Regis Resources Limited (OTCPK:RGRNF) Q4 2022 Earnings Conference Call August 24, 2022 10:00 PM ET
Company Participants
Jim Beyer – MD and CEO
Tony Bevan – Interim CFO
Conference Call Participants
Daniel Morgan – Barrenjoey
Andrew Bowler – Macquarie
Peter O’Connor – Shaw and Partners Limited
Alexander Papaioanou – Citi
Patrick Collier – Credit Suisse
Operator
Thank you for standing by, and welcome to the Regis Resources Limited Full Year Results. All participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session [Operator Instructions].
I would now like to hand the conference over to Mr. Jim Beyer, Managing Director and CEO. Please go ahead.
Jim Beyer
Thanks Sherry, and welcome everybody to our call on the full year financial results for FY22. Joining me is Elena Macrides, our Co-Sec, Ben Goldbloom, Head of Investor Relations, Tony Bevan, our Interim Chief Financial Officer, and Stuart Gula, our Chief Operating Officer
All right. So you should see on your screen, two things, a PowerPoint presentation, which we’ll step through and myself, unfortunately for you.
All right, so turning to page Slide 2, please, operator, and I’ll just draw your attention to the cautionary statement. We do make some forward-looking comments and discuss targets later on. So just draw your attention to that statement.
Slide 3, thanks. Look, we’ve had a year with record production, as we’ve noted earlier, and it’s great. It’s been our first full year of production from Tropicana, contributing to our performance as well. At the same time, we’ve been making a considerable investment in the future, in our future production levels. Over laid with this has been a very challenging environment with the impact of COVID and the inflationary conditions clearly having an impact on our results, on our financial results.
Our EBITDA was $336 million. That was after a $74 million write-down, giving us an EBITDA margin of about 33%. Our cash flow still reflecting the strength, I think of our operating business, $347 million. We ended the financial year with 30 June as cash and bullion at $231 million. And that’s after getting an AISC through the full year of $1,556, giving us a margin of $756 an ounce. But also noting in there that we had $161 million in growth capital through that period as well, as I’ve mentioned before, considerable investment in our future. That led us after a noncash post-tax adjustment of $60 million to a statutory net profit of $14 million.
Now with this context, as I mentioned, of the external impacts, and importantly, a couple of aspects here, the conservative nature of our balance sheet, and what we see and our Board sees as a positive outlook for our operations, the Board had confidence in delivering a full year dividend of $0.02, fully Franked per share. So that’s a bit of a high level summary of our financials.
If we turn to Slide 4, and I know that today is — has a focus on our financials, but there’s a couple of things I just wanted to touch on around our ESG front, slide 4, please operator. So first thing is just to highlight the fact that our safety as measured by lost time injury frequency rate is still quite pleasing level. I mean, you’re never happy until the number is zero, of course, but we do sit more than 40% below the industry average.
Diversity is quite — very strong, I think. We have around about 23% female, as a measure of diversity, which is certainly above the industry average, which is sitting a few percent below that. Looking at our environment, we had zero non-compliances and no significant incidents.
Pleasingly, I guess and the one thing I did want to also highlight on this slide was we’ve approved and are underway with the construction of a 9 megawatt solar farm at Duketon. And of course, this has got two advantages to us. No doubt people are pleased to see that the impacts of carbon reduction and reducing our carbon intensity over time with this. But also importantly, this has a quite significant impact on reducing our power costs, as this will be fed into the power grid that we have down at Duketon South. So a great project that will take about 12 months or so to get that online completely, but we’re pleased that we’ve been able to get that one moving.
So what I’d like to do at this stage now is hand over to Tony, who will talk through a little bit more of the detail of our results and background to the full year. Thanks, Tony, over to you.
Tony Bevan
Thanks, Jim. And if we could turn to Slide 5, please. So this is just a highlight summary. And some of the further slides will talk in more detail around the net profit and cash flow. But I’ll just highlight there, the increase in production and revenue. Revenue increased by about 24% over the year, and cash flow from operations also increased as well to $347 million. And I suppose that’s largely as a result of the impact of full 12 months of operations at Tropicana.
The other, just the other point I’ll make on figures on this page are the EBITDA for the current year, at $336 million. That up for a $74 million non-cash adjustment for NRV [ph] write-downs.
