MAC Copper Ltd (MTAL) 2024 Q2 法說會逐字稿

Thank you for standing by. This is the conference operator. Welcome to the Metals Acquisition 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. (Operator Instructions)

I would now like to turn the conference over to Mick McMullen, CEO of Metals Acquisition Limited. Please go ahead.

Thank you, and thank you, everyone, for joining us, good evening in North America and morning in Australia. This is the Metals Acquisitions 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 be speaking.

So I'm obviously Mick McMullen, I'm the CEO, I'll run through the highlights. 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 color 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 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 quarterly is 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 on the 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 $1.92 a pound. And our average realized price was broadly in line with spot at $4.41 a pound.

The balance sheet portion, we've got some slides coming up, and I think I'll let Morné 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 the slides, we actually had the processing plant down for clearly 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 in the marketplace between 38,000 tons and 43,000 tons 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 any impour we made successful in managing demand 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 in line with the annualized $52 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 the scorecard 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 turn around, which was still 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 made some additions to the Board today, and we've welcomed on a very strong candidate, Anne Templeman-Jones, to the Board. And that sort of also being in line with our diversification, 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.

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 slide 8 and 9 at the same time, which covers the sort of cash flow waterfall for the quarter in US dollars and then also 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 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 stamp duty 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 for Q1 on the Mezz date as well as almost $5 million or AUD7 million captured in Q2 as well.

Also key here is that we have some 24,000 dry metric tons of concentrate at site as at June 30, 2024. So due to this large component of concentrate produced but not sold, we decided to presell a portion of this preset June 30, 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, risk 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 for the half year.

Another key point I wanted to make is that we still had some 8,000 dry metric tons 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 June 30, 2024.

The other key elements of the cash flow to note is the sustaining CapEx. As Mick mentioned, it's almost $13 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 $14 million, which as I noted before, includes USD35 million in relation to Q1 interest on the Mezz date.

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 $88 million in cash, as I said, with further liquidity of around USD46 million, which includes the undrawn $25 million revolving facility, and as I mentioned, the $21 million of unsold concentrate ready for shipment at June 30. 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 carve out 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 15 million private and public warrants with almost 100% redeemed through a cashless redemption mechanism that's available in those warrants.

So we issued around 4.7 million shares to redeem those 15 million warrants. We're only some [1,026] warrants exercised from cash holders -- for cash by holders. And then some 27,000 warrants redeemed for $0.10 each by the company. Overall, this now means that we have 74 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 this, our net debt, which reduced further over the quarter to some $320 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.

Yeah. Thanks, Morné, and I guess it was a strong both production and cash flow quarter. And we're 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 in C1. I think just some of these comparative graphs are useful that people can take away and sort of do a little 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 1,600 tons of copper in the month of April due to that plant shutdown, but yet we still managed to come out with a C1 of the USD1.92 a pound. And Morné, 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 operate at. And 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 being 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, Morné? I touched on the grade, you know, obviously, grade was a little down in Q1, really as a result of sequencing through the east and west deposits. And we've talked in the past about a small number of relatively high grades stopes will drive the production for this mine and which just happen to be a few of those in Q2.

And I think some of their mining practices have improved the dilution control a little bit, which is also helped with the grade. So again, very pleasing to see the grade at that. You know the average grade that we 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. It's a combination of -- we don't include rehabilitation meters in that and the new reserve were sort of by the end of June, the decline was within about 65 meters for 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. 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 volumes started to pick up a little bit. We have the full detail table of mine and build by period in the quarterly report that's been released. But we're 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 started to roll over a bit as we sort of reallocated some stuff back in the mining and processing. And pleasingly now, 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 projects 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.

We can go to the next slide. Again, tons milled per employee, sort of flat, up slightly, sustaining capital down slightly as we did incur the spend on the float bank replacement project in the mill. Tailings dam works were 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 rates 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 tons per annum annualized 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.

Yeah. 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 the whole 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 field leadership training program.

