Aurelia Metals Limited (AMI) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Aurelia Metals Limited Financial FY '23 Results. [Operator Instructions] I would now like to hand the conference over to Mr. Bryan Quinn, Managing Director and CEO. Please go ahead.

Thank you all for your attendance today for our release of our 2023 full year financial results and [ enroll ]. I would like to introduce some of the Aurelia team who are presenting today and also online. Martin Cummings, Chief Financial Officer; Andrew Graham, General Manager of Growth; Matt Nuttall, the General Manager of Peak Mine [indiscernible]; Angus Wyllie, the General Manager of Dargues Mine. The results provide a very clear picture of an improving performance over the last 6 months with a volatile backdrop of economic uncertainty as it relates to prices to some of our commodities. We recognize the ability to operate strongly under all situations is actually fundamental for our company to be successful and to also manage the risks according for these periods. We provided feedback throughout the year informing the first half of FY '23 was not a good result, with the second half providing a step change improvement and helping towards setting up to FY '24 to be a strong year. It's very clear the management team [indiscernible] step change performance required and FY '24 as a [Audio Gap] and achieved 12 months reportable injury free, which is an incredible achievement. Dargues was also able to achieve record mining mill [indiscernible] and revenue for FY '23. Our Hera Mine in the Cobar region was ramped down and placed on care and maintenance. And the team was very busy with establishing funding arrangements for the Federation project which resulted in delivering a low credit risk at counterparty, Trafigura, which has assisted our liquidity to access our high-grade Federation ores in the near future. Lastly, we have delivered some very good results in converting our resource to reserve in FY '23 with reduced capital expenditure, and we recognize this will be our focus in FY '24 since our resource base is one of the largest in the region, Cobar, but it's very important that we convert this over the coming years and [indiscernible] for infill drilling and reviewing opportunities within our existing resource base. Adjusted cash flow in the second half of the year really important to our organizational reset program, which really focused on safety performance, reducing capital spending, paying down debt and then started a Working Smarter campaign which uncovered $25 million of cost benefits. These actions were all important to set up FY '24 to be a year where we focus strongly on operating discipline and driving out costs while having a clear growth plan, which will help really as a merger as a stronger base metals company. The cash flow generated in the last 6 months was effective in paying down our debt and strengthening our balance sheet, which we recognize is important to set up the organization for our growth pipeline to moving -- to stop funding beyond the Federation project. We continue to study and execute on our suite of excellent growth projects in the Cobar region, including the execution of the Federation project. We continue to look how to optimize all these projects using technological solutions with the result being ultimately lower cost, improved returns and improved volumes and grades. Look, we do recognize China's growth has slowed and government policy changes are not finalized to understand what direction that will take. And this obviously has a short-term impact on our base metals demand and pricing. We are strong believers in the medium-term fundamentals returning as population growth, urbanization, rising living standards that will promote significantly larger global economy in medium term. We also recognize on top of this that decarbonization focus will also accelerate the demand for critical base metals like we have. [indiscernible] outlook really are focused on driving our cost down and targeting the lower half of the cost curve is paramount to combat our inflationary pressures. It will be also a priority to be delivering maximum margins through the cycles for our shareholders and stakeholders. Our driver is actually to position ourselves lower than all of our peers, which we believe we are well on our way to achieve, [indiscernible], costs to buy assets, refinancing costs, lack of development opportunities and premium [indiscernible] and local stakeholder opposition. So I'm a firm believer that Aurelia is positioned well [indiscernible] Cobar region with our large resource, infrastructure grades, permits and good relationships that will support us to excel going forward. Time is a clear shortfall of plan for the future in terms of base metals and our strengthening balance sheet. We're positioning to be a catalyst for potential integration in Cobar region where it makes commercial sense using our high-quality infrastructure and access to our resources. As you all noted, we've updated our vision of the company, and we are now aspiring to be a developer and operator of choice for critical base metals, powering a low-carbon footprint and providing a superior shareholder value. This deliberate reshaping of our company and a lot of our portfolio means we will be well positioned to benefit from these trends going forward. The best outcome for delivering superior terms will be increasing our productivity and lowering our costs from existing and future assets. This require us to focus on developing a culture to embrace innovation and continuous improvement and [indiscernible] for our company to maximize returns to our shareholders. It's also important that we continue to generate options for our future by leveraging other levers, including exploration success and continue to build our hub-and-spoke model for the Cobar region, which will provide significant synergies in Tier 1 jurisdiction with significant resource potential. The proximity of assets improved people career opportunities, equipment optimization, working capital benefits, optimization of plans and growth projects, [ mining ] and logistics benefits and supply chain and procurement cost saving potential. The hub-and-spoke model will also provide the benefit of reducing overheads with the opportunity to streamline some back office work. Of course, we need to complete the Federation project to unlock some of these synergy benefits and finalize the project study on a Great Cobar which is our next potential high-grade copper project, which will be worked on in the financial year FY '24. I'll now hand you over to Martin to talk to the FY '23 actual results and the FY '24 guidance. Thanks, Martin.