So if you could just turn to page 6, we’ll go into more detail on the net profit result. So profit was obviously below expectation. And I suppose that’s been impacted by two significant events, or two factors. The first is the non-cash write-downs and impairment which totaled $85 million before tax and cost increases, particularly felt in the second half of the year, with fuel and the — I suppose the effects that has on the broader business as well.
So just in terms of the non-cash write-downs and impairments, totaling $85 million, $74 million of that was the write-down of net realizable value of the four stockpiles. And the two major factors contributed to this write-down. When we review the life of mine in the second half of the year, we pushed out the timing for when we were going to process those stockpiles. So as a result, by pushing those — the timing of those that processing further out, the gold price used in the NRV assessment is slightly lower, because it’s based on the consensus price. So that has an impact on the NRV assessment. So that was a big factor in the write-down.
And also the other factor is the cost to complete have increased. So that was the other factor. So that as I said that, the write down was $74 million. And as a non-cash adjustment, which is included in the EBITDA I’ll also, just on that slide point out the significantly increased depreciation and amortization, associated with the Tropicana purchase. This obviously does have an effect on net profit, but does not impact cash or EBITDA.
If we could turn to slide 7. So this is a summary of the — a waterfall of the cash flow for the year. You can see we started the year at $269 million of cash and bullion on hand, and finished the year with $231 million. Cash from operations of $378 million. So the operation has generated a very positive, very healthy cash flow. And in those next three are the $219 million mine development, the $56 million exploration in McPhillamys, and the $78 million about the CapEx, they’re all investment in future growth.
So we generated $378 million, and we spent $353 million on the future. So I think that’s a very positive — very positive message. So really, that’s the cash flow summary for the year. And that includes a dividend of $22 million which was paid during the financial year.
If we then turn to slide 8, the cash and bullion balance as I’ve mentioned at $231 million. In our quarterly report we did highlight the fact that since yearend we have — there have been some significant one-off payments which has reduced this cash balance. And that related to the — with the payment of the stamp duty on Tropicana and also our property purchase in New South Wales. And that title — the title of those two transactions is about $60 million, which has reduced the cash balance since yearend.
Our net debt is $69 million as at 30, June. So that’s made up of the $231 cash and bullion on hand, less the $300 million syndicated finance facility, giving you that net debt of $69 million. That $300 million finance facility matures towards the last — in the last quarter of FY24. And we’re obviously looking at refinancing options associated with the McPhillamys Development.
Our hedge book, we’ve reduced the hedge book by 100,000 ounces during the year. And so there’s 220,000 ounces remaining as of 30 June, and that will be — that hedge book will be closed out in the next two financial years. So currently 75% of our gold ounce is sold, unhedged and exposed to the spot gold price.
I’ll now hand back to Jim.
Jim Beyer
Thanks, Tony. Okay, well, look, if we just turn to slide 9, there’s not a lot to point out there. That’s our guidance, which we’ve already noted earlier this financial year. Our growth guidance in total 450,000 ounces — between 450,000 ounces and 500,000 ounces, all-in sustaining, sitting between $1,525 and $1,625. Our growth capital, as noted, $145 million to $155 million. And our exploration, including McPhillamys is around $72 million. So no change on that front.
If you could turn to slide 10 please. So this is — again, something that isn’t new. But it’s just a good point for us to show, that this is where we’re heading. And when we talk about the investment that we’ve made this year, or sorry, in the prior year, it’s helping us to — it’s all part of our plans and our approach to target this 500,000 ounces per year by FY25. We see that by our two operations, Duketon, we can — we see — our target there is to get that up to around 350,000 ounces.
And at Tropicana we’re anticipating a target there of 150,000 ounces is quite eminently doable. The key change coming through Tropicana this year is actually the Havana cutback while it will continue for — is a pretty significant area of activity for the next year, it will start to be a significant contributor to production as we expose a lot more ore and can really start feeding that into the mill and displacing some of the lower grade feed coming off stockpiles at the moment.
So it’s planned of course. As you can see, it does involve a steady reduction in the growth capital decreasing through FY24. And as you look out to FY26, and beyond, it’s sort of a hazy sort of bluey mixture of colors. We do look at the potential out there from McPhillamys although we obviously haven’t included that in that growth capital from Duke and Tropicana. But we see that there is a number of options for us to be able to get to 500 — our target of 500. And also to be able to certainly maintain that going forward from FY25.
