Sandfire Resources Limited

Thank you for standing by and welcome to the Sandfire Resources June 2023 quarterly update. 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. Brendan Harris, Chief Executive Officer of Sandfire. Please go ahead.

Hello and good morning from here in Perth. My name is Brendan Harris and I'd like to welcome you to our June 2023 quarterly conference call. I must say I'm very much looking forward to discussing our operational results with you and giving you a feel for the strategy that we believe will energise our people, unlock significant shareholder value and underpin our future success. This will pave the way for us to discuss the finer details of our simple strategy when we report our financial results at the end of August, when we'll also provide more granular forward-looking guidance the key financial metrics. But before I go further, I should also welcome my team to the call. We've got Matt Fitzgerald, our Chief Financial Officer, Jason Grace, our Chief Operating Officer, Richard Holmes, our Chief Growth Officer, and Scott Brown, our Chief People Officer with us here today. Last time, you may recall we sought to do something a little different by stepping away from the usual presentation, replacing it with a succinct overview of performance led by Jason, Matt, and me. On the basis of the feedback we've received, we're going to be even punchier today. I'll briefly talk to the key messages that we think matter and are helpful to understand, and then we're going to go straight to Q&A and spend even more time as a team on the questions that matter to you. So let's get into it. We achieved record low TRIFA of 1.6 for the year, marginally exceeded revised production guidance at MATSA, delivering 99,000 tonnes copper equivalent, are successfully moving through the commissioning and ramp-up phase of Matheo, and have transitioned to GRUSA to care and maintenance as we assess all alternatives for the operation. The old adage, a safe business is a productive business, rings true. So let me expand on Matheo, as I'm sure you'd like to know more about our newest mine. It is still early days, but things are going very well. In the most recent 14-day period to the 22nd of July, We achieved an average processing run rate of 3 million tonnes per annum and achieved a maximum recovery of close to 90% while testing and exceeding nameplate across a number of shifts. That's why we've reiterated prior guidance for Matheo as we are and should continue to see a rapid ramp up in performance with the initial 3.2 million tonnes per annum processing rate achieved on a sustainable basis in the September quarter of this year. and 5.2 million tonnes of capacity delivered towards the end of the calendar year, creating the platform to grow copper production to over 50,000 tonnes in the 2025 financial year. When we report in August, we'll have more operating data in our back pocket and a growing feel for costs. But at this stage, and let me be clear, we see no need to adjust our prior assumptions. To MATSA, I feel like we're one quarter in to a long process of building consistency, predictability and credibility. We delivered on a revised production guidance for the year. We've contained controllable cost inflation, notwithstanding the significant reduction in by-product credit pricing in Q4. And we've stuck to the forward plan we discussed with you in April. Across FY24, we will run the processing plant at around 4.5 million tonnes per annum rate, and run the mine at a slightly higher clip while spending incrementally more on development and investing in ventilation. This plan will allow us the space to further build our geotechnical knowledge, minimise dilution, open up more mining fronts and create much needed flexibility. All while building around 100,000 tonnes of stock on the ROM pad, giving the team a fighting chance to optimise the processing blends and deliver an increase in recoveries. It's on this basis that we expect to deliver an important 3% increase in copper equivalent production at Matza in FY24. And that's what we're looking for, frankly, signs of continual improvement, knowing we must push beyond 4.5 million tonnes per annum sustainably once we've established a solid base. And of course, our big lever continues to be exploration, given our strategic position in the Kalahari and Iberian belts, their prospectivity. for economic mineralised systems and the drive we have internally to materially extend mine life, unlocking long-term value for shareholders. San Pedro and Olivo at MATSA are prime examples of the potential we see, such that we've focused our exploration effort and will push hard to test near-mine potential quickly and efficiently. This means we've made the difficult decision to scale back very early-stage greenfield exploration in Australia, as it doesn't offer the same risk-reward trade-off, and we need to spend our dollars wisely. I expect we'll spend around $10 million to $15 million less on regional exploration in FY24. And lastly, to Degrussa. The innovation and ingenuity displayed by our team has been quite remarkable. particularly considering the personal uncertainty they face this year. While the decision to process oxide stocks brought with it increasingly high costs, as it should, a sharp focus on the economics created an additional $18 million of pre-tax cash flow. In parallel, we've been assessing all alternatives for the operation, including closure and rehabilitation and divestment. So in summary, we're primed to deliver. We finished the year on a strong note, generating unaudited $313 million in operations EBITDA at a robust margin of 40%, and the outlook gets stronger from here. We're working hard to mitigate cost inflation, steering our capital toward the best risk-return trade-offs, and we have a fantastic platform that will deliver more than 50% production growth across the next two years and holds enormous exploration potential to materially extend mine life. Suffice to say, we're motivated and we have plenty on our plate to keep ourselves busy. So with that, can we please have the first question?

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 two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Raoul and Anne from Morgan Stanley. Please go ahead.

Hi, team. My question relates to the cost base. You've talked a bit about it in the release today. I just wanted to touch upon some of the key reasons. I mean, is there a bit of a change in the payability side on zinc? Are there any other cost pressures that you're seeing? And then if we look forward into calendar year 25, you're talking about a few more initiatives there in terms of energy, et cetera. Can you help us understand on how we should think about costs for the coming period and perhaps a couple of periods ahead?

