MAC Copper Limited (MTAL) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to the Metals Acquisition Limited Half Year Accounts Conference Call and Webcast. [Operator Instructions]. The conference is being recorded. [Operator Instructions]. I would now like to turn the conference over to Mick McMullen, CEO of Metals Acquisition Limited. Please go ahead.

Thank you very much and thank you everyone for joining us, in particular in Australia, on a very busy results day. We'll try not to keep everyone for too long. So myself and Morne, our CFO, will be doing the talking on this conference call. So, Morne, you can go forward to the slide, if everyone can read the disclaimer at your leisure. So look, everyone knows we've got an asset in Western New South Wales, super high grade. EV is about USD 1.1 billion today, based on where the share price sits, and it's a very well established mine. We don't really need to sort of go through the detail of the operations too much today, but we think we've got one of the better copper assets around, as you'll see from the financial results. I think they speak for themselves. So we can go to the next slide there, Morne. Again from a year ago what did we say we'd do versus what have we done? We've sort of ticked all the boxes. I just checked. Our shares from a year ago are up precisely 0.09%. So not so sure that actually checking the boxes has done much for us, but we have delivered on everything we said we would do in the last -- in the last year and a bit. Next slide. Thanks. We've put out our formal guidance into the marketplace. Now I would say to people that guidance is based on the information we had at hand, actually from a year ago, the end of August last year. And as you will see from our production results and some of the things we're doing, we're getting increasingly more confident in our ability to meet and potentially go a little bit beyond that. So you can see there, over the next couple of years, we sort of end up above the 50,000 tonne of copper mark. Again, we have only been able to base that on reserves. We have no inferred material in there. We have QTS South Upper, which is predominantly inferred. We are drilling that out right now. We do see that as having very good potential to add a little bit more. And I think some of the productivity improvements and mine design changes that we've been doing with some of these double lift stopes that have allowed the site to pull a bit more high grade copper forward. We are feeling increasingly more confident that we may be able to potentially do a little bit better than that over that medium term. So, next slide there, please, Morne. Again, from the highlights, Morne will go through all these in great detail, but a strong quarter for Q2. So again, we're sitting around about midpoint of guidance for the half. Obviously, Q2 was stronger than Q1. So sequentially, we're building through the year. Strong cash balance. We've increased the mine life. So very long mine life now, which I guess was one of the things that we said we'd do at the start of this exercise. And as I said, guidance is gradually ticking up over the years as we sort of catch up on some of the backlog of development that we inherited. As the drilling is showing towards -- we'll see at the back end of this deck, we are seeing significantly more copper units as the mine goes deeper. So we're expanding the ore body. So that's all looking pretty good for our future production. So next slide, please. Safety, look, this is a work in progress. We have seen the TRIFR roll down a bit since the June quarter and we're a very big part of the community we operate in. We are the largest employer. We're about 80% residential now. We provide a lot of funding into the town, both through donations, but also just our economic activity there. And I think that's a key thing for us out in Cobar, where our main approval authority is the Cobar Shire Council. The people in charge of approving projects for us are the community that we interact with and impact with. So we think that's a great relationship and it does make CSA a little bit unique in, well, much of Australia, actually. So if we can keep going to the next slide there, Morne. I'm going to hand over to Morne for all the financial numbers now. There's a lot of numbers here, but I think the underlying story is very strong as you will hopefully pick up as he goes through this. Over to you, Morne.

