Metro Mining Limited

We have the CEO and CFO of Metro Mining, Simon Wensley and Nathan Quinlan, here to discuss the highlights from the June quarterly activities report. I'll hand it over to Simon to run through and we'll have a few questions at the end. Thank you, Simon. Thank you, Nathan.

Thanks, Peter. Good afternoon, everyone in Australia or wherever you are. Thank you for joining this call. We wanted to... give the chance to present some of the key elements of our Q2 release that we've released this morning onto the ASX. So I might just share that on the screen. So just bear with me. Okay, so this release is available on the website today, and you can obviously pick it up off the ASX as well. So, look, a very positive quarter for us. I mean, we'd already released the operational results at the start of the month, but record shipments for Q2, that's obviously our expansion has ramped up during the back half of last year, and now we're into our first full year of production at that 7 million tonne rate. So that's up 19% year on year. I think, I mean, the comment I made on the front page, we've obviously climbed that into a pretty robust market, the price of bauxite reached record highs at the end of 2024 and has has come down a little but we were still able to during the quarter back ourselves onto that high pricing environment and so we've had significant price uplift over Q4 last year which was our last full operating quarter and then we had some tonnage in Q1 this year, a low tonnage but so I mean the FOB, the net FOB unit revenue up about 41% to $72 per ton. So that's generated along with our delivery of some very positive costs between sort of the SIF and FOB level, about $32, just under $32 per ton. And so that's obviously a huge amount from a margin of leverage, obviously, over margin is much greater. So about a 500% increase from the same quarter last year and about an 83% increase over the So a very pleasing result and another mention in the paper, it's really indicative I think of the type of cash generation potential that we've got here at the Bauxite Hills asset. So I mean not everything I guess went to plan in the last quarter. We did have a tropical storm around Easter time and that did unfortunately damaged quite significantly our channel. I mean, it's a late storm in this season after we had already done the bed levelling where we sort of clear out the channel for operations. We'd already sort of spent quite a lot of time and effort doing that in early March. And so that was an unfortunate incident and that restricted our barging through the back half of May and into June. And that was sort of... you know, probably around 1400 tonnes per barge that we weren't able to put on. So that also affected our ability to bring empty barges back. So the tidal windows were also reduced. So it's a combination of both, you know, capacity per barge and the number of barges that we were able to get in and out in any specific day. So we did take the opportunity to bring forward some maintenance and so we shut down the site and the transshipping for three days to get that done. And so that should also enable us a bit more of a clear run during this coming quarter. So, look, so operationally, you know, it's still a reasonable result up on last year, but, you know, we were certainly targeting, you know, probably 15% more volume this year, sort of round about that sort of 1.9, 1.8 to 1.9 million times. Let me just touch, I'll pass over to Nathan in a minute to go a bit more into the operational results and some of the financials as well. But I'll just touch a bit on the market before I do that. So there's quite a good and lengthy explanation, as we always try and do, in the quarterlies. Oxide isn't the most transparent of markets but it's structurally moving in a good, you know, moving in a good direction generally. There would clearly be some volatility and we saw, we've seen that over the last, you know, six to nine months with Illumina pricing as you can see on that graph. I mean our customers are making Illumina and so this is an important factor that occurs you know, in our market and with our negotiations. So, you know, that did go up significantly at the end of 2024. There was a correction, but it sort of has sort of stabilized through the last quarter. And at these sorts of levels, you know, 3,000 Chinese RMB per ton, you know, most customers are making, you know, reasonable money. So that puts the market in a relatively stable position. a stable position again, albeit a bit below where you saw the levels in 2024 before the run up. So we did see some Illumina producers exiting the market. They were in Q1. That was really mostly inland refineries who were using high cost domestic bauxite. A few of those have come back online, but this is that swing has also cemented somewhat this transition between inland domestic refineries and coastal refineries in terms of the trend that's occurring in China. And those coastal refineries have either built or expanded, and they're quite, they're all exposed to imported bauxite. So let's, and you can see that, you know, you can see that sort of appearing there in the total bauxite consumption. of domestic and imported bauxite in China up until the end of May. And so the, you can see there that imported number is still, you know, that slice is still growing. And what we've seen in the first half of the year, again, is a record, another record. So the fourth year in a row, we've had first half record times over the previous half. And indeed just over a hundred million tons has been Now, you know, some of that has gone into inventory, and that's also, you know, I guess, created a little bit of context for a reduction in the bauxite price that's also sort of been driven by that Illumina price reduction. But as you can see from that chart, if you compare it with the Illumina chart, certainly the bauxite price has not dropped to the same level as the Illumina price, and that's because the bauxite market dynamics are different and so we've seen again that although there's been very strong imports in the first half of the year, the second half of the year is much more difficult to predict and indeed there'll be I think certainly increasing volatility again in that price. So the Guinea government has continued to exercise its rights in terms of the mining leases that it has there in terms of asking producers to consider doing studies on refinery capacity. Some are compliant, many are not and there are also other gripes that are there from the government and so at the present time and I flagged at the AGM that there might be just over 40 million tonnes of bauxite capacity, annualised capacity in in Guinea exposed to these restrictions, well, that's now risen probably to around 70 million tonnes of annualised capacity. So at some level, either some of those licences have been cancelled and others are under restrictions or constraints being placed on them by the Guinea government. The Guinea government's also decided to exercise some rights in gaining access to some books, to be able to sell itself which is obviously going to create some dissonance in the market and they've also flagged to those producers that they want bauxite placed on Guinea registered bulk ships which again is going to create I think a bit of dissonance in that market. So I think we're going to continue to see obviously the largest bauxite, traded bauxite producer in the world out of Guinea is going to continue to be quite volatile over the next – certainly over the next six to 12, probably 18 months at least. Look, in terms of our own offtake contracts, as we talked about before, they're predominantly with large and high-quality customers. Some are integrated, some trade Illumina on the market. Our bauxite goes into a combination of high and low temperature. so I do get asked this question quite a lot, but the line has blurred between those technologies. The Chinese, as they have done in many industries, have sort of innovated quite considerably in the use of raw materials and in the technology development as they build out their industries. And what we're finding with our customers, those that are innovative and willing to to trial and blend and work with our technical teams is that what we're seeing is that they like the high level of gipsitic alumina that we have in our book site. And because we have a relatively high level of quartz, so our silica levels exist in both the kaolin element and also the quartz element, but our relatively high level of quartz, which dissolves at between 230 and 240 degrees, if they can control their operating conditions, they can minimize what's called that quartz attack, the dissolution of the quartz. And so our reactive silica is somewhat better than the chemical silica that exists on our specification. Look, in any case, this is an ongoing piece of work that we're doing with all of our customers and we believe we do provide a very strong value proposition to those customers. In terms of guiding price, the spot pork site market Q versus where we were negotiating before Q2 and now in Q3, those contracts that we have been agreeing are about 10% below the price that we agreed for those contracts. And there are also some legacy priced contracts, fixed price contracts that we agreed. some time ago in 2022 and 23 that we're still having to deliver on. And there's about a million tons of those contracts left to deliver through the back half of this year. So in terms of tonnage, you know, we'll be looking at roundabout, you know, trying to catch up some of the loss that we had in tonnage in the last quarter. It's not a huge amount. And so we're still confident that, you know, we're tracking towards the top end of guidance. We'll be looking to produce probably around 5 million tonnes in the second half. So that million tonnes will be approximately 20% of that sales volume. Okay, Nathan, I might hand over to you.

