Sandfire Resources Limited

Thank you for standing by and welcome to the Sandfire Resources FY22 results 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 one on your telephone keypad. I would now like to hand the conference over to Ben Crowley, Head of Investor Relations. Please go ahead.

Good morning, good afternoon, everyone. Thank you for joining us today as we present our FY22 financial result and also the DFS for the Matheo expansion. With me today in the room, I have Kyle Simich, our MD and CEO, Matt Fitzgerald, our CFO, Jason Grace, Chief Operating Officer, and we also have Richard Holmes, Executive for Growth, and David Wilson, our Head of Technical Services. uh carl will give us some opening comments and run through the highlights of fy 22 and the dfs uh and then matt will step through the financials and jason will take us through the high level outcomes of the dfs uh and with that over to you carl thanks ben and welcome everyone to our year-end financial results 2022

and also, pleasingly, our announcements today regarding the expansion of the Mateo operations in Botswana to 5.2 million tonnes. Just as a highlight, we continue executing our vision, creating value through opportunity, and our mission to build an internationally diversified sustainable mining company And as we roll through this presentation today, we remain very focused and marching forward on delivering on our strategy and always ensuring we maintain values at the very core of our business, which effectively underline and provide the culture of our business. In terms of scale, we continue to move forward. And as we go through this transition, we will continue to be moving the ward being one of the largest copper producers on the ASX and obviously in those future facing metals and we believe for the jurisdictions that we are in as high quality jurisdictions a great ability to pivot off that and also working through those large exploration endowment that we have and a large exploration footprint both in the Kalahari and the Iberian pyrite belts We essentially have earmarked somewhere in the order of six million ounces of contained copper equivalent metal in either resources or tier three inventory that sits within all of the large ground holdings that we have in our various projects. And this is a dramatic change from where we may have been from two years ago, where we were effectively moving towards having very little in the way of resources in our metal inventory. And now we're sitting on that pipeline of inventory. So we're really looking forward to then extracting value from that as we transition for our business at the moment. Flicking into the headline financial results, and a lot of this information was pre-released earlier on. in the quarterly, but just important to highlight, record revenue for the last financial year, $922 million, and all these numbers are in US dollars. A very strong group, even a margin of almost $450 million, and a pleasing second largest profit after tax we've ever recorded of $111 million. So very pleasing financial results for the year that we've just had. and the ups and downs and the vagaries of durations in those markets and commodity markets towards the end of that financial year as well. Strong cash position at the end of the year at US$440 million. Sorry, US$463 million. from those very strong cash flow generation through the course of this year and net debt at the end of 30 June of about $320 million. I would just like to highlight Matt Fitzgerald, the CFO, will give further detail, but prudently the company believes As we're going through this large transition of our business and transition of our balance sheet off the back of major transactions with maps of about $1.9 billion and a large expansion of Mateo on 3.2, also now up to 5.2 million tonnes per annum. And that expanded global capital expenditure of about US $400 million, prudent to put a pause on dividends. Matt will give you a little bit more detail regarding that. I look at the financial operating highlights for the last 12 months. We produced order of magnitude about 115 kilotons of copper equivalent between copper and zinc. at an all-in-sea one cost of 127 a pound of payable copper. When we look at the combination of what, you know, Maxa will do at its 4.7 million tonne throughput and ultimately Mateo at 5.2 million tonnes, as we head into the mid-financial 24 year, we'll be operating at a combined throughput rate of some 10 million tonnes per annum and we'll be targeting a production rate of about 150,000 kilotons of copper equivalent, predominantly made up of copper, but also significant quantities of zinc as well. As I said, during the course of this year, we completed the MATSA acquisition for about $1.9 billion. That's transformational for our business, probably the single most important thing that's occurred to this business since the discovery of the GRUSA. That is integrating, and we're well and truly seeing the benefits of optimisation improvements as we work through and getting our feet on the table with MATSA. what i would like to highlight today though is the material copper mine development and its progress and its expansion we've done lots of work it's advancing extraordinarily well um production will be looking to ramp up in the june quarter of financial 23 and what was approved by the board yesterday was the formal expansion to 5.2 million tons per annum the feasibility study has been received the board has approved that expansion and credit funding appropriate for that expansion is in place and Matt will also the CFO will also give you some further detail on that We also continue, and Richard Holmes will give you a glimpse into the wonderful opportunities that we see in the Kalahari Copper Belt, and he will talk to you about our expanded exploration activity there. So we are building these operations for the future and for, we would expect, many decades to come. If I just quickly change for a bit of completeness housekeeping, the matcher acquisition which was completed, it really is just for a complete presentation, the type of funding that was used for that transaction, the financing facility and some hedging that we put in place for that. Quickly, turning to group production for the year, just really to highlight that we had a very strong finish for the year. It was a very strong year. We achieved over guidance from MATS over around 3,000 tonnes of copper equivalent for the year, and De Grasse was at the top end of its guidance. So a very strong year with effectively a copper equivalent production of 115,000 kilotons of copper. and about 82% of our production for the last financial year in copper metal as future-facing metals. I look forward to handing over to Matt Fitzgerald now to continue with the detail of his presentation. Thanks, Carl. We're just presenting here the EBITDA contribution from the different operations and development projects. As you can see on the left, as we've released previously, DeGrasso, a very strong year above guidance production for copper and delivered in operations EBITDA of just under $400 million. Obviously very pleasing. MATSA, in its first five months of our MATSA ownership from February through to June, $150 million of EBITDA. So a combined $543 million. operations a million EBITDA in US dollars as Carl mentioned continuing our progress of Black Butch in terms of permitting and also drilling Mateo as well in terms of exploration interest and exploration and project development particularly as we're looking at A4 and then across our exploration drives across our strategy Just to remind everyone, we do expense expiration as we go. And also around a third of the expiration and other costs in there relate to MATSA acquisition costs that went through the P&L. So in total group EBITDA, a very pleasing $447 million for the year as previously announced. Looking at comparison year-on-year, and not surprisingly, from 337 last year to 247 this year, the majority of the difference comes from the addition of MATSA, so period-on-period. We've got MATSA coming in, as I say, from February to June in terms of its financial