29Metals Limited (29M) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the 29Metals Limited 2023 Half Year Financial Results. [Operator Instructions] I would now like to hand the conference over to Mr. Mike Slifirski, Group Manager, Investor Relations. Please go ahead.

Thank you, Betsy. Good morning, ladies and gentlemen. We will be speaking this morning to 29Metals' equity raising presentation, which was released to the ASX this morning, along with 29Metals' first half 2023 financial results releases. The call and parallel webcast is being recorded and will be available for replay via 29Metals' website and also the Open Briefing website. 29Metals Managing Director and CEO, Peter Albert; and CFO, Peter Herbert, will lead you through the presentation before we open the call for your questions, at which time our COO, Ed Cooney, will also be available to answer questions. So now I'd like to hand over to Peter Albert to commence the presentation. Thanks, Peter.

Yes. Thanks, Mike, and welcome, everybody. Today, 29Metals released our half year financial results, launched $151 million entitlement offer with proceeds primarily to be used to fund the Capricorn Copper recovery plan. The focus of today's call will be on the entitlement offer. But of course, happy to take specific questions on either the entitlement offer or the half year results at the end of the presentation. And turning our attention to the entitlement offer presentation. Slides 2, 3 and 4 contain important information and should be read in conjunction with this presentation and the offer. Slide 5 is contents of what we'll talk through today. Firstly, an overview of the company, including our underlying strengths and potential growth opportunities, then an update on the recovery progress at Capricorn Copper and look at the growth outlook for Golden Grove. And then I'll hand over to Peter Herbert to go through the detail of the equity raising. So turning to Slide 7 and investment highlights. Whilst there is absolutely no doubt it has been a challenging 2023 to date for 29Metals as we've worked through the impact of the extreme weather event in early March, it is important that we zoom out and remind ourselves that this company is very well positioned to benefit from the positive long-term demand dynamics for copper and other metals critical to the global energy transition. We have 2 operating assets in Australia, both with plus 10-year mine lives in world-class jurisdictions. Both of our key assets, Golden Grove and Capricorn Copper, have large existing mineral endowments with a history of resources growth and replacement. There is significant potential to grow our greater than 120 million tonne resource and greater than 30 million tonne reserves from extensions to our existing known resources or via investment in our broader [ payment packages ], which have tremendous exploration potential at both operating assets. Golden Grove alone has been operating continuously for over 30 years. It started off with a resource of 10 million tonnes, has mined and milled 40 million tonnes over the past 30 years and today still has 60 million tonnes in resources. So it is at least a 100 million tonne system. We have an enviable metal endowment, 2.24 million tonnes of copper, 2.47 million tonnes of zinc as well as significant gold, silver and cobalt. In short, we have a lot of metals in 2 of the world's most attractive mining regions. Now turning to Slide 8, our company update. It is no surprise to any of us, of course, that our half year results were considerably impacted by the extreme weather event at Capricorn Copper in early March. We all expected that. Production results were reported in our June quarterly announcement, and our financial results for the half year were released on the ASX platform this morning. Peter Herbert will talk to these in greater detail after my introductory words. Capricorn Copper recovery and restart is well progressed. We were pleased to be able to recommence production on the 1st of August, earlier than market expectations. I will discuss this in more detail shortly. In Golden Grove, 4 key areas for our growth and outlook: Xantho Extended, of course, here, the ventilation and development and recent performance has seen significant improvement; Gossan Valley, the new mining front, again, I'll talk to that shortly; and the life of mine tailings storage facility for Golden Grove, submission for approvals in the near term and in the meantime, 2 years of current capacity that we have in the existing facility; and Cervantes, great results from the recent infill drilling, which we released to the market only a couple of weeks ago. On the balance sheet, Peter Herbert will talk to this in detail. Important points are that the entitlement offer will fully fund the Capricorn Copper recovery and deleverage the balance sheet. At this stage, we don't think additional liquidity will be required. However, we have received proposals for offtake finance, which we will continue to evaluate and which could potentially provide an additional liquidity buffer. Turning to