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Operator: Thank you for standing by, and welcome to the Evolution Mining Limited December 2025 Quarter Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Lawrie Conway, Managing Director and Chief Executive Officer. Please go ahead.
Lawrie Conway: Thank you, Harmony, and good morning, everyone. I trust you've had a good break and wish you a very healthy and successful 2026. I'm joined on the call today by Matt O'Neill, our Chief Operating Officer; Fran Summerhayes, our Chief Financial Officer; and Peter O'Connor, our GM, Investor Relations. Today, we released our December quarterly report, which will be a reference point for the call. Fran and I will be back in a few weeks when we release our FY '26 half year financial results. Before going into our quarterly results, I want to take a moment to reflect on the tragic event that happened here at Bondi on 14 December. 15 people were murdered due to racism. No violence is accepted even more so violence linked to racism. This heartless and cowardly act of terrorism, whilst many people and families were enjoying the Bondi environment, specifically the Jewish community celebrating Hanukkah. I know this has impacted our country, including our team members at Evolution. The attack is something that should have been avoided. The lack of action by the federal government over the past 2.5 years on racism is inexcusable. The refusal to call a Royal Commission until the overwhelming majority of Australian spoke of the need for it, and then to try and condense the time frame for political reasons is disappointing. It lacks leadership. On the contrary, the leadership of the New South Wales state government with quick and strong action and support was very welcome. My biggest concern is that we learned nothing from this and do not make Australia a safer and more inclusive country. Our condolences go out to the family and friends of those who were murdered. Our thoughts and prayers go out to everyone who was impacted by the attack, and we also thank all the first responders volunteered support during this incident. Turning back to Evolution. This was another quarter and the eighth consecutive quarter where we've safely delivered to plan. We produced 191,000 ounces of gold and 18,000 tonnes of copper at a very low all-in sustaining cost of $1,275 per ounce for continuing operations. We did it safely with our TRIF remaining low at 5.8. Gold production improved by 10%, while our all-in sustaining cost improved by 26%. Importantly, the cash generation has really gained momentum as we realize the benefits of the current metal price environment. Our underlying group cash flow improved 176% to $541 million or around $2,800 per ounce when normalizing for the FY '25 annual tax payment made during the quarter. Reported cash flow was up 110% to $412 million. The cash flow was achieved at a gold price around $800 below current spot. The group cash flow was on the back of record mine cash flows with operating cash flow up 57%, just over $1 billion, while net mine cash flow doubled to $727 million, with the operations increasing their cash flows in the range of 55% to 140%. The cash flow charts on Page 1 of the report very clearly shows our cash-generating capacity. We are on track to deliver almost $4 billion of operating cash flow. This is 40% higher than when we issued our guidance in August and is anticipated to be 25% higher than what we have delivered in the first half. Our cash balance improved to $967 million after we repaid $110 million and $116 million in net dividends. We have no debt due until FY '29. Our gearing is now at 6% compared to 11% at September and 30% just 2 years ago. We are well on track to being net cash this year, providing further balance sheet flexibility, including returns to shareholders. We remain on track to deliver original group production guidance of 710,000 to 780,000 ounces of gold, and 70,000 to 80,000 tonnes of copper. Group copper production is expected to be at the low end of guidance due to the weather event at Ernest Henry. At the end of the quarter, Ernest Henry received 300 millimeters of rain in a 24-hour period, resulting in water ingress to the underground mine and temporary suspension of the operation. All personnel were safely accounted for and no injuries reported. Recovery activities are progressing well with only short-term operational impacts expected. It is anticipated that the impact at Ernest Henry is about 7,000 to 8,000 ounces of gold, and 4,000 to 5,000 tonnes of copper for FY '26. Group all-in sustaining cost guidance is updated to $1,640 to $1,760 per ounce and is a 6% improvement on our original guidance, reflecting continued cost control, the impacts of higher by-product credits, partially offset by the Ernest Henry weather event. The updated group guidance further entrenches [Audio Gap]... Matt will go through the operational performance soon. However, I do want to call out a couple of key highlights. About 2.5 years ago, some analysts were calling Cowal's best days behind it. One even saying that the cash Cowal was over. Well, this quarter, it delivered $361 million of operating cash flow at $4,500 per ounce and $284 million of net cash, which equates to more than $3 million per day even after investing in the OPC project. This level of cash flow alone is better than a number of Australian multi-asset, mid-tier companies, and the operation has at least 16 more years ahead of it. Mungari delivered record net mine cash flow of $104 million, which is a 142% improvement for the quarter and represents nearly 50% of the plant expansion project capital. At Red Lake, the operation is settling into the desired rhythm of 30,000 to 40,000 ounces per quarter and positive net cash flow. That produced 33,000 ounces and doubled their net mine cash flow to $80 million. They have now delivered over $200 million of net cash flow in the past 18 months. On the projects front, Mungari successfully moved to commercial production and the establishment of the Castle Hill mining hub is now complete, following the full sealing of the haul road during the quarter. The Cowal OPC project made solid progress this quarter and remains on plan and budget. Studies for the next key growth projects being E22 at Northparkes and Ernest Henry are complete, and we'll go to our board for assessment during the March quarter. With that, I'll now hand over to Matt to take through the operational performance.
