29Metals Limited

Thank you for standing by and welcome to the 29 Matters Limited December quarter report. All participants are in a listen-only mode. There will be a presentation followed by a question and answer section. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Mike Sleveski, Group Manager, Investor Relations. Please go ahead.

Thanks very much, Winnie. Good morning, ladies and gentlemen. Mike Sliferski here. Welcome to 29 Metals December quarter and full year 2022 production report conference call. The call is being recorded and will be available for replay via the 29 Metals website and also accessible from the open briefing website. 29 Metals Managing Director and CEO, Peter Elbert, will commence the discussion before passing to Chief Operating Officer, Ed Cooney, who will lead through our operating performance. Ed will pass to our CFO, Peter Herbert, to discuss the financial performance before handing back to Peter Albert to facilitate Q&A. Also in the room is Mark Van Heerden and Cliff Tuck, both of whom will be available during Q&A if you've got any specific questions on exploration and sustainability and ESG. So I'd now like to hand over to Peter Albert, please, to commence the discussion. Thanks, Peter.

Yeah, thanks. Thanks, Mike, and thanks for the introduction. And welcome, everybody. Thank you for joining us this morning. On today's call, we will cover 29 metals performance for the December quarter and group guidance for 2023. You will recall we released an operational update to the market on the 21st of December, which was prior to the finalization of our December quarter results. We'll hear outcomes. Plus, we also released preliminary guidance on the 2023 outlook. Starting with safety, a generally encouraging quarter with our TRIPA, Total Recordable Injury Frequency Rate, continuing to reduce, now sitting below 10 per million person hours worked. And our LTIFR increased as a result of three lost time injuries in the group for the quarter. Turning to overview of production performance, let me say how pleased we are with the performance in the December quarter. At our last quarterly, we were on target to achieve a good finish to the year, especially in zinc from Golden Grove. In the December quarter, for the group, we produced 22,000 tons of zinc, as well as 8,000 tons of copper. Golden Grove produced its highest quarterly copper equivalent production result for the year at 14,251 tons of copper equivalent. Overall, for the group, we incurred net C1 costs of $66 million, down approximately 30% on the previous quarter, supported by strong by-product credits. And whilst absentees and concerns, which were always more prevalent at GG than Golden Grove and Cap Copper, have largely abated, labour pressures remain across the industry. Nonetheless, turnover rates at both operating sites appear to be stabilising in recent months, and we have successfully recruited a number of key roles. The labor pressures have also put significant pressure on contractors offsite and onsite, as well as regulators in both states. In the September quarter, 2022, we signed a new five-year contract with Burncut at Golden Grove, which commenced from the 1st of October, 2022. And we're now in discussions with Burncut in relation to the contract at Capricorn Copper, which comes up for renewal this quarter. And some more details around production. As noted previously, overall production for the quarter was pleasing, enabling us to deliver against or exceed our 2022 guidance metrics. On a 2022 annual basis, 29 metals met or exceeded our guidance for all metals, i.e. copper of 40,800 tons, zinc of 57,600 tons, both within the lower half of guidance as guided earlier in the year. Gold of 26,600 ounces and silver of 1.57 million ounces met or exceeded guidance. The strong finish to production for the year supported copper equivalent production for the quarter of 19,700 tons with full year copper equivalent of 73,400 tons compared to 2021 copper equivalent production of 68,200 tons. Ed will discuss production outcomes in more detail shortly. Turning to commodity prices, copper prices have been slowly but surely climbing during the last quarter, with copper rising from about $3.47 a pound to $3.80 a pound, and more recently as high as $4.28 a pound. Zinc during the quarter was broadly flat at around $1.35 a pound, but has risen in recent weeks to as high as $1.53 a pound. And notwithstanding commodity prices recovering as many industry participants had predicted, our focus in any price environment is on delivering production and managing costs. We remain very positive about the outlook for the commodities we produce, supported by the inevitable demand requirements for copper to support the transition to a greener global economy. Turning to costs, and in relation to costs, net C1 mine operating costs have been well managed with a reduction of about 33% over the previous quarter, supported by strong byproduct credits. This is also evident in the full year results with mine operating costs across the business of approximately $75 million per quarter, yielding a competitive C1 cost of $2.46 US a pound. Capital development, sustainability projects, growth and exploration investment for the year combined at about 112 million Aussie dollars are in the middle of the guidance range with sustainability and growth projects focused on ventilation upgrades and paste plant installation