MAC Copper Limited (MTAL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the MAC Copper Updated Resource and Reserve Statement and 2024 Annual Financials Conference Call webcast. [Operator Instructions]. I would now like to hand the conference over to Mr. Mick McMullen, CEO. Please go ahead.

Thank you, and thank you, everyone, for joining us. This is our full-year results, which Morne, our CFO, will present here shortly, and the resource and reserve update, which I will present. This presentation was released on both ASX and NYSE, and you can read all of the disclosures at your leisure. So MAC had a pretty good year last year. Our enterprise value right now is just over USD 1 billion. As we preannounced, we produced just over 41,000 tonnes of copper at a grade of 3.9% copper. Significant operational cash flows of about USD 117 million, lots of liquidity available at the end of the year, USD 213 million, the vast majority of which was cash at bank and a strong margin. So we have just under a 50% EBITDA margin, and we convert a lot of that margin to free cash flow. And as we previously said in our guidance, we have a pathway to being plus 50,000 tonnes of copper. And perhaps as you see some of the stuff we're rolling out today, you might get a feeling that we can do a little better than that. Our goals for last year were to operate the mine safely, and I'm glad to say that our safety, our TRIFR actually improved significantly in Q4. We wanted to continue to deliver a longer reserve life. So we now have reserves that will underpin a 12-year mine life. We had record copper production just over the midpoint of guidance. We've delevered the balance sheet significantly and simplified it and our net gearing at the end of December sat at about 15%. We are pushing on to that 50,000 tonnes of copper. We raised AUD 475 million in equity in 2 raises on the ASX. And we've got our management team and Board built out and in place. So it was a very busy year for us on reflection, but it really set us up for a strong '25 and onwards. So in terms of the detail of the numbers, obviously, overall, we had a C1 of about USD 1.92 a pound for the year. But Q4, we ended at $1.66. So trajectory was very good. Again, a lot of liquidity and a lot of cash, and our projects were advanced. Our ventilation project, which is really critical for unlocking the bottom of the mine is on track for Q3 of 2026. And our Cutia South, which forms part of the new Merrin mine we're talking about here, was commenced and on track for sort of first ore out of that by Q4 of this year. And as shareholders want to do, they want to know what's in the future. So this is all backward-looking stuff. So we've got a couple of quite good tailwinds. Obviously, the Australian dollar has continued to trend down against the U.S. dollar broadly about 80% of our costs are in Australian dollars. As our offtake terms are on annual benchmark terms, the TCRC reset in early January, which will reduce our C1 by around about USD 0.16 a pound. So a couple of pretty good tailwinds there on the cost side. Now we come to the Merrin mine. We have been mining here for about 20 months now. The vast majority of our mining happens towards the bottom of the mine. You can see on Slide 7 there between 2 ore bodies, QTS North, which is the large one on the right side, and then QTS Central, which is the sort of smaller one, about 2/3 of the way down the page. And these are great ore bodies, particularly QTS North. It's got some very high-grade zones in it. and is accessed through 2 haulage shafts down about halfway through the mine and then trucking. However, our current production is limited out of that by ventilation. I touched on this ventilation project we're doing, which should be done by Q3 of next year. That's really critical for opening up the mine. The ore body can produce a fair bit more ore than we're currently mining, but we need more ventilation to be able to put more fleet in there. When we bought the mine, we knew we had significant mineralization in the top 900 meters of the deposits. They were not in a digital format, all that data. They were not in the resource base. And so the team have spent about 18 months digitizing all data, scanning records, doing some twin drilling, some confirmation work. And that has now allowed us to estimate for the first time, some resources in that area up there. We have some internal resources that are not suitable for release just yet, but are sufficient for us to start actually mine planning. And as we spoke to investors over the last month or so, it became apparent that it was all a bit complex to have multiple different mines, deposits, lenses at the top. So we've elected to call everything from surface down to about 900 meters below surface. One name, one new mine. It is a new mine. We're calling that the Merrin mine in honor of our Chair, Patrice Merrin. And that will allow us to distinguish for the marketplace the fact that we have one mine at the bottom of the mine, what we're existing mining, and actually one new mine that's about 1.6 kilometers away from that mine. It just happens to be 1.6 kilometers vertical, not horizontally. The mineralization in this area is, for the most part, within 100 meters of existing development. It will be accessed separately. So again, the current mine, we bring the ore out and waste out through the twin shafts. The Merrin mine we will access through the existing decline. We have already started development across to the small ore body over on the left there, which is Cutia South Upper. We should have production out of that in Q4. But we now have been able to quote an inferred resource for the zinc mineralization up here, which is on one of the following slides. We have substantial copper mineralization in this area, which we have not quoted a public resource for yet, but we have sufficient information to begin mine planning. So we're quite excited about this. This can add some reasonable incremental production. It will materially derisk the operation by having separate ventilation and haulage systems to the rest of the mine. And I think our team has done a good job to pull the resource and mine plans together for this. There is significant mineralization up there, and it's all shallow within -- starting within 200 meters of the surface. We like the idea of this is just additional incremental production for start. So we've got a large fixed cost base, more money. But more importantly and equally as importantly, I guess, is that as we've spoken to before, we have a small number of very high-grade stopes at the bottom of the mine that have an outsized