Imdex Limited (IMD) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Imdex FY '22 Sustainability Report Update. [Operator Instructions] I would now like to hand the conference over to Mr. Paul House, CEO. Please go ahead.

Thanks, [ Zari ] and good morning, everyone. It's a great pleasure to be able to release our FY '22 Corporate Sustainability statement and presentation today. For those following along using the presentation today, I'll turn you now to Slide 4. And I'd like to introduce our ESG Committee. The key here is that we have broad representation across all aspects of our business to ensure that we embed ESG into every aspect of our operations, commencing with Ms. Sally-Anne Layman, our Board member, who represents the Board and the shareholders in our ESG team right through to every aspect of our operations. Speaking today, Shaun Southwell, Michelle Carey, Paul Evans and Michael Tomasz, who have joined me to speak to various aspects of our ESG report. I'd like to thank the entire team and their teams in turn to their ownership of corporate sustainability in their business and their time and commitment to what we think is a vitally important goal. Looking at Slide 5. At Imdex, we take a holistic view and it is part of our purpose as an organization. And as such, today's presentation is going to touch on the challenge that faces our industry and the opportunity that it presents in turn as well as our own purpose and our ESG approach, and then finally, the achievements in FY '22 and the targets we've set for ourselves in FY '23. More detail on each of these 5 focus areas and material topics be expanded upon in the balance of the presentation. On Slide 6, there is increasingly a global commitment to decarbonization that has been defined in multiple ways, whether they are -- whether it's through consumer behavior, government policy, the structure of the finance industry and the evolution of our supply chain, all of these stakeholders are acting consistently, and that has consequences for the industry in which we operate. In last year's report, we had given a detailed update on how companies like Tesla had initiated offtake agreements to ensure direct access to the critical metals they need to their motor vehicles. This year, you've seen other motor vehicle manufacturers follow suit. In this case, U.S. carmaker, Ford, is asking the Biden administration to speed up the permitting process of mining projects particularly those targeting critical metals such as lithium, cobalt, nickel and graphite. Whether it's these supply chain initiatives by the United Nations and their environment program, and the behavior of the finance industry, we see a genuine tipping point towards decarbonization and the overall society goal of achieving net zero and the solution to that is an opportunity for the mining industry. In Slide 7, we identify that opportunity in the form of the critical metals that are required to provide the power infrastructure that is needed to meet net zero. The demand for critical metals is outstripping supply. As 1 example -- by way of 1 example, outside of the vehicles themselves, we know that the units of copper required to develop a distribution infrastructure for renewable energy is 4x greater than the infrastructure required in the traditional networks. The industry, in this case, the mining industry is not the problem. It is indeed the solution is wider surprising goal. The outworking of that, you can see in Slide 8, increasingly, we will need greater quantities of these critical metals, and the graphic that you can see on Slide 8, it tends to put that in terms of the number of new mines required by commodities to meet that supply/demand gap. We, at Imdex are seeing this in our day-to-day operations. Whereas historically, 35% of all exploration expenditure has been in a broad bucket of critical metals. Increasingly, we are seeing 65% of new projects that are being initiated focused on these metals. In time, we expect that, that new project weight will start to impact the overall percentage of spend in these areas, all will evolve to try and develop new deposits to meet this supply-demand gap. Overall, the sourcing of new mines is not the only challenge base in the industry. It also has the twin challenges of making its existing operations more efficient. And like every other industry, the mining industry is on a quest to be sustainable in its own right. The graph on the left-hand side of Slide 9, attempts to show you how over time