Slide 9, comprehensive funding plan. Summary of our funding plan, $151 million entitlement offer and amended corporate debt facilities. Key points. Equity raising, $151 million underwritten, one for 2.2 pro rata non-renounceable entitlement offer. The offer will be at $0.69 per new share. This is a 5.6% discount to TERP or an 8% discount to the last close of $0.75. And importantly, EMR, our largest shareholder, has committed to take up its pro rata entitlement. We have received support from senior lenders, providing further covenant relief through to 31st of December 2024 with a revised amortization profile. And on insurance, $24 million early initial payment advised by the insurers with the balance of the claim ongoing. In terms of use of proceeds, of course, Capricorn Copper recovery, working capital, near-term Golden Grove projects and of course, balance sheet repair. Moving to Slide 10. This slide shows 2 things -- 2 key things. First of all, it shows the milestones we've achieved since the extreme weather event, such as: the recovery plan for the Capricorn Copper restart; restarting of Mammoth and Greenstone mining ahead of market expectations; a number of Golden Grove derisking projects have been completed; insurance proceeds being receipted, the early payment that I referred to just now; and support from senior lenders. These milestones have allowed us to assess our funding [ up ] requirement and come to the market with confidence that this capital raise ensures 29Metals is sufficiently funded for our planned activities. The second part of this slide shows the further milestones we will be able to deliver on with this entitlement offer. These are milestones that will build the business for the future. So the restart of Esperanza South in the mid half -- first half of next year; Gossan Valley development; continued increased production from Xantho Extended; the new TSF4 at Golden Grove; and the new TSF at Capricorn Copper, which I will come back to shortly; and of course, Cervantes, the continued drilling at Cervantes. I'll talk to all of these in a little bit more detail shortly. So turning to Capricorn Copper specifically. [ The divide ] there on Slide 11. That's a shot -- a picture of new evaporators that have been commissioned and operating in recent weeks, and you can see the tremendous impact they're having in terms of assisting us in our water management activities at Capricorn. And on Slide 12, the extreme weather event. I'm sure most, if not all, on this call are well acquainted with the events at Capricorn Copper in early March this year, so I don't intend to dwell on this slide. Only to say recovery planning and execution of Phase 1 restart on the 1st of August was ahead of market expectations. Now moving to Slide 13, our phased restart of operations. We are now focused on full recovery operation by mid first half 2024 and thereafter, the tremendous growth opportunities that exist at Capricorn Copper, growth opportunities both at Esperanza South and Mammoth, which I'll show you shortly. [ This ups ] the potential to increase mine capacity to meet the current mill capacity of 2 million tonnes per annum and cobalt opportunities. One of our ore bodies has a cobalt grade of greater than [indiscernible] ppm, and the recent drilling results from Esperanza South have also delivered similar high-grade cobalt outcomes. We are -- we have undertaken studies as to how to deliver additional value from this cobalt, and these studies are ongoing. And surrounding the Capricorn Copper mine, we have 1,900 square kilometers of tenements, largely unexplored by modern exploration techniques, a great future opportunity we have on the best base metal endowed ground in Queensland, i.e., the Mount Isa Inlier. Moving on to Slide 14. Financial summary on this slide here. I won't go through all the numbers on this slide in detail as it's largely a repeat of what was provided in our quarter 2 release. Key points are we remain on track to be within our guidance. Total remaining recovery costs are in the range of $53 million to $71 million with $34 million spent as at the 30th of June. And beyond first half 2024, further recovery costs are primarily associated with the water treatment plant, if we require it, at approximately $37 million to $44 million. Moving to Slide 15, tailings capacity. Tailings capacity at Capricorn remains a challenge for the medium term. We currently have approximately 6 months of capacity with the life of mine tailings storage facility planned to come online by mid-2025. So we have an approximate 12-month gap. We are focused on a number of avenues to resolve these challenges. The medium-term goal is to bring on the new TSF online, TSF3, as we call it. We are accelerating the studies to submit documentation for approval as fast as we can and exploring options to bring this facility online potentially late 2024 or early 2025. We are engaging constructively with the regulator, and they are very positive about our plan for this new facility. Nonetheless, even with acceleration of TSF3, there is a tailings capacity gap