Metals Acquisition Corp (NYSE:MTAL) Q2 2024 Earnings Call Transcript

Metals Acquisition Corp (NYSE:MTAL) Q2 2024 Earnings Call Transcript July 23, 2024

Operator: Thank you for standing by. This is the conference operator. Welcome to the Metals Acquisitions Limited Second Quarter 2024 Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Mick McMullen, CEO of Metals Acquisitions Limited. Please go ahead.

Mick McMullen: Thank you. And thank you everyone for joining us. Evening in North America and morning in Australia. This is the Metals Acquisition Q2 quarterly presentation and we’ll just go through to the slide with the list of speakers today if we can, to run through who’ll be speaking. So I’m obviously Nick McMullen, I’m the CEO. I’ll run through the highlights, and Morné Engelbrecht, our CFO is on, and he’ll go through the more financial metrics and then Rob Walker, our General Manager of the CSA Copper Mine is on who can give a bit of colour in terms of how the quarterly went about, and some of the more important projects and the like that we have underway for the future of the business. So if we can just go to the next slide, I think everyone would understand, we own the CSA Copper Mine.

We bought it just over a year ago out in Western New South Wales. We currently have 74 million shares in issue, fully diluted we have about 78 million shares, and based on the closing price on the New York Exchange on Friday, we had a fully diluted market cap of about USD980 million. I guess the mine has been running for a very long period of time. Most people will have heard this before, but, you know, it’s been running since 1967, very well-established infrastructure, strong relationship with local stakeholders. And, one of the things we think Cobar is a fantastic place to operate. It truly is one of the great jurisdictions to operate for mining, very stable regulatory tax and royalty regimes there, and good relationships with our local stakeholders.

So I guess the thing that people are really interested in is, how our quarterlies gone. That’s gone out into the market, as of the last hour or so. And, the word record will get used a bit in this presentation because it really was a very strong quarter. So under MAC, we produced a record 10,864 tons of copper, which was up 24% quarter on quarter. We had the highest daily production under our ownership of 265 tons of copper, the C1 was down about 11%, quarter on quarter to a USD1.92 a pound and our average realized price was, was broadly in line with spot at USD4.41 a pound. The balance sheet portion, we’ve got some slides coming up and I think I’ll let Morne speak to that. Some other highlights during the course of the quarter, were copper grade was up significantly about up 20%, for the quarter, to 4.2% copper and actually when we went back through the records, the month of June is the highest monthly revenue number in the history of the mine.

So, very strong quarter. I think particularly in light of as we go through these slides, we actually had the processing plant down for, fairly planned maintenance scheduled in April. And so actually the bulk of the production was really through May and June. So it was a very strong quarter in light of that. We’re on track for our guidance. We’re tracking to the midpoint of the guidance that we put out to the marketplace between 38,000 and 43,000 tonnes of copper for the year and we’ve also, during the course of the quarter, we’ve announced a very significant increase in the life of mine, the reserve life taken out to 11 years. All of those deposits are open. We made a small investment in Polymetals, which has the mine approximately 40 kilometers to the North of us, the Endeavor mine.

We’ve also got some water rights as part of that and it does give us a low-cost processing solution for the imports if we may be successful in managing the mine at some point. We’ve got some slides on capital projects coming along towards the end of the deck. And we spent just under USD13 million of capital during the quarter, which is pretty well in line with the annualized USD52 million that we said we’d spend for the year. So overall, it was a really strong quarter. If we can go to the next slide there. We like to use these scorecards to say, what did we say we would do a year ago? Where are we in that journey? And for those of you who can remember the last quarter, these were all more or less green, except the operational turnaround, which was still sort a bit of a work in progress.

I think we’ve delivered a very strong result here. We think there’s more to come out of the mine but I think we can give ourselves a pretty reasonable score here compared to where the mine was 12 months ago. You may have also noticed that we’ve made some additions to the Board today and we’ve welcomed on a very strong candidate, Anne Templeman-Jones, to the Board. And that’s also been in line with our diversification and strengthening of the Board with some strong Australian Board members. We’ll move on to the next slide if we can. We can dig into a bit more detail. And obviously, it’s all fantastic to have great production and increasing production, and lowering costs. What does it all mean? It all comes down to the cash flow. And so with that, I’m going to hand over to Morné, our CFO and he can run you through this slide and really be able to highlight what the benefit has really been for the business.

Morné Engelbrecht: Thanks, Mick. Good morning and good evening, everybody. My name is Morné, I’m the CFO here at Metals Acquisition. I’ll be taking you through the slides 8 and 9 at the same time, which covers the cash flow waterfalls of the quarter in U.S. dollars and then also AUD from an AUD perspective as well on, slide 9 and then going through slide 10 as well, just updating the capital structure. Also, please note that all these numbers are unaudited. So just on slide 9, all the great work that Mick has been talking about in terms of all the records and the operational — on the operational side and meeting our key goals really culminated in a great quarter from a cash flow point of view for the company. Our cash and cash equivalents materially increased by 25% quarter on quarter from USD71 million to more than USD88 million or in AUD terms around AUD109 million to AUD134 million and that’s after inclusion of material one-off payment of USD23 million relating to stand PD paid on the acquisition of the CSA copper mine was payable to the New South Wales Revenue Office and also includes an additional quarter of cash interest from — for Q1 on the net debt as well of almost USD5 million or USD7 million also captured in Q2 as well.

