Sandfire Resources Limited (SFR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Sandfire Resources Annual General Meeting for 2020. Thank you for taking the time to attend. My name is Derek La Ferla. I am the Chairman of the company and will chair this meeting. As a result of the COVID pandemic and related travel restrictions, our annual General meeting is being held virtually this year using a combination of teleconferencing and an online portal for the purposes of voting and asking questions. As this meeting is being conducted as a virtual meeting, I would like to welcome those shareholders who are joining us online and ask that you please submit any questions or comments via the Q&A function, which can be found in the top right-hand corner of your screen. When you submit a question or comment, please identify yourself by entering your name, shareholder number and then typing which resolution your question relates to so that it can be addressed at the appropriate time. Questions, which relate to the general business of the company and are not otherwise covered over the course of the meeting, will be collected and addressed after the close of formal business. Please note that as the AGM is a meeting of shareholders, it is only shareholders and authorized proxies attending the meeting virtually that are able to vote and ask questions. May I now introduce the other members of the Board and management who are in attendance today: Karl Simich, our Managing Director and CEO; and my fellow nonexecutive directors, Robert Scott, Paul Hallam, Sally Langer and Roric Smith. Our company Secretary and Chief Financial Officer, Matthew Fitzgerald, is also in attendance, along with our Chief Operating Officer, Jason Grace. There are also a number of the company's advisers attending our virtual meeting today, and I welcome, in particular, Fiona Drummond, representing our auditors, EY. Fiona is available to answer questions regarding the audit at the appropriate time. In terms of the format of today's meeting, I will shortly deliver my Chair's address, and this will be followed by a presentation by Karl as our Managing Director. We will then proceed to the formal part of the meeting, including the tabling of the financial statements and putting the resolutions set out in the Notice of Annual General Meeting. Against the backdrop of what has been an extraordinary year at a macro level, I am pleased to say that 2020 has been a busy and positive period for Sandfire, marked both by a strong and consistent operational and financial performance and by significant change and renewal right across our business. This comes as we continue to make the transition from being a single-mine company operating in Australia, to becoming a global, diversified and sustainable base and precious metal producer. The tangible steps we have taken during the year have not just been at the asset level, but also in terms of our people, our culture, our senior leadership structure, our ESG performance and, most fundamentally, building on our purpose as an organization. The 5 strategic imperatives of executing delivery, establishing a sustainable production profile, discovery, empowering our people and capital management are critical to our future success. Our important corporate and strategic changes are delivering a clear road map for the future, which is now well understood across all levels of the business. I elaborated on many of these topics in our first-ever combined Annual and Sustainability Report, including the progress we made towards articulating a new sustainability strategy, creating a structured Board Succession Plan and reinvigorating both our Board Committee structure and Remuneration Framework to reflect how the business will grow and evolve over the next decade. Notwithstanding the considerable amount of work that has been undertaken at this important strategic level, I am pleased to say that the company also enjoyed another outstanding year as measured by more conventional operating metrics. Despite the global COVID-19 pandemic, Sandfire posted a record production and cost performance at the DeGrussa copper-gold mine for 2020, while maintaining an outstanding safety record. This, in turn, underpinned an excellent financial result and enabled Sandfire to maintain its unbroken record of dividend payments to shareholders. We also completed the acquisition of MOD Resources with the MOD team and Tshukudu assets in Botswana now fully integrated within the Sandfire group, made substantial progress in advancing these assets towards production and progressed an expansive exploration effort in Western Australia on the Eastern Seaboard of Australia and in the Kalahari Copper Belt in Botswana. In the United States, we received a final Record of Decision on permitting of the Black Butte Copper Project in Montana and recently completed a Feasibility Study for the Johnny Lee deposit. We also delivered an updated Mineral Resource estimate for the nearby Lowry deposit, which offers the potential to further enhance the economics of a future mine development at Black Butte. Our Managing Director, Karl Simich, will shortly provide further details on these important milestones and the exciting outlook for the group over the coming 12 months. To have achieved these outstanding results in a year that has been largely defined by the unprecedented COVID-19 health crisis is a testament to the quality of our asset base and the hard work and commitment of our leadership team and staff. I would like to commend everyone across the Sandfire group for their proactive response to managing the impact of COVID-19, which not only involved protecting the health and safety of our employees and contractors in Australia, Botswana and the United States, but also assessing and managing the potential impact of the company's supply chain and global customer base. I would also like to sincerely thank Maree Arnason, who retired from the Board earlier this year; and Rob Scott, who steps down at the end of this calendar year. They have both made a significant and greatly appreciated contribution to Sandfire's growth and development as an organization. I will say a little more about Rob at the end of the meeting. We also welcome Sally Langer, who joined the Board recently as part of the first stage of our previously announced Board succession program. Finally, my thanks also go to you, our shareholders, for your continued support. While the significant amount of hard work that has been put in behind the scenes over the past year is likely yet to be reflected in our share price, I am confident that the strategy which Sandfire is executing will bear fruit over the coming months and years as we develop new mines against the backdrop of strong forecast demand for copper over the next decade and beyond. Thank you, everyone, and I'll now hand over to Karl.