results, adding $313 million of revenue and associated sites, and then also... of course, on the operating cost employee benefits side, producing, as you can see between those two bars relating to MATSA, effectively around the EBITDA number. Also, some movement and exploration, fairly minor year on year. Some additional support costs in terms of administration of moving the business to a more global business and a support structure for that. As I said, also in the P&L for this year, some MATSA acquisition costs, which clearly won't continue into the future P&L. So year on year, a pleasingly increase of EBITDA, as you said, largely driven by the acquisition of MATSA and the contribution of MATSA in those first few months of The cash flow, we've also had this out for the June quarter, but just to run from left to right, to remind everyone, $149 million presented here for the cash used for the acquisition of MATSA. As Carl mentioned, there's some larger numbers in terms of equity raisings and debt, but we've netted them all off for the purpose of highlighting more of the operational side of cash flow the grass to cash flows and operations just over 400 million around the ebitda number uh matt says contribution from cash 200 cash 218 million is above its ebitda number and that has some adjustments uh coming in terms of cash flow in terms of qp alignment and during that year so that will come through into the september quarter Although we do note a recovery in copper price, so we will see some offsetting of some of those books, QP adjustments of last year, probably coming at this stage, coming into the early part of financial 2023. And we'll see that when we put out our September results and cash movements for the September quarter during October. Mine development, as we've mentioned before, 200 million of mine development at CAPEX, 131 of that is developing the Mateo project, a 3.2 million tonne per annum scenario, and Jason will talk shortly about the expanded project. MATSA, 36 million, larger than the mine development site and accessing new mining areas. La Grossa and Black Butte make up the difference. Exploration is also very heavily weighted towards Matteo for the periods of the exploration spend, $19 million was Matteo and also the $23 million that we have spent on exploration and evaluation activities at Degrossa over the financial year. We sold our investment in Adriatic around the time of the MATSA acquisition, which assisted the balance sheet in terms of entering the MATSA transaction. And into income tax, $132 million paid out in terms of cash flow for the year. Probably just worth noting here, you might note from our financial results, there's a higher effective tax rate of around 44%. There is a note in the financials, Note 7, which takes you through the very, very detailed sections. But in a higher level, DeGrasse's future rehab obligations on balance sheet see a $9 million charge to income tax expenses that unwinds. and a $10 million impact of the non-deductible costs of the MATSA acquisition, given it's a foreign acquisition, it's a foreign jurisdiction, around $10 million of income tax expense relates to non-deductible MATSA acquisition costs. Dividends during the period, pleasingly, we did pay $42.4 million US in dividends, representing the final dividend of 2021, which we paid just prior to the NAPSA acquisition. And we also paid a $0.03 interim dividend earlier in the year. And I'll mention, talk about capital management and our dividends shortly on the next slide. That overtime and other parts that come into that in terms of corporate and other parts of the business. Overall, a $32 million increase in cash and at the end of the year, $463 million in treasury. So moving to dividends and noting that Sandfire has a very proud history of dividend payments, particularly from the strong operating cash flows at the Grasser. What we expect from strong operating cash flows from Matzer and further into Mateo, and we'd expect to also continue to be a dividend-paying company. That philosophy certainly hasn't changed. We have decided at this stage, though, to pause dividends in this transformative year. Transformative not only in terms of the business, but also in terms of the balance sheet transition. As I did note before, we did pay out $42 million of dividends during this year. We're really moving at this stage to a capital management focus. We do need to make sure that we appropriately fund and build the 5.2 million tonne per annum material copper project, as we've announced today, very pleasingly to get credit approval on the first pass of that funding facility. And we also, of course, through the MATSA acquisition, took on some debt that was already in MATSA and took on some additional debt in terms of that. So we want to be sure that we are well positioned to make that aggressive debt repayment. And I'll talk about that in the next slide. Those repayments, I'll talk about that again in the next slide. The back end of De Grasse, as De Grasse finishes processing under our guidance around the end of October or early November, We do have around $70 million of balance sheet movement in terms of DeGrasse's closure and payout of creditors and final working capital positions, as well as the payment effectively almost entirely DeGrasse-related for the financial 2022 year at the back end of this calendar year. So all of DeGrasse-wise, the next six months will see us pay out around $70 million of DeGrasse closure. We also have our corporate facilities, we know, also related to the MATSA acquisition. It's $138 million or $200 million. It's been nominated in Aussie dollars at Aussie $200 million, and we have that cash sitting aside ready for the end of September bullet repayment. Really an objective in terms of the next sort of six to 12 months is that capital position to support our all-reserve growth, particularly around MATSA, our exploration pushes around MATSA and Mateo, and our capital development programs, and also working to build, make sure we build an appropriate working capital position in the business after debt repayments to make sure that we are able to do all of the things that we are looking to do in terms of our strategy. So as I said, pausing dividends for now, but obviously hope to bring them back in the not too distant future. Looking at debt facilities and hedging now, as we know, a 650 facility at MAPSA related to the acquisition. We have those repayments due during the year. Our corporate facilities I've mentioned. Our current repayment profile has us returning around 43%. of our debt balances to repaying those during the financial 2023 year. So we clearly leveraged up for the MATSA acquisition, which we're very pleased with, and this is a time of balance sheet transition and consolidation. Materia facility supporting the initial T3, 3.2 million tonne per annum base case. And we're very pleased to say today that we have credit approval from the banks for 140 million facility. That's out of what we're scoping around a combined 180 to 200 million dollar facility to support what is the larger operation of 5.2 million tonnes at Mateo, producing up to 55,000 tonnes per annum of copper. So, as I say, scoping 180 to 200, and at the initial stages is the credit approval received and pleasingly received and board approved in terms of the 140 facility which would be a seven year facility at this stage and we're very close to to finalizing the documentation and signing those documents hopefully in the next a few weeks a hedge book um is again protecting our cash flow to a certain extent as we saw towards the end of the financial year we saw copper and zinc both come down zinc has recovered very strongly and copper is has also commenced its its recovery The last, when we put out the quarterly, I think our copper hedging for the next financial year is around 25% above spot. It currently sits about 15% above spot. So that relates to the recovery in copper, recent recoveries in copper prices. We also have that copper price protection in terms of cash flows and debt repayments and working capital into the future, exactly as designed. Okay.