Thanks, Bryan. So as Bryan has covered our operational performance, but I'll just quickly recap on the outcomes on Slide 5. So last month, we released our June quarterly report, and that was really highlighted by the achievement of both production and cost guidance. Gold production was above our guidance at 86,000 ounces, and our copper, lead and zinc were all within the plus or minus 5% range we provided. The achieved AISC of $2,315 an ounce was also within guidance. And it really was a very pleasing result given the lower base metal price environment in the second half of the year. And within Aurelia, this is also a period of extreme change in the business with completion of the owner mining transition at Peak and the closure of the Hera Mine. I'd just like to recognize the effort of the team at Hera, who took the mine to closure and the plant to carry maintenance, both safely and, in doing so, generated cash flow higher than we had planned. And now just turning to the group financial performance on Slide 6. And you recall back in February, at that time, we released a disappointing set of results for the first half. And whilst we weren't able to recover that for the full year, we have delivered a much improved result in the second half. Firstly, on sales revenue, that was about $70 million lower in the year at $369 million, primarily driven by lower metal volumes sold from lower tonnes processed at Peak and the impact of closing the Hera Mine in March. But looking at the revenue variance by metal, the main impact was from the 10,000 less tonnes of zinc that we sold during the period, impacted further by a lower realized price of about $200 below the prior year. So the total impact to revenue from Zinc was around $48 million of the $70 million. For the other metals, lead sales were down about $13 million with around 6,500 tonnes were sold, but that was offset somewhat by receiving a slightly higher average price. Gold sold was just over 8,000 ounces lower. But given the strong gold prices in FY '23, revenue was only about $3 million lower. And copper was largely in line with higher sales, offset by lower realized price. Our EBITDA improved from the half from $12 million to the full year result of $56 million for both statutory and underlying, noting that was lower than the prior year, but a material improvement. The lower impact from revenue -- sorry, the impact from the lower revenue, I just went through was the main driver, but we also did recognize higher ore inventory charges during the year. Improving our EBITDA margin from 15% really is now a key focus for FY '24. And that will be driven by improvements to efficiency and cost reduction programs that are now underway. Statutory net loss for the year of $52 million was released. A large part of that was the depreciation and amortization expense of $103 million, which is lower than the prior year, driven by lower production but also from a lower asset carrying value at, Dargues, resulted in lower depreciation charges this year. The other items that represents the difference between statutory and underlying loss after tax relates to 2 impairments that we booked during the year. So the first one we booked through in December, which was an impairment of the Hera asset, and we reduced the carrying value of that by $5.4 million pretax. And then at year-end, we booked a further impairment expense of $15.4 million pretax relating to the carrying value of our exploration assets. The bulk of that impairment relates to exploration around Dargues and about half of that impairment relates to expense that was incurred pre-acquisition. And finally, group cash flow was a reduction of $38 million for the year. But importantly, that movement includes full repayment of the term loan, which stood at $20.7 million at the start of FY '23. And we also added a further $26.1 million to restricted cash during the year to take that to just under $57 million for the full year. So in total, $47 million in debt reduction and cash backing was funded from our operating cash flow during the year. Our cash balance was further bolstered late in the year from receipt of proceeds relating to institutional placement and entitlement offer, which totaled just under $24 million net of fees, leaving us with a cash balance of $39 million at the end of June. So turning to Slide 7. And really, this slide is the key message I want to leave with you in terms of the results and that the FY '23 year was truly a year of 2 halves. On almost every metric, we are able to stabilize and improve business performance in the second half, which sets us up to achieve further improvements in FY '24. On safety, as Bryan outlined, Dargues was able to achieve 12 months recordable injury free in FY '23, which left the site with a site TRIFR at the end of June remarkably at 0. And the group as a whole went 6 months without a recordable injury that resulted in a 41% reduction in our TRIFR for the year and a 52% reduction in our TRIFR from December through to June. And again, all while significant change was occurring in the business. Our group all-in sustaining cost per ounce reduced 24% from