Nic Earner - Managing Director - Alkane Resources

Yeah, good Lucas, good to be chatting again, mate. It certainly does. You know, so we've been mining underneath the existing Tomingley deposits, which is Caloma 2, Wyoming 1, for a number of years, right, since 2019 when we first started going underground. So all the effort we've been putting in has been extending down to Roswell, and as well as being a significant amount of tonnage, it is higher grade, which is why we preferentially feed it. So yeah, particularly since we started stoping at Roswell in April, you know, the results through May and June, solid months, is our new run rate. You know, we've put guidance out for 70 to 80,000 ounces next year, you know, so that's sort of six to 7,000 ounces a month.

Well, June month was nearly 8,000 ounces, so it was higher. You know, we also had some gold within inventory to strip out, you know, particularly inside the loaded carbons from May's performance. Yeah, that's, you know, we did one and a bit thousand ounces across that April, May, June, with more of that coming in May and June than in April. So yeah, we're at that run rate now.

Yeah, thanks Lucas. Look, we certainly did. I think the first thing I really want to stress to, you know, people listening is we definitely have resources, in fact some reserves, that go out beyond this five years. So this is what we can define with a fair degree of certainty. After five years, it depends on grades, different mining areas, drill-outs from inferred to indicated, all that sort of stuff, right. So definitely have mine life beyond this period. So this next five years, as we envisage it, for the rest of 2024, so I'll be talking calendar years, right, for the rest of '24, we are finishing construction of a flotation regrind circuit at Tomingley to improve recoveries. We are commissioning a paste plant at Roswell to improve ore recovery from underground. That's the big job for the rest of this year at Tomingley.

Then next year, 2025, we're looking to do the road diversion works of the new highway. It takes the better part of 2025 to do, and we're also upgrading the throughput of the plant to 1.2 million tonnes per annum because when we have the open cuts online, it releases a lot of ore for several years in a row. That takes place through calendar 2025, and then the start of calendar 2026, we start open cut mining and pre-strip. It's not particularly expensive, a couple of million bucks, you know, there's only sort of 15 metres at the sort of most shallow points in the San Antonio pits, or the first San Antonio pit. And so that sees us hit through calendar 2026, and by the start of FY27, the middle of calendar 2026, that sees us hit 100,000 ounce run rate, and we envisage ourselves being at that run rate for a number of years after that. So they're the big milestones that we have coming up.

Exactly, you know, when I was roadshowing late last year in the US, I definitely, you know, 3D schematics. And you know, right now we're sort of finishing all that structural work, so we're at the stage where you don't really start to see much occurring on site, you know, in terms of photos, because it's piping and electrical works and instrumentation and all that stuff going in. So yeah, we are substantially complete on both of those projects, and the other thing people to remember is we're substantially complete on the financial spending of those projects as well, you know. So yeah, it's, you know, going to be quite an interesting couple of quarters.

Yeah, we do need to increase the amount of debt that we have at the start of calendar, so late quarter one, early quarter two, calendar 2025 next year, we'll be looking to upsize that debt facility. And obviously the size and scale of the deficit will depend on things like, you know, price of gold between now and then and all the other things that affect your cash balance. But yeah, certainly, you know, we see substantial cash flows. You know, all-in sustaining cost that we've modeled for FY25 is higher, $2,400 to $2,600 an ounce. The reason for that is we're doing a lot of vertical development at Roswell and substantial other, you know, sustaining capital works at Roswell. But that then goes, right, that goes by the middle of next year substantially, and then, you know, our all-in sustaining cost after that drops down to around the $2,000 per ounce Aussie. And yeah, we're looking to generate significant cash from that point, as we should, right, as we should, because we will have invested several hundred million dollars into the, you know, discovery, definition and extension of this project. Roswell is set up for making five-plus years of cash at over 100 million bucks a year.

No, I was just going to say, and look, and that's one of the reasons why I've always described one of my visions for Alkane is to move off being a single mine company, right? Because otherwise you have this sort of wave of capital investment, recuperation, generation. You can either reinvest that or pay it out or whatever you do with that cash that's generated, and then you go into an investment cycle again as you extend new mining areas. You know, and that cycle could be whatever you want to call it, four years, seven years, ten years, but that occurs on a single asset company. On a multi-asset company, if you time and sequence those things together, you get a much more stable cash flow. It's still occurring at an asset level, but it's not occurring as markedly at a company level.

Yeah, so Boda-Kaiser scoping study, people remember, you know, in 2019 we drilled, you know, a pretty astounding hole with the discovery of Boda, and then, you know, built on that slowly but surely, and then ended up drilling that out to indicated for both Boda and Kaiser over the last two-odd years, you know, quite a substantial spend rate that's really dropped away now. We'll obviously go into more of that later. But so the purpose of that is to say, what have we got? What's the value of this? How will it be developed one day? I think the first thing to say is, before I go into it and talking at a macro level, I'm pretty confident that this will be developed one day, right? As to when that one day is, it depends on commodity price. And so when we did this modeling, we chose the current spot prices, right? We chose $3,500 an ounce Australian gold and $115,000 per tonne copper, right? So people can, you know, do their own maths around from that. So then we looked at, okay, what might it look like, you know, 5 million tonnes per annum, 10 million tonnes per annum, 20 million tonnes per annum processed, right? So mining obviously varies at different rates at different times, but you result in that processing rate. And what we found was, somewhat unsurprisingly, that the bigger it is, because the resource is so big, the better the economies of scale and therefore the better the economics are. And at those, you know, with the costs and everything that we had, the internal rates of return were sort of 13%, 17-something%, and 24% across those three scenarios going from 5 to 20. And capital was circa sort of $900 million, $1.4 billion, $1.8 billion there or thereabouts, right?

And so what are the main things we learned from that? The first thing is I had certainly expected the 5 million tonnes per annum to be a little better IRR than it was, and the reason is I thought that with the higher grades under Boda we'd be able to put a larger stoping solution together, something in the order of 2 to 3 million tonnes per annum. That didn't really work, you know, for whatever reason. With the, you know, 50x50 drill spacing, you know, the most that I thought was reasonable below open stope was circa one and a half million tonnes per annum, which doesn't really move the dial in terms of the grade coming out, you know, in terms of the IRR. So that means that our next logic there, two things: it means economies of scale are important, and the second thing it means that something like a sublevel cave is a much more likely underground scenario under both Kaiser and Boda. So we'll go and do some technical work on that because we didn't really consider that that much because we were thinking the longhole open stoping underground would be a differentiation between the models. The second thing that it showed is the cash flows upfront, potential cash flows upfront from a 20 million tonne per annum scenario are quite substantial. So enough that were all those assumptions to prove true, the project would be paid off in four and a bit years with a seven-year mine life in total, seven-year mine life in total, right? And of course that does not include going underground for a sublevel cave. Most logically, obviously, you have to explore this sometime after you've paid off the initial capital. After year five, you would start doing, you know, development on a sublevel cave and then set up for, you know, future caving operations of some description. Yeah, that would be the most logical thing. We have to go and explore that, and of course that's all dependent on regional exploration and all the other things that affect mine life. So yeah, it was a very, very interesting scoping study in that what I was encouraged about was it did meet my broad assumption that there'd be a mine built there one day, you know, government approvals, permitting, and yeah, and I think, you know, it starts to give some broad financial metrics for people to value as they see fit.