2023-07-27 17:25:26 ET
Regis Resources Limited (RGRNF)
Q4 2023 Results Conference Call
July 26, 2023 9:00 PM ET
Company Participants
Jim Beyer - Managing Director and CEO
Anthony Rechichi - CFO
Stuart Gula - COO
Ben Goldbloom - Head, IR
Conference Call Participants
Levi Spry - UBS
Andrew Bowler - Macquarie
Daniel Morgan - Barrenjoey
Matthew Frydman - MST Financial
Hugo Nicolaci - Goldman Sachs
David Coates - Bell Potter Securities
Alex Papaioanou - Citi
Presentation
Operator
Thank you for standing by. Welcome to the Regis Resources Quarterly Results Conference Call. [Operator Instructions]
I would now like to hand the conference over to Mr. Jim Beyer, Managing Director. Please go ahead.
Jim Beyer
Thanks, Rachel. Good morning, everyone, and thanks for joining us on the Regis Resources June 2023 Quarter Update. First, I'd note that I'm joined this morning by -- with our CFO, Anthony Rechichi and Stuart Gula, our COO; along with Ben Goldbloom, Head of Investor Relations.
Look, first off on safety, remains solid. Our LTI, as measured by our lost time injury frequency rate, is 0.9, less than half of the industry average. We're very -- which, of course, we're very pleased to continue to improve on. We're also pleased to finish the year with a strong quarter of gold production and cash build. The cash build in the June quarter signaled another step in the transition from the company being in investment phase and moving into a more cash-generative position. Progress on our growth plans continued, with commercial production declared at our 2 key growth projects, the Havana open pit at Tropicana and the Garden Well South Underground at Duketon. We also released our updated resource and reserve statement during the quarter, highlighted by the underground mines at both -- at all sites outpacing depletion for the second year in a row.
On the ESG front, we saw more than just safety. We completed construction of the 9-megawatt solar farm at Duketon South, and that's undergoing commissioning this month. At Tropicana, the joint venture is going to build one of the largest solar and wind projects in the Western Australian goldfields. A contract was awarded to Pacific Energy to build a 62-megawatt combination wind, solar and battery facility, which will be integrated into the existing 54 megawatts of gas-fired power system that's currently on site. For the June quarter overall, we produced just over 122,000 ounces of gold for an all-in sustaining of $1,851 per ounce.
The June quarter has seen the underground mine hit record ore production rates, and we look forward to these rates continuing and harvesting returns on these investments. Look, I'd now like to hand over to Stuart, our COO, Stuart Gula, who will provide some more information on the operational performance. Stuart?
Stuart Gula
Thanks, Jim, and good morning, everyone. Looking more closely at the operations, you see that Duketon gold production was higher at just over 90,000 ounces at an AISC of $2,026 an ounce. And Tropicana was just under 32,000 ounces at an AISC of $1,259 an ounce. Duketon North was much higher at approximately 20,000 ounces at $20,000 -- at $2,055 per ounce. Pleasingly, production and cash margins improved at Duketon North with better access to ore as the Moolart pits come to the closing stages of their life.
So what we're seeing this year is that the majority of mining at Duketon North will be completed by December 2023 at the Moolart pits. However, some mining will continue at Gloster until the end of the financial year in June 2024, which represents the end of the current reserves. And while -- as we deplete mining from open pit, mill feed will be sourced solely from lower-grade stockpiles. So really has set the scene for 2 halves at Duketon next year as the mining from direct feed from open pit starts to reduce in the second half of the year. With costs being rebate to reflect recent inflationary impacts and recent performance, the ongoing economic life of low-grade stockpiles and marginal open pits remain under constant evaluation.
At Duketon South, production was also higher at just over 70,000 ounces at $2,018 an ounce AISC. Underground mining progressed well with Garden Well South Underground hitting a 3-month average rate of about 50,000 tonnes per month. Development rates were also maintained at good levels at nearly 3,000 meters for the quarter. In the open cuts, we commenced mining at Russell's Find and delivered first ore from Ben Hur with mining operations at Tooheys Well and Rosemont coming to a close in FY '23. Mining will now be from Garden Well, Ben Hur and Russell's Find in the coming year.
Tropicana delivered an improved quarter at just under 32,000 ounces for an AISC of $1,259 an ounce. In the open pit, operational efficiencies and fleet availability resulted in the highest quarterly material movements for the year. However, work continues on lifting performance in this area as we see room for further improvement here. Following commercial production at Havana, access to ore improved and is expected to continue improving throughout FY '24. On the underground production issues that were experienced in the March quarter were resolved, and we also saw the highest ore production for the year from the Tropicana underground.
That's it for me, and I'll hand over to Anthony for the financials.
Anthony Rechichi
Thanks, Stuart. On to the financials now. For the quarter, we sold just over 126,000 ounces of gold at an average price of $2,669 an ounce, which includes the effect of the hedges. This delivered $337 million of gold sales revenue. Operating cash flows remained strong.
Overall, we generated a total of $150 million in operating cash flows. That includes the hedges, with approximately $104 million coming from Duketon and $46 million coming from Tropicana. Talking on an accruals basis as we see in Table 1 in the quarterly report there, mine site capital expenditure during the quarter was lower this time around at $76 million. Additionally, exploration and McPhillamys expenditure for the quarter was $19 million.