December to June, and the second half all-in sustaining cost was under $2,000. And as I mentioned, this is during the environment where base metal prices were falling. That lower cost contributed to a significant increase in EBITDA of 267% from $12 million to $44 million in the second half. And the culmination of that improved performance is shown in that bottom right corner chart. At the end of December, we had cash net of bank debt of $11 million. And to just explain that, that comprises $23.7 million of cash that was on hand and our term loan balance that stood at $12.6 million. Our restricted cash balance at that time was $41 million. So in the second half, we repaid that term loan in full. We fully cash backed our performance bonds and along with the proceeds from the institutional placement and entitlement offer grew our cash on the balance sheet to $96 million. But just turning to Slide 8 and continuing on the theme of the balance sheet, I just want to recap you on the transformation that has occurred now that sets us up to restart development at Federation. Our new Trafigura facility we announced in May consists of a loan of USD 24 million, or AUD 36 million, and a performance bond facility of $65 million. This facility is very competitively priced at 6% above the U.S. dollar benchmark rate for the loan and a straight 6% margin for the performance bonds. But equally importantly, it is extremely flexible with no financial covenants, no establishment fees or early repayment fees and no requirement to draw down on the loan immediately, which will save us on interest costs. The repayment profile has been set to support the capital spend of Federation with the majority of repayments back ended to year 3 and 4 of the full year term. We satisfied all the conditions precedent under the facility in August and achieved financial close. So now we start FY '24 debt free with a significant pro forma cash balance of $132 million, which we will note is not far off our market cap today. Our preference to this pro forma cash as the balance includes some items that have or will be received this half. Firstly, the restricted cash. As I mentioned, the facility has reached financial close and the performance bonds have been replaced and that cash is in the process of being returned to us [indiscernible]. The next part on the chart is the proceeds from the retail entitlement offer. So that was the second part of the equity raise and that $16 million was received in early July. And finally, one further amount that we've added is the tax refund that we expect to receive this year. So once we submit our FY '23 tax return, $21 million under the loss carry tax offset for tax we paid in the FY '20 and '21 tax years will be returned, and we're carrying that amount as a receivable on the balance sheet at 30 June. So in summary, with pro forma cash and the $36 million undrawn under the Trafigura loan takes our total liquidity to $168 million and really means we're truly positioned to support our excellent growth opportunities at Federation and beyond. So now just turning to Slide 9, and we've outlined our guidance for FY '24. Gold production is guided lower at 60,000 to 65,000 ounces this year with the reduction driven by the closure of Hera in FY '23, but also reflects some lower gold grades expected at both Peak and Dargues. Our base metals production is very strong in FY '24 and will come solely from Peak, with strong zinc and lead almost offsetting the impact of the Hera closure completely. Our copper production will also be slightly higher. Our all-in sustaining cost guidance is $1,850 to $2,050 per ounce, which continues our cost reduction journey that we started in the second half of FY '23. I want to note that this guidance does factor in current base metal prices which are lower than the realized prices we achieved in FY '23 and the particular impact is for zinc. We do expect production to be slightly lower in Q1 as per our budget and thus as Peak ramps up its mining rates. And that will likely result in a slightly higher all-in sustaining costs for the first quarter, but then we expect it to trend down lower from quarter 2. Federation growth capital is largely in line with the profile we outlined back in April with $70 million to $80 million incurred in the year. As we released earlier this month, Redpath are now back underground with the development restarting on the 1st of August. We expect spend to be relatively low in the Q1, in line with our capital plan, and that will trend up over the year as activity ramps up on site. We've also allocated funding to explore our extensive tenement portfolio in FY '24 with $10 million to $15 million included in our guidance, and that is a slight increase on FY '23. I'll just point you to some more detail that supports the guidance, and that is in the appendix of the presentation. In summary, I know there's a lot of the Aurelia team are listening in on the call today. So I just want to thank you all for your contribution to a significant amount of information we've released today. It truly is appreciated. Thank you for your time, and I'll now hand over to Andrew.

