Burgundy Diamond Mines Limited (BDM) Earnings Call Transcript & Summary

Good morning, everybody. On behalf of Burgundy Diamond Mines and Bell Potter Securities, welcome to Burgundy Diamond Mines December 2024 Quarterly Conference Call. My name is Stuart Howe, Resources Analyst at Bell Potter, and I will host today's call. From Burgundy, we have the company's Chairman, Michael O'Keeffe; Managing Director and CEO, Kim Truter; and Chief Financial Officer, Brad Baylis. The format for today's call is that Michael, Kim and Brad will take us through a presentation. This will be followed by a Q&A session, which I will chair. So please enter your questions on the Zoom platform. After the presentation, I will read out your name, affiliation and question for Kim and Brad and Michael to respond to. Today's call is being recorded. Before we get started, I want to draw your attention to the important notice and disclaimer on Slides 2 and 3 of today's presentation. Michael, I will hand over to you for some -- to provide some introductory comments. Thank you, Michael.

Thanks, Stuart, and Hi, everyone. It's -- well, we've entered 2025, and I was just reflecting back and looking at the LVMH results over Christmas, and their sales haven't increased significantly. In fact, I think they're pretty flat, and that's a good indicator of where the luxury market is. And we look over at China and see what's happening in China with electric vehicles and what may happen with tariffs and also the sectors that's very heavily affected, and that's housing. So look, I was hoping by this Christmas, we'd see some green shoots appearing. It didn't seem to happen over Christmas, but we're very keen on seeing what happens during this year. We're sitting in a background of when we acquired the asset, we were forecasting, looking at the diamond prices, I think, going to around about $140 a carat at the time, they were about $119, $120. In fact, it's been a slow decline along the way, and it's quite painful. So that's -- our belief is there because the team is working heavily on the cost structure to make sure that we're not overrunning our cost structure. And I think everyone knows it was a mine that needed a lot of love and a lot of hard work to turn this asset around. So as I can talk today, we've got a very good team together, and we are delivering on reducing the costs. And there's a good consolidation in how we move forward, which Kim can run you through all of those issues. I'm confident in the asset. I'm confident in the people running it. Our biggest issue is the diamond prices. So when will that market turn? Let's hope it's going to be soon. We're entering a period that whereby at this time of year, always for us, we're building the ice roads and we have 2 or 3 months of moving inventory to site, and we also have to pay for that. So it's typical of this time of year when that's happened. And we're also spending quite a bit of capital moving in from the Sable mine to the Point Lake. So again, that requires capital and the development that we're doing on the Misery underground deeper and also laterally. So patience is required. I know it's an easy thing to sit for me to say, but did I forecast that's speaking the bottom? Yes, I thought I had. Did I get it wrong? Yes, we did. Where is the bottom? I'm not sure. But the main focus for us is to make sure that we can maintain a steady head and go forward. We'll talk to you also about looking at Brad and Kim are looking at taking on some more debt, which is going to be handy for us going forward, and they have certain ways of being able to raise that finance. So I'll let Kim run through the operations and give you an update on where we are with the various things I've mentioned plus more. But again, I thank everyone for their patience, and we're working very, very hard to make sure that this asset is going to be in good shape when the turnaround happens. So over to you, Kim.

Yes. Thanks, Michael, and good day, everyone. Always good to catch up with everyone. So we'll do the usual format. I'll take you through some of the operational numbers and the mine growth, and then Brad, our CFO, will take you through some of the financial numbers. So let's just kick off with the operational highlights, please, Brad. So if you actually -- if you look at the shape of that top graph, what you can really see that, that really shows you the transition as we move, as Michael said, from Sable to Point Lake. So you can see the waste winding down as we slowly got to the bottom of the of the open pit in Sable and then it starts winding up, as you can see in Q4 '24 as we start getting into the meat of Point Lake. So that transition is now nearly finished. We've got a few more carats left in Sable that we're te-spooing out. But essentially, now we have nearly fully shifted across to Point Lake, and I'll talk about that a little bit later. You can see down the bottom there how the carats recovered, moved up and down. Q4 was a slightly lower quarter for us, primarily because of that transition from Sable to Point Lake, and we had to supplement the process plant with a little bit of what we call coarse rejects. So that's dragged the grade down slightly and dragged the carats down slightly. But you can see still a pretty good run rate and obviously setting us up as we go into Q1 2025. So that's just a bit of an explanation there. Brad will speak to the financial highlights. So if you just run through those piece for us, Brad?