the industry has grown at scale and the amount of waste or water or energy required for each unit of metal, in this case copper, and how that is being required since over the last century to grow to where we sit today. If the industry is to be successful in meeting its own objectives, we gradually will need to see those ratios move back to a more sustainable target. And the use of mining technologies and other technologies available in our supply chains are going to be vital to achieving this. The book by John Doerr, Speed & Scale is a very well-planned math for how we need to move from the current state to the future state, and integral to that is sourcing the right tools and technology and moving from operating at scale to operating with precision. Many of the themes in this book apply very directly to the mining industry and indeed to how Imdex sees this opportunity within that industry. Having said the same for the industry at large, we'll spend a little bit of time talking about our approach to managing our corporate sustainability objectives. On Slide 12, we believe that mining is essential to every aspect of modern life and our opportunity, indeed, our responsibility as a business is to take our capabilities and apply them to solve these broader industry challenges. The opportunity we have comes with its own obligations, and we tend to look at corporate sustainability as being both inside of Imdex and outside of Imdex. Inside of Imdex, it's the practices that we control to ensure that we are responsible operators and continuously improve our business for the benefit of our people and the communities in which we operate. And outside of Imdex is leveraging our core capabilities in research and development to develop technologies that help solve the industry challenge that we've outlined on the preceding slide. Diving deeper into our initiatives, Slide 14 focuses on the 5 areas of focus that we have chosen for corporate sustainability. The material topics that we have set are reviewed annually by our ESG Committee and a member of our Executive Committee is assigned and accountable for each focus area. This ensures that ESG is embedded in our business and driven by that business on a day-to-day basis and is not simply a compliance objective. We will build into each of these 5 focus areas in a little more detail, and I'll start with people, while I'm speaking now on behalf of Kiah Grafton, our Chief People Officer. The achievements that we -- the achievements and targets that we have set take the same approach for all 5 areas. Our focus on safety engagement is a lead indicator and our improved LTIFR have been a key feature of our FY '22 results. We believe that protecting our people will continue to remain a priority in FY '23. All of the initiatives that we espouse start and end with our people and hence, why this initiative sits at the start of our corporate sustainability report. Our commitment through an investment in greater gender diversity in FY '22, including the words we sell around measuring and closing the gender pay gap, our policies supporting those who suffer in situations involving domestic violence are industry-leading and our diversity and inclusion council that we've established late in FY '22 and into FY '23 sets the scene for how we expect to engage with our workforce going forward. On Slide 17, the values that we have as an organization have been brought together by involving a group around the world, representing just under 400 of our FTEs. As such, it is extremely pleasing to see on a day-to-day basis that these values get played back to any group, including our clients, and therefore, representing how well they are embedded in our operations and how we as an organization we can breathe these values. And finally, the broader people objective requires us to redefine and hold a very high employee value proposition. These elements need to work together to ensure that we can attract, retain and motivate the best people that we seek and require to source -- to meet our aspirational goals. We measure the success of that program through the employee engagement survey for which we engaged Gallup as an external third-party to measure on a periodic basis. In FY '22, as we called out in our full year results, we saw that employee engagement improved by 15% since its previous reporting period. And we have clear areas of action for us to continue to grow that engagement score. Turning now to innovation, and I'll hand over to Michelle Carey.