Thanks, Martin. For those following along, we'll flip across to Slide 11 at this point. But just flipping back on a little bit of what Martin touched on. Over the last 6 months [indiscernible], the key piece was a step change in what we've been doing and then Martin has gone through, on Slide 7, we certainly achieved that in the second half across the board, [indiscernible] reduction costs, whatever. It's a real step change in the business and is setting up very, very well for FY '24 in the future. The other key element which Martin had a lot to do with is outlined on Slide 8, very exciting. And certainly relative to our peers, but particularly looking at ourselves [indiscernible] funded to deliver what it was that we wanted to deliver. And when I turn to Slide 11. Effectively, that's what we want to deliver. And Bryan touched on at the start, we formalized apparently change of vision, but we've been talking about this slide for the last 6 months to really [indiscernible] the base metals business. We are, at the moment, producing a lot of gold. But over time, and we're not talking a lot of time, we will organically shift into base metals. And we can see that in the updated chart on Slide 11. It is a similar chart to one of these many times before, but we have ticked up to the FY '23 actually here on the left. And you can see we produced a lot of gold through '23 on a revenue basis. No surprises there. Dargues is operating. Peak was producing [indiscernible] gold. And let's be honest, when the old price is more to $3,000 as you did at the moment, that's a great place to be, in that we're generating substantial cash, we have generated cash from that gold through last year and we will continue to do so into this year. And as you can see by the guidance that Martin has outlined. That said, we do transition. We transitioned very quickly to being a base -- a very well-balanced base metals producer. 2026 is what's approximated there on the chart on the right, and we will update that in due course. But you can see just visually, we shift from being very gold-heavy to being a very well balanced very base metals business. So a good mix of copper as well as zinc and those following on commodities, both off relative to where they are. Copper is still a good price relative to where it's been historically. And both have a strong future in our mines based on the shift to electrification and decarbonization. Now what supports all of that? Let's flip across to Slide 12. So the other thing we released today as well as our full year results is our updated mineral resource and ore reserve guidance and also our production target statement, which there's a lot of information in those. I certainly encourage you to get into those and have a bit of a read to fully understand what is the Aurelia business. And I say that because you flip to Page 1 of our mineral resource statement, 27 million tonnes. We have a very, very substantial resource of very good grade inventory. But it doesn't really tell the story when you look at it in that sort of total piece because what you're doing is averaging out copper ore with zinc lead ore, with gold ore. So I would certainly encourage you to think about it and have a look at a more granular level. So certainly, at the level of the assets. And in respect of Peak, it down even further because Peak ultimately is copper ore as well as lead and zinc ore. And we've outlined that in the mineral resource statement and ore reserve statement. It will give you a better understanding of what Peak particularly means and what Aurelia actually is. So just flipping to that on Slide 12, and a few highlights for us. One, just to call out straightaway on Peak. So we haven't done a lot of drilling this year, but we talked about that through December and January. Part of that was on cash preservation. We did curtail a lot of drilling. We did continue to do drilling at Peak, particularly underground near mine drilling, and we've seen the results of some of that come through today. A substantial uplift in resource in Chesney, for example, largely copper ore. And similarly, and for us, quite excitingly, the release of a maiden resource for Burrabungie. That's not huge, 220,000 tonnes, but very, very good grade for us going forward, 2.1% copper, certainly economic, as those tonnes start to fill out. And one of the tasks for us this year is continuing to think about how that fills out and also what it means, particularly to the South for other opportunities. So when you look at Peak, one thing to flag is, it is transitioning to being very copper dominant. I think on our resource statement, you've got 16 million tonnes, 1.8% copper and 0.9 grams gold. If a company -- exploration company had something like that, everyone will be very excited about it. We have that in the brownfield setting within very, very short tracking distance on a fully operation and fully permitted processing plant. So Peak is very, very well set up to transition from the [indiscernible] largely gold heavy, largely zinc into that very, very large copper inventory in time. And you're doing some work this year to think a bit about how that's best processed at Peak and through the Peak plant. And is there anything that we can do to improve that. Bryan touched on the fact that we'll do a study on Great Cobar through the year. We have done it previously. But thinking about the gold we know now is there something we can do around that to make it even better. On Federation, I did mention we didn't do a lot of drilling this year. One of the things we did curtail was further drilling at Federation. So we certainly had a resource and a reserve and a production target that absolutely supported the development of the project. So moving forward with that development is our priority. Efficiency will come from drilling from underground. And we're -- as mentioned on the call, we're in there at the moment, we are progressing it deeper. Once we get to having those drill cutting in place, we will be drilling from underground. We also have in the budget plan to do a limited amount of surface work as well, testing those extensions to the Northeast and the Southwest. But we were pleased, we did work through an enormous backlog of drilling. Remember, we have 5 drill rigs working Federation. We had to work through all of that core, which we've done. It largely upgraded material categories, supported the inventory we had and we've had no real change to our production target here at this stage. Just to call out in the Nymagee, as we track along our MRE, we have seen that in previous years, 1.9 million tonnes, 2.2% copper. Again, from an exploration company [indiscernible] very excited. So we have that within the portfolio and we do have a plan this year to do further drilling around Nymagee to start to then think about how we bring that on as [indiscernible]. Finally, just to touch on Dargues. We have disclosed previously its life of 12 to 15 months, and that is reflected through the [indiscernible] production target. We're pretty confident in that inventory. And the real challenge for us now is just continuing to operate [indiscernible] through that residual piece of its life. I'll pass over now to Bryan, who I think is going to cover through where we're up to on Federation.