between current capacity and TSF3, and there are a number of levers and options we are seeking to deliver on. More paste down the hole, down to underground facilities, i.e., locking up more of the tailings produced, possibly adjusting our production profile probably in -- possibly in the early part of 2024 to spread out or to extend the capacity time line that we have, returning the deposit tailings into the EPit, which is EPit is one of our existing storage facilities -- water storage facilities where we have deposited tailings in the past, and that's an obvious potential solution for us. And we are continuing with the process of [ an early ] lift of TSF2, the tailings storage facility where the regulator has requested further information, and we're putting that together and looking to submit that in due course. The company's focus is on these levers and delivering on these levers to secure continuous operations. As stated in the presentation, if, for whatever reason, there is a tailings capacity gap, then we would need to consider a period of suspension to operations. Slide 16. We've already referenced the tremendous potential of 2 of our ore bodies at Capricorn. Esperanza South, the drilling continues to demonstrate the ore body gets wider and with better grades and continues to be open at depth. Three holes shown on this slide, each with very impressive grades at intercept lengths: 23 meters at 2.3% (sic) [ 3% ] copper, 70 meters at 2.8% copper and 48 meters at 2.7% copper, all of these results outside of the current resource envelope. A potential new ore body at Mammoth, we're very excited about this opportunity. Two holes with very impressive grades and one of those, 36 meters at 3.9% copper, this must be one of the best drilling results in Australia this year. Now let me turn to Golden Grove, Slide 17 and then Slide 18. Three key growth areas at Golden Grove. Xantho Extended, of course, I'll come back to some of these in a moment, going to 1 million tonnes per annum. Gossan Valley, the third mining front, likely to get bigger and better just like Gossan Hill and Scuddles have done over the last 30 years. And Cervantes underneath the Scuddles ore bodies there on the right of that slide, tremendous recent results: 36.7 meters at 2.4% copper, 15 meters at 3.5% copper, 40.9 meters at 2.3% copper, all these results released recently, and also a very good zinc results. We will, as usual, look to produce a resource and reserve statement in about February next year, which will hopefully include or intended to include a reserve statement for Cervantes, which would then lead into -- potentially into a feasibility study. In the near term, we have a number of capital projects to support the growth of the Golden Grove. I've already talked about TSF4; conversion of paste plant to wet tailings, being able to handle wet tailings and to directly -- to convert the paste to go underground; ongoing development as Xantho Extended; and of course, Gossan Valley in development from 2025. Now turning to Slide 19 and a little bit more words -- a few more words on Xantho Extended growth there. And perhaps our most important development, of course, is Xantho Extended in the near term. Super high-grade ore body at Gossan Hill, a resource of 9.9 million tonnes at 2% zinc and 7.2% -- sorry, 2% copper and 7.2% zinc. As most of you know, development of this ore body has been slowed by COVID, resourcing and supply chain -- COVID and resourcing and the new ventilation fans, which, again, were somewhat impacted by supply chain issues in respect of COVID, but largely behind us now. You can see the picture there on that slide. The fans are installed and are being commissioned as we speak. And notwithstanding that, we have seen recent good improvement in both development meters and tonnes from Xantho Extended, and we'll see this continue to grow in the near term. Our target is 1 million tonne output by 2025. Moving to Slide 20 and Gossan Valley. Gossan Valley, a third mining front for Golden Grove. A number of key factors associated with the development of Gossan Valley. Not only would it be a third mining front, providing greater flexibility and derisking, it will be -- it is a shallow and therefore more cost-effective mining operation. It will be a new ore body, so open to potential -- the use of new technology as we start that mining operation up. And Gossan Valley likely to grow the same way that Gossan Hill and Scuddles have grown over the past 30 years, i.e., as we get underground at Gossan Valley, establish drill platforms underground and extend the ore body and the drilling activities at depth and laterally to continue to potentially grow Gossan Valley in future years. We're looking to bring Gossan Valley into first production from mid-2026. In summary, we continue to be tremendously excited by the opportunities to be delivered at both Golden Grove and Capricorn. We have a lot of the right metals. We operate 100% in Australia, and we have multiple channels for growth. I'll now hand over to Peter Herbert to provide further details on the equity raising.