That's predominantly aimed at our leaders within the business. Look at some workplace coaching, some increased safety presence, both underground and on the surface. So these measures, they're not only designed to address the recent TRIFR 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, although TRIFR, which was disappointing, I am proud to say that we had a 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'll have heard throughout the presentation, I guess, we have strategic plans for future expansion, production increases at CSA itself and the TSF lift that 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 there from Stage 9 lifts, 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 high standards of our environmental compliance.

Move to the next slide, please. I'll try and add some color, as Mick indicated before, from an operational point of view, consistency is our key. Specifically speaking there to 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.

Put simply, with 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 cycle of 52 tons to 54.5 tons per load and the quantity of loads from around 62 to 72. In context, that significantly translates into 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 with 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 12,500 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 oil production exceeded 100,000 tons, respectively, demonstrating that we can perform at 1.2 million tons plus annualized rates mining at depth.

Next slide please. We'll talk briefly to the April shutdown. Mick indicated there wasn't an overly pleasing month in April 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 the operation.

We did complete -- there were seven separate projects, if you like. However, the one that you see here in the pictures on this slide is (inaudible) So that infrastructure is 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 bound to fail at some point. So it's a completely new unit with a (inaudible) 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 there's six additional programs that they like have been completed in that 10-day shutdown. I guess just to pass through those relatively quickly, all of the programs there that we did complete in10 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, (inaudible)

We replaced six of our head ropes because they were nearing the end of their life also. Some critical works obviously carried out on a grinding media loading system, in particular, on mill 2. It was end of life, but also, there were safety and operational efficiencies picked up in that upgrade.

Finally, we had a transformer replacement, which is basically future proofing our operations. So mill 3 transformer, it was updated with the replacement which prepares our plant for installation of a larger motor when required to increase our throughput and support our future production goals. (inaudible) moving again, all these projects are managed in-house to be completed relatively safely 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 depth which is critical obviously to future proof our operations and for the safety of our employees who are underground working at depth.

So in the 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 an upgrade is executed, given that the existing network does not allow for sufficient -- it's basically mine air exhaust, can continue to mine at depth.

We have pivoted in terms of our mine plan and we will reallocate 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, sort of, projects execution. And pleasingly, these results have yielded relatively positive and our decision to offset the 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 will allocate those resources from the main mining areas to this capital vent projects.

And we do aim to have this project completed by mid-2026. It 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 mining rates up to about 1.7 million tons per annum, obviously, then significantly enhancing operational capabilities and our safety standards mining at depth.

All right. Perhaps we can move to the next slide. So look, we've flipped the guidance out before, as Rob's talked to, with -- as part of this new mine plan, we sort of 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 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 AUD42 million project which is the ventilation project. Everything else we're doing on the mine is very small incremental capital, and in general, the mines 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 plan 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 at half or less than that. But we did have several days in a row during the month of June where were testing that when we had both lots of tons and lots of grade.

So it's pleasing to know that we had the infrastructure to do this. We actually have the ore bodies to do it. We will be putting out a separate expiration update probably early next week once all the data has been received.

But I think it's fair to say 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, 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 tick up production.

I would say that due to the US rules, the guidance that we've put out doesn't really include anything from QTS South Upper in it, that is an inferred category mostly. We have a 25 hole surface program targeting that right now with the view upgrading that to at least indicate it, and then we can sort of talk about that a bit more.

But yeah, 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 have a plan 10-day shut for the mill at the start of April.

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

(Operator Instructions) Daniel Morgan, Barrenjoey.

Hi, Mick and Tim. First question, just the balance of the year, what do you expect in terms of tons and grades relative to this quarter? I understand again, you've got a high degree of broken stocks at the end of the quarter. Thank you.

Yeah. Look, we do I would say again, I think somewhere in there we say, these turnarounds aren't linear. But I would think that Q3 probably possibly slightly weaker (inaudible) 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 [landing areas, I suspect].

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? Can you just expand on the terms of the presale? Thank you.