If I could just turn to slide 11 please, to wrap it up. Thank you. So what we see here is just as a reminder, we have a strong financial platform. Tony just talked through the net debt position, and we’re certainly in a position to start being able to generate more cash in the future as we move from our recapitalization phase that we’ve been in. We are generating from an operating point of view strong cash flows. Long reserve life with a production profile that does grow as I’ve indicated.
We do operate clearly in a tier one location. We have a progressive and measured approach to ESG. And by that means we are moving forward. But we are making appropriate — we’re not making outlandish comments or commitments. We’ve been steady and considered but also we are making very strong progress as identifying and highlighting in our earlier — my earlier points on ESG.
We are looking at our businesses to return to a more consistent plan in delivery although we do continue to see, as you normally get with a bit of ebb and flow with movements from quarter-to-quarter but we are getting our operations back on a more a reliable basis from where we were at the end of calendar ’21, which is very pleasing to see. And we don’t touch on it. But I have mentioned earlier some of the very exciting exploration results we’re starting to see come through from our exploration program from the last couple of years that we’ve been stepping up, particularly around areas such as Maverick, and the like, in that Rosemont trend, Rosemont Baneygo trend.
Anyway, we’ll pull up there. Today was about the financial results. So I’d like to hand it back now to Sherry and open it up to any questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions]. Your first question comes from Daniel Morgan from Barrenjoey. Please go ahead.
Daniel Morgan
Hi, Jim and Tim. Just on the — on just the stockpiles under the impairment, could you talk about maybe what the breakeven gold price you think you need to process that, just to help us think about, if the gold price goes up, or assumptions change, might these come back into the mine plan? Thank you.
Jim Beyer
These are in the mine plan, Daniel. From a cash point of view these stockpiles are actually quite valuable. The write-down was because the way that they’re done from a statutory reporting point of view. Those stockpiles have both — they carry a cost if you like, have a history. And when we sat down and looked at the timing of it, and as Tony said, we’ve pushed some of those stockpile treatments, because we’ve been able to reschedule things and push them out in time a little bit. And we also see some increased costs of processing.
From a profit point of view, they were in the red, which is why we had to take the write-down. From a cash flow point of view, those stockpiles are still highly valuable, and the gold price would need to be considerably lower than what it is today for them to be not worth the price of processing. They’re actually quite valuable to us, because from a cash point of view, they’re basically all paid for. All they’ve got to cover going forward is the cost to pick it up and process it through the mill.
So any gold price involved in not processing those stockpiles would be pretty low. And understand they’ve been written down from an accounting point of view. They are still stockpiles that sit in our mine plan because they add considerable value from an NPV basis.
Daniel Morgan
And just further on that, when do they roughly sit in the mine plan? And does it relate to Moolart Well, or is it throughout the business? Thank you.
Jim Beyer
It’s throughout the business. So it’s varying between Moolart at the moment. It could be a couple of years out. Whereas down at Duketon South, it could be certainly four or five years out.
Daniel Morgan
Okay, and just could you refresh us on Moolart Well? What is the plan on mining, processing and life there, or life extension there?
Jim Beyer
Sure, at Moolart, we’re at — pardon me. At the moment, based on our reserves, we will be moving to — we will be mining or direct feeding into the mill this year and into part of next year. And after that we start to deal with some of those stockpiles that we’ve been talking about. However, we have some opportunities, some growth opportunity there in an area called Commonwealth which is sitting well and truly within the Isopack [ph] of distance from the Moolart Mill. And we haven’t finalized our reserves on that. But they certainly, we’ve been out there drilling over the last couple of months. And the results there are particularly encouraging.
So we’re anticipating that as those come through, that, that life that Moolart will gain something from that. And we’ve got a few other things that are very interesting there, that we’re not quite ready to break cover on. So as a minimum, we say probably, including the stockpiles that we’ve got there, I think Moolart will be around for at least another three or four years. So there’s a couple of years of stockpile treatment. But if we manage to deliver on the plan that we’re following, we’ll be able to feed-in some good material coming from deposits such as Commonwealth, which will add another — well as many as we find and add, I guess.
Daniel Morgan
Thank you. And then just switching to Tropicana, there’s an asset review called full asset potential. What does that involve? How are you — are you providing input into it? And what do you expect the timing will be on that? I know you said first half of this fiscal year, but just wondering if it’s later or — thank you.