Also key here is that we have some 24,000 trimetric tonnes of concentrate at site as at 30 June 2024. So due to the site’s component of concentrate produced but not sold, we decided to presale a portion of this pre-30 June to match the timing of the cash outflow in the quarter. This resulted in some USD74 million or around USD112 million of cash flowing in from our operations including those presales in the quarter. Based on the terms of our offtake agreement with Glencore, RIF does not transfer until the concentrate is loaded onto the ship. So as a result, we recognize the cash but not the earnings or revenue in Q2 or the half year. Another key point I wanted to make is that we still had some 8,000 dry metric tonnes of concentrate at port and site unsold.

This represents some USD21 million or AUD32 million of available liquidity to the company over and above the USD25 million of revolving facilities available to MAC at 30 June 2024. The other key elements of the cash flow to note is the sustaining CapEx, as Mick mentioned, is almost USD13 million which is in line with Q1. And we also further reduced our interest-bearing liabilities by around USD8 million and then paid interest as I said, of almost USD14 million which as I noted before includes that USD5 million in relation to Q1 interest on the Maersk debt. Overall, since we completed the oversubscribed equity raise in February on the ASX, which brought us in some USD215 million, we have repaid a total of around USD140 million in interest-bearing liabilities since the start of the year.

So quite a significant reduction in those liabilities. We ended the quarter with more than USD88 million in cash, as I said, with further liquidity of around USD46 million which includes the undrawn USD25 million revolving facility and as I mentioned, the USD21 million of on-sold concentrate ready for shipment at 30 June. So, overall, an extremely healthy cash flow position and we continue to build on our strong balance sheet from the last quarter. Just moving on to Slide 10, just quickly wanted to cover off the capital structure. We did meet one of our goals for the quarter, which was the further simplification of our capital structure. As announced, in June, we completed the redemption of some USD15 million private and public warrants with almost 100% redeemed through cashless redemption mechanism that’s available in those warrants.

So we issued around USD4.7 million shares to redeem those USD15 million warrants. There were only some 1,026 warrants exercised from cash holders for cash buy holders and then some 27,000 warrants redeemed for USD0.10 each by the company. Overall, this now means that we have USD74 million of ordinary shares on issue. We’ve still have some financing warrants outstanding there with our fully diluted securities now down to 78 million shares. Also noted on there is our net debt, which reduced further over the quarter to some USD320 million, taking into account we paid down that 8 million that I mentioned previously on the senior as well. So overall, a very strong cash position and reduction in net debt as well, from a capital structure point of view.

So with that, I’ll hand back to Mick.

Mick McMullen: Yeah, thanks Morne and I guess it was a, you know, a strong both production and cash flow quarter. And, we are using that cash flow to reduce our interest-bearing liabilities and any creditors that we can, because obviously, we’d like to run the business in a very strong balance sheet manner. And the best way for us to do that is to generate strong free cash. So, we’ve sort of run through the highlights of much of the production and C1. I think just some of these comparative graphs are useful that people can take away and sort of do a bit of work on but look, obviously a 24% quarter-on-quarter increase is good, but not only that, it’s actually an increase on where the previous two quarters under MAC were for production.

We all know that Q1 was a little bit weaker, and, partly because of mine sequencing, partly because of a bit of bad luck on a power line, and partly from a lack of consistency a little bit and Rob can talk about that. But I would say our team really got their act together in Q2, particularly May and June. We saw consistency much better. We saw, we added a few extra people back in and it sort of all came together very well during the course of May and June. And clearly, as I said, we only produced circa 1600 tons of copper in the month of April due to that plant shutdown down but yet we still managed to come out with a C1 of a USD1.92 a pound, and Morne, correct me if I’m wrong, but I think the average for May and June was somewhere in the order of 1.52, 1.55, C1 for those two months, which, I think we would like to sort of view as the potential run rate that this mine can sort of operate at.

I think those few months in particular have shown what this mine is capable of when we get everything all coming together. So, I think it’s been a great effort from the team at site, coming out of a little bit weaker Q1 and I think this bodes well for where we see the production over the rest of the year, and into next year. Total sort of cost, cash costs were a bit over USD2.60 a pound, and so again, we see this thing as a relatively low-cost operation compared to actually the majority of other copper mines of similar scale around, again very good grade. And when things come together, this mine can generate a lot of free cash. So can we go to the next slide there please, Morne? I touched on the grade. Obviously, grade was a little down in Q1 really as a result of sequencing through the Eastern West deposits.

And we’ve talked in the past about a small number of relatively high-grade stoves will drive the production for this mine and just happened to be in a few of those in Q2. And I think some of their mining practices have improved the dilution control a little bit, which has also helped with the grade. So again, very pleasing to see the grade at that, the average grade that we’ve put out for this year is around about 3.7 to 3.8. So I think we’re still feeling pretty comfortable about that. Development meters, still relatively low as a combination of — we don’t include rehabilitation meters in that and the new reserve, sort of by the end of June, the decline was within about 65 meters of the bottom of the reserve that goes on for another 11 years now.