Morné, I might hand that one to you.

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're load it on the ship and then there's obviously a key 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 that sort of loading on the ship.

So some of that be presold has already been shipped by the end of obviously June and then most of it would have been shipped already end of July and then some coming first week and all this sort of thing. But so all of that is sort of working its way through now.

Thank you. And just you mentioned in the report on dilution that that was managed a bit better than prior periods. Was there any positive reconciliation against what was expected for the oil growth?

A little bit is the short answer. It wasn't a huge driver. Our dilution was a little bit better. And they've tried a couple of different firing methods in some of the stoves, which sort of actually pull some of that out a fair bit faster. That was probably one of the key drivers in the course. There was one main stove that they managed to pull out about four months quicker than the original plan.

Thank you. And just the last question is just on the ventilation project, which you've earmarked for completion in mid-2026. You've obviously got production guidance lifting in '25 and '26. Presume this means that the ventilation project is broken up into many, I guess, subprojects, little projects, and so as you do have improvements in ventilation through time. It's not just a binary once we get to '26, it's improved.

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 month that are a bit less vent constrained.

Okay. Thank you so much.

(multiple speakers) no single one silver bullet. It's a combination of all of the above.

David Radclyffe, Global Mining Research.

Yeah, hi. Good morning, Mick, Morné, 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, is that sort of $50 million a year?

So when we think about the spending for the ventilation project, would that be within that number going forward or is it additional when we spread it equally over the period or is it a bit lumpy? Just trying to get an idea of that profile.

It's incremental. There's not been a lot of spend on it right now. So it's all lot dropped into sustaining. But it'll be -- as per the ASX prospectus use of proceeds, that AUD42 million will -- is in growth CapEx. And if so, if you roll forward to next year, sustaining CapEx is actually down slightly. It's, I don't know, in the order of USD45 million, give or take. But you'll have, let's call it, AUD20 million worth of capital on that vent project.

Okay, that makes sense. Thank you.

Then just you mentioned some changes to the mine plan to allow for the ventilation a little bit. Previously, you mentioned that the better grades were expected Q2 -- Q3 this year, given the very strong grade in Q2. Is that still the case? I'm just trying to think about what that profile looks like for the balance of the year.

Look, I think the mine plan that we've published as part of the technical report, that's the most recent one that's out in the marketplace that's been published in the US. That takes into account this ventilation project. And so effectively, you've got a bit of a lower tonnage or 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 pretty good grade, but more tonnage obviously to get to metal units out. So I think for now, we're not changing any guidance. So if you're still doing an average of 3.7% to 3.8% for this year copper grade, I think you'll be about right.

Thank you. Maybe just one last one.

I thin k it's a little too early. Sorry. It's a little too early to change or modifying factors on the reserve based on one quarter. Now we did do better on dilution. We did do 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 resource reserve upgrade, right.

Yeah. 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? And 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 million tons capacity post ventilation and 2026. So did this quarter give you confidence when you were testing the spin capacity that it can do that 1.7 million tons plus, given the changes you also made?

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 million tons, 1.43 million tons a year. But based on particularly June, when the 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 will -- is capable of doing, if we can feed it with the ore 4,500 tons, 5,000 tons 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 scopes available or development available to then not having enough trucks available to then getting them up the shaft.

And in really in the month of June, in particular, the bottleneck has actually moved through the plant and there's been a whole pole of niggling things to sort out in the plant to actually run it at that. And that has successfully done that now.

And now the bottleneck actually is moving all this concentrate off site with (inaudible) so it's a good problem to have. There's all this copper laying around everywhere. That's why we're pre-selling it. But 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.

Sam Catalano, Wilsons.

Just a quick one on the on the ventilation project. You obviously mentioned you started a lateral development for that project, but over the two-year time frame to completion, when are you expecting to actually do the raise 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 critical path component of the whole project. So just wondering when that's going to take place.