Jim Beyer
Yeah, so the full asset potential is something that Alberta has got running right throughout AngloGold. And it’s actually quite similar to a program that was running in Newmont back when Goldberg took over. So that was several years ago now, and it was appropriate. It basically looks at the business, looks at each site, looks at their bottlenecks, looks at opportunities for how’s the place been run, I guess it’s one of these — one of these activities where long held sacred cows might get questioned, for example.
There’s also an examination of — and looking at how the mine — is the mine being run at an optimum point. So it’s I would describe it as a great opportunity where they can get kicked over and everybody has a look and sees whether it’s actually — there’s a more valuable way of running it. It’s a well-structured process. It’s a common, it’s been the group that have partner with that.
Our role is the same as management’s role. It’s really a senior management role. It’s an oversight to see what happens. The team, there is a very well-structured process that goes — that basically breaks down cost mapping exercises and things like that. So we watch and provide a bit of input and maybe suggest areas to look at, but it’s a pretty thorough process on its own.
It also looks at other elements of the cost to see whether there is opportunities to — for the more general cost reduction. We need to use as many post it notes as we do. Like, it’s obviously a lot more serious than that. But so it’s a really quite well-structured approach that comes in from both ways. How’s the business run? Is it got the right mine plans? And are there — where are the cost out opportunities to make the business more efficient, just running with the existing plan?
Timewise, it’s underway at the moment. We won’t — nothing’s changed from the timing expectations that we’ve given before. So I think there’s an update due in the next couple of weeks, I think. Don’t hold me to that. I can’t remember exactly what that date is. I actually, I think it might be after the Denver Gold Show. And there’s a program that where there’ll be some quick hits, but there is also anything that does get worked on will probably take several months to follow through.
But we’re particularly pleased that it’s being done early in the cycle, running throughout — running right across Anglo. And the feedback from other operations that has been done already has been very positive. So we look forward to talking about the results in due course.
Daniel Morgan
Okay, thank you, Jim and Tim.
Jim Beyer
Thanks, Daniel.
Operator
Thank you. Your next question comes from Andrew Bowler from Macquarie. Please go ahead.
Andrew Bowler
Hello. Had a couple of mine answered already. Just after a bit more color on how you can do that divis over the next couple of years, just obviously, given the potential for Phillamys spend to start the next little while please.
Jim Beyer
Yeah, look it’s — thanks, Andrew. Good question. You know, I think the idea that the dividend was paid, obviously, there’s a fair bit of discussion about it. But we — it’s as much a recognition of how confident we feel about all the work that we’ve been doing, not just in the last year, but the last couple of years really starting to set the business as a — how that’s looking.
What we will do with dividends we will consider at the time, as we were asked on a number of occasions do we have a policy and we don’t. But we also recognize that the intention of a business is to make profit and return a combination of that profit to the shareholders while retaining some of it to continue to build the business in the future, which of course is so critical for a mining resource companies.
I think the payment that — Regis has got a great history of paying a dividend. We certainly well, and truly — well over $0.5 billion in dividends being paid since we kicked it off. We will look at the future as to every — a combination of both the profitability of the business over the next 12 months, and also what the demands might be for capital around McPhillamys and its timing, and also how we would — whether we would decide to take an approach to try and fund that all out. We will look to find that all out of cash flow or whether we do it with a combination of a bit of cash and a bit of debt, which is probably more than the way we’re thinking at the moment.
So it’s not a flash in the pan. It wasn’t a decision that was made quickly. It was a recognition that both, we were in a position where we could pay, but also where we were confident with the way that the company was going to be performing over the coming 12 months in the future.
Andrew Bowler
No worries. Thanks. That’s all for me.
Jim Beyer
Thanks, Andrew.
Operator
Thank you. Your next question comes from Peter O’Connor from Shaw and Partners. Please go ahead.
Peter O’Connor
Hi, Jim. Hi, Tony. Congrats on the results. And then the question is, Jim, firstly back on the dividend? Do you have a must pay view at the Board level?
Jim Beyer
No, because that would be a policy. No —
Peter O’Connor
Let me put another way. Do you think that shareholders would expect you to continue because of your continuity of dividends? And is that something that’s front and center discussion, when you have those deliberations?
