Aurelia Metals Limited (AMI) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Aurelia Metals Limited Half Year Financial Results ended December 31, 2023. [Operator Instructions] I would now like to hand the conference over to Mr. Bryan Quinn, Managing Director and Chief Executive Officer. Please go ahead.

Hi, it's Bryan Quinn, Aurelia Metals' Managing Director and CEO. And on behalf of the team, I'd like to provide you some key points from the half 1 FY '24 results. I do thank you for joining the call today. I'm joined by Aurelia Metals Chief Financial Officer, Martin Cummings and our Chief Business Development and Technical Officer, Andrew Graham. In today's presentation, we'll be referring to the slides released earlier today, unless you spend some time or additional time on the financial workflows and the exploration information both Martin and Andrew will talk to. For the half 1 FY '24, our businesses remain on track to execute our strategy, which include peak increasing volumes and meters relative to the previous half 1 FY '23. Our Federation project is progressing with development meters and remains on track for first stope ore in Q1 FY '25, and we're targeting a delivery of the project within the approved budget. Our cash remains strong. We're generating operating cash flow of $34.3 million at the half 1 of FY '24, and our cash in the bank was $108.7 million, with an overall strong liquidity position of $163 million. And I'll let Martin talk through some of the details with you on that. Overall, we're in good shape building our growth portfolio being self-funded at present in H1. Hopefully, from today's results, provide some clarity on why Aurelia Metals loses a good value proposition for our investors relative to our peers. But we also acknowledge we set have a long journey to deliver what we're aspiring to over the coming periods. Our operating discipline and lowering unit costs to offset inflationary pressures continue to be a priority, which is ongoing across all areas, including capital projects, operations and in corporate costs. We're starting to see some of the benefits flow through from this focus, but recognized significant work is still being targeting H2 FY '24 and also H1 FY '25 to deliver the sustainable step change that we are aspiring to. At present, our focus is improving efficiencies and productivity in the mining and maintenance and getting uptime on our processor facility for the remainder of H2. Our exploration team continues drilling in the Cobar region with 4 rigs within H1 FY '24 and to date, delivering excellent and exciting results for the Aurelia business. In fact, we published some of these results from the Chesney North region at the Peak North Mine and recently Nymagee results last week. This reinforces our view that the region and leases within the Aurelia portfolio have high prospectivity to build on our resource. Andrew is going to speak to this in more detail in the coming moments. But it's clear, we're very happy with the results and the option that provides us in terms of our short medium-term business planning. Our current safety influence has not been in line with our expectations for H1. We've had slips, trips and hand injuries, which have been disappointing that people haven't been returning home the way they came to work. We've put several measures in place. Firstly, really focusing on frontline leadership, working to identify haves with our teams, retraining people in basic processes to make the workplace safer for them on the job. Secondly, we're doing a lot of work on focusing on fatal risk controls across the sites so that we can actually understand what the controls are and ensure people are training those and we can identify hazards much more frequently and make it safer thing. And lastly, we're also looking at significant risks and looking how we can actually put the right controls in place there as well. So there's a multipronged approach to really ensuring we get the injuries prevented and also prevent our fatalities, which obviously we do not want to see. So I'm just going to hand it over to Martin to talk through the next couple of slides on the group operational summary, and then I'll refer to some more detail around the operating business and the projects. Over to you, Martin.