Matthew O'Neill: Thanks, Lawrie. As noted, we have successfully completed another strong quarter of safely delivering to plan, and we remain on track to meet full year guidance, allowing us to continue to benefit from the rising metal price environment. I'm pleased our safety performance remains in a healthy position with the teams at each of the operations continuing to focus heavily on this area. We did see a small increase in our total recordable injury frequency rate this quarter, which was driven by an elevated number of injuries at our Cowal and Mungari operations during the month of October. Our safety focus remains on leading indicators, and we continue to perform strongly here. On the production front, as noted, we're on track to meet full year guidance. For me, the production highlight of the December quarter was the successful ramp-up of the Mungari operation where we achieved an annualized run rate through the mill for the quarter of 4.1 million tonnes. Throughout the quarter, the team ran the new mill through a range of operational parameters, and I'm happy to say that they're very pleased with how it has performed. Similarly to the September quarter, we had minor interruptions to mining activities in the open pit at Cowal due to wet weather. Again, it was pleasing to see that the work the team have done on resilience and reliability pay off as we experienced only minor variations in the plant due to these events. As noted, works continue to progress well on the OPC project with the project ahead of schedule and in line with budget. The Red Lake and Mt Rawdon operations continued to deliver in line with their plans with minimal variations throughout the December quarter. As noted earlier in the call by Lawrie, Ernest Henry experienced a significant rain event at the back end of the quarter on the 29th of December. The Cloncurry region had its average annual rainfall of 420 millimeters fall in just a 72-hour period, 300 millimeters of which fell in just 24 hours. During this event, all personnel were evacuated safely from the mine via the shaft and the multiple dewatering systems, both in the pit and underground operated as designed to reduce the impact of the rain. We diverted water away from key infrastructure areas and into the bottom of the mine, minimizing the impact on mine infrastructure. Whilst we are dewatering and remediating the mine, we've moved forward the scheduled February plant shutdown to align with these works. The processing plant shutdown is underway now and scheduled to be completed by the end of January. Current estimates are for full year production from Ernest Henry to be lower by between 7,000 and 8,000 ounces of gold and 4,000 to 5,000 tonnes of copper. At Northparkes, we achieved a significant milestone during the December quarter, with the completion of the E26 sublevel cave after 10 years of operation and the successful ramp-up of E48 sublevel cave taking its place. In summary, we remain on track to meet the group's full year guidance and take advantage of the strong market conditions we are currently enjoying. This brings the formal part of our update to an end, and I'll now hand back to Harmony for questions.
Operator: [Operator Instructions]. Your first question comes from Levi Spry from UBS.
Levi Spry: Happy New Year. I mean, I guess, just firstly, on the -- moving to a net cash position sometime this half. Can you just talk a little bit around how the Board might address that in February, what the competing sort of interests are in terms of CapEx and exploration, maybe what you can bring forward potentially? And specifically, I'm thinking about your projects, but also the OPC and how you're going to optimize that going forward, Northparkes?
Lawrie Conway: Thanks, Levi. Happy New Year, and I'll get Fran to add a couple of comments. Our cash flow only just has increased since the day she joined. Look, we will move to a net cash position over the remainder of this year. And it is -- highlights that if you deliver a plan essentially in an unhedged environment and do that safely, you actually get the benefits. What the Board will consider our policy is percentage of cash flow, targeting 50%. We look at it on a full year outlook basis. And at the end of each financial year, we look at the policy. So we look at the policy at the end of the year. I don't expect it to change too much, but we've got certainly flexibility around the percentage that we pay. In terms of then internally, I think our discipline around capital allocation and projects will remain key. We have seen that OPC is advancing well, and I was out there last week and it's actually a lot higher than what it was 6 months ago and 3 months ago, which is good for the project and does open up some flexibility around that project and what we do. Exploration, I think Glen is going at full tilt, but he's looking at some opportunities there. And then obviously, the Board will consider E22 and during the quarter as well. So yes, well -- as I said, we'll look to make sure we continue to reward shareholders in this environment, discipline around our capital [ allocation ], be that in projects and exploration, but a good problem for Fran to have as to what to do. Fran, anything to add?