Thank you, Derek. Good morning, everyone, and good afternoon to you over East. I look forward to giving you an update with respect to Sandfire's activities over the past year and also, more importantly, to talk about the future of our business and as we see it. We have in recent times, as indicated to the market, reset our strategy and, as announced on the 1st of July this year, we talked about that. So I'll refer you to that. We've had an excellent 12 months of operations, and we have got some very exciting prospects as we move forward. We're seeking as a business to create value through opportunity. In the last 12 months, we've had record production and cost performance from DeGrussa and Monty. We have achieved production of some 72,000 tonnes of copper and 42,000 ounces of gold at record costs of USD 0.72 per pound. These are the best production numbers that we have ever seen and the lowest cost that we have ever seen in the last 8 full years of production, so a testament to the operation that is running very, very well. That's led to some very strong financial performance and an NPAT of $74 million and very, very strong free cash flow from the operations at DeGrussa and Monty of some $270 million. And cash at bank as at 30 June of this year was almost approaching $300 million, and as -- we have no debt as well. Through that process, we've been able to achieve earnings per share of nearly $0.43 and continued with the seventh year of dividends and paying fully franked dividends of $0.19 in the full financial year of '21. We're very excited about our new growth platforms. And particularly in Botswana, we are looking at a scale of operation that can be expanded to 5.2 million tonnes at what will be known as the Motheo Production Hub. We will talk about -- a little bit more about that in detail. We are -- it's imminent and we're about to complete the Definitive Feasibility Study for the T3 Copper Project. We have also made a significant discovery at the A4 Dome some 8 kilometers away from T3 and a maiden resource for that discovery and that will be released shortly as well. In America at the Black Butte Project, we have completed a number of major milestones in permitting, feasibility studies and the release of all reserves for one deposit called the Johnny Lee Deposit and what is significant about this is it's the first new hard rock mining permit that has been issued in Montana in some 26 years. So we are at the beginning of creating the value proposition in that jurisdiction, and we continue to develop that project. We also have the first inferred resources for the Lowry deposit some 3 kilometers from Johnny Lee, and there are a number of activities on foot at the moment that will continue to progress that project and look at enhancing the value of that project. And I'll talk a little bit more about that later on in the presentation. In terms of health, safety, environment, community and sustainability, clearly, it is critical for us to ensure that we operate in a safe manner and we look after the well-being of our people and our communities in which we operate. The TRIFR recorded rate for this year is down from last year to a figure of 5.8, so pleasing to see that reduction. We've had no material adverse environmental or community incidents. We have been able to secure almost 13,000 tonnes of saved CO2 emissions during the course of the year as a consequence of the very expansive solar energy array that we have at site, at the DeGrussa site. We've spent nearly $48 million in employee wages, we've paid taxes and royalties of some $94 million, and we've invested $600,000 in our community projects. Obviously, a large focus of our work ensures procurement locally: Australia, 76%; and Western Australia, some 70%. And we're very pleased with our new sustainability strategy and really making an effort in ensuring those 6 key elements with respect to our sustainability strategy pursued, ensuring that we work with our communities, work with our employees for their well-being, looking after water and natural resources and have strong stewardship in that area. And we continue to always push for lower emissions from our operations. We have responsible practices in everything that we do. And we have strong systems in our business that we are confident in -- on and that we can rely upon. Just to give you an overall snapshot of the business. Sandfire has a relatively tight capital structure of under 200 million shares. We have $300 million cash at bank as at 30 June -- as at September, sorry, and that number is continuing to rise with a positive cash flow at operations from the DeGrussa and Monty operations. We also had some approximately $70 million in relatively liquid investments as well. We do have no debt, and we have a market capitalization today of some $800 million, which, in my view, is very low and doesn't give full recognition for the inherent and underlying value of the quality assets that we have in our business. It will take some -- a little bit of time for us to see that realization come to the market. We do have 2 operating mines in Western Australia. We do have 2 development operations, one in Botswana at the T3 Project and also Black Butte in Montana in due course. And we are focused, in a general sense, in 4 significant exploration areas: the Greater Doolgunna Project in Western Australia, a significant ground holding and exploration activities in the East Coast of Australia, a major landholding in the Kalahari Copper Belt and also in and around the Black Butte project in Montana. To give you a sense, we have some 40,000 square kilometers under tenure. We are one of the largest tenement holders in Australia, probably in the top 10. We are the largest tenement holder in Botswana, and we will spend somewhere in the order of almost $50 million in exploration during the course of this financial year. Just to touch a little bit on the key imperatives within our business and the strategy. Our objectives are to create value through opportunities that come across our desk, and those 5 key strategic imperatives are to ensure we execute delivery, and that is basically delivering on the things that we do have inside our portfolio at this point in time, that is, optimizing the cash flow and operations at the DeGrussa-Monty mine that is looking for mine life extensions at that operation. It is to take Botswana into production and then to expand that. It is to take Black Butte in Montana into production and see if we can expand that. With respect to sustainable production profile, we have a 5-year target and aspiration to be producing some 150,000 tonnes of copper at benchmark cost profiles. In order to do that, not only is it important for us to develop the projects we have in our portfolio, but also to look at inorganic opportunities. And by that, we've been looking at potential acquisitions within our business. So we are active and very involved looking at those opportunities at the moment, if something can fit within our key strategic criteria for further development in our business. We will have a significant focus and looking to accelerate discovery, as I mentioned, some almost approaching $50 million to be spent in exploration in very significant and very prospective areas around what will be operating mining centers. We want to ensure that we align and empower our people to train them, support them, give them the freedom to operate, build on their capabilities, allow them to be resourceful people, independent and do all that within a very strong framework within our business, and draped over all of that is to ensure that we optimize our capital structure and make sure that we are fully aware of the markets, our funding options to ensure that we can enhance returns to our shareholders. If I just focus a little bit more now on our operations and the key projects, DeGrussa, obviously, has been an extraordinary discovery some 10 years ago, 11 years ago, taken into production inside 3 years and has been a tremendous cash flow producer for this organization. And let's remember, at the time of making that discovery, our share price was $0.04. It has delivered in spades. It has delivered in excess of 500 million tonnes of copper, substantial gold. It has produced revenue of $4.2 billion, almost approaching $5 billion as we sit and a free cash flow from those operations of around 50% on average, so in excess of $2 billion. We've returned, as we sit, almost $200 million in fully franked dividend essentially to shareholders, and our profits after tax cumulative are around $640 million. DeGrussa operations. It's a 1.6 million tonne per annum concentrator and it's fed by the 2 underground mines in DeGrussa and Monty. As we mentioned before, record production and cost this year. We're seeing some of the best operating results from our recoveries, both in copper and gold as well through this year, and the project really is humming. As we've moved into the next quarter that we reported on recently, the September quarter was, in fact, the best quarter we have ever had in terms of performance from a physical performance and a cost performance structure and some almost just under 20,000 tonnes of copper and operating at a C1 cost of USD 0.53 per pound, and today, the copper price is some USD 3.30. So you can see where these projects have the ability to generate significant margins. We're looking forward to a solid performance here throughout the entire year and, hopefully, touching towards the top end of what we've previously guided production at about 70,000 tonnes of copper and 40,000 ounces of gold. As you can see, it's -- from this slide on the bottom, it's been a story of consistency of 8 full years and costs that have dropped in every year, up until financial 2020. So it really has been a solid performance. The other thing worthwhile noting is that when we did start our operations at DeGrussa, it had a 7-year underground mine life. We have been operating for 8 years. We have got 2 to go. And essentially, if you put that in some numerical understanding, that is a 43% extension to the mine life since the time DeGrussa was discovered. So far, we've been able to achieve