Thanks, Bryan. So firstly, we covered our operational performance and outlook in detail in the December quarterly call, but I'll quickly recap on the outcomes turning on to Slide 4. Our production volumes were lower in the half with the comparative period, including production from Hera. We closed the Hera Mine in March 2023, and the processing infrastructure was placed on care and maintenance. You'll see throughout the fact that we've removed Terrafame Chart to highlight the impact after Hera. So excluding Hera Gold production was lower this half driven by a 23% lower grade at peak, and dark grade was also marginally lower. In addition, Peak processed about 10% less tonnes during this half. On the base metal side, though production, it was the opposite story with zinc and lead grades around 15% to 17% higher. As we outlined in the quarterly, we are expecting higher production to finish FY '24 with higher grade and tonnes at peak. Gold is expected to be in the upper half of the guidance range, with zinc and lead in the lower half of the range. And for copper, whilst it isn't a large production volume for us right now, we did reset that guidance lower in January, given the likelihood we would not achieve the original guidance. Pleasingly, our all-in sustaining cost is expected to land within the range and our sights are managing their costs well, resulting in spend that's lower than our internal plans. So just turning to Slide 5, which is the group financial performance, and it's pleasing that we've continued the journey of improved financial metrics across the board. There is no doubt that the comparison period on this slide being the first half of FY '23 was a disappointing period for the business, so improvement was expected. In this half, we're focused on increasing our operational efficiencies and costs at peak and generating solid cash returns from Dargues, and this has translated into material improvements that you see on this slide. As I said, we expect to build on this in half 2 with continued production growth at peak and cash generation from Dargues. And given all the mine development at Dargues now being completed in the December quarter, we expect the strong cash flow to continue. So moving on to Slide 6, which gives you a bit more detail on the movements in revenue, which overall was $45 million lower than the half 1 FY '23. We've pulled out Hera, $40 million of that variance was contributed to Hera. But from the remaining $5 million, it was driven by movements in volume and price. For gold, the lower gold production was more than offset by higher gold prices for Peak and Dargues production. And our average price received in this half was 3,060 an ounce, up from 2,570 an ounce in the comparative period. In terms of base metals, it was the mix of ore processed at Peak that really drove the higher lead zinc production and lower copper production. Peak metal fees this half consisted of 72% less in ore and 28% copper ore, whereas in the comparative period, that mix was a bit more even at 55% lead zinc and 45% copper ore. As I mentioned earlier, leasing grades were also up in this half. In terms of volume, these variances essentially netted each other out, leaving the main impacts here from the lower zinc prices we received this half. The realized price in the prior period was $4,678 a tonne for zinc, whereas the average realized price this half was about $850 a tonne lower at 3,822 per tonne. And the last variance on this chart, you'll see was regarding zinc treatment charges, which we had lower contract rates in calendar year '22 versus calendar year '23. Looking forward, we expect to continue enjoying these higher gold prices in the second half with our average hedge price of 3,072 an ounce for the remaining production from Dargues. Lead and zinc prices are around the prices we achieved in the first half, but the extra volume will lead to higher revenue. So just moving on to Slide 7, which is EBITDA and NPAT. And as I said, we did expect to deliver improved EBITDA in this period versus the comparative period. And we've pulled out the loss from Hera and added that back to the comparison in the top right chart. I talked about the low revenue from Peak on the previous slide, but it was the inroads that we're making on operating costs that have been the really pleasing aspect this half. And the main variance within this is within our mining costs. Those mining unit costs fell from $164 a tonne in H1 '23 to $125 a tonne in this half. And as we showed you in the quarterly, the December quarter unit rate was $123 a tonne. We are focused on continuing to lower that towards $100 a tonne driven by both volume and cost saving initiatives. Dargues continued their strong -- their solid EBITDA production performance, enabling it to realize the benefits of the higher gold prices in the half. As I just mentioned, all the mine development of Dargues was completed in the December quarter, so we expect that cash generation and margin to continue through to the end of operations in early FY '25. In terms of Corporate and Other, the main change in this chart for the first half is that we're now including the cost of care and maintenance at Hera within corporate and other. And as I indicated back when we issued guidance, those costs are around $0.5 million to $1 million per quarter. In terms of net profit, it was pleasing to return the business to a positive profit before tax, and that was driven by lower depreciation and amortization charges along with the higher EBITDA. The G&A was a little bit lower this half with the lower production from Peak. And given most of our assets are depreciated on a unit of production basis, we will expect that to increase marginally in the second half. And I'll just highlight, you'll note that the income tax expense of $2.7 million for the period was a bit higher than what you would expect as an ordinary movement on tax. The main driver there is that we took a $2.4 million adjustment related to the difference between the tax refund that we expected to receive at the 30 June accounts versus what we ended up receiving of 17.8%, and I took you through that in the quarterly. And finally, while we're talking about tax, you'll note, we do have a deferred tax asset of $9.2 million for carryforward losses at 31 December. And that has benefited, I guess, from the fact we've received $27 million in actual tax refunds relating to tax losses over the past 2 years. It's likely we will recognize some additional tax losses at the completion of Dargues in early FY '25, and we're currently working through that calculation in the lead up to mine closure. And I'll be in a better position to give you an update on the tax situation at Dargues when we release our full year accounts. And finally, we'll turn to Slide 8, which is around the balance sheet. And clearly, it has been a transformational period for the balance sheet with the completion of the equity raise and the closing of the refinance with Trafigura. So I think it's worth just reflecting on where the balance sheet has finished at 31 December. We completed the refinance with traffic and those funds are earmarked now for the development of Federation. With debt-free and other than some equipment leases and had significant cash of $108.7 million in the bank. We received a further $17.8 million in January from the tax refunds, taking our pro forma cash to around $126 million. Our finance facility has no repayment or cash backing requirements until the middle of calendar year '25 and a 4-year term. Today, we are only 6 months into that term. And the interest rate on our loan note is competitively priced at 6% over the benchmark, and we have no financial covenants. Pleasing for me as well within the half with the ability for Peak and Dargues to fully fund our growth expenditure, which means the proceeds of the refinance are largely untouched. Thanks for your time, and I'll hand the call back to Bryan.