Great. Thanks, Mick. Good evening, morning, everyone. I will take you through the next couple of slides, slides 9 to 15, which covers the elements of the half year financial results for 2024. And just specifically taking note that the presentation should be read in conjunction with the Appendix 4D and the auditor reviewed first half financial statements which were released in various markets. Starting on Slide 9, we have, obviously, the financial results overview there. Also a quick note that we report in U.S. dollars. So all amounts are in U.S. dollars unless otherwise shown. All the great work that Mick has spoken about in terms of the operational side for the half and meeting our goals are reflected in the half-year results, which resulted in some record earnings for the mine under the MAC ownership. We are comparing the first half of '24 to the preceding half of '23. And you will note all line items are considerably better in comparison, including the net revenue of USD 182 million AUD 272 million for the 6 months. This is up some 29% compared to the preceding half off the back of, obviously, slightly increasing copper prices and sales volumes for the half. I should note here that we did recognize the revenue and associated cost of sales for the concentrate presales to Glencore as reported at the quarterly as we did meet the requirements on the IFRS 15 revenue standard. So this has resulted in sales volumes increasing by about 5,000 tonnes and an additional revenue of $41 million for the half. The increased revenue together with the reduced cost of sales and admin and selling expenses contributed to our very healthy underlying EBITDA of USD 91 million or AUD 136 million for the half. More importantly, our underlying EBITDA margin increased significantly to 50% for the half, mainly driven by a 22% increase in sales volumes, which absorbed more of our overall operating fixed cost and lower cost of sales as well. And as I mentioned, there was a 3% increase in the average realized copper price for the 6 months compared to the preceding 6 months. Our statutory net loss of $95 million for the half was heavily impacted by non-cash change in fair value of financial instruments of $109 million, which was mainly driven by the increase in the copper price compared to the preceding half. It should be noted that the volatility around the fair value adjustments will be somewhat reduced going forward with the redemption of the private and public warrants which accounted for about 36% of that $109 million fair value adjustment, which was revalued just before the redemption of those warrants. So overall, record revenue, underlying EBITDA for the asset on the MAC ownership with a very healthy underlying EBITDA margin of 50%. Moving on to Slide 10. We provide a breakdown there of the statutory net loss for the period, noting the impact of the non-cash elements on the earnings with statutory net income from operations of $46 million shown there. The statutory earnings was also impacted by net financing cost of $32 million, with interest expense of $21 million and a realized hedge loss of $5 million for the half, with the remainder made up of non-recurring interest cost on the Glencore deferred settlement payment and working capital facility. I should also point out that as part of the cost of sales number, we reported an underlying corporate cost of about $10 million for the half. Slide 11. Here, we show the reconciliation from the net statutory earnings to the record underlying EBITDA of USD 90 million or USD 136 million, as I said before. If we move from left to right on the graph, we start with the statutory net loss and then adjust for tax, net finance expenses, net change in fair value in financial instruments, depreciation, amortization and then underlying adjustments relating to one-off items relating to the ASX IPO completed early in the year. In relation to the non-cash fair value adjustments of $109 million, the main underlying driver there, as I said, is the fair value change in the -- driven by the copper price, but also the increase in the reserves and therefore the increase in life of mine as well, which impacted