29Metals Limited

Thank you for standing by and welcome to the 29 Medals Limited June quarter webcast and 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 one on your telephone keypad. I would now like to hand the conference over to Mr. Mike Silferski, Group Manager, Investor Relations. Please go ahead.

Thank you, Melanie. Good morning, ladies and gentlemen. My name is Mike Sliperski. We will be speaking to 29Metal's June quarterly report, which was released to the ASX this morning. The call and parallel webcast is being recorded and will be available for replay via the 29Metal's website and the Open Briefing website. 29Metal's Managing Director and CEO, Peter Albert, our COO, Ed Cooney, and CFO, Peter Herbert, will each lead you through the June quarterly highlights before we open the call for your questions. So now I'd like to hand over to Peter Albert to commence the discussion. Thanks, Peter.

Yeah, thanks, Mike, and welcome, everybody, and thank you for joining us this morning. The June quarter was predominantly focused on Capricorn Copper and getting ready for a restart in the third quarter, as well as advancing the de-bottlenecking activities at Golden Grove for the acceleration of production in the second half of the year. I'll come back to specific activities shortly. As always, safety and well-being at 29 Metals is our primary focus. TRIFR tripper remained largely stable during the quarter, although we did have one lost time injury. Of course, there's no production yet to report from Capricorn, as we're still in suspension. Golden Grove ramped up production in quarter two as compared to quarter one, largely in line with our plans. Copper production at 4,200 tons was a 31% increase on Q1, and zinc at 13,400 tons was a 54% increase on Q1. Gold and silver production also increased against Q1. The two key drivers for the increase in production were firstly, the release on the mill throughput constraint following approval of the TSF3 lift approval in late April, and secondly, the improved production from Xantho Extended. All production from Xantho Extended was 76,000 tonnes, a 73% increase on Q1. We also achieved a significant increase in development metres at Xantho Extended to 570 metres from 410 metres in Q1, i.e. a 39% increase. Importantly, this increase in Xantho Extended development is before the ventilation updates and upgrades with the new booster fans, which will come online this quarter. Ed will talk to the booster fans in more detail shortly. We have provided an update to guidance today, guiding copper and zinc to be in the bottom half of guidance and adjusting our guidance for gold and silver to 15,000 to 17,000 ounces and 750,000 to 850,000 ounces respectively. Whilst gold and silver production remains weighted to the second half as previously guided, The lower gold and silver production in the first half has resulted in guidance for the full year being revised. Cost guidance, including Capricorn copper recovery costs, remains unchanged. Absolute site costs in Q2 were reduced as compared to Q1, despite the increase in activity levels. This is, again, despite continuing inflationary pressure and reflects early results of the cost-out program we are implementing. Peter Herbert will talk to some examples shortly. C1 and AISC costs are recorded as increases on Q1, driven by a number of factors, notably reduced byproduct credits as a result of lower prevailing zinc prices and higher charges related to movements in stockpiles, with a significant increase in Golden Grove concentrate stocks sold during the June quarter. Golden Grove, of course, by its very nature, is always lumpy in terms of cost outcomes, and we would not expect Q2 outcomes to be reflective of full-year performance. Looking at longer-term operational de-risking projects, and besides the Xantho extended booster fans, we are focused on life of mine tailing storage facility submission to the regulator in this third quarter, and the Gossan Valley submission, which is slightly deferred to the fourth quarter this year. We continued conversion drilling activities at Cervantes during the quarter, with approximately four kilometers of our seven-kilometer program for 2023 completed so far. The focus of this program is to convert a significant proportion of current inferred resources into indicated in order to inform feasibility studies for the project. This would likely occur in the second half of 2024 after release of our next update of mineral resources and oil reserves estimates early in the new year. At Capricorn Copper, our focus has, of course, been on recovery. We've planned activities for the first phase of the restart of operations on schedule. In the first instance, this will be a restart of the mammoth and greenstone mines and process plant in this current quarter that we're in today, with planned commencement of dewatering of Esperanza South in the fourth quarter of this year. Towards the end of the last quarter, the regulator, the Department of Environment and Science, DES, requested additional technical information for the purposes of the approval of the ETSF lift. The further extended approval process obviously puts additional pressure on tailings storage capacity. However, given reduced throughput as well as the number of other short-term tailings options, we remain confident of an ability to secure tailings solutions prior to the implementation of our planned life of mine tailings storage facility outcome. We will be presenting the Life and Mind Taylor Storage Facility proposal to DES shortly, and subject to any initial comments from DES, we will rapidly move to detailed design and approval submission. In terms of financial outcomes, Peter Herbert will discuss these in greater detail, but a couple of highlights. Revenue of $99 million, as expected, down for the quarter compared to the first quarter. This is, of course, a result of Capricorn Copper being suspended and lower revenue at Garden Grove, primarily as a result of lower zinc prices. Cash balance at the end of the quarter of $127 million, noting the unwinding of the $31 million favorable working capital at the end of the first quarter and the drawdown of the U.S. $40 million revolving credit facility. Average copper price received