Growth capital was lower this quarter 2 at $44 million, following the commencement of commercial production at Garden Well Underground and Havana open pit. With that transitioning to commercial production in the June quarter, growth CapEx reduced accordingly, with costs then reporting to all-in sustaining costs for those mining areas. I'll now point you to Figure 4 of the quarterly report, which outlines the quarter's cash flows. Cash from bullion closed at $243 million at 30 June. You can see that operating cash flows were $185 million. But partially offsetting this was $35 million in hedge losses, owing to the delivery of a further 25,000 ounces into our hedging program. You can see that over to the right of that waterfall chart. Furthermore, we spent $78 million in cash on CapEx, $20 million on exploration in McPhillamys, and corporate and finance costs were $12 million. And finally, regarding the $300 million term loan facility. During the quarter, we engaged with our lenders in respect of the deferral of that loan, which currently matures on the 31st of May 2024.
We'll provide an update on those discussions in due course. Thanks, and back to you, Jim.
Jim Beyer
Thanks, Anthony. Look, first off, just to cover on guidance. Look, at Regis, we've got a strong focus on delivering and ensuring that we're delivering profitable ounces and not just any ounces. And considering this, the company undertook a detailed reassessment of the life-of-mine cost base to reflect recent significant inflationary impacts and outlooks and realized performance over the last 18 months and also including the recent reserves and resource update. This has resulted in some production ounces previously considered profitable and in our plans to be excluded from forward plans, specifically that's at Duketon.
So with this context, we look at the FY '24 guidance, we have gold production ranging from 415,000 to 455,000 ounces of gold. We have an AISC ranging from $1,995 to $2,315 per ounce. Now clearly, at first glance, this appears a significant increase over the AISC of '23. However, from a true cash flow impacting expenditure perspective, I'll point out this is not the case. If we consider the 2 key drivers of this AISC increase, it hopefully becomes a little clearer.
Firstly, at Duketon, there is the inclusion of low-grade ore, which we are feeding in. I think Stuart mentioned that earlier. And as a result, we have quite a significant drawdown on our stockpiles. Now this results in an inventory adjustment to the AISC that equates to $200 per ounce across the group's production. Now I emphasize that this is a noncash cost and relates to money spent historically that is basically brought to account while we draw down these stockpiles.
It's a nuance of the AISC if you're following it in accordance with the World Gold Council. And the key here is that it doesn't actually reflect cash spend in the period. So if you're using AISC for cash flow, then exclude this cost as it's an accounting recovery. Now the second area relates to the change in definition of capital at Tropicana. In FY '23, all of the material movement at Havana pit was deemed as growth capital, and we reported as such because the pit wasn't in commercial production.
Now that it is, these costs are now defined as sustaining capital. So our growth capital goes down, which no doubt you've seen, and our all-in sustaining costs go up. From a cash spend point of view, it's pretty much the same, and it's just a classification shift. While we're talking about Tropicana, I just want to take an opportunity to touch on the picture of beauty that we actually think this is going forward. At Tropicana, we'll see the revenue increase this year.
Last year, the production was 131,000 ounces. And given the like-for-like on gold price, our range now is 135,000 to 150,000, which is what we were anticipating from Tropicana was an increase in production as Havana pit came in. So we're expecting the revenue to be up, again, as I say, gold price being the same. Now the total material movement, that is the TMMs, which is all of the movement of the cutback, remains pretty flat. And so -- and this is, as I said, is one of the key expenditure drivers.
So in reality, we'll see a bit of an increase in revenue with the cost of Tropicana overall remaining pretty much as they were. It's just how they're defined. However, the interesting piece is that from next financial year, we expect to see the total material movement in the pit start to drop. It's currently sitting in the low-30 million roughly BCMs per annum. And over this year, we'll be breaking the back of the Havana cutback, and we will see the total material movement, as I said, a key cost driver at Tropical start to pull away.
So after this year, production remains the same at Tropicana in this high-400,000s to 500,000 ounces per annum, but the cash spend in that -- in the future, in next year start to drop away. And we can see the site continue to grow in its cash-generating position, gold prices permitting. So over the next couple of years or the next -- within the next -- yes, over the next 18 months or so, Tropicana will shift into significant cash-generating mode. I hope I've been able to paint a bit of a picture there as to why we love the future of Tropicana so much. Back to guidance.
On growth capital, we see that dropping -- and we see it dropping to a range of $85 million to $95 million, primarily around Ben Hur and Russell's Find work with also some allocations for underground decline capital associated with exploration purposes. On exploration, we see that ranging from $48 million to $55 million for the year. That's across both Duketon and Tropicana and McPhillamys. And about -- a little bit over half of that, about 55%, is actually resdev, resource development work, to prove up more reserves. At McPhillamys, the guidance range is $22 million to $25 million.
I'd also note that in this expenditure, about $9 million is for what I would call long lead preparation and field work required prior to construction. If we don't do that now, then once we do FID, you need to do a lot of infill monitoring before you -- under the conditions that we were -- the IPC was approved, we've got a bit of work to do. And so we're getting -- included that in our budget. Turning now to growth. And on the growth front, our projects made good progress during the quarter.
At Garden Well Main Underground, and I draw your attention to Figure 5, which shows progress of the decline and also the initial target zone, along with some of the results there. Now back in June, we released our resource and reserve statement, and we included an exploration target for this Garden Well Main area. And the target was 80,000 ounces to 1.3 million ounces of gold, we believe, is the exploration target in that area. The underground exploration decline, we've now completed over 900 meters, which is about 70% of the current plan, with the first results being reported. Our results to date are there to be -- to note and be impressed by, and some of them are quite helpful for us, and they support the exploration target that I mentioned before of 800,000 ounces to 1.3 million ounces.
And this is -- and we see the potential growth at Garden Well Underground, which is why we are progressing this as fast as possible. We're already seeing the drilling supporting the potential extension north of some of the existing stoping area associated with the Garden Well South area because that's where the first drilling off the decline was done. We're excited about the potential value to the company this work has potential to deliver. At Tropicana, we've been progressing work on the Havana underground pre-feasibility study. The PFS is expected to be completed during the December quarter this year, December '23, with the potential to start the main access decline in the second half of next calendar year 2024.