that. Obviously, clearly, we'd love to continue to extend that operations, and we're doing a lot of work in that area. As I turn to think about the area we are in and the district and the exploration efforts, we've got a considerable exploration effort in almost our 7 -- just over our 7,000 square kilometers that we essentially either own or control in the district around the Greater Doolgunna district that houses the DeGrussa and Monty mine. And essentially, we continue to work away with some vigor. So substantial ground holding. It has essentially a 90-kilometer strike, and there are 3 particular areas that we have made VMS discoveries, 2 economic in DeGrussa and Monty, and not economic at this stage, but more, well, was certainly a mineralized area. And we continue to work in a number of areas at the moment. In terms of our understanding of moving forward and looking to accelerate this discovery, we're refocusing our efforts -- renewed and refocused efforts in that regard. We're looking at deeper targeting mineral system element processes. We've got a number of structural corridors that we are pursuing, and we're really looking at, as we step back in looking at it from a basin-scale prospective area, applying new geological techniques and technology. And there are a number of areas that we're looking to explore that have not been explored before. So we continue to learn about the geology in the region, and we do still believe with extensive exploration budget of some $23 million in Western Australia in and around the -- in this Greater Doolgunna region, we're still very optimistic about its prospectivity to deliver further VMS deposits, and that is our #1 priority for the region. But whilst we've been doing that work, we have also been looking at the possibility to extend our mine life. And in that regard, during the course of this year, we've been spending a lot of time going back to our original project that took us to the region in the Old Highway Project, and we are presently in the process of a resource drill-out program. And we are expecting that the operations at DeGrussa will be able to, from the current known end of the copper operations, transition into a gold production scenario. Work is continuing on the -- developing those resources for Old Highway. We are also looking at the synergies and being able to blend that material with our tailings and essentially undertake a gold retreatment tailings project as well. So those studies are on foot at the moment. We expect -- and are looking positive. We expect maiden mineral resources for Old Highway and also the -- our tailings impoundment and, together with scoping studies, to be completed in the first half of calendar '21. Order of magnitude -- we would -- aspirationally, we'd love to achieve a target of some 5 to 7 years, and if possible, at some 50,000 ounces of gold as a sort of benchmark scenario, but that will be dependent upon what comes out of those studies. We may continue then to look at expanding our gold strategy in the region, given that we have such a significant footprint and given that there are other gold projects in the region, and maybe there's a way to collaborate with some other people in that region to enhance a greater gold strategy in the region. But let's also remember, our primary focus is also to try and see if we can find repeat VMS deposit like DeGrussa and Monty as a priority. So that is why our exploration efforts will continue because it warrants doing it and the potential results from successful exploration for VMS is significant, and we've seen how significant it can be because we've experienced it. I just want to quickly touch on the Black Butte project in Montana. We have made solid progress. We continue to look to add value to this project. It is a project that one needs to be patient and persistent, but the value is building. The important thing, clearly, as we mentioned earlier, having achieved Record of Decision, which effectively is the grant of a mining permit and it being the first one that has been granted in that region in 26 years, it really does mean it underwrites the beginning of creating and adding some value. Since the issue of the mining permit, we have been undertaking some early works at the project that are on its critical path. We will now, through the course of this year, work once -- now that we've completed the feasibility study for the project, look to -- work towards enhancing that study and where we can improve and create more value from doing things better or cleverer. We are undertaking an exploration for the first time. Previously, when we made the investment in Black Butte, we chose -- given the challenges with respect to permitting, we chose not to spend any money on exploration. And the reason for that is we did not need a bigger project that we could not permit. So our focus was to get the permit, which we have recently achieved. Now that, that has been achieved, our focus is to enhance and create the value. So exploration is being undertaken. It's the first time since we've been involved in this project, and we'll be targeting exploration in and around the mining lease as granted for extensions to the known mineral ore bodies, but also near-mine opportunities in around that area. So within that area, we have the Johnny Lee deposit, which was the only deposit, the subject of the feasibility study, but we also have, outside of the feasibility study, the Lowry deposit and also other geological opportunities, which we'll be pursuing. We will -- once we had achieved the issue of the Record of Decision, we did receive a legal challenge. We believe that legal challenge is of not significant merit. We will be dealing with that legal challenge during the course of 2021, hopefully. And during the course of this calendar year into next year, we look at making further key decisions with respect to that project and enhancing value. If I just flip to the next slide. Essentially, it's got a little bit of detail there with respect to the key criteria and results of that feasibility study, and we will be looking to enhance that, but it gives you the key figures in terms of a project at a reasonably good grade that can withstand an 8-year mine life, produce somewhere in the order of 23,000 tonnes of copper a year at a production cost of $1.51 per pound of copper, and produce free cash flow of some USD 500 million and an NPV pretax of $125 million. The capital cost estimate is about $274 million. So what we'll be looking to do is enhance those values, but still keep the project moving along on that critical path, which is critical to creating value. And just bearing in mind, patience and persistence is the order of the day in terms of trying to create value and resources often. And just to finish up on Black Butte, the reserves that have been determined for the Johnny Lee Project are some 226,000 tonnes of copper. That comes from a mineral resource of some almost 400,000 tonnes of copper, which essentially has been converted into resources of 226,000. So we'll be looking at seeing if we -- are there ways potentially to increase the conversion ratio of resources to reserves to enhance the value, but also the possibilities of somehow the resources at the Lowry deposit of some 200,000 tonnes is, at some point in time, converting those into minable reserves. And if we look at the project as we know it today from a resource perspective, there are some 600,000 tonnes of copper that sit in ground in those 2 key deposits and in multiple resources. So it is a scenario where that potentially, together with other exploration success, really can add value if we can enhance the economics of that project. So we'll continue to move the project along its critical path, and we're looking to report more fully in due course. Now I'd like to move on to our Botswana operations and the Tshukudu project. And really, it's been a significant highlight for our business since the acquisition of MOD Resources in the last 12 months, and even with the advent of the COVID-19 pandemic, we have had a significant push in Botswana. We've been doing a lot. It's not -- it's been challenging, obviously, in the environment, but we're getting very excited about the progress that has been made and what the prognosis looks like for our extraordinary strategic footprint in that part of the world, so very much the case of expanding horizons in Botswana in what is a substantial mineral belt. The definitive -- well, since the acquisition, we have been looking at putting together a Definitive Feasibility Study for the T3 project and that Definitive Feasibility Study is imminent. We hope to be in a position that next week, we will be able to release further information on a number of matters with respect to that Definitive Feasibility Study and other associated elements relating to Botswana. In that Definitive Feasibility Study, we have a base case of operations, order of magnitude of about 2.3 million tonnes, but the work that we have been doing at that time is to evaluate a larger production hub concept, not only from T3, but also for some -- from other satellite deposits in the region and all to be named as Motheo Production Hub. And essentially, the scale of potential expansion is order of magnitude graduating from a base case of 3.2 million, but up to 5.2 million tonnes as an expansion case, and actually, seeing if we can establish the initial footprint of the operations to enable a relatively easy, efficient and effective, stepping up to that greater production profile. So that is the work that is on foot and that we're seeking to finalize and, hopefully, be in a position to update you on next week. The expansion case would be looking at -- including the A4 resource, and we're looking to complete a resource and be able to announce that next week as well. And what we're really looking at doing is not only enhancing the grade of the core resource of T3, but also looking at the scale -- increasing of the scale, obviously, and improving economics, but also potential mine life extensions to what we presently perceive as being the situation. And in that regard, within a radius of some 30 kilometers around what will