Yeah, Raoul, thanks. That's a really good question and I'm not surprised we got to costs as quickly as we have. Look, and this is something I know Ben will be happy to help anyone with. We know that C1 unit costs are materially higher than what our prior guidance was for the quarter. And hence, that flows through into the differential between what we said was guidance of 184 a pound going up over 190 for MATSA for the period. But let me be really clear. If you actually go and work through and reconcile, because I've done this work and the team's done this work, at what absolute costs were in the period, so absolute costs, they're flat. So there's no change. No change in the cost that we estimated for MATSA. We obviously delivered on the production front. The total costs are the same. The reduction is byproduct revenue. It's purely and simply a substantial reduction on the zinc price. That makes up 80% to 90% of the differential. So that's the first thing. And again, we're very happy to work through that with people. I think what we've talked about here is as we provide guidance for costs, we will look to provide both the absolute cost numbers for particularly those polymetallic businesses and as well as the unit cost number. So again, not only do you have greater visibility and transparency, but you can also track us because, of course, C1 unit costs is largely a function of some of the assumptions that are outside of our control. In terms of the CY25 initiatives, maybe I'll take you first to capital expenditure. So I talked about an incremental increase in development, and that's going to be critical because we are aiming to open up more mining fronts it means that it's an underground mine. Not everything will always go swimmingly, even as we get more control and better geological and geotechnical understanding. So having more degrees of freedom, having more mining fronts open, means you can always keep your equipment productive. That will see us spend incrementally more on development. I would think that would be somewhere in the order of probably $5 or $10 million. So it's not a substantial change, but it is an important continuation of that effort. We also talked about ventilation. As we're going into some of these areas and opening up domains, we've got to make sure there's good ventilation there for our people so that they can work safely. And that's going to see us spend incrementally more money as well. I'm thinking somewhere in the order of $10 or $20 million. So those costs will go through, but again, that will set us up for a period to come. If you then go beyond that and talk about operating costs, first and foremost... you'll notice that we've talked very clearly about working hard to mitigate cost inflation. You can take that another way to say, whilst we're finalising our processes, we currently see no material shift in absolute costs at MATSA into FY24. So no material shift in the absolute numbers. They'll always be the things that are outside of our control, but no material shift in mining processing and G&A costs. Then, as we go to energy, you talk to... working hard to finalise the agreement, dot the I's and T's, moving away from memorandum of understanding with the major provider there on the solar facility that would come in from calendar year 25. But we're well advanced and that final contract will put us in a very good position. It's not only giving us obviously security of supply, but at a very, very attractive price. It's not far off half of where the current spot price in the European and Spanish market is, of around 100 euros a megawatt hour. I've talked previously on energy that the two other contracts, one was backdated to the start of this year, was around 30% of our demand requirements. That was around 30% of the spot price at the time we talked about previously, again, on a number close to 110 euros a megawatt hour. And then if you look at the second contract, which kicks in from CY24, that's that other plus or minus 30% of our requirements. was a closer proxy, I should say, to spot. So that gives you a bit of a sense on energy. Suffice to say, as we've mentioned in our reports today, it puts us in a very, very good position as we enter 24. It will put us in an even better position as we enter 25. Energy costs were closer to 9.5% of our total costs in the period at MATSA. They were over 20% at the peak. So, again, feeling very, very comfortable with that. So, look, as I mentioned with Mateo, I know people would love cost guidance, but let's be frank, we've been running it for about a millisecond. It's going to be more meaningful when we come back in August and we've actually had another month of operations. But again, as I mentioned earlier, we're not seeing anything at this stage that leads us to believe we'll get outcomes materially different than the feasibility study estimates which we talked in the past of around the C1 cost in the order of $1.70 to $1.80 a pound and an all-in sustaining cost of incrementally high. So maybe just pause and see if that answers your question.

No, it does, Brendan. That's very comprehensive and also very helpful. Thank you. Look, for my second question, I'll perhaps stay with Matza. I just wanted to get some help to understand how we should think about the grade progression for the mine here. You've talked about the 4.7 million tonnes per annum in today's presentation, which is great. I just perhaps wanted to touch upon the grades and, you know, we are running currently above the reserve grade at the asset. You know, how are you thinking about that? Till what time do you think you can continue to run at those grades or are you expecting, you know, better definitional results drilling to help with, you know, sustenance of that higher grade.

Yeah, look, there's a lot in that. So I'm going to make a couple of very quick remarks, but I do want to throw to Jason who's here with me. I think the first thing is we've got to be careful how we propagate, if you like, our assumptions too far. And the reason I say that is you would have seen we talked about San Pedro again today. San Pedro is shallow in the mining sequence. It's around three to 350 metres. it's within around 100 metres of existing underground development. We can bring that into the mine plan if it continues to prove its merits, potentially as early as 26. Now, of course, that's important because not only will it bring us ore shallower to surface, but also it could have impacts on that grade profile. And of course, if we can find that high grade, we'll bring that into the mix. Equally, you would have heard me again talk of this new olive ozone that we've discovered just to the west of Bankdalina. The same thing holds true. So, of course, I'm eager for Jason to talk about what we see today and to give you a sense for that. I guess what I'm trying to highlight, though, is, as you'd expect, we're always going to be looking at that mine plan as we evolve with our reserve and resource estimates and recalibrating to chase the maximum or the value maximising plan. But maybe Jason to you.

Yeah. Look, thanks, Raoul. Look, from our point of view, grades we expect to hold going into FY24 and beyond as well. So if you look at it overall, FY23 largely was slightly below our grade expectations that we see, particularly over the next few years. And that's in respect slightly down on copper, but certainly more down on zinc. So you would see in our forward projections there for FY24 and FY25, we are expecting that overall zinc production to step up this year and basically be sustained there beyond that as well. That's largely driven by grade, but there's also contributions from the areas that we're working on operationally there, which Brendan touched on very well before, which is all about making sure that we're maximising NSR. So not pumping through the tonnes, but we're pumping through the grade, we're minimising dilution and we're also maximising recovery to get the best bang for the buck out of our ore bodies.

No, that's fair. Thank you for that, Jason. And fair to assume that FY26 and beyond, just for modeling purposes here for spreadsheet junkies, fair to assume that you revert back to the reserve grade post that? That's the best assumption long term. Brilliant. Okay, that's all from me. Thank you very much.

Thank you. Your next question comes from Levi Spry from UBS. Please go ahead.

G'day, Brendan and team. I hope you're well. Thanks for your time. Yes, I'd like to give you an opportunity to talk a little more about Mathéo. So it sounds like we're still working on the DFS estimates, but it sounds like also things are going very well. So can you give us a few more tidbits? You know, what sort of graph are you giving us... mining rates and processing rates, but what sort of grades are you seeing? You mentioned the recovery, how sustainable that is. Can you remind us of the capital that was out there for the 5.2? A couple of questions in there.

