Regis Resources Limited (RGRNF) Q4 2023 Earnings Call Transcript

Regis Resources Limited (OTCPK:RGRNF) Q4 2023 Results Conference Call August 23, 2023 9:00 PM ET

Company Participants

Jim Beyer - Managing Director and CEO

Anthony Rechichi - CFO

Ben Goldbloom - Head of Investor Relations

Conference Call Participants

Levi Spry - UBS

Alex Papaioanou - Citi

Andrew Bowler - Macquarie

Hugo Nicolaci - Goldman Sachs

David Coates - Bell Potter Securities

Alex Barkley - RBC

Matthew Frydman - MST Financial

Meredith Schwarz - Bank of America

Jim Beyer

Thanks, Betsy, and good morning, everyone. Thanks for joining us on the Regis Resources June 2023 Full-Year Financial Results, which we released earlier this morning. Joining me this morning is Anthony Rechichi, our Chief Financial Officer; and Ben Goldbloom, Head of Investor Relations. We will be referring to the slides that we released as well. So if you've got those handy to look at or if you're on the projection you'll see as well. So look, now while the headline loss of $24 million is disappointing, it is we know after a $115 million hedge book impact. And basically, the underlying results show a business that has strength and that will start to shine through.

Looking at Slide 3. The Company achieved some significant milestones in FY '23. By year-end, we had largely completed the construction of a 9-megawatt solar farm at Duketon. And we've signed an agreement with Tropicana to develop a 62-megawatt renewable energy facility, the combined solar wind and batteries. And I can confirm that our solar farm at Duketon is in the very final stage of the commissioning and it will either be switched on today or tomorrow and then delivering cheap and cleaner power to our operations at Duketon South. We declared commercial production at two of our growth assets in the Garden Well South underground at Duketon and also at the Havana open pit, Tropicana.

Our exploration tech services team established an exploration target at Garden Well Main underground, and this is a target of between 800,000 and 1.3 million ounces, and we're getting some early results that support our views on that. And most pleasingly, we received the last key state approval for the McPhillamys project in New South Wales. I'd also note that all of these achievements were done while maintaining our safety record of well below industry averages and our gender diversity and above industry.

So now I'd like to hand over to Anthony Rechichi, who will step through the financial results in a little more detail. Over to you, Anthony.

Anthony Rechichi

Okay. Thanks, Jim, and good morning, everyone. I'll start by just flicking it forward to Slide number 5. And there, that's our FY '23 financial results, some high-level numbers. You can see that the years delivered record gold production and record revenue.

Our open pit mine saw a reduction in stripping ratios and going forward, we've planned for reduced waste material movements in FY '24. The underground mines delivered record tonnes with commercial production at Garden Well kicking off, and the mills continued to perform well with stable throughput and recovery. That record gold sales revenue drove record operating cash flows of $455 million and relatively stable year-on-year underlying EBITDA this time at $402 million. Note, the underlying EBITDA is before an inventory net realizable value adjustment of $30 million.

Moving on to Slide 6, that shows the cash flow movement for the year. This chart highlights the investment that was made into the future of the Company, which is expected to reduce as we transition to more of an operating cash build phase, I mean, the investment cash flows are expected to reduce. $301 million was invested across mine development and other CapEx, and we spent $69 million on exploration and the McPhillamys development project.

Other notable items include the $67 million tax refund, $39 million in a stamp duty payment relating to the Tropicana acquisition and $115 million in foregone revenue relating to the clearance of another 100,000 ounces off the hedge book. The Company finished the period with a cash and bullion balance of $243 million. 30 June '23, net debt was $57 million.

Moving over to Slide 7. We see the underlying EBITDA of $402 million and a statutory net loss of $24 million. Depreciation and amortization was the largest driver between the statutory loss and EBITDA and a significant portion of that relates to the accelerated depreciation at Duketon North operations as it nears the end of its current reserves.

On Slide 8, that highlights that our balance sheet remains in good shape. Regarding that, I note we have a corporate debt facility of $300 million, which matures in May 2024, and we're confident about extending that loan maturity date, and we're working with our lenders to that effect. The line date extension will give us time to prepare our funding plan for the final investment decision on McPhillamys expected in the June quarter of FY '24.

Thank you and I'll hand back over to you, Jim.