Figure 6 shows a conceptual layer. And as you can see by the impressive thicknesses and grades indicated why we think this is a great potential and remain confident in the possibility of a third underground production zone at the Tropicana asset. At McPhillamys, we await the response on the federal Section 10 application. We remain confident this will be cleared. But immediately following this, we'll be able to complete the final geotech drilling to -- required to complete the detailed feasibility study.
This really is this -- the wait the Section 10 application is something that is holding this work back, and we are doing what we can to get that decision clarified or provided. Completion of the DFS and the final investment decision with this impact is now expected to be in the June quarter mid-next year. So wrapping up what the June quarter brought us was strong cash build in gold production. Commercial production at Havana -- declared at Havana and open pit and Garden Well South and a significant exploration target noted at the Garden Well Main area. Over the next year, we'll see Tropicana shift to stronger cash flows from lifting production, and after this year, dropping costs off the back of total material movement reduction in Havana pit and also a potential new underground production zone at Havana.
The potential for system -- the ore system at Garden Well Underground is becoming clearer for Duketon, putting more life into the place. Look, it's also worth highlighting that in under a year's time, the company will have completed its hedge book, and at the current spot price, once we clear of it, will mean we will realize a step-up in pretax cash flow of approximately $150 million a year on a like-for-like gold price environment. So we have a bright future. Clearing this year, we see Tropicana cash flows increasing off the back of the production and the drop in waste movement. And we also see a significant increase in the cash flow revenue that we'll get as we break clear of the hedging package we've been dealing with for over 3 years.
Thanks, Rachel. I'll now hand back to you for questions.
Question-and-Answer Session
Operator
[Operator Instructions] Your first question comes from Levi Spry with UBS.
Levi Spry
A couple of questions around the asset guidance, what -- you tried to give us a bit of detail there, but can I just confirm a couple of things. So the noncash inventory movements, are they only at Duketon? So $200 an ounce, do we model them just for this year? Or how long does it go on for, I guess, is the first question.
Jim Beyer
Yes, look, that -- yes, look, what I'll do is I will just deal with that one quickly. That's $200 an ounce overall of production, right? It's not just $200 an ounce of the Duketon numbers. And I -- look, a significant number of the ounces are coming off stockpiles, both at Duketon North and at Duketon South. And I think some of that would -- like Duketon North, as we've indicated, notwithstanding an increase in the gold price or some other options that we're looking at for Duketon North, that's where we'll end this year. We will still see some of these low-grade stockpile ounces being treated in the future. It just won't be to the same volume. So I wouldn't anticipate it would be to the same order of magnitude, but it will still be there.
Levi Spry
Okay, we got that. And then for Tropicana, so this idea of what was gross capital last year is now sustaining capital. So it's the same number. So the 16 or whatever it was last quarter annualized? And did I hear you say that it only goes for this year, and then there's literally no capital again? Or what's '25 look like? This is the tricky part the industry has given us not using all-in costs.
Jim Beyer
Yes. I know. And even -- I mean, we've always said there's a way to work out all-in cost is just take the change in the cash balance from month to month, and you can see through the -- I mean even from our point of view, of course, we're frustrated with the all-in sustaining cost definitions because it doesn't actually include cash costs either, but that's a debate over a beer in another time perhaps. Back to your question on growth capital. Yes, the growth capital and the volume movements for this current year are about the same as last year. So on a cost-per-cost basis, it's pretty much the same. What we do see is it doesn't fall off a cliff in FY '25. What it does is it ramps down. Like at the moment, it's probably, it's running at a little bit over 30 million BCMs per year. Over the coming next -- it stays at that level for this year.
And then after that, it starts to drop maybe 25%, 35% per annum, notwithstanding we find some other open pit, of course, which would be great. So it doesn't all -- that doesn't drop away quickly all in 1 year. It drops away over maybe at least a couple of years. But to give you some idea of what the order of magnitude of that, I mean that is waste movement is a huge cost that everybody would understand. Now the order of magnitude of a rate per BCM is anywhere from $11 to $13 or $14 per BCM.
So say, for example, if next year, FY '25, the BCMs dropped by $10 million -- and this is on a 100% basis, of course. If it did drop by $10 million, there's $120 million plus depending on what your BCM rate is, of course, that drops out of your costs. Now we're only 0.3 meters of that. But this is what we've been trying to -- and working on communicating with Tropicana. It's definitely been in this capital-intensive phase.
What we've actually seen here is because Havana is now in production, what's been previously deemed as growth capital for the last 2 -- couple of years, probably 2 or 3 years, that earth movement, this big earth movement, this big cutback is still occurring, but now it's been all deemed as sustaining costs. And therefore, it's sort of the quantum is just shifting from one definition to another. We've always been -- we view that we've always been transparent with our all-in sustaining and growth capital. If it's not in one, it's in another on this perspective, but now it's all shifted into AISC, which, obviously, has a bit of sticker shock, which is why I'm spending a bit of oxygen trying to explain it.
Levi Spry
Yes. We'll probably look forward to an updated sort of life of mine plan. Do we have to wait until the Anglo reporting cycle or something for that?
Jim Beyer
Yes. Look, it's always a bit of our view. And I guess one of the things that we point to as to we still see this asset continuing to run in an open pit and underground scenario out to the end of this decade, and not with -- unless we -- then it sort of transitions to purely underground. But the inclusion of this 62-megawatt renewable energy farm in terms of the solar, that's a pretty significant commitment that's being made there, which we think sort of demonstrates it's another way of illustrating that we see this thing, the Tropicana asset, continuing well into the next decade.