Thanks, Paul. So I'm going to be talking today about how we both build ESG considerations into the development of our technologies, but also how our technologies are then used by our customers to enable them to realize very significant sustainability benefits within the time lining industry and really covering some of the themes that Paul's already introduced. So if we can move to Slide 21. And what this metrics looks to do is to talk about the sort of ESG benefits that we can see across all of our product range, with our product range covering current optimization product [indiscernible] and real-time data and analytics. As I have already touched on, there are 2 different ways that we bring ESG to market Imdex with our products. The first is how we build ESG-related features into the product. An example of that, that you can see here are the places where we consider to take in the design of our products across a number of the things that we do, but then also how we think about things like recycling and reusable packaging when we're taking our products into the market. So that's really just building ESG into the way we build every product that we have. But the second piece is the technologies that we developed that actually directly speak to ESG benefits for our customers, in particular for sustainable operations for our customers. And that downstream optimization piece, which you can see across the bottom, I'll touch on that in a bit more detail using BLAST DOG as an example, at the back end of my section. If we move to Slide 22. Now I really just want to make a very simple point to this slide. There is, of course, if you want to have a sustainable innovation pipeline, you actually have to fund innovation in a sustainable way. So you need to be -- perhaps be able to have this pipeline and for us to be able to consider in this very deliberate way, how we do innovation to change the industry that requires a consistent level of funding year-in, year-out. So if we move to Slide 23, just talk about the how, and in particular, how and this case of how we build ESG into our stage gate process. I really just want to touch on a few of these areas within ESG lending. The first is that, that concept stage, this is really where we think about this idea that our product can bring a benefit that's not just financial to our customers, but can bring these sorts of benefits around water usage and water savings. If you think about something like our FIE, or true optimization and the sustainability of mining operations if you think about BLAST DOG. So really, it's right at the start that we baked in the idea that the benefits that we introduced can cut across the full range of ESG. And then if I talk about how we then bake in that second part about -- thinking about things like safety and reusability and refining, that happens very heavily in that requirement phase. And again, it's about thinking about the product in a holistic way, not -- you think about the user experience, you think about the profitability, but you also think about those other safety and environmental component. And then the final piece here really the will come to life is that commercial prototype, which is where the product first in the field. And the good way we'll be thinking about not just -- if you think about it with safety and design, then safety in use and impact in use really comes to the fore and that commercial prototype stage where you're developing the manuals, you're developing the way you take the product to the market. So really, I guess, in summary, it's quite a holistic thing. ESG is not something that's tapped on to the side for us in our product development process. It's inherent and built all the way through. So stepping to Slide 24. What I wanted to do now is really just give a little bit of color about what this looks like for 1 of our products, which is BLAST DOG. So when we talk about what BLAST DOG is, it's really around a series of senses that gathered data, which we then use our IMDEX HUB-IQ and MINEPORTAL technology to convert into answers about the nature of rock [indiscernible]. So that's what is it. So really, if we then -- I want to focus now on what is that the lease and in particular, in this case, what is the belief in terms of ESG benefits. You can see again here, they kind of sit in a couple of different categories. I'll touch on just 2 in detail. The first is you can see this point around if you know the rock, you can control the BLAST, and then it helps you to do things like manage vibration, dust and fumes, that being critical to stakeholders on the mine site in terms of their safety and their health but also potentially in some instances where the mine is very close to a community is very significant to the community stakeholders as well. So that's 1 group of benefit, but then it's a very big picture here. You can see that statistic around 4% of the world's data use relating to processing at the mill, crushing of big rocks into small rock. Again, if you're using rock knowledge gained from BLAST DOG to optimize your BLAST and that translates through to reduced energy use at the mill and therefore, you get that very big picture benefit of making mining more sustainable. If we move now to Slide 25. So just touching on this from a slightly different way and now thinking in particular around the automation component and what that means in terms of safety. So our vision with BLAST DOG from [ graph ] has been that it will be an automated technology that can be used on an automated mine. And of course, again, that has this idea that in its lower order form of benefit, but still very significant, that's really critical. The safe and reliable operations, we don't have people on the bench. You can operate the tools in a very safe way. But then if you then look back up to the higher order benefits, you see this concept that we start talking about around resource stewardship and how you can use this knowledge to mine your deposit in the most sustainable way possible. So that you release the value in particular, if it's a critical metal mine, you release those critical metals that the world needs in order to electrify, but you do as in the most sustainable possible way. So last slide is Slide 26. And this again, we know we're kind of sending in level of detail explaining what all of this really means when we talk about something like legal stewardship. One of the key concepts in the industry today is precision mining. But if you can mine in a much more precise way, then you can mine in a much more sustainable way, by reducing your weight and reducing your footprint and reducing the amount of material that you process. The sustainable precision mining like that requires really deeper data, technology like BLAST DOG is a way to collect the data at that really timely prompt that you need in order to be able to do something like precision mining. And you can see there on the right a picture from our MINEPORTAL technology, which really brings the like what that looks like when you can see in 3 days is incredibly deeper information about your mine, and therefore, you could start looking to mine it in a very precise and a much sustainable way. Okay. So that's the innovation section. I'm now going to hand over to Shaun Southwell, our COO, to talk through the next piece. Oh, no -- I've got 1 more slide to go -- over excited. The final slide that I just want to touch on is thought leadership and external membership. So thought leadership, you can hear the narrative that we're talking through here, something that both Paul and myself in particular, are very passionate about, but we can't do this alone. So we need to be talking to all of the industry about this. And we actually need to be talking about this with our partners. We're a very strong believer in cooperation. You can see here on this slide, we participate very heavily in a number of organizations. And actually, in particular, you can see that quote there, and Adrian Beer, the CEO of METS Ignited. METS Ignited actually funded our BLAST DOG project or helps to fund our BLAST DOG project, which is a collaborative initiative between ourselves, miners and then our supplier. And really, it's a great example of how to innovate in the way we're describing here, you really need collaboration from a lot of different people. And now I'm going to hand back to Shaun.

