Metals Acquisition Limited

Hello, and welcome to the Metals Acquisition First Quarter 2024 Results Conference. At this time, all parties are in a listen-only mode. Later, you will have an opportunity to ask questions. To ask a question, you may press the star and 1 key on your phone keypad. It is star 1 if you would like to ask a question. To remove your from the queue, press star 2. Please note that this call is being recorded, and I will be standing by should you require any assistance. I would now like to turn the call over to CEO Mick McMullen. Please begin.

Thank you and thank you everyone for joining. I'll be speaking to these presentation slides today along with Morne Engelbrecht, our CFO. We're going to give an update on our Q1 2024 results as well as a bit of an update on the business up until now. So CSA obviously we own is a very high grade copper mine sitting in a tier one jurisdiction in Western New South Wales. And as most of the people on the call would know, it's been operating for a very long period of time. And so it's a sort of a known quantity in terms of infrastructure and great relationships with local stakeholders and a very stable regulatory tax and loyalty regime, which in this day and age is becoming increasingly rare. The company's got just under 70 million shares in issue. As everyone would know, we're listed on the New York Stock Exchange as well as the ASX. and the enterprise value is near enough to about 1.1 billion US dollars. We have a very strong register, large institutional backing, not a lot of retail in the company, and we view CSA as a great foundational asset for us in terms of a phenomenal resource in the ground with a lot of excess infrastructure. We thought we'd put in a bit of a scorecard for us to sort of mark how we've progressed along our journey since acquiring the mine back in June of last year. And I think, you know, overall, we've delivered on many of the things that we said to people we would do. Obviously, closing the mine was the first of those. Operate the mine safely and in a fully permitted fashion. We've managed to deliver on several key permits since we got the mine, including the tail exam stage 10 lift. We said we'd deliver a large resource increase. We always believe that the mineral resource and reserve had potential for significant expansion. And as with our call last week, we've delivered on that. We said we'd deleverage and simplify the balance sheet. And as you will see, when Morne starts to talk here shortly, you can see exactly to the extent that we've done so. We've indicated that we'd like to simplify our capital structure. And I would say that's a work in progress, but something that is front and centre of our minds. So we've been building our team both at a board and management level and I'd say that's a bit of a work in progress as well and you know we have certain steps underway that we'd like to take in order to sort of further broaden our board diversification as well as management. Operational turnaround, we've always said that CSA you know was a turnaround story in terms of it being a very small asset inside its previous owner, which is a very large company and perhaps didn't have the level of focus that the asset really needed. And so I would say we're partway along there in terms of operational turnaround. We are by no means where we'd like to be, but we see good potential to further turn the asset around. We said we'd deliver a meaningful reserve life upgrade and we've now delivered that with with an 11-year reserve life based on data up until the end of August. Clearly, we have aspirations to grow the business, but we would be disciplined on M&A, and I think we've demonstrated that. And for those of you who can recall from the closing in the middle of last year, we had a reasonable-sized deferred payment due to Glencore, which if we didn't pay it in cash by the middle of 2024... would have converted to equity. And so having paid that down, we've removed that potential dilution overhang. So three quarters into our ownership, I'd give us a reasonable score in terms of our delivery. And I think a few of those orange or yellow ticks there, we have plans in place in order to deliver on the remainder of those over the next six to nine to 12 months. Moving on to the next slide, slide six, Obviously, we've increased the life of mine and the reserves very significantly, and I think, again, based on the call that we had last week, the fact that the 11-year mine life actually only goes down 95 metres beyond the bottom of the current decline is very important in terms of the requirement for development going forward. We've had a very large increase in resources, and again, the top 850 metres of the ore body actually are not in that resource. Q1 production was down a bit from where we'd like it to have been. It was 8,700 tonnes of copper. And similarly, because of the high fixed cost nature of the operation, our C1 went up about 15 cents a pound relative to the prior quarter. I would say, and I did indicate on the call last week, that sequentially we expect quarters to be better production during the course of the year. We spent about $13 million of capital, which again was sort of exactly where we'd guided to before. And look, as everyone knows, the copper price has been increasing. We did achieve slightly higher than the average price, the spot price during the quarter. So again, we're achieving a better price relative to the market. Balance sheet at the end of the quarter, we had about 100 million US liquidity, so 155 million Australian dollars. We did pay down $127 million of interest-bearing liabilities. We've been very clear that one of the key things from operating cash flow and the ASX IPO was to deliver the balance sheet. And we have some further simplification that we'd like to do there. And we've also put out our first sort of guidance for the three years there, indicating that by 2026, we'll be producing in excess of 50,000 tonnes of copper. So in terms of production, look, it was a bit of a weaker quarter relative to the prior quarter. And that was a combination of really a couple of, two or three things. One was we did see a bit higher labour turnover and absenteeism, which impacted the production a little bit. It was also partly with the planning of the stoves. So as we've said before, the mine would sort of turn over circa 70 stoves a year. The top half a dozen of those could be as much as a third of your metal. And so if you're out of those, you know, then you have weaker production. If you're in those, as we're sort of seeing two of those stoats coming online or have come online during Q2, then obviously you get a large increase in metal. So we do have a bit of variability or volatility quarter on quarter in terms of production. The other thing, you know, in Q1 was that we announced, you know, we had a three-day complete power outage to the mine. due to that storm to the east of us. And we did lose a bit of momentum coming out of that. So that was a sort of, you know, a 500, 600 tonne copper impact for the quarter. C1 really was driven by the volume. And so, you know, we did see a little bit of an increase in C1. We do expect Q1 for 2024 to be our weakest quarter for the year. And part of the scheduling is we were mining a reasonable portion of ore from the east and west deposits, which are shallower, but they are quite a bit lower grade. And so, you know, we did see that come through in the average grade. So again, as we move out of those east and west deposits into Cutias North and Cutias Central, which is sort of really what the new mine plan is based on, you know, we expect to see grade start to tick back up again. Similarly, development metres were down. Now, we did a couple of things in the quarter. One was that we did a fair bit of rehabilitation metres, which aren't included in the primary development metres. We sort of went back and did a fair bit of extra ground support, but also under the new mine plan because we only need to advance about 95 metres below where we currently are for the next 11 years. It does mean that we actually need to do a bit less development relative to where we had been before. So again, we focus very much on productivity. So productivity was in line with the previous quarter, well above where it had been a year ago. And similarly, CapEx was basically exactly as we'd sort of forecast in the previous couple of quarters. We are doing those TSF works. And in the quarterly report, we put some photos there of all those earthworks. And so as those things roll off during the course of the year, we expect the capital spend to drop back down. But again, it was exactly in line with where we'd guided the market to be. At this stage, we don't have any growth capex. It's all in sustaining capex. And so it's trending exactly where we said it would be. I'm going to hand over to Mornay, our CFO, for the next three slides as he talks about the cost side of the business.