impact on production. So it does lead to some volatility quarter-on-quarter, having some ore that we can pull from up near the top of the mine relatively quickly, separate to the bottom of the mine allows us to smooth out that sort of quarter-on-quarter volatility. We look at our annual production and we go overall on annual, we always come out where we say we'll be. But quarter-to-quarter, we do get some volatility driven by those small number of high-grade stopes. This will allow us to offset that and I guess, smooth out some of that sort of single-mine risk that people have sort of spoken about. We've got a little sort of image there on the right side. We can access this through the existing decline and more than likely eventually a new decline out to the side. But this is right near infrastructure. We can mine it pretty quickly. You can see in the 2 different colors there, the zinc loads and the copper loads. Again, we've quoted a zinc resource. We've not quoted a copper resource up there, but clearly, we have a block model for it. So coming on to the broader resource and reserves. Now last year, we had a massive increase. And so I'm not sure we're going to sort of double mine life every year. You can see there that our resources have gone up a little bit. We have increased the reserve life by one year. So we've replaced everything we mined over the first 18 months. And we've added another year to reserve life. So we now have a 12-year mine life on reserves. You'll also note, we put it in the detail of the press release we put out. Grade has gone up slightly in the resource through additional drilling and grade has gone up slightly more in the reserves as a combination of that in-situ grade increase, but also dilution control and changing the modifying factors. We did our first new reserve last year for a very long time at the mine. We probably went a little bit heavy on the dilution that was included in the modifying factors. We've honed in on sort of what did we actually get in the last year. So our reserve grade actually is about 3.44 now, which compared to, I think, 3.23 last year. So overall, I think a pretty good result. All the ore bodies are open, mostly up and down. We have lots of mineralization in the measured and indicated category not in the reserves yet, over 200,000 tons of contained copper at 5%, 5.5% copper. So there's a fair bit of work going on right now to see what we've got to do to get that material into a reserve. And so our focus has been for the last year, really sort of upgrading the quality of the resource, upgrading the M&I, increasing the reserve, and now focusing on this sort of Merrin Mine at the top of the operation, which gives us some opportunity to pull some metal out in a relatively short space of time. So again, if you take the midpoint of guidance for 2026, it's about 50,000 tons a year. We've clearly said in the press release we put out under the SK 1300 rules in the U.S., we are not allowed to put non-reserve material into our guidance. Clearly, that material at the top of the mine and the Merrin Mine is not in reserve yet, but we feel very comfortable about going and mining that stuff. So I would think that you can sort of see we expect to produce a bit more than 50,000 tons of copper, and we have not put the zinc on there that we intend to be mining and trucking up the road to the Endeavour processing plant 40 kilometers to the north of us. We have signed a zinc tolling agreement with that mine. And so I think based on their public disclosure, around the middle of the year, they should be up and running there. And we think towards the end of the year, we'll be in a position to send them some zinc ore up the road. So guidance, as I said, we haven't changed our official guidance here for this year. The range was relatively wide. So top end of the range is 48,000 tons of copper. Again, the zinc is inferred, is not in reserves, so I can't stick the zinc in there, but we are going to be mining some zinc. And grade has increased for the range for this year is about 3.8 to 4. If you went back to last year's technical report, the grade was 3.5, 3.6, I think, from memory. And that's a combination of, again, better dilution control, better grade in the resource as we drilled it out. And better sequencing of stopes. And then going into 2026, again, we see the grade, again, elevated to where it was last year in the plan, but sort of dropping down a little bit. And the top end of the range there at sort of 53,000 tons of copper, but no zinc and no production at all from the Merrin Mine actually. So look, I think we can show some pretty good organic growth here. Across the bottom of the mine when the ventilation project is in place across the Merrin Mine, I think we can basically fill the processing plant, give or take. And so the best IRR we can find right now for our shareholders, apart from the debt that Morne will talk about, the best IRR for us is to develop what we already own. We think we can get a pretty good return for shareholders with very nominal CapEx. All the stuff is more or less within 100 meters of development. And it's sort of known. It's been processed before at the mine. metallurgy risk is low. And that's by far and away the best return we can get for shareholders. So that's really going to be the focus for us in 2025. So we're quite excited about this. I'm very pleased to sort of name it after Patrice. And I think that this -- again, I come back to the point about the quarter-on-quarter variance depending on whether in these big high-grade stopes or not in them. We do want the ability to smooth that out a little bit. Again, the March quarter, again, if you refer to the press release, historically, the March quarter is a typically softer quarter in the year. We saw that pattern last year. We're going to see that pattern again this year. So sequentially, the March quarter will be a bit weaker than the December quarter, and it will be the softest quarter we have during the course of the year. And as that Merrin Mine stuff starts coming on in Q4, we expect to see a reasonable tick-up in production as we get towards the end of the year. So again, we're pretty happy about this CapEx, we've given guidance here. So last year, we spent, give or take, USD 50 million of sustaining CapEx. This year will be between USD 40 million and USD 50 million and in addition of between USD 20 million and USD 25 million of growth capital, which is really the Vent project and that Merrin Mine spend. So moving on to the next slide. I'm going to hand over to Morne Engelbrecht, our CFO, and he can talk to you about the financial metrics.