that and then the impacts of fair value adjustments on the hedges that remain outstanding included there. As I noted earlier, the big value of fair value volatility has now been removed with the redemption of the private and public warrants as well. On Slide 12, our cash and cash equivalents have materially increased by 174% from $32 million at the previous balance date of 31 December to more than $88 million as at 30 June '24. From the significant cash generation by operations, we ended up with some $70 million of free cash flow from operations for the half. We received a much needed boost through the ASX IPO subsequent to 2023 year-end, which raised AUD 325 million or the equivalent of USD 192 million after cost. The raising of the equity provided us with some greater flexibility and a stronger balance sheet. And as noted in previous call, we are focused on the simplification of the balance sheet and utilizing the great cash flow generation from the operation not only to grow our production materially but reduce our interest-bearing liabilities at the same time. So since the beginning of the year, you can see there on the graph that we have certainly done just that in terms of we've repaid the first consideration to Glencore, which is some $83 million, including the working capital facility of $15 million. We also repaid revolving facility of $25 million and then some principal repayments there on the senior debt of $16 million for the half. We also paid significant one-off liabilities in terms -- in the form of stamp duty, which amounted to $23 million for the half as well. And then from a growth agenda perspective, we have commenced the exploration program. So we show there the $3 million spent on exploration. And I've also commenced development of the Vent project, which will further support the expansion of the CSA Copper Mine and drive that 25% uplift in production to 2026 based on the midpoint of guidance. We ended the quarter with more than $88 million of cash and further liquidity of around $46 million, which includes the undrawn $25 million of revolving facility. And we also had some $21 million of unsold concentrate ready for shipment at 30 June 2024. So overall, we are in a very healthy cash flow position and continue to build on our strong balance sheet. Moving on to Slide 13. So here, we show the interest-bearing debt waterfall, so demonstrating the significant deleveraging that we have undertaken since June last year. And as you can see, we repaid some USD 160 million in interest-bearing liabilities after starting out with around $430 million of interest-bearing debt with the acquisition increasing to 31 December and then a significant reduction of 29% to be at around $320 million at 30 June 2024. Importantly, with the significant cash generation for the half, we have reduced our net debt position to USD 232 million. We are looking for further -- we are looking further into, obviously, simplification and strengthening our balance sheet with our strong free cash flow and increasing production. Slide 14. As a result of our drive to reduce interest-bearing liabilities, you will note on the slide there that we produced our net gearing ratio over the last 6 months by some 25% from 41% to 31% as at 30 June '24. Furthermore, we provide an update on our debt profile there at the bottom of the slide there and you will note that more than 80% of the scheduled repayments of the outstanding debt is to be made in '26 and '28 respectively. As announced, [ on ] Slide 15, in June, we completed a redemption of some $15 million private and public warrants with almost 100% redeemed through the cashless redemption mechanism available to the company. And we issued about 4.7 million shares to redeem some $15 million warrants. Overall this means that we have 74 million ordinary shares on issue with still some financing warrants outstanding and our fully diluted securities now around that 78 million shares. Also noted, just confirming the net debt position there, $231 million, taking into account that strong build -- strong cash build and repayment of debt over the half. And with that, Mick, I hand it back to you.