Levi Spry
Just a last question on the -- come to the last couple on the sort of FY '27 target of 500,000 ounces. Can you just talk to some of the assumptions behind that. Obviously, Duketon North might not be there. So I assume that's full speed at McPhillamys. Is that where you...
Jim Beyer
Absolutely. Yes. Look, I mean, our target that we've been talking about, and this is -- we've been cautious with the -- we've always targeted these areas. It's not guidance, but certainly, FY '27, to get to that 0.5 million ounces per annum is off the back of high level of production from Duketon, probably not where it's been. As we've said, the -- it's got to settle to a more sustainable rate, which I think will be not where it is at the moment. Later, on top of that is the 140,000, 150,000 ounces out of Tropicana, and then sitting on top of that to get to '27 is -- sorry, to 500,000 is definitely McPhillamys. Without McPhillamys, it's just -- the gap is too significant.
Operator
Your next question comes from Andrew Bowler with Macquarie.
Andrew Bowler
Just a question on the Duketon North stockpile. So you talked about open pit mining winding down over this financial year. Can you just remind us of the quantum of the stockpiles at Duketon North? And is there sort of grade differential between some areas of the stock? So is there some that are of higher grade that potentially could come into a mine plan given that cost review and some that may be excluded?
Jim Beyer
Yes. Look, our position at the moment is that the viable stockpiles, be they any of the low-grade material that we've got up there is all exploited and consumed by the end of this financial year. There are some low-grade stockpiles that would -- even lower grade stockpiles that would continue to be there. They might not be included in the plan, for example, because they're just too far away and the trucking costs make it -- the haulage costs make it too prohibitive so we just drop them. Now these are certainly optionality ounces, and the beauty is that it doesn't take much to change our mind and put them back on the plan. But there's not -- in the grand scheme of things, beyond this year, you'd probably be lucky if there's 20,000 ounces sitting in those stockpiles. So it's really -- that are even close to being viable. So it's helpful, but it's not really material in our value.
Andrew Bowler
Just to confirm, basically that is production finishing this year at Duketon North?
Jim Beyer
That's correct. It's basically what Stuart was saying is that we'll continue to produce from the Moolart open pit and the Gloster open pit for the first 6 months roughly of this year. By the time we hit Christmas, the Moolart pit will have wound down and finished completely. And then the mill feed in the first half of the year will be a combination of Moolart pit, Gloster and low-grade feed. And then in the second half of the year, the feed into the mill will be a combination of what we get out of Gloster, which will also then be finished by the end of June on its current plans. And then during that second half, it will only be Gloster feed and low grade. And then by the time we hit the end of the year, then it's just -- it's not viable to continue at the current outlook that we've got.
Andrew Bowler
No worries. And just one from me. Can we just think about the outcomes of that life of mine cost reassessment? In terms of your findings from that, was it mainly open pit that saw a bit of a cost increase compared to prior expectations? Are the undergrounds relatively on track as to what you thought previously? And I guess how that might flow through to McPhillamys if it is mainly open pits that are a bit more expensive?
Jim Beyer
Yes. Look, it is a little bit of both, probably more to the open pits. We had a lot more -- we had quite a few marginal ounces in the open pits that when we apply the inflationary impacts and projected them out a bit, that we said, look, they're just -- there's too much risk incurred in early mining because you've got to strip them to get to them. So we just had to park them. That's not to say that if there's a sudden surge in gold price, these aren't sterilized. They're still there's optionality there for us. In the underground as well, there were a couple of areas where there were -- it wasn't significant, but it was enough to sort of knock the production off a little bit to what we were anticipating. There were blocks where it just suddenly became not -- a little bit too far out to mine out to them for dedicated drives. Where you've got ounces and stoping all in the core following the core of your ore body down, that still is consistent and they're good and productive. But we did have a couple of small landers that you might drive out to, and it takes you 6 or 7 or 8 months to get out there and then you get a few stopes and then you're out.
They became much more marginal. And we've decided to be a little bit more brutal with those and cut them out of the plane, knowing full well that if the gold price does lift, we can then -- there's -- again, we might have mine passed them, but we haven't sterilized them. So it's that optionality is there as well. The flow-on impacts to -- are there any flow-on impacts to McPhillamys? Look, general inflationary flow-ons, yes. Anything that makes us concerned about the viability of that project at the moment from an operating cost point of view? No, not really.
Operator
Your next question comes from Daniel Morgan with Barrenjoey.
Jim Beyer
Daniel?
Daniel Morgan
Maybe just worth going on mute at your end because there's a bit of feedback coming through the line, is that possible?
Jim Beyer
Going to try.
Daniel Morgan
Just while asking the questions. So my first question is, why is CapEx at Duketon classified as growth CapEx if production is declining? So the $90 million you're going to spend on Duketon is growth, but won't this come through in future periods as noncash, i.e. that's about $300 an ounce of this year's Duketon production or $200 an ounce of group production. And so therefore, isn't the $2,200 an ounce cost guidance at Duketon, like, isn't that a fair AISC representation because you've sort of got $200 noncash this year, but you're spending CapEx anywhere, that sort of feels sustaining? Can you just run through that?
Jim Beyer
Yes. Look, Anthony, we can all chip in on this. This sort of feeds into the nuances of growth capital and AISC and how you deal with it. The -- your question, the first element of your question, which was if Duketon is declining, why is there growth capital? Yes, good question. So if you go to the World Gold Council and the definition is growth capital is what you spend on anything that is a new project or a new contributor to production that wasn't in your original plans. So from that point of view, we look at things like Ben Hur, for example, which is a whole new operating area. There's a road, a haul road that needs to be put in to go down there. And there's also a definition of the -- a chunk of the pre-strip and pre-mining that's counted as growth capital as well. So we use those definitions.
