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

Thank you for standing by, and welcome to the 29Metals Limited March Quarter 2026 Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. James Palmer, CEO. Please go ahead.

Thank you, and good morning all. James Palmer here, and thanks for joining the 29Metals update for the March quarter 2026. Today, we'll be speaking to the presentation released this morning alongside our March quarter report. And joining me are Ed Cooney, our Chief Operating Officer; Peter Herbert, our Chief Financial Officer; and Kristian Stella, our Group Executive, Corporate Development. So a quarter with some strong results and post quarter-end, a challenging decision to undertake additional work to further derisk Xantho Extended, which are now underway. So zooming out first before I talk to the quarterly, the 29Metals investment thesis remains strong. The company's intrinsic value underpinned by 2 large copper resources across Golden Grove and Capricorn Copper. As outlined on Slide 4, both assets have long-life potential and significant geological upside. At Golden Grove, we're nearing the end of a significant investment phase to enable mining of high-grade ore sources. So from the end of 2026, we expect reduction of capital expenditures and progressive ramp-up of mining from the high-grade ore sources of Xantho Extended, Oizon and Gossan Valley to support metal production growth and free cash flow generation. At Capricorn Copper, the team are progressing rapidly towards a restart of production. Water levels have been significantly reduced and are no longer an impediment to a restart. Focus is firmly on an approval for a new tailings storage facility and the study towards a restart of operations. Prior to the production disruptions at Xantho Extended, we were guiding to over 50,000 tonnes of copper equivalent production per annum at Golden Grove. So once Xantho is back, we'll be back at that run rate. At Capricorn Copper, we have a low capital intensity pathway to reestablish up to 30,000 tonnes of copper production per annum. So we're progressing this business towards potential as an 80,000 tonne per annum copper equivalent producer. And with the size of the resource of each asset, optionality exists to expand from there. So now to Slide 6 to talk through the quarter and how we're progressing both assets towards their full potential. While working through the challenges at Xantho Extended and in everything we do, we live by our most important company value of safety first, which is also reflected in our single-digit TRIF and 0 LTIF. We completed ground support upgrades at Xantho Extended post the quarter end as planned. This enabled reentry into the mine post the impacts of seismicity from last year. In parallel with the implementation of the ground support upgrades, further geotechnical review work increased our understanding of the Xantho Extended decline and level access of areas impacted by seismicity. And based on this further assessment, additional works to further reduce the risk of future potential production interruptions are being progressed prior to the recommencement of mining. Upon implementation of the ground support upgrades, we have the option to recommence mining. We chose to undertake the additional work to provide further derisking of production from the end of 2026 and for the life of the mine. Since the temporary suspension of mining at Xantho Extended last year, a dedicated team was established to incorporate remnant and extensional ore sources into the '26 mine plan. So far, this team is hitting the ball out of the park. We produced 6.4 kilotonnes of copper in the March quarter, a run rate beyond the top end of our 2026 full year copper guidance. This work is ongoing to incorporate additional copper and gold ore sources into the rest of the year mine plan to maximize mill throughput and production outcomes, and it's expected to partially offset the impact of the delayed restart of mining at Xantho Extended. The team delivered this result all while continuing to build a new mine at Gossan Valley, which remains on track for $112 million capital expenditures to first ore by the end of 2026. At Capricorn Copper, a successful wet season concluded and water is no longer an impediment to a restart. The team are now having reduced surface water levels by more than 2 gigaliters since the suspension of operations are in a great place. Focus is now firmly on the approval for a long-term tailings storage facility, which is now the critical path imperative for a restart of production. And we're planning for success with the commencement of a definitive feasibility study during the quarter to enable a restart of production upon approval of a new tailings storage facility. So we have a lot to deliver for the rest of the year and with Golden Grove generating $10 million of free cash flow for the March quarter and a liquidity position of $238 million, we have the balance sheet to deliver through 2026 with a focus on long-term value creation. I'll now pass to Ed to talk through the operations in some additional detail. Ed?