Now moving on to the development of the Mateo Copper Mine in Botswana. Firstly, as a quick update on the development of the 3.2 million tonne per annum project, construction continues to proceed on schedule, with first production expected in the June quarter of 2023. Construction activities are now around their peak levels, with over 1,700 personnel currently on site. Over 9,200 cubic metres of structural concrete has been poured, and a total of 950 tonnes of structural steel has been erected to date. In addition to this, SANFIRE has now achieved another important milestone in the company's plans to establish a major new long-term copper mining hub in the Kalahari Copper Belt. This is through the completion of the Definitive Feasibility Study for the 5.2 million tonne per annum Mateo Extension Project. This project includes the development of the A4 open-pit mine, and delivers outstanding project economics, including a pre-tax MPV of US$548 million and an IRR of 29%. Finally, Samphire is also very pleased to announce that Mateo Funding has also taken a major step forward, with selection of the Syndicate of International Banks now completed and credit committee approvals received for a US$140 million project debt facility. If we now look in more detail at the 5.2 million tonne per annum definitive feasibility study, completion of this work has confirmed a very strong business case for the development of the A4 deposit as part of an expanded 5.2 million tonne per annum Mateo production hub. And this is underpinned by a combined ore reserve for both the A4 deposit and the T3 deposit of 49.6 million tonnes at 1% copper and 14 grams per tonne silver, for close to 500,000 tonnes of contained copper and over 21 million ounces of contained silver. As mentioned before, the project delivers very robust economics over a 10-year mine life, which is scheduled to produce a total of 440,000 tonnes of copper and 18.4 million ounces of silver and an average all-in sustaining cost of US$1.79 per pound. Total development capital for the expansion project is estimated to be $397 million and this includes development costs for the A4 open pit and 5.2 million tonne per annum plant expansion of $47.9 million. Subject to contract award timing, site construction activities for the process plant expansion are scheduled to commence in the March quarter of financial year 2023 an increased plant throughput at a 5.2 million tonne per annum rate expected to commence in the March quarter of financial year 2024. As part of the definitive feasibility study, the life of mine plans for both the T3 open pit and the A4 open pit have been integrated and optimised for a combined ore production rate of 5.2 million tonne per annum. This yields a peak annual copper production of approximately 55,000 tonnes, and maintains around a 50,000 tonnes per annum production rate over a six-year period. Subject to the approval of the Environmental and Social Impact Assessment and granting of the mining licence for A4 by the Botswana Government, pre-strip mining at A4 is anticipated to commence by the March quarter of financial year 2024. Formal submission of the Environmental and Social Impact Assessment to the Department of Environmental Affairs in Botswana is planned for the December quarter of financial year 2023, with final approval anticipated by the middle of next year. Looking now at the key definitive feasibility outcomes. As mentioned before, the project's economics are definitely very robust and makes a major difference to the overall project. These have withstood the significant increases currently seen in input pricing for mining costs, diesel supply, reagents, grinding media and labour. If some of these numbers have been covered before, I won't go through all of them as shown on the slide, but I will touch on the estimated operating costs with the C1 cash costs over the life of mine and on a payable copper basis. is estimated to be approximately US$1.47 per pound of copper. And this includes $0.84 per pound in mining costs, $0.56 per pound in processing, inclusive of power and site administration, offsite logistic costs of $0.23 per pound, $0.19 per pound in treatment and refining charges, and a silver by-product credit of $0.35 per pound of copper. If we now look at the expanded mine layout, in completing the DFS, SAMPHI has been able to leverage off the work currently underway for the development and construction of the 3.2 million tonne per annum project, as well as the prior work completed on the 3.2 million tonne per annum feasibility study. Mine facilities for the expanded project include surface mining operations at the A4 deposit, expansion of the processing plant, and supporting infrastructure. New infrastructure for A4 includes a light vehicle access road linking the open pit mine to the already constructed access road for the Mateo site, a dual lane heavy vehicle haul road to be constructed directly from A4 to the Mateo processing plant, workshops, fuel facilities, crib and office facilities, along with electrical and water supplies. The recently completed Mateo mining accommodation facility requires no expansion as provision for additional personnel numbers were incorporated in the scope of the original Mateo project. Planning is also well advanced for a 22 megawatt solar power facility and battery energy storage system. The solar plant will be located next to the processing plant. with the potential to supply up to 34% of the project's future energy needs and will reduce carbon emissions by 475,000 tonnes over the life of mine. Capital for the solar plant is currently not included in the life of mine capital as firm pricing submissions are currently being sought. If we now drill down on the processing plant area, as you can see, The expansion to 5.2 million tonne per annum will be a very simple process with the addition of a 4.5 megawatt bore mill being the only major piece of infrastructure required. The reason for this simplicity and overall efficiency is due to SANFIRE's discovery and drill out of the A4 deposit during the period when the original Mateo definitive feasibility study was being completed. This allowed us to design a processing plant exactly for this outcome, which was to be readily scalable to 5.2 million tonnes per annum. And finally, looking at construction and development capital, the total development capital for Mateo is now estimated at US$397.4 million. This includes $47.9 million for the future development of the A4 open pit and the 5.2 million tonne per annum plant expansion, and also includes the 29.5 million increase in capital cost forecast for the 3.2 million tonne per annum project as disclosed in the company's June 2022 quarterly report. Please note, as shown on the slide, that the 71.9 million there includes 24 million of pre-approved capital. Life of mine capital is estimated at US $499 million And as at the 31st of July 2022, the company had invested $185.4 million of the total $397.4 million of the development capital.