Frances Summerhayes: No, you summarized it well.
Levi Spry: Yes. Okay. And then just at Ernest Henry, maybe for Matt, look, a pretty significant event, maybe lost a little bit, otherwise very good quarter. What's the current status? So you expect the plant to turn back on at the end of the month, but interesting in terms of the mine and dewatering...
Lawrie Conway: Yes. I'll get Matt to do that. I mean, yes, Levi, I think it didn't impact on the December quarter, as Matt said, it was right at the end, but it is what we're going through into this quarter. And Matt outlined a little bit on the call, but maybe just, Matt, color around the mine and the plant and the surface.
Matthew O'Neill: Yes. So I'll start with the surface. Things went quite well for us on the surface with that volume of water. The plant is completely fine. And so what we chose to do is instead of having that shutdown in February is that we will do it ourselves and that we would bring it forward into January, so giving us a bit of time back in that month. In terms of the mine, the infrastructure, there's some minor flooding remediation works that we need to do in areas that were sort of pockets rather than anything else as the water sort of moved through the mine, some of the pockets filled up and so that's tail end of 2 conveyors that doesn't take much to get back and then some works around a hydraulic pack that was sort of sitting in a pit in the crusher. So there's nothing material from the infrastructure side. Currently, we're dewatering into the existing dewatering system quite significantly. So we're sort of up around sort of 35 megaliters a day. The current status is that that's progressing ahead of plan. And like I said, we'll turn the plant back on at the end of January and then work our way back through that, bringing the mine back on through that month as well.
Lawrie Conway: And just a thing to point out, Levi, versus what we experienced in March '23 that the pumping stations and the main power substations were not impacted like they weren't really impacted at all this time.
Matthew O'Neill: No, that's right. We kept those operational throughout. We had a period where we didn't put people into the mine because we didn't want to put anyone at risk. And so we had tripped out until we got someone back in there to fix it. But outside of that, all of the infrastructure worked exactly as planned. The size of the event was probably the issue. It's almost triple the size of anything we've seen before. The [ 100 million ] a day was about the maximum from the last couple of events. And we did see that in the lead up to this event, and then we saw the 300 millimeter, so that the systems all worked as planned. The scale of that event isn't something that we've seen in that region for quite some time. And you could see around some of the neighbors in the area as well. The past has had some pretty significant impacts that they've not seen. So that was the issue for us. But managed well, infrastructure good, and we'll get back up and running in the short term.
Operator: Your next question comes from Hugo Nicolaci from Goldman Sachs.
Hugo Nicolaci: Lawrie, Matt, Fran, congrats on a fairly strong quarter. I just wanted to -- first question in and around sort of more strategic one. Obviously, this gold cycle has been pretty strong, if not unprecedented, with prices where they are, obviously, producer discipline has been pretty key in terms of capturing that operational leverage and not chasing low-grade ounces for the sake of volumes has been pretty -- has delivered a pretty good cash result. But looking at it from here, so the gold prices arguably more than double where a lot of these mine plans were set. I mean, is there room to start recutting how you look at these things to optimize value from here if this is the gold price going forward?
Lawrie Conway: Yes. Look, I'll let Matt have a bit of talk about the plans and the mines, the open pits and the underground. But essentially, we look at the current price environment and as we're mining in certain areas, if more material becomes economic, we're taking those, we're right into our life of mine and mineral resource, ore reserve review now. But we don't just let the short-term metal price drive the wrong behaviors. Matt?
Matthew O'Neill: Yes. We are taking advantage of that in the short term. But the discipline that I'll keep pushing with all of the operations is that any of the lower grade is not to displace any of the original plan or high-grade materials. So where that starts to help us is that when we can increase the capacity either through the plant or the materials handling systems, we can do that because most of the operations do have that capacity if we were to drop cutoff grades, we see some reasonable increases in some of those operations. And probably 1 of the key ones that sort of stands out in this environment, both copper and gold, is Northparkes, and you'll see that that's where a lot of the work is occurring and a lot of the focus for trying to take advantage of that is sitting. So yes, we are doing it, but I don't want us to drop back to erode the margin significantly by chasing stuff that's economically viable in this market.
