Aurelia Metals Ltd

I would now like to hand the conference over to Mr. Andrew Graham, Interim Chief Executive Officer. Please go ahead.

Thanks Rachel and thanks to everyone for joining the call. I'm joined today also by Peter Trout and Martin Cummings who will talk to parts of the presentation as well as be available to answer questions when we get to that point. For those who aren't aware, we'll talk to the presentation that's available on the ASX announcements platform. today and I'll reference slides as we go so that you can follow along. We'll open up on slide three for those with the presentation and I've chosen to open by talking about guidance and part of the reason is you may have when you looked and opened our quarterly today think the December quarterly looks a lot like the September quarterly and nothing's changed but I can assure you a lot's changed and a lot continues to change and our presentation today will take you through some of those things that we're working on. Firstly, on guidance, we are on track to achieve our guidance and I'll talk to that in some detail. On production, the four graphs to the right give you a good snapshot of why we're confident we're on track to achieve guidance with each of our major commodities sitting above the kind of halfway mark as we get to halfway through the year. There is some split quarter on quarter and variation between copper and lead and zinc and a lot of that has to do with flows through peak and a sequence of material coming through peak where, you know, we run batches of copper or lead and zinc ore. Also, we've had the lower lead and zinc production out of Harrah with the new mine plan. And we'll talk to that later in the pack. In respect of all in sustaining, you'll see that our actual for the quarter six above guidance, we are still very confident of achieving guidance for the year. You recall that we updated guidance on 19th of December and that was announced. And the timing that we put that out, we took account of the first five months of the year. And as we look through the pack and talk through it, you'll see December was an extremely strong outcome, all in sustaining around 1675. So on track to achieve our guidance for the year. Not saying that we're going to stay at that level for the rest of the year. We had a lot of things go right through December, but we're still very confident and achieving the guidance that we set with the full knowledge in December of where we sat. Turning on to page four then, you'll recall those who attended the AGM that Peter Botton and I spoke to you at the AGM on our near-term priorities. And I'm pleased to be able to report back positive progress against those priorities. Now, the slide title is CEO's Priorities. I mean, it's important to say priority is not my work and it's great to see the team across the business stepping up and supporting the change process. And we'll talk through some of that as I talk through the slide. Also, I'm only going to provide a summary here. Some of the detail that sits behind these activities and the work supporting those activities will be covered in a little bit more detail as we go through the presentation by both Martin and also Peter. Starting with safety then, TRIFR remains stable for the quarter. In all honesty, stable's not good enough. However, in a period of time where there's a lot of change going on, we were very pleased to see that that didn't go backwards or materially backwards. But as I say, it's not good enough and there's quite a bit of focus in the business coming into our lead indicator program and doing the work to ensure these injuries don't occur rather than just counting them after the fact including things like risk assessments and hazard identification, particularly in work that's not commonplace, a bit out of the ordinary. And we've had a few incidents in that regard over the quarter. The other piece of work we're doing is some early identification in the mental health space, recognising we're going through quite a period of change and some of that change, as you heard on the call in relation to HERA, materially impacts our employees. So we're being very conscious and ensuring we're on the front foot in that space. Moving to operational delivery and cash management. Peter will cover a range of additional topics for this, but in this point I'm going to focus on the error change we talked about in December. That change got implemented at the start of December and I'm pleased to say it really is delivering. We got very strong results in December. about 36,000, a bit over 36,000 tonnes from underground, which is really the target rate we want to be feeding into that plant. And we fed about 37,000 tonnes in the month of December. It really helps to reach fixed costs and help with a very strong oil and sustaining. For HERA for December, oil and sustaining sat around the 1400 mark, which was a strong contributor then to the overall December outcome for the business. And the credit for that really, you know, fits with Rob Walker, our site general manager, Nick McCloskey, the mining manager on site, who both put a lot of work into coming up with a plan that was deliverable and took account of risk and then actually worked through that in the period of the month of December and ongoing now. You know, it wasn't the smoothest of months. They never are in mining, but they had a plan. They had a backup plan. They were able to work through that and achieve what was a very, very strong outcome. Also credit to Justin Woodward in our mine planning department who really drove some of that early mine planning work. The other focus has been with HERA. We've implemented the plan. We're delivering the plan. Now we need to shift our focus to an efficient transition to care and maintenance. You'll recall that the plan shortened the mine life, focusing on higher value materials, which you're seeing the benefits of now through cash flow. But there's quite a bit of work we need to do to ensure a smooth transition to care and maintenance. The people part of that is very active and