Thank you, Michelle. There is a lot to talk about [ Imdex's space ] on the environmental side of our ESG committee. As we go to Slide 29, and talk about our material topics. Our material topics are around climate resilience, operational emissions, water and effluents, land disturbance and rehabilitation. When we look at our material topics, we don't just look at watch on outside and with our people, we also talk about how it impacts our customers and how we can improve their impact. In FY '22, additionally where we were transitioning our recycle, our plastic containers -- for recyclable plastic container, our drilling optimization fluids in this form, and this enables those tactics can be reused in a way that minimize. We've introduced a new facility in South Africa. This has created a much better performing facility for our people, a much nicer environment as well as enable us to improve our waste management, making sure that we minimize any water use within our site. And embedding sustainability in part of our facility management roles, making people understand the key impact that our facilities have a longer well and our people have made sure it's front of mind for all our people. Our target for the next year among the EMS Certification, Imdex noticed ISO certifications for safety, quality and data security and bringing that up for the same level of focus inside the business is really getting our baseline for GHG emissions and establishing a reduction program across all of our facilities. If we move to Slide 30, our low operational emissions, material 1 and 2 scope is what we are focusing on as an organization. These are ones we believe we can have the immediate impact on how we reduce while we're looking at that and when materials on the product solutions, we also look on that impacted our clients in the same area and what we could do to make a difference from their material scope as well. We move to Slide 31, please. Materials and packaging. So our business is made up of our [indiscernible] business and drilling optimization business. Drilling optimization fluids are principally based on natural producing products and less than 5% of our fluids sold globally contain any hydrocarbon. And when we look at all of our solutions, we always look for alternative solutions where we can offer solutions to have European to the same outcome and 98% of our products have that option. Billing optimization product, as previously stated before being moved into recyclable products, we have a hard board box solution as well as our plastic piles that have a recycling case #2, enabling easy standardization recycling processes. In our rock knowledge and sensor business, all of our components are made from recyclable products, and we have a very stringent reuse process. And then once we get to end of life, we ensure we have a strong end-of-life process to make for as much of our product as possible in recycle. This process is standardized globally, making sure things like to scale the factory, the wiring, going the right locations to make sure that we don't have any unnecessary waste disposal. Slide 32, please. The SRUs are 1 of our critical products in our solution offering. It reduces water consumption, the mud usage and cartage costs. All of these obviously having a significant impact on a mine site or exploration site, impacted the environment from an ESG point of view. They have significant benefits on their ability to execute their well and be able to get fill-on bottom time most effective. This time, the improved overall time to drill the hole and had the material shift in that CO2 emissions by reducing time operating at the [indiscernible]. The final benefit [ from -- this is the recycle ] remediation and the environmental management costs, [indiscernible] to be on your site enable significant shifting having to it to enable the fluid separation, and create the ability to leave the site with minimal damage and minimal remediation required. So I'd like to hand over to Paul Evans now. Thank you.