Thanks, Mick. Good evening, morning, everyone. I'll be taking you through the following 4 slides covering the 2024 financial results, which was released today in the form of the Appendix 4E and the annual financial statements. I'll first start by recapping our balance sheet position and cash flow waterfall for the year. So on Slide 11, the balance sheet is in excellent shape, and we are looking to further simplify it with the repayment of the facility as soon as the refinancing process is complete. Overall, as noted previously, we have significantly delevered MAC's balance sheet by reducing our net gearing by over 60% to a company record low of net gearing of 15% as at 31 December, which is only sort of 0.8x underlying EBITDA for 2024. So a very comfortable position at the moment. We also have a very healthy USD 172 million in cash and cash equivalents or around AUD 276 million, which is up over 400% since the end of 2023. This is further supported by an undrawn revolving facility of $25 million, outstanding QP receipts of $6.5 million, unsold concentrate amounting to about AUD 5.5 million, and the investment in Polymetals, which has done really well, amounting to about AUD 6.5 million at 31 December. So this brings our total available liquidity at the end of December to USD 213 million or AUD 340 million as I said, at the end of December. As you know, the balance sheet was further boosted by the completion of the successful equity raise. During the fourth quarter of around AUD 150 million or USD 103 million before costs. As announced in December as well, we did reach an agreement with Sprott to repay the mezzanine facility at MAC's discretion from the 1st of January 2025. To this end, we are in the process of completing our refinancing process, which will not only see us further simplify and strengthen our balance sheet through the retirement of this debt facility, but also provide us with much lower debt cost, ongoing debt cost going forward. So with the new facility, we're hoping to save around USD 14 million of interest per annum. The aim of the refinancing will also be to extend the senior debt facility, provide a deferred repayment schedule, and more flexibility with increased with the increase of our revolving facility as well. So as soon as we conclude this process, we will definitely make a further announcement to the market. So in summary, MAC has got an excellent balance sheet, very strong mining position, the best position since the acquisition of the mine. And that obviously gives us great flexibility to drive our organic growth agenda, as Mick outlined, in terms of the Merrin mine funding the Merrin mine as well. Moving to Slide 12. Moving on to the all-important cash flow waterfall. So there are a few key drivers to keep in mind that impacted cash for 2024. Firstly, we again have a healthy free cash flow from operations after sustaining CapEx of around USD 121 million for 2024, which not only form the basis for deleveraging but also will form the backbone of our funding going forward. It should be noted that due to delayed shipment at the end of December, we made a sale of concentrate at port, which were recognized in cash, but not able to be recognized in the free cash flow for operations nor revenue until that shipment went in January. Secondly, we repaid about USD 57 million of our senior debt in 2024 with that senior facility now sitting at around USD 158 million. And as I said, net gearing at 15%. The third point I wanted to make on this slide here is that we paid interest of around USD 38 million for 2024 in cash with the refinancing that we are looking to complete in the not-too-distant future now. That will reduce by that $14 million per annum, as I said before. The other key element in the cash flow notice that around $120 million of cash outflow for 2024 was related to once-off sort of cash payments. So that related to the settlement of that deferred consideration to Glencore and then also the stamp duty. So again, overall, in a very healthy balance sheet position, and we will further strengthen that with the repayment of the mezzanine debt facility, which will drive significant cash interest savings and further simplify our balance sheet and P&L. Going to Slide 13, looking quickly at the financial results now. Look, it's not really helpful to compare to 2023 results to 2024 because obviously, 2023 sort of covers 6.5 months of the year. But overall, everything has moved in the right direction. Most importantly, our underlying EBITDA margin increased significantly to almost 50%, driven by increased production and obviously, that lower C1 and total cash cost that we've reported as well. So overall, our statutory net loss after tax is $70 million, which has obviously been very heavily impacted by noncash movements in fair value for the financial instruments of about USD 81 million, which has mainly been driven by the increase on the copper price over the year and then also the extension of the mine life compared to 2023. It should be noted that some of the volatility will drop out because we redeemed those private and public warrants during the year as well. So that will reduce that volatility in that fair value adjustment going forward. So overall, record revenue and underlying EBITDA of $168 million under MAC ownership with a very healthy underlying EBITDA margin of almost 50% and converting about 72% of that to cash flows from operations. Moving to Slide 14. We provide a breakdown there of just our statutory net loss and the reconciliation there. You will note the impact of the noncash elements there on the earnings impacted by about $75 million of interest expense there, $75 million of finance cost, there's $38 million of interest cost. And then we've got realized hedging losses of $12 million as well that's recorded in there with the remainder made up of the streams and nonrecurring interest cost on the Glencore deferred settlement as well. And with that, I'll hand back to Mick.