Yes. So for the quarter, carats sold slightly below our average run rate. We did have a bit of a disappointing December sale with some announcements by De Beers and ALROSA with some price cuts that actually still had their prices higher than ours, but created a bit of negative sentiment in the marketplace. And those announcements happened just prior to our auction. So we ended up not selling all the goods. Typically, December is usually a really good sale for us. And so, we did have some lower quality goods, a couple of hundred thousand carats worth that we did carry forward to 2025. We did see a big drop in carats sold compared to 2024. Now this is largely due to the fact that we did carry some carats into '25. But also in -- if you recall, in 2024 -- or 2023, sorry, there was a large overhang of carats that moved from September into the Q4 2023 that resulted in higher-than-normal carat sales during that quarter. And so, comparing year-over-year does get tricky. On the good news side, I think that given the very difficult market conditions we're in, we actually only missed -- our revenue was only down 6% year-over-year. And actually, we were quite happy with our average dollar per carat, just over $90 for the year compared to a budget that was just under -- just around $95, $96 a carat. So for a market, where prices are -- the rough prices are down anywhere from 15% to 20%, I think we fared fairly well during that market. Obviously, like Michael said, we're all hoping that the bottom happens soon. And we haven't quite seen the end of it yet. We do hope to see some improvements, as we move into second half of '25. And then on the EBITDA front, our results were hurt a little bit due to the really inefficient mining we're doing as we're at the bottom of the Sable pit. Our mining costs on a per unit basis higher than what we would normally expect, and that's just because we're trying to scrape everything we can out of that pit. So it definitely hurt our profitability in the latter half of the year.

Yes. It's probably just adding one more comment to what Brad said there. As people probably know, De Beers sells differently. So that's why when Brad talks about their price coming down, typically, they dictate the price to their customers. And so, the prices that they dictate may not be market related, whereas because we run an auction process, our prices are market related. So when De Beers announces a price reduction, it's really to come more in line with the market as opposed to getting below where we are. I thought I'd clarify that. But Brad, just keep going with this slide, mate.

Yes. And so, on the balance sheet side, we see some small uptick in our plant and equipment. That's due to the pre-strip for Point Lake. Cash and cash equivalents down just under $50 million compared to Q3, and that's largely driven by 2 factors, one being the pre-strip for Point Lake and the second being the contribution into the environmental trust related to our surety payments. Diamond inventories, a nice trend downward on diamond inventories. We have put a big focus on shortening the pipeline, and we'll continue to do that into '25. But you can see a nice trend there where we're re, and this is largely impacted by the reduction in cash to end the year. Yes, a bit more detail on the cash change. So like I mentioned, just under $50 million reduction and the largest components related to that are the 2 surety payments, so the Q1 and Q2 surety payments that were put into an environmental trust at the end of the year; and then about $30 million of pre-strip related to the Point Lake. So once we get through all of that pre-strip, then we should start generating some cash from that asset versus the other way around. And the reason we put the money into an environmental trust is there are some tax benefits associated with that. So we really want to take advantage of that, which is why we kind of wait until the end of the year to deposit those surety payments.

