Metals Acquisition Corp. II Q2 FY2025 Earnings Call

Thank you for joining us. I'm here with our CFO, Morne Engelbrecht. I'll go through the slides, which will also be available for everyone to review later. This is our second quarter presentation for 2025. There's a usual disclaimer at the beginning for your reference. On Slide 4, MAC Copper is highlighted as a well-capitalized, low-cost, high-grade copper mine in a Tier 1 region, aiming for over 50,000 tonnes of copper production by 2026. During the quarter, we announced a transaction with Harmony to sell the company for USD 12.25 per share in cash, pending any superior proposals. We are on track for growth and maintain a robust balance sheet, with approximately USD 196 million in liquidity as of June 30. Morne will detail this shortly. We are progressing key growth projects, the ventilation project, and the Merrin Mine, having successfully arranged for net gearing to be below 20%, which has lowered our annual interest costs by about USD 14 million, with a current floating rate just under 7%. By the end of Q2, our actual cash balance was USD 102 million, putting us in a strong position. Transitioning to the next slide, our operational performance supports this position. We have made significant strides in safety, producing nearly 10,600 tonnes of copper, a 23% increase from the previous quarter. With CSA, our monthly production can fluctuate from 2,000 tonnes to 5,500 tonnes, and potentially 6,000 tonnes in July, depending on stope sequencing. We've noted how transactions can disrupt production, as seen in the difference between April and June figures. The copper grade was impressive at 4.4%, an 8% increase quarter-on-quarter. We reached a record production day on June 30 with 385 tonnes and saw several days around the 300-tonne mark. The C1 cost was USD 1.48 per pound, consistent with our expectations for the mine. In June, we achieved a low C1 cost of USD 0.94 per pound. Overall, our operating results were strong, with record quarterly operating free cash flow of approximately USD 42 million. We anticipate the first Glencore Contingent Payment conditions will be met in August, with payment expected in June next year if the current transaction proceeds. Our production guidance remains at 43,000 to 48,000 tonnes for the year, likely landing in the lower half of that range. We're maintaining the same grade despite recent production exceeding expectations, although we expect to transition to lower-grade materials later this quarter, followed by a strong production finish this year. Regarding capital expenditures, we're aligning with our guidance. The Harmony transaction is progressing, with executed restructuring agreements with Osisko and Glencore. We have planned a Jersey court hearing for July 30, with a circular scheduled for release on August 4 and a vote date targeted for August 29. We have some exciting developments in exploration as well, although we haven't shared many details as stock performance isn't driven by exploration outcomes. Our priorities this year remain consistent: maintaining safe, low-cost, high-grade production, advancing the Harmony transaction, progressing the ventilation project, extracting first ore from the new Merrin Mine by Q4, and ensuring a strong balance sheet. Based on Q2 results, we're successfully meeting all these objectives. Safety metrics have shown a promising drop in our TRIFR, especially considering recent corporate activities and uncertainties. Our team has worked hard to minimize incidents, achieving no reportable incidents over the past two years. The embankment works for Stage 10 of the TSF are on schedule for completion in Q4, which is a key capital project for us. We're pleased to have successfully reduced our environmental bond by AUD 4 million and contributed AUD 100,000 to the local museum efforts, supporting Cobar as a destination and highlighting mining's importance in the region. Regarding the Harmony transaction, considerable work has gone into both the announcement and restructuring agreements, with careful scheduling leading us to a vote date on August 29. Our AGM is on the same day, and the circular detailing the transaction will be distributed on August 4. The record date is July 29, allowing ample notice for all shareholders. Production saw a significant increase this quarter, particularly noticeable from the latter part of May. June's copper grade was around 6%, leading to a strong output with low C1 costs. As of yesterday, we've produced 4,500 tonnes of copper in July and expect between 5,900 and 6,200 tonnes this month at an average grade of approximately 7%. The CSA mine has high-grade ore that significantly boosts our annual production. We experienced a gap in producing from high-grade stopes in Q1, but we've since resumed and expect that momentum to carry through Q3. Cost management continues to be effective, despite some general cost increases. Our mining plan demonstrates the capacity to exceed current extraction, prompting us to explore additional ore sources. We anticipate some moderation in grades as we move through Q3, along with a scheduled maintenance of concentrate filter plates in August. Nevertheless, we expect Q3 to be a solid quarter, with July starting the period on a high note. Overall, we are pleased with site operations and have made resource adjustments to maintain productivity. Now I'll pass it over to Morne for the financial insights.