we got going on that straight away as we talked about on the call in December, ensuring that people had some certainty about their futures. But the physical part of care and maintenance is our focus at the moment and really thinking about the sequence, the timing, the work. And then once it's in care and maintenance, what's needed to keep it in a reusable form when we're ready to turn it back on for federation. Another key program which is up and running and certainly kicking some goals is our Working Smarter program on continuous improvement and margin improvement. There's real credit there to Simon Young and our team who's really been pushing that and spending a lot of time across the site driving that program with the sites and it's really great to see the whole team coming together and being part of this change program. Shifting here then to Federation. We'll talk firstly about the optimisation work. There'll be more on this later in the pack. We talked about further optimisation of the feasibility study. That work's ongoing. There's a very active mine planning element to that, which we're doing currently as part of our life of mine planning process. We're also looking at optimisation of the capital to develop the project with the scope and schedule, all the usual elements that make up project delivery, recognising that most of What's left is either mine development or brownfield and smaller capital in relation to the existing plants. The other piece of work that's ongoing is some further metallurgical test work. You'll recall the plans to take the early ore from Federation up to peak. So we're doing some additional test work just to confirm that we will get the recoveries and the outcomes that we're expecting. Federation funding was talked about in quite some detail in the past and obviously everyone's waiting to see the outcome of that Pleased to say that we're on track to come to a solution there for efficient, effective funding of Federation in this quarter. And Martin will talk in more detail about that later in the pack. The other really key plus for us on Federation is regulatory approval, sitting certainly well ahead of where we had forecast this to be. And I'll talk a bit more about that later. But, yeah, we're really looking to have development consent in place during this quarter. Finally, just touching on the leadership renewal, which Peter particularly talked about at the AGM. A few changes and a couple of new faces in the business. Obviously, I'm talking to you today as interim CEO. We've got Pat Cummings on the call as our new CFO. And Richelle had her role broadened, I suppose, into a general counsel and company secretarial role, taking on from Ian Poole, who was CFO and company secretary previously. The other change which we're really pleased to welcome in, Matt Nuzzle has joined us as General Manager of the Peak Mine. He started last week and is really getting his feet under the desk very quickly. Finally, and I won't talk to it because it's Peter Bottons to talk to, but we are ongoing with the comprehensive search for a new CEO. Peter will have something to announce on that once the search is complete. Turning the page to slide five, and as mentioned earlier, we're particularly pleased with the strong result in December. And, you know, we're cautious to not get ahead of ourselves. We recognise one swallow doesn't make a summer. But we're certainly pleased to see where December came out and getting some rewards for the hard work that's been done across the business. Looking at production first, down the right-hand column, Peak was mainly mining copper ore out of Jubilee in December. Strong Gold came with that, which resulted in a good gold performance, a good copper performance, and a very strong and sustaining in the order of So a great performance there at peak. Will it stay like that for the rest of the year? As you know, peak moves between various oil bodies and various commodities. I think that was probably an exceptional month for what we have ahead, but we certainly see peak being a strong contributor for the rest of the year. HERA and the graph speaks for itself. We talked about the change in the mine plan and it really resulted in a step change performance in December. I think we're mining around 2.3, 2.4 grams gold. Not a whole lot of lead sink credit with that, which is one downfall relative to where we've been in the past, but certainly the gold speaking for itself and contributing very, very strong cash. And DAGs, we talk about it quite regularly. It's a good stable performer, delivers as it's supposed to, as it plans to, and there's certainly no exception in the December month. So if I flip across then to the left-hand graphs in the top one, first of all, you can see the result of that performance through December 1675, all in sustaining, you know, against the 2300 guidance. It was certainly a very pleasing performance. It somewhat came to average out or average down the first two months of the quarter, having us come in very similar to how we came in the first quarter. But obviously we're hoping now to... steady somewhere below that $2,300 to then achieve the all-in sustaining guidance for the year. Turning to cash, inconsistent with what we're talking about for December, it was a strong cash month for us in December, arrested that cash reduction that we've been seeing for a number of months. The other piece which makes this even more pleasing is you need to recall our bank debt repayments and there is a repayment each quarter which occurred in December. So on top of generating additional cash into that cash balance, we also included in there paid almost $10 million of repayments to the term loan and also cash backing of the closure facility. The other thing that occurred, which post-states December, although it was submitted in December, was our tax refund of almost $10 million came in in early January. It certainly helped our cash balances. I'm going to pass on now to Peter Trout, our COO. He's going to pick up from slide seven, talking about our operational outcomes.