Jim Beyer

Thanks, Anthony. Okay. So if we're just looking now at Slide 9 on the FY '24 guidance, that remains unchanged at this point in the year, and we're very pleased to see that things are running to plan so far. I don't think there's anything really to identify here or highlight here apart from just reiterating this, our all-in sustaining cost guidance does include for the group, a $200 -- approximately a $200 an ounce non-cash proportion, which is related to stockpile drawdowns.

And in fact, all of those -- all of that is associated with Duketon. And if you actually calculate it out based on the ounces that Duketon achieved, it's equivalent of $300 an ounce on the AISC that is basically non-cash, which if you do the math, you'll realize that the AISC at Duketon's remain pretty much the same as it has in the past.

We do see this year, of course, a material reduction in growth capital relative to FY '24. Part of that, of course, is the transition at Tropicana with Havana moving into commercial production and the capital there for the next year or so is sustaining as to find the sustaining, but of course, in about 18 months or so it's time, we'll start to see the -- the back will have been broken at the Havana open pit, and we'll see that starting to ease off. And we see the Duketon undergrounds accelerating and certainly a step-up in ore production this year coming from the open pits at Tropicana.

Moving on to Slide 10. Look as a summary over the last couple of years, two to three years, we've transitioned the portfolio, and we've improved the balance sheet to provide a strong platform to grow the Company. We now have a portfolio of assets, which is 100% located in Australia, and two of the assets has got a projected mine life beyond or greater than 10 years.

The balance sheet, as Anthony mentioned, has got a low debt-to-equity ratios, and we're transitioning from the investment phase to the cash build phase. The hedge book is scheduled to be completed by the end of this financial year, just over -- a little bit over 10 months but is counting.

And with this, we'll bring an additional $150 million in pretax cash flows. It's important to understand when the hedge book falls away, it's the equivalent of over $10 million in additional cash revenue, and that, of course, is at current prices. It is this increase in cash flow that will be used to support future growth options at Tropicana and Duketon underground more notably at McPhillamys.

And if you look at our slide, you can see our pathway still exists to 500,000 ounces per annum. And those 500,000 ounces will have good solid margins. That's made up of the $200 million to $250 million from Duketon over the coming years. 135,000 to 150,000 ounces coming out of Tropicana as we continue to see Havana open pit contribute and the undergrounds continue to grow and similar underground commitment that -- or contribution from Duketon.

And then, of course, with targeting a final investment decision in the middle of next year, we'd see a couple of years -- for construction from McPhillamys, we can say that 165,000 to 180,000 ounces, giving us a total of comfortably 500,000 ounces per annum. So you can see the pathway that we're following to get there and to maintain that, all we have to do is just keep doing the things we're doing. So we see it's been a year of mixed results, really. Clearly, the net loss is disappointing, but we can also see that the business has been positioned well and we're certainly heading to improved times over the coming year or so.

So look, I would like to now hand it back to Betsy and happy to take on any -- answer any questions that anybody might have. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] The first question today comes from Levi Spry with UBS.

Levi Spry

I just wouldn't mind a reminder on McPhillamys and then the time lines coming up. So I think you mentioned the June quarter FID. What do we see before then? It feels like, yes, obviously, it's been a while since we've had updated numbers there and timelines?

Jim Beyer

Sure. Well, the timeline, as we mentioned earlier, the New South Wales, the key New South Wales permitting item of the recommendation or the support from the independent planning commission has been delivered. That was back in March and the -- any legal appeals process finished during May, June. So we're clear on that. we still have a Section 10 application that was put in -- Section 10 under the federal ATSIHP Act, the Aboriginal and Torres Strait Islander Heritage Protection Act.

We've responded to that -- the individuals have put their position forward. It was actually add and considered at the IPC as well and at the state level. The -- I think the Orange Lands Council were involved in that as well, and they indicated that there wasn't the degree of heritage relevance that I guess the claimants we're suggesting. And as a result of that, the IPC considered that the issue was not warranted to hold the project up. So at the state level, we're clear. We're now just waiting for that to be worked through.

So we have a view. We've done a lot of work on that front. We also know that the Orange Lands Council has made its position pretty clear. So we think that that's -- we're confident that this will work its way through. For us, it's just a question of timing, and we're waiting for that to happen.

