Sandfire Resources Limited (SFR) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Sandfire Resources 1H FY '23 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Jason Grace, acting CEO. Please go ahead.

Good morning all and welcome to Sandfire Resources December 2022 Half Year Financial Results webcast. Firstly, I draw your attention to the important information and disclaimer before we move on to our strategy and values. Over the last year, Sandfire's execution of our strategy has delivered an excellent portfolio of high-quality operating lines, development and exploration projects, and we have transitioned from being a single operation WA miner to being a genuine international copper producer. Our values of honesty, respect, collaboration, accountability and performance are key to Sandfire's culture and they guide our activities across every part of the business. When we consider that Sandfire is one of the largest copper-focused miners listed on the ASX, but there is an inevitable increase in demand for copper in the future driven by the global energy transition that we have a dominant presence in 4 mineral provinces that have excellent organic and inorganic growth opportunities that Sandfire has proven capability as an explorer, developer and operator of copper mines. And importantly, on the back of the MATSA acquisition and development of Motheo to a 5.2 million tonne per annum capacity, Sandfire is one of the few copper miners that has a firm production growth pathway over the next 3 years, growing to around 110,000 tonnes of copper and over 80,000 tonnes of zinc production per annum. If we look at group production for the first half, the company delivered strong operating performance during what was a transitional period for Sandfire, with a focus on continued optimization of the MATSA Copper Operations in Spain, the wind-down of the DeGrussa Copper Mine in Western Australia, and the final stages of construction of the Motheo Copper Mine in Botswana, which is now on the cusp of commissioning. During the period, overall metal production was in line with the company's expectations with copper production just over 48,000 tonnes and zinc production over 39,000 tonnes for the period. Lead, gold and silver production also remain in line with mine plans and guidance. Looking out to the full year, Sandfire is maintaining the previously stated group metal production guidance, noting that in line with the December quarterly update to the market, due to mine plan changes at Magdalena and the deferral of copper productions for the second half, we expect MATSA production for FY '23 to be at the lower end of the 60,000 to 65,000 tonnes guidance range for copper. And also due to the transition to oxide's stockpile processing at DeGrussa in mid-February, no further formal guidance is provided for DeGrussa.