So actually, we’re almost at the bottom of the reserve now. We know that the ore body carries on past that. We will start to see development meters picking up now, as Rob will talk to in a minute, as we start developing out to this ventilation project. But we feel pretty comfortable with where development meters are sitting right now. So can we just go to the next slide there? In terms of unit rates, we have seen an increase in unit rates for milling, really driven by that mill shutdown in April and mining operating costs have started to trend back down as volume started to pick up a little bit. We have the full detailed table of mine and mill by period in the quarterly report that’s been released but we still sort of see mining costs as probably having some potential to get back down a little bit.

And if we go on to the next slide, we should have the slide on G&A and development costs. Again, G&A has sort of started to roll over a bit as we’ve sort of reallocated some stuff back into mining and processing. And pleasingly, our development cost per meter has actually started to roll back over, despite actually not really pushing up the meterage in that. And as I touched on earlier, the ventilation project development commenced at the end of June. So we’ll start to see the total meters go up. And as we develop out into that area, it’s a bit better ground. So we might see some higher advance rates as we push out into that area. If we can go to the next slide. Again, tonnes milled per employee, sort of flat up slightly. Sustained capital down slightly as we did incur the spend on the float bank replacement project in the mill.

Tailings dam work sort of tapered off a little bit. But in general, we were sort of pretty stable in terms of tons quarter on quarter, which again you can see in the detailed quarterly report. I would say the run rate through the mill during the months of May and June was significantly higher than where they’ve been in the past, sort of running around about that 1.2 million tonne per annum annualised for May and June. So let’s go to the next slide if we can. What I’m going to do is I’m going to hand over to Rob Walker, our General Manager here, who can touch on safety. Now safety is an area that we do have a bit of work to do still. And I would like to think that we can do better and he can run through a few of these site-specific projects as well.

Rob Walker: Yes, thanks, Mick. Good morning — good evening to everyone online. My name is Rob Walker. I’m the General Manager for Metals Acquisition at the CSA Mine here in Cobar. Looking at the slides and going back to the safety performance as Mick indicated there, look, we have been presented with some challenges in particular through Q2. Obviously, there is some clear room for improvement. However, I guess, on a wholly basis, we still remain below the industry average as a business unit. However, we do also recognize that we need to do better. And that being said, we have made some strategic decisions at a site level to implement a couple of internal structure changes and implement some working initiatives as a first step, obviously, to address the issues and continuing to strive to improve.

Touching on those, a couple of those proactive safety initiatives, coupled along with the structure changes that we have done internally, we are embarking at an operational level on an intensive, what we would call, a visible felt leadership training program. That’s predominantly aimed at our leaders within the business. We have a look at some workplace coachings and increased safety presence, both underground and on the surface. So these measures, they’re not only designed to address the recent Clifford rates and in particular in Q2, but also to foster basically a culture around safety and awareness amongst all our team members. While we did see an increase in Q2 of ATRISO, which was disappointing, I am proud to say that we had zero recordable injuries in June, which I would suggest is making a significant improvement in highlighting the efficiencies in some of those safety initiatives, which have actually kicked off already at the mine itself.

In reference to the tailings facility, so broadly as an update, you all have heard throughout the presentation, I guess, we have strategic plans for future expansion, production increases at CSI itself, and the TSF lift are part of that broader initiative to prepare for the expansion, whereby we need to secure quite clearly some additional storage capacity with additional tailings deposition to support those production increases and the mine life extension. You’ll see in the slide deck from Stage 9 lift, that’s the bulk earthworks, which is now complete, which also demonstrates, I guess, from a site perspective, our capability to execute large-scale projects, efficiently managed in-house as well. And the Stage 10 preparations, they are in progress.

We have some geochemical testing on the Stage 10 material, which is underway. The tendering process has gone out. This is a strategic approach to ensure that we are well-prepared for our future stages. And briefly, at this stage, we’re also exploring to build a lower-cost lift and transfer over to the Northern tailings facility, which aligns with our goal of optimizing our costs while maintaining our standards of our environmental compliance. We’ll move to the next slide, please. I’ll try and add some color, as Mick indicated before, from an operational point of view around consistency is our key. Specifically speaking, there’s the left-hand side of your slide with what we call truck movements and load factors. They’re pivotal from an operational point of view to enhancing our efficiencies and overall productivity and to put simply, we’ve successfully, just through an education and communication program with our workforce, we have seen some material improvements month on month in both our truck load sizes and the quantity of our loads per shift.

Remarkably, in Q2, as you can see from that graph on the slide there, we have increased our average load size from 52 to 54.5 tonnes per load and the quantity of loads from around 62 to 72. In context, that significantly translates into an improvement in our daily movement capacities, which operationally means simply that improvements would translate basically moving our capacities from 1.1 million tons to 1.4 million tons annualized, without the requirement for any additional capital. Proving again, that consistency is the key. Looking ahead, obviously, we aim to optimize these initiatives further strengthening our financial position and our operational efficiency. Another one we wanted to highlight from an operational point of view is the production drilling on the right-hand side of the slide there.

We do continue to improve the sustained improvements in our productivity with our production drilling meters month on month as you can see. And pleasing that we have achieved an all-time record at CSA with over 12.5 thousand meters drilled in May. Operationally that unlocks a substantial amount of broken stocks and improves our production capabilities. Notably May and June as you can see, their all production exceeded a hundred thousand tons respectively, demonstrating that we can perform at 1.2 million plus annualized rates mining at depth. Next slide, please. I’ll talk briefly to the April shutdown. As Mick indicated, there wasn’t an overly pleasing month in April with, in terms of copper metal output. However, we did have a 10-day shutdown.

