29Metals Limited

Thank you for standing by and welcome to the 29 Medals June quarter investor conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Michael Sleferski, Group Manager of Investor Relations. Please go ahead.

Thank you, Darcy. Good morning, ladies and gentlemen. My name is Mike Sliperski. Welcome to 29 Metals' second quarter conference call. The call is being recorded and will be available for replay via the 29 Metals website and the Open Briefing website. 29 Metals' Managing Director and CEO, Peter Albert, will commence the discussion before handing the Chief Sustainability Officer, Cliff Tuck, to talk to Sustainability and ESG Activities and Achievements. This will then pass to our Chief Operating Officer, Tim Cooney, who will lead you through our operating performance, and then Ed will pass to our Chief Financial Officer, Peter Herbert, to discuss financial performance before handing back to Peter Albert to facilitate questions and answers. Our Group Exploration Manager, Mark Van Heerden, is also on the call to address any exploration questions during Q&A. So I'd now like to hand over to Peter Albert to commence the discussion. Thanks, Peter. Thanks Mike and thanks for the introduction and welcome everybody and thank you very much for joining us this morning. Mike's already done the introductions so I won't do that again and I'll go straight into an overview of the quarterly results and then as Mike said I'll hand over to Cliff, Ed and Peter Herbert for a bit more cover in each of their specific areas. First of all, as always, safety and health. There's been a significant improvement in the safety performance over the quarter, especially at Capricorn Copper. This has been especially pleasing given the labour challenges we've experienced across the business during the quarter. The West Australian Inquiry into the Sexual Harassment on FIFO Sites released its second report in June. We're in the process of reviewing this report to understand any areas of our operations in which we could improve. Our indivisible working group comprising members from across the business has been active in identifying improvement opportunities. I'm pleased to say that we do not appear to have any endemic or specific concerns at either operating site, although we will always remain vigilant and demand that our values, commitments and policies are well articulated, shared and adhered to. COVID cases have continued to be a part of our lives at 29 Meadows but pleasingly numbers on site have been contained to a handful at any point in time. Absenteeism due to COVID and other winter illnesses has caused operational challenges exacerbated by labour pressures especially in WA. Nonetheless our overall performance has been very pleasing which I'll come to shortly. In our quarterly, you will read a fulsome report on our sustainability and ESG activities during the quarter, which follows on from 29 Metals, our approach to sustainability and ESG, released in May. Cliff Tuck will elaborate shortly. I'm pleased to advise that Tara Garup joined us this week as a group manager of sustainability and ESG. Tara brings a wealth of experience and capability in this area and we are looking forward to significantly progressing our activities in this space in months to come. A highlight for me personally was attending the smoking ceremony at Capricorn Copper, a great experience helping to build our relationships with the Kalkadoon people. Also very pleasing was the attendance and participation of a large number of our team members at this event. Notwithstanding the multiple challenges relating to absenteeism, COVID, inflation and labour market pressures which continued to impact the whole industry during the last quarter, 29 metals performance was solid. Copper production at 11,100 tonnes was an almost 20% increase on Q1. While zinc production, which is weighted to the second half of the year, was 10,800 tonnes, a decrease of approximately 12% on the prior quarter. Overall, on a copper equivalent basis of 18,200 tons, production was up by 15%. Importantly, our guidance for the year remains largely unchanged, with reduced zinc TC costs, a reduction in precious metals production, and a modest $2 million increase in growth capital. Ed will discuss the production outcomes in more detail. Overall, we have delivered a solid quarter two result, and with some of the external factors predicted to abate in the balance of the year, we should continue to see good performance. Indeed, whilst we are still very early in quarter three, Capricorn Copper specifically has had a very strong start in respect of copper production. Commodity prices, of course, fell back during the second half of the quarter, which have had an impact on revenue, notwithstanding the improved production result. And whilst 20 Iron Metals is, of course, a taker of prices, we remain, like most commentators, bullish on the long-term outlook for energy transition metals, and especially copper. Our