Yes. Thanks, Morne. And look, just a couple of points, I'll also touch on there. So if we look at the company from when we closed on buying the mine 14 months ago, we had about nearly USD 450 million of interest-bearing liabilities or net debt actually, we've sort of halved that in that 14 months period. So gearing, not just in the half, but if we look at since we bought this mine, gearing has materially reduced in this business. We have a 50% EBITDA margin. I haven't searched through all of our peers, but I think we're probably at the front of the pack there in terms of EBITDA margin from our operation. And look, I think the other point that's on one of those slides there is that it's all well and good having EBITDA. But if you spend it all in CapEx, it's not much good to shareholders. We convert about 75% of our EBITDA to free cash flow of the ops. Again, I haven't looked at all of our peers, but I'm pretty sure that's one of the better in the class. So I'm a little bit perplexed with where our share price sits today. As I said, I'm 0.09% up in the last 12 months when we've actually completely not fully delevered, but materially delevered the business. Ops are going very well. 50% EBITDA margin. I'm sure a few of you have got your calculators out already and working out what our trailing EBITDA margin is, and I'm pretty sure you'll find that, again, it's pretty low for the peer group. This is a quality, long life, super high-grade, high-margin asset that's in a fantastic jurisdiction for permitting and operating. And we're getting a little bit frustrated with where the share price sits. And so from a strategy point of view, I think clearly, our #1 goal is deleveraging and investing in the mine to -- if we can invest in the mine and grow value for shareholders by doing that, there's a very strong internal bid for capital right now. So I think the team at site would say compared to sort of previous times, we are investing in that mine with a view to getting a return out of a strong return. What do we do? We pay down the debt, I think. We continue to make the business as strong as we possibly can, build as much cash in the business as we can. And look, at some point, well, I went into the market and bought AUD 300,000 or AUD 400,000 worth of stock a few weeks ago. But at some point if the -- we view the business as being a really strong business that it's undervalued, well, I guess at some point, one of the things we're buying is our own stock back. So I think we've done -- the team has done a great job getting this business sorted in the time frame. We just aren't being recognized in the marketplace for that right now. It does look like we're likely to get into the ASX 300 here in a few weeks' time. So we think that might be a good catalyst for the stock. The other thing in that period in that 12, 14 months is copper price has gone up $0.40 a pound. So we're a little bit perplexed with where we're trading. But I guess all I can do right now is just run the business as best as we can and sort that balance sheet out as much as we can and just make the story as simple as possible for people. So following my view on life on that, we might just roll on. So again, we put a 3-year guidance out. And as I said earlier, this is really based on information from literally a year ago. I do think we're feeling increasingly comfortable and confident, I suppose, is the best way I could put it. We have been asked, given the performance the last quarter and sort of where we're tracking now, whether we'll change guidance for this year. I think we'll stick with where we are. These new double lift stopes, we're on to the second one, seems to be working. But that's really probably a story for when we review our guidance for next year as to what we do with that. I would say, May and June really shows what this mine can do. We did 4,000 tonnes of copper in May. We did 5,400-odd tonnes of copper in June. When this mine is well run and things all come together, that's the sort of thing this mine can do. So clearly, June was an exceptional month, but I think repeatable at times, clearly, well above the run rate of what we're telling people for guidance for this year, right. So we had C1 cost of around about $1.60 -- $1.50, $1.60 for those 2 months. So again, high fixed cost operation. If we get the production out, that's what you're going to get. Again, we announced some drill results after the quarterly calls. I'll talk roughly what does that all mean on this slide. This ore body has been going well, really for 150 years, but in modern format since 1967. We've sort of doubled the reserve life since we've had it again on data from a year ago. The drilling that we're doing now in sort of QTS North around where we're mining, has extended the strike length of the ore body 20%, 25%. What does that mean? That means we're getting more tonnes per vertical meter. That means we need to do less development to get our copper tonnes out. Or conversely, once we have this ventilation in place, we have a lot more tonnes available and we have the vent available to be able to actually produce more. So we're very excited about what this ore body throws up. We continue to announce drill results of 20 meters at 10% plus or 15, 20 meters at 15%. The market seems to yawn because it sort of become, well, that's just a standard CSA drill result. I would suggest if we were a stand-alone exploration company announcing those things with 0 infrastructure, the stock would probably double on the back of that, right. Again, pretty frustrating that people sort of yawn when we put those kind of drill results out, when it truly is an amazing mine. And those kinds of results underpin our increasing confidence about being able to produce more out of this business than what perhaps we thought we could a year ago. So with that, we might just go to the closing slide. Again, very strong -- strong 50% EBITDA margin. 70% of that's converted to cash flow. Material deleveraging of the business over the last half and 12 months as well. So operationally, we think things are going fantastically. Always more to do. But, yes, I think it's a great asset. And I think compared to our peer group, I think we have many attributes that are towards the top end of the peer group or by our share costs. So with that, I'm going to hand over to shareholders. I'm happy to take questions.