during the quarter was $3.75 a pound U.S., and for zinc, $1.13 U.S. a pound, down 9% and 17% respectively on the March quarter. During the quarter, 29 Metals lenders provided covenant relief under the group's corporate debt facilities, and in respect of insurance, significant progress has been made with 29 Metals insurers. Key factors in our submission include the magnitude of the claim, the extent of damaged facilities, and the complexity of the claim. Insurers have all the information they need to confirm their view on policy response, and we will be engaging with them closely regarding a progress payment to assist with the recovery costs at Capricorn Copper. And I should say that notwithstanding the liquidity available to the company at 30th of June, we remain focused on enhancing our liquidity through delivering on higher production in the second half at Golden Grove, pursuing an interim payment from our insurers as a result of the extreme weather event at Capricorn, reviewing all non-essential capital items, including those in connection with recovery efforts, and reducing costs across the group. In addition, there are other moving pieces, such as the restart of Capricorn Copper coming soon, strong support and engagement from our lenders, as well as a positive engagement with insurers. We will, of course, update the market of key developments as they crystallize. I'll now hand over to Ed Cooney, the COO, on production activities at the two operating mines. And Ed will then hand over to Peter Herbert to talk about financial and commercial outcomes. So over to you, please, Ed. Thanks Peter. Good morning everyone. Well Peter has spoken about our safety metrics and production outcomes for the quarter. So I'll begin with progress against our recovery plan in Capricorn Copper. The key focus of the SAF team has been on progressing the various water reduction initiatives outlined in our May strategic update. During the quarter we have recommissioned existing additional evaporative capacity onsite and procurement of new high-efficiency evaporators as well advanced, with commissioning expected in early August. With the existing water treatment plant still inaccessible, pre-establishment of water treatment to support mining and processing operations as well advanced, via existing settlement finals three and four, with commissioning of this new system expected in early August. This project is intended to avoid reliance on additional freshwater drawn from the adjacent lake, contributing to an improved salt water balance over the medium term. Additionally, detailed engineering is underway on expanding treatment of water contained within on-site soil restructuring ahead of release opportunities during the upcoming wet season. Engagement with the regulator remains constructive and ongoing. Further technical matters related to our application for ETSF LIFA II have been raised and we are working with our external subject matter experts to address these matters. The delay to this approval has necessitated a need to progress and accelerate alternative options, which were already previously being considered available to Capital Corn Copper to address new-turn sailing storage. Notably, the Esperanza pit in which tailings has been previously and historically deposited prior to the current lift on the ETSF. This option remains subject to the plan for the revision performance of the upcoming six-month period. in addition to approval of an existing application to increase flow storage capacity within the pit. In parallel, planning of a life and mine facility continues as a high priority. In terms of mining, both Mammoth and Greenstone ore bodies are ready to recommence production, with recent activities focused on additional paste fill reticulation in order to maximise conversion of tailings to backfill underground, remodelisation of burn cut resources which were reallocated to alternative burn cap projects following the extreme rainfall event. And in parallel, progressing design and procurement of dewatering infrastructure for Esperanza South Albany. Additionally, a number of personnel seconded to Golden Grove are returning to Capricorn Copper ahead of planned recommencement of the phase one restart in August. Moving on to Golden Grove and progress on commissioning of the new booster fans for Xantho extended has been marginally delayed by completion of the required civils infrastructure and subsequent interruption to Gossan Hill access following remediation of the portal following the activities undertaken late in the March quarter. Access has now been reinstated with a focus on completion of the outstanding civils followed by mechanical installation of the fans and then commissioning. No further procurement is required and we anticipate commissioning of the fans to occur in August. As mentioned previously, these fans support increased volumetric flows into Xantho Extended, enabling higher mining activity levels at depth during the second half. Notwithstanding this delay to the booster fans, as Peter mentioned earlier, pleasingly development performance at Xantho Extended increased by approximately 40% quarter on quarter. Construction progress of TSF3, which was approved in early May, has been excellent, and construction is expected to be completed ahead of schedule in August. We have been focusing on preparation of our application for our new life and mine tailings facility, TSF4, and anticipate submission this quarter. Given our focus of regulatory processes being on life and mine tailings facilities at Golan Grove, recovery and tailings capacity at Capricorn Copper, Our submission for the Gossam Valley project is now expected to be made later in 2023, which we anticipate to have no impact on the longer-term G&G outlook presented to the market in May. And in terms of production outcomes at Olinbury, June quarter performance saw a 23% increase in mill throughput relative to the March quarter, higher recoveries and metal production across copper, zinc, gold and silver. And looking forward, production during the second half is anticipated to be higher than the first half, notably in Q4 for zinc, not dissimilar to 2022. I'll now hand over to Peter Herbert to discuss financial outcomes for the quarter.