Thanks, Andrew. We've gained traction across several initiatives over the December quarter, and the strong production result in December has really set us up and been sustained into the new calendar year. If you look at our total recordable injury frequency rate slide on page seven of the ASX presentation, You'll see there that there's a slight uptick in the frequency rate, which is not a change in the number of recordable injuries, but more so responding to fewer hours worked across the group in the December quarter. As Andrew mentioned, we maintained high compliance with our proactive lead indicators and progressed our externally facilitated mental health program for our workforce. In terms of environmental performance, we had no reportable environmental events over the quarter, and that led to the improvement in the frequency rate shown in the chart. And that's a particularly impressive result given we had several high intensity rainfall events in the Cobar sites and the water runoff resulting from those events was carefully managed to prevent any water discharge from the Peak and the Herra sites. We turn to slide 8 and look at the performance out of Herra. You'll see the impact there of the modified mine plan that was introduced at HERA to bring forward the higher margin ore. The higher ore delivery and gold grade led to a doubling of gold production to 4,500 ounces, and that directly flowed through to revenue, cash flow, and oil and sustaining costs. Underpinning the strong ore delivery was having access to three stoking areas, including the upper hay zone, and that helped us get that 39% increase in mined ore tonnage relative to the prior quarter. It's also significant that development mining reduced over the quarter in line with the new mine plan and will actually finish this month and that will further reduce the operating costs at the Harrah site. The process plant performed particularly well with good runtime and metallurgical recoveries and the feed grades reflected the prioritisation of the gold dominant ores at the expense of the lower grade base metal ores. Changes have been through before to care and maintenance planning. We're well advanced now with our care and maintenance planning and activities. We're looking at redeployment opportunities for our employees at HERA and transferring them to other roles that are vacant in the business. We've already started removing some of the assets from the underground mine that are no longer required for its ongoing operation over the coming months. At our peak mine, activities progressed in accordance with the new operating strategy that was announced in the first quarter. Mining and milling operations over the first half of this financial year have achieved the 550,000 tonnes per annum rates that were targeted under the new operating strategy. The other significant change was the continued staged transition to majority owner mining at peak. We demobilised most of the contract mining workforce over the December quarter and have filled the majority of the new owner mining roles that have come about from that change. As a result, the labor hours in the mining department reduced by 47% over the six months from June to December, whilst mining expenditure fell by around 25% over the same period. And you can see in the chart on slide nine, the downward trend in the contractor costs. The mobile fleet transition is largely complete with the demobilization of hired equipment and the introduction of the first of two haul trucks that are owned by Aurelia. and delivering immediate productivity benefits. We're confident that these and other initiatives provide us with a platform to drive further productivity and cost initiatives across the site over the coming months. With reference to metal production, the timing of our ore campaigns led to the higher proportion of copper ore in the mill feed and hence higher copper production with lower gold, lead and zinc production. We also did take some adjustments to concentrate stocks following the clearing of high concentrate inventory that accumulated at the end of September. Turning now to slide 10 at Dargs, our team there delivered another consistent quarterly result with gold production just below 8,800 ounces for the quarter. In the underground mine, good development and oil production rates were sustained and the gold trade continued to reconcile well against the geological model. That really highlights the value of the infill diamond drilling program that's been underway over the last two years or so. Pleasingly, we received regulatory approval for modification five of the DAGS 9 development consent, and that was received on December 20. What that does, amongst other things, is allow the processing rates to increase up to 415,000 tonnes per year. Without that approval, we would have hit the previous limit in December and been required to suspend processing operations