[Operator Instructions] First question comes from Daniel Morgan with Barrenjoey.

Mick and team, so my question just relates to -- can you give us a little bit of a sense of how the operations have performed post the end of the quarter, please?

Yes. Look, again, we've sort of left our guidance where it is. So midpoint of the guidance is about [ 40,500 tonnes ]. We feel comfortable with that. I did say on the quarterly call that just from the scheduling of the sort of high-grade stopes, Q3 will be slightly weaker than Q2, like a few hundred tonnes of copper. And quite frankly, that's as accurate as we can be. And Q4 looks like [Audio Gap] strong. So -- but overall no real surprises, I think, is the short answer. We will -- so the one thing that we will see a bit more of now is we've done the geotech drilling out for that Vent project, and so development has commenced out there. So we will start seeing development meters pick up as we get into that project and we are moving ahead with that pretty quickly. That's probably the only sort of real change, I think you'll see. No other surprises, I think, otherwise.

And latest plans to potentially exploit QTS South Upper, when might we hear more on that potential project?

Quite soon, I think. We sort of have got the final things in from contractors. Look, I -- we'll make a decision in the next, I don't know, week or so, but I suspect that there's a better than even chance that perhaps we -- we certainly have the people and the equipment to do it ourselves. And I think the team at site are getting increasingly more confident as they sort the bottom of the mine out in their ability to execute that. But fairly soon, we are doing a drill program to upgrade that to measured and indicated. There's 25 holes going into that. We'd be, I don't know, 1/2, 2/3 of the way through that. That will allow me to call it a reserve, which will allow me to then add it to guidance, right. It's not in our guidance right now. [indiscernible]

The next question comes from Eric Winmill with Scotiabank.

I had a couple of quick financial questions. But maybe just on the vent raise, can you remind us what the spend is there and kind of what the major deliverables we should expect, I guess, throughout the end of the year? Sorry, I should say, ventilation, sorry not, vent raise.

Yes. So there's a slide in the quarterly deck that we put out that's got the detail on it, but it's around about AUD 42 million, so not U.S., it's Aussie dollars. And that'll be -- sort of we started that drilling really about 6 months ago or 5 months ago. And that will go through to about mid-2026. And, Morne, I don't know how much we've spent on it. That'd be AUD 2 million to AUD 3 million -- maybe U.S. that we've spent on it so far.

Yes.

And do you have the number off hand there? But it's in that order, I think.

Yes, [ it's about ] USD 3 million.

Great. So the deliverables are -- the sort of components of that project are the geotech drilling to make sure the ground is good out there, which is sort of done. Then there's the development meters to get out there, which we'd be, I don't know, halfway on the first drive out there. We've got to do it across 3 or 4 levels. So -- and then raise boring. We've just -- actually just closed the tender off for the raise boring last Friday. Off the top of my head, I would think we'll be out there raise boring early next year, maybe somewhere in that order.

Okay. Great. Appreciate that. And just on the concentrate sales. So obviously, there was a bit of delay because of the rail issues. I assume that's all been sorted out now. And any views on Q3 in terms of timing of shipments or what we can expect there?

Yes, look I think -- well, Mick [ you got it. ]

Well, Morne, you can talk about the timing of shipments, but we still do have a fair bit of concentrate around. We produced a lot of concentrate. So it's a good problem to have, I guess. But, Morne, I might let you talk about it.

Yes. Look, I think in terms of the timing of the shipments, we spoke about at the quarterly call, that has started to be sorted out. I think in the call I did indicate that that will take some time to clear. But we're confident by the end of September, we'll have most of that sort of back in time in terms of the sequence with the trains, the shipping and obviously, production as well. Maybe a little bit into October still in terms of clearing that sort of backlog. But like Mick said, we've got a lot of concentrate on site, which is a good problem to have at the moment. And as we indicated, we're able to recognize that revenue in any event from those presales. So overall, we're still getting the cash in the door from that perspective.

Okay. Appreciate that. And just a quick one on taxes. Any view on what we should model or think about taxes for the rest of this year?

Look, we've recognized an expense there of about $7 million for the half. So I think full for the rest of the half, we do have a tax shield with the acquisition of the mine. And that tax shield obviously shields you from some of the -- from the tax liability on a yearly basis. Not really sure in terms of the quantum of that and how far that will extend. I mean, obviously that will depend on the copper price as well. But we might tip into a slight tax payment by the end of this year. But again -- that's if you roll forward sort of the last quarter going forward. So on balance, in terms of where the copper price is now, I wouldn't expect us to be in a tax paying position at the end of this year.

Okay. Fantastic.

[Operator Instructions] The next question comes from Paul Hissey with Moelis.

Yes. Just wanted to expand a little bit on the forward sales. Just trying to understand, I guess, the working capital moves and whether -- I mean, clearly, the sales number in your quarterly is not the sales number that's been reflected in the P&L. So how much of that stockpile has been forward -- pulled forward and how much of that is kind of a onetime deal? I'm just trying to understand, I guess, on a go-forward basis, the relationship between the sales you reported to quarterly versus the sales that will manifest in the revenue line of your financials.