Thank you. Thanks very much, Ed, and thanks, everyone, for joining the call this morning. I'll start with the revenue outcomes for the quarter. 200 mils unordered in revenue of $100 million in the June quarter, decreased 39% from March. Impact required for suspension of Capricorn Corporation, with no failed report of the Capricorn during the current quarter. Goblin Grove revenues were also lower than the prior quarter, primarily due to lower commodity prices, despite higher sales volumes than the past quarter, which also included the sale of the left parcel. High concentrate sales volumes at Goblin Grove were possible as a result of lifting of throughput constraints, foot-in-place managed available talent capacity. Serving costs, Goblin Grove costs were lower than water, as Peter mentioned, at $78 million. This is despite higher overall activity levels than the last quarter. The reduction in site costs reflects continuing focus on managing costs in an inflationary environment with efforts undertaken to rationalise contractors including the insourcing of payslot operations, reducing headcount on site, re-tendering contracts including drilling, village and aircraft services and deferring of non-essential expenditures. The put for improved productivity and lower costs will continue over the remainder of 2023 and beyond. Golden Grove's selling costs, however, were higher during the period, reflecting increased volume sold and the sales mix, specifically a material increase in zinc concentrate sales. The site reduction in site costs, the June 1 unit costs of Golden Grove were elevated. High unit costs are primarily resulting in materially lower by-product credits, with lower zinc prices impacting zinc revenues, in addition to the impact of negative QV adjustments from prior period sales. Stockpile movement charges of $11 million also contributed to higher unit costs, reflecting a drawdown in ROM stockpiles as mill throughput rates increased prior to references to the last quarter, a drawdown of concentrated stockpiles with high sales volumes during the period, and lower processing prices during the quarter. Assuming foreign exchange and bonding prices remain the same, unit costs are expected to decrease in the second half as production increases and with continued progress on cost reduction efforts. As of 30 June, year-state total capital costs of gold and growth are tracking towards the bottom end of our guidance range. Capital and copper total costs for the quarter of $28 million were predominantly recovery costs as the site prepares for the first stage of the restart operations in August. Whilst early in the recovery process, expenditures remain in line with expectations, noting that our cash outflows for the quarter of capital and copper of $37 million were materially higher than cost, reflecting the unwanted working capital and capital and copper post cessation of operations in the March quarter. We will continue to evaluate opportunities to improve with the profile of recovery extensions as the recovery works advance. 29 Minutes finished the quarter with unordered cash of $127 million after the following key movements during the quarter. The unwind of the positive working capital moves from the March quarter for approximately $31 million as we will shadow the ending March quarter report. Weakened cash flows to Golden Grove on materially lower seed prices during the coil, including the impact of negative QP adjustments from prior sales. Cash outflows of $37 million of capital on copper as working capital from the March quarter operations unwound, in addition to the recovery works undertaken. and the drawdown of the group's $40 million U.S. quarter capital facility and repayment of $6 million to the group's term loan facility principal, as well as the net interest costs. On a net basis, the group had unordered net debt of $124 million at the end of the quarter, an increase on the March quarter position of $34 million. As previously announced, 29 Metals received a waiver on certain whether they're on group performance. 39 Metals continues discussions with its insurers on the impacts of the extreme weather events in respect of property damage and business interruption and is working towards a potential interim payment. The company continues to evaluate options to improve near-term cash flow profile, including, as mentioned, advancing discussions with our insurers, including the potential for an interim payment, exploring opportunities to reduce or defer recovery expenditures and non-essential capital across the group, and in addition to reducing costs across the group, as discussed earlier. Finally, stamp duty in connection with the acquisition of Golden Grove remains outstanding. $29 million is maintained to $26 million provision in relation to stamp duty. Thank you very much for your time. I'll now hand back to Peter.