be the Motheo hub or T3 effectively are a number of other targets in A1, T3, T2 Western, T2 East, A27 and A13. And we're very excited and looking forward to getting in to being able to drill and explore those targets in the not-too-distant future. I just want to touch on, I suppose, Tshukudu and Botswana as an overview. And if we look at the slide presented here on the screen, this really is from the Botswana perspective and our investment and, I think, what will turn out to be a very prudent and wise investment. This is, as I say, the money shot. And to give you some sort of perspective, in the middle of the page there, you have that sort of orangey color, which is all the tenements we either -- we effectively control outright. There is a hard line there, and you'll see the distinction between countries of Botswana and Namibia, and we pick up -- we have picked up ground in Namibia as well to the extension of what is known as the -- that diagonal between the Northeast and Southwest is effectively the Kalahari Copper Belt. It's a substantial copper belt. It really is coming to the fore now as we speak. To the Northeast and in the gray is our neighbor, called Khoemacau that is, a private equity group out of London, essentially have invested -- by the time they get into production from the Zone 5 mine in the middle of next year, they will have invested some USD 1 billion to take that project into production. But to give you some perspective, they have done a lot of work over an extended period of time and essentially sit with resources in that gray area and the yellow stars in that gray area of some 500 million tonnes of copper at a grade of just over 1%, copper grade, and about 17 grams per tonne of silver. So to give you some perspective, order of magnitude, we are talking about not much shy of USD 50 billion in contained metal for our neighbor to the Northeast in ground that is probably -- that had more exploration on it. It was easier to discover. And our contention for the area that we have got, which is -- has had little in the way of exploration is probably it's better preserved geologically. It has had less erosion. It has been preserved by -- more so by a calcrete cover in the region, which probably has meant it hasn't attracted as much exploration historically, but now it is attracting exploration from ourselves predominantly, and we potentially have a significant ground holding with significant potential in the region. And as you look at those little dots on the page there, the brown dots, the blue dots, the green dots in one form or another, that is copper mineralization throughout that belt. There is copper everywhere. The key issue for any company here is to find economic concentrations, and that's the work that we'll be doing in this region. The extension of our strike of our tenements is almost 400 kilometers from Northeast to Southwest. And in its breadth, it's up to about 160 kilometers wide. So we're really excited about being able to control this belt. And it is a belt -- compared to all the other global scale belts in the world, it is the only belt at the moment in the world from a copper perspective that has an accelerating rate of discovery compared to other more mature belts. So we're really excited to be in such a dominant and controlling position. And I think with significant budgets and efforts that we're putting in at the moment, we expect to see significant results coming from that over the many periods to come. And we are, I suppose, hopeful that we'll have more than one production hub, probably multiple production hubs over that length and breadth. And our expectations, we would not be surprised, if there were multiple decades of production in that region. So very excited about that. And with a bit of luck, you'll get a lot more detail on that next week. Just running through -- just to give you a bit of a sense of it, we've got a schematic here of what our expectations for the Motheo Production Hub will be. In essence, the footprint and the foundations of these facilities will cater for a 5.2 million tonne operation. So there's additional investment and lateral thinking of being able to do that. And you'll see a couple of pink bits essentially on this diagram, and the pink bits will be the additional bits and pieces of equipment required to take this plant from 3.2 million tonnes to 5.2 million tonnes. And essentially, they are -- the first pink bit will be a ball mill and then potentially another tank and an extension to the concentrate shed. But other than that, essentially, everything will be built initially to be able to cope, being able to be at 5.2 million tonnes and, I think, will be a significant improvement in terms of timing to be able to do that and have cost efficiency of being able to go to that scale. So -- and we essentially have got a confident sense that we will have those resources to run that after some graduating period. Just to touch a little bit more on exploration near mine. The focus of near-mine exploration, you'll see the diagram there, you'll see a little circle around the T3 dome. To the left of that, you have the A4 dome, where we have 6 drill rigs running at the moment, doing further work in enhancing or putting together that resource. And you'll see to the top of the page, we also have the A1 dome and a number of other domes. Essentially, the A1 dome is looking very exciting. It's very similar-looking to the A4 dome. So we're looking forward to getting access from our local farmer and being able to get into that very soon as well to start drilling once we complete the A4 drilling program. And really, the focus around the T3 hub, where the facilities will be close to, is looking at other satellite feeds that we'll be able to bring in there. Initially, the focus will be for an enhanced grade because, obviously, if you can put the same tonnes through the mill, but at a better grade, it will create a much better margin and profitability. So that's the initial focus. The secondary element of that focus will be looking for additional tonnes to underwrite increasing scale to potentially look at mine life extensions. And the third element of our exploration portfolio is to look at major regional discoveries along and throughout the belt. And as I said, it's a substantial belt. So we've got a lot to do there. We will be -- our budget for this financial year, order of magnitude, is about $20 million. We have 6 rigs running, as I said, at A4 at the moment. And I think collectively, we have about 12 rigs running in Botswana and throughout the belt itself. We've also found that the use of airborne electromagnetics is an excellent tool, and we're looking forward to flying some additional electromagnetics in the region. And hopefully, that will help us pinpoint better some of these other targets. And there are numerous other targets that we need to follow up on. And as I mentioned, with respect to the A4 resource, 6 rigs are on there, and we look forward to -- this is a shallow, high-grade, vein-hosted copper mineralized body. Essentially, MOD had done some work there previously at a deeper level. We stepped back, lifted it all up and found some intersections at a higher level and, hopefully, they will substantiate putting in place an open pit operation there that can blend into Motheo hub. There's also still a great opportunity with these structural controls for mineralization deeper within those structural [ assaults ] and controls, and we'll be doing further work, not only at a shallow level, but also at depth to follow up and possibly looking at picking up mineralization like our neighbor has. Our neighbor has essentially an underground mining scenario of 2% copper, and we will be looking further afield now that we've got some understanding about this higher-level material and looking for potential at depth throughout the belt as well, but in due course. So that is where we are in Tshukudu. And as I said before, with a bit of luck, we look forward to being able to update you in much more detail next week with some luck once we complete all our work. So just to conclude then. In the last 12 months, it's been a record on a number of fronts in terms of our performance. And really, it's been year in, year out, really, over the last number of 8 years where we've seen that from a production profile. So really, a big thanks to all the people that do operate at DeGrussa and Monty to deliver what they have done for a long time. And everyone in logistics, support and back -- through the back office into admin in terms of the work that they've done has been sensational. We are putting in place, and we do have, really the foundation for a growing pipeline of some really exciting copper areas where the potential is significant. And we're looking forward to moving those forward. Development projects, we have 2. Botswana would be moving at a rate of knots to be followed in due course by Black Butte. And we are continuing with a significant expenditure that we are putting in, in exploration, is looking for organic success. And what I can say is that I've never known anyone to make a discovery without exploration. So we will continue to explore. And as we've seen in Western Australia, we've enjoyed that exploration success recently. We've seen a couple of junior companies become quite significant companies in De Grey and in Chalice, and we will continue also to be an explorer. And as I said, success can only come from putting in the effort, and we are putting in that effort. We have a very strong balance sheet. We have no debt. We do have some very strong partners that we can also do business with. Many of our customers are excellent people that we could potentially do things. So we are in a very strong position to benefit off the back of all the hard work that we've done and the relationships that we've built, and we are well and truly gearing up for the future and taking this company into the next chapter of its growth. So Sandfire has definitely commenced the transformation from a single mine company into a multi-jurisdictional, multi-asset, multi-mine operation. Thank you very much for listening to me, and I'll pass back to Derek.