At the moment, there is no more to be done apart from the department to give its views, it's clearance.So on the project front, we've got a little bit of work we want to do in the field, some that we're working on at the moment. We -- we're updating and finalizing the feasibility study and the basically the bankable estimates. We anticipate that, that would be early in the new year, sometime in the March quarter, positioning us for an FID in the middle of next year. Now that is -- all of that is somewhat contingent on the timing of getting the Section 10 clearance because there is work we need to do. And we don't want to upset that process, but that's the time line that we're running it at the moment. We haven't given any updated formal guidance on what that project is looking like.

It still sits in this 7 million -- 6.5 million, 7 million tonnes per annum of capacity is what we're driving to. It will be a 10- or 11-year production profile, there's 2 million ounces in reserves. Certainly, the guidance on the CapEx is north of half of $500 million. And we've got to finalize that. Obviously, there's been some movements, a lot in increasing that over the last couple of years, but we are seeing some softening around that as well.

And that also includes a $100 million pipeline to bring the water in from coal mines about 90 kilometers away. So when we're producing, we see that we'll be sort of operating in that range of -- initially, certainly 165 to 180. Interestingly enough, the grades improve with depth. So as you get further down later in its life, the production actually lifts to over 200,000 ounces per annum. So key answer to your question there, Levi, is we're looking for driving to an FID decision in the middle of next year. But unfortunately, as these things tend to be, the administerial process is somewhat the tail wag in the dog and we just have to work hard to try and keep that moving, but respect the process has got to run its course.

Operator

The next question comes from Alex Papaioanou with Citi.

AlexPapaioanou

So just following on McPhillamys, if the Section 10 approval does continue to push out, is there any risk to that FID date? Or should it be quite a quick process to gather that information once the approval is granted?

Jim Beyer

Yes. Good question, Alex. It depends how long it's pushed out for. But the short answer is it could. We're trying to work around it so that we can get everything -- we're not sitting on our hands at the moment.

There's a lot of work going on. But if -- obviously, if it pushes out and there's no more -- our understanding is that all of the responses have been gathered by the department. And in fact, when we've been talking to the department about the timing as much as you can do because you limited in how much influence you can have there.The key message that's been coming out of the issue, which is the department dealing with it at Fed level is that there is a lot of Section 9 applications around Australia. Now Section 9s are effectively an application to cease and desist work that is currently underway while an assessment happens. And it's almost like, I don't know, I guess, without wanting to pretend I'm an expert in this area.

In my view, it's a bit like to cease and desist the activity immediately. So you might be building -- constructing a highway or you might be building a light factory or something. If a Section 9 comes in, the activity has to stop. Now that is -- the department challenge is they got a lot of those coming through at the moment, and that's consuming their time, so they're not getting to close out the Section 10, which is clearly frustrating for us. So we need to get to work, and we are -- we're trying to get this department to understand that while we may not be in construction, time is money and time delays also jobs and opportunity. So we're trying to push it along as much as we can.

If it continues to delay for extended period, it will have an impact on that FID day.

Alex Papaioanou

Great. And in terms of D&A, so it was quite -- it was a bit higher than what we were looking for. How should we think about D&A going forward?

Anthony Rechichi

Yes, Alex, I mean, we don't -- it's Anthony here. We don't typically provide our forecasted D&A numbers. But look, the view is that it would be moving forward at similar rates to what you've seen. 2023 was bigger, like I said, predominantly because of -- now we're nearing the end of that life of mine at Duketon North. So there was an accelerated depreciation there, but that's what we're seeing going forward.

Alex Papaioanou

Yes. And just to confirm, the A$30 million inventory adjustment that you've reported, is that primarily Duketon North changes?

Anthony Rechichi

It's scheduled across a few different stockpiles. We do a fairly scientific way, we work those things out now that, Alex. But basically, it is with respect to the longer-term stockpiles that -- all of our sites have them. The longer-term lower grade stockpiles that we see, and you see that mainly in our non-current assets, you'll see that the portion in those non-current assets has actually reduced year-on-year FY '22, moving through to FY '23. And that's because this year, we are expecting to use up a lot of those stockpiles.

And so that actually has an effect as well as reducing the amount of stockpiles that are typically at risk when you're doing those sorts of calculations.