Yes. I think obviously, with the anomaly at year-end that sort of had a material difference between production and sales to start with, we recognize as additional sales. So that sort of brought it back in line with production matching up with the sales volume there. Going forward, as I just said, by end of September, probably middle of October, we'll probably work back through that backlog in terms of the concentrate and be on even keel in terms of having a healthy inventory of concentrate on site in the warehouse versus port versus what we're shipping out. So I think by sort of end of September, beginning of October, we'll be in an even keel in terms of having a normal runoff inventory in terms of the concentrate rolling through in terms of having that balance right. So I think come December you'll -- we'll be in full swing, I suppose, in terms of that sort of working capital movement. So I suspect a little bit more to go in terms of end of September. But then by December, you won't notice that from that perspective, bar any issues with trains and picking and stuff.

Yes. So will we see higher sales because I mean, really there's sales and then there's sales, right? There's the regular sales and then there's the forward sales. So will we see forward sales as well at the end of September?

Look, we might do. I mean, as you can appreciate, as Mick has outlined, I mean, currently we've got over 20,000 tonnes of concentrate still import in the warehouse. We've obviously spent the cash to actually mine and process the ore to generate the concentrate. So if there's still that sort of amount, or close to that amount at the end of September, we would want to obviously get the cash in the door and obviously pay for that -- the cost to get that cost straight to that point in time. So I think there might still be at the end of September, that sort of imbalance that we need to check in terms of the working capital and making sure we've got the cash balance right as well. But then going forward, bar any issues on shipping or trains, that should even out and we shouldn't be doing any pre sales from that perspective going forward.

Paul, [ perhaps I'd ] clarify a little bit. We obviously can't presell stuff that we haven't made. So all we're trying to do is get revenue in the door from stuff that we've made and pay the cost of making, right. So my gut feel is we'll still have a bit of that stuff sitting in inventory at the end of September, just given what the month of September looks like. So, yes, I'm pretty sure there'll be that. I guess in an ideal world, we'd like to end up with, I don't know -- at the end of every quarter, carrying about USD 10 million of inventory at most.

Sure. Yes, yes.

Probably fortuitous if we can get it below that. Like I think that's sort of about what you need to have sitting in the business. But clearly at the end of June, we had $58 million worth. Now, that's a bit much. So we presold $37 million of it, which is recognized in the EBITDA revenue line here. We still had $21 million, which is still too much. And right now, yes, we'd have a fair bit. I think there's both this week and another one in a couple of weeks. But yes, what we're trying to do is align production. Like, you obviously can't sell stuff you haven't produced unless you're a magician. So all we're trying to do is catch up that lag of all this stuff. All this value we've got sitting around we want it to be dollars.

Sure. No, no. No, I completely understand that. It's just the reconciliation between the copper sold number you quote in the quarterly versus, I guess, the amount of tonnes you need to have sold to reach the revenue number when you come to the financials, right? So, I mean, I'll be frank. I missed the discrepancy, right? So my financials don't look anything like your real financials because I add your selling -- I had your selling 16 tonnes, not 21 tonnes of copper, right. So just trying to understand, I guess, the accordion effect in your inventory there and whether or not we're creating a hole in the future. But clearly, you had a big buffer to begin with that you're trying to work your way through. But I must admit, I didn't appropriately factor in those additional forward sales on top of your, I guess, conventional sales, for want of the better words.

Yes. But again, for the half, we've produced, I don't know what it was, 19,500 tonnes just under 20,000 tonnes. If I'm just a simple [ BushMaths ] guy, I look at it on the basis, well, how much did we produce. Assume we sold it all. How much money did we make on that? Then there's a working capital line that goes below that. But that's how I look at the business, right? If we -- if you assume that we sell whatever we produce then there'll be some sort of working capital adjustment somewhere in there that will work its way through the system as Morne said. I think we were very back ended in the half, if you want to think about it that way. We produced a lot of the metal. I've got -- there's a slide in there somewhere. But we produced whatever it would be, not quite half, 40%, 45% of the total metal in the last 2 months of the half, right.

Sure.