The first half of financial '23 has certainly been about operational and also balance sheet transition. A number of these headline numbers have been pre-released with the December quarterly results, and I'll run through them here. Sales revenue of $431 million came from 46,000 tonnes of payable copper production and 33,000 tonnes of payable zinc production at a price of copper, $8,100 on average and zinc of $3,000 spot above those levels at the end of the period and also post that into January and also February. A pleasing operations, EBITDA as previously advised of around 40% margins. After depreciation and amortization and a number of other costs and international costs, I'll also cover some of those later on in the presentation. We've recorded a $27 million loss for the period. We are concentrating, of course, on not only the transition of the balance sheet but also the transition of operations. So as we continuing to optimize the operations at MATSA, we are, of course, building our new operation at Motheo in Botswana and looking at the wind-down and closure of DeGrussa in Western Australia. In Motheo, in particular, construction activities are nearing completion, the commissioning ore -- there is commissioning ore on the ROM Pad. And in fact, the primary crusher has been commissioned during the month of February. And the stock, we'll see later on in the presentation where Jason will cover some of the updates in terms of Motheo. And we expect first concentrate is scheduled for the first -- production is scheduled for the first part of the June quarter, which will be very pleasing for the company and the team to achieve. Our global opportunities remain, and we, of course, are very conscious of our holdings within 2 of the world's great copper belts. And we've recently announced some very pleasing results in terms of the San Pedro discovery extension of Aguas Teñidas, a new zone of copper and zinc mineralization just 100 meters away from existing workings. We're also -- we'll also shortly commence some drilling at Magdalena with some similar effects. The initial 400-meter strike length has been identified, and thanks very much to the MATSA geology team on building their geological knowledge of the area, an untested prospective horizon around Aguas Teñidas mineralization, has also been newly identified and is interpreted to be around 2 kilometers in extent. Look at some comparisons, certainly, within the operating results. Firstly, in terms of EBITDA contribution. You can see here on the left, DeGrussa, around $80 million of operating EBITDA, and MATSA contributing just under $95 million of operating EBITDA prior to exploration and also a small impairment. The exploration evaluation, as you're all aware, one of Sandfire's key parts of our strategy is across the 2 significant copper belts and also looking in Botswana and Spain and also across Australia and the U.S. and $20 million of expenditure during the period, including some of those, very pleasing new mine results. Impairment, a small impairment in terms of balance sheet and then some corporate costs, and of course, across the different operations, brings us from an operations EBITDA of just under $175 million, down to a group EBITDA of just under $136 million for the half. Looking now at a reconciliation of waterfall of NPAT. So from that -- relatively minor NPAT loss, adding back depreciation, as we can see, now importantly, that will take -- that is taking some of the tail end of DeGrussa, as of course, we're aware in terms of the wind-down of DeGrussa and eventual closure or so, but it's also importantly bringing on the depreciation and amortization of MATSA, which is over an initial period of around 8 years. So it's relatively accelerated in my view. Depreciation and amortization rate, particularly in the early years prior to us continuing to optimize the ore reserve and mine life at MATSA. Net financing costs, possibly look a little high. $9 million of that is noncash accounting expenditure in terms of the FX losses that are booked on things like at MATSA in terms of deferred tax liabilities, rehabilitation and other liabilities that are euro-based and are converted through to the reporting currency. So there is a noncash number in there of $9 million. Just out of interest, up to June last year, there was a profit at that line of around $20 million. Now tax, $5.8 million, down to a group EBITDA -- as we said on the previous slide, just under $136 million. And then adding back those other areas that I talked about in the previous slide, impairment, exploration and corporate back to reconcile -- back to just under $175 million of operating EBITDA. And very importantly, also cash flow provided as we did in the quarterly waterfall and reconciliation between opening cash July and closing cash at December. And as I said, these are pretty much the pre-released numbers. We can see from left to right, we talk about generating operating cash flow and equity, also the proceeds of the equity raising, the Motheo drawdown of $110 million during the period, and we'll draw another $30 million in the next month or 2. Debt repayments across both the corporate facility and also pleasingly repayments at MATSA, which also continued after the end of the half into the end of January. Exploration expenditure capital, USD 114 million at Motheo and USD 44 million at MATSA. And also at the back end of this waterfall reconciliation, we can start to see the impacts that we've talked about for a number of months around the balance sheet transition for Sandfire. So income tax elevated in terms of cash outflow due to $30 million being from the prior period relating to DeGrussa's profitability in the prior period and also into other, just under $20 million of DeGrussa impact in terms of credit to wind-down at the back end of the sulfide mining operations, in particular in sulfide mining which finished in October of 2022. For closing cash, as we noted there. Importantly, looking at our facilities and hedging. As I said, we've repaid the MATSA facility in -- around 12 months. We've repaid the MATSA facility down from USD 650 down to USD 452 as at the end of January, making that $80 million repayment, as we mentioned around the time of the quarterly. We've also repaid in full the corporate facility, which began at AUD 200 million and then the final payment of that was made at the end of December for the final AUD 50 million or USD 33 million. The Motheo facility certainly touched on, and is repeated here, $140 million drawn in 2 parts, October and December during the period of $55 million each. We are quite pleasingly well progressed in terms of our discussions with the banking group and what is likely to be an expanded banking syndicate. We thank very much Societe Generale and Nedbank for their support in that first part of the $140 million facility, and that's been very, very useful in terms of our ability to fund this operation and to get production on time and on budget as being a big part of the effort and the team effort that's gone into that. We are, as we've flagged before, looking to upscale that $140 million facility to something around a target of $180 million to $200 million, and that's certainly the discussions that are ongoing at the moment are within that range. We may also add a working capital facility in terms of month-to-month turnover of revenue and creditors. So in total, we may look at a facility in total of around $200 million to $220 million based on a turning over working capital facility there as well. But still to be advised, and we'll certainly update the market as we're aware of more progress towards that target. The hedge book is restated here in terms of the remainder of the financial year and is very much the numbers that we've put out in the December quarterly. With some copper protection, the rest of the financial year, and also some zinc protection and our hedge book also goes into another approximately 18 months on top of that in terms of copper and zinc hedging. And we are QP hedging at DeGrussa and also at MATSA. As I said in the earlier comments, this has very much been a period of balance sheet transition and something that we've certainly kept the market abreast as we've gone. There's been a focus on a period of transformative growth and a balance sheet that needs to support that transformative growth, and transition from a business that has been most entirely West Australia to be almost entirely international and across an operation that is optimizing in terms of MATSA and also a brand-new operation, of course, at Motheo. At MATSA, we have also kicked off in February, the opportunity to resculpt the future debt schedule. That is based off Sandfire's first mineral resource that was -- based mineral resource released last year. And also our first ore reserve, that drove our mining schedules and through to -- all the intention of a potential [ risk out ] in terms of the remaining $452 million. And I'm glad to say, we'll kick that off in February and we'll, of course, keep the market up to date in terms of what we can achieve in terms of that rescope probably into the next quarter. And I talked about the balance sheet transition in terms of particularly back end of last year, the DeGrussa wind-down relating predominantly to the end of mining sulfide at DeGrussa and the $30 million of additional tax payments relating to DeGrussa from the prior financial year. So those are now behind us. And that has been a pleasing part of certainly that first half balance sheet transition. Into the second half, our balance sheet transition is more around the debt side. So the MATSA resculpting the additional Motheo facilities and also just making sure that our balance sheet is well positioned to support ore reserve growth, exploration and development programs. And we, of course, hope to return shortly back to dividend payment. At the moment, we have continued to pause in terms of a nil interim dividend, which I think is well understood, given the position and the transformation of the business, but we do hope to return back to our dividend-paying position that we are so proud of over the last few years.