Hugo Nicolaci: Got it. That's helpful. And then second one, just following on from Levi's question at Cowal on the OPC. I mean, obviously, ahead of schedule there. If you've got the team on site, how do you think about bringing forward the next stage [Technical Difficulty] or just maybe the recent rainfall we've seen maybe limit your ability to do that immediately?
Lawrie Conway: Yes. Look, Hugo, I think what we're doing, the northern bond as we completed in the last quarter enables us to then start works around E46 and a lot of other surface infrastructure in the northern end, which is why it was scheduled first. The water in the lake is receding and receding at a good rate. And unfortunately, when I was at Cowal, they said they would have liked some of the weather that -- or the rain that Ernest Henry got because it is fairly dry out there and at Northparkes. So when we look at it, it's anticipated that the lake would be dry by the middle of this year. And you might recall when we approved the project, the south -- the south part of the lake move was scheduled for FY '28 and scheduled to be dry. So it does provide an opportunity for us to consider bringing that 1 forward because you wouldn't want to be waiting a couple of years and find out that you got a wet lake or a full lake again. So that's something that we're working through right now. And then I think in terms of the other surface infrastructure and works that Joe and the team are looking at, I think, they will build that into the plan. It will allow us to look at the IWL, whether we build that up in preparation for having 2 and 3 open pits in the next couple of years do that earlier. Certainly, 1 thing that we'll look at is just anything else that can be done now in the environment that they're experiencing.
Hugo Nicolaci: And then maybe last one, if I could, maybe 1 for Fran. Just can you remind us how the copper quotational pricing periods were just looking at the realized pricing on some of the byproducts. It looks pretty favorable versus average prices in the quarter. If you could just remind us if there's any timing or any impact there we should be considering?
Lawrie Conway: Yes. Hugo, it's not simple for you on your side to be able to, I guess, model them because at Ernest Henry, you've got a quotational period that gets nominated every month. At Northparkes, you've got a quotational period that gets nominated quarterly, and you've got 2 offtake partners in terms of Sumitomo, our joint venture partner and IXM as our offtake main partner. And so they have to nominate them. And if we look at it in the -- at the end of September, we had about 8 shipments outstanding that were still open to pricing about 21,000 tonnes of copper, split sort of 3 at Ernest Henry and 5 at Northparkes. They, at the end of September were priced around $15,000 a tonne. They then move to the December pricing, and that was around $18,500 a tonne. So that's what lifted our achieved copper price for the quarter by about $3,000 a tonne. At the end of December, we've got about 4 shipments outstanding around 10,000 tonnes that will get finalized in this quarter. And then it depends on what each of the offtake partners nominate in the next 3 months for their pricing. So that's why it's a little bit difficult. Where we stand today, it's averaged about 19,200 month to date. That's what some of those shipments are going to get repriced at -- if they finalize this month. As I said, it's not easy for you. But it's really dependent on what the offtake partners or what they nominate.
Operator: Your next question comes from David Radclyffe from Global Mining Research.
David Radclyffe: So just a bit of a follow-up to Hugo's question. Because obviously, when you look at the quarter, it was really only Mungari that was setting a new record, and that obviously reflects the expanded capacity. But there is some late mill capacity across the group. So just trying to understand if there are any near-term opportunities you're considering to push throughput and take advantage of this environment. And if not, what is the constraint there? Is it the fact that you're not prepared to budge on the current capital budget. Just trying to understand there how you could actually push the mills a bit harder.
Lawrie Conway: Thanks, Dave. I'll let Matt just give a run-through on each of them. I mean -- but I will start off by saying it is not about the capital constraint. It is about making sure that if we commit the capital, we're going to get the returns. I think when we look at it and if you see the announcement today, the land around Ernest Henry, that we've now picked up that plus the previous project that we announced a while ago, that gives us a continuous footprint all the way around the plant. That's all within trucking distance. And so we've got 1 program has already started. This 1 will be the next one. So that's giving us an opportunity because it's constrained by the mine and you obviously got berth. But we will look at all of those opportunities where we can. Matt, 9 months?