at Golden Grove. And turning to capital investment, capital investment in sustainability and growth projects are investments in our future. A number of key projects have been advanced in the December quarter, including the Paceville plant at Golden Grove has now delivered pace to a number of underground stoves at Gosselin Hill, progressively delivering pace to deeper stoves. The chiller plant at Gosselin Hill was delivered and commissioned by year end, considerably enhancing underground operating conditions. Likewise, at Capricorn Copper, a new chiller plant facility has significantly improved operating conditions at the Mammoth Mine. And new ventilation facilities at both sites have been impacted by breakdown of equipment and commissioning challenges. We're working closely with the vendor to rectify these challenges as soon as we can and as soon as possible. The latest TSF extension at Golden Grove was completed and operational in the December quarter. And the next TSF lift extension at Golden Grove was submitted for approval in the last quarter and in the December quarter and is anticipated to be approved with construction commencing in this quarter, March 2023. The next TSF lift extension at Capricorn Copper was initially submitted for approval in August 2022 and is anticipated to be approved in this March quarter. New high-volume evaporators were commissioned during the quarter and are now operational at Capricorn Copper. Unfortunately, there was a delay due to equipment delivery, but they're now making a significant impact on water management at Capricorn Copper. And the Cervantes and Gosling Valley studies were completed, and the results were leased to the market during the last quarter, December quarter. In terms of financial outcomes, Peter Herbert will discuss in greater detail, but a couple of highlights. Strong revenue of close to $209 million for the quarter. An unaudited net debt of $32 million at year end. Copper hedges now fully closed off with final settlement occurring early in October 2022. And 29 metals paid its first dividend, an interim dividend, two cents per share, also in October. Those are the headline numbers, if you like, for December 22 and the end of the full year. Let me turn to 2023 guidance now, released today with the December 22 quarterly report. In December, we released preliminary guidance for 2023 with an operations update, and guidance released today adds granularity to our announcement late last year. Copper metal guidance of 36,000 to 43,000 tons against approximately 41,000 tons produced in 2022. Thick metal guidance of 54,000 tons to 61,000 tons against approximately 58,000 tons produced in 2022. Gold metal guidance of 20,000 ounces to 23,000 ounces against approximately 27,000 ounces produced in 2022, and silver metal guidance of 1.15 million ounces to 1.33 million ounces against 1.57 million ounces produced in 2022. Guidance for copper and zinc reflects our expectations of the impact from reduction in milling rates of Capricorn copper being implemented to manage tailings capacity as we continue to work through the regulatory approval process for the next planned tailings storage facility lift. The recent ventilation fan challenges at Golden Grove and previously reported shortfall in development advance, particularly during the first half of 2022 at Golden Grove. Guidance for precious metals reflects a great profile of planned ore sources as a result of the direct and indirect impacts of COVID-19 and labor market pressures in 2021 and 2022. And zinc guidance reflects a very strong finish to the month we had in December. Currently, 29 metals anticipates returning to normal milling rates at Capricorn Copper early in the June 23 quarter. In respect of cost guidance, Operating cost guidance at a total of 643 million to 740 million as compared to 2022, total OPEX of 659 million. Generally higher for 2023, reflecting activity and the impacts of cost inflation continuing to be experienced in the sector. Capital cost guidance of a total of $113 million to $143 million as compared to 2022 total capex of $111 million, reflecting investment in capacity and higher capitalized development. Our capital cost guidance for 2023 includes growth capital of between $20 to $25 million associated with early stage planning works on life of mine tailing storage facilities, and a portion of development capital at Xantho Extended, which will support longer term production outcomes as production ramps up from Xantho Extended. Also included in capital cost guidance is exploration costs of between 9 to 14 million, including resource conversion drilling, which was previously reported to sustaining capital. I'll now hand over to Ed Kearney, the Chief Operating Officer on production activities at the two operating mines and exploration activities for the group. Ed will then hand over to Peter Herbert to talk about financial and commercial outcomes. So thank you. Over to you, please, Ed. Thanks, Peter, and good morning, everyone. The December quarter production performance was good with significantly higher zinc, gold, silver, and lead offset by lower copper. At Golden Grove, mining activities, volumes and development events were all higher relative to the September quarter. Production was sourced from zinc-dominant ore sources, consistent with the mining schedule, and at quarter's end there was approximately 70,000 tonnes of ROM stocks