Hillgrove Resources Signals Stronger Copper Upswing Ahead

Hillgrove Resources Limited ((AU:HGO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Hillgrove Resources’ latest earnings call struck an upbeat tone, with management emphasizing record copper output, expanding reserves, and clear progress on growth projects despite some near‑term cost and operational bumps. The mood was one of confidence that recent investments and drilling success are laying the groundwork for stronger volumes and cash generation into 2026.

Full-Year Copper Output on Target

Hillgrove delivered FY2025 copper production of 11,315 tonnes, landing squarely within its 11,000–11,500 tonne guidance range. This performance gives investors comfort that the mine is operating reliably and that the company can meet its own forecasts in a period of significant underground expansion.

Record Quarter Lifts Production and Sales

The December quarter marked Hillgrove’s strongest quarterly copper production to date at 2,962 tonnes. Payable copper sales reached 3,121 tonnes over the period, generating healthy revenue at an average realized price of AUD 14,754 per tonne, even after the impact of lower‑priced hedges.

Costs Track at Low End of Guidance

For FY2025, all‑in costs came in at USD 4.29 per pound, close to the bottom of the USD 4.20–4.45 range. In the December quarter, all‑in sustaining costs improved further to USD 4.03 per pound, reflecting operating efficiencies and offering a solid starting point for the next phase of the ramp‑up.

Operational Delivery Shows Strong Gains

Year‑over‑year operating metrics improved sharply, with development meters up 38% and mine tonnes up 57%. Copper tonnes produced increased 26% versus 2024, underscoring that the mine is now moving more rock and converting it into higher metal output.

Cash Generation and Liquidity Improve

The operating mine generated $12.7 million in cash during the December quarter and $35.8 million over the full year. Hillgrove ended the period with $20.6 million in cash and total liquidity of $30.8 million including receivables and unsold concentrate, providing a buffer to fund the ongoing growth push.

Nugent Drives a Step-Change in Mining Rate

Nugent stope production started on 15 October ahead of schedule, and the decline breakthrough on 19 December opened up a crucial second ore source. With Nugent now contributing, Hillgrove is positioned to lift the mining rate to around 1.7–1.8 million tonnes per annum in the first half of 2026.

Reserves and Resources See Solid Growth

The 2025 update delivered a 43% jump in ore reserve tonnes and a 14% rise in resource tonnes compared with 2024. The new ore reserve stands at 4 million tonnes containing 34,000 tonnes of copper and 29,000 ounces of gold, while the broader mineral resource is 22 million tonnes with 160,000 tonnes of copper and 120,000 ounces of gold.

Drilling Program Underpins Future Upside

Hillgrove completed 69,000 metres of underground diamond drilling during 2025, though only 29,000 metres fed into the latest resource update. The remaining 40,000 metres will be incorporated in the December 2026 update, and early results from Emily Star and Kavanagh show encouraging intercepts that could enhance future mine plans.

Capital Discipline and Project Delivery

The company invested about $21 million in major capital and $20.5 million in sustaining capital during 2025 to extend the underground footprint. Importantly, the total Nugent project spend of $21 million came in line with budget, reinforcing management’s message of disciplined project delivery.

2026 Guidance: Higher Copper, Easing Costs

For 2026, Hillgrove has guided to copper production of 12,750–14,000 tonnes, implying a double‑digit percentage lift over FY2025. All‑in sustaining costs are expected to moderate in the second half to AUD 5.75–6.25 per pound, while major capital is planned to drop sharply to AUD 8–10 million after the heavy investment phase of 2025.

Hedging Strategy Balances Risk and Upside

The company has hedged about one‑third of expected 2026 output, with 3,560 tonnes of copper sold forward at a weighted average price of AUD 14,459 per tonne. Management described this as a prudent buffer against price swings while still leaving significant exposure to potential copper price strength.

Equity Raise Bolsters Balance Sheet

Hillgrove completed an equity capital raise of $28 million, with net proceeds of $26.2 million received during the quarter. This additional equity supports the growth program and helps ensure the company can fund development and exploration without over‑stretching its balance sheet.

One-Off Costs and Maintenance Weigh on Q4

The December quarter saw one‑off stock write‑offs and unplanned plant maintenance, pushing up reported costs and reducing the benefit from inventory credits. These items affected margins in the short term but were flagged as non‑recurring, with management emphasizing that the underlying cost trend remains constructive.

Underlying Cost Pressure Before Ramp Benefits

Excluding the acceleration at Nugent, all‑in costs were USD 4.44 per pound in the December quarter, higher than the headline USD 4.03 figure and the FY average. This highlights some near‑term cost pressure that should ease as higher‑grade ore and increased volumes from the ramp‑up flow through the system.

Hedges Temper Realized Copper Price

The average realized copper price of AUD 14,754 per tonne in the quarter was pulled down by deliveries into lower‑priced hedges. While this reduces near‑term revenue, it reflects past risk management decisions that protected cash flows when pricing was less certain.

Gold Output and Recovery Still Modest

Gold remains a relatively small contributor, with 2,249 ounces produced in 2025, including 753 ounces in the December quarter. Current plans assume about 55% gold recovery, and while process improvements are being investigated, management is not yet baking any upside into guidance.

Geological Variability Remains a Risk

Grades at Kavanagh were affected by pinch and swell zones during the year, highlighting ongoing geological variability. Management believes these zones are increasingly well modelled and expects grade improvement, but stressed that this remains a risk until drilling fully defines the orebody.

Inventory Drawdown Dampens Short-Term Margins

A drawdown of ore stockpiles during the quarter reduced the accounting benefit of inventory credit. Combined with stock write‑offs, this inventory movement put pressure on reported margins in the near term, though it does not change the broader trajectory of rising production.

Conservative Cost Outlook and Limited New Hedges

Hillgrove kept its 2026 cost guidance conservative and avoided adding new hedges during the quarter, leaving some exposure to future copper price volatility. With roughly one‑third of production already hedged, the company appears comfortable riding the market for the remaining volumes.

Back-End Weighted 2026 Production Profile

Management cautioned that 2026 production will be heavily weighted to the second half, as the Nugent ramp‑up and higher mining rates take hold. This means early‑year cash flow and unit cost metrics may look softer until the operation hits its planned H2 run‑rate of about 1.8 million tonnes per annum.

Guidance Points to Stronger H2 2026

Looking ahead, Hillgrove expects a meaningful lift in copper production to 12,750–14,000 tonnes in 2026, underpinned by a 1.7–1.8 Mtpa mining rate and a 1.8 Mtpa run‑rate in the second half. With major capital dropping to AUD 8–10 million and all‑in sustaining costs guided to ease to AUD 5.75–6.25 per pound, free cash generation is expected to improve as Nugent and higher‑grade areas contribute more strongly.

Hillgrove’s earnings call painted the picture of a copper producer transitioning from heavy investment into a period of rising volumes and improved cash flow. While investors must navigate near‑term cost noise, geological variability and a back‑loaded 2026 profile, the combination of record output, larger reserves and a funded growth path suggests the company is positioning itself for a stronger medium‑term performance.