Thanks, Martin. I'm going to talk through the operations and the project and then I'll hand to Andrew to talk in more detail on our exciting exploration results we've been getting. Firstly, on Slide 9, with Peak, the Peak business is obviously focused on delivering the sort of increase in volumes and the increase in meters. So we can set ourselves up for a good finished FY '24, but also of FY '25. There are a little of projects that are well underway to safely improve the unit costs, but also to look at how we can maximize value through our production. Some of those -- the adding that some of those projects are additional in excess of $10 million, if you look at both the productivity and efficiency projects that we follow on the table at the moment. Development performance at Peak for H1 has improved in line with our expectations and is now focusing on delivering this in a consistent way quarter-by-quarter and obviously focusing how we can improve the unit cost for the development meters. It's great news for Peak that we've been able to get those meters back up where they need to be. And in fact, it's given us a good scope to have access to stopes several months ahead of ourselves now to get the work done for preparation for stopping. It does help derisk the overall production plans for the full year. But obviously, we still need to get that to the service and process it and deliver those sorts of overall complete process for the organization. We rolled out the regional Cobar model, leadership model for -- with Peak and with Federation in H1 and has been implemented in H2. There's obviously opportunities around standardization, having one set of management team focusing in the region. It's optimizing mine plans, looking at how we think about trucking, optimizing the plant throughput, both from Peak and from Federation going forward and really setting up our crews and staff at Peak and Federation to align to one plan that can optimize the value of that complex in that Cobar Region that we call our Cobar Regional model. At Dargues, the focus for the H2 period is really to safely and reliably retreat out of the mine with production finishing in Q1 FY '25 while obviously safety maximize cash from the operations, especially on the back of some very attractive high gold prices, we've been able to lock in. The work is well underway in parallel for the sale of the complete site, including the mill or just the mill. And in parallel, there's closure planning being well advanced in terms of the work in the actual side itself. Importantly, we're working through what components also that we can take from Dargues and use in the Cobar region which will be cash and capital savings for the Cobar operations going forward as well. Equipment loaders, trucks, light vehicles, as examples, how we factor those into building our business in Cobar. Obviously, all of this is in light of how we maximize the value back to our shareholders from the sale process and closure process as well as meet our provisional requirements to remediate the site in the right order. In the meantime, we're also working with our workforce at Dargues to look at how we can redeploy the people into the Cobar region and the completion times and various closing with the team members who want to lead the operations at the end of the operations. Much of Federation project, obviously, the critical path has been development of the decline and obviously, getting us into the stope area for Q1 of FY '25. Other critical part work has really been infill drilling to obviously resolve where our stope location is set up is going to be. The first shaft rate fall was completed safely, and we're just over 70% complete on the second one, which is one of the largest shafts. The bird road upgrade has been tracking very, very well, considering the weather events. And effectively, over 8 kilometers has been sealed and completed for that particular part of the project, which is a great milestone for Federation. Some other key milestones included over the period, underground electrical substations being installed in a decline commissioned. And as I said, the underground infill [ Drewry ] was placed in one of the cutouts and have been drilling since early January. All of those events, obviously, all those activities continued on even though we reported rain impacts on development and potentially causing a pause to our development for a period of time. We are able to continue most of the other activities running in parallel, and the bad progressed to, as I said, the first shaft raises being cleared, shop created. And the second shaft is being raised as 70% complete. Just one last comment on Federation. We obviously did report about the pause development because of the water and the rainfall impacts we had, and we subsequently reported that we don't see this being impacted on our first overall in FY '25 quarter 1. All the equipment in terms of pumps and pipelines and still way work that was underway both before the event and during the event of the rainfall and now have all been put in place. There's still ongoing project work around water management. We need to do as we continue to build our project, which is also just part of the project scope and operational scope to get the business ready for the future. At a strategic level, our growth team continues to work on the optimization options of our portfolio in the Cobar region to utilize our infrastructure as we continue to set up our operations to use our full capacity in our mills. Obviously, that's going to be based on where we maximize value and how we distribute our sort of volumes. We have several options that we're working through, and then we'll provide some insights to that in the future. But it's obviously clear that we're looking at both what we have internally, but also when our neighbors potentially have and how can we get synergies from each other to optimize our value. So the load on the operations in the project space and also strategic base around how we optimize the value going forward. I'll just pass on to Andrew now to cover the details around our exploration plans and results.