Thank you very much, Peter, and thank you to everyone who has dialed in to the call today. Turning to Slide 23 (sic) [ Slide 22 ]. We outlined the key details of the offer. The offer is structured as an underwritten accelerated non-renounceable entitlement offer and priced at $0.69 per share, a 5.6% discount to TERP and an 8% discount to last close. 29Metals is pleased to have the support of its largest shareholder, EMR Capital. We've committed to take up the pro rata entitlement under the offer. The company has also continued to be well supported by senior lenders who have provided covenant relief in connection with the offer, which I will talk through in more detail shortly. Turning to slide -- apologies. Turning to Slide 23 now, which sets out the use of proceeds from the offer. Completion of the offer derisks 29Metals' balance sheet and enables the company to deliver on its plans. The offer proceeds will be used to fund the balance of Capricorn Copper recovery expenses; key near-term projects at Golden Grove, including the TSF4, a life of mine facility, and the tailings plant conversion to support our plans at Xantho Extended; as well as additional working capital and transaction costs. At 30 June 2023, 29Metals had cash of approximately $127 million. And following completion of the offer, 29Metals will have substantial liquidity, moving from a net debt [ and just to ] the company's senior loan facilities. Our engagement with senior lenders following the extreme weather event in March is being constructed. And in connection with the offer, our lenders have extended covenant relief through to December 2024, recognizing the scale of the recovery task ahead of the company. In connection with the offer, our lenders have extended -- apologies. In addition, the revised amortization schedule accelerates deleveraging with higher amortization in 2023 and '24 and lower amortization in calendar year '25. Additionally, we are pleased to report earlier this month on progress in respect of the insurance claim at Capricorn. As disclosed, insurers have agreed to make a $24 million unallocated payment in respect of surface damage and associated business interruption. There is, however, further work to do with our insurers in respect to progress in the balance of our claim and responding to queries in respect of the underground portion of that claim. Unsurprisingly, since the extreme weather event, the company has received numerous approaches from financiers, including strong interest from offtake financiers in connection with an undrawn subordinated facility. The company will continue to review these options to enhance its access to contingent liquidity as it progresses its plans. Importantly, 29Metals is expected to be fully funded, and our plans are not dependent on additional capital or insurance proceeds. Turning now to Slide 25, which sets out the pro forma metrics for 29Metals' post completion of the offer, which will significantly enhance the company's financial position with unaudited pro forma cash of $278 million and a net cash position of $31 million relative to our net drawn debt position of $120 million reported in our half year financials earlier today. The derisking of 29Metals' balance sheet positions the company well to execute on its plans. As Peter touched on earlier, 29Metals released its financial results for the 6 months of 30 June earlier today. Results for the first half were heavily impacted by the extreme weather event with revenues of $235 million for the half, down on the prior period result of $356 million, reflecting lower production levels; cost of sales of $275 million inclusive of depreciation and amortization charges, also lower on the prior period, reflecting activity levels; and a net loss after tax of $307 million. The group's net loss for the first half includes significant noncash impairment charges of $206 million, comprising: $170 million in impairment charges at Capricorn Copper following the completion of an impairment assessment which consider the cost of recovery and the deferral of revenues as a result of the extreme weather event; in addition, $27 million in asset impairment charges relating to flood damage at Capricorn Copper; and $9 million in inventory write-down expenses across the group. Full details on the results for the first half have been released to the ASX today, and I will refer you to those documents. Thank you for your time. I'll now hand back to Peter for some closing remarks.