Thanks, Andrew. As Martin highlighted, Federation commenced on the 1st of August its cut, in line with the plan. And there's a significant amount of work also going on with this project tenders that have been released and also along with the plan. The amount of commitments that have been made on the critical long-lead items including ventilation fans, raisebore and it's all pretty much underway. The photos on Slide 13 really just show a couple of photos -- one of which I took about 2 weeks ago when I was in the mine having inspection. And -- I guess the key thing for Federation now is that the team has established itself as being into the routine. It's moving well through the development and ramping up nicely. There's currently about 40, 50 people working on site through Redpath and [indiscernible]. And we're really focused on now building our team and getting it set up for success. So I guess the key takeaway for Federation is after very much -- the funding was approved, the Board approval, the project has really kicked off in line with expectations that we set out earlier in the year. We will continue to optimize and evaluate scope as we progress. Obviously, just to reinforce, the total capital for this product is $143 million, of which, in our guidance, we have $70 million to $80 million being guided on for this year. So in summary, we're actually well placed with the resource of our infrastructure. We have a good balance sheet supporting our growth plans. We have a refreshed vision that Andrew also talked about for the company, which really drives our focus towards base metals going forward as per the graphic set Andrew provided on Slide 11. And it's really going to allow us to get ahead of our peers in terms of how we get the turns out of our business going into the next 5 years or so. As I get towards the Slide 14, what's important are the 6 dot points. I put out a CEO's 100-day plan just under 90 days ago. And those points are still very much in order. Obviously, point one, which is really finalize the revised vision and strategy. So we've sort of talked about that. That's well I'm surely kicked off, and we're launching that and rolling it out through the organization. Very much focused on being a developer and the preferred developer and operator of choice for critical base metals, as I said, powering a low-carbon future and really focused on maximizing providing superior shareholders' returns. In terms of continue hitting our operational targets and strengthening our balance sheet, we have 2 big projects underway at the moment. One where we focus on new costs and volume potential from Peak. We're also making sure we apply a very strong capital discipline. And obviously, doing that while we're trying to fill as quickly as possible at Peak. So there's a large piece of work and a project underway. The team is fully engaged at Peak to deliver that. And I believe we're going to have some good runs on the board as we progress through that project over the coming months. The second or the third priority is delivering Federation project. So obviously, the contractor has been remobilized, as we discussed, projects are now moving along quite well to the surface and sticking to the time frame we've committed to. And obviously, the next big milestone for us to be the raisebore contractor being mobilized in December 2023. And the fourth, the Peak improvement program is really focused on how to get more efficiency out of Peak in terms of overall efficiencies basically focusing on lower unit costs and getting more use of our [indiscernible] the next 8 months before the Federation will arise. The fifth piece is work on Cobar province model which really focuses on, for us, how do we optimize the flow of material in the Cobar region for ourselves, in terms of using our assets as we sort of ramp up our overall business with Peak hopefully moving forward with better returns, Federation coming on board, the Great Cobar study being completed. And any other sort of commercial options we look at as well that sort of fuels our mills and deliver superior value. So Andrew is sort of leading that work and looking at the whole growth model in that region. And we're going to be open to opportunities that come up in terms of commercial opportunities with other players in the field. We do want to be the catalyst to obviously integrate that region and deliver superior returns to our shareholders. And lastly, optimizing the management structure, realization -- and really to manage the risks and the opportunity of the organization is going to be a really good focus, getting very much an organization fit and ready for our future is already well underway, including [indiscernible] several key roles as we settle the organization into the future [indiscernible]. I also want to call out a big thanks to the Aurelia team, as Martin did, for their response over really the last 6 months of stepping in and improving the performance of the company and really helping us set up for financial year 2024, as Martin said. I know there's a lot of people online from the company. We're going to do a staff call out after this as well to sort of provide the same sort of feedback and engage with our teams. But we want to call out to those people. They are the ones who are making this change and coming on a journey with us to improve our business. So that's all. So I'd like to now hand it over to questions and answers.