They certainly -- to be clear, they're not the definitions and the approach you use for normal statutory accounting. And there are nuances in there that we see reported in different ways in different places, but we take a view that at the end of the day, if we're giving people what the AISC is, and this is what we've taken the view up to this point, if we give people what our AISC is and also the growth capital, you put them together, you're getting a pretty clear picture. It doesn't really matter where they're being defined. Where we've just come unstuck this year on that is that we've got this historic stockpiles coming in with these long-dated old costs from the past that are now coming through and hitting the AISC, which obviously, in our view, it shouldn't. But basically, the bulk of the growth capital that we're spending this year is on the prep work and the initial work on getting Ben Hur to a point where it can be into commercial production.
That's how we define the trip point between is it growth or is it sustaining? Is it in commercial production or not? That's what we did with Havana. That's what we did with Garden Well Underground. It's actually what we've been doing with all our pits over the years, certainly, for the last 4 to 5 years.
Daniel Morgan
Yes, sure. And I guess the other part of the question is kind of is there a period where we get some cash harvest at Duketon? Because it almost feels like we get to guidance each year, which we have today, and there's growth CapEx to keep the business going. Is there a moment where next year, a year after where you come out with a growth CapEx number which is very modest like you have the Tropicana? When do we get that cash harvest period at Duketon?
Jim Beyer
Yes. Well, Daniel, the #1 thing that will drive our cash harvest at Duketon and will be when we're rid of the $150 million worth of hedging. If you take that out of the -- if you take that out of the numbers, and exclude that from the reduction in revenue that gets allocated to Duketon, you actually see that the business is not a bad cash generator. So if you look at this year, in our cash growth, in our cash balance from the beginning of the year to where it's ended up at $246 million, I think it was at -- $243 million, sorry, at the end of June, you could stick another $100 million on top of that if we didn't have the hedging. So we sort of -- we look at Duketon, and we know that it's in a good cash-generating position.
It's not spectacular. It's not as great as it used to maybe 5 or 6 years ago when it was low strip ratio and good grades, great recovery, easy mining and oxides and the like, but it's still pretty solid. And if you always know in mining, you've got to continue to invest to keep going. So if I look and see when do I think, I actually think that Duketon is in a reasonable cash-generating position at the moment. I certainly think it will be better next year because Duketon will be in -- sorry, Ben Hur will be in commercial production.
Our hedging will be off the cards, which I think the impact on Duketon's revenue this past year of the hedging in total, figure that out for me while -- please just estimate it. Thanks, Anthony. So I think it's a little bit unfair even though we fall in the same trap to consider that Duketon hasn't been generating cash. It's just been absorbed by these delightful hedges.
So will we have growth capital going forward? Kind of part of me wants to say, no, we won't because that's not part of our plans. Eventually, the growth capital drops away on our plans. The other part of me says, well, I wouldn't mind it if there's a little bit there because when you're spending growth capital, it actually means you're bringing more reserves online. What we just want to make sure is that that's a reasonable cost per ounce.
So it's a bit of, frankly, a long-winded answer to your question, but I needed to deal with this question of the concerns that Duketon is a recreational mining. It isn't. It's just shadowed by the impact of the hedge at the moment. But as I said, this time -- by this time next year, we'll be clear of that, and we'll be seeing that actually, there's an additional $150 million, gold price being the same, disappearing from our -- effectively from our costs.
Daniel Morgan
Well, I do think the hedge book that you have been dealing with is a very good thing. And a credit to your team that you've been dealing with it and reducing that liability. And obviously, it's great that it ends at the end of this fiscal year. And just lastly, McPhillamys...
Jim Beyer
Daniel, I can tell you. So are we.
Daniel Morgan
Yes. McPhillamys, I see you are targeting FID in the June '23 -- sorry, June '24 quarter. Can we expect an updated feasibility study?
Jim Beyer
Yes, certainly. I mean we're working -- we can't finalize that at the moment. As part of the EIS application process over the last 3 years, we had to modify the site design quite a bit, in particular, where the plant -- key elements of the plant went and also modifications to the tailing dam footings. So we need to go in and do geotech work, some drilling there. We want to do a little bit of other exploration work as well, but mainly geotech to allow us to get to a high confidence estimate for foundations for the HPGR and crushers and tailings dam and all that kind of stuff.
If you look at -- and we can't get in and do that until we've got clearance on the Section 10. So that's really the holdup for us. Once we've got that geotech work done, then we can firm up on the capital cost. Once we've firmed up on the capital cost and the last remnants of the scope, we'll be in a position to complete the final -- the DFS that will feed the final investment decision. I'd imagine that those numbers will be put out in the public arena sometime in the middle of the first half of next year.
So late in the March quarter or early in the June quarter. That -- something like that. It's very difficult for me to -- I mean, it's sort of a bit of weaving there, but it's difficult to put a hard date on it until we know that we can get clear of the Section 10. Because we actually can't go and drill on the ground until we're clear of it. That's all connected by a piece of string, if you understand what I mean. Yes. And look, just coming back to that question on the impact of the hedging of the last year, the impact of the hedges was about a reduction in our revenue of effectively about $115 million, and $75 million of that could be attributed to Duketon. So these are sort of ballpark numbers. So in reality, what we generated at Duketon without the hedging, we would have generated another $75 million in cash. So it's not a bad generator.
Operator
Your next question comes from Matthew Frydman with MST Financial.