Moving on now to an update on the Motheo copper mine in Botswana. Firstly, as an update on the development of the Motheo 3.2 tonne per annum project, construction is nearing completion and continues to proceed on schedule with first production expected early in the June quarter. With over 1,700 personnel construction personnel on-site and the operations team now fully recruited, commissioning is now in full swing, with over 0.25 million tonnes of ore on the ROM Pad and crushing of the first ore to the stockpile achieved on the 21st of February. In addition to this, Sandfire has also progressed the 5.2 million tonne per annum Motheo expansion project with the environmental and social impact assessments submitted to the Botswana Department of Environmental Affairs. The Ball Mill was delivered to site in late December. Engineering design for the 5.2 million tonne per annum expansion is now 90% complete, and the Ball Mill civil contract has been awarded with work commencing in January 2023. And as Matt touched on earlier, during the period, the $140 million Motheo project finance facility was executed during the period with the first 2 tranches received during the first half and the balance to be drawn in the March quarter. Now stepping back to progress at Motheo. Subsequent to the end of the first half and following on from our pictorial update to the market on the 3rd of February, we continue to be very pleased with progress with first production now just a matter of weeks away. The construction and operations team at Motheo just continued to kick goals with a number of key milestones achieved. So first and foremost, the site achieved an outstanding safety milestone with 4 million hours lost time injury free achieved on the 8th of February. I was fortunate enough to be on site when this milestone was achieved. And as a leadership team, we took the opportunity to shut down the construction workforce to celebrate this performance and also to reinforce the importance of maintaining a strong focus on safety through to the end of the project. Mining of the T3 open pit also continues to perform very well and will continue to maintain our position of being ahead of the feasibility mine plan and schedule. All power infrastructure is now 100% complete, and the site was successfully connected to the Botswana electricity grid on the 7th of February, and most recently, the primary crusher was commissioned on the 21st of February with first ore crushed and placed on stockpile as you can see from the images shown on this slide. Looking forward, following the completion of construction of the comminution, flotation and concentrate filtering circuits, we expect to commence [ ore ] production during April. Now looking at construction and development capital. Not only is the project tracking well from a progress perspective, but Motheo development also remains on budget. The total estimated development capital for Motheo remains at $397.4 million, and this includes $47.9 million for future development costs for the A4 infrastructure and the 5.2 million tonne per annum plant expansion. Please note that the $71.9 million shown here includes $24 million of preapproved capital. Life of mine capital is estimated at $499 million or maintained at that. And as at the 31st of December 2022, the company had invested approximately $280 million of the total $397.4 million of development capital. And in closing, first, we're very proud of Sandfire's team or the Sandfire team's performance over the first half of financial year 2023. As I touched on earlier in the presentation, this has been a time of great change for the company with a focus on the continued optimization of the MATSA copper operations in Spain, the wind-down of the DeGrussa copper mine in Western Australia and the final stages of construction at the Motheo copper mine in Botswana. At the same time, the company has also made a significant Board and leadership transition. And as we prepare to welcome Brendan Harris into the team in early April, I would like to sincerely thank the Sandfire team for their support and hard work. All of which has positioned the company for great success in the future. Finally, I would also like to reinforce my points from the start of this presentation, which is again to remind everyone that on the back of the MATSA acquisition and the development of Motheo to a 5.2 million tonne per annum capacity, Sandfire is one of the few copper miners that has a firm production and growth pathway over the next 3 years, growing to over 110,000 tonnes of copper and over 80,000 tonnes of zinc production per annum. I will now hand back to the moderator for Q&A.