So we saw an immediate benefit from that approval by being able to process an additional 2,000 tonnes of ore in the December month. And looking forward there, those higher ore processing rates will transfer the production bottleneck to the underground mine. So in anticipation of that change, we commenced a stope backfill optimisation program. It's designed to reduce our cement consumption, which will directly benefit costs, and shorten the filling time for stoves, which will allow us to cycle stoves more quickly and sustain higher production rates. The underground infill and essential diamond drilling program is now drawing to a close and the latest results will come into the geological model and we'll use them for mine planning work that will dominate the economic depth extent of the underground workings and potentially the inclusion of the ruby load into the mine plan and those results will be coming through in the coming months or two. I'll hand over now to Martin, who will cover the financial results for the group. Thanks Peter. As you saw earlier, while our cash was lower this quarter at $23.7 million, it did grow from November to December. It is important to reiterate here that the cash balances we report exclude a further $41 million that we're holding as restricted cash to back our performance bonds. And as Andrew mentioned earlier, this is after almost $10 million of payments to the banks in December to either reduce our term loan or to further cash our bonds. You can see the chart on the bottom right here, just the rapid repayment over the last 12 months of our performance bond and debt facility. And our term loan is now down to $12.7 million. And we only have a gap of $16 million of performance bonds that we haven't cash backed. And as Andrew also said, again, this cash performance really does exclude the $9.8 million tax refund that we received in mid-January. So I'll just work through some of the movements in cash for the quarter. Peak had a very strong quarter, as Peter mentioned, and $19.8 million of mine cash flow. Concentrate sales were higher this quarter, and it did include sale of production from September quarter. But pleasingly, mine operating costs were also lower. Dargs was a solid contributor again. Cash flow was slightly lower than the prior quarter, but this is really due to the timing of shipments from Dargs around that Christmas New Year's period, which we will sell this quarter. HERA was slightly negative, but it is a material improvement on the prior quarter, and that really is a result of the actions that we've taken at HERA to maximise remaining value, and it resulted in a much improved cash flow in December of $6 million. Our growth capital was lower this quarter with the suspension of development and federation and we expect that this will remain relatively low for the next quarter before we expect to restart development in the June quarter. I've mentioned debt and cash backing so I'll just now move to the largest bar in this chart which is working capital and just explain that unfavourable movement. There really are two main drivers to that. The first one was about $13 million in higher trade payables paid during the quarter, and these were payables that were built up over the June and September period. And with our spend slightly lower in the December quarter, some of that working capital has unwound. The second part is related to the revaluation of our shipments. So we actually value our shipments each month, our shipments and our QP hedges, and we report that revenue within the operations. However, the cash for those movements isn't settled until the quotation period has completed, and therefore we report those overs and unders through Working Capital during that period. We'll talk about Federation a little bit later, but I'll just make a few comments on the balance sheet and the funding. Our existing bank syndicate have demonstrated they're keen to support the company through this funding process, and during the quarter they provided waivers of our covenants through to March to give us some space to complete the financing. This also included an extension of $10 million working capital facility out to March. The funding process is very active, as you can imagine, and we've noted in the pack we've now received a number of term sheets. The funding package will incorporate a requirement for a performance bond facility, and that's going to be around the same level as the current facility, about $65 million. The other limb of the facility will be funding for Federation, for the Federation development, but noting that the $41 million we're currently holding as cash backing will be an important component of that funding requirement going forward. We're continuing to evaluate the funding options across multiple forms, and we remain on track to finalise this by the end of this quarter. With that, I'll now hand back to Andrew.