You end up with all stuff that you then can't get on a train and get on a boat by the cutoff date. So, hence why we've done the presale. And there's more to talk about that between publishing the quarterly and the half, there's been a lot of work go on with in terms of revenue recognition and meeting. Does it meet the standard for revenue recognition? And the answer, yes. So, in an ideal world we'd sell every tonne that we make, and it'd be on a boat by the end of the quarter and that's that. It's a bit lumpy, right?

No, appreciate that.

[ So we got a gap ] adjustment here and there.

The next question comes from David Radclyffe with Global Mining Research.

Mick and Morne, so my first question is just on -- if you come back to one of the thesis for the transaction was obviously the big opportunity for cost out. Costs have been sort of moving the right way. But I thought it may be good to get a bit of an update on what costs you think still could come out of the business? And if there were -- or have you largely sort of gone through what you saw as the key opportunities?

I'd say head count wise, we're there or thereabouts where we need to be. Again, Q1, we probably undershot on head count a little bit. So Q2, we've added, I don't know, 20-odd people back into the operation to make sure that we've always got operators. I think that component is done. I think, commercial contracts, we're part of the way through. There's still a bit of work to be done there. And Morne and the team are sort of going through that. Some contracts we can renegotiate at short notice. Others you're sort of waiting for the contract to run its course. And I've done a fair few of these turnarounds. You sort of get to a point where you can't really cut your way to future profit -- further profitability, right. So then you got to grow production. And I would say that's the inflection point where we're at. And we clearly saw that in May and June, right? We look at the cash flow or EBITDA or C1, whatever metric you want to look at. When we get that mine running at those levels, then that's really your cost out, right as you'll see one really drops. That's where we are, right? We need to get more production out of this thing, both from what we're doing in the rest of the mine plus some incremental stuff like QTS South Upper? That's the key, right? And I know you're not a big fan of EBITDA, and I may have actually stuck that metric in there of our EBITDA to cash conversion for you. I think that's the other key thing here, is we're not having to spend every dollar we make on CapEx.

Okay. Then look, I think a number of us are trying to get the -- reconcile the revenue. So it's very helpful to get the sales number of copper tonnes sold because that sort of helps us square that away. But look, in terms of how should we be thinking about this -- what a normal inventory level should kind of be? I mean, you produce 100,000 tonnes -- roughly 150,000 tonnes [ of coin ] a year, and that's sort of spread between, I guess, the mine and the port, or on the way. But what is sort of a normal kind of level that we should be thinking of? Is it sort of a month's worth [ of coin ] or the such like, because I guess we don't get the granularity on where it sits and that's causing a lot of us to, I guess, not be able to estimate exactly where inventories currently are?

I'd like it to be 0. But like I said, I think USD 10 million worth of inventory, probably. Morne, I don't know, do you think we can do better than that? I'm not sure we can.

Yes. Look, I think this -- it's -- we do about 2 trains a week at full tilt. So I think if you're around that sort of ship load at any one point in the system or a little bit more, I think that's probably what you're going to get to. So that's about, I don't know, 11,000 tonnes. So that's about -- sort of about 2,500 tonnes of copper. So it's about that sort of number, I would think. So maybe a little bit more than [ 18 million ], Mick, but it's probably not going to be much more than that. But that's sort of the -- I don't think you can get away with less than that because you need 11,000 tonnes sitting at port ready for the next ship, right. So that's going to be there or thereabouts.

I'm giving you a stretch target, Morne. [indiscernible]

Yes. I think the short answer is unless it just happened to strike that you load a boat on the very last day of a reporting period, I don't think it's ever going to be 0 is the short answer. There's always going to be some -- there's always going to be some working capital floating around in the business.

This concludes the question-and-answer session. I would like to turn the conference back over to Mick McMullen for any closing remarks. Please go ahead.

Well, look, thanks, everyone. I know it's a very busy reporting day here. So if anybody has got any questions, we're happy to take them offline as well. But again, I think the ops are doing very strongly and we still see a bit of room for improvement here going forward. Clearly, if we can get production up, you can see the impact on C1 EBITDA, free cash flow and everything. So that's really the key for us where we are now.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.