Thanks, Peter. So, Melanie, we can go to Q&A now.

Thank you. If you wish to ask a question, please press Star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Rahul Anand with Morgan Stanley. Please go ahead.

Hi, Peter and team. Rahul Anand here from Morgan Stanley. Good morning to everyone. If I can please start with perhaps the gold and copper being lower. I appreciate that the grades came through lower. I just was interested to understand some of the drivers here and is this mainly a mine plan change? Are there dilution issues or you didn't access specific areas of the mine? What drove the silver and gold miss in this period and the guidance downgrade?

Yeah, thanks. I think you corrected yourself there, Rahul. You said gold and copper first, but gold and silver is obviously what you focused on. Morning, Rahul. Eddie, I'll take that one. I guess a number of contributing factors to gold and silver and the decision for us to lower the guidance on those metals. If I start with the mill throughput, so that constraint on the mill throughput Earlier in the year that was longer than we had anticipated in terms of being a function of delays to that approval. Also lower zinc metal production year to date and really the gold, the precious metals being associated predominantly with some of the zinc mineralisation. And the third element will be some underperformance. I think we reported in the first quarter as well a bit of dilution in one of the production sources that had gold associated with it and a deferral of another heavy precious metal ore source but lower base metal content deferral of one of those stoves into 2024. So probably they're the key reasons.

Okay, so just touching upon that throughput, obviously there was a miss in the first quarter, I understand that, but milling throughput did pick up this quarter. It seems largely that the grades that came in were significantly lower for gold and silver. So If we can maybe break that down into, like, if you talk about the dilution side, did that continue into this quarter, and what are your expectations and what's baked into guidance for the rest of the year, perhaps?

Yeah, so the one in the first quarter, there was a scuttle stope that did incur quite significant dilution. That was a remnant stope taken between a couple of backfill stopes. To mitigate that going forward in terms of future sources, we are leaving more substantial pillars. around that for the next source. But that was the key sort of source of dilution. Although you'll accept, Rahul, that we do turn over quite a lot of stoves. So from time to time, we do get some stoves that underperform via either recovery or dilution, but others that outperform. So it sort of depends on the period and the nature of the precious metal content as to those which are affected.

Okay. All right. Perfect. Perhaps then turning to two other things, which are firstly the insurance claim and then perhaps capital availability. Obviously, firstly, you know, the $61 million draw on the Revolver, can we perhaps get an update on sort of capital availability going into the second half and when you're expecting that insurance claim to have an update or some kind of a resolution?