Thanks, Martin. We'll turn now to upside opportunities and opportunities to unlock further value, which the whole business is very much focused on. Turning to slide 13 in the first instance, just a little bit more detailed about our Working Smarter program that I mentioned earlier. The program's ultimately a classic bottom-up business improvement, continuous improvement program. We're running that in-house. All of us have had a lot of experience with those types of programs over many years. So we certainly have the skill set within the business to run that without an expensive external consultant. And it's really delivering benefits, as you can see on the chart on the right. In my mind, one of the strong elements of these kind of programs is it's tapping the knowledge, the experience, the ideas of the entire organization. And we're certainly seeing that. We haven't put it on this chart, but the initiatives that are being implemented, there's 106 of those that make up the partial circle there on the left. Of the initiatives in the pipeline, there's another 222 on top of that. So you can see there's a lot of ideas being generated across the business. The team has a very robust program of prioritising those after an assessment, making sure we're putting our energy into those that will have the biggest bang for the business. A little bit more detail then on what we have implemented to date. It's a mixture of cost deferral, one-off cost savings, as well as ongoing savings. And probably half of what's in that left-hand partial circle is a cost deferral. In some ways, those are the easy, early, low-hanging fruit. I say easy, but the reality is the business has those in the plan for a reason. So bringing those things, pushing it into the future, often requires a bit of work and some thinking and making moves with what you have. And then largely the other half of implemented initiatives at the moment are made up of those on-off savings and also then the ongoing recurring year-on-year type savings. So the program hasn't been running for too long to have achieved this level already. We're very, very confident that our $24 million target will be blown out of water, especially with those 222 initiatives and $20 million worth of value in the pipeline. And we're certainly looking forward and the team's working very hard to bring some of those savings to bear in the near term. Turning into slide 14, a little bit more information on federation. I touched on all of these items and Martin has certainly touched on funding. But I'll talk firstly about approvals because in the last month it's been a very, very pleasing development in relation to federation approval. We were tracking well through the approval process. I suppose the mine and what we're trying to permit has all the attributes of something that the world needs and is a good corporate citizen. That's a low impact development. It's largely brownfield. It's critical minerals, copper, zinc, lead, that the world needs to move forward. So it's sort of no surprise really that it's progressed quite quickly. The other bit there is the team has done a very good job of thinking about what's the impact of the business, minimising that impact and ensuring we have something that's in some ways easier to approve. The other piece to all of that is we've had great support from the New South Wales Government and particularly the Department of Planning and Environment who's been working diligently through their side of the approval process and really it's that combination of our effort and our projects and our work and the effort and the work of the New South Wales Government that's allowed this to come together quickly. So we're certainly expecting development consent within this quarter which is earlier than the mid-year we were guiding people to previously. To those who aren't familiar with the process, the development consent is effectively the key consent to a project to move forward. It doesn't end there though, so we'll then get a mining licence, an ML, which can take in the order of two months. and then the other part of the various management plans that are required under development consent, which we will be working up in parallel through that process. But really, development consent is the key tick in relation to the project moving forward, and we're certainly very pleased with where we find ourselves at the moment. I won't talk about Federation funding any further. I think Martin covered that extremely well earlier in the call. And also in optimisation, I've touched on a few things that we're working on, you know, refinement of the mine plan, especially thinking about how we get early times from the mine up the road to peak for processing and being turned into revenue. I mentioned the net testing we were doing. One thing to think about and to keep in mind is, as the photo suggests on the right there, this has all the look... If you go to the site, you'll see a mine. Ultimately, we've got surface workshop facilities, we've got change houses, we've got... equipment park areas. We've got, as you can see in the photo, fully developed box cut and about 90 metres of underground development, the face of which is sitting 80 metres above the ore body now. So when we're ready to go again, it's a very, very quick process for us to get underground and start developing a mine. The other thing, and this is a kind of cross your fingers and hope that scheduling all works, So we have Redpath at HERA. We have Redpath also on the contract to develop Federation. And with the changes scheduled at HERA, it is possible that the crews coming out of HERA may be able to be redeployed to Federation if our funding timing allows. Moving then to slide 15, those who may have missed it, 18th of January, we put out some very exciting geophysical results All of the results were around what we call an energy district, which is the area and the exploration ground that we hold around the Herra Mine and the Federation Mine. We did four IP surveys as part of that program in the back end of last year, finalizing that at the start of this year. And all four delivered what are very, very exciting results. We firmly believe we've got the best land package in the Cobar Basin. and certainly one of the most prospective base metal packages in Australia. So to be able to allocate funds to do this kind of early work and to get good results from it and to really focus their energy now in chasing some of these targets is a really good outcome for the exploration team. I did get one question after the announcement went out on the geophysical results on why we went to do IP first and didn't do things like soils. The reality is we've got a very, very strong database of soils, magnetics, other forms of survey which we use to target this IP work. So soils have been done. So when we said the next step is to do finely spaced soils, that's exactly what it is. So we'll do additional soil work around these IP results before we then target our drilling to ensure we're making the most opportunity from our drilling spend. Now turning then to slide 16, I'll start with, and I'll let Martin add a bit more colour, but anyone following our commodity mix, our commodity prices relative to the commodities we have, will know that we're in the right commodities at the moment. We're seeing gold up, we're seeing copper up, we're seeing zinc up, and it's certainly very strong. We did have a question I think on an earlier call about our hedging, so it's probably useful just to give you some additional detail on that so that you can see that we're very much exposed to this attractive run-up in commodity prices. So Martin, I might just pass you for some additional detail on that.

