Cyprium Metals Limited (CYM) Earnings Call Transcript & Summary

Welcome, everybody, to today's virtual site visit of the Nifty Copper complex in the Paterson region of Western Australia. I'm joined today -- delighted to be joined today by the Executive Chairman of Cyprium Metals, that is Mr. Matthew Fifield, who's going to be taking you virtually to the Paterson region via presentation. Following this, the format will be that we will open it up to Q&A, and we've already received a lot of questions, so we're very thankful for everyone who -- all the investors and shareholders that have sent those through. At any time, you can ask a question using the Q&A feature down the bottom of the screen. So people are still joining the webinar. But I might hand over to you, Matt, for opening remarks.

Yes. Fantastic, and thank you, Dannika, and I wanted to compliment you on your screen saver. So look, we're very excited about sharing this with you. So we have recently taken the VRIFY tool, which enables you to visualize not only the site, but also the ore body. And it's a great tool, I think, to share with you the brownfield attributes and some of the back history and then the emerging future that we're going to see here at Nifty. With that, let me just take you through this. The presentation side of it, give or take, 25 minutes, and then we'll have Q&A at the end. So as you know, Nifty is our principal asset, the Nifty Copper complex, and that's where we're going to spend all of our time today. Cyprium also has a secondary asset in the Paterson region close to Nifty and Telfer, the Maroochydore deposit. We may spend a little bit of time on that, but hold your questions on that. Nifty is about 4.5 to 5 hours by road from Port Hedland. That's where we will be exporting copper cathode and copper concentrate and the logistics center for our supply chain. And as we zoom in and get oriented, I just wanted to step back and say, for those that are less familiar with Cyprium, this is a brownfield copper asset, again, in Western Australia, and there's 3 big assets. One, is there's about 91,000 tonnes of copper in an aboveground stockpile sitting next to an SX-EW. And that's really the Phase 1 of redevelopment of the Nifty Copper complex, and we're just on the edge of it. Two, there's a lot of remaining ore inside the ore body that we'll explore in depth today. Our reserve from our PFS shows 83 million tonnes at just over 0.9% copper or about 750,000 tonnes contained. Three is there -- this is being maintained as an active mine site, and there's a whole suite of permits and approvals that -- some of which we had an announcement out today have recently been updated in time frame and adjusted for what we're about to embark on at the -- in the Phase 1 expansion. So look, let's dive in to the site overview here, and I'll give you a little bit of the history. Here we are, we're looking basically northwest. And what you can see is there's an open pit. There is -- over here where my cursor is. There's the existing heap leach pads. The SX-EW is to the south and then there's offices, power blocks and other things. There's an airport, a camp and then the concentrator from the underground is here on the west side and then the tailings and waste rock storage to the north of the pit. Nifty has been a prolific past producer. It's about halfway through its life, and it has another 20 years to go, and we're excited to show you how it's going to unfold. What you see here is the Nifty Orebody, and this is a grade shale that is 2% and above. It's a very high-grade copper orebody that stuck up out of the ground, and that's how it was discovered by WMC and initially exploited. If you look at this orebody and you can kind of spin in this VRIFY, you can see that's in a syncline shape, and then there's also quite a lot of grade that sits outside that high-grade area, and we'll be talking about that. Historically, this was started to access the portion of the ore body that is oxidized, can be processed using heap leach technology and recovered through a solvent extraction electrowinning plant. And that's what happened at the initial phase of its life. So it produced about 220,000 tonnes of copper cathode. Its peak year production was 25,000 tonnes in 2004. And the ore that it targeted with this shallow open pit was this high-grade copper that was oxides that were coming out here. And then also, you can see with this pink area, a supergene blanket that sort of squeezed out and was accessible very easily from the surface. One important thing is that the open pit actually stopped because the chemistry changed, because the metallurgy changed. It went from being oxides to sulfides. It didn't stop because they ran out of ore. It stopped because you couldn't process it using SX-EW technology efficiently. And so what you see is there was a very high-grade underground. Now these are spectacular-looking grades, I'll admit. But in that -- there were parts of the underground that reached up to 17%. And you see on the right-hand side here that it's a dolomitic replacement and sort of sediment hosted. And so you have these very clear areas of copper and very clear areas of non-copper. And so grade and non-grade is very tangible. And the drill holes showed spectacular high-grade underground. So the concept was, let's go ahead and