Thank you, Mick. Good evening and morning, everyone. Now moving on to Slide 11, which addresses the overall capital expenditure and development metrics. We achieved another record for MAC ownership and development meters this quarter. Overall capital expenditure increased by about 85% compared to the previous quarter, primarily due to heightened activity around the vent project and the Merrin Mine. The development meters reached a record-breaking 1,196 meters for the quarter, with the Merrin Mine's development needs rising by around 65% to 530 meters and the vent project increasing by 125% to 564 meters. This contributed to a growth capital expenditure increase of 139% for the quarter, driven mainly by these two significant projects, with approximately USD 7.3 million spent on the vent project and around USD 3.5 million on the Merrin Mine. It's encouraging to see these projects progressing well according to plan, with the Merrin Mine expected to come online in Q4 this year. On the sustaining CapEx side, it mainly involves the Stage 10 TSF, which is advancing as planned and is also projected to be completed in Q4 of this year. Now, transitioning to Slide 12 and the cash flow waterfall, there are several key factors to consider that affected cash flow during the June quarter. Firstly, we reached another record on MAC ownership related to free cash flow from operations after sustaining CapEx, which totaled about USD 42 million for the quarter. This was largely driven by a 23% increase in production, an 8% rise in grade, and a 3% improvement in realized copper prices. Additionally, our interest costs saw a significant reduction this quarter following the refinancing completed at the end of March, resulting in a decrease of more than 30% in average weighted interest costs. We are on track to achieve USD 14 million in annual interest savings. Regarding growth capital, which includes the vent project and Merrin Mine, cash spending for the quarter was USD 30 million, driven by the record development meters achieved. Our senior facility stands at USD 159 million, with a drawdown on the revolving facility of USD 66 million, leaving us with USD 102 million in cash at the bank as of the end of June, resulting in a net debt figure of USD 123 million. Currently, our net gearing ratio is just over 17%. We also have a strong liquidity position of USD 196 million, nearly AUD 300 million available, including an undrawn revolving facility of USD 59 million, outstanding QP receipts of USD 11 million, unsold concentrate worth USD 18.5 million as of June 30, and an investment in Polymetals of around USD 5.5 million, which remains beneficial to us. Finally, regarding the contingent copper payments to Glencore, we expect the condition for the first contingent payment will likely be met by August of this year, based on the average daily LME closing price over the past 18 months. According to the Share Sale Agreement with Glencore and Intercreditor Deed, this payment obligation will be deferred until either the current debt arrangements permit the payment or the three-year anniversary of MAC's acquisition of the CSA Copper Mine. Consequently, we anticipate making this payment on June 17, 2026. Given MAC's current liquidity situation, we expect to fully settle this obligation in cash when it comes due. Overall, we maintain a strong and healthy balance sheet position at the end of the quarter, with approximately USD 102 million in cash and USD 196 million in liquidity. Now, I'll hand it back to Mick.

Thank you, Morne. As I mentioned earlier with that photo, we had even more concentrate at the mine last week. We have a strong amount of liquidity beyond the USD 196 million. We're on track to reach the 50,000 tonne mark or more with key projects like the capital vent project and the Merrin Mine driving our growth capital. We're increasing development meters and acquiring more equipment for these projects, which is reflected in our rising capital expenditures, aligning with our guidance. We're making good progress at the Merrin Mine, with rapid development occurring now. The exploration team is also making progress with drilling at QTS South Upper, where we're more than halfway through. They've also drilled at Pink Panther, which has additional lower-grade material that could be mined. This part of the mine allows for independent firing, enabling us to develop at a faster rate compared to the lower levels of the mine. Additional ventilation is being installed, and we are on track with this development. Initially, progress was slow as we had to interact with the existing mine, but now that we've reached independent firing, we can move much faster. We are also planning to mine a series of zinc stopes and some copper areas that are not yet in resources. During the quarter, Polymetals announced the recommissioning of their concentrator, which is now operational and ready to process zinc ore. We anticipate being able to send material to them by the end of the year, and we are preparing for that. Regarding the ventilation project, we are increasing our spending as part of our capital budget. To accomplish our project goals, investment is crucial, and we're close to commencing the vertical raise boring work, which marks the next significant phase of this project. On the exploration front, we haven't focused on it much lately, but our exploration team is excited about an EM survey conducted about 15 kilometers north of the mine that identified a strong anomaly similar to the CSA mine. We have quickly deployed drill rigs to that location and are drilling now, expecting to reach the target zone soon. If we find a CSA-style ore body there, it could be quite promising. We will update the market on any significant findings before the vote date to ensure everyone is well-informed. To summarize our goals for this year, we are speeding up progress on various projects. With nearly AUD 300 million of liquidity, we have a solid balance sheet for a company of our size. We reduced our C1 costs to USD 1.48 a pound in the quarter, with June showing an impressive USD 0.94. If we increase copper production in July, it could improve even more. We've also navigated through a substantial amount of documentation for the Harmony transaction and are now ready to prepare for the vote. Overall, the second quarter was a strong performance in terms of safety, production, and costs. July has been exceptionally positive as well. Given our position at the end of Q1, we have caught up and moved ahead, which is a favorable situation as we approach the end of the year. I'm now open to any questions.

There are no questions at this time. I will now hand back to Mr. Mick McMullen for closing remarks.

Okay. Well, look, I appreciate everyone taking the time to dial in. Thank you very much, and we will be back to you as we progress the transaction. Bye.

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