Jim Beyer

Thanks, Alex. It's the first time I think I've heard accounting described as scientific, Anthony, but [indiscernible].

Anthony Rechichi

We do our best.

Operator

The next question comes from Andrew Bowler with Macquarie.

Andrew Bowler

Just a couple from me. Firstly, on dividends. I mean, obviously, no final dividend declared today just a note in your commentary that it's part of progressing the funding strategy for McPhillamys. So can we take that to mean that or certainly before the study is finalized, we won't see any dividends for the next sort of year or so? Or will you revisit that as hedge commitments roll off maybe into FY '25?

Jim Beyer

Yes, a good question. I mean, you never say never, right? That's -- and our underlying D&A of Regis has always been you're there to make money and return it in dividends to our shareholders, which is why we've over the years, when we've been in a position to do it, we've paid over $0.5 billion in divis. But at the moment, we are in the reinvestment phase in that cycle. You're quite right.

We have -- we made the decision not to pay dividend on the basis of what we can see coming towards us for capital requirements. That continues to be part of our thinking. There's no doubt that, that will stay there -- that requirement for funding of McPhillamys when we get to the point of FID, is certainly part of one of the key things that we've got to keep our focus on over the coming 12 to 18 months. So I'm not saying no, and I'm not saying yes. I'm saying that you can never say no, but under the circumstances we're operating, I mean, if gold price went to $4,000 an ounce, which it'd be nice if it did, then obviously, that would be different. But right now, we've made that decision to conserve the capital for obvious reasons and would need to be something clear for us to change that view at the moment.

Andrew Bowler

I guess another hypothetical question. I mean, obviously [indiscernible] hedge commitments to roll off at the end of this financial year. Is the funding for McPhillamys, I mean, obviously, depending on gold price, how much you might need in terms of additional funding? But would you consider hedging again along with another debt facility attached to McPhillamys or has the experience with hedging been a little bit traumatic and that's sort of moves off the table for any perspective in that package?

Jim Beyer

Yes. Well, whenever anybody talks about hedging, I don't pick a glass up off the table because my hands are shaking too much. But look, I think there's no doubt that when we come to consider the form of funding from McPhillamys that we'll need to consider and one of those is clearly debt -- there, it's probably going to be sensible to be considering whether that risk is covered by some debt position -- sorry, some hedge position. So we can't rule that out. Certainly, the best -- the pleasing thing is that the hedging that we've got at the moment is basically nearly half of the current gold price.

So any hedging that we did put on would presumably be a lot better than that. But we'd be doing that on the basis of forms of protection around that debt obligation. So yes, there's -- we're certainly not ruling out hedging in the future. It's just going to be done for risk management purposes, I would think.

Operator

The next question comes from Hugo Nicolaci with Goldman Sachs.

Hugo Nicolaci

Maybe just following on from Andrew's question on dividends. Firstly, I appreciate, obviously, your big CapEx spend on McPhillamys coming up. But I guess in the context of the franking balance as well, noting that you probably do another tax refund in the December half. Is that also a consideration in terms of when you potentially look to restart dividends going forward?

Jim Beyer

Yes. Yes. There's certainly form part of the consideration in our decision not to pay a full-year dividend.

Hugo Nicolaci

And then maybe one for Anthony then also just kind of following up on the kind of framework for McPhillamys around funding. Can you give us any updates there on how you're thinking on the funding mix in terms of how much of that comes from debt? And then maybe just an update on how you're thinking about group level sort of debt or gearing sort of targets?

Anthony Rechichi

Yes. I mean, look, at this stage, Hugo, we're of the view that -- and as you expect primarily that the funding for McPhillamys would be a combination of our own cash flow generation that we've got and also taking on additional debt. So that picture will become clearer as we move through the feasibility process. Look, it's the main reason why we've chosen to do a debt extension now, a deferral of the day as opposed to do a full refinance at the moment. And as you say that we've got an absolute clear picture on McPhillamys.So yes, that's -- obviously, primarily, we think we should be able to do this with debt and cash flows, but we just need to see as we progress through the feasibility study work at the moment.

Hugo Nicolaci

So just to clarify, so that the deferral on the debt, then you're really just looking for probably another, what, 12 months or something on that so that you can shore up that McPhillamys funding option. And then, I guess, overall, you're probably thinking still at the corporate level funding debt rather than say, project financing or something like that for McPhillamys?