Thanks, Brad. Good overview. Thank you, mate. So if I just switch to growth and the operations. So this is the update on the Misery mine. This is the underground mine that keeps on giving. And so, you can see that what we call the Misery deep drilling is now finished. We're just waiting for the results to be analyzed and then that will feed into the updated JORC mineral resource and reserve statement. Michael mentioned the lateral extension of Misery. So that's what we call the Southwest extension. That drilling is now 40% complete. So we'll keep doing that drilling and then that will also go away to get analyzed. And we're also doing a bulk sample in that Southwest extension, just tunneling directly into the kimberlite pipe and taking a bulk sample, so we get a handysize sample there. And we'll do a second bulk sample in Q2 to make sure we've got the most information possible on Misery. And that's really making sure we pin down the price per carat, and so we understand the quality. And then just a bit of as a reminder about Misery. As I said, this is the underground mine that keeps on giving. There's very little capital spend. Effectively, all you're going to spend money on is ongoing decline development, as you keep going deeper, and it's a very profitable operation. Misery on it own generates [ USD 0.25 billion ] a year in revenue. And we've got some big efficiencies planned for the underground mine this year. We plan to try and introduce some bigger trucks that the actual excavations can handle bigger trucks. And so, if we bring those bigger trucks in, we can probably get the underground output to increase by 10% to 15%. So that's our plan for 2025. If I just shift to Point Lake. So as I mentioned earlier on, this has been the transition as we -- as Brad said, teaspoon every carat out of Sable and now transitioning into Point Lake. So that's a very wintery picture of Point Lake. You can see what you're basically seeing there is the upper benches as they got formed, where those trucks are on the right-hand side, that's the waste area. And then down there on the left-hand side where that truck is sort of standing, that's as we intersect the kimberlite pipe. So the good news is we've now intersected the pipe. In fact, the first ore found its way towards the process plant over the weekend. And so, we'll now get a really good feel for how the Point Lake ore move through that process plant, and we'll also get a good feel for the diamond recovery. So you can see all the bullet points there. The other thing is we're going to take a bulk sample once we're getting into the meat of the ore body. That's that third bullet down at the top there. That will also give us a great feel for the -- for how well the model is performing. And we've really reduced the strip ratio to a sort of a just-in-time model, which has pulled quite a lot of cost out of '25. So we're only going to move the waste that's required to expose the ore during 2025, and then we'll move whatever is required in 2026 to expose the rest of the ore. Just as a reminder, this is the 10th kimberlite pipe that's being mined at Ekati out of the 125 million on the property. So there's still quite a long queue to go. There's 24 million tonnes in the indicated resource, and it does on the face of it contain a yellow diamond population. So we're quite excited to see what goes to the process plant, what sort of colors emerge, as we start processing the Point Lake ore. The big benefit, of course, is that Point Lake is very close to Misery. So the camp infrastructure is only a couple of kilometers away. So for the workforce that now gets housed over at Misery, it's very quick and easy to get to work day and night, as they get to work. And of course, it also gives us long-haul efficiency because both Misery and Sable are now on the same side of the property, and so all our long haul is in one direction. If we just reflect briefly, I'll just go back to '24 a little bit. So if we reflect, first of all, reflect on our guidance results, so you can see which ones we exceeded, achieved or missed. So the miss was on the carats recovered. I have to say it was only a miss by about 40,000 carats, but it's a miss. And a lot of that miss was because, as we mentioned earlier on, was that transition from Sable to Point Lake didn't quite go as smoothly as we would have liked. We just didn't get the ramp-up fast enough in Point Lake. So because we just weren't quite on track, we didn't recover all of the carats. So that's why we missed that carat result. And then some of that flowed into the revenue and EBITDA and also some of the pricing and the sales result that Brad mentioned, which is why we achieved the revenue but missed the EBITDA. If I go into '24, just looking at sort of some of the -- I guess, some of the big gains in '24. So the top one there, as I mentioned, is the transition from Sable to Point Lake. And I think in the case of Ekati, it's a much bigger deal than normal because these 2 open pits are 50 kilometers apart. So you've got the Sable pit 25 kilometers in one direction from the process plant and Point Lakes in 25 kilometers in the opposite direction. So it's 50 kilometers apart. So the transition why it was difficult was because you're really splitting your workforce between those 2 pipes. And so, it took a little bit longer than we thought to go from one to the other. But that's done now, and we're into the ore. The convertible notes was paid out of cash. In hindsight, given what Michael was talking about with the market, we might have revisited that decision. But