access this high-grade underground and build an underground mine. And you see the pink is kind of that plus 4% and then the red is sort of that 2% type of grade. And so that's exactly what happened. An underground mine was built. This is the -- what the underground mine looks like from a shape and form and extracted about 500,000 tonnes of copper and concentrate from 2008 to 2019 when it closed down. And to process the ore that was coming up out of the underground, there was a concentrator that was built on site. This is what it looked like last month. So this is a noncorrosive environment, and we're very lucky for that. That means that all of the things that are on site are in general, structurally sound. So since the mill shut down, it's been continually electrified. There are a couple of things about this mill that are out of code, but -- and needs some changing, but the high-voltage electrics and quite a bit of it has been maintained. And what you see, as I pan to the right, is the -- this is the open pit here in the distance and the ore came up out of the underground to a primary -- the primary crusher is actually underground. It came up to the ROM pad, was secondary crushed and then put through the plant through the mills and then through the float section. And interestingly, because the grade was so high, the back end of the plant, the thickener, the float cells, filter presses are all designed to be able to process and produce that kind of 50,000 tonnes a year of copper in concentrate. It's just that the front end of the plant, the crushing and comminution was designed to handle very high-grade ore. And so as we move into a lower grade future, the PFS looked at should we add more crushing and comminution and be able to max out the back end of the plant and produce those kind of 40,000, 50,000 tonne years. So what happened to the underground? The underground basically, there's 2 things that happened. First, as you can see, that high-grade area, all of the flatlining areas of that high-grade area and the geometry that makes for very profitable underground mining was effectively mined out. Two, what happened was without new areas to go to or without the other areas being more expensive to access from the underground, the macros hurt as well. So from 2015 to 2019, I'm sure many of you will remember, copper price fell from USD 10,000 to USD 6,000 a tonne and the Aussie dollar fell from above parity to 0.74% FX. So really, there was a revenue issue where the cost to mine this underground just became too prohibitive. And so in 2019, the mine went on care and maintenance, and it was sold to Cyprium and later abandoned. So let's go back and go through the grade shells because that's actually what's interesting here is there's quite a future. What you see here is there's about 370,000 meters of drilling in Nifty, and there's just a lot of information. You can see that some of the drilling happens from underground as you get better definition and then a little bit of it happens from surface as well. And when you knock out that high grade, so I've deliberately taken that pink out, what you see is effectively that what we talked about earlier, the open pit focused on extracting the oxides and then below it remains quite a bit of copper at slightly lower grades than the underground and in geometries that weren't correct. So I'm going to walk you through now from high grade to low grade, and you'll see how you build up what's left in the pit. So you've got -- this is your 2% grade shell, plus 2%. And there's actually a lot of 1%. This was not profitable underground business, but there's a lot of 1% left. And what you see is that the 1% in particular, is recoverable by surface mining and would have been very, very difficult to be economic from an underground basis. And then as you continue to ramp up, this is our PFS pit and this is 0.5% and above. And there's a lot of material in the pit. And our cutoff -- economic cutoff here is at 0.25% copper. We do recover the lower grade areas. There's actually even more mineralization as you start looking outside of that 0.25% cutoff and in the PFS, we recover it, put it on the ground. Once the mining costs are done and it's recovered, you run it as a low-grade stockpile through the plant. So that's the direction of the open pit is basically to go back and bulk mine. There's been quite a few -- throughout history, there have been quite a few successful remining of undergrounds where you're going after all the material that is left that very same story. And I think that the repositioning of Nifty as a bulk mine is one of the great opportunities today on the ASX. So what has also left though, and this is interesting, is we have this above-ground resource. So originally, this open pit was -- produced about 17 million tonnes at 1.8% when it was -- there were some very high-grade areas that were partially recovered, and there was a sense of urgency where they're dumping -- when you go back through history, where they were starting to dump agglomerated material on top of partially recovered. And so when you look at the metallurgical accounting, what you can see is that of the 17.2 million tonnes, there's a residual grade in the range of 0.5%, 0.53% copper. So then what we've been doing as we've been looking at the cathode restart is saying, okay, well, if