And now moving on to Mateo Exploration. Let's talk a little bit about our dominant position in an emerging belt. The Tallahassee Copper Belt is probably one of the most underappreciated belts around the globe. And putting that into context, the known endowment of this belt already is 9 million tonnes of contained copper, and that sits in around 20 deposits. The reason why we like this belt is the average grade of those deposits is around 1.4% copper, and if you look around the globe in operating mines, the average grade around The world at the moment is around 0.5% copper. If you look at the pipeline of study projects coming on, again, it's around 0.4% to 0.5% copper. So we think we've got an amazing opportunity in this belt to bring on high-grade deposits into the Mateo exploration portfolio. Well, itself has seen little exploration over around 15 years, so just over 600 holes drilled. If you look at our land holding sitting around at 26,000 square kilometers, equates to one hole every 40 square kilometers. So we think we've got a real opportunity here to build out your large regional data sets, build our targeting models to really push forward exploration and bring on those new discoveries. The big focus going forward for the year will be A1. So A1 is a prospect that sits around 19 kilometers from Mateo as the crow flies. A significant amount of work has been undertaken here already. We've done a fair amount of drilling and some IP and EM. We've identified a prospect that's got about nine kilometers of strike. Previous operators, being modern resources, discovered significant ways of copper mineralization at the NPF contact, so relatively deep. We have a slightly different approach and different geological model, and our challenge now is to locate high-grade economic mineralization near surface in the DeKalb Formation, so we're working hard on that at the moment. So the exploration budget going forward for the year for the Tallahassee Copper Belt will be around $13 million U.S., and a significant portion of that will be aimed at A1 in helping build out a mineral inventory to support the Mateo processing plant.

Thanks, Matt, Jason, and Richard.

And just really to wrap up, thanks, everyone, for attending today. We're very excited. pleased with the very strong financial results for the last financial year, June 22. We're delighted to be able to be announcing today the expansion, the board approval and funding appropriately for the Mateo facilities to 5.2 million tonnes as we continue to transform our business and work towards that global vision of having those global capabilities as we build that diversified and international sustainable mining company. Look forward to your questions and we'll open the floor now to that. Thanks very much for your time.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're using a speakerphone, please pick up the handset to ask your questions. The first question today comes from Rahul Anand from Morgan Stanley. Please go ahead.

Hi, Carl, Matt, and Jason. Look, two questions from me. First one is around dividends. Obviously, you've chosen to suspend them today, and you've talked about how you can reinstate them going forward. So I wanted to get a bit of a framework, perhaps. How are you viewing your target net debt? I mean... On my numbers, you're basically sitting at one to one and a half times net debt to EBITDA next year, 20 to 25% gearing. What kind of level do you want to get that down to before you can recommence dividends? That's the first one, and I'll come back with the second.

Thanks, Raoul. Carl here. I think, Raoul, just at the moment, So what we need to do as we go through this transformation is deal with what we have in front of ourselves. Clearly, the acquisition of MATSA was a transformational transaction, and we put the balance sheet to work. And at the same time, we are working towards that expansion of MATEA, which is in the best economic interest of all shareholders. to do that and to accelerate that expansion. So I think with that, we have not set a target ratio at this point in time, Raoul. We will work through, I suppose, through the financial 23 year to attend to those debt structure and repayments. as are currently anticipated and build it up. And I think when we see things roll out, then we'll start to put together, you know, target numbers and target ratios. But I think as we go through this period of significant transformation and change, we just need to work through that. So we don't have target numbers in front of us at the moment for those numbers.

Sure, okay, no worries. And then, Carl, look, a good result in terms of that expansion study at T3. I perhaps wanted to touch upon potential to extend life. I mean, there's an additional five years sitting in the resource as opposed to the reserves. If some of the drilling work that you mentioned just towards the end of that presentation, is that targeted towards life extension or is this, I mean, infill or is that more exploratory drilling to basically expand the resource space. I just wanted to get an understanding when we can start giving you a bit more credit in terms of the life of the asset beyond the 10 years that we currently have.

I will pass it to Jason in one second, other than to say I think some of the highlighted points that Richard made is that we have 26,000 square kilometres of tenure in the Kalahari Copper Belt, and just to re-highlight again, just the endowment that is there at a very underexplored province. So I think it is a very, very long journey here, and we're at the very early stages, but over to you, Jason.