[Operator Instructions] Your first question comes from Lyndon Fagan from JPMorgan.

Just wanted to check in on the operating cash flow and the tax specifically within it. So the $57 million, if we take out the $30 million of catch-up tax, can I just confirm that, that all relates to DeGrussa and that the depreciation that you're reporting at MATSA is acting as a tax shield?

Partly, Lyndon, is the answer. The -- in addition to the $30 million, there are normal tax payments, provisional tax payments made both at MATSA and also at DeGrussa. There is some shielding in terms of depreciation, allowable depreciation. But at MATSA in Spain, you don't get the tax break on the uplift on the acquisition, and that's what where the detail comes from. So [ shortly ] is the answer.

So how should we calculate cash tax at MATSA, given that you don't get that M&A benefit for the up lease?

I'll take that on board. I'll come back to you maybe with -- in terms of when we do our guidance numbers, I think, might help.

Okay. And the other one, just is there anything you can say about Black Butte in terms of where [ attach ]?

Yes. Thanks, Lyndon, and Jason here. Look, where we're at with Black Butte? That project is doing 2 main activities at the moment or the team over there. So firstly, we are continuing to defend the legal challenges that relate to our mining license and also our water rights. Importantly to note that we've now received a granting of all the water rights that we required to develop the mine. So that's another important milestone that was achieved late last year in the project. We continue to go through the process there around the mining license. So we're both -- we're doing that into two-pronged approach. So we're working with the regulators to close out any gaps that was had in terms of the process that was taken around granting of the mining license. And secondly we're going through an appeals process there as well on the legal challenge to the granting. So anticipated time line of those things, it's always very hard to, if you like, estimate that. But we estimate at this point in time that we should be close to having a much better position on that towards the end of this calendar year. At the same time, we're also doing work on adding value to that overall project. So we're currently undertaking a pre-feasibility study on the Lowry satellite deposit, which is roughly about 2 kilometers away from the Johnny Lee deposit, which is the subject of the previous feasibility study there at Black Butte. So we've completed a resource drill out on that, and we've started mining and also overall project studies on that, and we expect to complete that work probably in Q1 of next financial year.

Your next question comes from Kaan Peker from Royal Bank of Canada.

Just wondering if you could provide an update on ground conditions at matter as of the poor ground conditions that -- have they continued over the quarter? And have you've been able to access all 4 areas?

Thanks, Kaan. Look, overall, what we've seen currently in this current quarter, we have seen an improvement, particularly at Magdalena, and that's where the only real issues that we've had, say, in the first half of last year. We are opening up and extending development into new areas, and we are seeing that there's an improvement in those ground conditions in the new areas there as well. So we're working through it. And we do expect, if you like, copper production to lift on the back of higher grades, and we are working towards improving or increasing production rate, particularly at Magdalena. I would note that Aguas Teñidas and Sotiel, there are no material or even real issues there were with ground conditions at both of those mines.

Very clear. And just maybe an update on where we stand regarding the PPA at MATSA in time and progress.

Yes. So we've basically finalized all of the commercial negotiations, and that was done late last year. We'll be moving then onto particularly about finalizing that agreement, so that formal agreement. And that's what's taken some time. So particularly around we are making provision there in terms of making sure that there's joint investment and in renewable energy sources, going forward for the long term for MATSA as part of our ESG commitment, and that's probably taking a little bit longer than expected. But certainly any benefits that we expect to get from this new power agreement will actually be backdated to 1 January.

And maybe just a follow-up, the quantum of benefit on costs?

Yes, we're still working through those at the moment, and we are limited in terms of what we can disclose just from -- basically a confidentiality perspective, but we will provide the market on regular updates as we go through and as we start to realize those benefits.