In terms of the insurance role, we're obviously pressing the insurers, as we've indicated already, to deal with our claim and to make an assessment. As I indicated, they have all the information that they were seeking in terms of moving to that position. We are not in a position to know exactly when that will transpire, but we we are, of course, pressing for an interim claim, an interim payment in the meantime. Can't advise because we don't know at this point in time when that might be.

Okay, and now that the claim is submitted, are you able to perhaps talk a bit about how we should be thinking about the claim itself in terms of, I mean, is it going to include the production loss? Is it also going to include damage and, you know, recovery, ramp-up related losses? How should we think about that claim?

Well, essentially, two key components is the loss of equipment, infrastructure, of course, and then there's a business interruption component. And those are the separate components. And so they have the information that has been requested. The ball is in their court. We anticipate that the eventual outcome will take some time, which is normal in these processes. But, of course, we are, as I said, pushing for an interim payment in the meantime.

Okay, and then final one was just on that capital availability and flexibility. Just a quick reminder or recap, perhaps on available debt facilities as we stand today and capital budgets and if everything's still looking comfortable for yourselves. Thanks.

Yeah, thanks for that. Sorry, Peter Herbert here. Yeah, we're really focused on our cash flow profile for the rest of the year. It's delivering on a lot of gold and rose. It's looking at the profile in terms of the recovery expenditures and seeing how we can improve on that and reducing, you know, cops across the group. And sorry, actually, and that's in addition to the, you know, pursuing an interim claim from insurers. But as Peter said, you know, some of that is outside of our control to an extent. So they're the things we're focused on in terms of, you know, improving our profile. Test facilities, in terms of your specific question, are fully drawn at this point in time.

Okay. Perfect. That's very clear. Thank you very much. I'll pass it on. Thanks, Cheryl.

Thank you. Your next question comes from Daniel Morgan with Baron Joey. Please go ahead.

Hi, Peter and Tim. Just for the Capricorn Copper, for the tailings approval, do you feel you need the approval to turn on the mill again in August, or are you willing to go forward with placing tailings in the Esperanza pit if required? Thank you.

I'll start first. Thanks for the question, and Ed might add to that. Certainly very comfortable with continuing and commencing the startup of Mammoth and Greenstone of the no production over the last five months. And as we've had indicated in the past, we're not intending – that we'll have a 100% mill throughput from here until we get Esperanza South recommenced, restarted in the middle of the first half of next year. So, you know, not an insignificant reduction in the amount of material that we need to place in the turning storage facility. Moving forward, plenty of options that we have that we're working through with DES And as Ed indicated earlier, one of those in terms of the short term is the replacement re-engaging or replacing tailings into the Esperanza pit, which has historically been a disposable area. Very focused on our life of mine, telling stories facility, and as we indicated, advancing and presenting that to DES in the very near term and looking to move. That is fantastic. as rapidly fast forward as we can over the coming months. So from a confidence perspective, we're very confident of our tailings position and being able to manage our current production profile and certainly anticipate resolving tailings storage facilities as we go through the next few months. Anything to add to that, Ed? And perhaps a couple of additional points. By operating MS and GST, you retain core skills, resources on site to be able to manage the various water reduction projects. To be honest, we are non-discretionary. We need to reduce site water inventory, return the site to compliance from that perspective. processing ore and depositing tailings up on the Esperanza TSF, that does entrain quite a lot of water up onto what is quite a large evaporative pan, the Esperanza TSF, in addition to entrainment of additional excess water in paste that goes underground as backfill. There's a few additional water reduction opportunities that we can leverage by operating Mammoth and GST, notwithstanding the revenue that it also generates.

Just to follow up on the water reduction initiatives, I mean, what seems to be key to my mind is the wet season that's coming up and the ability to put water into, I guess, swollen creeks or what have you. What do you need to do to do that? Do you need the water treatment facility back up and running, and what's the latest on that?

Absolutely. That's a very important initiative we are focused on. We have a dedicated team of resources. We have detailed engineering underway to treat water contained in the site storage facilities in anticipation of release, and the engagement with the regulator DES is constructive and ongoing as well. Just one clarification point there, Daniel. If you were thinking or suggesting that we need the water treatment facility in full operation to be able to do that, that's not the intention through this period. The intention through this period is to treat water, bulk treat water, to get it into a condition for release. So we're not reliant on a new water treatment facility, if that was the point of your question.