Thank you, Karl. Let's now move on to the formal part of the meeting, which is to consider the financial statements and vote on the resolutions set out in the Notice of Meeting. I've been advised that a quorum is present, and I declare the meeting formally open. Now as well as permitted this year, a letter with the details of the notice of this annual general meeting and explanatory statement with mail to all registered members on 23 October 2020 and sufficient notice of the meeting has been given. Unless anyone has any objections, I will take the notice as read. Voting on all resolutions will be conducted by poll, and the company's share registry, Automic, will process the poll votes at the end of the meeting with the results to be announced to the ASX once they are available. I appoint representatives from Automic Group, the company's share registry, who have examined and prepared summaries of the proxy forms received, to act as returning officer and to conduct the poll. Shareholders in attendance that have already submitted a vote by proxy should note that your votes will already be counted towards the poll. You do not need to lodge another vote unless you wish to change your proxy instruction. Shareholders in attendance that have not submitted a vote by proxy and wish to vote on the resolutions being put to the meeting today can do so by following the instructions provided in the virtual meeting registration and voting guide released on the company's website and on ASX. Please note that the Automic online voting portal for our AGM is now open and will remain open until the poll is declared closed. Your votes must be submitted prior to the poll being closed for them to count. During the course of the meeting, I or the Company Secretary, may advise that a short pause is required to attend to administrative matters of the meeting. During this period, you will hear silence until we return to continue with formal business. I'm advised by the Company Secretary that 296 proxies have been validly received from shareholders representing 128,089,824 shares or 71.86% of the issued capital of the company. As reflected in the Notice of Meeting, I confirm I intend to vote all available and appropriately authorized proxies I hold as Chair in favor of each resolution. The minutes of the last Annual General Meeting held on 27 November 2019, are available for inspection by contacting the Company Secretary via the company's registered office. These minutes have been accepted by the Board as a true and correct record. Now the first agenda item is to receive and consider the company's financial statements for the year ended 30 June 2020, together with the Directors' Report and the Auditor's Report as set out in the company's 2020 Annual and Sustainability Report. The Corporations Act requires that the company lay the financial statements and reports before the meeting. The 2020 annual financial report of the company, including the financial statements and the Directors' and Auditor's Reports has been circulated to shareholders and I now table these documents. There is no requirement for members to vote to approve the financial statements, but you are, of course, welcome to ask questions or comment on them. And as mentioned earlier, Fiona Drummond, representing the company's auditor, EY, is available to take questions as well. I will now pause to check with the Company Secretary if any questions have been received on this item of business via the Q&A function.

