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Thank you for standing by, and welcome to the 29Metals March Quarter Investor Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Mike Slifirski, Head of Investor Relations. Please go ahead.
Thank you, Melanie. Good morning, everybody, ladies and gentlemen. Welcome to 29Metals March Quarter First Quarter Conference Call. This call is being recorded and will be available afterwards either via the 29Metals website or via the Open Briefing website.
Joining me today is 29Metals' Managing Director and CEO, Peter Albert. He will commence the discussion before passing to Cliff Tuck, our Chief Sustainability Officer, who'll talk to sustainability and ESG activities and achievements. Cliff will pass to Ed Cooney, our Chief Operating Officer, who will lead you through our operating performance. Ed will also cover up on exploration at this time because our Group Manager, Geology, Mark van Heerden, is actually doing some pretty exciting work for us at Redhill in Chile, which we'll perhaps talk to next quarter. Ed will pass to CFO, Peter Herbert to lead you through the financial outcomes, then back to Peter for Q&A. So I'd now like to pass over to Peter. Thank you, Peter.
Yes. Thanks, Mike, and thanks for the introduction. Welcome, everybody, and thank you for joining us this morning. Mike's already done the introduction so I don't need to do that again. We'll go straight to the overview of the quarterly results, and then as Mike said, I'll hand over to Cliff, Ed and Peter for a bit more color in each of their specific areas. And as Mike said, Mark Van Heerden is not with us today. He's down in Chile, with the teams down there, are doing some exploration fieldwork at Redhill.
First of all, of course, safety and health. The safety performance has been held mostly steady during the quarter, although we did have 1 lost-time injury at Golden Grove. There has been a lot reported and in the press in recent months in respect of harassment at mining sites. A workplace health survey we conducted late last year at our sites indicated no major concerns. However, we have to assume that the risks are prevalent in these fly-in, fly-out environments. Our leadership team has taken an active role in communicating the nonacceptance of any form of harassment or bias.
An inclusivity and diversity working group has been established across the business, which has already identified a number of initiatives, which are being followed through to enhance the workplace environment. This is a significant area of focus for us to ensure our culture supports an inclusive and diverse environment, initiatives widely supported by our leadership teams across the group.
COVID, of course, has been a significant business matter for us during the past quarter. The opening up of borders has seen significant COVID impact at both operations whilst more so in Golden Grove in the west. The difference in the regulatory environment between states and the definition and treatment of close contacts has resulted in multiple events where contractors and employees have either been isolated or unable to turn up to work.
Monitoring reports from other operations, it would seem that to date, 29Metals sites have fared better than most. And whilst we expect an improvement in rates of COVID-related absenteeism going forward, nobody can be quite sure that the impact has yet peaked.
Last Thursday, we released our 2021 and our first annual report and included within the annual report but also available as a separate document on our website is our first sustainability report. During the quarter, we also appointed Cliff Tuck as our Chief Governance and Legal Officer, adding sustainability and ESG to his other responsibilities as Company Secretary and General Counsel. We are also in the process of recruiting a group manager of sustainability. Cliff will provide a short overview of the ESG work and our sustainability and ESG report in a moment.
With the backdrop of COVID impacts on our workforce, multiple weather-related interruptions at both sites -- we've had quite an extensive lightning at both sites in this last season -- and supply factors exacerbated by the extreme weather events in eastern Australia, I can only say that whilst production has not been at the levels we had planned, I'm nonetheless pleased with what we have achieved. Zinc production was always weighted to the second half of the year, so zinc at 12,200 tonnes produced was strong. Copper at 9,300 tonnes is below what we had planned, primarily due to lack of labor and slower access to high-grade mine areas and, therefore, treatment of lower-grade material.
It is, however, worth noting that on nearly all metrics for the quarter, performance was significantly better than for the same quarter last year. Subject to COVID impact stabilizing and reducing during the current quarter, we anticipate that our full year production will remain within our previously provided guidance range, although probably more likely to be in the lower half.
There is a change to guidance in respect of capital development, but that increase is offset by a corresponding reduction in mining costs. And there's also an increase in zinc TCs as a consequence of the extremely strong zinc prices being currently received. All commodity prices have been strong in the quarter, resulting in a very strong revenue of AUD 232 million, almost double the same period last year.
As advised previously, we no longer provide guidance for copper equivalent production, but we do report actual copper equivalent production on a quarterly basis. And for the March quarter, our copper equivalent production was at 15,800 tonnes, down on the December quarter, which, of course, as we -- I'm sure everybody is aware of, was an outstanding quarter but significantly up on the same quarter in 2021.