[Operator Instructions] Your first question comes from William Thurlow from Ord Minnett.

Just a couple of focus points from myself, just touching firstly on FY '24 guidance. Certainly a stronger outlook than we had, which is good to see. Focusing on Peak, could you just provide some detail on, I guess, the levers that are at play for the all-in sustaining cost expectations? I guess, aside from product pricing and sustaining capital, are there any other, I guess, inbuilt expectations on cost initiatives that you've talking?

Martin, do you want to answer that one?

Yes. Thanks, Bryan. I guess the key focus for guidance this year is deliverability. So we've built guidance across all of -- underpinned by our budget across our business, a budget that our teams are supporting and that has an element of deliverability in it. So we haven't gone too aggressive on the cost structure at either Peak or at Dargues. But we recognize the opportunity. So we've taken probably a different route and rather than build that into guidance, we've put it into our incentive plans to actually go after those savings. So really, the key to Peak next year will be getting the development rates back up where we want them. And that will, in turn, open up headings to increase ore mines and, obviously, we are looking at new mining and milling rates, which are in excess of FY '23. Ultimately, the medium-term goal is to drill that mill at Peak. Federation is an important ore source for that, but Peak right now is focused on those operational improvements. Peak is a very sensitive site to volumes, and you will have seen that in your model. So anything we can do to increase that will have a natural benefit back to all-in sustaining costs. But in summary, we haven't been super aggressive on our costs. And we've also factored in that lower zinc price. So yes, we're quite comfortable with it.

Okay. Excellent. And I guess just thinking about -- I guess, to Andrew's comments about how we should think about Peak in terms of the copper and the zinc [indiscernible] of the operation. Are you able to provide any indication as to what the kind of tonnage would be between, I guess, either between the copper and the zinc and/or between the north and the south mines [indiscernible]?

Andrew, do you want to go ahead?