Great. Thanks, James, and good morning, everyone. I'll move straight to Slide 10 to talk to some additional detail on our plans at Xantho Extended. So as James mentioned, we completed ground support upgrades post quarter end as planned. In parallel, the team have continued to progress our geotechnical understanding of the impacts to production we experienced last year. A key learning was that although ground support upgrades alone may be sufficient to mitigate future production interruptions, there are specific locations on the existing decline susceptible to higher rock stresses. These locations are situated where the decline crosses over and are coincident with seismically reactive fault structures. To further reduce risk of future production interruptions, we've made the decision to commence new accesses to the footwall drives, which effectively bypass these higher stress zones. This development was kicked off over the last 24 hours with the first 2 cuts on the deck as of this morning. We considered a range of scenarios to complete these works, such as progressing the works in parallel with production. And we do continue to test our thinking on the potential to accelerate recommencement of mining in the upper levels of Xantho Extended whilst development of the new accesses is being completed. The current plan is to defer recommencement of mining until the new accesses are complete, which is expected to be in the December quarter. This approach allows for higher development rates by progressing multiple headings without interruption or interaction from production activities. It gets us to our desired endpoint faster and provides greater production certainty at Xantho Extended from the end of 2026 onwards. And importantly, although this decision does result in deferral of metal from Xantho Extended, no impact to the reserve is currently contemplated. On to Slide 11, and the team at Golden Grove are doing a phenomenal job in reworking the mine plans and evaluating alternative ore sources whilst we progress works at Xantho Extended. As shown on Slide 11, Xantho Extended contains high zinc and precious metal grades in addition to copper. However, there are other areas in Gossan Hill and Scuddles that have similar copper grades. Hence, we maintain copper production guidance as we complete the additional access development. Ahead of greater mine plan flexibility from Gossan Valley, Oizon and Xantho Extended in 2027, the site team remain laser-focused on identifying and incorporating additional remnant and extensional ore sources into the rest of year plan with a focus on maximizing value from the best available ore sources and the key objective of replacing the tonnes from the deferred restart of mining at Xantho Extended and finding additional ore sources to push the mill and metal production outcomes harder for the remainder of the year. And excellent progress on this front in the March quarter, as James mentioned, with over 6,000 tonnes of copper production. We do still have a lot of 2026 to go. But with the early wins on the board, the team are pushing hard to keep the momentum going. I'll now hand over to Peter to discuss costs and capital.

Thanks, Ed. On Slide 12, we summarize costs and capital for the March quarter. Across the business, we continue to maintain a focus on cost and productivity improvements. The ongoing containment of site cost is a testament to the excellent work done by the team with $97 million in site costs in the March quarter, in line with that achieved 1 year ago. That is despite ongoing inflationary pressures across the industry. Even as we work through the interruption to mining at Xantho Extended, we continue to maintain a healthy unit cost margins. AISC unit costs of USD 5.10 and C1 unit cost of USD 4.30 per pound of copper sold, respectively, was a strong result. Diesel supply and costs have been a focus in the current quarter. As a high-grade, low-tonnage operation on grid power, Golden Grove is relatively insulated from diesel cost increases. We estimate that based on current diesel prices, diesel costs will increase from approximately 2% to 3% of total site costs. That said, we are engaging with our fuel suppliers regularly to understand any potential disruptions resulting from global events. Pleasingly, we are not seeing any disruptions currently. On capital, Gossan Valley remains on track for $112 million of capital expenditure to first ore by the end of the year, with total capital for the quarter of $28 million versus the prior quarter of $48 million, reflecting the step down in activity during the quarter upon completion of surface civil works at Gossan Valley and subsequent demobilization of the civil contractor in January. The additional works at Xantho Extended to reduce the risk of further interruptions are estimated to cost between $10 million to $15 million. With reducing the capital development activity in 2026 from the delayed recommencement of mining, we expect to manage the cost of these additional works within our pre-existing total capital cost guidance of $160 million to $195 million. Work to identify opportunities to reduce and defer noncritical capital expenditures to better align with the resumption of mining at Xantho Extended remain ongoing. Back to you, James.

Great. Thanks, Peter, and thanks, Ed. So before I move on to progress at Capricorn Copper, I want to touch on the Golden Grove drill results released from the 2025 drill program during the quarter and post quarter-end. Slide 15 shows some of the highlights from the '25 program. Every hole bar 1 is a resource extension hole. So wide high-grade intercepts outside pre-existing mineral resource estimates. Overall, the '25 drill program added mine life and provided mine plan flexibility, which then flows into the important work I talked about earlier, incorporating and accelerating additional remnant and extensional ore sources into the '26 mine plan and beyond. As this work bears fruit over 2026, the additional works at Xantho Extended are completed and Gossan Valley is brought online, you can see how the pieces of the puzzle for Golden Grove come together in 2027 and beyond. We're really excited to bring that to fruition. And while the decision to undertake the additional works at Xantho Extended have come at a cost of production in '26, they're essential to delivering this potential. Now on to Capricorn Copper on Slide 20, a huge milestone achieved during the quarter. Site water levels now sufficiently reduced to no longer be an impediment to a restart of production. The team has had an extremely successful wet season with significant water level reductions that now see the total water inventory significantly below the maximum operating level and service water levels comparable to the levels prior to the extreme weather event in March 2023. And this was achieved through a very heavy wet season. It was a 95th percentile wet season, so only 5% of wet seasons have had more rainfall, 1 in 20-year event. The outcomes achieved during this wet season demonstrate that a sustainable water balance footing is possible at Capricorn Copper with the right focus and the appropriate water treatment infrastructure. A great job by the team. Approval for a long-term tailings storage facility is now the critical path for restart of production, and we're working towards a response to the regulators' request for information in the September quarter, and we're planning for success with the commencement of a definitive feasibility study during the quarter to enable a restart of production upon approval of a tailings storage facility. I'll now hand back to Peter to talk through the balance sheet prior to wrapping up.