Matthew O'Neill: Yes. I think Ernest Henry is the main 1 for us. We do additional milling capacity available today compared to what we bring through the mining system. So we are open to that, whether it's our own material through exploration or whether it's a toll agreement with people in the region. That's something that we're actively pursuing. Then outside of that, if I look at Northparkes and Cowal as the next 2, they are mill constrained. So we spent some money at Cowal on the mill setting it up for the next 20 years in the last financial year. And -- we also spent a bit of money there on improving the recovery. So we are working on opportunities account to increase throughput through the mill, but it's something I'm certainly not wanting to rush through there. So those do essentially mill constrained with improvements and incremental improvements possible, and we can feed them from our own sources. Mungari is a similar story. So Mungari, obviously, now ramped up. What we were wanting to do there, our strategy there is to run the Castle Hill complex, which is running very well at our baseload feed and then supplement that with our underground feed, which is where the grade from -- grade comes from and gives us the ounces. The opportunity there is to be able to postpone or defer any of the lower-grade material from Castle Hill by putting in higher-grade product through the mill. And obviously, we run the finances on that depending on what we do. So the exploration team, that's 1 of our key spend areas and where we do see an upside if we can get additional underground feed. We want it to come from our own material. That's where we make our best margin. That said, we do have opportunities where we will and can and have toll treated other people's product at a higher grade if the finances make sense for us from deferring that material. So those are your areas. Outside of that Red Lake does have mill capacity. There's not a huge opportunity there for either increasing our own material, which is still the bottleneck from the mining operations. But third parties, there's not a huge amount around there, but those are things that John and the team are looking at when they come up. I think that's the run through of most of the operations.
David Radclyffe: Right. Maybe if I could just come back on Mungari there because I think on the site visit you were still ramping it up and hadn't really tested it and it looks from the commentary that you may have sort of pushed it a little bit here with third parties. So are you confident -- you're obviously confident you can get to capacity. Did the engineers sort of leave anything there in terms of conservatism? Do you think you could run Mungari a bit higher than nameplate?
Matthew O'Neill: No, that's something we're investigating. At the moment, it did ramp up exactly as we wanted to. We had periods where we were above nameplate, but that was more related to the material [Technical Difficulty] or a little bit softer. So like most mills, depending on what we're putting through, it will give us a rate. But that's what I'd like us to do. At the moment, we're certainly not promising that, but that's what we're working on.
Lawrie Conway: And I think if you look at it for the quarter, it annualized at a whole point [Technical Difficulty] special production.
Operator: Your next question comes from Daniel Morgan from Barrenjoey.
Daniel Morgan: Lawrie, just going back to the Cowal southern bund decision. Can you just maybe expand what drives the decision to execute a bit faster on the Southern bund? Is it it's easier, costly, more productive and sort of costs? Or is it revenue items are you're going to have potentially access to more or more material, better grades and can grade sequence like what goes to the decision to execute earlier if you do so?
Lawrie Conway: Yes. Dan, look, I think the primary 1 becomes where the lake is sitting at with the level of -- that it's receded as you'd recall, we've always planned to do it dry, it's more cost effective. So that's -- that is the primary decision point because it's not about what can we afford the capital as long as we're staying within the $430 million, we'll be fine. Then in terms of -- the second part of it is, what does it give the site in terms of flexibility. So having put all of that infrastructure around the southern area, it gets the ability to look at E41 and when we time that. But that's coming into FY '27 and beyond. And I think that's why the secondary piece is that flexibility it provides to Matt and the Cowal team is that for a period, we'll be on low-grade stockpile material. You're going through the cutback of Stage I, so if you can open up E46 and E41, it just derisks that operation a lot more.
Daniel Morgan: Right. Another question. Just there is a footnote on Page 2 regarding Northparkes, where there's been some sort of a positive adjustment relating to stream deliveries, the number there is $18 million, that was an outflow. It just seems a bit lower than what I thought. Is there any -- can you just clear up what's going on there?
Lawrie Conway: Yes. So during the period, there was a reconciliation of the finalized pricing and payments for the stream with Triple Flag and as the final pricing and everything that came through on that back for a number of periods resulted in a credit back to us. So that's why the $18 million, I think last quarter was about $32 million. So there was a benefit relating to the final pricing. That is one...
Daniel Morgan: That's a one-off? Or is it something that there's an annual true-up or something that we might see again in a year's time or that could be adverse or better or...
Lawrie Conway: More of a one-off, Dan, is going through with Triple Flag about the whole mechanics of it, and we're obviously learning it in the first year. We've then done all the reconciliations with them, and that it's more of a one-off.
Daniel Morgan: Okay. Very clear. Just shifting over to Red Lake. It looks in -- you've made a breakthrough at Cochenour, where if I read that correctly, does that mean that you are no longer going to be using ore passes and that you're going to truck down, ore down to the high-speed tram. And is there benefits in terms of grade and reconciliation that could come?