we know that from metallurgical accounting, what can we actually prove? What can we prove on a JORC basis? And so we went back and looked at and correlated all the different drill holes and all the different metallurgy, and there's been 2008, '09, '14, '15, '21, '22 drill programs where the drilling effectively went down, but not all the way to the bottom of the pit. And what you can see -- to the bottom of the pad because that would cause a bit of an environmental mess. And so what you see is that there's a well-defined area that you can declare a resource and indeed a reserve on. And then there are these green areas that are inferred. And then at the bottom, there's this kind of bottom pad material, which under JORC code, you count as unclassified. So in our PFS, what we -- and in most of our presentation materials, we're really referring to the JORC classifiable materials, 10 million tonnes roughly of reserve, 12 million tonnes of resource, while we know that there's 17 million tonnes there. So optically, there's a 4- to 5-year project life and then ability to extend beyond that. So what does 17 million tonnes look like? Welcome to Nifty. Here we are on top of the pads. And what you can see sort of here's the open pit, often the distance, the sulfide concentrator and all the plant that we saw earlier. We've sort of cleaned up and sculpted and getting ready for irrigation. And then you have a series of ponds and trenches that lead down to that SX-EW plant. So if we keep going for people that aren't familiar with how a heap leach works, you basically irrigate these heaps with a weak sulfuric acid that selects out the copper into solution. And then you have a series of ponds and pumps that basically are continually trying to upgrade the grade until it gets to a place where it's recoverable in the SX-EW plant. Quick shot on what it looks like from a fly over down at that end. And then this is actually what it looks like today. So the material comes in through the ponds and it goes through effectively a hydrometallurgical plant where you are continually taking out material you don't want, e.g. non-copper and then upgrading the purity of the solution until you get to a purity that you do want, which is well above 99%. And so that's the mixer settler and the tank farms and there's a bunch of different reagents that cause that to happen. This is what the plant looked like just a couple of weeks ago. And what you can see is, again, this is just -- it's a fabulous site. It's a working mine. One of the benefits that we have at Cyprium also is there's been a long run-up around this. The -- and so there's quite a lot of project knowledge and quite a lot of preparation. So here, this is the cell house and the classic picture that you see of copper cathode with people pulling out those beautiful sheets of copper. That all happens here. So that high-grade solution goes into these tanks where a low-voltage current is passed through them, and that causes the copper to condense and precipitate onto the sheets and then you knock the sheets off. And what you can see here is that we've pulled the anodes. We have tested all the tanks and are sort of getting ready for the next step, which is, again, on to FID and project mobilization. In terms of ancillary gear, we have -- this is the power block. We hold down here. This is the TM2500 that we hold for sale. It's a 20-year-old in great shape, powered the underground, but not what we would put behind the next 20 years of the open pit. And then in this area over here, we have 2 2-megawatt generators and a number of diesel gensets and other generators that can power the camp, power the site, power the SX-EW. And so that's -- with the generators that we're selling, we have more than adequate generators left on site. And when -- let me see if I can kind of look around here? Maybe I can't. I can't. So anyways, as you look around, you'll see that often to the right, there's core sheds and offices and buildings, natural gas, diesel tanks, everything you would sort of expect. Camp, we have a camp that has been maintained with people staying there, and I bet that there's quite a few people on this call today that have stayed at Hotel Nifty. So thanks for your visits. And right now, this camp could easily hold 150 people. We think that there'll be far, far less than that operating Nifty. In total, our complement is hovering somewhere between 60 and 70 people on a total hire basis. And when this SX-EW gets up and running, what you're actually doing is you're turning over the material on site and running it through the plant. So it's a handful of people operating the site and the plant. And so we have all the adequate places to host them. And then, again, there's an air strip for when we start to move on the concentrate project, you can start to bring people in, in 100-person jets and it's very efficient. So I think with that, hopefully, you got a sense of why there is additional resource left in the pit, why it makes sense to come back in a bulk mine and actually access it and mine it. And then the fact that we -- the site is in fabulous shape, and we're really lucky to have it, and it presents a compelling nearness in time for what we're doing. So very excited about it. Thanks for coming on that visit. Dannika, do you have a couple of questions?

