Develop Global Limited ($DVP)

Thank you for standing by, and welcome to the Develop March 2026 Quarterly Report Conference Call. [Operator Instructions] I would now like to hand the conference over to Bill Beament, Managing Director.

Yes. Thanks, Travis, and welcome to our second quarterly conference call on activities of Develop. Hopefully, I don't drop out. I'm on site at Bellevue. So comms are good, and hopefully, they're paying their IT bill. So look, we're deep into the quarter of this business. We're coming out nearly to our 4-year anniversary of mining services establishment and when we got the keys at Woodlawn. So we're only 4 to 6 weeks of finishing that first quarter. So it's been an extremely busy sort of quarter that we're going to go through today. As you can see, there's a lot of information and a lot of activity. But I'll start with declaring commercial production at our first mine that we've now completed building. Woodlawn has reached a steady state. We achieved that in the March quarter. And that's what we articulated and we set that target last year for our shareholders and the market. So it's extremely pleased and proud of the Develop team in delivering Woodlawn to steady state. And that was culminated off with record performance in the month of March. We mined over 80,000 tonnes for the month. We processed 78,000 tonnes for the month. So we've really successfully even stress test above the nameplate of this operation in the mining and a processing run rate. Our copper equivalent production was 17,000 tonnes per annum. And that will increase further, and I'll go through that in a minute. We had extremely strong quarter-on-quarter ramp-up from our December quarter. Our ore tonnes were mined were up 46%. Our mine grade was up 41%. Our processing tonnes were up 25%. Our concentrate production was up 50%. Our value of metal and concentrate was up 66% to 68%. Our copper equivalent production was up 88%. We grew our surface ore stockpiles. They're now sitting at 14,000 tonnes at the end of -- sorry, 15,000 tonnes. We even had a lot of underground broken stocks. So the mine is really hitting its stride. One of the other key things, and I'll get Ben to talk about this later on. Our mine and port concentrate stockpiles sit around nearly 12,000 tonnes and $33 million, and the vast majority of that was shipped in April and money in the bank. Our mined ore grades, they're definitely progressing very quickly towards our life of mine reserve grades. And I'll point people to Figure 2 is really important, which is the Kate Lens, and I'll let people have a look at that in due course. But we are on the edges of Kate and now we're coming back into the main part of the ore body. So we expect those grades to improve quite remarkably in this quarter and beyond. And obviously, as grade goes up through the mill, that has a huge impact on our recoveries as well, and our recoveries will continue to improve. But we've made huge progress on what we're producing. All our concentrate was in spec. So there's a lot more room for improvement, both on mine grade. Obviously, recoveries will improve as we get into more of that Kate Lens. And obviously, we end up producing a lot more metal. So we're very, very excited at how month of March went and we've seen great progress in the month of April. And in fact, our recoveries and grades are already up quite substantially from the March quarter. We've been very busy on the drilling as well. I can't underestimate. We started a program last year called DM15. We want to drill and mine and we're going to take this mine plan from 10 to 15 years. The first rig went in. And it was basically just grade control drilling, and that's hit another lens, N Lens and M Lens. And then we drilled some sterilization holes as well right up the top of the mine, and that hit the best ever intercept the mines ever received, and that's in the quarterly report. So have a look at that. And we will follow that up. And I think we've got 7 other holes we've seen into a bonanza zone at the top of the mine that we thought was barren. So very fertile system. We have the second rig coming in this quarter, and that rig is the 1 that goes into purpose-built drill drive that is near completion at the moment. And that's the 1 that's really designed there over the next 18 months to take it from a 10- to 15-year mine plan. So we haven't seen value creation yet in Develop really with the drill bit, but you're starting to get it now. The other thing, obviously, Ben will talk about is just there's a big fall in treatment costs and refining across the base metals. We're seeing negatives everywhere on treatments. So we're getting paid by smelters to process our own materials. So it's a really extraordinary position to be in. And we think that's going to continue. On to our second project, and this is probably, again, we've now completed building our first mine, but I think people really need to be conscious of the next 2 mines and how quick they are going to come online and how quick we are progressing it. And there's a lot of detail in this quarterly report. So our Sulfur Springs project, that is now a copper, silver, zinc project, basically half the revenue is copper and silver and the other half is zinc. We've started the -- well, the underground development is rapidly progressing with 15% ahead of schedule. We did nearly 900 meters of development during the quarter. Our engineering and construction preparations are advancing extremely quick. GR Engineering are finalizing