These activities, they were critical to ensure our long-term reliability and the efficiency of our operation. We did complete, there were seven separate projects, if you like. However, the one that you see there, in the pictures on this slide is roughly bank one. So that infrastructure had quite clearly in our eyes exceeded its design life and substantially needed replacing. It was in a state of disrepair, so we couldn’t actually repair the system itself. It deteriorated to a point where it was, down to fail at some point. So it’s a completely new unit with a rougher bank. But being replaced, the reliability of that infrastructure, it will meet the long-term copper recovery targets and our improved operational safety, going forward in the processing plant.

Couple of other programs we did there, you can see that six additional programs if you like, that we completed in that 10-day shutdown. I guess just to pass through those relatively quickly, all of the programs there that we did complete in that 10 days, all of them were at their end of use life, if you like. So the copper thickener, basically that was a rebuild. We did significant amount of conveyor upgrades, head drums, gearboxes, belt replacements. We typically go on our main critical conveyors. The winders, we replaced six of our head ropes because they were nearing the end of their life also, the critical works obviously carried out on our grinding media loading system in particular on mill two. It was end of life, but also there was safety and operational efficiencies picked up in that upgrade.

And finally, we had a transformer replacement, which is basically future-proofing our operations. So mill three transformer, it was upgraded with a replacement which prepares our plant for installation of a larger motor when required to increase our throughput and support our future production goals. And pleasingly again, all these projects were managed in-house and completed relatively safe with no incidents, and on time and within budget. Capital Vent Project. Obviously, this has been implemented as a response to the failed attempt in 2019 with a mine ventilation system to address basically the limitations in our network currently, where we have inadequate air to continue to mine at depths, which is critical, obviously, to future proof of operations and for the safety of our employees who are underground working at depth.

So, in a way of an update with the Capital Vent Projects, we have made some adjustments to our mine plan to allow for enough air, obviously, to continue in mining in the key levels while this project and upgrade is executed. Given that the existing network does not allow for sufficient. It’s basically mine air exhaust continue to mine at depth. We have pivoted in terms of our mine plan and we will re-allocate those resources to execute this program itself and we are doing that in-house. Currently, we’ve completed some geotechnical drilling in the Northern legs of the project, which have proven critical geotechnical data for the project’s execution and pleasingly, these results have yielded relatively positive and our decision to offset new ventilation rises away from the main ore body.

It’s proving to be a good decision long term. We have also started the development out on the 8430, in preparation for the development out to the new risers. And as I said a moment ago, for the most part, all the resource allocation will be done in-house and we’ll allocate those resources from the main mining areas for this Capital Vent Project and we do aim to have this project completed by mid-2026, which basically sets the Stage for high productivity, improved working conditions thereafter. With the ventilation project, once it’s implemented in place, commissioned, and operational, we believe that we will be unlocking mine rates up to about 1.7 million tonnes per annum. Obviously then significantly enhancing operational capabilities and our safety standards, mining at depth.

Mick McMullen: Perhaps, we can move to the next slide. So, look, we’ve flipped the guidance out before, as Rob’s talked to, as part of this new mine plan, we sort of — we’ve reallocated resources to that ventilation work as we develop that, which allows us to actually push up that production over the years. As you can see, going out there over ’25 and ’26, we feel quite comfortable with where the guidance range sits at the moment, given where we’re currently producing at. And in general, we have really only one sort of significant project, and that’s a AUD 42 million project, which is the ventilation project. Everything else we’re doing on the mine is very small, incremental capital and in general, the mine’s pretty well capitalized for where we need to be.

So it’s a question of consistency and consistency and consistency. That’s the key. Get the ventilation project in which really unlocks the ore body and gives us the ability to try and fill that processing plant up now, it is a large processing plant. It’s rated at the back end of about 80,000 tons of copper a year. And I would say that generally it’s been running half or less than that but we did have several days in a row during the month of June where we were testing that when we had both lots of tons and lots of grade. So it’s pleasing to know that we can — that we have the infrastructure to do this. We actually have the ore body to do it. We will be putting out a separate exploration update probably early next week once all the data has been received.

But I think it’s fair to say that that exploration drilling that we’re doing in the main ore body, QTS North, QTS Central, QTS South Upper, and is continuing to provide similar types of results that we’ve seen in the past. So overall, we’ve got a lot of work underway to try and update this awesome reserve again for the end of this year, but we see a fair bit of potential still to further increase it. So again, we’ve published all of the R&R before. We’ve left them in the deck because we put them out during the course of the quarter, but I think most people will be familiar with them. But we do view that as a bit of a snapshot in time based on data back to the end of August of last year and there will be a fair bit of new information put out in terms of drilling results at some point in the next week to 10 days, I guess, when all information is not.

So with that, if we go to the very last slide, perhaps just to sort of finish on, which is the summary again of Slide 25 there, very strong quarter. I think it really highlights for people what this mine can do when things come together properly. It will generate strong free cash flow through the cycle based on its cost position and we see pretty good potential actually as we get into it more and more to again pick up production. I would say that due to the U.S. rules, the guidance that we’ve put out doesn’t really include anything from QTS Upper in it. That is an inferred category mostly. We have a 25-hole surface program targeting that right now with a view to upgrading that to at least indicated and then we can sort of talk about that a bit more but yes, I think it was a very strong result from the team at site coming out of a little bit weaker Q1, but actually has gone incredibly well through Q2, particularly in light of the fact that we actually had a planned 10-day shut for the mill at the start of April.

