Metro Mining Limited (MMI) Earnings Call Transcript & Summary

Thanks, everybody. Good afternoon and welcome to the Metro Mining presentation. So I'm Simon Wensley, the CEO and Managing Director of Metro. Metro is an independent bauxite producer on the very well-known Weipa Bauxite Plateau. We are the only ASX-listed bauxite producer. We are cash-positive, and we are almost all the way through a transformational expansion in a strong and growing market environment. I'll encourage you to read this at your leisure, some important statements. So to the summary, why would you pay attention to me today? Well, amongst all the companies presenting at this conference, Metro is unique. We're not a project, we're not an exploration play. We're a production company, we're in the -- we are delivering a brownfield expansion right now. Bauxite is the original critical mineral. The only way to make the most important metal in the energy transition, primary aluminum. I'll talk a bit more about that in a second. The market is growing. We have locked in offtake contracts, which run for 4 years. We have 15 years of JORC reserve with additional resources on top of that. We are an operator with a simple flow sheet and are cash-positive. We are fully funded, and we have a low-risk brownfield expansion that is almost complete. And we have a highly capable Board and management team and an excellent and dedicated local workforce. Let me cover that last point first. We have a tremendously well-credentialed Board, all experienced in the mining value chain from the likes of Rio Tinto, Glencore, AMCI, et cetera. I have also built my team deliberately to bring the relevant experience and capability. They have delivered the turnaround in the company since 2021, delivered the financing and are now focused heavily on delivering the expansion. Our workforce has now grown to almost 350 people, and we are very proud of our indigenous participation currently running at around 32%. This is the foundation of the tremendous flow-on benefits to our communities in Cape York, Far North Queensland and to the Queensland state itself. So more about bauxite. So I disagree with Reg from before. My favorite mineral is bauxite. And the critical -- the IEA misses out aluminum in its analysis because it's too big to put on the same slide as all those other metals and minerals. It is the most important metal in the energy transition, far more important than lithium, cobalt, anything else that you might talk about. It is the biggest beneficiary of decarbonization, and it's used in lightweighting of vehicles, transportation, planes, trains, automobiles. It is the largest component of an EV battery after graphite, and it underpins the manufacture of all renewables. And that's over and above its intense use in construction, in food packaging and electricity transmission. Let's get to some numbers. So there's about 100 million tonnes of aluminum produced each year, and that's going to grow by 40% or 40 million tonnes of additional aluminum required by the end of this decade. But why is it set to growth? I've already touched on this, but let's see the numbers. 40 million EVs by 2030, that will transform -- the biggest growth areas you see on that chart, that will transform aluminum demand. 40 million EVs means 40 million EV battery packs in which aluminum can be up to 20% of the weight of each pack. The IEA says there will be 0 solar without aluminum. When you look at electricity grid transmission, people think about copper. But actually, aluminum will provide twice as much metal into electricity grids and transmission over the next 10 to 20 years. But this is already -- this sort of dream is already happening today. Here are -- here's actual Metro bauxite inside Tesla bumpers, iPhones, Mercedes wheel hubs, Tesla battery structures. And this is at one of our customers' showrooms. So there's actual Metro bauxite. This is not Intel Inside, it's Metro Inside. So no wonder there is record demand for traded bauxite. China will break bauxite import records for 3 years in a row this year. And there'll be an additional 50 million tonnes of bauxite required over the next 10 years, just in China alone. That's 10x Metro Mining that's had to be built over the next 10 years to satisfy that demand. This is partly driven by not only by the growth of the aluminum sector, but also by the structural and reduced supply in China. This is very analogous to the iron ore sector at the beginning of the 2000s, where you had top line growth from steel and reduced structural demand from iron ore mines in China at the same time. Our bauxite prices are reacting. Australian bauxite prices are up 25% since the beginning of 2022. So they're not down like most of those other commodities that Reg put up earlier. They're up 25%, and we're still only roughly at mid-cycle pricing. So there's still a long way to go. Okay. So how do we produce the bauxite? We have a simple and low-cost flow sheet. So I've got some cartoons later, but I thought I'd put some actual pictures just to bring alive what's actually happening in Cape York today. We have very little stripping of top soil and overburden, and then we conventionally mine down to about 3 meters using front-end loaders. We haul to the port using road trains. You can see one of our new Scania road trains pulling 4 trailers there, which will carry about 230 tonnes per consist. Our pits are between 5 and 22 kilometers from our port, our barge-loading facility, which you can see in the second picture. So they're pretty close to the coast. We screen there, we load the barges, and then you can see one of our tugs towing a barge out to sea. So we go about 20 kilometers into the ocean where we have a single floating crane barge with a high-capacity crane on board. So transshipping occurs at that point into ocean-going vessels, and you can see there a Capesize vessel being