the final engineering drawings and flow sheets now. The surface infrastructure has been cleared, ROM pads built, and our long lead items, so things like ball mills and MCCs and all the long lead items for the processing plant have been ordered, deposits have been paid. Of importance, to the General Manager, he commenced 3 weeks ago, and Ben will take you through the financing outtake later on in this call. But that is rapidly progressing, and we're not stopping there, and we're still on track for final investment decision this quarter. Our third mine, so we're building 3 mines in 3 years. Our third mine, and I think there's nothing in our share price on this is our Pioneer Dome Lithium Project. This is rapidly progressing towards a mine. As we know, the lithium price has resurged. And I think it looks very sustainable moving forward, and this is even pre-Iran let alone, post-Iran with everyone, including myself now wants electric car and solar panels in our roof and a big battery. So it's only going to escalate and get off the fossil fuels in the future. So we are going to capitalize on that with 20 -- as of today, we're probably 25% through our grade control drilling. So we are infill drilling the open pit, the DSO open pit as we speak. Results have been fantastic to date, and you'll hear more on this in probably 4 or 5 weeks when we give a much fuller presentation on Pioneer Dome. But the resource model integrity has been picture-perfect from the geology team. Like I say, we've done 8,000-plus meters of grade control drilling. The ore body is probably thicker in parts than we expected. We did hit a third lens that we didn't know was there in our drilling. And most importantly, it's very visual when you're drilling lithium and we're seeing no impurities like -- this is a really clean ore body, and we're getting intersections up to 40 meters thick. So it's not like some of these narrow vein stuff you're seeing in industry. We've got a big, big ore body that's got geometry and it means we don't get dilution in the ore body. So a very clean product. Samples have already been to China. We've got recoveries back from offtakers and debt funders. So it was shaping up extremely well. We've done budget pricing guys on open pit crushing, port and ship loading. So we know the economics around that. We are going to full form tenders. The documents will be finished this week. We've got NDAs signed by open pit contractors, and we'll put our documents next week. I've already bought a camp, that's part of our CapEx that we bought. I've got a 40-person camp that I just purchased, sitting in storage, ready to go for the mining contractor there. And we just appointed a Manager of Mining. So you can probably see that we are quickly progressing this to a mine. It's fully permitted, shovel ready. Obviously, we've got another couple of months of grade control drilling. We're doing the final drawings and final body engineering from a mining engineering perspective at the moment. I'd love to be digging -- if I could dig this thing up today or yesterday, I'll be doing it. So the only thing that slows us up here is basically the mobilization of open pit contractor. So we are rapidly progressing that. And I think with what people can see the spodumene price and when you start seeing the [ CIF ] price of that, and it's pretty extraordinary margin that we can make out of that. So very excited about kicking that off. And last but not least, our mining services. I couldn't say it'd be any more buoyant than what it is in that arena at the moment. Obviously, that's getting driven by record high gold prices and everyone wanting to create an underground in that space, plus a lot of other products are going underground as we speak. So Ben can talk to the revenue numbers. But obviously, for us, the key thing is the renewal of the Bellevue contracts. So all that's been submitted and qualifications have been done. And really, there should be a decision in the June quarter on that. We're very keen to stay here. We've built the new home. We'd love to live in it for a few more years. So we're very keen to keep that. And I think it's -- we've got a great workforce here, and Bellevue had a great quarter last quarter, which was recognized in 19% share price growth in the day they announced that compared to market. So it was an extraordinary thing. It's a really good project, and they're making really, really, really good inroads here and great cash flow. So we want to help them continue. We are mobilizing our second contract. We'll start the first cut and the box cut at the end of this month in New Zealand with OceanaGold. So that's been a really good mobilization. All the equipments there, people were being no dramas. A lot of people wanted to relocate back home to New Zealand, and we've been able to supplement that talent with some other people. So that's been really easy to staff up that and Oceana have been an amazing client to deal with. And as I said in the quarterly, we're currently tendering on negotiating this quarter on about $2.5 billion worth of pipeline of tenders, which obviously includes Bellevue, very favorable time. So we're getting to the point end on 1 or 2 of them now. And so we're very excited about the landscape there. And basically, after this quarter, I think our mining services tender book can get closed and jobs done, and we've got the amount of projects we want in the clients and the locations that we desire to work in. So with that, I'll hand over to Ben to go through the financials.