Matthew O'Neill: Yes, Dan, it's Matt. Look, we will still be using ore passes, but what it does do is derisk those. We've got some duplication and contingency in that system given the issues we had earlier on. So we will still use all passes through that. The biggest benefit for us there will be ventilation as well. And also the mobility of some of our equipment. So it's more of an operational flexibility and reliability thing that it will give us. It doesn't necessarily impact grade and other bits and pieces at this stage. It does open up some other areas. And allow us to do things a little quicker, but that's really around operational flexibility that the benefit comes.
Daniel Morgan: And just last question is mainly cost, I mean, obviously, there was a provisional pricing stuff that came through, but signs of cost control are evident as well. Just on Mungari specifically. There's obviously a bit going on with various third-party ore purchases. You had commercial declared partly through October. And so the AISC number is not necessarily completely clean as a go-forward guide. Just wondering if -- what's the latest view on what Mungari costs roughly are going to be on a clean basis?
Lawrie Conway: Yes. Dan, I think when Matt talked about testing of the plant and everything the team took the opportunity around that ore purchase to get that type of material through the plant earlier. So those costs and ounces are excluded. So when you look at what we've reported for Mungari for the quarter, that AISC and the costs are really about just our ore. So it gives you a good reflection of -- so about $2,000 an ounce, you take it that most of October, there were commissioning costs. So you're going to be in the early low 2,000s -- going forward, when it hits the 50,000-ounce quarterly run rate is what you should expect to see. So we're at $1,980, I think, was a quarterly cost for Mungari. As I said, some commissioning in there, but it is only on our ounces and our costs.
Operator: Your next question comes from Matthew Frydman from MST Financial.
Matthew Frydman: Lawrie and team. Happy New Year. I guess my question is a continuation of some of the earlier discussion. I'm very interested in the outcome of the 2 studies that are currently undergoing board review, and I'm sure you'll present that [ in time ]. And I guess I hate to sound a bit like all of a twist, but wondering what's next to be considered in terms of any sort of formalized growth studies out of those options that Matt discussed conceptually the key growth projects that you're moving into that pipeline over time? And I guess the secondary question to that is just looking at your reserve on Marsden, obviously, a big low-grade reserve there in your numbers. I think it was last cut at $1,350 an ounce gold price. So we're only about $5,000 an ounce higher than that at the moment. So I guess at what point does that become a viable growth project? Or does that reserve need to be, I guess, reconsidered at all?
Lawrie Conway: Matt, Happy New Year. I definitely hope that our now nonexec chair is listening because he would love to hear about [ Marsden ]. I'll start on that, well, look, I mean, for us, on Marsden, anything that we do there would have to be better than what we've got at Northparkes and Cowal. And so that's really what it's got to compete against at the moment. So it sort of sits there in the background. It certainly doesn't get the priority from Nancy and the team, but it does get looked at. It's good to see that you talked about Bert and E22 and you've moved straight on and gone, okay, what's next. I think for us, Bert is really important to Ernest Henry because of the capacity we've got in the plant. So that will be something that the Board will consider the studies are finished, and we'll take that to them this quarter. E22 really is what can unlock what we have at Northparkes in terms of increasing both mining and processing capacity. We've got such a large resource there. We've got to look at how can we expand that over time because it's not going to reduce the NPV of the asset. So that's something, I think, when we take that through to the Board this quarter, it's like, okay, what does E22 give us as a -- we looked at a block cave, the sublevel hybrids the -- sort of the best outcome is the block cave, and we've talked about that previously. Now we've got to work out where does that fit into unlocking the rest of the operation around expanded capacity. I think when you look at -- the other thing is what's next. At Cowal, we've got the OPC going. We've got E46, E41, E42 operating. We get the undergrounded capacity. And what Matt's talked about is, okay, with all of those ore sources and the work we've done on the plant, are there ways to increase the processing and production rates at Cowal. And then I think when you look at Mungari, Matt also talked about it earlier. We've got the base feed at Castle Hill, the underground is really which is getting most of the exploration dollars is what gives us an opportunity of can we get more than 20% of our material going through that plant. And can we get the plant running at greater than nameplate.
Matthew Frydman: Okay. And then maybe, I guess, the follow-up to that then is then how we think about capital allocation for the business going forward. As you just described, you're pretty advanced in terms of your capital spend across the majority of the portfolio. You've got a couple of formalized, I guess, growth projects still on the pipeline in terms of Bert and E22. But overall, clearly, the business is generating a lot of cash. How should we think about any kind of revision or revisiting of the capital allocation policy, I guess, in the absence of any other sort of big scale growth investments like Marsden like we just spoke about. And how does that look in the current gold and copper price environment in terms of how attractive that capital is to spend externally to the business?