Yeah, thanks. Yeah, there is. Thanks, Levi. No, that's great. We will obviously continue to provide more and more information as it comes through. in all of those respects. I think if you look at the back of the presentation, you're probably familiar that we do provide a lot of information on our mods and operations. Mateo is not yet in commercial production. What I can tell you is that the concentrate grade that we're delivering is generating in the order of the 30% that we would have expected even as we're working through some of this oxidised material. So that's been very, very pleasing. I think maybe if we step back... The first thing I want to say about Matheo is to really, again, commend the team. It's not often in this industry. I saw one of the analyst notes today talked about it being atypical for a project to be delivered on time and on budget, and particularly one that was actually being built through the midst of COVID. And also, again, easy to forget, a new country entrant at that. So, you know, incredibly good achievement. Jason and I, as I mentioned last time we spoke, were actually on site when the first ore was delivered to the SAG mill. which was a very pleasing experience. It's not often you sit at a concentrator that's running clean water and has never had dirt through it and to see that change was wonderful for the team and an incredibly important milestone. Right now, of course, we've been working predominantly through shallower ore and running low-grade stock through the plant. And of course, that brings with it its own unique challenges. One of those, of course, is that you tend to find the grind size is much finer. So the teams had to work through and calibrate that. In recent times, we've been introducing high-grade material because as confidence grows, you start putting the high-grade feed into the processing circuit or the flotation cells. We're seeing the sorts of recoveries as we'd expect, again, given this is slightly oxidized. You know, of course, we're aiming to get up towards the mid to high 90s, so 95, 96%. But in the planning, we always expected to be at this sort of level through those sufficient laws. You know, what have been some of the challenges? Because I guess it sounds like everything's gone swimmingly. You know, of course, there have been challenges at the moment. Jason, and I'll ask him to just add in a moment, would tell you that we're actually intentionally capping the throughput rate. We know we can do more. If you look at the charts we've provided in the pack, we've exceeded nameplate capacity. It's really around the filter press. So both in the plates and the cloth, we haven't got the performance that we would have hoped for. Now, if you're going to commission a plant, you're always going to want the bottleneck to sit at the back end. That's where it's at. The OEM's been on site. We've got new plates and new cloth literally being installed as we speak, and that's going to get us, I think, into that position where we'll take that next push, if you like. The mine itself is performing very well. We've been all bound. Again, the mine's been running almost for 12 months, certainly running at a strong clip for the last six to nine months. You can imagine once you present enough low-grade material to the crusher and put it onto the core salt stockpile, As I mentioned, you become all bound. That's when you start just filling up the wrong pad, which we've done. And then you actually start just stripping waste. And so in the pit itself, we have got a very substantial amount of ore exposed, which puts us in a very good position, if you like, from a risk perspective with the mine, at least for the next six plus or minus months. And we're very confident that, again, that gives us a very strong runway as we move ahead. So, yeah, look, I think your summary up front was it is going very well. I can also should note that I think we've got 5,000 tonnes of concentrate currently sitting at the Port of Walda, which is actually our first shipment, the first parcel. It's there. Trucking operations are now running to plan. And again, it paves, I guess, the way for us to progressively ramp up shipments across the course of this year. Look, I am hopeful that we will be able to declare commercial production at the end of this month, if not the end of this month, the month thereafter, which obviously is important because from that point we start reflecting the performance of Matheo in the profit and loss statement rather than obviously adjustments to balance sheet. But Jason, anything I've missed there? And then I will hand to Matt in a moment as well just to talk through capital. All right.

So just to build on Brennan's comments there as well, if we... And I'm referring to the graph there shown on slide 8 of the presentation pack for the quarterly, so particularly commissioning and ramp-up mill tonnages. You will note there that we very quickly ramped up to nameplate throughput rates there, and we've been consistently achieving those since relatively early in June, so roughly around the 12th of June. Since that time, we've been really focusing on particularly their plant reliability, just ironing out nickels, and also de-bottlenecking. So as we move through into July, we've certainly got plant reliability significantly improved. We've been doing a lot of work on recovery and particularly flotation performance. And I will note that once we started feeding higher grade material, we saw the float circuits really start to settle down and really do what they were designed to do, which has been great. Now, since that point, we've moved the bottleneck and the overall circuit through to concentrate filtration. So we are seeing there at the moment, particularly with some of the material types that we're seeing coming out of the ore body and that partial oxidation of the host rock types, the grind size that we're seeing coming out of the sag mill is significantly lower than our test work in the feasibility. And what that's doing is slowing down our concentrate filtration rates. and causing that to be the bottleneck. And so you'll note on that chart there as well, from about the 17th of July, we've been deliberately capping those throughput rates because in essence, we've filled up our concentrate storage tanks as we've become, for want of a better term, a bit constipated through there as well. So at this stage, we are fast tracking our additional capacity ramp up in that filtration infrastructure. We expect to have that in the next few weeks and then we'll be consistently, I would say, sitting above target throughput rates or sitting at or above target throughput rates. You made comment about the DFS. Yes, we are expecting to be in line with the DFS going into FY24. We've got a good handle on mining. Our face position there is slightly ahead of what we expected in the original feasibility study. So overall presentation won't be a constraint for us. And as I said before, their throughput rates and recoveries are tracking extremely well.

And maybe, Jason, just to Matt then on capital.