No questions have been received on this item of business.

Thanks, Matt. We'll now move to consider the resolutions and vote by poll. Now as noted previously, if you lodged a proxy and wish for this to remain in place, you are not required to do anything. Shareholders can vote via the online portal. Importantly, shareholders are reminded not to click on next until you have selected your vote for all resolutions. It should be noted that Resolution 1 is a nonbinding resolution and Resolutions 2 through to 6 are ordinary resolutions, requiring a simple majority of votes cast by shareholders present in person, by proxy or representative and entitled to vote on the resolution. The text of each resolution and the proxies received in relation to that resolution will be on the screen as we work through the business of the meeting. Now the first resolution for today's meeting relates to the adoption of the Remuneration Report as set out in the company's 2020 Annual and Sustainability Report. Please note that key management personnel and their closely related parties, such as a close family member and any controlled companies, are not permitted to vote on this resolution unless they are doing so as an appropriately authorized proxy. Shareholders should also note that the vote on this resolution is advisory only and does not bind the directors or the company. Now on Resolution 1, the company has received valid proxies from 127,226,677 shareholders, representing 71.37% of the issued shares of the company. A summary of the proxies voted for this resolution is set out on the screen for you. I acknowledge that, based on these proxy votes, it appears, subject to the results of the poll, that the company may receive its first right against the Remuneration Report. The material new matter for 2020, in fact, financial year 2021, is our 4-year front-loaded long-term incentive equity plan. We have been very transparent in outlining our strategic plan for Sandfire's growth and transformation into a diversified international mining company and aligning our remuneration framework to that plan, which, in our view, will ultimately lead to the creation of shareholder value. We have also been completely open and highly consultative in our interactions with shareholders and proxy advisers around this matter. The Board has resolved to implement a 4-year front-loaded long-term equity incentive to tie executive awards to the company's full year strategic performance cycle and create a strong motivational and retention mechanism. This aligns with the expected time frame for bringing new major mine developments on stream as part of the company's development pipeline and will help to ensure that we retain the right people to deliver on this strategy at a time when competition for people in the resources sector is extremely high. While we understand that front-ended incentive plans are not appropriate for all companies, we have determined as a Board, with significant input and advice from independent advisers, that this is the most appropriate long-term incentive mechanism for Sandfire at this time to support this next chapter of the company's growth. It is pleasing to have over 70% of shareholder votes cast in favor of the Remuneration Report, and we have also received significant proxy adviser support for these important matters. We will, of course, continue to liaise with shareholders, proxy advisers and other relevant stakeholders on this matter in the lead up to next year's AGM. I will now pause to check with the company's secretary to see if any questions have been received on this item of business via the Q&A function.