Yeah, Rahul, look, there's a number of things that are happening at the moment. We believe there's still some more tons to be had or reserves to be had at A4. So we have factored into our budget this year and for next year as well, resource extension drilling that may or may not extend the A4 open pit. But all indications are at the moment that that is highly prospective and there's a good likelihood. And particularly, you know, I'll hand over to Richard, but the work being done around A1 and up at T1, T2, and in particular that area that we've called in the past the Mateo project area, is particularly exciting and I think highly prospective.

Thanks. So, yes, well, the budget I talked about is Greenfield's exploration. Obviously, it's focused on A1, T2, which are easily within trucking range of the Mateo processing plant.

Gotcha. Okay. Final question from me then around MATSA and solar. Obviously, gas prices, energy prices, very volatile at the moment and perhaps improving economics for additional solar, I guess, by the hour rather than by the day. How are you viewing that opportunity? What is the update there? Is there a change in scope? Can we make that bigger? I just wanted to sort of get an idea of how we're thinking about energy costs at the asset going forward. Thanks.

Rahul, thanks for listening.

Look, we have our plans at MATSA for solar, I think we've spoken about before, but we have an initial 20 megawatt facility, which there's a signed agreement. That one is expandable to 40 megawatt, which we're looking at over there. So that project is the most advanced, and that one we based at the South Hill and the southern part of the MATSA operation. We're also, the team over there, working through an additional 20 megawatt facility up near the Aguas Toledos concentrator. So that one is a little bit early stage. So all in all, we've got 40 megawatt capacity in the pipeline. And just to put that, I guess, as a reference point, our peak demand, we're somewhere around 37 to 39 megawatts. So that would cover 100% of our use when obviously they're generating 100%. Beyond that, we'll need to look at things like storage and other things, which is, of course, on the agenda. We'll get many options.

Perfect. That's helpful. And how should we think about timing of these coming online?

The first one we're timing to be towards the end of quarter three, FY23, is the latest date. And the other one we're still working through with providers to get a firm date.

Perfect. That's all from me. Thank you. Thank you all. Thank you.

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

Hi, good morning, Carl and team. My question just comes really to the balance sheet, and as you put it, the aggressive debt repayment profile this year. Just trying to understand why you really chose not to restructure the maturity profile to better suit the needs of the business, given that it seems to have cost even a token dividend here. And then in the absence of sort of debt targets, as you were asked before. How should we think about what you're thinking here? Are we being just conservative, or do you see other opportunities you want to present or position the balance sheet for?

David Carl there. Look, just very quickly, I think initially when we look at the transaction of MATSA, which has been... ended up with the structure that we've got. If we just go back one step, max transaction was order of magnitude at that $1.9 billion. Clearly transformational for us in terms of scale and what we believe it will ultimately deliver over a, you know, put a hand on a heart and say a $10 billion. 20- to 30-year mine life, lots of exploration potential and significant footprint in the Iberian pyrite belt. But if we sort of go through the bouncing ball, we go... maximise the quantity of equity that we could raise on a one-for-one equity raising with an ASX-approved waiver for a 30% placement, so there was not one more share we could issue. We inherited, with the blessing of the previous vendors, the debt facility that was within the project of MATSA itself, and so that just got rolled over. And then we looked at what our cash requirements were from our expanded large treasury, or just our normal business requirements for Mateo expansion. At the time, we also had a sense that there might be requirements for further expansionary capital for Botswana, so we had that factored into our modelling. And therefore, there was a quantum that we were happy to release out of our treasury, and then the balance was extra debt that we wanted to secure. That debt had to be secured above the MATSA asset in a holding company, and that was a balance of debt to pack the gross MATSA debt up to $650 million. So it was really out of necessity as to being able to complete the transaction at the time extraordinarily quickly, with effectively limited options available to achieve it without going to information being leaked to the market or any of that sort of other stuff. So we sort of got what we got. And things like we drew down also in a corporate facility with the ANZ Bank for a couple hundred million Aussie, and that was all to complete the transaction. It was what it was, and it would enable us to be competitive and complete that transaction. um so we didn't sit here and luxuriate around going around in circles about you know what that amortization is looking perfect for the project that will all occur over a period of time as we're going through balance sheet so i think we need to go through this period of period of time. It'll be the next six, nine, 12 months. As Matt said earlier on, 43% of the current debt profile is repayable within this current financial year, which is not normal, smooth amortization of debt facilities, but it is what is required to get the job done back on settlement of 1st of February of this year. So it is what it is, and that's what we're dealing with. There's no problems. We knew about it and we're catering for it and the business is set up to deal with it and complete all the other strategic imperatives that we have got without compromising this strategy that we have got on table. What will occur through the course, I have no doubt, of this year and as we get time to... integrate all these things into our business and complete the material construction and ramp it up is that we'll start to then be able to modify and and work within having target debt ratios and all the rest of it so it really is as a matter of necessity to get something done We're in this position. And as we see things roll out, we will start to be able to look at how we want to massage, where we want working capital to be, what our dividend philosophy is going to be, what our target debt ratios are going to be. That is not something that we need to focus on because we've got far more important things right here, right now to focus on. which is the completion with the integration, which is going well with MATSA, fantastic expansion, optimisation, and for the completion of construction and expansion of Mateo, absolutely, it's on schedule, on budget, when I say on budget, time-wise, there's been a little bit of an uplifting cost, which is relatively insignificant, comparable to what's happening in the rest of the industry. We've had a 10% uplift, and during this period of supply chain disruption, COVID, that is relatively low. We've had to find that from our Treasury to fund that, clearly. But importantly for that asset to optimise that business unit, it is to accelerate that development into a double T3, T4 as quickly as possible because the returns are significantly greater than they otherwise would be. But at the same time, not to prejudice our organic growth, you know, development at MATSA but also exploration at MATSA. So the number of moving parts at the moment, and I think at an appropriate time, it won't be too far away down in the future, we will be able to get back to those more mainstream things of ratios and, you know, what's your sense of that after we've gone over the transitional hump. So it doesn't pinpoint and answer your question. It gives you a sense of what is going on and the importance of being... We're very focused at the task at hand at the moment and doing exactly what we said we're going to do and dealing with achieving our targets and milestones and delivering back on the requirements of our syndicates and debt ratios and... repayments and all those other things. And then going back to the dividend, it's just prudent not to go and say, well, we're doing that when we're in the middle of doing extraordinary transitional transaction, three times the size of the company and doing a large development that's expanding as we're going along, which is all on track. So it's just sensible, broad management being sensible and prudent for where our business is today. It's just a general sense of where we are as an organization.