Jim Beyer
I think the payment of dividends is front and center of the conversation. I mean, it’s a reason to be, right. It’s part of what [ph] is the business? There needs to be a combination of growth and return. But ultimately, you’ve got to look at your return. We’ve done some — it’s a certainly. We’ve had a great record of that in the past. It’s pretty safe to say that over the last couple of years, it’s been a little bit harder for us. But that’s also in part because we’ve been dealing with some of the historic hedges which have had an impact on our ability to pay dividends at the level that they were before.
I think the fact that we’ve done it, and the fact that we’ve — it hasn’t been a great — from a pure statutory accounting point of view, it’s been a challenging year, but we still feel that it’s appropriate to be paying dividends. As I said, combination of how — where we currently sit and how we think we’re going to be in the future.
So the Board certainly takes a very strong consideration as to our ability to pay dividends, certainly in the full year, whether you’re talking to interims, I guess, maybe different question, but certainly every full year at least. And it’ll continue to do that. If it means putting balance sheet at risk, then I think just for the hell of paying a dividend and effectively for saying, we wouldn’t pay dividend if we didn’t think we could afford it, or the business is positioned, right, I think. I don’t think we’d be pressuring yourself to do it just for the — just to feel good.
Peter O’Connor
Thanks, Jim. Back to the payment, you make a really good point down about the — it’s more casual payments. And these stockpiles are actually very valuable. Could you just put some numbers around that? So you talking you can pick it up a couple bucks a ton. You got to process it $20 a ton. Is that kind of what I’m looking at from a cash perspective when I process that material? And —
Jim Beyer
Pretty much, pretty much.
Peter O’Connor
So if I take a gold price of $2,500, $2,600 Aussie, I’ve got a pretty solid cash margin on those ounces, despite the fact from an accounting perspective, there may be no margin.
Jim Beyer
Well, as you say, it’s a couple of bucks to pick it up. Processing cost per tonne, probably can be $20s, it’s high 20s. So you got to put a little bit on for tailing, the cost of building, putting a tailing, the tailings dams, we always estimate at $0.50 a tonne. You’ve always got to put it somewhere. So this is — it’s pretty, it’s low cost stuff. And some of the stockpiles are actually quite low grade. But I’ve always said we put the — we just make — some stockpiles are very low grade. And we specifically from an accounting point of view, we don’t put any — they don’t carry any value, because they’re the ones that you’re going to get caught up with these stockpiles where we took the write-downs on.
They were sort of middling, I don’t know. I get the grade probably seeing about 0.4 grams something like that, sort of grade. So they’re not ripping tons [ph], put the damn thing through the mill already. It’s all part of the classic lines, categorized area. So great management. So yes. But it still won’t — they’ll still make reasonable to get.
Peter O’Connor
And Jim there is the recovery declines with grade, is that helps things out as when you put that 0.4 grams through the mill, what’s the recovery?
Jim Beyer
Oh, yeah, we adjust it, as you quite rightly point out, recovery is usually related in as much to — there’s always a bit of gold that goes out in tiles that you just can’t get. And therefore your recoveries drop as the grade goes lower. Yes. That’s well noted. And that’s all taken into account.
Peter O’Connor
Okay, I’m still intrigued by the use of consensus price take. I’m sure your auditor must have had some flexibility which presented — why wouldn’t you have presented the forward curve?
Jim Beyer
Yeah, it’s a good question. And that is — it does become a point of a point of discussion. I guess, the more conventional way to run it is with a consensus price stack. If you — arguably, if you’re going to use a forward price, then you could use that if you actually have locked everything in which we have. So we use data from the consensus price deck, which is pretty conventional.
Peter O’Connor
Just philosophically you are using data from a bunch of muppets like us, instead of a forward curve, which is a much deeper liquid markets. Seems like. Kind of next question is, corporate admin costs up about $5 million? Is that just Tropicana additional costs? Or what’s that?
Jim Beyer
Sorry, what was that last question? I was still trying to come to terms with you describing yourself as a muppet, please.
Peter O’Connor
I was speaking in the third person, not me. Corporate and admin costs up $5 million year-on-year. Is that Tropicana, and just the additional work with that or is that [multiple speakers] going forward?
Jim Beyer
It’s a little bit — there was a little bit of spill over, a last bit of cash that had to be paid out for some feeds for the Tropicana deal, which is sort of a non-recurring piece that pushed it up a bit. I think that was about $6 million or $7 million bucks sitting in there.