Yeah, thanks Andrew. Just the additional detail to add here is, as Andrew mentioned earlier, we are actively managing our cash during this period while we complete the refinance. In the short term, we do have some hedging on place for shipments and we have a very modest hedge book for gold as noted there. But really beyond this refinance window, we are well positioned to provide an exposure to these price moves. The gold hedge book will be fully delivered by the end of October. And probably the other point to note that as was contained in the Federation Feasibility Study release, over the next few years, we are going to transition away from what really at the moment is an equal mix of precious metal and base metal to much more dominant exposure to these future-facing metals with around 80% of our revenue coming from base metals. So once the balance sheet is in place and the funding for Federation, we're well positioned to take advantage of this favourable outcome. So I might just finish there and hand back to Rachel to open the line for questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to come to your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. We'll just pause momentarily for people to register for a question. Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your first question comes from Adam Baker with Macquarie. Please go ahead.

Yeah, morning guys. Just wondering on the draft conditions for development consent at Federation. Good news there that it's all sitting along nicely. Just just wondering if you could add a bit more color to what those conditions are.

Yeah, Adam, I'll just touch on that Andrew here.

Look, I won't go through the conditions, as you'd appreciate it's a lengthy document. I think it's fair to say, though, there was nothing in there that necessarily surprised us. It was all largely in line with the conditions under which we operate for the likes of the PEAK asset and the COBAR approval that we got earlier. So as we worked it through, there was nothing in there that was going to materially change or impact the way we had planned on running the business. We had planned and we had designed and we had submitted something that was a world-class kind of an operation and therefore it aligns nicely with what the New South Wales Government expects.

Yeah, sure. Great. For Federation funding, have you been seeing much more inbound interest given the strong start to the year that we've had with base metals prices along with gold as well? Anything you could add to that?

I'll just pass that one to Martin who's been doing an excellent job in running that funding process for us internally.

Hey, Adam. Look, I wouldn't say we've seen any more. There is significant interest in this opportunity, and I think there is a valuation gap at the moment. So I wouldn't put any of the interest down to necessarily a strong link to commodity prices. Obviously, appetite for the metals that we produce is improving, but I think there's equally an investment opportunity here, which is generating interest. Andrew, anything to add to that?

No, I think it sums it up well. Martin's certainly been quite a bit of interest in what we have to offer. And I don't necessarily think anything's materially changed based on the commodity price that Martin's seen.

Yeah, sure. Thanks for that. And guidance, production for metals looks pretty achievable this financial year. around a bit over 50% for most year metals, which is good. Just wondering where we sit on costs. You're likely expecting about a second half of the financial year for all of the standing costs, and you're still comfortable with about $2,300 for standing cost level. Obviously, higher base metals prices will help bring that down. But anything operationally, we should be thinking about for lower costs for these operations.

Hi Adam, it's Peter here. Yes, as you said, metal production, we're tracking well for guidance. As Andrew pointed out previously, we do see some ups and downs at peak, depending on the timing of all processing campaigns. So that does lead to quarter-on-quarter fluctuations. On to costs, there's a couple of things coming up where we're seeing lower expenditure in the business, which will flow through into all in sustaining costs. If you look, say, at HERA, for example, it's really about mining for cash there. So we're winding back development and other activities, which will bring down the spend at HERA. We're already seeing that come through. At DAGS, there's a number of initiatives underway from the Working Smarter Program, which will see some costs come out of the business. It's also worth knowing that at the back end of this half, we will see development rates come off at DAGS. We're already at the... next to last final level in the mine based on the current mine plan and with less development obviously we'll see less cost coming through there it's initiatives around the back chilling campaigns um competitive tendering for some of our consumers that we use across all sites is reading some benefits over what we currently pay outside of contract and coming to peak which is our largest cost center i think that chart in the presentation showing reduction in contractor spend is really a good analogue for what we're seeing for the mining expenditure spend at peak. As we remove some of the duplication we carried through the first quarter, just to make sure we didn't have a production hiccup with the change to owner mining, but also off-hiring equipment and be able to do things more productively ourselves. A good example of that is multi-skilling our operators so that one day they might be operating one piece of equipment on one task, but the next day they can go over and perform alternate tasks, which they're equally well skilled and qualified. And then there's a working starter program. There's a whole host of initiatives there we haven't got to yet. We've got traction on several of those, but there's a lot more in the pipeline we need to work our way through. And that's, at the moment, a matter of prioritising the ones that give us the biggest impact for the lowest upfront investment.