at the time, it was the right decision given what we -- the cash we had on hand and our view of the market at the time. And then the 2 big ones were we're negotiating an environmental bond payment so that we could amortize it over the life of the mine. And as we've said before, if we extend the life of mine, we'll amortize it over a longer period. And then just to a reminder to everyone, in the contract, we basically have a safety net, where we don't need to pay that bond payment if we haven't got 70 -- sorry, USD 30 million on the balance sheet. So we work very closely with the surety providers to decide whether we're putting a payment forward or not. And then as Brad mentioned, that qualifying environmental trust is a big deal because it really gives us the benefit of the tax in 2025. And then you can see some of the other benefits there, lots of progress made on the mine extension opportunities. Brad, who looks after our sales has done a great job in getting multiple sales channels going. And as Brad mentioned, that 6% revenue decline year-on-year is probably really a result of the innovative sales channels we've now got in place. So that's probably some of the highlights for 2024. Let's shift the focus to '25, please, Brad. I'll just take a bit of a few seconds to catch up. So if you look at the head '25, so if I just break it down into sort of 3 areas, starting with the market, rough diamond supply is tightening up considerably. So on the supply side of the equation, global supply has now dipped below 105 million carats for the first time since 1995. And we still think that underpins the thesis for strong diamond prices being maintained or growing. And we still believe that the indications are that the industry has hit bottom. We are seeing some green shoots here and there. Michael mentioned some of the sales in the luxury brand. Richmond also -- Richmond also recorded a very, very good quarter. So we're seeing some good results coming in some areas. On the operational side, as we mentioned, big production hauling and cost efficiencies will now occur as we have both Misery and Point Lake co-located within a couple of kilometers of each other. So we'll have less travel time and all that long haul in one direction. So that will simplify the asset quite significantly, and that will reduce our costs. So we get a big step change in costs at the end of Q1 that we can look forward to. And then the big highlight in this quarter we'll be releasing our first official Burgundy plan at the end of Q1. And then just as a reminder, that will be followed by a second iteration or a second longer-term mine plan that we're hoping will push the life of the asset out into the mid- to late 2030s. And then on the financial side, we've got a pretty solid plan for 2025, built off the back of the fact that it's a much simpler operation to run. And then as Michael hinted at, we've got a big focus at the moment just to make sure our balance sheet is strong, including some nondilutive working capital opportunities, which I'll talk about next. So just hop on to the next slide there, Brad. So I know for some investors, they'd be worried about our liquidity, and I just wanted to reassure everyone that we're making sure that our cash position improves. So we've got quite a few initiatives, both focused on cash management and working capital management. That first one is not an insignificant change. We've successfully negotiated with the government of the Northwest territories to increase the number of royalty valuations from 10 a year to 20 a year, which means that we can now export from the Northwest Territories and from Canada 20 times a year. And in theory, that means we could have 20 sales if we chose to do that. We probably won't have 20, but we can certainly increase the number of sales, and that will smooth the revenue stream, and it will also shorten the diamond inventory pipeline even more. We've also got quite a few very credible diamond purchase options, and I'm talking about things like pre-purchasing diamonds from us. So for example, if we feel our cash is getting tight, some of our customers are prepared to actually buy diamonds in advance of our auction. And I'm talking about sort of $5 million, maybe $10 million sales, those kind of numbers. So we've got a few of those up our sleeve. Probably the most exciting thing on this page is a work that we're doing on a fuel consignment opportunity, which will reduce our sort of one-off cash flows and improve our working capital management. Effectively, the way that would work is Michael mentioned how we're buying all of our suppliers for the year ahead. If we successfully achieve this consignment opportunity, which we believe is a few days away from concluding, then effectively, we get paid back for the fuel we've already paid. So all of the money we've outlaid on fuel, we receive it back. And then as we consume fuel, we would pay for the fuel again. So it's a huge inflow of cash once that is in place. So fingers crossed on that opportunity. And then the bottom one there, on top of that, we're also working with both our existing lenders and new providers to see if we can get an additional working capital facility just to give us even more flexibility. So what you can see there is we're really doubling down. We're making sure we've got multiple liquidity options at our disposal. And all of those will be real options that we can draw on either simultaneously or individually. So that's probably the end of our presentation. I think I'll hand back to you, Stuart, for the Q&A.