Okay, great, thanks. I'll pass it on. Yeah, good, thanks. Thank you. The next question comes from Matt Green from Credit Suisse. Please go ahead.

Hi, good morning, Carl and team. I just have a few questions on the TAO study. Just to start with on the economics, the MPV, The reference date for that, for the PFS versus the feasibility study, are you using the same reference date for that?

Reference dates?

I mean, is the feasibility study MPP as of today, whereas the PFS is as of 12 months ago?

The PFS and the feasibility are pretty much the same dates. They are the same dates.

Okay, so that's September last year, I take it.

I'm just trying to bridge the gap between what's driving that 20% drop in NPV. We know that CapEx has stepped up a bit, and you've mentioned some of the cost pressures, but I'm just trying to get a sense as to how much of those costs, because it does seem like the profile at T3 has changed a fair bit. I think it would be a bit better if I just I have all the copper production profiles, you know, 27, 28, you're reaching 60,000 tons a year, but now it seems like you're peaking up at 50. So, can you just perhaps talk about what's changed on the profile? Because the grade doesn't seem to change a great deal. So, is this more about managing the strip?

No, that's absolutely correct. If you look at it, our war reserve hasn't changed at all from basically pre-feasibility through to feasibility study on that. So that's for both A4 and also the updates that we've used on T3. The one thing, I'm not sure if you've seen the ASX Word release or the broader report. It does do a reconciliation there about changes. or key changes and assumptions between the pre-feasibility study and the feasibility study. So that hopefully might give you some more insights in there as well. But if you look at metal production in particular, what we have done is integrate the two mine plans and we've also optimised those mine plans for actually that blending configuration. and also our open pit mining schedule. Now, the only thing that has shunted some metal around in terms of changing of timing, we actually changed our staging designs in the A4 open pit between the pre-feeds and the final feasibility study. The pre-fuse actually used a three-stage pit on A4, but when we looked at that in more detail from a mining efficiency and a cost point of view, it was actually more efficient to actually change that back to a two-stage open pit.

Okay, thanks. And the T3 staging hasn't changed? No, it hasn't.

Okay, that's great. Thanks for the comment there. And, Matt, just on the project finance facility, 140, you said it's the first pass, hoping to get it up to 180 to 200. If you can increase this, when do you expect the balance of that facility to flow through?

Yeah, Matt, we're targeting probably somewhere around the middle of calendar year next year. So the process now will be the banks clearly are aware of A4, and they also have in their head a 5.2 million tonne per annum project, as a full project, given now the completion of the DFS and and an approval of the DFS those banks the funding banks will have a look at that combined model as Jason mentioned it does reschedule and does optimize T3 and A4 together so there will be an impact on their models as well of that so I'd expect that probably something like a six to nine month process in terms of engineering experts and those sort of things to run over the combined model but as I say SANFIRE and those banks I can safely say, have a 5.2 million tonne per annum project ultimately in their mind.

Okay, thanks, Adelpha. And I heard you mention it was a seven-year term. Sorry if I missed this, but when do the repayments commence? And is this a pretty flat amortisation schedule?

Yes, seven-year term. We are currently sculpting the repayments under the model and the final debt facility documentation. So that'll come out, I'm guessing, at this stage during September. We'll have a bit more detail, but not exactly final yet. They'll be sculpted based on the final agreement.

So at this stage, debt repayments would start towards the back end of calendar 23. Understood. Thanks.

And just lastly, Carl, I think I may have heard you correctly. Did you say that you inherited the $650 million facility at MATSA?

The MATSA facility, when we completed the acquisition, there was an initial facility within MATSA of $313 million. So we effectively rolled that over. And in addition to that, we secured a further facility for MATSA above the project level at the holding company above. So our holding company into Spain of 337 million. And the two of them collectively, what we call the MATSA facility or the project facility for 650 million US dollars. So, really, the MATSA facility in your hedge, it's almost... We inherited the project debt facility related to MATSA and we got an additional acquisition facility, if you want to sort of think about it, in two parts of 237, which was to assist us in making the acquisition of MATSA together with the ANZ facility for 200 million Aussie or 140 million US, as well as money out of our treasury, as well as the funding from the equity rating that we did at the time.

Yeah, is that clear? Yeah, that is. Thanks for clarifying, Carl. That's all from me. Thanks very much. Thank you.

The next question comes from Khan Peeker from Royal Bank of Canada. Please go ahead.