And we did put some of that consideration into our guidance in terms of cost guidance that we put out in December.

Your next question comes from Daniel Morgan from Barrenjoey.

First question is just a follow-up to the question by Lyndon on the tax shield at MATSA. Just wondering if you would have to hand what the book value of the assets that you acquired is as maybe, obviously, we know the acquisition costs.

Yes. I can provide -- I don't have them right in front of me, Daniel. And just for that -- I'll Provide them properly because there isn't a breakup of course, between different types of assets and liabilities and then deferred tax liabilities. So I'll grab those and make sure you've got it.

Okay. And just following up on Motheo. How does Motheo look as it ramps up both physically and financially? So when is first concentrate expected to be shipped and when might commercial production being declared?

Look, Daniel, we are rapidly approaching production there at Motheo, and the team is doing a very good job. We expect that we'll commission the full plant in April, and we will expect, once that plant is commissioned and operating continuously, we estimate that we'll have first concentrate production basically within 14 days of that. Now in terms of first shipment, we -- that will depend on the ramp-up to operations. But at this stage, we are planning on potentially one shipment there very late in this current financial year.

Your next question comes from Levi Spry from UBS.

Just an operational one for Jason, please. The uplift in copper production at MATSA in the second half, can you just run me through the drivers there, a bit of a recap, I know, but grade throughput and recoveries to get you through the -- I think you're saying now the low end of guidance, just remind us on that, please?

Yes. Look, if you look at it, we originally for the year forecast that were was rising grades, particularly with zinc and to a degree, copper towards the back end of the year. So that was exacerbated by some of the ground conditions that we saw in Magdalena affecting access to higher copper ore, particularly in half 1 and in particular, the second half of Q2 or the December quarter last year. So what we haven't seen at this point in time, we've started to see that overall production at Magdalena has been impacted by that. Access to those higher-grade areas is now deferred to the second half. So we will see particularly rising copper production on the back of access to that ore. And we do see an underlying improvement on the back of higher grades there, particularly in the mill on recoveries. So there are some improvements, and the team is working on a very important project at the moment on recovery improvements, and we have factored in some of those improvements that we're already seeing in the plan and in the very detailed test work that we've done.

Okay. Great. And then just on MATSA, talk about cash tax all that sort of stuff. But in terms of resculpting the debt, how far away is that? What needs to happen?

It's a little bit of a process to go through in terms of updating the models which are all done, and working through that process. I would imagine it will take a couple of months to work through a process to the point of being agreed and announced. But we certainly expect that during the course of the June quarter.

Okay. Great. And last one. Yes, the question on the Black Butte being a bit of a sleeper in the portfolio. Like is there any angle with IRA and things like that? Has it crapped up the priority list? Are you in talks with anyone on those angles?

No, not at all. So look, the next, the next stage on that project for us is, we need to complete the studies work on Lowry, right? We need to progress with basically defending -- basically defending the mining license. And then we'll actually strategically look at that in more detail as we get a better line of sight on what that project looks like for the long term.

Your next question comes from Sam Berridge from Perennial.

Just trying to reconcile the gap between your operating cash flow and your EBITDA. If I include interest charges in operating cash flow, which I see that's in the investing cash flow line, but assuming this ticket, back what -- it usually is an operating cash flow, you get to negative $35 million versus EBITDA of $135 million or whatever it was. So just within that cash flow waterfall on Page 10, are there any chunks of that, which aren't included in the P&L?

Yes, Sam, I'll do my best to answer it. In addition to the cash flow of 10, you probably say there are some elevated receivables. There are some other balance sheet style movements that do impact cash, we do have an elevated level of receivables that will have some impact there. I'll also draw your attention to the cover note announcement in terms of the ASX release this morning does talk through also the impacts on operating cash flow of some of those elements that I went through, including tax receivables timing, other. So there are a few other measurements in there in terms of getting back from operating cash flow back to -- yes, back to an EBITDA measure. It comes -- as we reverse out a couple of the elements, including exploration, the operating cash flow sits at about $60 million. So there is a comparison of that back to EBITDA, which is effectively going to be more balance sheet movements around receivables.

Yes. Okay. So I was just sort of curious because there was -- there's not a working capital movement sort of chunk within that cash flow waterfall, but I suppose as you say it can be reconstructed from that earlier stuff you're saying?