With that, I’m happy to turn it over to questions for anybody, and one of us should be able to answer those.

Operator: [Operator Instructions] The first question comes from Daniel Morgan with Barrenjoey. Please go ahead.

Daniel Morgan: Hi, Mick and Tim. First question, just the balance of the year. What do you expect in terms of tonnes and grade relative to this quarter? I understand again you’ve got a high degree of broken stocks at the end of the quarter. Thank you.

Mick McMullen: Yes, look, we do. I would say, again, I think somewhere in there, we say the turnaround is not linear. I would think that Q3 is probably possibly slightly weaker or thereabouts with Q2 and I think Q4 will be another pretty strong quarter. I think if we just think about the trend, but it will be in the rounding areas, I suspect.

Q&A Session

Daniel Morgan: Thank you. The decision on the presales, I understand obviously you didn’t sell everything during the quarter. What — does this mean the copper price is locked in? What are, can you just expand on the terms of the presale? Thank you.

Mick McMullen: Morne, might hand that one.

Morné Engelbrecht: Yeah. In terms of the presales, obviously, as I said, trying to match the cash outflows, the timing with the cash inflow. We also had some trains, some slow-moving trains, at the end of the quarter. So we’ve rectified that at the beginning of the next quarter. And in terms of the terms, that’s basically open. The pricing is open until you load it on the ship. And then it’s, then there’s obviously a QP period, that follows that in terms of the 10% that’s left but once it’s loaded in the ship, we get paid within 10 days off of that sort of loading on the ship. So some of that that we pre-sold has already been shipped by the end of obviously June and then most of it would’ve been shipped already end of July. And then some, coming, coming first week in August sort of thing. But, so all of that is sort of working its way through now.

Daniel Morgan: Thank you. And just, you mentioned in the report on dilution that was managed a bit better than prior periods. Was there any positive reconciliation, against the, what was expected for the ore grades?

Mick McMullen: A little bit is the short answer. Not, it wasn’t a huge driver. Dilution was a little bit better and they tried a couple of different firing methods in some of the stopes, which sort of actually pulled some of that out a fair bit faster. That was probably one of the key drivers in the course. There was one main stope that they managed to pull out about four months quicker than the original plan.

Daniel Morgan: Thank you. And just the last question is just on the ventilation project, which you’ve, you marked for completion in mid-2026. You’ve obviously got production guidance lifting in ‘25 and ‘26. So I presume this means that the ventilation project is broken up into many, I guess, sub-projects or little projects, and so you do have improvements in ventilation, through time. It’s not just a binary, once we get to ‘26, it’s improved.

Morné Engelbrecht: Partially, yes. Partially the improvement comes from getting the development ahead of ourselves, so we have some more working levels available. And partially also from opening up some areas that are a bit shallower in the mine that are a bit less vent constrained.

Daniel Morgan: Okay. Thank you so much.

Mick McMullen: No single one, silver bullet. It’s a combination of all of the above.

Daniel Morgan: Understood. Thank you.

Operator: The next question comes from David Radcliff with Global Mining Research. Please go ahead.

David Radcliff: Oh, hi. Good morning, Mick, Morne and Rob, just some follow-up questions to Dan’s actually. Just in terms of the ventilation project, I think you’ve been sort of guiding to the sustaining CapEx rate or what the current rate is of that circa 50 million bucks a year. So when we think about the spending for the ventilation project, would that kind of be within that number going forward, or is it sort of additional when we spread it equally over the period, or is it a bit lumpy, just trying to get an idea of that profile?

Mick McMullen: It’s incremental. There’s not been a lot of spend on it right now, so it’s sort of all locked, dropped into sustaining, but it’ll be , as per the ASX prospectus, use of proceeds, AUD 42 minimum is in growth CapEx. And so if you roll forward to next year, sustaining CapEx is actually down slightly. It’s — I don’t know, in the order of USD 45 million, give or take but you’ll have AUD 20 million worth of capital on that vent project.

David Radcliff: Okay. That makes sense. Thank you. Then, just — you sort of mentioned some changes to the mine plan to sort of allow for the ventilation a little bit. Previously, you’d sort of mentioned that better grades were expected Q2, Q3 this year. Given the very strong grade in Q2, sort of, is that still the case? I’m just trying to think about what that profile looks like for the balance of the year.

Mick McMullen: Look, I think the mine plan that we’ve published as part of a technical report, that’s the most recent one that’s out in the marketplace and that’s been published in the U.S. that takes into account this ventilation project. And so, effectively, you’ve got a bit of a lower tonnage, ore tonnage, higher grade for ‘24-‘25. And then into ‘26, you start opening up the material that’s a bit more medium grade. When we say medium grade, 3.3%, 3.4%, still a pretty good grade but more tonnage, obviously, to get your metal units out. So, I think for now, we’re not changing any guidance. So, if you sort of still run an average of 3.7% to 3.8% for this year copper grade, I think you’ll be about right.