Absolutely do. Thank you, Matt. That was a fascinating site visit. I can see everybody's reactions coming through. I think it was very, very valuable to walk all interested stakeholders through what you're doing. And we have received a tremendous number of questions actually. I've tried to summarize them into key themes. So to start with, could you walk us through when you expect first copper production to commence at Nifty? And what major milestones are remaining to achieve this?

Sure. So first -- let me just repeat that back, first copper production. So first copper production comes when the heaps have been irrigated, the grade has built up and it is being recovered in the plant. And that is -- when we look at the engineering and the feasibility work that we've done, it's roughly 7 months of construction and a month of commissioning, so 8 months from FID to copper production. We're targeting FID in this next quarter. And so that means on that kind of a time line, somewhere around midyear next year, we expect to be producing copper. There's quite a few intermediate steps that go through that. We have to finish the feasibility study, have it go through our process, at the Board, execute our contracts with McMahon and of course, have the funding aligned to do that. But it's -- one of the things that is interesting is very quick from investment and start through to copper production. The other thing that is interesting is because it's a historic site, there's a lot of copper floating in solution. I think most of the experienced Cyprium investors will have seen that high-grade blue that comes out when it rains, we see that there's copper and that early copper flush means that we'll have very quick copper production from when the plant is able to start plating it.

Okay. And you mentioned one of the milestones is funding. What are your plans, your funding plans for the cathode restart?

Yes. Look, it's where we're spending a lot of our time at the moment. We're well advanced in a number of funding discussions and considering a couple of different proposals. If you think about the company where it's been, our cost of equity has been very high. In particular, we've been through a low period in the first half of this year as we had a selling shareholder put some pressure on our register at the moment for a variety of reasons, I think things are looking a little bit better. But that means that we've really been considering, and we've been very public about this nondilutive options. And those nondilutive options, what that means is capital partners that can help us bring Nifty Phase 1 to light. And in general, that means either sharing the cash flow or selling assets and taking dilution in a different way than taking it at the head stock level. So those conversations are very mature, and you should expect more news on that soon.

Okay. Fantastic. Thank you, Matt. And moving to the open pit and the concentrate project. Could you provide an update, including the progress towards the bankable feasibility study?

Yes. Look, the major reason to be here isn't the Phase 1 restart. As we've said all along, it is the bulk mining scenario. That is a $1.1 billion NPV, pretax NPV pit at $4.25 copper. Those numbers start to explode when you look at today's -- sorry, when you look at today's foreign exchange rates and the forward curve. So it's a very interesting open pit project. So just -- I wanted to probably say a couple of things on that. First is that our PFS was originally designed to -- the right size for the mine is about 4.5 million tonnes a year. And so the PFS contemplated expanding the plant and then opening up for business. And in fact -- and so the plant expansion from what you saw today, that's about a 3 million tonne a year plant to get it to 4.5 million tonnes costs about $100 million on a PFS basis. The second is that the other largest cost item is the mining. And so to open up at a 4.5 million tonne a year rate means you have to create a lot of room. We had about $175 million of pre-strip in that $410 million PFS number. So those are the 2 big cost items, the plant expansion and the amount of pre-strip. And we've been spending time with McMahon, who's currently with us on site, looking at and iterating our mine design, our mine start-up sequence and the plant expansion to figure out if there's a -- I think generally, you should expect that we'll be looking at a faster start-up because -- and a lower capital start-up, and we'll have numbers for you in September.

Okay. And I guess just speaking to the value of the existing infrastructure, that -- one of the investors, Craig has sent through, can you estimate, broadly speaking, what you would expect that to be worth?