Thanks, Simon. So from a quarter perspective, as you can all see from the table, a fantastic result on a margin basis, which we were all expecting given the pricing environment. Site costs have naturally been impacted by the channel restrictions, which saw reduced volume than what we had set out for initially at the start, but still some pleasing structural savings that we've seen come through that give us greater confidence over the flow sheet, particularly at this activity level, and definitely expecting to see, with the channel restriction now lifted, expecting to see full realisation of those scaling benefits into Q3 2021. So pleasing to see that site margin. Look, from a cash perspective, as you would have seen, cash balance has built up quite nicely. From a 30 June perspective, the cash balance will have been impacted a little bit by just timing of shipment. So I think we had roughly around 200,000 tonnes of bauxite shipped over the rails over that period. So I have a fairly large trade receivables balance with our customers. of around $25 million, most of which has been subsequently received. So in combination of cash and the working capital, in a very good position. In addition to that, some of the highlights for the quarter, we're in a position where we've now essentially paid all of the deferred royalties that we've had. So we paid $9 million in deferred royalties this period that you would have seen come through the cash flow. So that will be the first time in many periods where we have fully paid out all royalty obligations. So that's a big moment for Metro and one that we're really pleased with. In terms of other highlights, we've been pleased to be able to restructure the hedge book on the FX. So you might recall at the end of last year we had fairly significant unrealised losses and so it's been pleasing to make sure that we haven't had to crystallise those losses and we've been able to convert some of those foreign exchange contracts that were at 68 cents. We've now been able to hedge out our book for the remainder of the year at 63 cents, which is, I think, sitting in a pretty good position relative to where the spot rate currently is.