Matthew Frydman
A couple of more questions, if I can, on all-in sustaining costs, Jim. And I know you've obviously just given some pretty extensive detail, but I'm interested in maybe trying to think about it quite simplistically to try and really understand the cash generation of the business year-on-year. So firstly, that noncash of $200 an ounce, if we back that out and invent a metric that maybe we call it cash all-in sustaining cost, it'd be fair to say that, that number would be more like $1,795 to $2,115 an ounce or in other words, somewhere between $0 and $300 an ounce higher than what you did in FY '23. Would that be a fair way to think about it?
Jim Beyer
Yes. Yes. On, as it's classified as all-in sustaining, remembering that some of the increase as well relates to -- well, last year, we defined as growth capital at Trop, which I think equated to probably a bit over $100 million is now basically rolling into AISC. So from a cash flow point of view, it -- we spent it last year and we'll spend it again this year. It's just in a different bucket.
Matthew Frydman
Right. And that leads into my next element of the question, which is that difference, if we assume the middle of your production range, that difference of additional capital that's going into that bucket is around $135 million, which is obviously almost exactly the difference between the growth capital that you spent in FY '23 and what you're guiding to in FY '24. So again, it seems fair to say that it's almost 100% reallocation of the difference in that capital. There's nothing that's really been gained or lost there in that reallocation.
Jim Beyer
It is. Yes, it is, pretty much. I mean we saw some movements around. But broadly, when you do it by big numbers and keep it simple, what you described is pretty much what's happened.
Matthew Frydman
I'm a pretty simple guy, Jim, so I'm trying to keep it as simple as I possibly can.
Jim Beyer
I think it's important.
Matthew Frydman
And so all else being equal, obviously, we've got gold price, you've got ongoing impacts of hedging in FY '24 as you talked about. But in terms of your controllable sort of metrics, and given that you are, in fact, guiding to slightly softer gold production year-on-year on top of that all, at a high level, how do you actually see your cash generation in FY '24 versus FY '23? I mean is it flat? Is it down slightly? Is it up slightly, again, gold price, notwithstanding?
Jim Beyer
Look, I mean, obviously, gold price notwithstanding, it would be -- it's interesting. It's similar, I guess, when you run it all out. The key thing to keep in mind is that this year, the impact of the hedging is much more significant because there is -- last year, the impact, as I said, was about $115 million of the overall revenue, which was 100,000 ounces. This last year, we've got to sell at 120,000 ounces at $1,571 per ounce Australian. So the impact of our cash flow is $150 million this year.
Now if you sort of look at it all, yes, broadly, it's a similar year, slightly lower in production. As you pointed out, the cost -- some costs, actually, our gross costs have actually adjusted as well downwards related to some volume reductions at Duketon. Pretty flat at Tropicana in terms of the big cost drivers in there. Whether they've changed, they haven't. They're pretty much the same. So yes, similar in the year-on-year.
Matthew Frydman
Thanks for stepping through that with me, Jim. And...
Jim Beyer
I mean if you did -- I mean, to be honest, sorry, if you did -- if we were comparing it truly year-on-year, and saying, well, what would it look like if the hedge impact was the same as last year, then actually this year would be a better year for cash flow because there's $40 million extra in cash flow that we're losing because of this last surge in the hedging, if you understand what I'm saying.
Matthew Frydman
Yes. No, that's pretty clear. And I think, obviously, important to kind of step through that given that, obviously, the guidance at a headline level, looks like a very, very big step-up in all-in sustaining costs year-on-year, which probably the market wasn't expecting. So I think...
Jim Beyer
Look, you're right. I mean, it's -- and it's sort of -- it's been -- it's a bit of a complicated story and one that we -- this call is important for people to get the opportunity to go through these questions like you and the other folks have because, yes, high level, where you can't explain it as you go, it doesn't look particularly good. But actually, when you peel it apart, all things considered, it's -- I mean we always want it to be better, but it's not too bad considering the overlay of the hedging. So that's why -- to be honest, that's why I spent a bit of time talking about how things look clear of the hedges and where we're actually going. We're not on a downward spiral.
We're actually holding steady. In fact, a little tight accounting for the hedging impact this year. We're improving a little bit. And next year, we really start to come out and really see the value of our investment, which has been pretty good to date, but it's really in Tropicana is going to start hitting its straps.
Matthew Frydman
Got it. Maybe just to round out that cash discussion. You've got $70-odd million tax refund in the second half. How do we think about -- second half of FY '23, I should say. How do we think about cash tax outflows looking forward?
Jim Beyer
Yes. I'll let -- I'll give Anthony his minute in the sun to answer that question.
Anthony Rechichi
Thanks, Jim. Always shoots across the table when you talk about tax there, Matt, but I'll go through that. But look, the FY '23 tax refund, $67 million, it's a big number, difficult to repeat that year-on-year. But for FY '24, the expectation is that we're likely to take another refund again. It's not going to be anything like that sort of size that we saw in FY '23. And with the expectation that we move to a tax payable position again in the financial year after that, FY '25, on it. So -- and then back to similar levels of taxation, not unusual in this sort of business, but it does tend to be around 30% of our pretax profits.
Matthew Frydman
Got it. That's pretty clear, and you actually did keep that to a minute so I'm sure Jim will be happy with that. Maybe just finally, and anyone is open to answer this one. But maybe just finally, if you can cut through the comments on the debt refinancing, wondering, I guess, what your goals or what your ideal outcome would look like there in those discussions? And how do you factor in consideration for funding McPhillamys going forward or any other elements of your capital requirements?
Jim Beyer
Well, we're fighting each other to answer this question, but I'll let Anthony do it because he's really driving the program there.