Thank you, Bill. So the revenue for the quarter -- or the external revenue for the quarter was $69.3 million, $50 million of that was our Mining Services division and the remainder being our concentrate sales from the Woodlawn site. The cash balance at the end of March was $30 million. So there has been a larger than previous quarters draw on the cash this year. But it's a story in 2 parts. One is sort of the growth CapEx we have with a number of the projects and then timing issues in relation to the concentrate sales. So with that growth CapEx, we're obviously building our second mine at Sulphur Springs. So we're continuing to do the decline and the site clearing work at that site. So that's around $12 million. We raised money last year for expansion of the Woodlawn site. So getting that second jumbo into the decline. There's been $12 million spent at Woodlawn in that growth CapEx. As Bill mentioned, we're now buying and setting up the camp for the Pioneer Dome. So that spend has occurred this month and that camp in storage ready to go. And then the Waihi project as well, so $9 million has been spent on the new equipment for that Waihi project and getting that ready to go. So that equipment is in country now and they should be starting that work relatively soon. And then the other major element of that, the timing issue is to do with the concentrate sales. So we had a large copper shipment and a large zinc shipment due to go at the end of April -- at the end of March, that just fell into April with sort of ship availabilities delayed due to some of the Middle East issues. So -- that -- those 2 shipments have left and the money has been received. So to kind of add that back, we're actually positive from a cash flow operations point of view. So really, it's a growing CapEx and just some timing issues with the concentrate sales. So I guess just moving on to the other main part of the finance section is the funding process of both Pioneer Dome and Sulphur Springs. That process, which we started back in December is going extremely well. We've had a huge number of parties interested in the process, particularly in the Pioneer Dome, we've got up to 11 proposals on the Pioneer Dome debt piece and offtake piece as well. And we're certainly looking to have that still on target to have that all wrapped up in the June quarter and go to the Board with a fully funded decision for both Sulphur Springs and Pioneer Dome to allow feed to happen in the June quarter. The other thing that's just worth noting as well, and we've certainly seen it with this copper shipment and the zinc shipment that left in early April is that impacted the TC/RCs that you're seeing in the base metal space. It's a material change. So we moved off fixed-price TC/RCs for calendar year '25 on to a spot index in calendar year '26, and going forward for the remaining offtake at Woodlawn. So to give you an idea, we're talking -- we're looking at close to a negative 100 realized TC/RCs on the copper, and mid-teens on the zinc TC/RC. Now if you go back 18 months, 2 years ago, zinc TC/RCs were close to $250. So it is a significant reduction. It's a great time for miners to be bringing new products to market. And we firmly believe having done a lot of work and looked at the smelting industry, we firmly believe these TC/RC is going to be lower for longer. The smelting industry is making very good money through byproduct credits and the sulfuric acid price. And they're able to -- those elements will keep the TC/RCs lower for longer. So we certainly think it's a great time to be bringing our Woodlawn concentrate for the market, and it's an even better time to be negotiating an offtake for a new Sulfur Springs project. So that's all on the corporate. I'll pass back to Bill for closing remarks.

Questions, yes. Thanks, Ben. I'll hand over to Travis to open up for questions.

[Operator Instructions] The first question today comes from Joseph House from Bell Potter Securities.

Congrats on the quarterly update and achieving steady-state production at Woodlawn. Just a few questions from me. So firstly, it's good to see that the processing rates in March were roughly 10% above nameplate capacity. What's the sustainability of those processing rates? Do you think this can be maintained going forward? And I can also see that you're making some investments in the flotation circuit at Woodlawn. Just wondering if that's going to potentially allow you to creep up production over time?

Yes. Thanks, Joseph. Yes, look, it's -- obviously, it was -- in March, we knocked it out of the park, and it was a good ability to stress test the mill. I think we've said before, we do know the mill can get up to probably closer to that 1 million tonne per annum without any extra CapEx. Obviously, the key thing is the underground to be able to feed it. So I'll stick with my 850,000 tonnes per annum run rate because we've still got to, I guess, walk before we run. But even the mine, we -- as we open up the stopes and get more flexibility in the mine plan, it's pretty easy to maintain that 850,000 tonnes per annum, and we're demonstrating that in the exit run rate in March. So very confident in how that's looking. And I think please go and have a look at the diagrams and -- in particular diagram #1, figure #1 in the quarterly. We've got so much spatial separation happening in this mine because we've been able to push the capital so deep, so quick. We're down now because obviously, it's a quarterly, we're now at the end of March -- sorry, end of April, but we're down now 600 vertical meters below surface, and we're literally mining G Lens 100 meters below surface, Kate Lens at 250 meter, and I&D, we're starting to start to stope -- literally, we just dropped the stope from 48 hours ago in there as we speak. So we're getting that real separation giving us -- and that's going to continue to give us more flexibility in the next 3 or 4 months as we keep bringing more and more of these I & D and N and M Lens online.