Lawrie Conway: Yes. Look, Matt, it's a good situation to be in. I mean, 2 years ago, we were getting asked that how can we afford these projects and now we're getting asked how can we [Technical Difficulty] -- that discipline. I think we've outlined our capital sort of spend for the projects that are already in the pipeline. As being that $750 million to $950 million, what now with what we're seeing, the progress at Cowal and the outcomes of the studies and where the metal prices is what can we incrementally invest in, either bring projects forward, accelerate them or new projects to bring forward production growth. As long as if you look at the portfolio at the moment, the asset's average annual rate of return is sitting around that 16%. If we can generate those sorts of returns, then we would increase our capital allocation. If we were to increase that allocation by $100 million, $200 million a year, and we can generate those returns given the cash that we're generating today and where the balance sheet sits, I think that would be the best use of a part of the extra cash flow we're getting. We obviously are still remaining committed to increasing returns to shareholders through dividends, and they'll share in the increased cash flows automatically by our current policy. But if there's ways to [Technical Difficulty] -- through the second half of the year as well.
Matthew Frydman: Got it. That's a sensible way to think about it, obviously. And obviously, the balance sheet has changed very quickly. So a nice position to be in. Thanks.
Lawrie Conway: Thanks, Matt.
Operator: Your next question comes from Adam Baker from Macquarie.
Adam Baker: Just back to Mungari. I noticed the 127,000 tonnes to 9,000 ounces gold is third-party ore process in the region. Just curious if you could touch further on that. Is this a normalized rate we could expect moving forward? I know you're looking at further opportunities. And just to give us a bit of flavor, are there any companies out there knocking at your door to process the material in the region? I know, it's about 10% to 15% of your planned throughput capacity at the moment.
Lawrie Conway: Yes. Look, Adam, I'd say, firstly, yes, there's people out there that would like for a brand new mill that's got capacity for them to put some ore through. I think as Matt outlined on the call, we used the opportunity to purchase that ore to really test the plant through the commissioning rather than waiting until we get our ore, both the main ore out of Castle Hill and the underground through given we've got a large campaign this second half on the underground. So that was -- I would sort of almost say that's one-off. But if we've got capacity, we will take it because we believe with our mine plan we've got 4.2 million tonnes of our ore that will go through the plant. If there is spare capacity, we would look at it. But right now that is only really around the commissioning part of the plant that we did that purchase. If we do, it's going to displace. I mean, this 1 did -- yes, it made a profit, didn't make a lot of money for us, but it allowed us to learn a lot about the plant.
Adam Baker: Yes. And the reduction in cost guidance, I mean, that makes a lot of sense due to the stronger byproducts. Just trying to understand the 6% improvement at the midpoint, how much of that would roughly be driven by the stronger byproducts versus it's a better-than-expected cost control from Mungari, et cetera?
Lawrie Conway: Look, Adam, it's a combination of both what the split -- it depends on how we go through the second half. But like we're achieving $2,000, $3,000 a tonne halfway through the year above what we had sort of guided at. Current price at [ $19 ] is sitting about $4,500 a tonne above. So the byproduct credits are pretty important in that regard. But if you look at our gross operating and our net operating cost spend against our budget, it's pretty well in line, a little bit lower in some areas. And then when you look at our sustaining capital, we're actually tracking well against our guidance a little bit. I'd say, a little bit of an opportunity for some of the sites to ask Matt for a little bit more money given the cash they're generating, but I do think the discipline around all of the capital has been very good across the business.
Operator: Your next question comes from Mitch Ryan from Jefferies.
Mitch Ryan: I just wanted to sort of pick at 1 of your answers to Matt Frydman's question with regards to accelerating Northparkes. You sort of said you're obviously looking at E22 and accelerating that, but then also that expanding capacity. I just wanted to understand, is your thinking materially impacted by the Triple Flag agreement? And is there anything you're able to do around that with expanding Northparkes?
Lawrie Conway: Yes. Look, Mitch, I mean, yes, when you look at Northparkes, you've got a stream over it that we only get 40% of the gold and pay 100% of the cost. So it has an impact on what we can do in unlocking Northparkes. What I'd like is that we've engaged actively with them since we -- since we've owned the asset, they know they have a role to play, and we continue to work through what role they have in the site going forward in unlocking the value. I think because when we look at it, we've got -- it's permitted to 8.6. It's running. It can get to 7.5. We've got 600 million tonnes in resource. If you keep running at those rates, this mine is running for 75 years. So increasing processing capacity and mining capacity is the right thing to do at some point. But we've got to make sure that it's going to give us a good return, both on a pre- and post-stream basis.