Good morning, Carl and team. Thanks for taking my questions. I just wanted to clarify one thing. I think the line you've come across, is there 70 million of expenditure at the grass on rehabilitation? I just want to see if this is also in cash and the timing around that.

I think you're referring to 70 million on slide 12. We're talking about capital management. Is that right?

I just heard it on the call, so I think you were mentioning a $70 million expenditure.

Yeah, sure.

So really $70 million in terms of cash flow, more than sort of on the expenditure side. So certainly some costs in terms of closure. We do have a retention scheme at Degrassi to make sure that our employees are well incentivised to remain and continue to perform strongly to the end of the current mine life but most of that 70 million is in cash flow rather than in pnl and relates to the final clearance of creditors so the start of an operation you start in that working capital position where creditors are 60 30 60 days later at the back end we do have some catch-up to do in terms of the last month or the month after in terms of clearing a creditors balance there's also the set of tax payment that's in the balance sheet as a provision already, so it's already expensed, financial year 22 tax payment. So the majority of that $70 million that I've talked about is really a cash movement, and most of that will hit during the September and December quarters of this current financial year.

So I think you're very clear. Just also on the debt facilities, and specifically the project finance and the credit received, Are there specific clauses that impact certifier's ability to pay a dividend?

Or is that, is it self-imposed? The Mateo facility you're talking about?

Either or, I mean, both of them. Is there anything specifically in the clause with the debt that impacts?

No, neither of them has an impact on the, sorry, neither of them has a, any restriction on the corporate entity paying dividends, but they do, the MATSA facility does have a restriction in terms of it needs to, the MATSA debt facility needs to make its initial debt repayments before it is able to send, MATSA is able to send dividends within the group. So does that answer your question? There's a restriction on the ability to move cash, but there's no ultimate restriction on the parent in paying dividends, no.

Sure, okay, thank you. And just also with the capex increase, I think most of it has come from the $3.2 million base case. Can you please, I think there was a mention that $72 million only includes processing capacity. Is there any other, it seems very low in terms of capital intensity for groundswell expansion. Is there any other capex like mine pre-strip that isn't included in that growth capex but may be included in other

No, a short answer on that one, no, there's not.

It's all included. I think, Khanh, if you recall when we did the 3.2 million times process facility, it had a certain amount of CAPEX and there was a pre-approved additional amount for pre-works for A4 work, et cetera, et cetera. And there was a certain amount of CAPEX If you have a look at the capex, then subsequently what happened in the June quarterly, we announced the quarterly results, but then also the capex adjustment fundamentally relating to T3, and there was that lift in that capex, which was about 10% or 12%, I think, or thereabouts. But given the extent of... And most of that related to a lot of energy prices, you know, diesel for the pre-strip for... for T3 predominantly in that uplift. There are other bits and pieces, but most of the capital componentry for the expanded 5.2 million tonne facility, other than the volume, it was essentially in that T3 expenditure anyway. And I think the balance that sits in there of that 70 million includes then the balance of all of those costs relating to get, and Jason, I think you're confirming, the pre-strip of A4 as well.

There's nothing else that's not. There's nothing missing.

Sure. Okay. Thank you. And just finally, the ESIA, I think, was mentioned that it will now be in 2Q. I think previously indications were to be submitted in 1Q with essentially a 12-month process. But I think now guidance is for June, for the approval process to be achieved, June 1st. That would suggest a six to nine month turnaround. How confident are you with that timeframe?

Yeah, look, we're very confident. Obviously, it is out of our control once we submit the ESIA documents. But what we have seen from the Botswana government is there's very strong support for the project. And at all levels within government, we're getting a lot of cooperation and we're working really well there. So at this point in time, there's no reason that we would see that that would extend. And even if I touch on the scope of the ESIA, there's really nothing complex or there's nothing really controversial associated with the A4 project from an environmental or social point of view. So all indications are really quite good, very good at this stage.

Thank you very much. Very helpful. I'll pass it on. Thank you. The next question comes from Levi Spry from UBS. Please go ahead.

G'day. Thanks for the call. Two quick questions. One from Matt. Just to confirm, the Matheo project facility, you said six to nine months. Was that for the extra 60? What about the first 140? Can you draw that soon, i.e. this quarter or next quarter?

Yeah, Levo, my comment was around the uplift to the target, full target 180 to 300. Yeah, the 140 we expect at this stage to draw between September and March, September 22 and March 23.

Okay, perfect. That's what I was after. Thank you. And maybe one for Jason. I have to ask about Spanish power prices. So... What are they today? What did you use in the guidance? And what percentage of your costs are they at the moment?

Levi, I'm going to hand over to Dave to answer that one.

Hi, Levi.

Today they're seeing about $250 right now, as we speak, $257 to be exact. I think we said in the quarterly that for the five months of June last year, we averaged €2.52 megawatt hour, and we guided going forward €1.80 to €2.80 or €2.70, I think, from memory. So that's still in line. And then just probably also to refresh that parent contract, which is linked to spot run through to the end of December this calendar year. and we're out in the market at the moment with the different options going forward. That'll both fit with our solar plans going forward, but also we'll try and lock in lower prices.

And your question on percent of total cost, it's in the region of 20, 25%. 20 to 25, my gate. Yep.

Yep. And any complications from your customer in terms of high power prices impacting their business?

No, nothing like that. We're good. All right. Thanks, guys. Thank you.

Thank you. The next question comes from Peter O'Connor from Shorin Partners. Please go ahead.