Craig, thanks for the question. Actually, the most compelling part of it is time. So as a rule of thumb, if you were going to build an SX-EW from scratch on a greenfield, it's, call it, USD 10,000 per tonne of capacity. There's a 25,000 tonne SX-EW, which means it's about USD 250 million just on the SX-EW itself, so call it, $400 million, $500 million, put it in an airport, camp and a concentrator and a pre-strip pit, and it's more and more and more. So it's hard to put a number on that. I've seen a previous estimate of $400 million, you could probably escalate that significantly to today's value. But I think that the biggest advantage of that infrastructure probably isn't just avoided cost, it's time. As we all know, today, it's an interesting backdrop. And therefore, rather than making an investment and waiting 3, 4 years and figuring out what the copper market is then, we're actually just in a much compressed sequence as a brownfield and able to move forward. So I'd actually say the great advantage on this is years, not dollars.

Absolutely. And there's been a few questions on Maroochydore. I know you walked us through Nifty. But what's the potential for processing Maroochydore feed through Nifty using the infrastructure you just outlined? And how viable is the integration of the 2 assets?

Yes. I mean, look, Maroochydore is an inferred resource. It's about 80 kilometers away by current exploration road. So it's a ways away. And I think that probably the most honest answer is that it's too early to tell. We -- when we look at it, one of the -- it's a huge -- it's definitely big enough to host its own processing plant. It's about 360 million tonnes at 0.43% with a high-grade area of 100 million tonnes at, call it, 0.67% copper plus cobalt. So 100 million tonnes is a 5 million tonne -- 20-year, 5 million tonne a year mine. 360 million tonnes is a very big mine. But the real question is, can you use it in a hub and spoke. So some of that is going to depend a little bit on our ability to grade stream either through finding higher-grade areas that, therefore, the value that you're moving is higher or through the application of technology like ore sorting.

Okay. And I'm just conscious of time. We've got 2 minutes left to go. If we haven't got to your question, we will certainly get to it after the webinar personally. But Matt, could you maybe walk us through your view on the current copper price environment and what it means for Cyprium, broadly speaking?

The current price environment, again, I think it's very constructive. We're in a world that has a lot of change in it and the copper prices remain steady. It's hard to bring on greenfields and form $1 billion of capital, particularly for something like Nifty, it's easier to form that kind of construction capital around the concentrate project. So the prices remain robust. It's a very economic project. What we actually see because of that nearness in time, and we've talked about this publicly in some of our remarks, is that what looks like $35 million a year of cash flow on a PFS basis using those macros, $4.25 and $0.71 copper basically doubles. So everything gets much more accretive. It's also spicy because it's -- the supportive copper environment seems to be driving -- seems to be pervasive and driving a lot of M&A.

And I guess on that point, do you think that Supreme might be a takeover target? Or if you could -- you probably can't talk to that, but what is your view -- personal view on that?

Yes. I think -- look, it wouldn't surprise me if we're on a couple of people's lists. Everything we just showed you and talked about a lot of brownfield, a lot of permitted copper sitting next to 2 permitted plants. We're not really too excited about that at the moment. The thing that's really for us is focusing on executing a really good project on the Phase 1 restart, executing a really good project on the Phase 2 concentrator. We have fantastic partners in Glencore. We have fantastic partners in McMahon. We have a huge advantage. And so in the scheme of difficulty, this is lower down on the overall difficulty. So it's actually just -- this is an execution story, right, not an M&A story. This is an execution story. And so what I would say one of the things that is interesting is that there's fewer and fewer places for investors to take a view on copper. We recently started getting reverse inquiry from investors. And so I wanted to say to them and to those that took your time today to learn a little bit more about Cyprium and go on this tour with us. Thanks for the interest. We appreciate it.

Absolutely. Thank you to everybody who joined today. And Matt, we are out of time. But to all who have submitted a question through the Q&A, we will get back to you. And a replay of this webinar will be available on the company's website in coming days. So thank you, Matt, and thank you to everyone who joined, and we will end the webinar there.

Fantastic. Thanks again.