Thanks, Morne. So I think the company at the end of '24 was in a vastly different position to the company mid-'23 when we bought the mine. I think we feel pretty good about the way the business is running. You can see here our production trend, we feel very comfortable just given where we ended up in Q4 in terms of getting to our midpoint of guidance. And again, that's without the Merrin mine, which clearly is not going to be negative production. Cash cost, again, we had a strong cash cost result. We've always sort of talked about having a target of around USD 1.50 a pound C1. I feel quite confident of getting there. It would be lovely to have some byproduct credits from some zinc to drive that down a bit further like a few of our peers do. And net gearing, we ended the year at about 15% net gearing. We've got a gearing range there of sort of 0% to 20%. I like no gearing. But the facilities that Morne has been working on to put in place will incorporate a fairly sizable revolver that we can use as we need. It will also give us some flexibility for additional mine growth internal funding if and when needed or to eventually start looking at things like sort of shareholder returns and the like. So yes, I think the business is looking pretty good compared to where it certainly was. Our goals for this year is, again, consistent, safe, and low-cost copper production. We want to deliver our organic growth projects, open up the new Merrin mine. Again, that will give us a better IRR than anything else we can do. Obviously, taking out the higher-cost debt within the stack is a guaranteed return. And so that's sort of happening fairly soon and maintain balance sheet flexibility to support our growth. But again, I think for this year, we're very focused on delivering our organic growth projects. We see an ability, we have a large processing plant with a lot of excess capacity. We do now actually now that we have some resources for that stuff in the Merrin mine. We actually have a pathway to be able to open that stuff up and to sort of get going towards filling that mill finally. Again, we do see a fair bit of volatility quarter-on-quarter between production. It's lovely to have 8% stopes. They're great days when you're in them, but you don't have them every single day of the quarter. And so having some additional sources of production allow us to smooth that out a little bit. We feel very comfortable with our annual guidance. But obviously, month-to-month, we do see a fair bit of volatility in that copper production, right? So again, bear in mind, absolute production growth, more cash flow, but I think equally as importantly is the ability to smooth those quarters out. And with that, I think we've sort of gotten through the bulk of the information. Happy to turn it over to any questions from anyone, and we'll open the floor up to questions.

[Operator Instructions] Your first question comes from Daniel Morgan from Barrenjoey.

The first question is referring to Merrin, is there any copper resources from Merrin, which sit within the total resource? I think previously, you've had QTS South Upper resources. But I guess I'm referring mainly to the bit that is not QTS South Upper if that makes sense.

The answer is no. So there's a very small indicated resource up at the QS South Upper. The significantly larger portion over sort of 500 meters vertical, we have an internal resource. The assay data is relatively old. And so the reason we can't quote it as a resource is we don't have the assay QA/QC certificates predominantly. So the answer is no. We have a resource. We have sufficient information for us to start mine planning. The capital hurdle on mining that is very small. And so we are confident enough to go and start mining that. But that is why it's not sitting in the reserve, and that is why it's not sitting in the guidance.