focus in any price environment is on delivering production and controlling costs. In relation to costs, despite industry-wide costs and inflationary pressures, our costs have been well managed across the business. The operating conditions we experienced in late 2021 informed our expectations for this year and largely played out as expected, albeit some costs have been higher than we had anticipated, such as, for example, diesel. High-grade underground mines typically consume less diesel and power, which is, of course, a competitive advantage for 29 Metals. Nonetheless, we recognize that our unit costs on a backward-looking basis are relatively high compared to current commodity prices. This is a reflection of 29 Metals committing to capital projects to ensure the long-term sustainability and growth of the business. Noting that the 29 Metals AISC reported numbers are almost a complete see-through to total business costs. With higher production in the second half of the year, unit costs will reduce, and if required, we're able to optimize our capital spend to further enhance unit costs. Access to labor and labor costs have remained a significant issue for the industry, with almost historical low unemployment rates prevailing across the country. 29 Metals remuneration, attraction and retention strategies are continuously reviewed and updated as necessary and we have been successful in balancing business costs whilst retaining our teams and recruiting new members as required. In relation to my prior comment regarding investing for the future, a number of key projects have been advanced in the June quarter. including the Paceville plant at Golden Grove, now being commissioned with the first place to be placed at Gosselin Hill in August. The ventilation upgrades that have been completed in recent months are now delivering cooled air direct to the Xantho Extended Mining Front. The Chilling Plant and booster fans at Gosselin Hill have been ordered and due for delivery by end of the year, which will further enhance operating conditions at Xantho Extended. The next tailing storage facility extension at Golden Grove is underway and is due for completion in the December quarter. The Cervantes PFS is well advanced and will be completed in the September quarter. At Capricorn Copper, the new ventilation shelf has been concrete spray lined and the new fans installed and will be commissioned in this September quarter. Exploration activities at all three sites continue during the quarter and we anticipate providing a more fulsome report early in this current September quarter. In terms of financial outcomes, I've reflected on revenue previously and Peter Herbert will talk in more detail about those outcomes, noting that we will be releasing our half-year results in late August. I'll now hand over to Cliff Tuck to give us a bit more color and insight to our sustainability and ESG report and some of our plans for this year. Then Cliff will hand over to Ed Cooney, the COO, on production activities of the two operating mines, and Ed will then hand over to Peter Herbert on commercial and financial. So over to you, please, Cliff. Thanks, Peter, and good morning, everyone. In the quarterly report released today, we've outlined our sustainability and ESG activities during the quarter, including our progress against the priorities for 2022 that were outlined in our annual report. The presentation of sustainability and ESG in the quarterly report has been updated to reflect the 29 Metals, our approach to sustainability and ESG, as launched in the annual report. In this way, and on an ongoing basis, 29 Metals seeks to report its performance and activities as it has on previous quarters, as well as outlining progress against our sustainability and ESG priorities for the year. As you'll see from the quarterly, there was a lot of activity during the quarter, with the First Nations Welcome to Country and Smoking Ceremony at Capricorn Copper in June, as mentioned by Peter, a highlight, both from the perspective of engaging with our First Nations stakeholders and also because of the enthusiastic participation and interest shown by our workforce. Events such as these provide a strong foundation for a long-term sustainable relationship with the custodians of the land where we conduct our business. Waste and water management at both operating sites remains a key priority, with activity on both fronts and the formulation of further initiatives to reduce waste notable across both sites. Pleasingly, as shown in the report, we've also made progress against all of 29 Metals' published 2022 Sustainability and ESG priorities. This has included commencing work on better understanding Twin Iron Metals emissions profile to inform how we look at emissions targets under our CCSD roadmap, also launched in the annual report. Our work to promote a safe and inclusive workplace progressed on a number of fronts during the quarter, with improved safety performance reported, as well