Great. Thanks very much. Michael, I'm not sure if you want to make any closing remarks.

Yes, and thanks to the team. Look, the message we're trying to get across here is that everything is very tight. The market is tight. We do see green shoots appearing. But remembering this is that we're quite unique as opposed to a mine in Western Australia or in warmer climates, where we don't have to be making ice roads. We don't have to be bringing one big lot of product over 2 months of the year to keep us going all year. That's when the pressure comes on. And when the pressure comes on, you can be assured one thing that we're working very hard to make sure that working capital is there, so we get through this period, and we can take advantage of what's in the ground. And what is in the ground is what really attracted myself and Kim there to look at this opportunity, and that is one of the biggest diamond resources in the world that's untapped still, and this place has been operating for 20-plus years. And as Kim said, without even mentioning the Jay pipe, which we always talk about, which is doable when obviously, when the diamond price is there. People have more confidence in us. People are prepared to put more equity and people at the right times and people are prepared to put more debt in, but also the cash flow is totally different because the revenue we're generating makes a huge difference. Now put all that in perspective and just say, in this time, we're going through a lot of hardship, but we're making the cost structure totally different. So that sets us up to take advantage of this opportunity. I think the only thing I totally got wrong was the timing, timing on when we saw the floor. A bit like Champion [indiscernible]. [ It's the same as it was ] different to Champion because the day we got the phone call to say we have the asset, iron ore was $38 a tonne. That was that day, and it's never been down there since and it's continued to go up. Here, we bought the asset, we're forecasting USD 130, USD 140 a carat, and we're sitting at [ 90-something ] a carat. So it's different. But the -- our hearts in this, our money is in it, and we spend a lot of time thinking and working out of these things. So the working capital facility will make a big difference to us to carry us through. And I think the indicators you look for is when we announce those sorts of things, and hopefully, that's imminent. I hate using that word, but we will keep you posted on where we sit on this whole thing. And it's -- hopefully, we'll see that improvement in the diamond prices. So we'll pass over -- Kim, unless you want to add anything to that to Stuart to open the Q&A.

Yes. No, thanks, mate. Maybe just 2 more points, Michael. I think that's a great summary. I mean, probably just worth reminding people that even in a tough market, BDM still achieved in AUD 600 million in revenue and AUD 150 million in EBITDA in a multi-decade low diamond price environment. So despite the low market, we still achieved pretty good results. And probably just worth reminding people that for every 10% the price increase [ versus ] the diamond price increase, that translates to about a USD 50 million EBITDA improvement or AUD 80 million, which is about what our market cap is now. And there is probably not a single other listed ASX company, where a 10% price can basically give you an EBITDA about the same number as your market cap. So we're enormously leveraged on the upside from diamond price. So there's no doubt that as that price starts taking off, we're going to benefit enormously. And the other advantage is our debt structure. So we've got our debt paid down to a very low number, and that positions us very, very well from a flexibility point of view. So I just wanted to highlight those 2 points, Michael. Thank you. But over to you, Stuart.

Great. Thanks, Kim and Michael. I'll kick off the questions. And I guess it's more around the outlook and guidance for 2025. There's the first Burgundy mine plan and then the longer-term plan down the track or in the second half of the year. Can you perhaps talk a bit about the timing of when you expect that news flow to come out? And I guess just firstly, with the 2025 guidance, and I understand that you're probably limited with what you can say, but we've now seen the transition from Sable to Point Lake. You're not dealing with the bottom of pit, you're dealing with broader ore sources at the top of the pit sort of co-located with the Misery underground. So that has some improvements there. Perhaps just talk a bit about some of those factors again.

Yes. Thanks, Stuart. I mean, let's just link this all back to the guidance. We contemplated putting out the guidance in this call, but we decided not to. And the reason we decided not to was because we really want to just work through the first couple of benches on Point Lake to give us the confidence that the carats are there as per the model. So as soon as we get confidence in that -- in the performance of Point Lake, that will put us in a position to give out the guidance. And typically, with these kimberlite pipes, I've always created the analogy that the kimberlite pipe looks like a carat as like the carrot that you eat, not the carat that you put in your finger. And normally, the top of the kimberlite pipe is always a little bit unreliable. So you've always got to just work through the first 10 or so meters of the pipe and then you get into what I'll call the meat of the sandwich. So what we'll see in the next couple of weeks and months is a little bit of variability. But once we actually getting to our stride, that will firm up and then the carats will start flowing again. We're pretty confident. But just linking it back to guidance, Stuart, that's why we didn't put our guidance out. Once we've got a bit more confidence in Point Lake, we'll put that out. So probably towards the end of the quarter, we'll issue that.

And in terms of the first mine plan that you plan to put out, how far into the future do you expect that to be able to take you? You mentioned that in the second half, you hope to have a runway that looks out to the mid-2030s. But that first -- that initial plan, what's the views on that?