This sits well with Matt or Martin, but -- well, it's worth noting on the pack at Slide 17, you've come across that. We do provide slightly more granular details supporting some of that guidance, and this does include some information in relation to Peak. [indiscernible] probably something you want to just check how '24 plays out. Just flagging we do continue to chase high-grade gold and zinc, too, particularly in South mine in the near terms, speaking quite generally, before we transition to really chasing North mine copper. And part of that is just straight up on [indiscernible] it's worth chasing that period now. We know it's there. It's continuing to grow as we drill. So we will continue to chase that, which is why we're putting Federation ahead of Great Cobar. And that we know we've got good material at Peak that we'll continue to chase and then we develop the North mine. But I'm going to turn over to Matt [indiscernible] might just talk a little bit just about what you're targeting for the year.

Yes. Thanks, Andrew. Cobar, the northern operations, we're seeing a reduction in FY '24 from FY '23, mainly driven by having mined out developed stocks in the, which is the upper part of the new Cobar system. So production over there from about 120,000 tonnes last year down to 64,000 tonnes this year. That will be offset by an increase in lead, zinc production from the South mine. So as Andrew said, while we transition over the long term from lead/zinc to predominantly copper in the short term in FY '24, we're actually producing more lead/zinc than copper from FY '23. So that decrease in copper from the northern operations will be offset by an increase in lead, mainly in the [indiscernible] going from 124,000 tonnes last year to 194,000 tonnes this year. It will take up most of the difference, Kairos will remain steady in lead/zinc fleet at around 80,000 tonnes. We do have a small copper spoke in the ore identified in the Western drill program will come in at around 20,000 tonnes at 3%. We are kicking up the S400 production, although that is predominantly a gold lens. So last year, 20,000 tonnes; this year, 50,000 to 60,000 tonnes at 4.7 grams. And that ore body really is stope by stope or whether it goes to a lead/zinc side of the plant or the copper side of the plant. So it's 0.7, 0.6 and 0.4 copper, lead, zinc, respectively. So some of the stopes will be slightly higher in copper and good to copper feed, so that's slightly higher in the zinc and go to the lead/zinc. It is also a very good blending material. The other big change this year which is reducing copper is a wind down of the perseverance stopes, 67,000 tonnes last year, wanting to be under 40,000 to 50,000 tonnes this year, and that may just creep over into FY '24, and that we'll see the end of production of perseverance.

That was great. And just squeezing in one last quick one, just on Federation. Is Redpath fully staffed now for the project? And with respect to the long lead items, are any of them sitting on a critical path for [indiscernible]?

In terms of Redpath, we've got the resources now to do the development work they need. So all the equipment for -- all the shifts are both resource to do the work, that's on a critical path right now, obviously. In terms of the long lead items, obviously, they are on the cooper part. That's how it runs. But there's nothing which would suggest that we have any schedule [indiscernible].

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

Just wondering if you can touch on the Federation capital growth guidance in FY '24 of $70 million to $80 million is probably a bit lower than where I was pitching their CapEx for the year. Is there any read-throughs on that capital profile that we can take through? Or is that kind of larger than expectations?

Martin, would you like to answer that question?

So if I take you back to April, we talked about capital sale for $143 million. If we work backwards, it was around $108 million got into commercial production and around $73 million that got you to first ore. And at the time, we said that first ore that stope is achieved about 12 months after the restart. So on that basis, you will recall my comments earlier that the guidance of $70 million to $80 million was largely in line with our capital profile. Noting that we said $73 million sort of in this year. So no read-through on tracking as per April.

And I guess just touching on your comments as well about -- obviously, there's cross change as metal pricing has changed over, I guess, since the recommencement of the project that's probably still to real to, obviously, you make any changes, but has that changed how you're viewing the development time frame of our schedule and like where you're expecting to go into development? Any of the mine plans that you're working towards? Is that impacting any of that?

Look, I'll answer that first. There's no change to our plan at this point in time. The project is basically focused on delivering this on schedule. And if you referring the Federation project, there's no change to the plan. Apart from as we go, normal due diligence work, we'll continue to revise the scope and optimize the project to maximize the value. But there's no sort of diversion of the project based on the current short-term pricing. Martin, any other comments from you?

No. Probably, the only other comment would be back to those donut charts that Andrew talked to, Dan. So we are a gold dominant at the moment, and we have a very balanced revenue profile of the group. So this year, the lower base has been supported by the higher gold. So at the portfolio level, our portfolio is working for us. But we're not going to make changes based on any sort of short-term price action at the moment.