Yeah, hi, Levi. Just to run through the Mateo project and maybe a little bit of a recap to begin because there are a few numbers in here. Just bear with me. So you remember the full program at 5.2 has capital estimates of $397 million. The first 325 of that is the 3.2 T3 project, and there's another 72 on top of that to get to 5.2 and also bring in the new pit at A4. So within those two elements, as we've mentioned, we're largely there in terms of the first one of the 325 on Mateo 3.2, and as the guys have talked about, very solidly through into ramp-up phase. On the second part, 72 million, which covers the upgrade to 325, 5.2 million tonnes in A4. We're about halfway through that program, particularly in the plant areas and some of the early expenditures into A4. The second half of that $72 million we expect to come into next year in financial 24, in addition to the A4 pre-strip, which will start as we get mining licence approval and also complete the financing. So half of the $72 million, $35 million plus another So 40 in A4 pre-strip, probably coming to next year, gives you about 75. And that is the sort of number we're looking at, as you'll see, with the financing uplift. The financing uplift from 140 to 200 is 60 million, of course. That's contributing to that 75 million of capex into next year. And there's a few other bits and pieces around sustaining capital and tailings lift. So that gets you through to that sort of 397 plus into the back end of A4 pre-strip into next year.

Roger, that's great. Thank you. Thanks, guys. Thanks, Levi.

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

Morning, Brennan and Tim. Thanks. Just to follow on to that question, just with regards to the increased debt facility at Mateo, can you provide an update on sort of expected timing of that completing and at what point would it, you know, do you see it ever constraining the ramp-up profile to 5.2?

Maybe I'll quickly add there, Mitch, good to chat. We're effectively done. The banks, we've worked through the process. There's really a requirement now to just get the final approvals from government. You would have seen, we noted that the ASEA had been approved by the government during the period. We now need to move to the final mining extension approval, which I think was said we're expecting, you know, in the very near term. Once that happens, it all triggers and flows through. So we're not seeing any major concerns. We just need to work through a few issues. And of course, there are other alternatives in terms of ways to make sure we have liquidity. So it's a great question, Mitch. Frankly, it's the one we're asking here all the time, is making sure we understand their cash flows. And I don't see that becoming a constraint for us any time soon.

And just my second question, I sort of note you've removed the disclosure of operating costs on a dollar million basis this quarter, but then your comment was you were planning to give increased transparency going forward. Should we expect those to come back in future quarters?

Yeah, look, absolutely. I think the thing you'd be aware of, Mitch, is we work through an audit process. So, you know, personally, very hesitant to provide too much financial information and ahead of audit and so you know we'll obviously come back provide that information at full year result we'll provide the guidance we've provided in the past once we've we've got that process behind us and then we'll continue on as I said you know as we have in the past but I think at half year and full year end one's got to be you know mindful of the level of granularity you provide around financials when you're still in the heart of your audit process okay no I totally understand that thank you

One very quick last one. The margin of error around the production guidance, you know, previously you've provided a range, whereas this time it's a straight number. Should we think of sort of plus or minus 10% or 5% to those numbers?

I think you should hold us to account on those numbers, frankly. We've put them out there. I mean, that's got to be our commitment. We do run, you know, particularly at Matza, it's an underground polymetallic mine. I obviously had a lot of experience with Cannington. These things chop around quarter to quarter. they do tend to have a bit more variability. Again, we've put this estimate out there because we believe we can deliver it. So rather than me trying to almost step away from that at this stage, I'd rather you just hold us to account and that's certainly what I'll be doing internally.

Thank you very much for taking my questions.

Thanks, Mitch.

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

Hi, good morning, Brendan and team. So my first question is on MATSA and the strategy you're talking about here now, where you're talking about more development and building stocks. Just really wondering, first off, a year and a half in, why now and what's changed? And then as part of that and the new strategy, are you thinking here to any changes to the right mix from the three minds going forward? And where the opportunities lie to deliver more tons to the mill?

Yeah, David, good to hear from you. Thank you. So first and foremost, you may recall in the last quarterly when we caught up with people, I sort of emphasized a view that if you look at MATSA and what it had done over a number of periods is run at around 4.4 to 4.5 million tons per annum, and it was delivering the sorts of metal output that we've talked about today on average. In other words, It was performing as it should perform. It was unfortunate, I think, that some of the expectations post-acquisition were possibly overly aggressive, primarily because you might recall I also said that the prior owner was... We are an experienced underground miner and operator of VMS systems. Perhaps a little different. They didn't necessarily prioritise or value geotechnical and geological information the same way we do. So from ownership, the team saw enormous amounts of potential to drive improvement. I think it's fair to say that the time that it takes to complete that reinterpretation work and then start to build it into how you think about your mind plans at the same time, getting the level of development, getting the ventilation in place, getting the degrees of freedom takes longer. I think that's primarily where we got to when we spoke to you last quarter. What we're saying is this next 12 months is really an extra year, I think, of making sure we build that stable platform. And part of that is putting some stock on the surface. And to give you a sense, and I'm sure this will resonate with many of you, if you've got a processing facility that runs a poly line and a copper line, for simplicity, you need to have really good control over what you're presenting to those circuits. And the only way you can do that is if you're not running hand to mouth. You need to have some stock there so you can manage that. The second thing that we're doing is we've actually got a program of work that's now well underway that is looking to build a much greater level of sophistication into the way we work compared to what we've had in the past, where we will track effectively every bucket that comes out of a stove, moves its way through the mine, up to the surface, to the ROM pad, into the crusher, to the core source stockpile, and then is presented towards the flotation circuit, such that, again, we're going to get much more control over the blend. Because, again, the conversation that Jason and I particularly had very early on was our resources are very, very valuable. I mean, it's the most valuable asset that our shareholders hold. It's more important that we drive for value rather than drive for throughput. And so that's really what we've done over the last quarter. We're starting really pushing through that we're going to have that extra 12 months. But what I do envisage, somewhere in that order, if it's 12, 18 months, we should be where we need to be. And that's when we should be able to not only keep delivering on the, what I call those optimization outcomes, but actually then be in a position to start driving throughput. Now, the last piece, and this is now when I go into theoretical land, is, you know, of course, with Magdalena and the potential we're seeing there with Olivo and some of the down, you know, down plunge, deeper drilling that we referred to today. And of course, with San Pedro, What we're obviously aiming to do is to substantially increase mine life of those two areas, again, to be proven. Why does that matter? Well, because if we can do that, then we actually start thinking about choke feeding the processing facility with those two ore sources, which will give us a better value outcome. It will mean that we're no longer trucking Sotial Ore 35 kilometres to the process plant. The Sotial Ore of the three is the one that's different, if you like, finer grain, polymetallic. It then frees us up, which you've heard us talk about, to complete and undertake and learn from our concept study at Softiel as to whether that could be reconfigured to be a very different operation. Could it be a standalone operation that we run in a different way? One could argue that is much more of a zinc mine, and if we actually focused on running for zinc recovery rather than copper recovery, we might get a much better economic outcome. It's still too early for us to be certain, but that's the work we need to do. It's obviously a very exciting prospect for the team, but, you know, that is some way off in terms of us getting the level of definition and confidence. But, you know, I think it goes right to the heart of your question, David. Yeah, no, thank you.