Anthony Rechichi

Yes. Look, that's fair enough, say, around 12 months. And look, wherever possible, we'll try not to do specifically a project finance type arrangement. We try and keep it corporate, but we'll just see what the markets are willing to do at that stage and what -- and our risk appetite as well.

Operator

The next question comes from David Coates with Bell Potter Securities.

David Coates

Just circling back to costs. And you've highlighted [indiscernible] back to $300 ounce inventory drawdown. In fact, if you just include Duketon, you also made a comment about the CapEx at McPhillamys. Just from a high level, broadly speaking, you've also sort of previously said that the diesel costs sort of coming off and now it's sort of helping the cost base. What are the key kind of cost drivers and in which way are they going as we're sort of looking to FY '24 for you guys across operating in CapEx?

Jim Beyer

Yes. Good question. Look, I mean, if you're looking at it on a per ounce, well, the key inputs, the diesel has been reducing, although I think that's leveled off and we might have seen a slight increase, a fractional increase in the last month. Diesel is obviously a reasonable chunk of our costs, given that all our power -- or not all of our power now, but most of our power is generated from diesel and the fleet. So that's probably a single significant single input cost.

The contractor and mining cost, the rate per BCM overall is the other key factor. One of the -- what I said in terms of pit mining, what are the three things that drive your cost per ounce, one is the grade, well, no kidding. The other is the strip ratio and the other is the rate per BCM.So the rate per BCM is influenced by the diesel price, which we've seen sort of stabilize. We also see a key element on the rate per BCM and the rising falls. And with the inflation starting to certainly tempering around, that has slowed down the -- costs always are increasing, but just not at the wildfire rates that they were for the last 18 months.

So we see them stabilize quite a bit more than we were seeing this time last year. There's always pressure. There always is. Labor still continues to be an area. More so the issues there, I think, is shortage of experience rather than the actual cost. They just -- there's just a real tightness in the labor market, and you can fill a position, but you're not always getting the skills, experience that you'd like.

So you've got to be patient who will live with it. And that, I think, is a little bit more of a cost to the industry that doesn't show up straight away. And I think that's something we're all dealing with. So there's -- pressures haven't gone away, David, but they're certainly not as dramatic as they were this time 12 months ago.

David Coates

And on the CapEx front, again, sort of high levels of you're considering McPhillamys?

Jim Beyer

Yes. Look, we still -- I'm a little bit reluctant to go any more than what I said earlier, partly because there's been a lot of pressures on components and parts over the last probably 18 months or so. And we've seen that definitely cool down demand for this time two years ago or 18 months ago, the market was wild with all these projects that were going to happen. Now they're not quite so busy. And so rates have dropped, major componentries have become more available on factory lines and therefore, they're a bit cheaper now because of -- so we see that easing. But given that our FID is still probably six or seven months away before we finalize the capital build, I'm a bit reluctant to say any more than I already have on that range that we're sitting in.

David Coates

No, ultimately that's the goal] [indiscernible] specific range of some of those underlying input factors. That's great.

Operator

The next question comes from Alex Barkley with RBC.

AlexBarkley

Just on the -- I didn't really see any major asset impairment despite a few changes to your mine plan reserves, maybe a higher discount rate as well. Are you able to give a comment on that testing process? And was it close or no issue at all, just how you saw the book value there?

Jim Beyer

Alex, yes. The impairment work, we look at that every six months as you expect we do, whether or not there's a trigger internally, we'll always take a look at that. Yes, you're right, discount rates have gone up. You'd expect that forever and interest rates are going up and we're exposed to that too. But we still continue to get the headroom there around -- the carrying value at Duketon North obviously come off quite a bit anyway.

Duketon South got its life of mine that protects it and gives it plenty of headroom going forward. And with Tropicana, yes, it's a good asset, and that's got its headroom available, too. So yes, that's where the work's landed.

Alex Barkley

Yes, I'll put on quite back that up [Multiple Speakers]

Jim Beyer

Particularly around the Tropicana. We're pleased with the way that, that continues to evolve and unfold in its value and get spot price, it's way -- it's way over. So we're very pleased with that.