Yes. Thanks, Peter. So just key takeaways really before we move to Q&A: $151 million entitlement offer expected to fully fund the Capricorn Copper recovery plan and derisk the balance sheet for key growth initiatives; entitlement offer supported by 29Metals' largest shareholder, EMR Capital Investors, who have committed to take up their pro rata entitlement; we had positive engagement with senior lenders and agreement to key covenant waivers and revised amortization profile; significant progress made on the implementation of the Capricorn Copper recovery plan with the restart of mining on 1st of August -- mining and milling on the 1st of August at Mammoth and Greenstone; confirmation from insurers of initial $24 million Capricorn Copper insurance claim progress payment; and now the company is positioned for delivery of expected future growth. Thank you, everybody, for listening to the presentation today. Betsy, we can go to Q&A, please.

[Operator Instructions] The first question today comes from David Radclyffe with Global Mining Research.

My first question is on the raise. So maybe could you talk to how you settled on the size of $151 million? Maybe some more color there on what drove that. Or was the key here to eliminate all insurance proceeds risks? And then in the scenario that future insurance proceeds or other funding you mentioned give you sort of a notional funding surplus here, where would you look to invest?

Thanks for the question, David. It's Peter Herbert here. I think we obviously considered a lot of scenarios. And ultimately, the decision to raise at $150 million is a judgment call after considering a range of those outcomes. I think we wanted to be absolutely clear that the company is fully funded and not coming to market with a view that's dependent on other outcomes going our way. You mentioned insurance. We obviously remain very optimistic about that process. However, obviously, the timing of that process is not certain. And so we didn't want to be at the whim of those sorts of outcomes. As to what we would do with insurance proceeds, look, we'll consider that as we move through the process, having a look at our balance sheet, having a look at the status of our recovery works and all those sort of usual things that you would consider. It's a little difficult to crystal ball on those. But naturally, happy to have high-quality problems like an excess of capital.

So David, to add a bit there, so we can't -- we're not in a position to be able to know or guarantee what insurance outcomes will be or when they might be, David. We're very pleased to have received a $24 million early initial payment. And of course, the claim is substantial, as we've said before, but that process -- that claim process continues on foot. But at this point in time, we have no way to say what the outcome will be and when it will occur.

All right. That's very clear. Then I was wondering if we could get a bit of an update on how the operations have fared over sort of July, August given the guidance requires a bit of a step-up in volumes in the second half to hit guidance. So any more color there would be helpful.

Yes. I'll make a couple of quick comments, and I'll ask Ed Cooney, the COO, to contribute as well, David. So overall, we've always said that the Golden Grove is weighted to the second half, and that remains the same. No change to our guidance. And we're -- and as I indicated, we're certainly, in recent weeks and time, pleased with the way that Xantho Extended is coming on stream. So [ on that ] couple of quick notes or maybe a couple of points to you, Ed.

Yes. Thanks, Peter. At Golden Grove, which I think is the intent of your question, David, I mean, our key focus at the moment is on the successful commissioning of the ventilation fans, which remains ongoing. We are confident that it will add pretty significant incremental [ volumetric ] for us to enable increased mining activity levels. And obviously, you're also focusing on continued development progress at Xantho Extended, which really those 2 things underpin a stronger production in Q4, principally zinc. And in terms of Capricorn Copper, look, a lot of progress in terms of commissioning of evaporators, restarting operations and continuing to work through tailings solutions in the near term.

The next question comes from Kate McCutcheon with Citi.

Just on the raise, why not come to the market back in March when Cap Copper was out of action? Why wait till now? And why put out a market announcement 10 days ago saying you weren't sounding out for a raise? Has something materially changed over the past 13 days? I mean, clearly, raising now is dilutive to the kind of metrics we tend to value copper projects on, like [ NPVs ].

Yes. Thanks, Kate. You're referring, of course, to an AFR article, which I, of course, need to point out was retracted almost immediately. It was incorrect, and we released a statement to the ASX at that time. So I'll refer you to that. That was all incorrect. As to the timing for our coming to the market today, we got quite a number of activities that we needed to undertake to understand the sizing of the raise and what work needed to be done. And as we came through the weather event and came through sort of April, May time, we were well funded and had plenty of liquidity on the balance sheet. So we had time to work through those things, such as the detailed planning for Capricorn Copper recovery; derisking of projects at Golden Grove; the activities or the progress with the senior lenders; insurance activities, which have obviously resulted in -- we received a pretty positive outcome; and a number of other activities. So a fair number of lines of work that we undertook between sort of the weather event and today and not related whatsoever to what you referred to in the press a couple of weeks ago.

Okay. Sorry. I was just making the point that you put out a market announcement saying you weren't sounding out for an equity raise 10 days ago, and today, we have a raise.

Sorry, Kate, I didn't get that at all. Say it again, please?

Okay. Never mind. I will follow up. And then just a second question around Capricorn Copper. You did touch on the tailings, but it's not 100% clear to me what the holdup is with the permitting and removing the processing constraints for Cap Copper. It seems we've been talking about how the regulators are positive on the approval for some time now. So anything you can add would be helpful.

Yes. Thanks, Kate. So a couple of things with the regulator, and of course, we're in continued discussions with the regulator. They -- and we obviously -- in terms of where we are, there are 2 or 3 activities -- or 3 or 4 activities that I referred to in the presentation in terms of levers that we have. In respect of the lift on the existing facility, what the regulator has asked for is further information around that lift and really requesting further information which relates to the history of that facility and how it was put together originally. And we're obviously undertaking that work to be able to provide that information and really provide that clarity for the regulator. That's in process. We have also, as I indicated in the past, put tailings into a facility which is called EPit. That is an option that is open to us, and we're working to that as to how and how much and when. But we think that, that would [ show up ] and give us some months of additional capacity there once we work through that. So a couple of specific tailings deposition options open to us as well as tweaking around paste fill and also production rates to extend existing tailings storage facility. So hopefully, that helps address your question there.