Peter O’Connor
So what should we think about long term?
Jim Beyer
Well, what we had —
Peter O’Connor
$20 million, that 20.
Jim Beyer
More than that. That caught from a title corporate maybe $20 million, $24 million.
Peter O’Connor
Okay. You had another impairment, a non-current asset impairment of $11 million, which was below the EBITDA line. What does that relate to?
Jim Beyer
Yeah, so there’s — the stockpiles are actually not impairments. They’re write-downs. I mean, having just spent the last two weeks discussing this in some reasonable detail, as you can imagine, with the auditors, they do get technical on the titles. So the write-downs are on the stockpiles. And the majority of that was non-current, meaning that it was in future — expected in the future.
That impairment was related to — was about $10 million, I think $10 million or $11 million. It related to some exploration ground that was dropped. And that had some value that we had to impair and take that in. So impairment has taken off, and it’s below the line terminology, whereas write-downs are incorporated and taken off EBITDA, even if they’re non-current,
Peter O’Connor
Got it, and D&A, clearly a big step up. We know it’s Tropicana. How you review your mineral reserves resource position, Anglo does as part of the JV every year. So when do we expect the next meaningful review of that? And when can we expect that unit depreciation charge to step down as you extend the reserves base? Like drip feed you on it, so it’ll never really change? Or do we get a large step at some point, [multiple speakers]?
Jim Beyer
Good question. Look, I don’t I don’t think we got — I mean, we’ll see steps here. I think, like last year, in the resources, I think, the — sorry, in the reserves at Trop. It went backwards a little bit, but it did include the first reserve statement for the Tropicana underground. And I think what we’re going to see — we — understanding the mine plan and the timing, I think it’ll — it will be — it’s probably more likely to be steps than a little bit dribbling in every year, although we’ve just got to wait and see how that plays out just based on — I think the extension of reserves, for example, at Trop to [ph] shake out, likely to maybe be a fit a reasonably steady rolling addition because it’s got well established development, and it’s an extension of known geology.
Whereas when we look over at Tropicana, there’s areas there that have basically — historically have had no drill holes in. Now we’re putting them in. We’re starting to — as we were expecting, we were finding mineralization. They got to plan and put the development in to make sure they can access that, which is — it’s a bonus that it’s being found, which is what we think is great. It just — it’s not quite as smooth in its ability to sort of roll forward.
So I think that might come in fits and spurts. And then the other area that they’re looking at over there is the Havana Underground, which I think, there’s the — well, there’s nothing in the plans for that, and no reserves there at the moment for the underground. But we’ve already got the — can’t remember what’s called, the link drive isn’t — the link drive that’s been commenced, where there’s a drive that heads out there, and we’ll be doing some resource and drilling near for the next phase of the feasibility study on that area.
So I think that’s all coming quite steadily and the others, others will come in steps and not quite so smooth while I get into the rhythm.
Peter O’Connor
And the last question, page 10, the growth outlook, plus 500,000 ounces you talked about in the McPhillamys and other internal sources. Is that other internal is that Havana? Is that the Undergrounds at Trop? Or is it that middle ground that you talked about at the quarterly between — that you’re looking at the moment, is that the type of opportunities that you see there?
Jim Beyer
Yeah, yeah, certainly. We see opportunities in like Garden Well Mine is probably one of the –from an underground point of view, one of the more exciting areas we see significant potential in. We’re just working through the process of finalizing the details of that big exploration — or not big but an exploration drive we want to put out there. We see some rolling additions for Rosemont Underground as well. But not beyond the existing reserves life.
We also see, as I mentioned earlier, there’s deposits like Commonwealth, Ben Hur, we see extensions of it, got potential there. And then a little bit further afield, we’ve got underground potential at Gloster, which is some great intercepts, but complex geology that we’ve — that we’re trying to work on as well.
So we certainly see the potential. Getting to the 350 at Duketon is really squeezing some of our assets just a little bit harder. And we’re a bit wary of being too quick to run into that. But we also see additional production coming from new production sources and like Garden Well Mine, like Commonwealth, and like a couple of other areas that we’re just working our way through that we will let people know about when we’re a bit more clear on their contribution.
Peter O’Connor
Thank you, Jim.
Jim Beyer
Thanks, Peter.