Thank you, Shaun. On Slide 34, under the heading of Society, the material topics we have identified are sustainable earnings growth and local support and engagement. There were a considerable number of these initiatives already being undertaken in this area within the global teams that we are now considering with a stronger ESG lens. In particular, we wanted to make mention of the development of the community engagement and the global procurement policies, which were put in place in FY '22 with the aim to implement these in FY '23. Moving to Slide 35, you can see we have a large global footprint to influence our society initiatives. We are located in all the key major mining regions of the world with access in 22 locations and sales into over 100 countries. Pleasingly, in FY '22, we saw economic value retained up 28% in FY '22 over FY '21. Our global influence is impacted by a tax strategy, which is designed to ensure appropriate compliance and tax contributions in the countries in which we operate. And we attempt to buy locally where we can, and currently, approximately 70% of our procurement budgets are from local suppliers in the countries from which we operate. On Slide 36, we show some examples of the community support Imdex is involved in. Here, you can see the Maca 200 Cancer Ride and the VARIETYWA proceeded hands donated to Helping Hands Foundation. Lastly, I wanted to mention, we are formalizing our global volunteering program in FY '23 to enhance further support. I'll now hand over to Michael Tomasz to look at governance.

Yes. Thanks, Paul. From our point of view, our corporate structure and our global footprint has always means that we have a focus on ensuring that we want to act ethically and that we have very strong governance controls when it comes to dealing with our channel partners. However, we recognize that it's an ongoing requirement and a continuous improvement opportunity to ensure that we try and achieve our best-in-class outcomes. So this year, we've had a focus area, in particular, on our supplier code of conduct to ensure that we've had an increased focus on the human rights and ethical obligations within our supplier base. And we've upgraded our purchase order conditions with our suppliers to ensure that we have a contractual mechanism to be able to support this outcome. We've also had a big focus on Modern Slavery, in fact, it's been a significant focus area for the last year, where we've upgraded our reporting. Part of that upgrade has been looking at a review of our due diligence suppliers, and we've decided to change out and upgrade our due diligence suppliers will be using Dow Jones to do our, know your customer, know your supplier reviews. Those will be rolled out from this year. And that's to ensure that we're enhancing our review of our broad global supply base of over 2,500 suppliers and significant customer bases as well. Going forward to FY '23, one of the most critical changes that we've done is formally establish our ESG subcommittee as part of our ARC, Audit and Risk Committee. This is important because what we're now doing is we've formalized the governance reporting structure through to the board and identify the areas of responsibility for the ESG subcommittee. We're also going to be looking at modern slavery awareness and training obligations for our supplier groups as well [ net locals ]. We're also quite proud of our compliance obligations. However, we always make certain that we're doing risk reviews for all of our key areas to ensure that there is minimal exposure to production, and we're maximizing our training processes. In this relationship, we have actually had all of our -- sorry, all of our employees complete our compulsory anti-bribery and corruption training and ethical training this year, which is driven as part of their corporate key objectives -- from a governance point of view. Back to Paul House, please.

Thanks, Michael. If I could take you everyone to a recap that we have captured on Slide 41. Most importantly, first and foremost, insight of Imdex, our progress around our own ESG initiatives, our corporate sustainability objectives made significant progress in FY '22, and to the people that have spoken today and their teams around the world, I extend my thanks to all of them for their leadership in this area, and I look forward to the progress in FY '23. Outside of Imdex, the opportunity that the industry has in front of it to play a vital leadership role in driving great sustainability outcomes for the mining industry and the society at large is very real, and the opportunities that, that presents for Imdex's capabilities through greater ore body knowledge to enable precision mining and greater efficiency and ensure that the overall mining industry can undertake its objectives in a more sustainable way is very real. And our core competencies, our Geoscience technologies, our drilling optimization technology mean that we can play a leading role in this growing demand for orebody knowledge. And that concludes the recap of our corporate sustainability presentation that we've released today. And I'll leave everyone on Slide 42 with a quote that was made by Toni O'Neil an Anglo American probably 3 years ago now, where he says, "We need to get to the point where society views mining as necessary for the wellbeing of its own existence." That quote 3 years ago was largely an internal industry view, and I think we can safely say in FY '22, we started to see that understanding being articulated by people outside of the mining industry. And of course, whilst we are at the beginning of this journey, we would be looking to see this continue into FY '23 and beyond if we are to be successful in our goals. And with that, we will conclude our presentation, and we would open the line to any questions. And I'll hand it back to you, [ Zari ].

[Operator Instructions] There are no questions at this moment. I will now hand back to Mr. House for closing remarks.

Thank you, [ Zari ]. Thank you to everyone who dialed in, and thank you to our team with Imdex. We look forward to speaking to you again next year.

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