Thanks, Bryan. And those following along, we're up to Page 12 of the slide pack, where we showcased a little bit of what we've been doing. And since the start of the financial year, we've put out 3 exploration releases, which showcases really how great the tenement packages that we've got there in Cobar and also the in-line and near-mine prospectivity. So first of these releases featured amazing grade at our South Mine Peak in the PerseDeeps, which we got, for example, 13 meters at 17.6 grams gold, which is a fantastic hit in anyone's book. We also, on that same release, put out some information about Chesney South drilling, 11.5 meters 1% copper and 1.9 grams gold. Again, a great hit. Testing that piece between Chesney South or Chesney and the Burrabungie opportunity. So some excellent results there for the Peak Mine. Also at Peak, we followed up in January with the results of our Chesney North exploration program. Peak holes completed there, all hitting mineralization, cover mineralization, just to call one out, 17 meters at 1.8% copper and 0.4 grams gold, certainly fantastic from 2 points of view, great copper, great grade with a credit period gold, but also very, very close to planned workings there at Chesney North and giving us the potential to think about how we time Great Cobar as we mine Chesney North ahead of it. It's a great photo there in the slide for those following of Danesh from our Cobar District team. In that case, logging hole 81 of that Chesney North program. We certainly have a really great team on the ground there delivering these results. Now to top it all off, last week, we released a for-hold program at the historical Nymagee deposit. Just to call out, for example, whole 102 to very strong intercepts around 30 meters at around 2% copper, and that's fantastic. But as well as that, 7 meters in excess of 17% zinc in the Western lead zinc zone. And on top of that, some great copper grades in the interland stock work. So if you haven't looked at that release, I'd encourage you hop on to the ASX website or our own website and have a look at that some excellent drill results from our first all holes there in Nymagee, and we'll certainly be following that up through FY '25. So it's great that these exploration programs are yielding results, really evidence of the strong prospectivity in and around and across our exploration package in Cobar, but also a fantastic showcase of the people we've got on the ground doing that exploration. So back to Bryan to wrap up.