Despite industry-wide cost and inflationary pressures, our costs have been well managed across the business, although the unit costs are higher due to lower copper production than planned. Access to labor and labor costs are a significant issue for the industry, with almost historical low unemployment rates prevailing across the country. 29Metals is focused on ensuring our remuneration, attraction and retention strategies are market competitive.
There are a number of important operational and derisking milestones in the March quarter, including, completion of what is known as the HOX Deep Link at Golden Grove, enabling a one-way traffic system, improving truck movements and ventilation; extension of fresh air raises to the new mining front at Xantho Extended; significant advancement of the paste fill plant in Golden Grove; completion of surface water infrastructure projects at Capricorn Copper; completion of raise boring the return air rise in Capricorn Copper; completion of the lift at the Capricorn Copper tailings facility; and completion of the transition of the Capricorn Copper process plant maintenance and paste plant operations to 29Metals' management.
We also issued the 2021 Mineral Resource and Reserve statement, which produced a 100% uplift in the estimated resource tonnes and a significantly greater uplift in metal content for Cervantes and a continuation of project activities for the potential development of Cervantes and Gossan Valley with decisions anticipated in the third quarter this year.
Our organic growth program has suffered a little this quarter due to COVID impacts and, in some cases, a redeployment of labor to production activities. Nonetheless, we've continued extension and exploration activities with an excess of 11,000 meters of drilling at Cervantes, Conteville, Xantho, Amity, Scuddles-GG4, ESS, Mammoth North, Mammoth G-Lens and Esperanza Deeps. We're also most of the way through our first Redhill exploration field campaign due to finish in [ mid-May ] with some encouraging samples collected. Assay results as well as the high-resolution magnetic survey are due to be received and analyzed in the second and third quarters of this year.
Peter Herbert will talk to financial outcomes, but in brief, a very pleasing outcome for the quarter, given the challenges experienced by the whole industry, supported, of course, by strong commodity prices. I'll now hand over to Cliff Tuck to give us a bit more color and insight to our sustainability and ESG report and some of our plans for this year. Then Cliff will hand over to Ed, and Ed on to Peter Herbert for the commercial and financial results. So thank you. Over to you, Cliff.
Thank you, Peter, and good morning, all. It's a pleasure to join you this morning to speak about 29Metals' sustainability and ESG. The quarterly report sets out our continuing progress on sustainability and our ESG actions at Golden Grove and Capricorn Copper. Notably, the recommencement of our partnership with TAFE WA and other stakeholders to provide First Nations traineeship opportunities following a period of COVID-19 interruption, and environmental projects at Capricorn Copper as we continue to improve water management on site.
Late last week, we were also pleased to release our first annual report, as Peter mentioned, our first as a listed company, which included our first sustainability and ESG report. The sustainability and ESG report sets out our performance for 2021 and our priorities in 2022. Early in our journey as a listed company, a key priority in 2022 is improving the collection and analysis of sustainability and ESG data so as to inform specific targets and objectives for 29Metals into the future.
The sustainability and ESG report, which, as Peter mentioned, is also available as a stand-alone document on our website, also launches 29Metals' -- our approach to sustainability in ESG, outlining how we will approach sustainability and ESG subject matter as part of everything we do at 29Metals. As set out in the report, 29Metals' approach is founded on 3 core dimensions: safe and inclusive workplace, responsible environmental stewardship, including action on climate change, and partnering stakeholders, and supported by our critical enablers being responsible and ethical business practices and continuous improvement and, of course, underpinned by our values.
The sustainability and ESG report also includes a second milestone for 29Metals in relation to our action on climate change. Building on the first formal link between action on climate change and executive remuneration as part of the company's 2022 LTI, we have published our road map for reporting aligned to the Task Force on Climate-related Financial Disclosures, or TCFD.
Having now published our sustainability and ESG report, we look forward to engaging with our investors and other stakeholders in the coming weeks and months, including the local communities for each of our operating sites, regarding our approach to sustainability and ESG and delivering against the priorities and actions identified in the report. I'll now hand over to Ed to speak to operations, projects and exploration.
Thanks, Cliff. Good morning, everyone. In terms of production, as Peter mentioned, the March quarter was challenging on multiple fronts. At Golden Grove, mining volumes broadly matched mill throughput, meaning we were able to retain a good surface stockpile balance at quarter end. Copper production is tracking broadly to plan, with zinc production consistent with the December quarter, noting a higher weighting of zinc and other byproducts to the second half, as previously guided.