And I guess related to that, on Slide 10, you intimate that the growth CapEx numbers you've given the market include CapEx for Merrin. Is the Merrin CapEx, is that significant? And it looks like we've got the capital cost to get Merrin online, but obviously, you haven't given us the benefits of that yet, which I presume will come at a later point.

Yes, that's correct. So we're just working through some plans. So there's a couple of options. One is we could go and mine some stopes quite quickly from more or less just near existing development, and you're talking of a few AUD 2 million, AUD 3 million to get into a sort of thing. We could go the other way where we sort of elect to go to ramp up faster, but that's likely to be sort of a few couples of tens of millions of Aussie dollar type sort of thing, which would be decline off the site at the 2 level, new vent rise, which would allow us to ramp up much faster. But it's I don't know, it's in that AUD 20 million, AUD 30 million sort of thing. So the reality may be somewhere in the middle, something, I don't know. But it's in that sort of order, right? It's not large amounts of capital.

Yes. And so I mean, referring to Slide 8 and that diagram you've provided, you've got a new decline in there in the red on the right. Is the reason for the location of that decline is the resource opportunity, i.e., the zinc and the copper stopes that you've outlined there, would they impair the old decline? What's behind the new decline decision?

Well, I haven't made the decision yet, but I'm just showing you a couple of endpoints of the spectrum of what we could do. I don't know whether you've driven down there, but we've got a narrow point in the existing decline, I don't know, 300, 400 meters down the hole that you need to bypass if you're going to haul ore up there. So we have some stopping areas that are well above that, that we can get started on. But if we're going to develop it as a full mine, you will need to bypass that. So the question is how much of a bypass you are putting in and how much of extra event do you want to get down that decline in order to ramp up production faster. So it's a bit of a work in progress. We've got 2 endpoints. I guess that's the other reason I'm not giving you guidance apart from the not-in-reserve. But yes, the 2 endpoints.

And just the last question on Slide 8. I know it goes down to 600 meters below the surface. And I think Merrin is defined as down to 900. Is there conceptually opportunities in that last 300 meters as well?

Yes, we haven't done the resources for that lastly. Sorry, I would say the zinc resource that we've quoted isn't all of the zinc mineralization up in that area, but we have enough to sort of make a mine plan and get started.

Your next question comes from David Radcliffe from GMR.

So a couple of more questions on that theme with me. So Teck and Glencore have recently published some pretty positive charts on the zinc market. So you can definitely see the optionality there. But in terms of the value per tonne of copper ore versus zinc core, the zinc ore tolling cost, and then the spare capacity in your own plant, are there higher grade zinc stopes that can compete with maybe putting through some additional tonnes of even lower-grade copper ores at Merrin? So how do you think about that in the planning?

Well, I'd like to take it all is the short answer. The zinc grades are quite high. So we're looking at sort of 9%, 10% zinc, a couple of percent lead. And because that's not going to go through our plant, they ripped out the zinc circuit, I don't know, in the 1980s. So that zinc ore will get mined and get trucked up to Endeavour, the polymetal zones. And so copper, we think about margin as opposed to grade. So 2.5%, 3% copper dirt up near the surface, that's a pretty short haul and easy mine is if we've got spare capacity in the plant, we should be putting that through as much as we can. I must admit I haven't actually done a comparison of the 2 because we've sort of looked at mining both the zinc and the copper. I guess at some point, if we get to a point we're having to pick one of the 2, we'll pick whichever one has got the best margin for us.

And then just on picking up on something you said there. I mean, historically, the Western system has had quite a lot of lead in it. But no lead grade was reported today. So is that from just lack of assays or it's not there? How should we think about that?

In the zinc load. It's in the press release, somewhere in the press release there, but I want to say off the top of my head, 1.6% lead, I think from memory was the number. It's relatively much more rich in zinc than lead. But there'll be some tolling agreement we have with Endeavour is they'll produce a zinc con and a lead.

And sorry, lastly, then just to kind of Dan's question, trying to sort of quantify how much of this current inferred resource for zinc is representative of, I guess, what you see as the potential because I guess we can't see from the diagram how much is sort of encapsulated within that. And maybe when you might think about is there a time line for actually putting out some zinc reserves?

Well, we'd like to try and do it during the course of this year because we're going to mine it. Yes, I think we'll give you some info. But like I think we should be able to mine 150,000, maybe 200,000 tonnes of this material a year at 10% zinc type sort of stuff, a couple of percent lead. That's why there's obviously much more tonnage than that, but we'll try and restrict it to a higher-grade core, I think. Cutoff grades are a fair bit lower than that, but we must try and buying the better stuff first, I think.