Hey, Matt, Carl, just to push back on the dividend comment, it's a small thing, but you've explained with incredible granularity the debt facilities that you had and your knowledge of the cash flows and repayments. It's hardly a surprise that you're not paying dividends that you haven't flagged before. And thinking through, anything that's really changed is the copper price, which peaked in April. So the June quarterly, I just went through my notes and did a word search. You didn't mention dividends, dividend payments, or anything like this. Why did it just land upon us now?

I think, Peter, I'll have a go first. I think, really, the philosophy of Sandfire has always been to assess dividend payments at a point in time. We've very deliberately not come out with a mathematical dividend policy that has percentage of revenue or percentage of anything else. We've assessed it as we go. We always, I guess, wanted to come through the first period of MATSA ownership. We're very pleased, as we said, about what we've been able to achieve at MATSA in terms of throughput rates. I guess we've seen some copper price movement in recent months and a recovery in recent times. Really, I think it comes back ultimately back to a balance sheet question of saying, what obligations are there? How do we need to build to support our strategy? How do we make sure we have enough working capital in the business to have higher dividend payments, let's say, into the future? So not something that we, as I say, necessarily message every month or every quarter. It's really something at a point in time where we look at, the board looks at and says, where are we positioned? How's the next 12 months of transformative growth and balance sheet transition look? As I said, we have a very proud history of dividend payments. I think we've shown that through the Degrassi years. And as MATSA continues to perform and as we get Mateo into operation and into positive cash flow, then I personally have no doubt we'll return to dividend payments. That's I think it'll just be a transitional year at 3 1st, and that's how the company looks at it.

It feels like, Matt, it's always been a transitional year, and again, the detail you've given reflects that. So the only thing that's changed is the copper price. I'm just surprised at your lack of... Come on, I'll move on. So just a few quick ones, Matt. Tax, effective tax rate, you talked about the maps and non-deductibles. Is that a one-off, or should we expect non-deductibles going forward? If so, at what level, and what would the effective tax rate be?

uh yeah one off so the certain the high rate i think i said 44 percent the high rate is um non-deductibles and um and the rehab um the dt dtl unwind in terms of your process so that's also one off um we might i would expect we'll still have an effective tax rate of probably 35 or anything um there's some detail when you have a moment peter in note seven details out the actual differences between 30% tax rate and the tax rate in the financials. But as I said, largely one-offs in terms of the acquisition costs and also the Degrassi impacts. But we also are conscious that we have international operations and after October, November of this year, entirely international operations. So there will be some non-deductible costs that are exerted in Australia that are not tax deductible.

Just to lead that back to the dividend, so franking is a... What balance do you have remaining and will that be paid out when? And going forward, zero franking balance or zero franking credits on dividends?

No, not necessarily. No, we have a very healthy franking credit balance. I don't have it in front of me. I'll come back to you with it. But that remains on foot as well and is very, very healthy given the profitability of Degrassa over the last eight or nine years. um and that we had over that time probably established without obvious um of cranking credits i'll come back to you with all the numbers and peter just at carl head your question on dividend and whilst i heard you trail off dot dot lack of i'll get on with things um i think just to recognize um and matt made the comment but essentially We sit down and we talk about dividends and we discuss them as a board when we look at our half-year results and we look at our full-year results. We don't sit there and we consider all the things that are in front of us. I think it would be fair to say, if you looked at the history of this organisation and what we have done, and if you looked at the last 12 months and what has occurred and what is occurring, I think it would be fair to say that, on balance, a lot has changed in a relatively short period of time. If you can't see that, I would be very, very surprised. So prudently, the board has decided, given all of the moving parts and bits and pieces, whilst I'm sure there could be a modest amount of dividend that was paid, the board decided in being prudent, and I see it's a word that has been used occasionally recently, that it didn't make sense to pay a dividend, and so it resolved not to pay a dividend. So I wouldn't get too hung up about it. And your comment about, well, lending itself, didn't you know or didn't you? We know everything. And so because we know it, we think it's important to be prudent and to ensure that as we go through transition, we transition well. And I think the shareholders will appreciate that and they recognise that. So I don't think there's any surprises and I don't think we need to be talking about things before they need to be talked about. It just doesn't make any sense to me.

Thanks for the clarity.

That's right. Very happy to have this longer chat if you want offline.

Okay, two more small ones, Matt. Long-term corporate charges, you talked about the step up in one of your waterfall diagrams during the year because of MATSA. How do we expect those numbers to play out going forward? Will the corporate charge be giving you a now global business?

At about $30 million a year, we're predicting to do.

And any more, Carly, you can give us on the QPs we should see drop in the September quarter, how they look, quantum, et cetera?

I'd save that for the quarter. I just want to see how the copper price moves and how they readjust. So I'm modelling those at the moment. My comment was really saying towards the back end of the year, we saw a QP adjustment down. Copper has recovered, not back to the same level, clearly, as we all know. But that bounce back will also have an impact on QPs. I'd rather do that when we...

Okay, thanks, Carl. Thanks, Matt.

Thank you. At this time, we're showing no further questions. I'll hand the conference back to Carl for any closing remarks.

Thank you, everyone, for listening today to our financial 22 financial results and the announcement of the Mateo expansion project to 5.2 million tonnes. And we're very pleased with the results for the last financial year. And we are particularly pleased with the continuation of the execution of our transformational strategy, which is on track. So once again, thanks very much for listening. We look forward to updating you at the next public release, which will more than likely be our next quarterly report.

And I wish you all a very pleasant day. Thank you. Thank you. That does conclude our conference. Thank you for participating.

You may now disconnect.