Yes. Effectively, if it sits -- it can sit back in that -- correct. And if you've got not the elevated receivables, but potential if you've got to elevate the concentrate stocks, the elevated concentrate stocks impact EBITDA because you haven't sold it, therefore, you have an unlocked capability from the stockpile.

Yes. Got you. And just finally, just confirming that the QP adjustments, that does go through the P&L. So that is captured in the EBITDA figure?

It is -- corrected is in the P&L. Yes, that's how we map it. Yes. It's in the cash flow there, and it's also in the EBITDA number.

Your next question comes from Ben Lyons from Jarden.

Jason, Matt and Crowley, et cetera. The first one is on Motheo. Fantastic performance guys with the delivery of the development ahead of schedule and extensively on budget. I think I heard you say in the preamble, you've now got 0.25 million tonnes of ore sitting on the ROM. So I guess all of that gives you great confidence for your expected production profile as we look into fiscal '24. And as we said, the market sort of turns their mind to the potential production from this asset over that period, just wondering if there's any kind of major tie-ins, shutdowns, et cetera, to be aware of over the initial, call it, 12 months as the concentrator ramps up?

Ben, thanks. And it was good to see you on the trip to Motheo there recently as well. So looking out to FY '24, there are no major tie-ins other than the tie-in for the Ball Mill, which is the 5.2 million tonne per annum expansion. So we expect that, that will happen very late, from memory, in the calendar year. But as we've almost designed the plant for this to happen almost from the word go, now it's not going to be a couple of weeks. It's more like days in duration.

Excellent. Maybe just one that hasn't been talked about yet. Is there anything you can say about the process you're running for the potential divestment of DeGrussa?

Look, the only thing is there that we're advancing. There is interest in the DeGrussa assets, and we are working through that process. We would envisage at this point in time that we'll probably look at concluding that process around about the middle of the year, the calendar year.

Okay. And I know there was a bit more wind-down style expenditure that was captured in the result. Are we expecting a little bit more of that cash outflow to come through in future results? Or is that pretty much dealt at this stage?

It's pretty much done DeGrussa. So DeGrussa has moved on to those oxide stockpiles. It doesn't have the element, of course, of mining costs like the sulfide does. It doesn't really have that closure element in terms of creditors. It's more a month-to-month processing costs, energy costs and salaries. So you don't really have that working capital movement like you do in the normal operations. I'll just add Ben, as well in terms of Motheo. The numbers we currently have out are the feasibility study, combined feasibility T3, A4 numbers. When we get to releasing guidance in July this year, we'll release guidance, of course, for the next financial year, and that will be more specific into next financial year in terms of, obviously, more detail around production parameters and guidance. At the moment, we've got the feasibility numbers out there in terms of annual future copper production from Motheo.

Yes. Awesome. And since I've got -- you hammered through those waterfall charts, and I might have missed it. But there was a bit of a blowout in trade receivables on the balance sheet. So that had a bit of an impact on your working capital. And obviously, that slides through to the cash flow as a few people have mentioned on the call already. So presumably, that's just an end-of-period timing issue on concentrate sales or the like. And given that we're at the end of February, I assume that that's basically already been unwound and sits in your cash bank account at the moment.

Yes, correct. It does wash through quite well. We don't tend to have major receivables movements outside of commodity price at MATSA. MATSA sells almost continuously, but we have had some of those. You're right, it washes through in the first part of the following quarter. So subject to where it sits, of course, at March, we would expect a net benefit in terms of receivables washing through. There's also an increased element in terms of copper pricing, of course, at the end of the period. So some of that uplift, we'll also see into the second half of the year.

[Operator Instructions] The next question comes from Matt Greene from Credit Suisse.

Matt, if I could just ask on the hedge book. You touched a bit, just the elevated pricing at the end of the period. Just looking at Slide 11, about 33,000 tonnes at around $3.95 a pound. Some of that has QP hedging in there. But I guess I'm just trying to look at kind of the hedging you have in place at MATSA and DeGrussa and then trying to figure out what's the remaining components that could be QP. So you got 10,500 tonnes, looking at Page 7 of your release at $3.80 for DeGrussa over the next 6 months. Do I look at the remainder of that 33,000 tonnes as, I guess, hedged what sales out of MATSA for the next 6 months. So essentially, looking at on a group that where you have a pricing floor of $3.95, is that sort of how we should be looking at it?