That makes a lot of sense. Certainly it's great colour. Then maybe if I can have a quick follow-up. Just on slide 21, maybe if you could sort of talk a little bit to that, talk about, you know, the global... growth platform for the business today. Maybe if you could talk to the strategy. And I'm thinking here, do you really need to look outside Botswana and Spain, given the sort of the competition for assets out there at the moment, but also what appears to be a very strong organic potential of both, obviously, Matza and Matheo?

Look, I'll talk more about this at results, so bear with me on that, but thank you. I think you're getting right to the crux of how we think we're going to unlock value for the organisation. So first and foremost, I think Black Butte, I touched again on the last call on the fact that I believe copper is very hard to find. I think we'd all agree with that. Certainly good economic copper resources. They're hard to develop, and it's even harder to buy copper operating copper assets for value. So when you've got one, i.e. a development option that's well advanced, that's well through the permitting process, with work to do, you should understand it. And so that is what we're doing at Black Butte and hence the integration of the Lowry study. We hope in the next 12 to 18 months we'll at least have a clear pathway as to how we unlock value for shareholders. I mean, my suspicion is that Black Butte's carried at zero in the share price. I'm pretty sure it's not worth zero. So we need to do that work. We need to unlock that value. But I think as you point out beyond that, we have chosen the Iberian pyrite belts and the Kalahari copper belts by definition. We've made major investments in both areas, and I think we have two very modern processing facilities in what will be strategically important belts for the world of copper. The pleasing thing for me is we think both belts offer enormous exploration upside, and I've touched on some of that. And so when you then think about our business, there's a nuance, if you like, when we look at say Sanfire compared to some of the larger companies you may look at and many others as well, where they have 20 years of mine life. You know the way your spreadsheets work and time value of money. Unless you can grow the business, it's very hard to get anything other than incremental value accretion. The real opportunity for us is when we've got, you know, 7 to 10 plus or minus years of life. If we can turn that to 15 to 20 years of life through very focused, targeted exploration in and around our mine sites, we can fundamentally transform the value of the organisation. And again, that's underpinned by the prospectivity, not only that we believe is there, but we're actually seeing in the drill holes that we're completing today. So, you know, again, I think that's why we need to have a very, very clear focus in those belts, in and around our existing processing hubs, because I've got no doubt that that, by definition, has got the greatest prospect to deliver economic returns for our shareholders.

Great. Thank you very much. I'll pass it on.

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

Hi, Brennan and team. So good result on time and budget at Mateo. Why are you not receiving the inflation that we're experiencing elsewhere in the mining industry, particularly WA? Is it labour being more available and productive? I'm also wondering what this means for operating costs going forward. Thank you.

I'm going to start with Matt, sir, and I'll throw to Jason for Matteo. I've just spent three weeks there. I got back last weekend, I think it was. First and foremost, very different setting. It's why it's important for someone like me to just go and sit there and enjoy the Hamon. what you recognise is that these people live in and around the mine site. They're not flying in, flying out. They're not bespoke, if you like, workforces. You know, this is an area where they've been mining from prior to Roman times and it is very much embedded in the lifeblood of those communities. The area also has relatively high unemployment. So what we see is we have turnover of around 2%. Now, you know, Whilst we talk about the cost of labour, turnover cost of labour is also something that's a real challenge in a place like Australia. So you've got that benefit. The second thing with that is whilst some people would argue that productivity may not be at the levels we see in some of the underground operations in Australia, and that is probably true, the typical underground worker comes at a significantly lower cost, again, for a number of reasons. So when you look at the cost of that productivity, if you like. I think we've got to be careful what we focus on and make sure we focus on the real challenges and opportunities. I think beyond that, I mentioned previously, if you look at our numbers in the first half, we had the quirk of dealing with the Putin-Ukraine issue where European power prices had moved substantially higher. And so we had real inflationary pressures coming through from that shock We now have costs from energy back under, as I said, 10% of the cost base of MATSA. So we've had, if you like, at least in the half on half, a deflationary factor moving through there. So I think there's many reasons with MATSA. We're also working very hard, of course, to make sure we control these because just like some of the other mines and underground mines I've dealt with, we have the same issues. Mine's getting deeper. You've got small stoves in many areas. You've got faster stoke turnover. We've mentioned there's more development and so on. So we have to work really hard to try and control our costs. And I think the team is doing a good job. And as I said, I left there feeling very, very confident. The only other thing I might just add as an aside is the Andalusian government just, and I met with the concierge while I was there, the minister, they just released their mining strategy for the region. And all I can say is it's an incredibly supportive location for mining. As I said, it's in the lifeblood. They also recognise the role it can play along with renewable energy and, in their case, the desire to push into green hydrogen. You know, we had a very, very good conversation and we did describe, and we haven't touched on this today, but how important that renewable energy is for us. And that's one thing I really like about MATSA. If you look at its carbon intensity, very hard to beat. We have 100% renewable energy under the terms of the agreement zero carbon emissions feeding that site. But perhaps, Jason, if I can just throw to you on Mateo.

Yeah, so Mateo, we've got the benefit of having quite a recent feasibility study on Mateo, which takes into account some of the inflationary pressures that we have seen over prior years. The other benefit that we're seeing, and particularly, you know, I'll give the site team a good rap, they're taking accountability and ownership of those outcomes. And they are seeing particularly, you know, Brendan touched on it before, We've now been mining there. So I've been mining there since March last year. So well over 12 months. We're starting to see productivity increase and that's offsetting some of the cost increases that we are seeing coming in from external factors in particular. And what we are doing particularly and the team over there is doing a lot of work on is keeping those costs down. But at the same time, lifting productivities to make sure that we're offsetting things out of our control as well.