Understood. And just trying to get a sense of the OpEx at Woodlawn. So would you say that the cost profile is similar to, say, the 2024 restart feasibility study adjusted for inflation, obviously. And just wondering as well if there's any operational efficiencies that you've realized to date that might maybe be a benefit compared to those previous forecasts?

Yes. I think, look, Joseph, obviously, we're just declared commercial production. So I'd expect from next quarter onwards we'll give really good visibility on the cost structure. That will be an ongoing thing in our quarterlies, obviously. But probably to know is -- obviously, we're completely volume-driven like any mine, the more physicals we can get out from the underground to the mill, the lower the cost. But we're actually probably tracking, and Ben can confirm this, but our cost structure is actually tracking a bit lower than what we actually have budgeted and probably what even is in that feasibility. Now you can adjust a little bit for inflation, but we're actually tracking lower than what we expected. So -- and that's probably due to the productivities of the underground crew and also the dirt gone through the mills being softer. We're not using as much reagents. So things like that, obviously not as much power draw. We did get, I think, a change in our power contract, Ben, from what we put in this. We are on lower grid rates than what we budgeted. So all those combinations -- we've been able -- the teams on site has done an amazing job to keep that cost structure lower, and we are tracking ahead of budget on that.

All of that's absolutely correct. The key delta here is the productivity that we're getting is much better than we budgeted and that's driving the mining costs lower than that restart plan. So that's the big delta.

Understood. And just maybe a question for you, Ben. Just around the silver stream liability, I can see that you've produced a significant -- there's an increase in contained silver quarter-on-quarter. Maybe that's not yet flowing through into the sales and the payments for the silver stream yet. But is there any update you can provide on that? And just how quickly you think you can pay that down given the current silver price outlook?

Yes. Absolutely. So just to remind everyone, we have a AUD 27 million capped silver stream. So when we initially modeled this out, we were using a silver price of $25 or $26, and it was estimated that was going to take us around about 4 years to extinguish that silver stream. Clearly, the silver price is at a much higher point than that. So our latest modeling is kind of sort of -- around 18 months, we'll have it paid out. So -- once that gets through, we'll get the full benefit of that cash flow coming in from the silver. But it was a very good part of the deal we did. Previously, that was an uncapped silver stream, but what was negotiated as a part of the purchase was to cap it at AUD 27 million, which will be end up being a great outcome for the business. But we'll get into it very quickly. We made a big payment in April off the back of the copper shipments and the big copper shipment that went out. So yes, we're getting through it at a rapid rate, Joe.

Fantastic. Okay. And lastly, just considering your relationship with trough and traders, just keen to get your thoughts on the near-term market fundamentals for copper, zinc and spodumene DSO. Like, what are you hearing and seeing? That will be greatly appreciated.

Yes. I'll grab that one, Ben. Yes. So look, it's -- like Ben articulated, I think there's 2 elements here to our business and the financials is, like you said, the smelters, in particular, zinc smelters because they get more of the by-product credit revenue from silver. And they get gallium and things like that out of people's products. And obviously, sulfuric acids at record prices. And they -- whether you're a copper or zinc smelter, you're predominantly a sulfuric acid business. So their byproduct credit revenues have gone through the roof of gold and silver, and they put the ticket on the metals as well. So they obviously, metal prices have gone up. So they're having wins all around and obviously, sulfuric acid. So hence, they've been able to give like -- you've never seen zinc TCs be in the negatives ever. So you've seen that at the moment. And lead, Ben forgot to mention lead, but they're slightly negative, I think, USD 170 or USD 150 a tonne. So those are coming through to the bottom line. Payabilities are probably going up a little bit as well moving forward, like you saw that with -- industry doesn't know exactly what the benchmark got set with Teck and Korea Zinc the other day, but they did make comment they got better silver payability in the zinc con. So there's a fuel, there's little things coming through. So it's very tight for new supply. Zinc is much tighter than copper on supply. There's no room for error in the zinc industry, whereas copper has probably got 1 million tonnes of stockpile sitting between Comex, LME and Shanghai. But -- and obviously, we're still probably in a disturbed market with Iran. But I think post-Iran, I think we're heading into a metals boom in those and then throw in lithium, which I think is extraordinary how much people have been caught out in that space. I know internally, we're talking about battery storage, and now everyone's talking about it, and that's real, and that technology is changing really quickly. We've just quoted up a power station in Sulfur Springs and we're putting a open big battery with solar in there. It's just a no-brainer. So anyone looking at new electrical infrastructure is 100% looking at solar and big batteries. So that's only going to escalate, whether that's domestic or industrial scale. No one's going backwards in that area and obviously, there's fuel shocks just escalating electric vehicles and battery storage. So very positive. And I think by the level of activity, Ben, we're seeing with 11 proposals -- and there's no funky backyard operators in those 11 proposals, I should mention, too. These are some of the world's biggest end users and biggest commodity traders in this space, banging our door down. So -- and I think in the next 4 to 6 weeks, when we put out a few optics on the financials of Pioneer Dome, I think it's going to be a lot of very happy shareholders.