Yeah, okay, thank you for the clarification. And that's my last question. Thanks, Dave.

Thank you. Your next question comes from Mitch Ryan with Jefferies. Please go ahead.

Morning, Peter and Tim. Just focusing on capped copper and wondering if you can sort of provide some more colour on the recovery and specifically the underground water in Green Centre and Mammoth, how high are the water levels have you gained access back into those areas and what are the ground conditions like as you're re-entering those areas?

Yeah, Mitch, Eddie, I'll take that one. So just to clarify, so Mammoth and GST, which is where we'll recommence the operation or production in August, so that's fully dewatered. We have full access to those two ore bodies. Esperanza South is the one that still has quite significant amounts of water in it. We've maintained the water level, so no additional ingress of water, just through some small pumps while we procure the larger dewatering pumps ahead of the proper dewatering efforts commencing later in the year. So we don't have an ability to inspect obviously beyond the current water level, but everything we've seen so far In terms of inspecting up to where the water level is, conditions are fine, although we do anticipate that we will need to rehabilitate the ground support once we commence dewatering. So in parallel, dewatering rehabilitation, and the recovery costs allow for that.

Okay, thank you. And then moving across to Golden Grove, when would you expect mine production to be restricted within Upper Xantho if you don't get at all? Yeah. Without leveraging off Xantho extended, when does Xantho become constrained?

So the Gossan Hill complex, so there's probably, I don't know the number, perhaps there's eight different ore bodies there, and then there's also the Scuttles mine. So in the quarter just gone, we produced... about 80,000 tonnes from Xantho Extended of the circa 350,000 tonnes, to give you an idea of proportion. Over the medium term, if you recall the outlook statement we made in May, the proportion of production from Xantho Extended increases Each year so next year off the top of my head was sort of circa six or seven hundred thousand tons the year after increasing further again ultimately ramping up to you know eight hundred and fifty to a million tons or thereabouts so the cost of the other Gossam Hill ore bodies and Scuttles will contribute to the remaining material. I hope that clarifies question I might just add a different comment there, Ed. We are really quite pleased with the performance that Zanto extended in this last quarter. as we've got down there, opened up development headings, et cetera, et cetera. And, you know, the increase in development rate as well as production tons without those new booster fans, which are coming in very soon, we're starting to see that additional throughput, sorry, additional production coming out of Xanthox extended. And it can only get better from here as we bring on that additional ventilation rate. and able to put more equipment down there. Thank you.

Thank you. Your next question comes from David Radcliffe with Global Mining Research. Please go ahead.

Hi, good morning Peter and team. First question is on the insurance payment and how you're now seeking, if you could, an interim payment. Just trying to understand, is there a subset of the claim this refers to, and why it's actually in the insurer's interest to accommodate this?

So David didn't get the first part. It's not an unusual practice for insurers to accommodate these interim payments, certainly in the case of larger claims such as we have. So I don't believe that's an unusual situation and quite typical. What was the first part of the question?

The question was whether it would be allocated to a particular part of it. I think that's a point of detail that we're working with our insurers on.

Thanks, Peter.

Okay. Thank you for that, for clarifying that. Then in terms of the debt restructure, you sort of talked to looking for maybe a debt restructure in 2024, given the fact that there's some uncertainty here in the potential timing of an insurance payout. Just wondering if you've brought that process forward.

No, not really. I mean, I think, you know, ultimately, you know, if we didn't have a problem with the process of insurance payments, I mean, it would be – and, of course, but I think it's fair to say that, you know, in terms of a refinancing, our lenders, you know, quite rightly – I want to see what we get to in terms of progress of the recovery and the wrap-up of the growth. So I think, you know, given, you know, I think we've come at the process in 24 with a lot more certainty about where we are on those two key things. So that'll be a key consideration, you know, for that process. I think doing it in the absence of some greater certainty there obviously makes that process much more challenging, if I can put it, you know, around the other way. So, you know, it's not irrelevant, of course, but insurance is not the driver of that timing.