Your next question comes from Samuel Catalano from Wilsons Advisory.

Mick, if I could just explore a little bit your guidance. So you've been very clear on the upside potential out of Merrin to current guidance figures. But just on the guidance that you do have, so you mentioned in your comments that the grade for this year's guidance that corresponds to this year's guidance has gone up to 3.8% to 4% from somewhere around 3.5%. So let's call that a 10% increase roughly in grade, but you kept your overall production guidance flat. So is that you being conservative? Or have you sort of reassessed throughput figures as well?

Probably like what we're actually seeing in the mine is we're mining less tonnes, higher grade for the same metal or a little bit more metal is sort of [indiscernible]. Ore tonnes may be a bit less, but it's the same metal, right? Like it's ore tonnes a bit less, grades a bit higher.

Sure. So unit cost should be a bit lower, all things being equal?

Yes, that's right. Yes, that's right. And look, it's a range. It's a pretty wide range. So maybe this time last year, we were sort of giving you a range and maybe we're coming in towards the bottom of the range and maybe we're not coming in towards the bottom of the range now.

And just to clarify, I think in your answer to Dave's question just before, were you suggesting potentially as a rough order of magnitude, 150,000 to 200,000 tonnes of zinc-bearing ore is what you're thinking in terms of order of magnitude?

Yes. The planning engineers will tell you can do more, but I think that's a reasonable sort of reasonable range. The Endeavour mill has got plenty of capacity for that. If you look at his public disclosure, I think he should have it up and running midyear, maybe a little earlier, you have a bit of time to sort of troubleshoot. I think that's fair. So we're hoping to get some of that out by Q4 of this year and then really get going into it next year. So again, I think it's a useful byproduct credit for us, some decent cash flow. And if we ever get to the point we're having to pick or choose copper or zinc ore, I guess we'll just take the stuff that gives you the best margin.

And the mining cost per tonne up there wildly different from lower down in CSA?

It will be cheaper because you got so much quicker to get to it and nowhere near as much ground support and not as much double handling. It's probably slower. We're going to have to be like we're going to be drilling up and around that area as well. So that will be a negative. I would imagine it would be somewhat cheaper than what we're currently mining. I think we're at USD 75 a tonne in Q4 for the overall mining cost. I would have to -- I'm not going to give you the exact number, but if I net-net everything out, it's definitely got to be cheaper than that.

Your next question comes from Ben Lyons from Jarden Securities.

Just like to get a feel for the capital pipeline as we look into calendar '26, please, Mick. Obviously, you've got the ongoing vendor projects, which will carry through into next year. Just whether there are any other major projects to bear in mind as we sort of cast our mine forward?

Well, we haven't given guidance, but the short answer is we sort of dropped stuff off. So in this year, '25, we're executing the Stage 10 tailings lift. That's about USD 12 million in total. I don't think we spent $2 million or USD 3 million last year on it. Once that's completed by the end of Q3, early Q4, so I don't know what are we spending this year, maybe USD 9 million on that this year, give or take. That's sort of the end of that. We then have tailings capacity for 2030, so that will drop away. Obviously, if we start producing -- like I can't produce a lot more copper and zinc with no extra capital. So there will be a little bit of marginal sustaining capital up in the top of the mine in the Merrin mine, but it won't be that much. It won't be USD 9 million. And then the growth capital, I would think that will sort of gradually tickle down. There's a fair bit of spend this year on that Bent project as well in there. So yes, I would sort of expect to see sustaining capital trending down next year, maybe by $5 million, and growth capital flat to down a little bit, I would think.

Your next question comes from Eric Winmill from Scotiabank.

Just looking at some of the year-over-year cost comparisons, I see like energy cost is up quite a bit. Also, contractor's up a little bit. How do you see those 2 line items shaking out into the year ahead?

That might be a question for Morne. Do we have that? I'm not sure we have that in the detail here, but I'll let Morne handle that one.