Thank you. Now that you've got Mateo into production and you've got an asset base there, can you run through your exploration strategy? I mean, you are retilting it towards where your plants are. You know, what do you think the plan and opportunity is between, well, particularly Mateo? Thank you.

Yeah, look, and I'll pass to Richard in a second. He might talk to some of the work we've done recently to fundamentally review our understanding of the geological setting across the whole of the Kalahari Belt. But look, more specifically, there's a couple of things that are really important this year. So we think A4, remember that's that pit that's going to come in to support the 5.2 million tonne per annum expansion. It's got grade that comes with it. We've got to drill a potential extension, an open area where we're targeting something like a one to two year sort of extension there. That's really important, of course, the role that it plays. Then we've got the A1 resource that was discovered. We want to do enough work there to be able to bring it into some sort of inferred category, most likely, but that's just to build our understanding because that's absolutely an opportunity we think that can fill out, if you like, the right-hand side of the spreadsheet in terms of mine life. But then we have, and Richard, this is where I'll pass to you, We have, and it changes daily to be honest, around 12 targets that we've identified within 70 kilometres of the processing facility. The reason I mentioned 70 kilometres, it's a crude number. It's got science behind it, but it's roughly the distance that we think sort of represents the ability to have an economic resource that can be exploited and transported back to the centralised processing facility. basis the sorts of grades that the deposits have that we see in the Kalahari. And so, you know, we will run one drill week continually through this year working on both A4 extension opportunity, A1 definitional work and then testing these 12 targets. But Richard, maybe if you can talk to some of the sort of progressive thinking around the geological belt.

So a lot of the work that we've been doing recently is around building a 3D structural and basin model. So we've just completed, well, we're almost completed the large-scale AGG survey, so around 50,000 line kilometers. It's taken three or four months to run. Incorporating that data into our big picture thinking enables us to build a really detailed model around the structure, but also increasingly the depth of the basin and the sedimentary horizon is really important control and mineralization. So trying to work out where these mini basins are is a really important aspect. So focusing on that for the next 12 months. And then as Brendan said, we'll spend the next three months drilling out A1. So bringing that through to an inferred resource status so we can hand that on to a team to complete a concept study. And then the balance of the year will be just as Bill Rigg testing these regional targets within 70 Ks of the head frame to try and find economic mineralization that will support a much longer mine life at Mateo.

Thank you for your perspectives. Thanks, Doug.

Thank you. Your next question comes from Karen Peeker from RBC. Please go ahead.

Hi, Brendan and team. Yeah, two questions from me. I think prior there was talk about recovery improvement projects at MATSA. I think you partially touched on this with Dave's question with stockpiles being part of this, but just wondering what new term initiatives are being worked on outside, I suppose, the longer term Soitel processing initiative, but just, yeah, and what's been...

initiatives that we worked on and what commodities it seems like zinc recoveries were previously stated yeah look okay thanks for that i'll pass to jason um probably not a lot more i'd add from what i said in the sense that a range of those issues particularly the the sophistication of understanding how the ore is flowing throughout our chain is critical in terms of getting that control in the ROMPAD, in the core source stockpile, and then enabling us to manage the way it presents to the different processing lines. It's absolutely critical. And as I said, I was walking through the processing plant with the team circa a week and a half ago, and they have a laser focus on this. Of course, we'll talk more about this, but what we're aiming for is something like a 2% to 3% increase in recovery through the poly line for copper in this year. And so perhaps Jason, if you want to dig a little deeper into that, that'd be great.

Yeah, Karen, from our point of view, there's three key areas that we're working on and we've already seen some benefits of some of these kicking in as well. So firstly, I'll touch on, you know, Brendan mentioned it earlier, our strategy about maximising NSR. So stability of feed going into the plant, managing of blending, right? So we've got that, which will enable us to improve recovery as well as improving overall concentrate efficiency. characteristics as well so there's a double benefit there. That work has started but we'll see that really start to kick in during FY24. The work that you mentioned before that we had previously stated around reagent regimes and optimizing that for the oil and particularly we expect that to deliver further benefits in zinc recoveries so we have seen some benefits there as well. But what we do see is, particularly when we've got a variable feed, a lot of that benefit is being masked by the variation in feed that we get coming out of the ore body. So once again, sort of circling back to that blending and optimization and stability of feed to the plant will enhance that even further. And then the third key area there as well is really understanding our ore body. And Brendan, once again, touched on that earlier. It's a key part of our mine planning aspect Now there's aspects of that that relate to geotech and predictability of mining conditions. There's aspects of that as well that relate to geology and also ore body extensions but there's a really important part that quite often gets almost overlooked by a number of operators and particularly in polymetallic ore bodies where we see a variation in mineralogy and a variation in in the ore types that we're feeding through and being able to predict that as part of the mine plan. And in particular, we've done a lot of work on understanding that and we're seeing that we've got parts of the ore body that contain a very reactive version of pyrite. And we see once that goes into the plant, our recoveries go, they go down significantly almost immediately. So understanding those types of things in terms of drivers getting those into our mine plan and being able to proactively manage that through blending and configuring the mill is going to deliver significant benefits for us.

So just sort of building on that, any of these initiatives built into the current proper guidance for MATSA?

Yeah, so I think, as I mentioned, if you look at the 58,000 tonnes this year, you've got an improvement coming through in recovery, particularly for that polyline and particularly in the copper circuit. And as we start to see the results of this work, we'll continually optimise and then update our guidance. But yes, so we need to get some runs on the board to deliver these numbers. So they're not soft targets, going back to the question now as to what's the level of risk around these. We've got work to do, but the plans are in place and we're confident that we can deliver.