Yes. So the plan, and we've been consistent in saying this all along, Stuart, is that the initial plan will probably be a 5-year plan. It will just make sure that we've got a very robust 5-year period ahead of us. And then the second, the longer-term plan, we'll run it out as far as we can get it. It probably won't include Jay pipe, as Michael said, but it will have everything in it, including Fox and Sable underground, Misery, the low-grade stockpiles and Point Lake, of course. And that's enough to get us out to certainly until the mid-2030s. And then the third version will be the one that probably includes Jay pipe. So if you think of it like that, it will be a 5-year plan, kind of a 10-year plan and then the next one might be a 15- or 20-year plan.

Great. I'll cover some questions from the audience and Mike Milligan, my contemporary [indiscernible] has asked a couple, so I'll sort of wrap them up. In terms of surety payments, is the catch-up in 2025? How does that profile look?

Yes. So just to remind, Mike, there is no catch-up. Remember, the way it works is you pay -- every quarter, you need to pay a payment subject to that USD 30 million. But we've had very open discussions with our surety providers. If we're not in a position to pay it, we won't pay it. So they've got low expectations of payment in 2025. If prices improve, then we may be in a position to pay. But at this stage, there's very low expectation on paying those.

And another one, I guess, just talking around working capital initiatives, and you mentioned -- I think you mentioned prepayments on diamond sales could bring in another $5 million or $10 million just to assist with working capital a little bit. But the other big one that you mentioned, which you're pretty excited about is the fuel consignment option. Can you roughly, I guess, put some numbers around that, perhaps not even if not in dollar terms, but how much fuel would you burn each year at Ekati? What's the opportunity there?

Look, it's a huge opportunity, Stuart. We -- if you talk about the fuel consignment. So we pre-purchased all of our fuel, and then we've got to transport it from Edmonton all the way up to Yellowknife, which is 1,600 kilometers by rail and truck. It then goes into storage tanks in Yellowknife. And then when the winter road opens, we transport it from Yellowknife to the mine site. So in total, we spend -- Brad, just help me. I think we spent around about $80 million or $90 million getting fuel up to the mine. It's a huge cash outflow. So the way the working capital facility would work is we'd be prepaid for the fuel portion landed in Yellowknife, and so that could be circa $50 million to $60 million. So basically, we repaid that amount. And then as we consume the fuel at the mine site, we'll be paying that amount back each month. So basically, on a consumption basis, we'd be paying for the fuel as we use it. So the big benefit you get is that big cash outflow hump that Michael spoke about, this fuel consignment arrangement effectively would eliminate that. And the discussions we've had with the provider is something on a go-forward basis as well. So we're working hard to get it in place for this year. And then if we can get it in place this year, chances are it could be in place every year. So in future years, instead of spending the money upfront, we even have a scenario, where we could actually -- they would purchase the fuel for us. So that's the kind of thinking. A bit early to count our chickens before they actually hatch, but I am pretty confident we'll have that in place. Just the diamond presale, Stuart, so that effectively, it's 1 or 2 of our customers saying, look, we like some of your colors, let's say, your yellows like the ones on the screen. They specify the sort of diamonds they want and then they would basically prepurchase them and then they pay the auction price. So basically, we get the advantage of cash earlier and they get the advantage of certainty in terms of access to diamonds. So that's honestly speaking. But we're not talking -- these are not $10 million or $20 million deals. These are sort of $5 million deals that you would do.

Great. There's a handful of questions on -- I'll switch over to the diamond market now, and there's a handful of questions on synthetic diamonds and perhaps how that's impacting the market. Do you want to just talk a bit about how you see that at the moment and the future of those diamonds?

Yes. Look, I mean, it's probably the most common question we get asked is the role that lab-grown or artificial, whatever you want to call them, what role they're playing. And I'll give the same -- and I'll get Brad to chip in here as well. But when we look at the lab-grown problem, what we say is 10 years ago, lab-grown was a real fit because we weren't quite sure how it was going to play out. 10 years later, we now understand that there are 2 different products. So lab-grown diamonds have lost a lot of their value. And so, they're now selling largely as fashion jewelry. So remember, fashion jewelry is cheaper, and natural diamonds are selling more in the luxury segment. So there are 2 different retail segments. They do cannibalize some of the natural diamonds in the bridal segment. So in certain size categories, they do make inroads. So for example, if you were to go and buy yourself a 1 carat white diamond, you could either buy a natural one for $6,000 to $10,000 or you could buy a lab-grown one for $800. The problem with the $800 lab-grown diamond is you know it's only $800. And if that's what you want to give your bride, well, then good luck to you. So...