Nice one. I'll hand it on. Thanks, Gareth.

The next question comes from Anthony Wallace, a private investor. Please go ahead.

Hello, gents. Thanks very much for the call. My question relates to last, well, this month's announcements for the IP surveys around the Nimigi area. And I was wondering, with the effort that's been put around there at the moment, what's happening with Great Cobar?

Hi, Anthony. Thanks for joining the call and thanks for your question.

In relation to Great Cobar, ultimately it needs capital to develop it. And when we look at where our near-term cash is best spent and the margin, the very, very high margin we get out of federation and the small amount of capital needed to get that up and running now that we've done a lot of the work, it's certainly a priority to get federation up and running. The Great Cobar is definitely not forgotten. The world going forward will be desperate for copper. We're sitting on a very, very large resource at the peak, including Great Cobar. So it will see its time in the sun. What we're ultimately, and with our plan to put Federation all through our existing mills, we get to a place where the ore effectively have to compete for space in the mill. And so, as I mentioned, Federation, very, very high-margin material, will compete well for space in the mill. We have some additional high-margin, high-grade material at peak that we're working through as part of our mine plan at the moment. And we get to a point where Great Cobar then has its day in the sun. Ultimately, it becomes a bit of a lever for us as to when we choose to do that. But we expect it to follow soon after Federation is up and running and ramped up. It will ultimately be filling the mill with original peak inventory. And then thereafter, as some of that higher-grade peak inventory is depleted, Great Cobar will then come in and fill the peak mill.

Perfect. Yep. Thanks very much for that, Andrew.

The next question comes from Michael Evans with the Cova Capital. Please go ahead.

Good morning, Andrew, team. Thanks very much for the quarterly update. I've got a few questions. I might start with the simple ones. In your report at the back end in the appendix, which has got lots of helpful information, you split out peak copper and peak lead zinc. Have you done that in the past? Is that the plan to continue doing that going forward? Michael, it's Peter Trouty. I'll take your question there. The answer to your question is no, we haven't done that in the past. But given the quarter-on-quarter movements, we thought providing that information as part of the quarterly would give a bit more transparency about what's driving reported metal production. So we've got that listed there for both the December quarter but also year-to-date. And the intention is to carry that forward, especially, I guess, as we get more base metals in our portfolio with the introduction of federation down the track. Yeah, that's really helpful. Thanks, Peter. Just more numbers to crunch. And just switching over to Federation, one of the funding options on the table mentioned at one point was a sell-down of the project. Is that option still on the table or is more conventional sort of equity debt considerations being prioritised?

Martin, did you want to comment on that, sir? I'm happy to then follow up.

Certainly more conventional funding is the priority right now. I'm actively involved in Aurelia funding that project.

I think I could just add to that. ultimately federation is the highest grade, highest margin, highest value inventory in our business. You can bring it on as effectively a brownfield development using your existing plants. That in itself cornerstones our business going forward. So we're really quite keen to fund a conventional source of funding for that and then bring it on and realise the value to shareholders.

Okay, great. Thanks. Andrew Martin. And whilst I've got you on federation, just the ability to put death in the project, you've got about, correct me if I'm wrong, but there's about 2.2 million tonnes of reserves and about 4 million tonnes in the mine plan. How does that impact the amount, quantum of death? that you can allocate to the project. And just secondly, the second question, which is separate, can you just remind me how you're putting the high-grade stuff to peak and the lower-grade stuff to the hero mill? How do you split those laws at the mine, simplistically? Thanks, guys.

I'll let Martin have a go at the first one first, and then I can talk a little bit about our plan for collectively mining that.

I guess the one point I'd stress here is that we're not actually looking for a project finance facility here. We are implementing a corporate facility. So the refinance that we're going on at the moment, we'll consider cash flows from all the operations, bonding requirements of all the operations, with the intent to refinance the existing term loan and performance bond facility. So we're not looking at the refinance in terms of the level of debt that the Federation can carry on its own. would be probably the important point there. That's really helpful. Thanks.