The operations felt the impact of an ongoing tight labor market, exacerbated by elevated absenteeism associated with both positive COVID cases and close contact isolation requirements and high ambient summer temperatures. Approximately 1,200 lost shifts of the underground workforce, in particular, negatively impacted ore tonnes to surface, development advance, diamond drilling and project-related activities. At Xantho Extended, we progressed important ventilation upgrades with completion of the HOX link decline, which enables an opportunity to better distribute all haulage underground, and we also advanced multiple fresh air raises down to current operating levels. During the June quarter, we expect to complete these activities such that surface chilled air is ventilated directly to working faces at depth. Additionally, we placed orders for an additional surface chiller plant and two 1-megawatt booster fans to support future development to lower levels of the orebody.
In terms of the mill, throughput, at approximately 400,000 tonnes, was stronger than the December quarter, which was impacted by constraints relating to tailings deposition during October and November of last year. Pleasingly, no mill downtime was incurred as a result of elevated absenteeism rates, with the production and maintenance teams doing an outstanding job of balancing rosters as required.
The zinc regrind mill suffered failure related to the housing of the trunnion bearing, resulting in some short-term impact to recoveries, which we expect to be rectified during the June quarter. Importantly, after prior communicated delays associated with approvals and then drilling of surface delivery holes, the paste fill plant has made very good progress during the quarter with civils now largely complete and installation tracking to plan for commissioning during the June quarter. In parallel with this, installation of underground reticulation advanced towards the upper areas of Xantho Extended orebody.
Moving on to Capricorn Copper. We produced lower copper metal production relative to the December quarter on the back of both lower volumes and grade. Volume was negatively influenced by operational disruptions typical at this time of year, including lightning delays and high ambient temperatures, exacerbated by lost shifts associated with high COVID-related absenteeism. A number of our site-based personnel were also impacted by the flooding in southeast Queensland during the period.
Lower grades were influenced by delays to production from higher-grade draw points at the sublevel cave as a result of a combination of blasting hang-ups and lack of available production drillers and [ charge ] crew. Adding to this was a discrete section of hanging wall dilution incurred. We completed raise boring activities of a new surface ventilation shaft at Esperanza South and orders have been placed for surface fans. We expect delivery and installation of these to occur during the September quarter.
In terms of the mill, we successfully transitioned the mill operations and maintenance teams and paste fill plant operations to 29Metals. And similar to Golden Grove, we incurred no downtime as a result of elevated absenteeism rates. Once again, a credit to the production and maintenance teams.
Volumes were influenced by planned mill reline and unplanned downtime associated with the power outage to the site. Pleasingly and importantly, at Capricorn Copper, a number of environmental projects were completed during the quarter, including multiple clean surface water diversions, which reduced accumulation of affected water and the site water balance and completion of a temporary surface clean water diversion around the Esperanza South cave subsidence zone, with an application for a permanent diversion to be submitted during the June quarter.
Now I'd like to take the opportunity to acknowledge the hard work and dedication of the site teams who have been extremely flexible and have gone the extra mile to cover higher-than-normal absenteeism whilst faced with challenges in an extremely tight labor market.
Moving on to exploration. Drill testing of areas determined to have organic growth potential continued at both Capricorn Copper and Golden Grove. And in South Chile, crews are mobilized and commenced field work at Cutters, Redhill, which is continuing into the June quarter. At Golden Grove, underground conversion and extensional drilling targeted Cervantes, Amity and Xantho orebodies. Initial testing of the Scuddles-GG4 near-mine target area also took place.
Surface drilling commenced late in the quarter, targeting Conteville, which lies approximately 1 kilometer north of Gossan Valley and is being considered as potential upside mining inventory for the Gossan Valley project. Productivity was certainly below expectations for the quarter due to delays in the timing of surface rig mobilization and, in particular, underground personnel issues due to COVID-19. Both Conteville and Cervantes will be subject to further drilling in the June quarter, along with Xantho Extended. And drilling of the Amity and Scuddles-GG4 targets will resume upon completion of the Cervantes drill program, expected to occur in the September quarter.
At Capricorn Copper, underground conversion of extension -- and extension drilling occurred at Greenstone, Esperanza South, Mammoth North and Mammoth G-Lens. Surface drilling at Esperanza South also occurred and was weighted towards the conversion of existing inferred resources. Looking ahead, surface rigs will continue to drill Esperanza South into the June quarter before moving to test the regional lead-zinc-silver target called Grey Ghost and copper target, Eagles Nest, located approximately 45 kilometers southwest of the mine site. And that drilling is likely to carry over into the September quarter. Underground rigs will focus on organic growth and conversion at Greenstone, Esperanza South and Mammoth North in the June quarter.
As Peter mentioned, at Redhill, the 2022 field season is underway and is focused on evaluating the overall potential of the mineralized system at Cutters Cove. Portable short drills are being used to take samples of the rock underneath Cutter along strike of known mineral resources, and a high-resolution drone-based magnetic survey has been completed over the area. Results of that survey are pending. And the first samples from the field season will be dispatched for assays later this month. I'll now hand over to Peter Herbert to address the financial outcomes across the business.