Sorry, Joe, I was going to say, I think the interest we've seen both in the Sulphur Springs funding and offtake process and the Pioneer Dome process is a really good indication of where the metals market is. It's very tight at the moment. If you are bringing new product into the market, it is highly sought after and you can get it a competitive -- or at very competitive rates and payabilities. So we're very bullish on the metal space.

[Operator Instructions] The next question comes from Hayden Bairstow from Argonaut.

There were just a couple of things on Sulphur Springs and the DSO. I mean, how are you looking at scheduling development of that? I mean Sulphur Springs looks like it's completely underway. You're about to press the button. But how do you work in the timing on what you're doing in Pioneer Dome? Or is it just a smaller scale up, it's not [indiscernible].

Yes. Look, that's exactly right, Hayden, is -- Pioneer Dome is like -- I think the bottom of the J curve, we worked out is about AUD 30. So not -- and we're very close to finalizing all the offtake and debt on that -- or we could do our existing balance sheet if we want. But it's only a small open pit. It's very similar to what [ Core just ] announced. It's like a 5:1 strip ratio. There's 800,000 tonnes in the start-up pit. And so it's a pretty simple execution. And all we're doing is out crops. So it's just a body -- small operation for an open pit contractor and crush screen and put on road trains and send to port. So it's a very simple project to execute from a mining perspective. We're obviously not building a processing plant all that complexities. So we don't see that as a huge drain on, I guess, talent or capability. And obviously, Sulphur Springs is, we're derisking it with the development at the moment. And obviously we've got GR Engineering there locked and loaded to push the button and start constructing that midyear, hopefully, subject to feed.

And how much [ cover ] do you want on the DSO? Are you looking for floor pricing or how are you thinking about that?

Yes. Look, a lot of the proposals have actually had floor pricing in it and the ability to hedge as well. So that's quite -- I think Ben, you can -- probably you can hedge 3 to 6 months out with product on pricing. So there is real flexibility in that market. It's definitely open. And look, we don't know how long it will open for, but it's -- but we're getting very good indications of how buoyant the market is. And I think like the first shipment basically pays off the whole body CapEx of the project. So it's pretty extraordinary. The CIF pricing that we're getting offered, it's very attractive for miners, let's just put it that way.

Okay. And just one on mining services, the revenue was obviously lower ex the internal stuff. So that was, I presume, just a mix of stoping versus development at Bellevue. And when does Waihi start reporting revenue?

Yes. Look, yes, exactly right on the mining services, but we expect that to pick back up at Bellevue. And Waihi will come in this quarter. So we only just mobilize effectively this month. So we'll be lodging obviously the first sort of mobilization invoices this quarter. And we'll start the first cut in the box cut will be the back end of this month. Look, there was a bit of weather that went through New Zealand. I didn't know what cyclone could go that far south -- over the Southern Hemisphere, but Auckland and the North Island to get hit a couple of weeks ago by the cyclone. So the box cut there got delayed a couple of weeks. Otherwise, we would have taken our first cut by now. But as I said, all equipment is there, people are there, and we're rolling to get into it and start this 5 new development contract.

[Operator Instructions] At this time, we're showing no further questions. I'll hand the conference back to Bill for closing remarks.

Hopefully -- sorry, guys, I just broke up then. Thank you, everyone, for joining Develop's call today. As I said at the start, we're fast closing the first quarter of this business out. Take time to read the quarterly. There is a lot of activity. We're basically building 3 mines in 3 years. This business is looking radically different month by month. And we're very excited about bringing the next 2 mines on, and hopefully winning some more mining services. So we have 4 to 6 weeks left in the first quarter, but we're super excited about the second quarter of what our business looks like. A thanks for joining us today.