Michael, just to talk to you, your other question on the spitter material. So peak mill is very suitable for federation ore in that it can make a zinc concentrate and a separate lead concentrate. It can capture the copper into the lead concentrate. And then we have the gravity gold as well as the gold leach circuit, which then allows you to maximise recovery of gold. So we really wanted to exploit those features of that plant. So with the full tailings leach, so with olive or leach outcome on gold, it makes sense for high gold material to make its way to peak. Similarly, high-grade zinc and high-grade lead material goes well through peak and gets maximum... payability for as individual products and the other one which is a little bit more nuanced I suppose than the other two being straight grade is the copper lead ratio so that if we are getting a lot of copper material it makes sense for it to go up to peak and end up in the lead concentrate as opposed to going through HERA where it ends up in a bulk concentrate in which it doesn't get paid Now, the planning group have come up with a split based on scope grades, so it's on a sort of scope scale as opposed to sort of a block scale or something similar, which gives us some confidence then that that kind of split should be potentially achievable at the sort of levels that we've modelled it.

OK, Andrew, that's great, Carl. Thanks. And to be clear, Because you're sending different materials to Peak and HERA, how does that affect your rate of development in terms of do you have to have more development earlier in the mine life because you need more faces open to give you flexibility to send the right grades to the right mill? as opposed to if you were just sending water one now, a more conventional process. Do you need more development up front in the mine life?

I think I'll start answering that, and Peter may want to jump in a little bit more detail. But just on development, one of the key pieces for federation is the ramp-up, and the ramp-up comes from having more faces open, as you would know. So part of having the exploration decline according to the original plan is pushing that down under the exploration behind permit. And then once we got development consent, we're able to push laterally and start mining stoked material. We're now going to, it would appear, have development consent a lot earlier in the development of the underground workings. So we are, in that life of mine planning piece that I mentioned, the team's very active on that at the moment, thinking about how do we effectively ramp up more output sooner? And part of that is ensuring you have sufficient faces. And the other bit is really just around where do we prioritise our development? So instead of pushing all the way down on the decline because we didn't have the permit to start mining, it allows us to put some of that development out naturally and start bringing on scope blocks. So it's more around getting a ramp up, getting a sooner ramp up, as opposed to necessarily trying to do more development to chase, you know, a good mix of materials. Because once we're up and running, we have enough spaces in order to manage that. And it's been, the feasibility scheduled that out in some detail to give us some confidence. Now, this is ups and downs, while it's constant to the number, sort of feed that goes up the road. But that was part of the feasibility work. Peter, I'm not sure if you have anything else in relation to the development of the mine planning work that's going on at Federation.

I might just add, Andrew, that there's two phases here. One is the ramp-up phase for all production out of Federation, and the second one is steady state. So essentially what the feasibility study looked at, and you have to go back 12 months or so for the shaping and assumptions went into that, it anticipated that both the Herra and Peak Mills will be operating concurrently. So clearly there's a change in that whereby the heroin mill is going on to care and maintenance and all or initially will go up the road to peak. So the mine scheduling work that Andrew referred to there will be considering that particular change. So then once we get into steady state operations, it's a bit more of a straightforward exercise as in the development will be established. We'll have the stoking cycles and routines established. And when the oil comes to the surface, we'll probably take a similar approach to what we do at Dargs. where each stope actually goes onto its own dedicated stockpile on the ROM pad. And as Andrew mentioned, the grades will have the grades for those stoves. And then when we crush them, we can segregate the material to go into a truck that either goes to Peaks or to Herrah based on the date of that material. So there's a well-established process we have from our DAGS operation that we envisage transferring across over to Federation. That's great. Thanks, Andrew. Thanks, Peter.

I'll leave it there. No further questions for me. Thanks.

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

Thanks Rachel.

I haven't got a lot more to say. Thank you for joining the call and for giving us your valuable time. Just to summarise really the key messages from us. Firstly, look, we remain on track to achieve guidance that was said in December. And December has definitely given us confidence in that. December was a very strong month, you know, with our various initiatives starting to have an impact, especially that change to HERA, the HERA Mine Plan, which clearly resulted in quite a change for December versus where we were tracking. Federation permitting and funding are both going well. And as I mentioned, we expect to have development consent significantly earlier than the mid-year target that we were working to. And really, just to summarise, the whole team is really looking forward to getting on with developing federation, what is really one of Australia's best undeveloped base metals projects, and looking forward to bringing the product from that to market. So thank you again for your time.