Operator
Thank you. Your next question comes from Alexander Papaioanou from Citi. Please go ahead.
Alexander Papaioanou
Hi, Jim and team. Just one question for me. One of your peers has reported easing input costs since they’d set their initial FY23 guidance in July. Have you noticed any easing at your cost of your operations?
Jim Beyer
Well, yeah, look, probably the most obvious one is fuel. Fuel was actually quite significant. It was amazingly, FY22 was like the year of two halves for fuel. The average fuel price that we paid in the first half of last year was probably mid-80s. And then the fuel price that we paid in the second half of the year was probably a $1.20 or something like that. If you look at our — if you look at our sensitivity, sensitivity to fuel, in rough terms, a $0.10 movement in fuel prices is worth about $15 an ounce, something like that.
We have certainly — we’ve in our all-in sustaining costs guidance we made — we were assuming that the fuel price as it was back in June would stay that way for probably at least a quarter and then some easing back to $1.40. So I think our average the average fuel price we use for AISC was about $1.475 $0.1475 [ph] a liter. So, has it moved — fuels actually softened a little bit, I think in the last month which is nice.
Not enough for us to charge out and restate our guidance at this point in time. We’ll probably wait and see what happens. Other costs less so. Fuel is clearly the one that has the biggest impact representing I think, around about 20%, 25% of our costs. So that is a single point, that we — that is probably the most biggest leverage all the rest — and it’s not — that’s direct, when fuel then has other flow-ons to everything from how much it cost to move things to site, to how much it costs to run planes, and all those sorts of things.
So that’s — we have seen a little bit of movement, but nothing at the moment that’s caused us to go back to our guidance and say we are nervous about [indiscernible].
Alexander Papaioanou
Yes, perfect, very helpful. Thanks.
Operator
[Operator Instructions] Your next question comes from Patrick Collier from Credit Suisse. Please go ahead.
Patrick Collier
Hi, Jim, team. Two for me please. Just basically on the stockpile write-down, do you have — give any insight on what the split was between the gold price assumption change with processing costs? Those are the two main factors.
Jim Beyer
No we haven’t got that detail to go into, I think. I mean, I don’t even know what it is off the top of my head. But it was — there was a reason. I mean, the gold price was that we were seeing certainly for the DSO or stockpiles was a couple at least couple of hundreds lower because it was pushed further out in time. And the operating costs were — yeah, I don’t know. I’d be guessing, I think it was half and half. But yeah, we haven’t got the breakdown. And it’s probably, I think, getting into a little bit too much detail. But both of them were significant contributors to the outcome.
Patrick Collier
Okay, that makes sense. But that’s significant. Thanks. And then just looking at refinancing and looking at funding McPhillamys, are you able to comment on what level of debt you’d be comfortable with, and just any metrics that you’re using to assist that when the time comes?
Jim Beyer
No, we haven’t. We’ve — well, there’s a couple of things that we’ve actually got to be thinking about. One is the — obviously, what’s the capital costs going to be, and we’ve done quite a lot of work on that, as you can imagine, but — and there are certainly in the last 6 to 12 months have been significant pressures on the cost of building anything, both in terms of the availability of people and the raw inputs. Although we do note that things like steel and some of the others have dropped in price a little bit, which is helpful.
What we do need to consider when we’re with our funding is — as Tony said, we have about $300 million worth of debt sitting on the balance sheet, that’s due for the bullet in mid-two years, bit over two years’ time, a bit less than two years’ time, I should say. And that no doubt would form part of how we would restructure our debt around that and incorporating McPhillamys. We haven’t set ourselves any metrics in the likes of debt ratios and the like.
We just were just starting to turn our mind to how that looks. But obviously also wanting to understand what our cash flow generating is, as we get closer to the time will be an important one as well. When we bought Tropicana, one of the things that we liked about Tropicana was once it got through this high price drip phase at Havana, which was last year and continued this year and start to drop off from next year, it then moves into a much more significant cash generating phase, the right gold price. If we wanted to, we could potentially fund it out of cash flow. Because we’ll also — so there’s a lot of levers and a lot of a lot of moving parts in that at the moment, Patrick. So I can’t — that’s probably the best I can give you on context.
Patrick Collier
No, that’s been very helpful. Thank you. That’s all for me.
Jim Beyer
No worries.