Yes. And Kim, adding to that, that's true. And what we're seeing now is there's a lot of people that when they were buying house, they want to get engaged and have mortgages at the same time. So it was obviously -- it was a stop gap method. And what we're seeing is a lot of replacement of that -- of those diamonds now. But also, if you look at De Beers, De Beers started up the synthetic diamond business. And it's interesting because with the breakup of De Beers now or potential breakup of De Beers, people are looking to acquire that the synthetic manufacturing and not really for the jewelry market, but more for the industrial market. And that's becoming more and more prevalent in lenses, high-grade lenses, that sort of thing. So it's a perfect fit for that business. So there -- the future of synthetic diamonds is more in the industrial uses, and there will be, obviously, I think the impact is probably about 10% on the jewelry market, 10% to 15%, and that's flattened out pretty well. Wouldn't you agree, Kim?

Yes. No, it's a great clarification. I think it's a very important point that you make about the industrial uses.

Just sticking with the market there then. Obviously, Russian supply has been a theme. And with sanctions coming on to that market, have you seen any impact of that in the market from your end?

Yes. Look, I mean, I've always said the problem with the Russian conflict is that the Russian diamonds are still getting out of Russia despite the G7 sanctions. And they're probably getting out to China and then going back into India, and they have been dumping a lot of their diamonds on the market. So there's no doubt in our minds that Russia has been funding their war by selling off their diamonds and probably cheaply as well. So it has had an effect on our bottom line. I think if we look at the causes of diamond price decline over the last 18 months, that is one factor. Brad would point out that another big factor in the price decline has been China and the fact that China is not consuming diamonds and the economy hasn't been strong. So China is a big factor. And then -- and Michael mentioned the other factor, which is the lack of disposable income, as people had to pay high interest rates on their mortgages, and so they didn't have money. But generally speaking, all of those effects are easing. And so, that will play into more disposable income and tighter supply and slowly the prices are going to creep up.

And we need to see the shift in inventory because ALROSA and supposedly ALROSA and De Beers were holding quite large inventory. So that was that announcement that Kim was talking about with -- when they just came out and said, okay, we're just selling and [ needs of the ] prices the way we go. So it was more like dumping. And it was -- that had a serious effect over the last few months.

Great. I might just cut back to a question on cash flows. And obviously, there was a fairly large capital item pre-strip for Point Lake in the quarter just gone. As we move into 2025, I mean, is that something that a lot of those costs now transition across into OpEx? I guess, just trying to get an idea for capital requirements for the year ahead.

Yes. I'll let Brad pick up on that one, Stuart. But obviously, your waste stripping is capitalized, but I'll let Brad answer that one.

And probably just to add to that question, I think Brad mentioned around the stripping ongoing. I'm just wondering how much of that pre-strip is at Point Lake is left?

I'd say the majority of the pre-strip was spent in '24, but probably be a little bit of an overhang into the first month of '25. But as we get into the ore, then yes, you'll start to expense that pre-stripped capitalized waste kind of over the production period, right? So over the next 4, 5 years, the life of the asset, right? So yes, the big heavy spend for Point Lake is kind of behind us. And we should start to now -- as we start to process the ore now start to generate some revenue from that investment. So obviously, a bit of a lag there and kind of normal with any transition from one pit to another. And as far as the rest of the capital program, yes, we don't have any major capital investments in '25 planned other than our regular kind of sustaining capital, which we've kind of looked at it and making sure that we're as efficient as possible and always spending the dollars from a capital perspective that we need to.

So I guess -- and I'm sorry to harp on this, but I think it's pretty important to the audience. But if you look at 2025, we're now in Point Lake, the majority of the pre-strip is behind you. It's much shallower ore. Misery is the underground mine that keeps on giving. So essentially you continue mining at depth no major capital requirements there. You're also blending in some of the high-value Fox stockpile again, not high capital, in fact, very low OpEx because you're basically [ kicking it off ] the ground and blending it in with the feed that should have a material impact on cash flows this year. Am I correct?

100%. You described it perfectly, Stuart. So that's the simplification we talk about, which flows through into lower costs and more cash. 100%.

And then I guess in terms of the guidance, you expect this quarter to provide not only the guidance for 2025, but that initial sort of 5-year outlook, say, and the second half of the year we'll have a longer-term outlook provided.