Thanks, Mick. Good evening and morning, everyone. My name is Morne Engelbrecht, and I'm the CFO for Metals Apposition. I'll take you through the next three slides and also the high-level liquidity waterfall at the end of the quarter. Before we get into slide 10, if you look at through our recently launched SK1300 report we issued in the US and copied on the ASX as well, You'll note that in that BDA report, they note that around two-thirds of our overall costs are being fixed. Costs from a mining point of view, which impacts to a large degree our cost per tonne and cost metrics as presented here, especially if volumes are down. Going to slide 10 and to the left is our processing cost per tonne in US dollars, which remains pretty steady with a slight uptick of around 2%. on the lower volumes compared to last quarter. And due to the higher fixed cost nature of our mining costs per ton, we're also impacted by those lower mining volumes as Nick has already covered off on. That metric is also impacted by the fact that our capital development meters were down by almost 45% compared to last quarter, which just means that less of that sort of fixed cost component is capitalized and therefore had to be distributed over the mining volumes as well and therefore it allows a net higher cost per litre. Going on to slide 11, you will see there that the volume game is critical once again with two-thirds of the G&A cost being fixed. There's little room to move when volumes drop off. The underlying costs are still high for my liking and we are actively working to reduce these overall through return ring contracts where possible. As I said before, on the development meter side, we're almost 45% low on quarter-on-quarter, and as Mika's outlined, this is predominantly due to more rehab meters being completed, which is not part of the rate calculation. And then we're also pivoting in the new mining plan. We were going to mine high-grade areas going forward. On slide 12, here I wanted to take you through a high-level liquidity update. as at the end of March 2024. As you can see, we started off the year with liquidity of around US$32 million, which included the drawdown of our revolving facility of US$25 million. We then completed a very successful oversubscribed equity raise on the ASX, which brought us into much-needed liquidity of around US$215 million or AU$325 million before costs almost immediately We paid a deferred link call consideration of around $83 million U.S., which was one of our higher debt costs on our balance sheet as it carried the same interest as the nested facility, so immediately accretive to earnings. Alternatively, this liability could have been converted to shares, which would have been highly dilutive, so paying that back as soon as possible was the best thing to do for us there. We then reduced further some additional interest-bearing liabilities by repaying the revolving facility of $25 million and reducing some of our principal on our senior facility as well of around $8 million. We ended up the quarter with around $100 million of liquidity, which is around that $155 million Aussie has outbound as well. I think it's very important to note that the This liquidity does not include the two shipments we referred to previously as well on our previous calls of around 48 million US dollars, which was shipments around, one of the shipments was the last week of March and the other one the first week in April. And if you look at that sort of liquidity graph, you will see that we carry obviously all the costs in the quarter for those two shipments. during the quarter, but there's no revenue or cash to offset that. So you will see that coming through in the next quarter. And that's just based on our terms and offtake agreement, which sort of states that title doesn't transfer until that provisional payment is made, which can be around two weeks after the ship is loaded. So that's just a cash flow timing issue there. And then also there's no revenue accrued at the end of March for those two shipments as well. So just wanted to make that very clear. Also of note, this subsequent quarter we paid the stamp duty on the acquisition of the CSA copper mine, which is around $24 million, which you will see coming through the next quarter as well. And then, as Mick has mentioned, we are looking at ways to strengthen our balance sheet and simplify our capital structure, as I mentioned before as well. So we're looking at a number of options there, which we can report on over the next couple of quarters. With that, I'll hand back to Mick.