Good question. I'm not sure if Rob is still on or not. He was getting kicked off the call for some reason. But it's probably not inside the next nine months, I would think. For that raise, we'll 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, though almost all the way through. The key difference, though, is that the ground conditions are just -- like 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.

You know, mining engineers love to design stuff right next to where you're mining. That'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 best chance of getting it there, the cheapest, the quickest, and also the best chance of success.

So more than likely then back end of '25 likely for that raise will work.

I will be starting before then. But yeah, somewhere in '25. I don't think it will -- I think we'll get to it in '24.

Eric Winmill, Scotiabank.

Oh, hi, Mick and team. Thanks a lot for taking my question and nice to see the strong results this quarter. I just wanted to follow up on the comment in the presentation. You talked about this double lift opening strategy. Just wondering sort of when that came in, how much of that was in the quarter, what the decision was to go with that? Maybe any more details would be helpful. Thanks.

I might pass that over to Rob, if he is on. I can see you on, can you take that one?

Well, he's been kicked out for some reason. I think we did it somewhere in the May -- roundabout May. And yeah, it's been very successful. Low dilution dragged forward the stock significantly. So again, from a -- we want to be applicable for every stope.

But for certain applications, it stopped the ability to significantly drag forward metal from memory. That stope was running a bit over thoughts in copper. And so dragging forward something by four months that's running at that drag, clearly, is beneficial for your production. Time is money.

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?

Too early to tell. We're just out on tender on it at the moment on the two different designs. It's probably really -- it's really cool discussion, I think.

(Operator Instructions) Paul Hissey, MA Financial.

Couple of questions from me if I can. I just want to ask Mick, I guess, at a philosophical level, when you talk about efficiency gains, 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?

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 have 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're about right size the business. In terms of headcount, there's still a bit of work to do in some commercial areas. Morné is pretty busy on a few commercial negotiations. And having done a fair few of these turnarounds before, you get to a point where you've right size the business, give or take, you know 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, whereas we've got today, you can't cut your way to further profitability. So it's actually about growing your copper units is really the key. Again, we had some 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.

Yeah, 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 getting more out of what you've got in place.

Yep. Great. We're -- sorry. 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 bang 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 level.

Sure. Okay. Just on the concentrate movement and the presales, I know a couple of the guys asked questions earlier. But can you just remind me of the 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?

Yeah. Look, in an ideal world, our normal stock is zero, but Morné, I might hand over to you and it is a bit lumpy, I will say.

Yeah, it has been a bit lumpy. We've 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 ports, so we need to time it correctly in terms of what sits in the warehouse at site versus port. And then the movements are trying as well. Obviously, you've got some capacity on those trains as well in moving those concentrate.

But in terms of getting to a more normalized level, we expect it 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 moved on to the shipping site. 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 have a normalized level of production and all moving through the -- and concentrate moving to port as well. That all line up. So by September, we'll be in that sort of normalized frame, going forward.

And just out of curiosity, do you have regular shipments like every fortnight or every month or the actual vessel sailings somewhat ad-hoc?

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 the 10,000 mark. So we need to have that at 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, get the timing right with Glencore, in terms of when those ships arrived. 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 by like I said, by September, all of that should be in a normal cycle in terms of going forward in terms of normalizing that. So we should see those lumpiness 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.

Right. Another question, probably for you, Morné. Just on the balance sheet, I know you guys have been chipping away at potentially looking how you can optimize that balance sheet. What -- how's that process going? What does the next 6 to 12 months look like in terms of you know ongoing payments and in management of the existing facilities?

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 you know, 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.

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?

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.

Sam Catalano, Wilsons.

Yes, thanks, Mike.

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?

Well, firstly, no, we'll only put out a new resource the year end data cut off, yearend 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 we felt it was appropriate to do it at this point in time.

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 has also been auditor at [Wooley].

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

That's clear. Thanks, Mick.

And I will say that Mohit who has joined our Board, he is new to us 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 has a new director, he is not an unknown to us. We've known Mohit for the whole process basically.

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.

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 that 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.

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