ahead of the mill, comprising predominantly copper ore. At the Xantho Extended ore body, a new surface cooling plant was successfully commissioned with encouraging improvements to underground operating temperatures. Overall development advance was pleasing with consistent capital development progress and a significant increase in lateral ore body development relative to the September quarter. Production from each of the stoves at Xantho Extended has performed in line with expectations with good grade reconciliation and geotechnical performance. The pasteball plant commissioning advanced with three stoves now filled higher up in the mine and a fourth stope currently being filled lower down in the mine. And in parallel, underground reticulation was extended further towards the Xantho extended ore body. In terms of the mill, throughput was significantly higher than the September quarter, reflecting higher run time and higher throughput rates as a result of the higher proportion of primary zinc ore milled. which is typically softer than copper mineralisation. Higher feed grades and lower pyrite levels in the zinc feed contributed to higher recoveries, except for copper, which was lower due to the lower copper grades in the zinc ore. Application for a further lift on TSF3 was submitted midway through the December quarter, with an approval anticipated in the March quarter and construction to commence immediately following. This lift is intended to provide approximately two years' capacity, with engineering well-progressed on a fourth and life-of-mine tailing storage facility for Golden Grove. The application for this life-of-mine facility is expected to be lodged later in the September quarter. The procurement of two important new booster fans intended to increase ventilation volumes to Xantho extended and supporting higher mining activities has been delayed. and we are engaging closely with Avendor to manage this delay. Moving on to Capricorn Copper, which had a softer quarter due to lower tonnes milled and lower feed grades. Mining volumes were impacted by poor truck availabilities and ventilation constraints in the sub-level cave, which was driven by commissioning issues with the new surface fans. We have since reinstated underground primary ventilation to partially restore mining activities in the sub-level cave, while the surface fan commissioning issues are resolved during the March quarter. Tons milled were lower, reflecting a planned shutdown, which was well executed. However, runtime was then impacted by a subsequent downtime to replace the trunnion bearing on the sag mill. Feed grades and recoveries were lower due to a combination of lower grade greenstone material in the ore feed and a lower proportion of higher grade material from the sub-level cave. The approval process for the next lift of the Esperanza TSF remains ongoing with milling constraints being implemented during the March quarter as the process continues. And post quarter end, in line with planned reduced processing in the March quarter and coinciding with heavy rainfall, the site team took the opportunity to release treated water consistent with the site's environmental permits. And positively, three new high efficiency evaporators were successfully commissioned in early December. These have significantly higher flow rates relative to the previously installed equipment and will contribute to reduce the volume stored water on site. And additionally, two rental surface chiller plants were also commissioned with encouraging improvements to underground operating temperatures at mammoth or body being measured. In terms of exploration, during the quarter, drill testing and resource conversion drilling continued at both Capricorn Copper and Golden Grove. At Golden Grove, drilling at Cervantes continued in the December quarter with a focus on upgrading the mineral resource category within the central portion of the ore body, as well as testing for potential mineralisation to the north of the interpreted feeder position. Drilling is proceeding well and will continue into the March quarter. The results of the bulk of the Cervantes drilling conducted in the December quarter is expected to be included in 29Metal's update on mineral resource and ore reserves estimates, which are expected to be reported in the March quarter. Xantho extended resource conversion and extension drilling targeting the deepest parts of the known Xantho extended resource was concluded in the December quarter, and the ore body remains open down plunge with drilling activities planned to resume early in the June quarter. Exploration activity at Capricorn Copper during the quarter also included regional drilling and ground-based geophysical surveys across multiple prospects on the exploration leases. Surface drilling at Esperanza South continued in the December quarter, targeting approximately 100 metres downslunge of the mineralised intercepts from the drilling reported previously in the September quarter. And this drilling will conclude early in the March quarter. Underground drilling was conducted across Greenstone, Mammoth and Esperanza South in the December quarter and assay results are pending. At Redhill, there was limited activity during the period, reflecting the seasonal nature of the exploration work in the southern part of Chile. I'll now hand over to Peter Herbert to discuss the financial outcomes of the quarter.