Yes. And I mean we're actually getting very excited about that longer-term outlook. I mean, in fact, I was having a discussion earlier today about some of the long-term projects we can put in place, including things like upgrading the Fox ore so that actually you're not having to haul as much ore, so you can upgrade it at the mine itself and then you haul back sort of a concentrate, so to speak. So that will be one of the features. One of the things we focus on is what -- which technology can we deploy to actually further lower our cost and upgrade some of these pipes. So I think people will be quite excited when they see some of the innovation we have in those plans.

Kim, it's worth mentioning the people that you're bringing in to do that work, too, because when we inherited this place, it didn't have the technical people that could evaluate this. I mean everyone's focus was on underwater mining rather than what was seeing right in front of them, which was the opportunity to be able to mine the resources that existed there and how to extend them. So that's been a quantum change for us and bringing the right people on to do the valuation work, I think, is important to mention, too. So I, as Chairman, have noticed that significant change in the breed of people that you bring in to do that work.

No, I think that's a fantastic point, Michael. We've -- I think our technical team is probably some of the best brains on the planet. They're very, very sharp people. And as you say, I mean, some of the things we're discovering about the things sitting right under our feet is extraordinary. I mean I think the Fox pipe will be the next big surprise for us. It's a wonderful pipe, very, very high value per carat, quite low grade, but very, very high value per carat. It's got lots of long-life potential. Outside of Jay pipe, Fox is the biggest pipe from a reserve point of view. I think I forget the exact number, but there's close to 20 million carats sitting in reserve at Fox alone. So Fox could easily be a 10- to 15-year mine if we can put that together. So -- and as you say, Michael, a lot of it is coming from the new technical thinking that's going into the operation.

And so, a final question for me, which also, I think, pulls in another question on the platform is obviously 2025 looks like it will be a fairly low capital year with the benefits we just spoke of. But moving into 2026, and I guess with the information we see in 2025 results from feasibility studies, et cetera, will that be more a year -- will 2026 be a year where we start investing again in these new sources of supply? Or is that sort of depend on how Misery goes and Point Lake goes? Just any sort of, I guess, longer-term color on that.

Yes, good question. So it's all about timing, Stuart. I don't think '26 will be a big capital year. I think we need to start spending money in '27 to basically mobilize Fox and some of the other pipes. So I mean, we do need to spend the capital. You can't keep postponing it. You've got to eventually spend the capital to bring the next pipes into the portfolio and into the pipeline. But probably '27 will be the year we start spending a bit more capital. We've had a very close look at the capital, Stuart, and we think we can be quite aggressive in dropping the capital spend. I had previously mentioned numbers of $200 million over the 5-year period. We think we can actually do a lot better than that. So we think we can squeeze it down to much lower numbers. And every year that Misery extends is another year we can push that capital out. So we'll take every opportunity we can to push it out as far as we can.

Great. Just considering time, I don't know, Michael, if you've got any final remarks you'd like to make.

Look, it's not easy. I thank all the people who stayed in there for their patience. We've had people depart, lose patience and leave. That's their choice. And people have said to me, why don't you start buying? Well, I'm not about to put money in to pay out people ex directors, ex Chairmans and -- sorry, CEOs and that, that have lost faith in this thing. I prefer to put my money into where it counts, and that's into the operations. And I'm always prepared to do that as we go forward. So if there's any doubters out there about my dedication to it, let me tell you that we're fully committed to this asset and making it work. I mean it's not easy, but that's only a reflection of what's happening in the market with the diamond prices. If you look across the market, we saw Lucara raise money [indiscernible] or something the other day or a couple of weeks ago, and they raised $3 million or $4 million. That's just to keep the lights on. It's -- we are certainly in that in a much stronger position than that. But this industry is going to take -- there's going to be a lot of casualties through the process. And we're working to make sure that we will survive this, and we can take advantage of the upside. So thank you all very much for your support those that have stayed and even be on the call, if you [ weren't ] a shareholder and I thank you very much for that, and we'll work our [indiscernible] to make sure that we try and get this thing right for you, which I hope that message comes through loud and clear from Kim and Brad and myself.

Great Michael, Kim and Brad. Thanks very much for your time. We will leave it there. Thanks, everyone for joining the call.

Okay. Thank you.