No questions have been received on this item of business.

Thank you, Matt. Shareholders can now vote on Resolution 1 via the online portal, however, are again reminded not to click on Next, until you have selected your vote for all resolutions. I'll now move on to Resolution 2. Resolution 2 relates to the election of Sally Langer as a Director. Sally was appointed as a casual vacancy to the Board on July 1, 2020, and retires in accordance with the constitution and, being eligible, offers herself for reelection as a director. Sally has 25 years' experience in professional services, including as founder and managing partner of the management consulting and executive recruitment firm, Derwent Executive, where she set up and led the growth of the Perth office, servicing a wide range of clients, both local and national, and led the mining and industrial practice. Prior to that, she was a director at international recruitment firm, Michael Page, and a chartered accounting -- accountant at accounting and consulting firm, Arthur Andersen. Sally is considered by the Board to be an independent director. Sally commenced as a member and, from 1 December 2020, will chair Sandfire's People and Performance committee, with a focus on organizational culture, health and well-being, diversity strategy, remuneration strategy, Board membership, and performance and succession planning. The performance has brought a valuable skill set to the Board in the key areas of people and performance in an international setting. The Board, other than Sally, who is abstaining from making a recommendation, unanimously recommend that shareholders vote in favor of Resolution 2. It has been wonderful to have Sally as a member of our Board. On Resolution 2, the company has received valid proxies from 128,089,826 shareholders, representing 71.86% of the issued shares of the company. A summary of the proxy results voted for this resolution is set out on the screen for you. I will now pause to check with the Company Secretary to see if any questions have been received via the portal.