Anthony Rechichi
Okay. So look, at this stage, as we sort of alluded to or written in the quarterly report there and I mentioned earlier, the existing debt facility matures on the -- in a year's time, well, 31st of May next year. We're looking to extend that facility to push that out further so it's no longer a current liability. And we're working with the lenders on that at the moment. And basically, what that does is, among other things, besides giving us the extension there, it gives us time to finalize funding -- well, McPhillamys' feasibility study and investment decision to then determine the funding requirements for McPhillamys. And then we can regroup on that -- on what we've done by extending that debt facility to work out what we really need and how we need to profile it over time, factoring in the McPhillamys requirements.
Matthew Frydman
Got it. Maybe just one other cheeky one quickly. I risks being abused probably by the Regis Board and management team by asking this, but would you contemplate hedging as part of a revised debt facility?
Jim Beyer
I'm sorry we're going to answer that question with the mute button on. Look, at the end of the day, there is a time and a place for hedging. There may be a time in the future where we've got to do it as part of the bank's requirements to manage the commodity price risk on repayments. It might also be something that some of this material that's extremely low -- or that is low grade and quite costly, there might be something there that makes some sense in the future to ensure that we don't start down, attract of some minor ounces that then blow up in our face. But that, quite frankly, would be minor amounts that we touch on.
So would we consider hedging? Not really. Not significant. Having said that, though, there's certainly some risk management that may need to be required around the debt, and we'll deal with that at the time. I'm sure everybody would understand that piece.
Operator
Your next question comes from Hugo Nicolaci with Goldman Sachs.
Hugo Nicolaci
Most of my question has probably been asked. But just, I guess, coming back to the cost piece, obviously, focused on the, I guess, allocation and noncash movements, maybe just comment to how you're seeing kind of the underlying costs move, I guess, in terms of labor and cost inflation, but then more broadly, how that's flowing through to the mining and processing costs at each asset?
Jim Beyer
Okay. So if -- so you're asking about -- sorry, I'm just going to -- you're asking about what the impact of the inflation on our -- on this year's costs?
Hugo Nicolaci
Yes. Yes, essentially, just trying to understand how the underlying costs are kind of moving in guidance. I think you kind of touched on it initially with Matt. But just getting into how you're actually seeing those mining and processing costs move into FY '24 on the current plan.
Jim Beyer
Yes. Look, I mean across our overall business, actually, our open pit costs are dropping a bit. As I mentioned, sort of alluded to before, probably the overall mine physicals are dropping. So we are seeing -- obviously, everybody is seeing inflationary impacts flow through. And you can -- at the end of the day, last year's all-in sustaining cost was significantly above where we'd anticipated it would be early in the year, driven by -- in no small part to inflation. We have seen -- we are seeing that -- we're not seeing the major step changes in inflationary costs. So it's not increased assumptions and not as significant as we assumed for last year. But what has driven down our gross expenditure has been the mine physicals, in particular, at Duketon. The other costs, I guess, the diesel, I think we sort of were looking at a little bit lower than last year because we saw some pretty big spikes in diesel through the -- through last year. I think our diesel price was -- Anthony is telling me our diesel price was about $1.50 on average last year.
And this year, we're assuming it will be around $1.05. Obviously, our guidance all-in sustaining hangs off the diesel price. But -- so we've assumed that that's -- and we've seen that come off quite considerably. I mean, I think back in December, we were paying over $1.70 a liter. And if you're using 100 million liters on your site, you can -- it's pretty easy to see what kind of an impact that has.
So in general, overall costs being driven down by lower volumes in the mining, slightly higher inflation, not material at Tropicana just through general inflationary costs. Processing and costs are down a bit sort of off the back of some cheaper processing that will occur up at Duketon as we process some of the easier materials. So there's a lot of moving parts there, mate. But hopefully, that gives you a little bit more color.
Operator
Your next question comes from David Coates with Bell Potter Securities.
David Coates
Well done on a good final quarter. Just obviously been through quite a bit of detail already. A couple of things that I want to -- haven't been asked but I think is just with D&O seemingly coming to a close at the end of FY, closure costs, and what's the sort of current sort of notional plan for that? What kind of closure costs you're looking at and your thoughts about what to do with the mill first up?
Jim Beyer
Yes. So look, D&O, it has a closure cost of circa mid-$30 million. We have no intention of closing Duketon at all at this point in time. It's really going into a care and maintenance. And part of the reason for that is we've got our extensive exploration program beavering away out there. But a little bit more -- what's the right way to describe it, a little bit more near-term potential is sitting -- we're still reviewing Commonwealth. We've mentioned Commonwealth in the past. It sort of went a little bit ugly when we started applying the new inflationary impacts on it. And Commonwealth was one of the things that we thought might keep Duketon North running post this year. It's still a potential and is really going to depend on how with our mining contractor we can work out whether there's better ways to do things that don't involve as much overheads and historical costs that we've done in the past, even in equipment.
And there's a couple of other sort of, I guess, satellite opportunities that sit up in that Duketon North area that mean -- that we aren't yet willing to pull out, it's time to go, completely go home. That -- really, that process plant there and the camp is we consider that it gives us significant optionality for that part of the world, and we have no intention of walking away from it. We certainly don't look to -- I mean, if we found another deposit, I don't know, up in the northwest corner of the Duketon Greenstone Belt, and it made sense to move it, we might move it. But moving is always a lot easier on a spreadsheet than it is in reality, but that's an option, too. But no, we certainly -- the short answer to your question is we don't plan to close it.