Alex Barkley

Just the last one. If you have any more clarity on what sort of cash tax you're expecting in the upcoming year or quantum of refund, maybe?

Jim Beyer

Yes, we are expecting a refund again based on the FY '23 year. It's not going to be as big as last time, though, that's for sure. And look, we're still working through that. But yes, we do expect the refund.

Alex Barkley

So maybe you're refunding and no cash tax out. Is that the right way to think about it?

Jim Beyer

Our expectations in that refunding, yes.

Alex Barkley

All right. Thank very much, guys. Thank you.

Jim Beyer

And that ties back to the question of -- on the dividends as to if we paid a dividend and used up the franking credits, it means that, that may not eventuate. So that was a bit of a double hit that we were trying to avoid keep our cash growing.

Operator

The next question comes from Matthew Frydman with MST Financial.

Matthew Frydman

Just wanting to unpack that pathway that you've given to 500,000 ounces. Unpack that a little bit more, in particular, the Duketon component, so 200,000 to 250,000 ounces. You may have to get the crystal ball out, Jim. But just wondering in your view what that asset looks like in FY '27 and even beyond? I guess, in particular, the proportion of production that you think is likely to come from open pit and stockpile versus underground?

Context of the question is obviously, considering the record of operating costs that you've just been talking about. And clearly, what that's done to the remaining reserve life at Duketon North? It does seem like Duketon South will naturally have to push underground over time to continue to be economic. So yes, just wondering how you sort of think about that asset at that point in time?

Jim Beyer

Well, yes. Thanks, Matt. Well, pretty much the way that you described it, really. Duketon North has got its year to run. We are looking for other opportunities up there, but I think it's going to take a little bit more time before we find the next 0.5 million ounce deposit just to keep Duketon North running hard, but we're looking at options at the moment.

So -- and clearly, we had been quite a bit more optimistic about Duketon North probably a year or so ago but with the inflationary impacts on costs. And clearly, that's had an impact and our desire to ensure that the ounces we produce are ones that have a margin, which is why we're sort of looking at this lower range for Duketon.It is -- I painted a picture and said, as a minimum, what would I think Duketon would be looking like out at that point in time, we'd have the underground is running possibly with a new production source at the Garden Well Main if that -- we have some reserves there, but we see that as being another 1/3 potential production zone from underground with all of our underground continuing with this rolling reserve replacement, which we see as part of the nature of -- if you look at the reserves for the underground and said, "Well, it doesn't -- don't look like you got much life," people who haven't been -- just need to go and have a look at the history of underground across WI in these relatively small operations where you just -- you have two years of reserves and you have done for the last 8 or 10 years as you've been rolling. And we can see that sort of -- that story presenting itself. In fact, you can look and see that we've been replacing depletion quite well in that part of the world. And Duketon South -- oh, sorry, not Duketon, Rosemont underground has got new production areas that are opening up in the southern area that give us optimism as well. Open pits will always have a role to play.

We have a number of little satellites around the place that will help sort of contribute to effectively, if you like, keeping the mill full. But there are other underground targets that we've -- we know that, for example, there's some potential at Tooheys Well, we know there's potential of Baneygo. We're barely getting started at Ben Hur, but we know there's potential underground extensions there as well that we're looking at.So I can certainly see where out at that point in time and beyond that underground would continue to be a significant contributor to the proportion of production. And that's on the basis, of course. In the meantime, we've got our exploration program going across the belt, where we are getting -- it takes us time, but we're looking for the next Garden Well size deposit or Rosemont size deposit and a 0.5 million, million ounce deposit, which is definitely something that is -- it's just taking -- it will take time.

So -- and of course, if we do -- when we do find that, and we do bring that into the portfolio, that means that Duketon was quite potentially returns to its previous production levels in that above 300,000 ounces. But at the moment, we can certainly see a pathway with the underground. So probably just a bunch of descriptions that are reinforcing what you were presuming in the first place.

Matthew Frydman

I guess the follow-on question then is, how should we be thinking about the capital required to replace that sort of baseload feed from the open pits over the next, say, four or five years? Is that just business as usual sustaining capital in the existing underground that you've got at Garden or South and Rosemont? Or should we be maybe factoring in something a little bit higher in order for your ability to -- in order for you to build on that ability to produce from the underground?