No questions have been received on this item of business.

Thank you, Matt. Shareholders can vote on Resolution 2 via the online portal, however, are reminded not to click on Next until you have selected your vote on all resolutions. We'll move on to Resolution 3. As Resolution 3 relates to my election, I will hand the chair over to fellow Director, Robert Scott.

Thank you, Derek. Resolution 3 relates to the re-election of Derek La Ferla as a Director, who retires by way of rotation and, being eligible, offers himself for re-election as a Director. Derek has been an Independent Non-Executive Director of Sandfire since December 2010. Derek is a corporate lawyer and company director with more than 30 years' experience. He has held senior leadership positions with some of Australia's leading law firms and a variety of board positions with listed public companies and not-for-profit organizations. Derek is Chairman of Sandfire and is also a member of the Audit Committee and a member of the People and Performance Committee. The Board, other than Derek, who's abstaining from making a recommendation, unanimously recommend that shareholders vote in favor of Resolution 3. On Resolution 3, the company has received valid proxies from 128,089,827 shareholders, representing 71.86% of the issued shares of the company. A summary of the proxies voted for this resolution is set out on the screen for you. I'll now pause to check with the Company Secretary if any questions have been received.

No questions have been received on this item of business.

Thanks, Matt. Shareholders can vote on Resolution 3 via the online portal, however, are again reminded not to click on Next until you select your vote for all resolutions. I'll now hand the chair back to Derek.

Thanks, Rob. Let's move on to Resolution 4. Resolution 4 relates to the re-election of Roric Smith as a Director, who retires by way of rotation and, being eligible, offers himself for re-election. Roric has been an Independent Non-Executive Director since December 2016. Roric is a highly experienced geologist with extensive Australian and international experience and has held previous senior executive roles with Evolution Mining and AngloGold Ashanti. Roric is the Chairman of the company's Risk Committee and is also a member of the Audit Committee. It has been a pleasure to have Roric on our Board, and his wealth of experience and insight has been invaluable. The Board, other than Roric, who is abstaining from making a recommendation, unanimously recommend that shareholders vote in favor of Resolution 4. On Resolution 4, the company has received valid proxies from 128,089,828 shareholders, representing 71.86% of the issued shares of the company and a summary of those results is set out on the screen for you. And I'll now pause to check with the Company Secretary if we have received any questions.

No questions have been received on this item of business.

Thanks, Matt. Shareholders can vote on Resolution 4 via the portal and are again reminded not to click on Next until we've dealt with all resolutions. Let's move on to Resolution 5. Resolution 5 relates to the approval of the Sandfire equity incentive plan for the purposes of Listing Rule 7.2 and for all other purposes. Passing this resolution will allow the company to issue securities under the plan to employees without taking up placement capacity under the ASX listing rules. The plan is designed to provide incentives to the employees of the company and to recognize their contribution to the company's success. A summary of the plan is set out in the Notice of Meeting. Now please note that any person who is eligible to participate in the plan and their associates cannot vote on this resolution. Further, a restricted voter who is appointed as a proxy will not vote and the company will disregard any such votes on Resolution 5 unless the appointment specifies the way the proxy is to vote or in the case where I have been appointed as a proxy for Resolution 5 and the appointment expressly authorizes me to exercise the proxy even though the resolution is connected directly or indirectly with the remuneration of a member of key management personnel. On Resolution 5, the company has received valid proxies from 128,089,828 shareholders, representing 71.86% of the issued shares of the company, and a summary of the proxy results is on the screen for you. I'll now pause to check if any questions have been received on this resolution.

No questions have been received on this item of business.

Okay. Shareholders can vote on Resolution 5 via the online portal. Resolution 6. Resolution 6 relates to the approval for the issue of options to Karl Simich, our Managing Director and CEO. Passing this resolution will allow the company to issue 927,703 zero exercise price options to Karl under the company's long-term incentive plan in a similar fashion to those already issued to our other senior executives under the plan. The options are only exercisable once they have satisfied the vesting criteria. The vesting criteria are linked to relative total shareholder return performance, absolute total shareholder return performance and increase in ore reserves and production scale. Details of the vesting criteria are set out in the Notice of Meeting. Now please note that Karl and his associates cannot vote on this resolution. Further, a restricted voter who is appointed as a proxy will not vote and the company will disregard any such votes on this resolution unless the appointment specifies the way the proxy is to vote or in the case where I have been appointed as a proxy for Resolution 6 and the appointment expressly authorizes me to exercise the proxy even though the resolution is connected directly or indirectly with the remuneration of a member of key management personnel. The Board, other than Karl, who is abstaining from making a recommendation, unanimously recommend shareholders though in favor of Resolution 6. On Resolution 6, the company has received valid proxies from 127,237,516 shareholders, representing 71.37% of the issued shares of the company. A summary of the proxy results is set out on the screen for you. I'll check with Matt now as co sec to see if any questions have been received on this resolution.