Sure, thanks. So just the second one is on costs. Slide 12 of the presentation, normally increased quarter on quarter in euro terms. You know, the TCRCs, I think they were well flagged and should have been understood. But maybe just can you talk around the increase in mining costs? What's driven that? Thanks.

Yeah, look, I think... perhaps if I can just reiterate what I said before, that we actually haven't seen an increase in absolute mining costs relative to plan. We've obviously had a degree of volatility in the mine over the last 12 months, as we will, as I mentioned, these polymetallic underground open-stope operations will tend to do that to you. But relative to our plan, our numbers have basically come in absolutely where we had anticipated. So, of course, the opportunity, as we touched on earlier, as we get if you like, better ventilation, we open up more mining areas, we've got more degrees of freedom, we should be able to improve productivity because at the moment where we find ourselves, recently we blasted a stope and we had a major issue with a legacy paste field that obviously above this particular area and that created one of these big issues with dilution. It slows everything down because you've then got to remedy, rectify and you've got really nowhere else to go. And that is really what we're trying to resolve by having more development and more open mining fronts. I don't know, Jason, if there's anything you wanted to add. No, I think that's covered it well.

Thank you.

I appreciate it. I think the simplest way to think about this is, as I mentioned earlier, if everything stays equal and all you see is the zinc price mean revert to people's long-run view of price, our C1 costs are going to fall substantially. without anything else happening. It's really a remnant of revenue for byproducts, which is a pricing artifact.

Yes, understood. Thanks.

I appreciate it. Thank you. Great. I appreciate it.

Thank you. Your next question comes from Paul Young from Goldman Sachs. Please go ahead.

Good morning, Brendan. Good to connect. I've been enjoying this discussion around the technical aspects of MATSA in particular. Just the zinc guidance for the next two years, particularly FY25, the wide range there of 80,000 to 100,000 tonnes, it can only be tonnes grade in recovery. So just stepping through, what do you think maybe the one largest variable there is of that range? Is it simply just mining rates?

Yeah, look, I think what I'd encourage you to do is it's a way of sort of trying to describe on the left how that operation is evolving. If you actually look at the chart, it's a specific number. So it's not a range of guidance, and apologies if that's confusing. I'd look to the chart on the right, and again, we can help you and understand the breakdown of how you get there. It's pretty easy because we've actually put a percentage in the bubble which tells you the contribution of Mateo, and Mateo, it's got obviously the silver credits, but obviously the copper is primary. So the delta is around that, which gives you, I think, in the order of 92,000 or 93,000 tonnes of copper equivalent. But we're happy to break that down for you. I don't think there's any issue with that.

There you go. That's OK, Brent. I can get the ruler out and have a look at that. Sorry, I missed that specific chart on the right. I can't do that analysis.

Yep. We'll make it clearer. Sorry about that.

No, that's fine. OK, and I guess the next question is, again, back on... on the drive to increase mining rates and spending more on development obviously makes sense. Well, certainly does make sense, sorry. Just to clarify, the five to 10 more in development and ventilation at 10 to 20, that's in addition to what we saw in FY23. So just adding those two together. So, you know, 15 to 30.

Yeah, I guess what I'm trying to do there, and I've got a sense that, you know, I understand the challenge with public information. There's only so much. If you look at all the capital expenditure guidance, you know, for last year, you know, it was in the order of that $322 million to $352 million, if I remember correctly. I guess what I'm saying is, simplistically, you've got, you know, that sort of increment of development and you've got an increment that's going to come through in terms of ventilation. So, you know, you would expect to see those sorts of numbers flow through into guidance. Yep.

Yeah, okay, no problem. And then not to lament on it all, spent so much time on this blending, but it sounds, is this quite a manual process, this blending and building 100,000 tonnes of stocks, just simply modelling stopes, where the tonnes are coming from, which stopes, what the grades are, but when it gets to the ROM stockpile and the core source stockpile, what are we doing? Are we doing sampling, the on-stream analysis here, or simply is it a manual process, just tracking those tonnes coming through the system?

I would say the simplest way to think about this is you're moving towards something that's more sophisticated where actually you have very good visibility of how this is flowing through the chain and how it's presenting such that it's more moving towards an automated approach rather than a manual approach. You still need to move the material. I think that's the key thing. You know, there's no two ways about that. But this is actually, I sort of think about it, you know, a lot of people in the call would be very familiar around an iron ore stockpile. You've got very, very significant differences in some of those feeds with different contaminants, voluminous silica, et cetera, and the way your reclaimer is recovering those to manage a blend. In a way, I guess, similar to what we're trying to do at MATSA. The difference is we wouldn't today have the level of control that they would have to understand all of those elements. So it's really around how we're presenting the material to those different stockpiles and how it's feeding from Crusher to Corsall stockpile, and then how we can, if you like, recover that and feed it into the flotation circuit. So, Jason, I don't know if you want to add to that.

No, I think you've captured it well. The only thing I'd add is that MATSA has an existing live control room and dispatch system there that covers the underground mines. That dispatch system, we're actually looking to expand that capability to use its full functionality and have a modern ore tracking system that goes from the face or the stove all the way through to the surface stockpiles. And that will be really important. backing that up with increased stock levels, as well as the predictive work that we're doing on all body characteristics there as well. So all of those things will come together nicely to give us more control on how we manage the plant and maximise NSR.

One of the things, Paul, that's quite unique about MATSA, and I've said to people, I've been quite surprised how well capitalised this business is. I mean, it's a modern processing facility. It is a very well capitalized site. You've only got to go to the head office and see something that I've never seen at a mine site in terms of what's there. Everything is undercover. The whole concentrator is enclosed. The core source stockpile is enclosed. There are doses that are used to move that material around within those enclosures. But again, the sampling process, what we're trying to move towards is something that's much more sophisticated and is really, if you like, it's pit through to ROM, through to course or stock file into the circuit itself.

Yep. Thanks, guys. Understood. Just last one quickly, the 784 revenue, Brendan, any PP adjustments to call out in that, in a half?