Okay, thanks. And then maybe if I could, just one last one. A couple of your peers have obviously come through with some pretty, on the base metal side, some impairments. Just wondering for you if this is a process that you do look at on the half of it's an annual process. And it may not be obviously a fair question because obviously without knowing the insurance payment at Quantum, it might be not something you could even do. But just trying to understand when you do look at carrying those.

We have to consider that at each balance date, so that includes half-year and full-year balances. As you say, lots of moving pieces in all of that and we're working through that. Pulling together our half-year financials is a live process at the moment.

Okay, thank you. I'll pass it off.

Thank you. Once again, if you wish to ask a question, please press star 1. Your next question comes from Adam Baker with Macquarie. Please go ahead.

Hey, morning, guys. Just on Golden Grove, pretty good increase in development rates there. I think you mentioned 40% increase. Just wondering what the drivers are of this. Is it a reconfiguration of the mining fleet? Did you get more jumbos? Yeah, just wondering if you could add some more colour there, please.

Yeah, thanks. Good question. It's an area that we have been focusing on a lot lately, so we've enacted a bit of restructure in terms of various factors organizationally, some additional resources to focus on execution in that particular area, ramping up our compliance to plan metrics and discipline, as well as sort of alignment in terms of objectives between 29 metals and burn cuts. So a whole multitude of factors there, and it's pleasing that the site team are achieving some benefits as a result.

Yeah, it's certainly positive. And on your guidance, you trimmed the by-product-based guidance. Just on the copper, you know, where we're at at this point in the year, you know, if you look at the first half, that's around 44% of your target there. And then on zinc, it's about 41% on the half-year, annualising that. Just... Just wondering, you know, you mentioned you get some of that Xantho extended ore in the fourth quarter. Are we expecting to see a similar uptick in copper as well?

Yeah, so second half, and in particular the fourth quarter, we'll have a higher proportion of the higher grades anti-extended ore body contributing to production, which drives grade, which drives the metal. We saw quite a similar sort of profile and uplift in the fourth quarter of 2022. So particularly for zinc, we would expect that Fourth quarter will be the highest zinc production and copper production, you know, probably relatively consistent over the second half. Adam, we've always, you know, right from the get-go this year... guided to a greater weighting to the second half. So we're feeling pretty comfortable or confident that that will play out as we had expected. And so, thanks, Peter. One other comment, sorry, I failed to mention was the throughput, obviously, so we won't have that restriction that we had in, well, effectively the first four months of the year. So we're unconstrained for the remainder of the year.

Sure, and maybe if I may, just on the recoveries, pretty strong uptake, about 87.5% copper and 88% zinc. Are we expecting similar to that in the second half of the year? Is that something that can be maintained further into the future?

Yeah, no, it was a very strong quarter in terms of recovery, so I've got things contributing there. We had quite low iron content in the quarter relative to the grades, and those grades treated, that does have a very significant effect. If we compare the Q2 recoveries to sort of full year 2022, they are higher, so I wouldn't necessarily anticipate the Q2 performance being achieved for the remainder of the year. Certainly pleasing and something we'll always aspire to achieve, but... Can't guarantee it. It's probably a bit of a one-off.

Right. I'll hand it on back to you.

Thank you. Your next question comes from Kate McCutcheon with Citi. Please go ahead.

Hi, good morning. Maybe a couple of questions for Peter H. The covenant relief, what's the key one that's been waived or perhaps was of concern? And then you slightly touched on it before, is there any scope to delay debt repayments?

I think on the second part of your question, of course, Kate, I think as I mentioned, I think that would be something more likely to be considered next year. I should elaborate there. The point here is, as we think about routes, you know, the plans and tech growth, particularly things like cost and value, it's making sure that our dead facilities fit in our property line with that profile, which is the key point of looking at a refinance that we talk about. So I think in terms of that, you know, looking at the right growth for this business, that's more than one of the 20 minutes of exercise as we, as I'm planning, Coming back to the money question, Kate, the covenants there relate to, you know, profitability and cash flow for this period. As you can see, we've obviously consumed cash and also that the costs and lack of production impact our earnings. So those metrics relative to the net outstanding covenants that were made.