as activity to identify potential barriers to an inclusive workplace environment, and rolling out 29 Metals policies regarding workplace behaviour and code of conduct. In that rollout, we've highlighted the support available to our workforce and the different mechanisms through which concerns may be raised if they arise. Workplace behaviour remains an important topic for all of us in the sector. We're working through the findings and recommendations of the second report of the WA Parliamentary Inquiry regarding sexual harassment against women in FIFO, released late in the quarter, so that we can identify any opportunity to enhance our workplace environment and safeguard against the sorts of behaviours that have been highlighted by the inquiry and media. In summary, a lot of activity across sustainability and ESG at Tweenine Metals and with more to do. As Peter mentioned, we have bolstered our internal capacity to further shape and implement Tweenine Metals' strategy in this space with the targeted recruitment of our first group manager, Sustainability and ESG. We're very pleased to have welcomed Tara to the team this month and look forward to working with her and the broader management team as we move forward. We look forward to updating you and the market further in future quarters as we advance our approach to sustainability in ESG and with that I will hand over to Ed. Thanks Cliff and good morning everyone. In terms of production as Peter mentioned the June quarter saw an improvement on March quarter's performance with metal production of both operations higher. Copper, gold, silver and lead were all higher with zinc lower. At Golden Grove, mining volumes were lower relative to the March quarter, largely as a result of ongoing related absenteeism levels, combined with a difficult labour market, particularly in WA, and exacerbated late in the quarter by seasonal winter illness. The labour market in general remains challenging, however 29 metals, along with our contract partners, continue to both attract and retain good people. To better manage available resources we have adjusted our operating plans to exploit all sources nearer to surface where ground support and truck haulage requirements are both lower. Some of these sources do contain lower precious metal by-product credits which has contributed to the updated guidance range for gold. Ventilation upgrades remain a key focus for us, with further progress made during the quarter. We have now established fresh air delivered to the Zanto extended decline phase, which has significantly improved operating conditions. And as a result, we do anticipate advance rates in the decline to improve during the second half as a result. In terms of the mill, throughput was marginally lower than the March quarter, which was impacted by a higher proportion of relatively harder copper ore. and some additional planned downtime due to labour availability. Mill tonnes were higher than mine tonnes, reducing surplus rum stockpiles. During the March quarter we sustained a failure of our zinc regrowing mill. Sourcing replacement components and labour to rectify the tissue has taken markedly longer than anticipated. However, maintenance activities to reinstate the mill have commenced during the June quarter and we expect the mill to be reinstated in the September quarter. Moving on to Capricorn Copper, we produced higher copper metal production relative to the last quarter on the back of improved grades. Mining volumes improved as a result of both lower absenteeism rates and a moderation of seasonal factors experienced earlier in the year. On the back of good mining performance, we ended the quarter with good ROM stocks ahead of the mill. Grade mines also improved relative to the March quarter, largely due to improved grades from the Esperanza South sub-level cove. Ventilation projects advanced with the installation of two new surface fans following completion of the vent shaft and commissioning of the fans as expected imminently, which will serve to improve operating conditions at the lower operating levels of Esperanza South. In terms of the mill, volumes were marginally lower than the March quarter due to higher than planned downtime and reduced throughput rates associated with a higher proportion of barred ore types. Feed grades and recoveries both improved relative to the March quarter. Moving on to exploration, during the quarter drill testing of prioritised areas continued at both Capricorn Copper and Golden Grove. along with regional drill testing of the eagle's nest and grey ghost targets at Capricorn Copper, and completion of field work for the season at Redhill in southern Chile. At Golden Grove, drilling of Cervantes ore body below scuttles continues to deliver good results, with a focus on infill drilling the upper extents of the ore body. Drilling below the ore body indicates further extension drilling is warranted. Drilling will continue in the September quarter. Drilling also