Thanks, Andrew. So as highlighted throughout the presentation, obviously, the management team is really focused on delivering our full year guidance and our growth plans. And as followed by Andrew, there's some really exciting work being done in unpacking we're uncovering our prospectivity. And as Martin talked about showing our financials and our balance sheet, some really strong indicators that we're a business team in the right direction. Like any business, we have ups and downs, but we're very focused on developing and operating premier base metals business in this very prospective Cobar region, which is obviously Tier 1 by any standards globally. In summary, it's really -- for us, we want to highlight what supports our vision going forward. We have this really strong extensive resource base, and we're obviously uncovering more as we progress our exploration program. We have the established infrastructure in place. We have the 1.2 million to 1.3 million tonnes. And really, we're looking at how we can optimize that as we build -- continue to run Peak to maximize value of Peak and start Federation mine in FY '25, how do we utilize our infrastructure to really maximize the throughput but also maximize cash and value to our shareholders. But we have that opportunity in front of us, and it's there for us to use. We're transitioning, obviously, at the Peak Mine to be more copper-dominant in the medium term from the zinc sort of base business to more copper, which is very exciting to see in where we're heading as a company. We have multiple mines with multiple sources of ore in the both Peak and Federation going forward, which will give us opportunity to optimize our throughput through our mills and obviously to optimize cash flows as well for our shareholders. We have the fully funded high-grade project of federation, which is on track to first Opal. We're progressively advancing through the scope of work as we've highlighted. We've had 83% commitments against our FY '24 budget at the end of January. And overall, at the end of January, our total project is about 43% of total project plan, which obviously goes into FY '26. Priorities other than development is really the electrical engineering works, power station, and Stage 2 construction works on site going into FY '24 and FY '25 for the Federation project. Once again, it's fully funded, and we have sort of got a clear path to getting to our first stop in front of us. And I guess, overall, if you look at our -- we've got a lot of programs underway to progressively improve our productivity and lower the unit costs, and these are well underway. Like I said, we still -- we're on a journey. We still have much work to do, and that's going to progress as we move forward as the organization. And hopefully, the amount of work will start giving us results in H2 and also into FY '25 as well. So I'll pause there and pass it to Betty to open up for the Q&A, and then I'll come back and provide some wrap-up comments.

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

Thanks, Bryan, Martin and Andrew, we got some of the results today. Probably I just wanted to start with yourself, Martin, just some of the financial stuff. So just with the utilization of these tax losses, you've got $9.2 million. There may be some more coming from Dargues when that closes down. What's the expectation on the -- when those come into the, I guess, the income statement, what's the utilization of those tax losses going forward?

Dan, the profile, the way that we'll get the tax deductions for Federation, so as you know, we'll get immediate deductions on mining development. So there is a bit of a tax shield in the early stages of Federation as ore starts to be mined. And then as you pointed out, we've got the $9.2 million of carryforward tax losses. So we don't have any tax payments in our models in the near term given that starting position and then the -- that sort of natural shield from the higher development early on in the mine. I talked about commercial production out of Federation. We're going through a lot of mine process at the moment. But after stope ore, that commercial production window is on the old plans was around 6 to 9 months after first stope ore. So that's the sort of time frame where the operation won't be cash positive, but commercial production will come inside with a round about the time when it starts to break even. I hope that gives you a bit of color. So nothing really in the short term.

Yes. No, perfect. That's great. And I just wanted to talk on depreciation as well a little bit kind of probably a bit semantics. But even accounting for the removal of Hera, I guess the numbers I was coming out within a unit of production basis had the depreciation for the past year a little bit higher. So I was just wondering what the -- I guess, how should we think about the outlook for the remainder of FY '24. And I guess going into FY '25 as well after Federation comes online. So we're trying to press what the expectation for depreciation for the next 2 years, I guess?

I won't guide you on year 2, but I'll give you some guidance on this half. So as I mentioned, a lot of our assets are on a unit of production basis. So it was a lower half production-wise. And therefore, the depreciation unwound a bit slower in line with that. The other piece that we're working on is the Dargues assets. So there is a lot of work going on at the moment to work out the remaining values and how those assets will unwind, and some of that was actually pushed through in this half. So that is around recalibrating Dargues to the expected finish date of the first quarter of 25%. So on the rest of this year, I think I mentioned I expect depreciation to be slightly higher than in the first half, just given the higher production. And then I'll give you some guidance on what Federation depreciation looks like in time.

Awesome. All right. Thank you. I might ask one more just for, I guess, the group. You've got the Cobar Basin optimization projects during FY '24. I wanted to kind of unpack the current scheming around, I guess, Great Cobar. There was mention of, I guess, some organic and inorganic synergies in exploration and maybe from some of your neighbors around what that profile might look like. So I just wanted to, I guess, ask and understand a bit more about what the current thinking was around the Cobar Basin strategy and where Great Cobar fits into that profile.