Okay, understand. And is there... Another catalyst that you're looking for or balance sheet timing gates, I guess, is there a point where you're dependent, where you need that money from insurance to come in and then you have to come to the market or perhaps revisit the cap copper restart spend any further? Just on my numbers, there's not much headroom, so trying to understand how you think internally about the timing and the hurdles you're looking for.

Yeah, I wouldn't say there's a key stage point. It's obviously something that we keep a very close eye on, as you would expect, and reach for all those things as quickly as possible. As I said, our focus is on things we can control, optimising that profile that you talked about. There's not a staging gate out in there. It's something that we just continue to monitor. We're obviously focused on delivering better production in the second half to support our cash flow profile. and cost reduction efforts, which is an ongoing process. So I wouldn't put any of those things around the stage gate. It's all just stuff that we keep on top of, we keep a close eye on, and we continue to push the things that we can control. And in addition, the work with the insurers is going on at pace. But again, to be clear, that's not something that we ultimately control, but we're doing everything we can to advance it as quickly as possible.

Okay. Got it. And then just my last question following up from Dan's question on the water treatment. How do you future-proof cap copper here? So you're spending mid-100 mil on the recovery, but my understanding is that doesn't include a new water treatment plan? And without that, and you've got limited water storage, how do you ensure in another extreme weather event situation you future-proof this asset, I guess?

Yeah, Kate, I'll take that one. So there's a multitude of key water reduction or water actions. One we've spoken about is the reuse and recycling of site water in the existing settlement ponds, three and four. So that's an interim solution, obviously, while we don't have access to the existing water treatment plant. And we'll commission that imminently. That's a key enabler of... getting the site water balance on a better footing. Longer term, obviously we are keen to subject to inspection of the existing water treatment plant infrastructure. We are keen to replace a water treatment plant, be a size fit for purpose in a slightly different location. That's one. Second is our investment in additional high-efficiency mechanical evaporators. They also contribute to refraction of water over time. And ongoing treatment of water for release during the wet season as opportunities arise and the work we're doing in terms of investing in permanent infrastructure to enable So they're probably a few of the key items. And once we do reduce the site water inventory, the water balance modelling that we've done indicates that the water, we do get to a very sustainable position with that additional investment.

Okay, good. And then just remind me, was the water treatment plant in the scope for the insurance payout?

Yes, correct. Just one point of clarification. Ed talked about some of the elements of the water management strategy. As an overall comment, our intent here is to move to a negative water balance outcome. Historically, the site has drawn water from a local lake, which obviously adds water to the system. Our intention through our revised water management strategies is to reduce that to a bare minimum, i.e., just for potable water requirements and recycle and reuse water on site through the strategies that Ed's talked about, Kate. So that's really where we need to move to.

Okay. So the strategy is perhaps to maximize the amount of storage you can have in another extreme event.

Correct. Correct.

Cool. Thank you. Thank you. There are no further questions at this time. I'll now hand back to Mr. Albert for closing remarks.

Thanks, Melanie, and thank you, everybody, for lots of good questions there through this webcast. Cool. So thanks for joining us this morning, everybody's online. We've covered a lot of ground here. We are excited on a number of fronts, not the least of which, of course, is restarting Mammoth and Greenstone, the continued improvement at Xantho Extender, which, as we've said, can only get better when the new fans are operational in the very near future. We didn't really touch on the conversion drilling at Cervantes. That's ongoing and looking forward to that and turning that into a feasibility study in due course. And focus on the longer-term project for the long-term sustainability of the business, Gossan Valley, and life of my tellings at both sites. And also, of course, the opportunity to recommence the tremendous exploration prospects we have at Capricorn Copper. So thank you once again, everybody. As always, any follow-up, please come back to Mike or indeed any of us with any questions you may have to follow up. And have a good day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.