Your next question comes from [ Bill Murray from W. Murray Super Fund ].

Could you give us a little bit more information on the Chesney and Burrabungie operations or not operations at this point, but where do you see those going forward?

Thanks, Bill. Andrew, would you like to talk to that or we'll pass it to Matt?

Matt, you might want to go first, and I think I have a bit of a conversation about Burrabungie and what we're seeing.

Yes. Thanks, Andrew. Bill, the Chesney is in our production profile for FY '24, and we will recommence development there from September. So [indiscernible] transferring over the next week. Pleasingly, in Chesney, between the life of mine early this year and the budget pack, we've identified an Eastern gold lens sitting behind the previously mined copper stopes in the upper Chesney. So we'll start development in that area, bring that online and then there are some further development in FY '24, both in Chesney Upper and Chesney Lower. Production this year from the stopes targeting 24,000 tonnes with 0.4 grams gold and 2.2% of copper. We actually have a [indiscernible] over there this month. So we are drilling more, particularly in the depths at the moment.

Thanks, Matt. And I might just pick up from there just on the drilling. So we had a drill over 30 dates. And when that comes off in the next week or so, we will move it to Chesney. The intent is to drill a long strike and also at depth, testing [indiscernible] tensions and also the strong potential for continued depth. That's a real focus for the very near term into this year. We've filled Burrabungie to surface last year, and we did some work from underground more recently, which is really around trying to look at the connection between Chesney and Burrabungie. It suggested that they're not connected. They are separate lenders, which is what we expected. But really just trying to understand what's around it and they certainly haven't got to money. The other piece to note and I couldn't say briefly is work to the South. So beyond Burrabungie, we get to [indiscernible]. Both had some historic drilling. Both have items there that is interesting. So we haven't planned for exploration for these two to do some service work as which is the sort of mix potential along to the South. And then in the following year, we had some money in the forecast [indiscernible]. So look, as always, [indiscernible] the end is not in sight for any of these ore bodies. And one of the things we're doing a bit this year is trying to close out certain parts and things like Burrabungie [indiscernible] Chesney find that upside potential, which Peak is certainly known for.

A couple of additional questions. Federation, you had some good gold hits. Would you intend to sort of tax that initially in the production schedule?

Yes, I'll just pick that one up, Bryan, if you like to. Yes, we did have some good gold intercepts. Trying to understand the gold and what controls that versus the base, what controls that has been a focus of the team and will be a focus when we do the underground drilling, surely. There isn't a gold [indiscernible]. So thinking about [indiscernible] mining is something plenty people will do, but yes, the intention is to do more work on gold at Federation. We did some scientific work [indiscernible] over the last 12 months, particularly trying to understand that [indiscernible] trying to better understand the gold. But yes, certainly, as we flagged, good to have those very high-grade gold in [indiscernible].

And finally, just on Dargues. It's a relatively modern plant. When that eventually closes, is there any potential of moving it up to the Peak area?

Yes. So basically, the intention there is under Angus' leadership at Dargues, we will be looking at the optionality of what we remediate, what we take up to the Peak area. So Angus is very much involved with what is the sort of projects we'll be doing in the Peak region and looking at what makes sense to bring it up versus what makes sense to fill, what makes sense to just demolish in some respects. So that's an ongoing project in the next 12 months in detail, actually. So thanks for that question, Dan.

There are no further questions at this time. I will now hand back to Mr. Quinn for closing remarks.

Thank you very much, everyone, for joining today. Thanks for the questions that came forth in the session just now. Hopefully, the information that has been provided really gives the investors and others on the call to understand where we're going in the business in terms of our guidance, acknowledging the turnaround has been happening over the last 6 months in the business. And we look forward to providing further updates, obviously, throughout the year on the quarter-by-quarter deliverables. We're quite confident we have a solid plan in place now. The team runs the plan. They run the budget and are very committed to delivering against that. And hopefully, we can find some upside as well as we progress through the year. So thank you all very much. I appreciate it and look forward to speaking to you all next time. And thanks very much for the Aurelia team both on the call and more broadly for the ongoing support and deliverables.

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