Yes. Well, thanks for the question, Dan. Look, I think it's firstly, most important to point out that we've got a very robust plan that we can deliver on. And that plan is the one we've articulated to the market previously, developing Federation, taking some of that Federation or up the road to Peak. We have a permit in place to do that and then turning on Hera when the time is right. With that, then there's a natural sequence at Peak, mining South Mine higher NSR materials predominantly at the moment. The sort of transitioning, as Bryan talked about to North Mine and copper in time and how that sequence then works and the timing of that is the key piece of our life of mine planning activity, and that work's ongoing at the moment. It's really, for Great Cobar, a toss-up of continuing to mine the ores we have right in front of us in North Mine versus taking the time and the effort and then the money to get across Great Cobar when it makes sense. So that will be a key output of our life of mine work at the moment. Obviously, it's a moving feast as we drill holes and get excellent results as we have been. So it's really taking account of all of that most recent information. From the second part of your question, just around sort of third parties, I've talked about it last time in the quarterly. It would be remiss of us not to be thinking about the possibility of working with others given we have 2 fantastic mills there in the Cobar Basin. But really, at the moment, we have a very, very strong feed and pipeline of materials between Federation and also the Peak Mine. So really sequencing those for maximum value is something we're really focused on.

The next question comes from Adam Baker with Macquarie.

All right, Bryan and team, thanks for taking my question. Maybe just one on Federation. You are more back-ended for the gross CapEx this financial year of about $40 million to $50 million from what I can see. How much CapEx will go through into FY '25 until that project, I guess, the development changes to sustaining? Thanks.

Adam, Martin here. So yes, we're still maintaining that guidance this year of $70 million to $80 million. So your inference around the spend rate in the second half is correct. You might recall when we went through the feasibility study update, the movement in capital from what we called first stope ore through to commercial ore was around about $30 million, a bit over $30 million. That did have some capitalized production in it. So there were some operating costs starting to come through, and we were capitalizing those and capitalizing the revenue as well. So through the commercial production, which is around, as I said, 6 to 9 months after first stope ore was a net of about 30%. And then it will start to transition to -- there's still be heightened mine development going on through that period, but some of the other costs will end up being in production activities and operating costs. So that's probably the best color at this stage. Obviously, we'll give you some more as part of next year's guidance on what it looks like.

Thanks a lot. And the [indiscernible] shaft and the installation, the ventilation fans, that's all captured within FY '21 guidance. Is that correct?

Yes, so the ventilation to the reboring is being done on one shaft completed been obviously [indiscernible]. The second one we're doing is 70% complete. It will have -- its work done in the third shaft will be raised in this financial year also. Obviously, the various activities in terms of ventilation fans and so forth or egress letters will be generally installed this financial year ready for our first of in Q1 FY '25. On the money side, commitments have been made for those things. So it's already out in the market and the money is being spent in FY '24.

Got you. And just touching on that point on the first commercial production confederation, 6 to 9 months kind of ramp up from first stope ore. Can we infer that that means that you're at the 600,000 tonne per annum run rate, I guess, by the March quarter next year?

No, no. So that was around about 20,000 tonnes a month at that point. And obviously, we then ramp up progressively from then to the nameplate of 50,000 tonnes a month.

Got you. So yes, still a little bit further ramp up to go from there. All right. Thanks very much.

Quite a lot really here to go from 20 to 50. Yes.

The next question comes from Paul Kaner with Ord Minnett.

Bryan and team, no financial questions from myself and maybe just a couple on the operations. So firstly, at Chesney you filed your first stope, production stope there. Was that always coming into this mining sequence this early in FY '24? Or you're just being a bit more opportunistic given those recent drill results?

In terms of Chesney, you're referring to the Chesney operations, part of the operations?

Yes, yes.

Yes. So the sequence, based on the sequence of the Peak Mine has been -- as we talked about at the quarterly, the sequence was we moved some stopes from Q3 into Q2 and then obviously it starts from Q2 into Q3. We're progressively mining those stopes now. And if you look at the total year of FY '24, we'll be real. The plans to be reasonably close to the sequence, including obviously the Chesney area as well that we have factored into the plan from the period. But the results that Andrew is talking about the exploration, they obviously will go through our job process and be factors along going forward. I think I answered your question. It's a bit hard [indiscernible] that's all.

Yes. No, that makes sense. I was just making sure that nothing has been sort of brought forward in the sequence, which you answered anyway. And then just secondly, on recent rainfall, good to hear that the first, first stope ore bed is still on track. Could you maybe just elaborate a little bit more on the tailings facility there at Hera and how that's sort of coped with recent rainfall?