Yes, it's pretty close. I think, yes, it's predominantly MATSA, it's under that original hedge book. So at the time of the MATSA acquisition, we took out a 3-year hedge book at around, call it, 35%, 40% of production, and that was -- that is, obviously remains, and we're rolling through that into the second part. So this clearly covers the second half of the financial year or really February -- January through June. Yes, predominantly, that is MATSA, but we're also QP hedging, particularly at DeGrussa. And we've also got production hedged at DeGrussa in January and February. So some of that would be in addition to this. So when we do the March quarter, I'll break it out a little bit more or give me a call, and I'll run you through a couple of the slips.

Yes. That will be handy. Because if I look at when you provided that hedge profile at MATSA, I think it was on an annual basis, but it was, I recall it was around $4.20, $4.30, but looking at your hedge book, it's applying $4 for MATSA and it just seems a little bit lied. I just want to make sure we're not understanding your hedge [ stand ]. That would be helpful. And then just on the Motheo facility, the project finance, any hedging associated with that?

No mandatory hedging on that facility. We may do it. Of course, from time to time, we may do QP hedging. We may decide as a company, but we're also, of course, conscious about our investments and their desire to be exposed to the long-term copper price and decarbonization. So on balance, that of course, the Executive and Board will consider that. But at the moment, no, there's no requirement for hedging.

Okay. That's great. And then I guess just as you're nearing first sales of your copper from Motheo, who's your offtake? I mean, are you just looking to sell some spot? Or is traffic going to be taking this through?

No, we sort of know and individually at this stage. We will run -- we're running a similar process to what we did at DeGrussa in terms of Motheo offtake, particularly spot during that commissioning stage is important to make sure that we sell that commissioning concentrate on the right terms, and we don't have any restrictions under longer-term concentrate offtake, but we certainly intend to form and enter into longer term more run of mine concentrate offtake agreements in the second half of the calendar year as we hit normal run of mine normal concentrate terms. And certainly, the concentrate at Motheo is very, very attractive, around 30% copper contained in concentrate and also very low deleterious element. So our recent marketing activities have been very, very pleasing in terms of the desire for longer-term offtake as to get hold of concentrate from Motheo.

Yes. Understood. And if I can just ask one last one. Jason, you touched on some of the recovery improvements you're looking at MATSA. And if I recall from the site visit, there was also potential looking at work in terms of some of the [ MET ] studies at Sotiel, perhaps good to upgrade a product or produce a separate product on-site and then exploring that. Any sort of updates on both of those sort of studies where we could expect some views on that?

Yes. So firstly, on the -- basically recovery and also concentrate grade optimization from the existing mill and also the existing feed blend, we are at the stage where we've completed all of our lab test work, got the results on that, and we're moving to full plant-scale trials. So in the early stages of that, but there's certainly some very promising signs from what we've seen so far. In terms of Sotiel, we are basically initiating formal studies on that. But in the interim, we actually have done early test work, particularly around focusing on what we can do in the existing Aguas Teñidas mill to optimize recovery and also concentrate specs to maximize the value of that ore. And once again, there's some really good opportunities that are starting to emerge.

Okay. And sorry, just on that lab test work, what was that sort of indicating? I appreciate there's an early stages, but what's the sort of potential uplift you could see on recoveries?

Yes. Look, we are probably early -- too early stages in terms of -- we do want to look at the performance in the plant before we hand out any real numbers and improvements. But we are looking at a material uplift in -- potential uplift in zinc recovery, a little bit less on copper, but some real benefits there in concentrate specifications as well.

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

Right. Thank you, and thanks to everybody for dialing in on the call today. I think the key takeaway from my point of view, once again, is around the first half of FY '23 has been a period of transition. We're transitioning our operations. We're transitioning our footprint in terms of international from WA. We transitioned our leadership. But what we've done at the same time is really set up a platform for growth, and that includes a solid pathway for growth over the next 3 years, but also our platform for longer-term growth and prospering of the company. And particularly when you take into account the optimistic long-term outlook for copper and copper demand. Now we are really placed in a very good position, and we're looking forward to continue taking forward the company to the future. Thank you, everyone, and we'll talk soon.

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