Okay. So you're saying there's no real issues with the tailings dam proposal. It's just the back and forth with information with the regulator. Is that correct?

Well, with the regulator, you got to get through those processes, Kate. So I think I was pretty clear. If, for whatever reason, that doesn't come to pass, then we will have a gap, and there's a potential for a suspension for a period of time. We don't expect that. We don't -- we're obviously working to resolve that. But we're -- but our focus is on delivering those outcomes so we don't have that outcome.

The next question comes from Tim Hoff with Canaccord.

If we could just double click on the tailings issue at Capricorn Copper. If we have a look at the satellite imagery, it looks like the water treatment plant is still underwater. Water levels are slightly lower in the pit and in the current tailings area. If you were to get the in-pit capacity to put tailings in the old pit, do you actually have sufficient freeboard to start placing tailings in there?

Ed Cooney here. I want to take that one. So we currently have an application with the regulator to increase what we call a DSA, design storage allowance. So that's the volume of water we need to have in the pit ahead of a wet season [ that starts in November ]. So that application, we have submitted to increase the amount of water that we have in the pit. But currently, it's fair to say, we need to have a successful wet season. We are well advanced in terms of design, execution on treatment and release for this upcoming wet season and commissioning of additional evaporators, all in efforts to reduce the site water inventory, which we need to do.

Okay. And then maybe just staying on Capricorn Copper. Esperanza, how much has been dewatered there? How far down the decline are we at the moment?

Haven't yet commenced the watering of Esperanza South. We've obviously commenced restart of Mammoth and Greenstone. We have been maintaining water levels within Esperanza South. The intention would be to recommence dewatering and rehabilitation of ESS in the fourth quarter this year.

Excellent...

And sorry, I should add, and then the intention for that timing is it dovetails into the surface water reduction initiatives and activities that we've been undertaking today.

Okay. So the water from Esperanza, presumably, that's going to be acidic to some degree or [ perhaps is ] acidic. Would that have to go into existing storage before for a period of time? Or does that require any extra treatment?

So that -- correct. So that would go into existing surface water storage infrastructure and then be treated before release in the wet season.

Perhaps moving on to the balance sheet. That [indiscernible] revolver facility with the capital raising today, would that -- do we assume that, that gets paid off tomorrow?

No, I wouldn't assume that [indiscernible] going forward. It's not a requirement of what we're announcing today that, that happens. And it's a -- as I said, it's sort of a 12-month revolving facility. But yes, we'll sort of consider that as we go forward, Tim.

Okay. Any update on the $26 million stamp duty payment that's due?

No, there's nothing to update. We've had no news on that matter. Thanks, Tim.

[Operator Instructions] The next question comes from Daniel Morgan with Barrenjoey.

First question is on Capricorn Copper. Why not just make the decision now to have a hiatus at Capricorn until the business is on a sustainable footing, i.e., you get the dewatering done or more sustainably, the water level is reduced, get the tailings with a clear solution there with the regulator and then restart? It just strikes me that we've got potential demobilization, remobilization and potentially redundant costs?

Yes. Thanks, Daniel. When we've gone through the process of working at our detailed plans, Daniel, we've obviously considered all scenarios, including what you have just described. And from an outcomes perspective -- financial outcomes perspective, there's no material difference between a stop now and a potential stop next year. What this does for us is buys us the time to ensure or endeavor to ensure that we can keep the process going. It keeps our labor force. It keeps our equipment turning. It keeps our operations in good standing. It keeps the equipment in good standing. And it secures us the opportunity to work through these issues that we have now. And from a modeling perspective when we did the analysis, there is very little difference to an outcome that -- in terms of what you proposed versus what could potentially transpire sometime next year. But we're obviously working on outcomes to make sure that, that doesn't happen.

The carrying value for Capricorn Copper, if I've read it right in the release, is now down to $173 million post the write-down. So I understand the need -- or the background to the write-down. But just can you unpack the key assumptions on what this carrying value is comprised of? Like how was it set?