David Radcliff: Thank you. I think —

Mick McMullen: I think it’s a little too early — sorry, it’s a little too early to change our modifying factors on the reserve based on one quarter. Now, we did that on better on dilution, we did do a bit better on grade. And if that trend continues, then obviously at the end of this year, then we’ll roll that into the next, into the 2024 reserve upgrade, right?

David Radcliff: Yes. Okay. And then maybe just one last one in terms of the mill throughput. I mean, obviously, you had to shut, so therefore the result was pretty strong in May and June. What are your thinking on the mill capacity? I mean, when you acquired the mine on paper, it was supposed to be, obviously, a lot more than you expected to put through. And now you’re talking to the potential of sort of 1.7 mine capacity post-ventilation through 2026. So, did this sort of quarter give you confidence that when you were testing the spent capacity that it can do that 1.7 plus, given the changes you also made?

Mick McMullen: Well, yes, is the short answer. To be clear, the guidance and the tech report we have in the marketplace peaks at about 1.45, 1.43 million tons a year but based on particularly June, when that mill was running very strongly at very good grade, we know that the wet end of the plant that’s rated at 80,000 tons annualized will actually do that and the front end is capable of doing, if we can feed it with the ore 4,500-5,000 tonnes through the front end. So, I think we’re learning more about the operation. It’s fair to say that the bottleneck has moved in the last 12 months from not having enough stopes available or development available to then not having enough trucks available to then getting it up the shaft. And really in the month of June in particular, the bottleneck has actually moved through the plant and there’s been a whole pile of niggling things to sort out in the plant to actually run out of that and that has successfully done that now and now the bottleneck actually is moving all this concentrate off-site with the ramp.

So it’s a good problem to have. There’s always copper laying around everywhere. That’s why we’re pre-selling it but yes, I think we’re feeling increasingly more confident in the abilities of that whole operation and that infrastructure ecosystem to do a lot more actually than what we’re currently putting out in the marketplace. Still further work to be done. One quarter doesn’t make that all come true, but the fact is we have now demonstrated that it will do that.

Operator: The next question comes from Sam Catalano with Wilson. Please go ahead.

Sam Catalano: Just a quick one on the ventilation project. You obviously mentioned you started a lateral development for that project, but over the sort of 2-year timeframe to completion, when are you expecting to actually do the rise boring because given my understanding that Glencore obviously tried a couple of raised bores in some poor ground areas, that’s likely to be a sort of critical path component of the whole project. So just wondering when that’s going to take place.

A – Mick McMullen: Good question. I’m not sure if Rob is still on. I know he was getting kicked off the call for some reason. But it’s probably not inside the next 9 months, I would think, for that raiseable work. We’ve got to get the development out there. And you’re right, Glencore did attempt to raise bore in 2019 and didn’t get it through, got almost all that through. The key difference though is that the ground conditions, jet lag in and around the ore body, they’re the most challenging ground conditions we have. As you can see on that image that’s on the slide there, we’re standing these rises off to the side. And that’s why we have to do the development to get out to them. Mining engineers love to design stuff right next to where you’re mining.

It’s not always necessarily the best ground condition. So we’ve been doing the geotechnical drilling out into this area, so a few 100 yards out. The ground is much better and so that actually we think gives us the, a, the best chance of getting it there, the cheapest, the quickest, and also the best chance of success.

Sam Catalano : Yes, so more than likely than back end of ’25 to likely for that raiseable work?

A – Mick McMullen: I think it will be starting before then, but yes, somewhere in ’25. I don’t think it will be I don’t think we’ll get to it in ’24.

Operator: The next question comes from Eric Linnell with Scotiabank. Please go ahead.

Eric Linnell: Hi, Mick and team. Thanks a lot for taking my question and nice to see the strong results this quarter. I just want to follow up on the comment in the presentation. You talked about this double-lift stooping strategy. Just wondering sort of when that came in, how much of that was in the quarter, or what the decision was to go with that, maybe any more details would be helpful? Thanks.

Mick McMullen: I might pass that over to Rob, if he’s on. I can see you on there. Can you take that one? I think he’s been kicked out for some reason. I think we did it somewhere in the May around about May. And yes, it’s been very successful low dilution drag for the stope significantly. So again, from a, it won’t be applicable for every stope, but you know, for certain applications it’s got the ability to significantly drag forward metal from memory that stope was running a bit over 5% copper. And so, dragging forward something by four months that’s running at that grade clearly is beneficial for your production. Time is money.

Eric Linnell: Yeah, for sure. No, appreciate that. And maybe just one more quick one, perhaps I missed it earlier, but on the TSF, you said you’re looking at options to build this lower cost lift. Any idea on the quantum there you think that might save or what’s involved there?

Mick McMullen: Too early to tell. We’re just out on tender on it at the moment on the two different designs. It’s probably really a Q3 call discussion, I think.

Eric Linnell: Okay, great. No, appreciate that. Alright, I’ll hop back in the queue, but yeah, congrats on that strong quarter. Thank you.

Operator: [Operator Instructions] The next question comes from Paul Hissey with MA Financial. Please go ahead.

Q – Paul Hissey: Good morning guys, couple of questions from me if I can. I just wanted to ask Mick, I guess at a philosophical level when you talk about efficiency gains, and where you’re going to get to over a two-year view, are you talking about, I guess improving the numerator, or the denominator? I guess what I mean by that is, you’re talking about getting more metal by spending the same amount of money, or you’re talking about actually spending less dollar millions each quarter?