loaded. Like most commodities, grade is critical. Our mining tenements are in the world-class Weipa Bauxite Plateau. You can see there about 100 kilometers north of Weipa township. We have 90 million tonnes of high-grade alumina direct shipping ore within a resource base of 125 million tonnes and with further exploration potential throughout the plateau. Okay. So how is production going for 2023? After some focus maintenance and upgrade work in Q1 on the fixed plant, we started very well. And we consistently -- started well and consistently took out a lot of the variability that we've had over the last couple of years, and we established a steady-state 4 million tonne rate. So you can see the lower green line there, that's the 4 million tonne per annum rate. We stepped up production in Q3 to the 5 million tonne rate as new mobile equipment came online, and we supplemented the floating crane with smaller geared vessels. Then from September with an additional large barge arriving, we've been ramping up to the 6 million tonne per annum rate. This was achieved for the month of October, and we are on track to beat that in November as we sit today. Then over to Q1 next year, we expect that the new screen circuit will be constructed and commissioned. And our new offshore floating terminal known -- named Ikamba. Ikamba is the local indigenous Ankamuthi word for saltwater crocodile. So we have -- we will have finished refurbishment of that vessel. You can see it there in the dockyard in China. We should have finished that in -- sometime in December, mobilized to Australia, received regulatory approval and being commissioned by March next year. Here is the contracted offtake for the next 4 years or so. We're pushing hard to reach 5 million tonne sales this year, and we will have 6 million to 6.5 million tonnes of contracted offtake for next year. About 1/3 of that is fixed price and 2/3 of that will be market-related in a growing market. If production goes well next year, we should be able to hit the 7 million tonne rate with additional spot volume. Here is a high-level cost outlook, which was refreshed for the expansion final investment decision in May this year. You can see the economies of scale flowing through to the cost as we ramp up, and we get all of our expansion infrastructure in place. These costs are still in line with the 2022 feasibility study when considering inflation, including further optimization built into the scope changes that were built into the expansion between the DFS and the FID. Ocean freight outlook shows us leveraging our transshipping into an even greater strength versus our Australian neighbors and also Atlantic supply, which means an increasing competitive advantage with Guinea. I've also added the price deck which we used for the DFS, that lower dotted line, but also the actual achieved price from Q3 quarter this year. The top line is the price achieved for a couple of spot cargoes in Q4 this year, which essentially aligns with the market price on the slide shown earlier in the presentation, adjusted for Metro's quality and value in use. You can see the inflationary effect flowing into the revised projected 2026 cost curve from the CM Group in U.S. dollars here. The 90th percentile of a cost curve is usually where one might expect equilibrium market prices to be set. This has risen about $12 from the 2022 cost curve from when the DFS price deck was set. If we can achieve the cost laid out in the previous slide, then we will be at the bottom of the cost curve, which places Metro Mining in an excellent position to maximize margins and be resilient to almost any market downturn in the future. With the expansion on the cusp of being delivered, whilst my team and I are fully focused on this, I wanted to give a sense of organic options that we are looking at in the future. The NPV laid out in the feasibility study was $400 million for the 6 million tonne expanded rate. We've already talked structurally about higher prices structurally. And these will flow into the cash flow, providing additional margins. We will be building capacity to 7 million tonnes, so this is a low-risk move. And we are studying requirements to move to the 8 million tonnes, which is likely a combination of utilizing more of the year for operations and some minor debottlenecking. Our freight strategy has further upside through more elements like long-term time chartering, and we'll be recommencing exploration drilling in 2024 and working on deals that could bring additional resources to the portfolio. Lastly, we've had some external interest in our kaolin resource and have started doing some further drilling and test work this year to establish what would be needed to valorize this resource. The bottom bar is very indicative, but it gives a sense of what might -- what these initiatives could add subject to completion and approval. So in closing, we are the only pure-play bauxite producer on the ASX with 90 million tonnes of reserve. So if you want long-term upstream exposure to the most important metal in the energy transition, we are it. Our current market cap is below $90 million. Our expansion feasibility study said the company was worth $400 million at the 6 million tonne rate. We are now running at that rate, and we'll be implementing additional items in the next 4 months that will reduce costs, increase capacity and increase resilience. The market is much stronger than considered in the feasibility study. And there are a number of organic options which can be implemented over the next 2 years, which can take the value of our business much, much higher. 12 months ago, I stood here telling you what we were going to do. 12 months later, we've raised the capital and we've delivered what we said we were going to do, and we don't need any more money. So thank you very much for listening, and I appreciate any questions afterwards.