time to sort of -- [I mean I've got] a choice, I guess, but can you maybe just talk a bit more about the timing on the decision-making there? Because it feels like you're out of time?

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [29]

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Yes, look, it's a good point. I'm relatively accountable for a couple of reasons. We've got a full year ahead of us plus a full processing year. And as I mentioned, we're looking for some extensions that we've used to being able to find. The other thing is, and we don't necessarily announce these, but when we're mining a longer bench and we're doing grade control drilling, we often find that we're mining outside the shelf. So stuff that we haven't reported because it just continues in areas. And that's the nature of that orebody. But like I said, I won't promise things now. I'll just complete the work and let you know how that goes.

So having 2 years with potential extensions. And the fact that what we're contemplating here is we've already done the PFS on, which we're currently upgrading, we never stopped doing the EIS work for the permit. And the effect of what we are contemplating is just putting flotation, modular flotation banks, into the back of the plant largely as the main change with some con handling, gives me relative confidence that this can still be executed in time and ideally perhaps while you're doing your low-grade processing here. But really, the economics need to be out there for us. When we looked at it last time, it was a positive NPV, but not one we necessarily wanted to invest in. So it's really hinging on the quality that Sorowar can add. Obviously, Simberi looks a hell of a lot better at $2,200 gold price, right? So we are not going to miss a trick on that.

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Paul Hissey, RBC Capital Markets, LLC, Research Division - Analyst [30]

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Yes, okay. Now I just -- it does feel like your conviction is waning a bit and I guess that's the additional level of concern. From our perspective is it doesn't just feel like this is a slam dunk that we can keep rolling forward with Simberi for another 5 years. So yes, can you tell us what the resource update looks like? And then obviously, you've got sort of 12 months, I guess, before you would need to start actually investing in that flotation circuit. Would that be about right?

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [31]

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Yes, possibly. I mean as I'd like to say, we'll just get the modular and build them on the island. I'm not trying to understate that. But my enthusiasm hasn't waned at all. The -- and if we're going to do it and what it will be much more than a 5-year extension. So what I'm very keen to do is, especially gold prices, it makes you redouble your efforts. But like I've said before, we've got the, airport, we've got the power station, the village, we've got the support of the local people, we're training 600 local people. Why wouldn't you do it? But of course, it's got a passive investment criteria with the Board and investors. And that's really, at the moment, dependent on what we can add from Sorowar, which we're completing the drilling on this quarter. I am a big fan.

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Paul Hissey, RBC Capital Markets, LLC, Research Division - Analyst [32]

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Sure. And just a last follow-up question, will you be using a different gold price assumption to estimate the financial metrics, sort of going forward than you did last time around?

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [33]

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Oh, yes. I mean last time we looked at it, we were probably 15 something gold.

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Garth Campbell-Cowan, St Barbara Limited - CFO [34]

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I think we used -- the last time we used about AUD 1,500 but -- I think those are the things we'd have to consider too in terms of -- if you could lock in some price to cover the capital that you might invest, I guess it depends on the timing of the decision and what the environment is at that point.

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [35]

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Yes, I mean, last time we looked at it, it was -- we were looking at USD 100 million, and that was flotation banks and con handling and for about USD 60 million and USD 40 million on fleet and other things. Now because we've meant to have finished this a year ago, we have already replenished some of the trucks in the fleet. I've ahold some of the diggers and we've done all that overhaul work on the aerial rope conveyor and we've upgraded the splitter and the main belts into the plant. So we've actually made some investment already. Now we would look -- one thing we are looking at in the upgrade of the PFS, which has been underway for some time, is just whether we get a second-hand mill or something. We'll just upgrade the front-end milling to keep the ground size down and throughput up for as good a float as we can get. So that's one of the options we're looking.

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Operator [36]

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Ladies and gentlemen, there's no further questions at this time. This concludes today's conference call. Thank you for all participating. You may all disconnect and goodbye.

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Robert Scott Vassie, St Barbara Limited - MD, CEO & Director [37]

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Thank you, everyone.