Mick McMullen: Well, that’s a good question. We’d always like to spend less money. But I think, off the top of my head, we added around about 20 people in headcount in Q2 relative to Q1. If you cast your mind back to Q1, we actually had a fair bit of broken stock available at the end of the quarter, which didn’t have quite enough operators to actually drag the stuff up the hole to the bottom of the shaft. So, I think we’ve sort of about right-sized the business, in terms of headcount, there’s still a bit of work to do in some commercial areas. Morne’s pretty busy on a few commercial negotiations. And having done a fair few of these turnarounds before, you get to a point where you right size the business, give or take, maybe headcount went down a little bit too much in Q1, but seems to be about right now.

We’ve got the consistency, Rob’s talked about moving those truck movements out of the hole. You get to a point, particularly at elevated metal prices where we’ve got today, you can’t cut your weight to further profitability. So it’s actually about growing your copper units is really the key. And again, we had some metal maintenance challenges in Q1. We actually have several spare trucks. We put them back down the hole. And whilst the utilization on that fleet isn’t as good as it perhaps was before, importantly, we’re moving the dirt every day. And so, when prices are where they are, it’s all about getting the extra tonnage out of the hole and that’s where this consistency part comes in, right? So I think that’s probably the key for us going forward from here is to get more metal out of the hole.

Q – Paul Hissey: Yes. So you’re comfortable with how much, with your cash levels of cash expenditure. It’s not about cutting costs from a spend perspective, it’s about sort of getting more out of what you’ve got in place.

Mick McMullen: Yes, great. Sorry, sorry. Just we, we are continuous improvement people, so we’re always looking for cost savings. We’re always looking to do things more efficiently. But where we are now, the biggest thing for your buck will be to get more production out. And I guess that’s where June has been particularly, May and June. June was a really strong month, but let’s average May and June. That gives us a good indication of what this plant can do or the mine can do on a more — on a regular basis. So that’s our goal now, is to deliver around about that May-June average production.

Q – Paul Hissey: Sure. Okay. Just on the concentrate movement and the presales, I don’t know if the guys asked questions earlier, but can you just remind me of the sort of normal frequency of your shipments? Are these forward sales something we would expect to see frequently? What would normal stock levels be at the port? Can you just give me a bit more background there, Mick?

Mick McMullen: Yes. Looking at ideal world, normal stock is zero but Morné, I might hand over to you and it is a bit lumpy, I will say.

Morné Engelbrecht: Yes. It has been a bit lumpy. We’ve sort of increased the train movements come July. So from July, there will be more train movements going out to port. There’s obviously limited storage at the port, so we need to time it correctly in terms of what sits and the warehouse at site versus port and then the movements are trained as well. Obviously, you’ve got some capacity in those trains as well in moving those concentrate. But in terms of getting to a more normal life level, we sort of expected to by September when we report the next quarter that, that would have normalized in terms of a production versus warehouse versus what’s sitting at port. And then when the ships come in in terms of loading that. So we have worked pretty hard in terms of Mick, as Mick has outlined, the bottleneck has sort of moved on to the shipping side.

So we’re now getting that to sort of work in sync with the production, the increased efficiency there on the production side so that we sort of have a normalized level of production. And then all moving through there and concentrate moving to port as well. So that all line up. So by September, we’ll be in that sort of normalized sort of frame going forward.

Q – Paul Hissey: And just out of curiosity, do you have regular shipments like every fortnight or every month, or the actual vessel sailing somewhat ad hoc?

Morné Engelbrecht: Look, they are regular, but it is sort of — we need to have obviously the concentrated port to load a full load of ship. So that’s about sort of the 10,000 mark. So we need to have that the port to be able to load it. Obviously, so we need to get the time right in terms of getting it there. And then obviously, sort of get the time in right with Glencore in terms of when those ships arrive. So we’ve got a pretty good view in terms of the next couple of months when those shipments are coming. So we are lining it all up. So like I said, by September, all of that should be in a sort of normal cycle in terms of going forward, in terms of normalizing that. So we should see that those lumpiness sort of disappear as we normalize the mining in the milling, the processing and then timing the trains as well. So we’re running two trains a week now from that perspective. So like I said, by September, that should all be normalized and we should all be in sync.

Q – Paul Hissey: Right. Another question probably for you Morné. Just on the balance sheet, I know you guys have been chipping away at potential looking at how you can optimize the balance sheet, what — how is that process going? What does the sort of next 6 to 12 months look like in terms of ongoing payments and in management of the existing facilities?

Morné Engelbrecht: Yeah. Look, I think in terms of where MAC is currently and especially over the last year, we’ve strengthened the balance sheet in terms of where we’re sitting now with the capital raise, which will reduce costs with the mining efficiency per cell production is obviously as we’ve shown in the quarter, we deserve — we have better credits for bank, so we deserve a better deal. So we are out there looking at how we can sort of structure that from a financing point of view in terms of our debt capital and whether we can reduce the margins on those and obviously scope that repayment on that as well. We’ll see where we get to this year but it might be — because they miss debt. We can repay next year June for that 4% penalty.