Look, no. I mean, we're still going through, to be honest, these numbers of, you know, you imagine financials, you're in the audit process, you're still doing some of the analysis. But there's nothing, I think, overly surprising. I know some people do have some challenges trying to work out on revenue. I think that if I can just give you an example, I'm glad you asked, I'll take the opportunity. If you think about MATSA and you look across a year into the guidance, you'd have something like 53,000 tonnes of payable copper. you know, you've got, if you look at the hedge book at the back end of the slide deck, you've got around 16,000 tonnes of forward sale. So that tells you there's around 30% currently forward sold at a price of around $9,000 a tonne. The remainder is sold at a market price. But one thing, and again, Ben's happy to help. We're all happy to help if needed. You've got to then back out freight because the copper is sold, if you like, into China. So there's a rollback and you've got to back out the freight for the Mediterranean and China price. These things are all available, they're benchmarks. And then for zinc, the material is effectively going from, it's priced on a basis of Mediterranean into Europe. And you've got to back that out as well. So there are possibly two things that I'd just encourage people to look at. So I don't know if that answers your question, Paul, but hopefully it helps. Yep, a bit more work to do. Thanks, Brandon. Pass on.

Thank you.

Thank you. Your next question comes from Ben Lyons from Jarden. Please go ahead.

Thank you. Good morning, everyone. Just two quick ones from me. Sticking with slide 11 there firstly, Brendan, and just referring to the EBITDA disclosure, just trying to reconcile between that operational number of 313 and the corporate level 246. So a $67 million delta between those two amounts is... pretty significant. So maybe there's an element of Mathéo costs that are actually coming through unless they're all being capitalized still, or otherwise there's some chunky stuff at the corporate level. Understanding that you're still going through that audit process, as you've mentioned, did you want to get ahead of the result by just calling any of those larger amounts out?

Yeah, look, so, and Matt might help me, but to give you a sense, so what we try and do is actually provide if you like a really simple way of thinking about what's the EBITDA as a proxy for cash coming specifically out of the operations. But then beyond that, you've got some of the centralised costs, so some of the exploration that doesn't accrue to sites, so exploration and studies. And then you've got corporate and business development. I think if you go back to the half-year slide, I don't have it in front of me, but I think we talked around $40 million of guidance for exploration and studies and around $30 million for corporate and business development. which is effectively $70 million, and that would be the biggest delta then. So, yeah, look, now one thing I might flag is, and I've been working with the team on this, you would know many companies in our space would report some version of an underlying earnings metric, particularly as you become a global company where you've got functional currency differences that can flow through either through your P&L above the line of EBITDA, but then you've got impacts on interest and tax. So we're working hard to be in a position to also provide an underlying estimate. Just for completeness, what I'm seeing at this stage, at least through the process, is that that group EBITDA number and the underlying number wouldn't be that dissimilar for us, at least for this period. But hopefully when we start providing that, that will help. But Ben, I hope that answers your question of the major delta that sits between the two.

Yep. Yep. That's helpful. Thanks, Brendan. Um, and then just a quick second one, just on the operating environment in bots. Um, yeah, clearly there's some great advantages to operating in that jurisdiction, but possibly also some challenges. So, um, just noting that the broader regional Southern African power matrix remains relatively unstable. And there was a particularly eventful day in bots in early May. Um, Just if you can talk to your experience with the power supply coming over the fence from the BPC to date and your current thinking about possibly putting in some captive redundancy on the site, whether it's solar or diesel gensets or whatever. Thank you.

Yeah, thanks, Ben. Great question. I know you've made the effort to spend quite a bit of time on Botswana, which we appreciate. When... So when we think about this, you're right, and one of the key questions is understanding that balance in terms of Botswana and its reliance on the South African grid. What we do see is that there's a strong both motivation and desire to prioritise industrial uses of power because of obviously the criticality of employment, remembering this is an area that despite the benefits, as you say, about operating in Botswana and the fact that it is deemed to be a very good place to do business with respect to Africa. It does have high unemployment. It does have challenges in its, I guess, socioeconomic fabric. And we're really pleased to be trying to help and do our bit there to support it and improve people's lives. And I think we're starting to deliver on that. We therefore feel quite comfortable with regards to the certainty and, I guess, availability of power supply. The one point I would make, though, is I did talk about the wonderfully green energy that we have at MATSA. Botswana has one of the highest carbon grid factors in the world. So it does come with its fair share of carbon emissions. So we're motivated for two reasons, Ben. For one, as you said, security of supply to build other alternatives. But secondly, we're motivated because we want to have, obviously, greener concentrate. And so... We've currently got a tender process underway to actually have a dedicated solar facility on site. We need to work with government because obviously there's policy changes that would be required, but that's advanced discussions that are underway. And so that would be a first step. But we would need quite more substantial change from a policy setting to move towards a combination of more solar with battery storage. And then there's that question around the grid in terms of its ability to receive that power when you're in an excess position, which is important, obviously, to justify the economics. I think that's probably a long way of saying then that we're doing a lot of work in this area, primarily because we do want to deliver a greener concentrate, but it will have the ancillary benefit of also providing some degree of security, more so because it probably takes the the load that we present off the grid for the Botswana government.

That's very helpful. Thank you very much for addressing the questions. Thanks Ben.

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

Yeah look, thank you. Appreciate everyone making the time. I've seen how many notes have been coming out and how many companies are reporting. So thank you for joining. I know we had a a really good number of people on the call. I did just want to make mention, and I'll make more of a mention around this when we present our results in August. Matt Fitzgerald obviously has decided it's time to do other things. Matt's been with the company well over a decade. He's seen Sandfire move from being a West Perth explorer to now being increasingly, I think, seen as a as a meaningful copper producer, a global producer of significance. Of course, I just wanted to make mention of that. We wish him very well. I know he's not going yet, thankfully. He's going to see it through this audit process and to results. Obviously, his corporate memory will be lost, but he's also committed to help us through the transition process. I didn't want to finish the call without making mention of that, Matt. We'll do so more so in August when we present our financials. So thank you, everyone. I wish you well. I know you're busy. Have a great day.

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