Yes. So with the rainfall I mean, obviously, the rainfall is very localized out there. You can have a lot of rainfall at Hera and very little at Federation, vice versa. And obviously, some of these can be leading on the Peak because it's nearly 100 kilometers away. We had a plan to so much the pipelines between Federation to Hera to be [indiscernible] obviously, water from Federation to Hera. Those pipes are actually on the ground and just waiting still in time. We're also in the middle of installing a spillway in the TSF for dealing with obviously any major rain events that may have occurred that would exceed the levels of the dam and that was obviously to protect the dam from any potential overflow to prevent in the future if we have significant rain. So those things are being [indiscernible] finished, and the pipelines have been finished to have some work to do on some small bits of work on them and they've actually installed 4 water cans now in the TSF. The design of that really is to basically present water there and evaporated through the actual cans. And there's some more plans underway to bring some other bigger evaporators in as well to help with that. So the work was -- a lot of it was planned, a lot of it is still work to be done in terms of having the operation fully set up to operate at full capacity in the future. But being a project, we just didn't have all those things in place that we would love to have in place in operation.

The next question comes from David Coates with Bell Potter Securities.

Bryan, thank you for the presentation call this morning. Just a quick one for me on the unit cost savings that you're looking to achieve, that $100 a tonne target. Whereabouts do you guys see the opportunities to make those savings? Is it the economies of scale or more jumbo headings or something like that? What are the key things you guys are looking for?

Yes. Thanks, Dave, for your question. Look, there's a couple of things. Obviously, volume is one of the -- obviously, [indiscernible] having more volume is one of the benefits of unit cost. But you have to get the volume you need developed meters to be ahead. So you've got some way to actually mine and produce stopes to make that happen. So obviously, getting our performance on our jumbos to the right level. And we've recently moved to jumbo, the jumbo from Dargues to Peak. We've got 2 of the same type of machines now running at Peak, which is [indiscernible] to the condition. So again, those 2 jumbos really panning out getting the meters -- getting us 3 or 4 months ahead in terms of stope options, obviously, allows us to sort of look at how [indiscernible] the volume on. So that's obviously a big metric. The other thing is really around unit costs in terms of maintenance unit costs, having a strategy in place for our equipment. It's in terms of mine cost in terms of what we're doing in the mine, use of contractors versus our own employees and so making sure they have the right number of people doing the right activities. So there's a host of work going on in terms of becoming more efficient, but also on the basis that we can get better productivity as well from having these developed meters ahead and sort of well and truly improved. It also comes down just better, having better focus on availability and utilization that we have for those for several years, we've had the cage growing facility not being operational, having that operational in the future mean we can get people back in the mine and utilizing their time much more efficiently as well and gives us hours on equipment and obviously can reduce our costs indirectly as well through having the right number of people running their equipment the right way. Through to things like, David, just making sure that the right load at each truck running between the [indiscernible] and the Dargues. So making sure we're using what it's designed for gives us better productivity improvements as well and lower the unit costs. So they're all the generic sort of things that we're focusing on in the site, but it's a target we're aiming for. You've seen the sort of decline that's happened so far, and we believe there's more to go, and the team is going after it.

And you just sort of touched on people there as being part of that equation. Are you guys seeing more skilled labor availability with the tough times for the guys and the nickel mines in the west are having? Or is that sort of not really filtering through?

Well, we've been obviously employing people at Peak and part of the change that was done last year when [indiscernible] mine, we've got our own operator. And we've been gradually employing people across the last 12 months into those roles. I guess we've seen a bit more of people being available and putting a hand up from the west. But our real market focus is the East Coast, Victoria, New South Wales and Queensland. We have recently deployed a charter from December to provide opportunities where we can get labor in the local market that we can bring them in from Brisbane or our other Eastern state areas and just bring them on the roster of our charters and we get more efficiency, but also open to the market to people who may have been flying to the West and are happy now to fly far less distance and work on the East Coast in a sort of a mine which we believe has got good growth potential.

[Operator Instructions] The next question comes from Phil Murray, a private investor.

When the drilling at Nymagee was extended a few years ago, metallurgical considerations were considered the major problem. Has that might be overcome?