But that’s how much most expense of debt. So we would want to at least restructure our debt to lower our overall cost of debt going forward. Whether we do it now or next year, I mean that’s to be decided, but we definitely update talking to banks to see whether we can give a better deal now for what is a vastly improved credit proposition for them.

Paul Hissey: Sure. Okay. So watch this space. And last question. I think Mick, for you, when we’ve caught in the past, you’ve spoken about the potential to add, I guess, an additional mining fleet, perhaps higher up in the mine to help get you more or to feel what looks like an underutilized mill at the moment. Is there any sort of update on that potential? Or is that something that perhaps isn’t likely to materialize?

Mick McMullen: I think it’s fair to say that it is likely to materialize. I think when we put the expiration update out sometime in the next week to 10 days when everything is known, that’ll give a good bit of color on that. And as I said, we’ve got this surface drill program underway, QTS South Upper at the moment to really put it all into reserve. There’s a fair bit of work underway on how we’re going to mine that. And so we been a little busy at the mine in Q2 with actually getting our day business running properly. But I think we’re now in a position where we can start really turning our mind to QTS South Upper but I’d sort of suggest watch this space when we put some of that stuff out. What — how’s that process going? What does the next 6 to 12 months look like in terms of ongoing payments and in management of the existing facilities?

Morné Engelbrecht: Yeah. Look, I think in terms of where MAC is currently and especially over the last year, we’ve strengthened the balance sheet in terms of where we’re sitting now with the capital raise, which will reduce costs with the mining efficiency per cell production is obviously as we’ve shown in the quarter, we deserve — we have better credits for bank, so we deserve a better deal. So we are out there looking at how we can sort of structure that from a financing point of view in terms of our debt capital and whether we can reduce the margins on those and obviously scope that repayment on that as well. We’ll see where we get to this year but it might be — because they miss debt. We can repay next year June for that 4% penalty but that’s how much most expense of debt.

So we would want to at least restructure our debt to lower our overall cost of debt going forward. Whether we do it now or next year, I mean that’s to be decided, but we definitely update talking to banks to see whether we can give a better deal now for what is a vastly improved credit proposition for them.

Paul Hissey: Sure. Okay. So watch this space. And last question. I think Mick, for you, when we’ve caught in the past, you’ve spoken about the potential to add, I guess, an additional mining fleet, perhaps higher up in the mine to help get you more or to feel what looks like an underutilized mill at the moment. Is there any sort of update on that potential or is that something that perhaps isn’t likely to materialize?

Mike McMullen: I think it’s fair to say that it is likely to materialize. I think when we put the expiration update out sometime in the next week to 10 days when everything is known, that’ll give a good bit of color on that. And as I said, we’ve got this surface drill program underway, QTS South Upper at the moment to really put it all into reserve. There’s a fair bit of work underway on how we’re going to mine that. And so we been a little busy at the mine in Q2 with actually getting our day business running properly but I think we’re now in a position where we can start really turning our mind to QTS South Upper but I’d sort of suggest watch this space when we put some of that stuff out.

Operator: We have a follow-up question from Sam Catalano with Wilsons. Please go ahead.

Sam Catalano: Sorry, two quick ones just around — just to clarify on the exploration update, you’re planning in the next couple of weeks, that’s just assays, there’ll be no MRE update. And then the second question is just, I wonder if you could speak to the potential for any sort of nuance changes in the relationship with Glencore, given obviously going from two Board seats to one? Arguably the two guys stepping off the Board are very senior members in the Glencore machine and you’ve got a totally new Board member there. Is there anything to read into that at all from your perspective?

Mick McMullen: Well, firstly, no, we’ll only put out a new resource the year-end data cut-off, year-end basically. But I think people will get a flavor from what we release as to directionally where it’s going. No, look in terms of in terms of relationship with Glencore, it’s very good. As anybody who’s had the very detail of the F1, Glencore has a Director right — one Director per 10%. And they had two, they were just over 20% and they’ve gradually diluted down as we’ve done various things. And so it was the appropriate time for us to go back to one Glencore director. And actually, that Glencore director is actually the replacement for one of the other Glencore guys who was actually leaving Glencore. So, and we felt it was appropriate to do it at this point in time, we’ve, you’ll have noticed we’ve just appointed Anne Templeman Jones at the same time, which is again, a very strong director candidate with a lot of banking knowledge in Australia and, also been Audit Chair at Warley.

So we just felt it was appropriate to do it now, and so that’s why we’ve done it now. But in terms of relationship with Glencore, no, I think we have a very strong relationship, they’ve been pre-paying us or pre-selling this stuff for us at site as per the offtake and very, very supportive shareholder.

Sam Catalano: That’s clear. Thanks Mick.

Mick McMullen: And I will say that Mohit who’s joined our Board, we, he’s a new director, but we actually know him very well. He was the two IC on the deal team actually selling the asset to us. So whilst he is a new director, he’s not an unknown to us. We’ve known Mohit for the whole process basically.

Operator: This concludes the question and answer session. I would like to turn the conference back over to Mick McMullen for any closing remarks. Please go ahead.

Mick McMullen: Well look, thank you everyone for all your time. I know it’s gone on for a little bit, but we think it’s actually a quarterly well worth explaining. We’ll get this other update out when we get the final results in here for this expiration stuff. And we look forward to talking to many of you over the coming weeks and months. And thank you everyone for that.

Operator: This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.