Jim Beyer

Well, I think the existing undergrounds have really got this rolling sustaining capital. There's no -- like when you start an underground mine, there's probably a reasonable lack of, I don't know, $30-odd million setting up the portal, putting the initial ramps in vent shafts, power, all that sort of getting it into a position where it's ready to run, which is what we saw at Rosemont, similarly at Garden Well. With Garden Well mine, I'm not quite sure we'll be -- I don't think it will be quite that significant because a lot of the infrastructure is already around, but that might require some proportion of that. And we'll give some guidance on that at the time. But the -- as you look at rolling on the ounces from the existing operations, it's just more of the same would be my view on that.A new mine, like I mentioned, there's a Ben Hur or maybe there's a Baneygo or something then yes, certainly, there's a $25 million or $30-odd million to set it up to get it before it starts production and then it's just running in a normal consistent cost way.

Does that help?

Matthew Frydman

Yes, that's very helpful. Thanks, Jim.

Operator

The next question comes from Meredith Schwarz with Bank of America.

Meredith Schwarz

If I could just follow-on from that -- good morning, from Matt's questions on Duketon South. So you've had some good exploration results in that middle zone as you go down with the exploration drive. When can we expect a resource update on that area? And secondly, in terms of your broader plans for production from those zones. Will you look to drill out that entire area from south to north to determine a production schedule or will you start bringing on some areas -- production areas sooner to add to underground feed for the mill?

Jim Beyer

Yes. Good question, Meredith. Look, it's a combination of those. We certainly -- we have an area that we're targeting for potential production that sits out underneath the mine. It's where the actual -- that exploration decline will end.

If you -- and we don't have a slide of this in the pack but if you have a look at, I think, the biggest [indiscernible], there's a slide there in a long section of Garden Well. And you can see where the decline sort of comes to an end, which is later on this year, that's an area that we're already targeting to be a potential production area. But in the meantime, while that drives mining across, we are slowly working through each drill cutting that we put in as we run down that ramp. We're actually drilling it out as we speak and getting results that are encouraging for us.Of course, the first drill cutting that we drill from is virtually an extension of -- is looking at ore bodies that just extend slightly northwards of the current south area. You have a look at the plant, it had a section, you'll see what I mean.

But -- so we're encouraged by that. So in summary, yes, we're looking to open up a new production area within a reasonable time frame sitting underneath Garden Well Main. We need to get there and just confirm the reserves that we believe are there and get a decent, I guess, grade control plan in place. And then in the meantime, we'll be drilling out that whole area between the South and the North and looking to see whether that, in fact, could be a third underground production zone. That's -- if I painted the ideal picture, we keep producing from the South and keep rolling down, which is what we're doing. We target this new area underneath the Garden Well Main proper, which is where that decline is heading, and that's got a potential new production zone.

And then while we're sort of bringing that up, we complete the drilling satisfy itself and hopefully, if things pan out the way that the upside of our exploration target, we've got another production zone sitting in the middle. But obviously, we've got a lot of work to do yet before we can hang ahead on that. But that's the strategy and that surprise we're chasing there.

Meredith Schwarz

Yes. So if I could -- so in terms of that, I suppose, second production front in that northern zone, what would be a likely timing for production to come out of that? Do you think are we looking two years away? Would that be a rough time line?

Jim Beyer

I wouldn't think it two years, it might be a little bit far out. It certainly won't be this year. We need to get there and drill it and confirm it. Our experience tells us that don't go out too early and tell everybody how fantastic and how soon it's going to be because underground mining, particularly when you're opening up new areas, just takes a little bit of time so that you don't play your foot up. So two years, certainly earlier than that, well, I'd love it to be.

But Stuart Gula, our COO, was understandably wanting to make sure that we don't overpromise there.

Operator

[Operator Instructions] There are no further questions at this time. I'll now hand the call back to Mr. Beyer for closing remarks.

Jim Beyer

Thanks, Betsy. Thanks, everybody, for joining us this morning. And I appreciate the questions too, it always helps us to add a bit more color and perspective to what can be a bit dry. And as always, if there's any follow-up questions or anything, please give us a call or drop us an e-mail and we'll do the best as we can to help you out. Thanks very much for joining us. Appreciate your time, and have a nice day.