Thanks, James. Gross revenue for the March quarter was $165 million. That was $28 million higher relative to the prior quarter result. That result was driven by higher payable copper and zinc metal sales. 29Metals finished the quarter with unaudited available liquidity of $238 million, consisting of $223 million of cash and undrawn liquidity under the group's offtake facility of USD 10 million. Golden Grove generated $10 million of free cash flow after all capital expenditures for the quarter, inclusive of its Gossan Valley investments. The decision to undertake further derisking works at Xantho Extended prior to the recommencement of mining provides us with greater certainty of the production outcomes from the end of 2026 and beyond and allows us to deliver on the long-term potential of the assets. The decision follows consideration of our March-quarter performance, available liquidity, the macro environment, options to manage group operating capital expenditures and the ongoing efforts to identify additional ore sources in the rest of the year mine plan. Back to you, James.

Thanks, Peter. So wrapping up here, we've seen globally mines are becoming harder to find, lower grade and harder to mine. On the demand side, as the world electrifies, the world is going to need a lot more copper. 29Metals remains well positioned to capitalize on this favorable copper supply-demand dynamic with over 2 million tonnes contained copper in our mineral resources across 2 Australian-based assets, both with long-life potential and significant geological upside. The team remains focused on leveraging this position by delivering safe production and prudently allocating capital to deliver long-term value to all stakeholders. Prior to the production disruptions at Xantho Extended, Golden Grove, 50,000 tonnes of copper equivalent, and we'll be back at that run rate. Capricorn Copper, a low-intensity pathway to reestablish another 30,000 tonnes of copper. So we are progressing this business towards its potential as an 80,000 tonne per annum copper equivalent producer. And with the size of the resources at each asset, the optionality exists to expand from there. So with that, I'm happy to take your questions.

[Operator Instructions] Your first question comes from Daniel Roden with Jefferies.

I just wanted to, I guess, understand with -- I guess, with Xantho Extended, I guess, the indicated mining rates there when we do get back into production kind of year-end. Probably a couple of questions in here actually, but, I guess what's the decision and guiding factors for bringing that forward? I guess you're assessing it against seismicity and safety in the area, but -- like what do you need to see to be able to accelerate mining in that area? And then I guess a follow-on, like any of the work that you've done at the moment, has that indicated that we need to be reviewing, I guess, the mining intensity and mining rates longer term from that area, just given to manage that seismicity impact and make sure that you're not causing any safety implications for your work force down there?

Yes. Great. Thanks, Daniel. Thanks for the question. I mean the first thing, safety, yes, as I said, and I'll certainly reiterate it, that's been the primary focus and the ground support works that we've done, they certainly allowed that. So we've had reentry into the mine. So yes, safety first always. Then the decision for the additional works is all around minimizing the production potential interruptions going forward. So that first work focused on safety and then, of course, making sure that we can safely and without interruption, progress the performance of Xantho Extended. Then within that, while we're doing those works, that's where we are considering the upsides to accelerate both outside Xantho Extended as well as Xantho Extended itself. I'll just hand to Ed to give a little bit more detail on some of those.

Yes. Thanks, James. So to inform a decision on any earlier commencement of mining, i.e., in parallel with development, we do want to undertake some more technical work and principally, that will be some numerical modeling. In terms of your other question about run rate, we -- in January, we did revise the production rate, the maximum production rate from Xantho Extended to about 600,000 tonnes per annum. That absolutely remains the goal and objective and nothing that we've seen from the technical work done to date would suggest that, that target is not achievable once we restart production. So that's certainly the objective. Once we complete the bypass development, then we can get back into production.

And I suppose part of the question is just looking at, I guess, Golden Grove was able to kind of give a $10 million net mine cash flow in the quarter. And I think it just goes to show that the NSR profile of the production zones isn't just Xantho Extended. You do have some other, obviously, areas with high NSR tonnes that are coming out. So maybe is there any, I guess, additional color on like what that might look like into the end of the year kind of until you get into Xantho Extended? Are you looking at similar, I guess, NSR profiles to what you've delivered in the March quarter? Or would you expect that to change modestly and you've kind of targeted some higher areas first to improve, I guess, the operations there?