Yes. Look, so I mean, the carrying values with respect to [indiscernible] includes all-in cost that we anticipate in connection with the recovery. I mean the way -- I mean, if we think about it in very simple terms, adding a significant amount of cost in the near term and a deferral of revenue out for some period until we can get -- restore full production, that has had an impact on the carrying value. And just for context, as you may or may not be aware, the way that the IPO worked was that through the -- Golden Grove was the acquiring entity for that transaction. And as a result, Capricorn was the acquired entity, and that was written up following the completion of that transaction. So the carrying value reflected the outcomes of the IPO, and naturally, those plans have changed with the extreme weather events. So I suppose when you think about those terms, it's not too surprising. But yes, we think we've adopted reasonable assumptions in terms of commodity prices, discount rates. They're all in the accounts today, and we're comfortable that we have a robust carrying forward going forward for the capital.

So is that like a reserve case, your mine plan case on, say, consensus commodity prices or something thereabouts? It's just...

It's [ a lot of ] mine cases. It's not just, sorry, reserves. But we have a robust 10-year mine plan, as you know, Dan. So yes, we're comfortable with it. So it's a fair look forward on what Capricorn can achieve.

And then last question is just you mentioned, I believe, earlier in the presentation, you've received some potential offtake finance agreements. Could you maybe just expand on that a little bit and why you'd consider it? Because anything of that nature, I imagine, there's a cost to these, and you've just undertaken an equity raising, which puts the funding task, the funding of the company, obviously, on a much surer footing now. Why would you consider an offtake finance agreement that has costs?

Yes, I mean, I think we've obviously outlined today that we've had those approaches, those discussions. And as I'm sure you'd appreciate, we've looked at a number of options recently and had a number of approaches. I suppose one thing we reflect on as we come to today is that having good liquidity -- good access to liquidity has been very helpful for the company. It's sort of managing through this event and positioned us well to work through that in an orderly basis. And we want to make sure that the company continues to have that going forward. So we have been looking at undrawn contingent facilities that ensure that we do that, and we wanted to be transparent around where we were today in terms of coming to the market.

The next question comes from Meredith Schwarz with Bank of America.

I just had a question regarding impairments. Are you expecting or is there likely to be any further impairments into the second half as a flow on from the first half?

Certainly not. We've obviously done our impairment assessment on the basis of our forward-looking plans. So we -- that wouldn't be our expectation on the basis of us executing the plans as we've outlined today.

Okay. Perfect. And then also on the debt covenant, can you please remind us when the next test to the covenant is, please?

Covenants are tested on a 6-monthly basis, in fact, over the last 12 months.

Okay. Okay. Great. And then one more, if I could, on the insurance claim and in particular, the underground component. So you released to the market that the insurers rejected the underground claim. Can you give any update to that, perhaps the reasoning behind or what you're doing going forward to work on the underground claim, please?

Yes, sure. So the equipment and infrastructure damage, if you like, is primarily on the surface. So the portion in terms of the underground component is relatively much smaller than the surface component. So the insurers have taken a position that perhaps the insurance doesn't cover that underground equipment damage. We, obviously, don't support or agree with that, and we will address that in -- as we go through the claim process. But I need to point out that most of the damage is on surface, which is fairly clear that, that coverage is in place, as the water treatment plant, workshop, warehouse, et cetera. So I hope that provides some clarity.

Okay. Yes. So underground is a much smaller component of the claim. And so even if you don't -- you're unsuccessful with the underground, that's still a -- the major component is from the surface claim.

For the -- definitely for the equipment and other damage to physical facilities, yes.

There are no further questions at this time. I'll now hand the call back to Mr. Peter Albert for closing remarks.

Okay. Thanks, Betsy. And thanks, everybody, for listening in and calling in today. Lots of information provided. We, at 29Metals, are very excited about where we've landed today and this equity raise and the path forward that provides to the company and the security of the balance sheet and our ability to undertake the recovery programs, the near-term Golden Grove projects, working capital and obviously, the balance sheet repair. So we're very pleased with this result today, this announcement that we put out today, and looking forward to a good second half of the year and continued growth of the business thereafter. If there are any follow-up from this call -- this meeting today, please feel free to follow up, be in touch with Mike Slifirski, our Group Manager, IR, and we'll seek to address any further questions that you may have. Thanks, Betsy. Thanks, everybody.

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