Yes. No, look, from a -- in terms of the costs you sort of mentioned there, Eric, the power cost, the power cost has been very variable. So that contract we sort of inherited from Glencore when we bought the mine, and that's a spot contract on buying power on the market. So in the East Coast of Australia, it's a pretty volatile market. So what we've been doing is sort of looking to hedge that. So we've hedged a fair amount of that coming out to the contract, which is in sort of June of next year, which we will then sort of renegotiate that and try and enter into a fixed price contract. But there has been some sort of volatility during the year, especially in that sort of March, April, June sort of period, where that's contributed to a bit of an increase in cost for 2024. But for 2025, like I said, we've hedged out 80% of that volume for the year or most of it already. So that should actually come down for 2025 from that perspective. And then contractors on the contractor side, we have been going through a bit of a process. And I think Nick has spoken to this before. Initially, when we bought the mine, we reduced the numbers from about 700 to 500 employees. And then that sort of reduced to about 450, 460, which is probably a bit low to where we want to see numbers. So 500 is probably that sort of running rate. So during the year, some of those positions were sort of filled by contractors while we then get more permanent employees to fill those roles at obviously a bit of a lower cost as well. So again, for 2025, that should come down. And going forward, that should stabilize more so.

Yes. I think on cost control, again, C1 has come down to $1.66 a pound in Q4. I think we've had a pretty good effort given the backdrop of cost escalation in the Australian mining industry, particularly the West Australian mining industry. We locked in a 4-year wage deal in November at 3.25% per annum for the bulk of the employees. So that's sort of locked down our biggest cost. Our second biggest cost is power. And as Morne said, we're hedging that now. So again, not trying to get the lowest, lowest possible power price, but we're trying to hedge out the extreme spikes. There's probably a bit more room to go on absolute cost. But really where we are now is the biggest bang for our buck is going to be about growing the production line. And so that's what we're doing and growing it through cheap add-on type sort of in the mine type expansions. That will give us the best bang for our buck. We've got so much of our costs are fixed, that actually will give us a fairly substantial cost benefit on a unit basis.

Your next question comes from Paul Hissey from Moelis Australia.

Maybe just a question for Morne first, a little bit specific around freight or transport. I mean the terms are notionally interchangeable. But just am I right in thinking that there's a freight charge or a freight credit you give up to your off-taker, and that's what we see recognized effectively as an expense at the revenue line? And then there's additional transport costs, is that transport of the con from the site to the port. Morne, are you just able to give us a bit more granularity on the distinction between those 2 things, please?

Yes. No, we've got -- I mean, from our site to the Newcastle port, I mean that's the cost per tonne that we move from the concentrate from site to the port. And then from obviously, in terms of going on a ship to the delivery of -- to a market, that's obviously another cost to us. And then there's the normal TC/RCs that are offset against the revenue that Nick has referred to previously, that's reduced by 70%. So you get the combination of those costs that are reflected either as a net revenue or as a separate cost as the freight cost.

Yes. Just to be clear, though, the shipping cost is netted off against the revenue and the rail cost is taken as a cost as a traditional expense, yes.

Yes, separate cost. That's correct.

And just I guess, perhaps a bit more of a high-level question for you, Nick, just around -- I mean, clearly, it's frustrating that you can't incorporate your additional copper tonnes from the high levels of the mines because you don't have a reserve yet. I guess I just wanted to ask you, I know that MAC has been borne out of the SPAC listing in the U.S., but still do you think that listing still fulfills its purpose? Or is it more of a pain than you get benefit from it? And what might that mean for the future of your sort of dual-listed structure?

Yes. Look, good question. The reality is that 70% of our liquidity is all on the New York line. I'm pretty sure the New York line sets the price. And again, we're in a few indexes over in the U.S. that have bought substantial amounts of stock, right? So the wisdom when we did the ASX listing was that all of the stock would move to Australia, all the liquidity would be on Australia and that U.S. listing would become irrelevant. Well, the reality is actually, yes, we've listed on the ASX. We've raised a bunch of money. 70% of our liquidity is in the U.S. still. And so what we found is some shareholders want to hold the stock where there's the most liquidity. Maybe that's the rules or that's what they just like to do. So actually, we've seen some stock move back to the U.S. line. It's fully fungible. So yes, if it had worked out the way that everyone sort of indicated it would, and actually, I thought it would, then yes, that U.S. listing would be probably not very relevant, but that's not actually the case. So for now, we're dual-listed. And unless something changes, I think that's likely to be the case.

Your next question comes from Daniel Morgan from Barrenjoey.

Mick, I thought I'd come back around. Just probably following up from that point, I understand you've got QA/QC issues on resource and reserve from very high up in the mine in the Merrin piece. But you also are very confident enough to look to mine it. It appears you're a bit hamstrung by SEC guidance rules when it comes to guiding on this. Just wondering how will this evolve in news flow, i.e., will you be doing more work on drilling and assays to get into a position to declare reserves in the upper portions of the mine in Merrin, and then that would logically give you a potential upgrade if appropriate later this year? Or will Merrin be a mining area where it will be hard to perpetually give guidance under SEC guidelines?