Operator
We have a follow-up question from Peter O’Connor from Shaw and Partners. Please go ahead.
Peter O’Connor
Jim, just with that last question in mind and looking at slide 7, just trying to think about the cash flow generation going forward as you’re probably doing every board meeting. Mine development, exploration and McPhillamys and other CapEx, can you just walk us through how those numbers will look? I know you are not giving us guidance for FY23? More like a ’24, ’25, we talked about the drop off at Tropicana and the drop off of Duketon. There’s a big step down in mine development.
Jim Beyer
So, yeah, I’ll give you the — I’ll give you some context around using the guidance that we’ve already provided. I’m not in the position or desire to continue to expand on that at the moment, but you can see what our cash flows are going to be roughly looking like over the coming — this coming 12 months. That’s the whole idea of AISC and growth capital, and the other key elements that we give there.
If I look a little bit further out, and I don’t think we’ve certainly made no secret of the fact that, at Tropicana — Tropicana has total material movement, last year was a little bit lot was lower than we were all planning on. And it was sort of some significant impacts on there from COVID-related labor availability. I think the site’s back running on its plan now, which is great to see. We’ll see total material movement levels, I think at Trop are roughly the same this year as last year. And then after that —
Peter O’Connor
What’s that number Jim? How much?
Jim Beyer
I think it’s about 8 or 9. Actually, that might, might be 30%, I think, at 30%. So it’s got to be a level that we outline that in — if you look at our physicals, in our quarterly reports, you can see how it’s been traveling, so probably continuing along those lines for the next 12 months, and then it starts to drop down by at least 10^ or 15% on their performance this year. And then as you do with open pits, it starts to drop away. And then any of the real growth work then just sits in underground development, which is more routine in nature that we just continue to roll down plans.
And it’s, well, it’s — I think if you look at the plan at the moment, for example, at Moolart, and then at Duketon North, the total material movement, I mean, we were moving almost half as much material, a little bit more than half as much material this year at Duketon as we — as we did last year. So that’s obviously quite a reasonable dropping in material. But that’s on the basis that we don’t bring in any more new open pits.
If Commonwealth comes in, then we’ll see some pickup, you know that you’ve got to do a little bit of pre-mining before you get into that. So but that’s not part of our guidance at the moment. So as they come in, we’ll provide an update, if that has an impact on — we will give an indication of what the impacts of that are at the time.
So the short — in the near term, Tropicana, levels of activity onsite are probably staying pretty much where they were last year, at least for this year. And then they drop off. And Duketon has already started its drop off, because of a lot of the capital work from last year, we say, as I said, the physicals drop-off. Now they — unless we bind and incorporate into our plans new open pits, then that’ll continue to drop off. But obviously, what we’d like to do is to not have a drop off to nothing, because that’s the least desirable outcome.
So we’re expecting that. We see some easing this year, but not a complete drop to zero in the following years. It’ll stay the levels and depending on how successful we find more material that might lift a little bit, but we don’t have a clear picture on that to give you.
Peter O’Connor
Another way to think about it, Jim that over the next year or two, your capital total will be close to depreciation but post that, it drops away quite sharply.
Jim Beyer
What he’s saying, so the capital…
Peter O’Connor
Depreciation is about $300 million and your capital spend last year was about $300 million. It sounds like this is going to be about the same three to depreciation versus $300 million capital is similar and beyond that, when you get to things you’ve just talked about coming back, you’ll be spending less than you’re appreciating. So you get that tax benefit in the P&L and it’s your cash flow benefit as well.
Jim Beyer
Yeah, so I mean, for the current year, you might be right, but beyond that it’s too complicated — it was not too complicated. It’s just that we don’t give guides that far out.
Peter O’Connor
Thank you.
Jim Beyer
Thanks Pete.
Operator
There are no further questions at this time. I’ll now hand back to Mr. Beyer for closing remarks. Please go ahead.
Jim Beyer
All right. Thanks, everybody. We appreciate you joining. We realized the diversity in time as always. If anybody’s got any follow up questions, please touch base with Ben and we’ll get — we’ll do what we can to help you from there. We do appreciate everyone coming on the time and especially the questions that helps to expand and elaborate. So I hope everybody has a good day and we’ll hopefully catch up with people soon. Bye.
Operator
That does conclude our conference for today. Thank you for participating. You may now disconnect.
Be the first to comment