took place at Xanto Extended targeting the conversion of the deepest parts of the known resource and this highlighted opportunities to add to the mineral resources estimated down plunge and a long strike. An extension drilling also occurred at Conterville north of Gossam Valley. These holes focused on testing south of the existing mineral resource estimates towards Gossam Valley. This drilling has not intersected any significant sulphides and has concluded for the year. Contaville does remain open down punch. So drilling is planned to occur at Xantho Extended, Cervantes, Oizon, Cougarmont and Xantho Extended North during the September quarter. At Capricorn Copper, near-moline surface drilling focused on Esperanza South with a combination of resource conversion and extension drilling undertaken in the quarter. Results of this drilling have been very favourable and warranted commitment of an additional $2 million to expand this program and continue drilling into the September quarter. Underground drilling also occurred across the three old bodies, Greenstone, Leather and Esperanza South. Regionally, drilling occurred at Grey Ghost with three reverse circulation holes completed and assay results pending. Drilling at Eagle's Nest also commenced in the June quarter and continued into the September quarter with a total of three holes planned. Looking forward, planned regional activities for the remainder of the year include ground geophysics at six regional prospects as well as some minor drilling at Merlo and Coshy's East prospects. At Redhill, the field season has now concluded. In total, 390 tree holes were completed using portable small drills to obtain rock samples below the peak cover. Field mapping was also completed, identifying other prospective veins of cutters and unglaze. Rock samples from this mapping campaign have been sent for assay. A drone-based magnetic survey was also conducted as part of the field season. All assay results are expected to be returned in the September quarter. I'll now hand over to Peter Herbert to address the financial outcomes across the business. Thank you, Ed. Starting with revenue outcomes for the quarter, the 29 metals revenue of $165 million in the June quarter declined on the March quarter results reflecting flat copper sales for the quarter with increasing copper volumes at Golden Grove offset by lower volumes at Capricorn Copper. Lower sales of zinc and silver, partially offset by higher gold sales in the June quarter, and lower prevailing commodity prices, resulting in a materially negative QP adjustment of approximately $44 million on realized and unrealized sales. Turning to costs, group site costs in the June quarter were approximately $5 million higher than the prior quarter, reflecting increased costs of diesel. At Capricorn, higher mining activity levels and a planned mill shutdown completed during the quarter. and at Golden Grove, a write-down of obsolete stock and other G&A expenses. Group C1 absolute costs were approximately $8 million higher than the March quarter, reflecting the highest cost just discussed. A stockpile credit of approximately $12 million, reflecting the timing difference between higher production and sales, and lower by-product credits due to lower sales of zinc and silver and reduced commodity pricing during the quarter. Group transport and TCRC costs were flat quarter on quarter. Group AISC absolute costs were $2 million higher than the March quarter, reflecting the higher C1 costs, partially offset by lower royalties, sustaining capital and capitalised development. AISC unit costs of $3.57 per pound US were marginally higher than the March quarter, reflecting cost outcomes and flat copper sales for the quarter. Unordered cash at 30 June was approximately $228 million, an increase on the unordered cash balance at 31 March of $188 million, reflecting a strongly positive working capital movement due to the timing of sales prior to the end of the quarter and the reversal of working capital which accumulated during the March quarter. The settlement of approximately $11 million out of the money hedges and a positive market to market of approximately $8 million on US dollar denominated cash balances. Following the hedge settlements in the June quarter, approximately 3,200 tonnes of pre-IPO copper hedges remain in place, all of which will crystallise in the September quarter. Drawn debt remained constant during the quarter at US $150 million. 29 Metals will make its first principal repayment of its term loan facility at the end of the September quarter. And finally, following further engagement with the WA Office of State Revenue, 29 Metals expects to receive an interim assessment of stamp duty payable in connection with the acquisition of Golden Grove during the September quarter. As a reminder, 29 Metals recorded an Aussie $26 million provision in relation to stamp duty in its four-year account released in February.

Thank you for your time. Back to you, Peter.