No, I think we'll -- our goal will be to sort of switch some of our drilling. Well, in fact, we have switched our drilling to be drilling stuff up near surface. So of our exploration spend. I'm just going back to see if I can find -- so on this slide that I've shown here if we haven't started, it will be starting in this week. There's a small deposit called Pink Panther, which is right up at the very top there, just off to the left of what is QT South up that little block there. We're drilling that from service because the plan is to push the decline on from there and go and mine that thing as well. We'll then come back and actually probably from underground, I suspect, drill out some of the zinc and copper stoping areas in the Merrin mine. Once we get a sufficient number of sort of new drill holes with new QA/QC on them to allow us to sort of then upgrade the classification. It's really about classification. It's not about we're confident of space and grade and volume. It's just classification. Then yes, we clearly -- because obviously, I'd rather not have to tap the has around what we think we're going to mine up there. I'd rather be able to just come out and tell you what it is, but I can't. So yes, we literally got these resources the week before Christmas. And so we have moved pretty quickly to run through our optimizations to see what's economic up there and now we're looking at designs. And that's why I say there are sort of 2 endpoints on the design of what we can do. But I figured I might as well tell you what I know right now. And what I know right now is the capital hurdle is very low. So we are going to mine some of this stuff by the end of this year. And yes, I'd like to get a rig in there, and I'd like to be drilling it and then I'd like to be able to quoting it into an indicated or better resource and then seeing it into our guidance, absolutely.

And then just to be clear, when you talk about mining it this year, are you saying you expect to get a stope out of Merrin, not QTS South up or I'm referring just to the Merrin piece that's not QTS South? Will you have a copper stope out of there this year is your expectation?

I'd like to, probably a zinc stope first.

Your next question comes from Hayden Bairstow from Arden.

Just a couple of things. Mick, your comments around just the first quarter being softer. Obviously, when we look at this year from last year and the year before, it was at 20% of production or something last year. Is it -- are you talking about that sort of metric or more sort of it's a bit softer, but not quite as dramatic as it was last year?

Well, we haven't finished the quarter yet. But I think under 10,000 tonnes of copper for sure. All I can just tell you is that it will be weaker. We're very comfortable with our annual guidance. I'm letting people know that the first quarter will be softer. So when we put it out, I'm telling you ahead of time we're very comfortable for our annual production. Normally, we don't normally guide by quarter-by-quarter, but I'm just telling you so that it doesn't come as a surprise, but we feel very comfortable with our annual guidance.

And is that something that's just going to be ongoing every now and then you just had a softer quarter and then you'll be plus 4% for the rest of it and hence, the pathway to mid-50s is still quite relaxed in terms of how you get there?

Yes. Yes. Look, again, I've talked about the fact that we have a small number of very high-grade, somewhat sizable stopes that drive a lot of our production, right? It used to be something like the top 6 stopes were more than 1/3 of our production. And so just depending on where you are in the sequencing, that has a big impact on your quarterly production, right? And so as I said, Merrin mine, yes, I want more production out, but I also I want the ability to smooth that out a bit, so that shareholders can go, okay, we can sit here and say we can see the month-by-month schedule going out. We can see what the stope profile looks like. We're comfortable with our annual guidance. But shareholders like to see consistent -- same number every quarter, or shareholders like to see 50% increasing every quarter, but that's not going to happen. So yes, it will be under 10,000 tonnes of copper.

And then just on the Merrin stuff, I mean it's given as much as you can, I guess. But is there -- how do we split the volume here? Is it sort of -- visually, it looks pretty similar between copper and zinc. Is that right? Or is it more zinc in here?

No, there's about double the amount of copper resource tonnes as there is zinc tonnes, but the grade in the zinc is pretty high. And still open. We still haven't done all the way down. There's still another zinc lens to go, but we have what we have, and this is the time when we're talking about R&R. So we can tell you what we know about it. We know there's enough to go. We're going to go and mine this stuff.

There are no further questions at this time. I'll now hand back to Mr. McMullen for closing remarks.

Well, look, thanks, everyone. I appreciate it's a busy time for everyone. We're pretty excited about all the developments here. The team at site have done a really good job last year, and I think they can continue to execute pretty well through this year. And we're pretty happy. Our investment in Polymetals has done very well. I think he's doing a good job there getting this thing going up the road, gives us a great outlet for our zinc. And we look forward to continue to engaging with people, and we like to take people through the mine. It's a bit of -- we like to showcase it. It's a fantastic operation.

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