Mitch Ryan: Okay. And then my second question relates to Ernest Henry. Just noting that you've obviously been able to pull forward some of those works. But were there any works that will be unable to be rescheduled into the shut that was bought forward? And if so, will they be deferred or completed later in the half.
Lawrie Conway: The short answer probably is no. So nothing material. There were some minor tasks in the underground that we couldn't complete just based on access. So they will be completed, but they won't drive a processing plant shutdown or a material underground shutdown in the quarter. So I'd say 95% of the tasks we've been able to pull forward or defer depending on which one it is.
Operator: Your next question comes from David Coates from Bell Potter Securities.
David Coates: Thanks for your time this morning and congratulations on a great quarter. Matt, it's a bit of a high-level question. There's been a lot of discussion and questions this morning about where you guys can value add. Is it dropping cutoff grades? Is it expanding plants? Is it maybe regional acquisitions. Just wondering -- and we're in this -- what's fairly unprecedented gold price environment, not just the price but still the rate that it's risen. Are there any -- out of all the sort of growth of value-adding options that you guys presumably are considering and have been discussed, what are the ones that are sort of floating to the top as the best bang for your [ buck in ] in this sort of environment as well at the moment across the portfolio?
Lawrie Conway: Yes. Look, I'll get Matt to talk about what he sees as the opportunities at each of the assets. I mean, for us, if we can get more ounces or tonnes, copper tonnes out of any of our operations that basically improves our margin, that's really where we're going to focus. I mean I think we've always got to be conscious of is that in this current pricing environment, if you do approve a project and Cowal OPC as an example, and Mungari was an example, your time to bring those to production is 2, 3 years' time. So you've got to have the real confidence in terms where the metal price will be in that time versus those short-term ones around improved marginal increases in processing capacity or recoveries or those things. They're the ones that you can certainly bring on straight away. But the others, you're going to be looking 2 to 3 years at confidence that when you do bring them on, they're going to be in a good environment. And Mungari is an example, in '23, gold price was about 40% of what it was is today. And they're coming on at the right time. I've been involved in projects that gone the other way. Matt, you want to talk about some of the things that we're looking at.
Matthew O'Neill: Yes. And aside from the ones that have already been spoken about of sort of [ E22 ], if I just run through the operations quickly. The area that excites me most, if I pick Cowal is -- and I'm stealing Glen's thunder, but is the exploration and the resource potential that's there. So investing the money in the drilling, investing the money in the mining, [Technical Difficulty] those 2 things, there's an opportunity to extend, which is not as exciting as growing, but there's also a pretty good opportunity there depending on where we see the long-term metal prices level out at, that you would grow Cowal again, that's pretty -- that's very exciting in terms of the results we're getting back through that, and Glen will give an update next time we talk through that. And then the other 1 there is also Mungari. In a similar vein, the margin and the value comes from the underground. So that the mill capacity is good, but if we can invest in our drilling and increase that percentage of underground through, that's where we get our growth in ounces without a material one. So they're our best bang for buck. And then the, like I said, Ernest Henry exploration, you do have that capacity there. But the cave and whatever else is reasonably sort of restricted there. So additional ore sources around the region that we would see growth from with that one as well.
Operator: [Operator Instructions] Your next question comes from Zane Guo from JPMorgan.
Zane Guo: Just the 1 for me today on capital management. How do you think about the dividend versus a buyback into the half?
Lawrie Conway: Yes, Zane. We've talked about this previously. I mean, we -- buybacks are a part of a capital management plan that we look at -- I mean, for us, they need to be sizable. If you're looking at 10% of the value of the organization as a benchmark, that's a large commitment over. And I go back to the point of like if we've got projects that we can invest in that get a greater return for our shareholders, that will be the first priority. The second part is that the flexibility around our dividend policy, where in this rising price environment, our shareholders will receive a greater portion of cash flow than what they have in the past. And I think that really gives the best value for our shareholders. So I don't expect that buybacks would be on the table for consideration by the Board this half year.
Operator: Thank you. There are no further questions at this time. I'll now hand back to Mr. Conway for closing remarks.
Lawrie Conway: Thanks, Harmony, and thanks, everyone, for taking the time on the call today. We've got another safe and successful quarter. The cash flow is building the projects that we're running to are on plan and on budget, and we really look forward to updating you in a few weeks' time where Fran can tell you what we are doing with the cash as we release our half year results. Thank you.
Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.