Andrew, would you like to answer that one?

Yes, absolutely. And thanks for your question, Phil. Look, we haven't done any more metallurgical test work in the last 6 months. We've done exploration drilling. We're fully aware of the history of Nymagee and some of the question marks around deleterious elements and other things. The drilling we completed, we certainly didn't see any uptick, which is good. It's certainly been reported in the past. The TAP was -- we did see TAP, but it was just within that lead-zinc zone. And if you think historically when they were doing the original study and think about bringing the mine on, they were looking at bringing that lead-zinc material early in the Peak and it made up a fair portion of the feed. So I can kind of see why the TAP was [indiscernible] mine at that time and how it's resolvable metallurgically, but it's about understanding what we have first and think about how we do that. And similarly, with [indiscernible] definitely some [indiscernible] with the copper lens. Again, it can be resolved metallurgically, but our focus at the moment, Phil, is to understand the ore body, drill it out, get additional inventory, understand what that inventory looks like and then think about in a study phase how we would then treat that material once we have sufficient inventory at good grade.

Another question, the Hera upgrade of the mill, is there any timeframe for that to treat the Federation ore? And any idea of how much it's going to cost?

Might keep going, Bryan, if that's okay. So yes, the base plant that we have effectively takes the high lead-zinc grade material [indiscernible] material, the high copper grade material from Federation up to Peak is processed through Peak, which is a much more suitable to product flow plant with the gold lead circuit. It's very well suited. The plant at the moment then leaves that lower grade material, lower lead-zinc material for treatment through Hera. And the current plant is it goes through the plant effectively as we turned it off. So creating then that bulk lead-zinc concentrate. To restart, obviously, the plant was turned off operationally when it was operation. So to restart, it's a case of bringing it back to what it was. We had a contract crusher on there, which has since been demobilized. So we will need to remobilize the crusher. But otherwise, the plant other than the work required to get it back to what it was. It's base form. It shouldn't be a huge amount of work and shouldn't be that expensive. One of the pieces of work we are doing as part of that Cobar optimization though is to say where could we spend or deploy targeted capital to improve what we're doing there at Hera in sort of a go-forward sense. And that work's ongoing. But the base that we've talked about previously and that we put out in the market is effectively turning Hera back on as it was.

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

Thanks, Betty. Just to wrap up. Thanks, everyone, for joining the call, and thanks very much for the questions, so we can provide those answers to everyone on the call. Obviously, as a team, we recognize we do have a good value proposition going forward and it's on us to develop and operate our base metals businesses in this Tier 1 location to really maximize value. Four of the key focus areas really right now is to make sure our people are safe, make sure that we're doing all the right things to deliver the Peak performance where it can be, making sure we get the Federation project for first stope ore underway and focus on for Q1 FY '25. And importantly, we need to make sure we continue to maximize, safely maximize the cash coming out of Dargues and in parallel to setting up for closure and making sure we look out for the people and also make sure that we have a clear path to demobilize and remediate that site and obviously get some value out of what's actually there on site. So in terms of where we're going in our value proposition, we have resource and we're continuing to unpack what that prospectivity looks like as Andrew described. As we described also, we're obviously looking very hard around how we can maximize value out of the infrastructure. We actually have the infrastructure and it's how we put capital in the right location to make sure we can maximize that. We have the high-grade project federation relatively under construction, and we're moving through all the [indiscernible] and sort of working our way through to a point where we can get to this first stope ore. Importantly, as Martin highlighted, financially, we're in a good position especially relative to our peers, we sort of very much got the strong balance sheet. Cash is funding our growth right now. And obviously, we need to keep that focus going forward. And we've got significant sort of work underway to try and improve our performance, both on the productivity and the efficiency side of things that's happening on the sites as well. So we've got a lot to do, and we've got a plan to get there. But it's important that we sort of quarter-by-quarter pushing for our performance and be credible in what we're trying to see. So thank you very much. I do appreciate the team, the Aurelia team and all contracted partners we have working with us. Everyone is putting their effort towards delivering these results and also appreciate the support of our investors as well to give us feedback as we have been getting every quarter. So Betty, that's all I have to say. Thank you, everyone, for participating. Appreciate it.

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