We plan to put it on care and maintenance, and that's because we've still got plenty of optionality there that we're reviewing, and hopefully, over the coming months, we might get a picture there that gives us something that's a little bit more -- some ounces that we're more confident enough to drive on to come back and revisit it and put it back into service after we've finished with it this year.
David Coates
You've actually touched on another question I was going to ask, again, which is what has -- I guess, kicked some of those ounces out of the mine plan, and it sounds like particularly Commonwealth was impacted by cost. But -- and the second part of that, this is likely, yes, what -- has the exploration up there kind of not met expectations? And yes, what sort of live options, I guess, remain up there with you that you could potentially take advantage with all that infrastructure you've got up there?
Jim Beyer
Yes. Look, I mean, the cost did drop some ounces out, clearly. And I sort of alluded, too, that we saw, even at Ben Hur, there were some marginal ounces that we've had to decide to leave in the ground and wait to see how things look maybe a little bit closer to the end of mine life again. There was the underground impacts I mentioned in Duketon North. What's the exploration like? Has it been disappointing? Well, every month that you spend money on exploration and don't find anything, I describe it as disappointing, but the exploration geologists take a slightly different view.
David Coates
Take it differently?
Jim Beyer
Yes. Look, I think having -- sort of being a bit of a smarty pants about it, the reality is there are some very exciting work that they're finding and areas that they're finding along the Rosemont trend, which is more down around the Duketon South area and running through Baneygo and up through Rosemont. And then that continues up onto that -- basically that western side of the Greenstone Belt, which is sort of some pretty encouraging finding there. There's not -- there isn't anything immediately to write home about sitting around the Duketon North operation from an exploration perspective, but it's actually because it hasn't been an area that -- it's an area that's now coming, you might think why not? Well, why haven't we been focusing on that given the like -- I mean we've always had -- we had a view up until a few months ago that there was quite a few options to keep feeding some modest-grade material in and we could -- we had a bit of time up our sleeve -- but we -- our exploration geo has also prioritized where they -- now where they find the biggest, see the biggest potential economic targets, and that's basically sitting on the western side.
So they'll be back. We haven't written that Duketon North area off. We just haven't been putting as much effort into that as we have into the areas where we think there's far more attractive targets, which is one of the things that I was saying is if they do come off, that could be a possibility that we moved the Duketon North mill to those because it's probably just a little bit too far away to truck it all the way to Duketon North.
David Coates
And we are asked this question occasionally but given the sort of you're still clearing ahead of this year and sort of a bit of capital at Tropicana this year but sort of FY '25 will start -- cash flow starts looking better. But in the meantime, probably a little bit of a tough period or not tough, just a few things -- feeling the valuation of the market potentially might be attributing -- is making you an M&A target.
Jim Beyer
Well, it's always those aspects, particularly when people understand what the true value is relative to what the market might be seeing. So our task is to focus on -- internally to continue to deliver into our plans, make sure we understand where our value lies and deliver it and do our best to let the market know that we're -- and obviously, there's impacts even today as we see. And I think quite as has been pointed out by a couple already, the picture isn't quite as bad and isn't as anywhere near as bad as the impression might be. And we've got to make sure that we're out there sort of educating people as best as we can.
So -- and understand what the true picture is because I think it's crystal clear that our business becomes a much stronger and much more significant cash flow generator in the -- over the next 10 to 12 months. Tropicana in fact, lifts its production, as you can see in the guidance, it's already lifting, so that's strong. The cash cost will start to drop away there, as we said. And the hedge book drops off. I mean it is a very strong picture that people probably need to be looking beyond the next quarter.
It's a little bit -- mining can be a long-term game, and this is certainly showing that over the last couple of years as we've worked with the hedges, position the business, refocused on reposition underground as a growth area for us to sort of settle Duketon into what could be a new plane of production, and Tropicana and then a great growth project is the next cab off the rank. So there's plenty of value there, but just need to see beyond the impact of the hedges, frankly.
Operator
[Operator Instructions] Your next question comes from Alex Papaioanou with Citi.
Alex Papaioanou
On the hedge book, has the Board discussed options to close the hedge book faster like some of your peers have done, especially given consensus forecasts for higher gold prices to come?
Jim Beyer
Look, I think it was Matthew that asked whether -- commented on the Board discussing hedges. We discuss the hedge book all the time, what's the best thing to do, what can we do now? There was discussion probably 3 or 4 months ago about taking our windfall cash from the tax and buying out part of the hedge book and being unhedged for the next period of time and then taking the gains from that. Now we elected not to do that. And our back analysis tells us that, frankly, if we had taken the hedge book out 4 months ago, we'd be no worse and no better off today.
So there's always a risk. And of course, that's the -- if you have a view that the gold price is going to go to $3,500 ounces, then knock yourself out. If you think it's going to drop a little bit because there is a cost of delivering into them early, then -- seeing cost is going to drop, then obviously, that would be the wrong call. Do we discuss it and the Board discussed it? Yes.
Keeping in mind that the hedging applies to -- it's 120,000 ounces. There's a lot of our other ounces that are unhedged. I think we'll continue to look at that going forward. And whether that means we run the full course of the hedge book out to finish in June next year or whether there's something done earlier is certainly something that we have and we'll continue to give consideration to.
Operator
There are no further questions at this time. And I'll hand back for closing remarks.
Jim Beyer
All right. Thanks. Thanks, everybody, for joining us. And as always, if there is any questions or any follow-up, please feel free to give us a call, and we'll do our best to help you out. Thanks again.
I appreciate there's been a lot to absorb during this one -- this call. It's important that we get people to understand just how well positioned we are, particularly over -- heading into the next year. Thanks very much, and have a good day.
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Regis Resources Limited (RGRNF) Q4 2023 Earnings Call Transcript