Thanks, Ed. Starting with revenue outcomes, 29Metals generated revenues of $232 million in the March quarter, supported by continuing strong commodity prices, which partially offset lower metal sales during the period. At Golden Grove, for the March quarter, revenues -- zinc revenues remained strong, broadly in line with the December quarter, supported by consistent production and increasing zinc prices. This result was offset by lower copper and other byproduct sales for the period.
At Capricorn Copper, revenues for the March quarter declined by approximately $4 million as lower sales were partially offset by higher prices during the period. Group revenues for the March quarter included unrealized QPs of approximately [ $13 million ] as commodity prices continued to increase in AUD terms during the quarter. Consistent with the production outcomes described earlier and movements in commodity prices, copper accounted for approximately 59% of group revenues, whilst zinc accounted for a further 26%.
Turning to costs. Group site costs were approximately $4 million lower than the prior quarter. Mining costs were lower at Golden Grove by approximately $4 million as a high proportion of costs were capitalized during the quarter due to short-term changes in the mine plan, as discussed by Ed. Processing costs at Golden Grove were higher during the quarter, reflecting increased throughput, following the lifting of tailings and later restrictions partway through the December quarter.
Mining costs were also lower at Capricorn Copper by approximately $2 million, reflecting lower activity levels quarter-over-quarter. Group's C1 absolute costs were approximately $8 million higher than the December quarter, reflecting lower site costs, lower byproduct credits and a net stockpile expense for the quarter of approximately $3 million as timing differences at Capricorn Copper unwound during the quarter.
TCRCs were flat at Golden Grove despite lower metal sales as increasing zinc prices contributed to higher zinc TCs through applicable escalators on existing zinc offtake contracts. TCRCs at Capricorn Copper were lower in the March quarter, reflecting lower sales for the period. Unit C1 costs reflect C1 absolute cost outcomes and lower cost sales during the quarter.
Group all-in sustaining absolute costs were largely flat on the prior quarter, with higher C1 absolute costs offset by lower sustaining capital relative to the December quarter. All-in sustaining unit costs of approximately $3.60 per pound reflects flat absolute costs and lower copper sales during the period.
Turning to the balance sheet. Unaudited cash at 31 March was approximately $188 million, approximately $9 million lower than the 31 December balance, reflecting the cash settlement of approximately $8 million of out-of-the-money hedges, the payment of $3 million in tax, which is expected to reverse over the full year consistent with full year guidance, an increase of approximately $30 million in accounts receivable attributable to timing of receipts and increasing prices during the period, particularly in relation to zinc sales.
Drawn debt remains consistent during the quarter at USD 150 million. While stamp duty in connection with the acquisition of Golden Grove continues to remain outstanding, 29Metals understands that the delay is administrative in nature. And as a reminder, 29Metals recorded a AUD 26 million provision in relation to stamp duty in the full year accounts released in February of this year. Thank you very much, and back to you, Peter.
Thanks, Peter. Great. So Melanie, that's our presentation -- formal presentation, if you like, complete. I'd like to go to Q&A now, please.
[Operator Instructions] Your first question comes from Rahul Anand with Morgan Stanley.
For my 2 questions, 1 relates to TCs and the other is on recoveries at Golden Grove. So if we can start perhaps with the TC question first. Thanks for the extra visibility around the TCs in the corporate section of the report. I wanted to touch upon perhaps if you can help me understand the delivery schedules and sort of how we should think about these escalators in terms of what price they get engaged at. So you have pointed out 32,000 tonnes of zinc concentrate in March, and the escalator is coming in at $2,050 per tonne. But then the other part of the year seems to have a higher escalator. I'm just trying to understand how I should be thinking about these going forward in terms of being able to model them and then also the delivery schedule. That's the first one.
Yes, sure. So the first TC, the lower escalator that you mentioned, they are accounted for in the March quarter costs and relate to deliveries during that period. The higher relates to the balance of the year. So that is -- that relates to the balance of commitments under that contract.
Okay. And then beyond '22, you have provided the 320,000 tonnes. How should we think about the escalators because they seem to be between the $2,050 and $2,900. How should we like -- should we take an average of that price for the escalator? And what kind of a delivery schedule do you have in these?
Yes, so the deliveries are spread over that period. And I think that's a fair approach that you suggested there in terms of taking the average.
Okay, perfect. All right. And then the second question was around recoveries at Golden Grove. So admittedly, the milling grade was slightly lower for both copper and zinc, but it was quite mild. I just noted that the recoveries, however, were down for copper at about 3%, and zinc was down about 5%. Any particular drivers there? And how should we think about recoveries perhaps for the rest of the year, excluding the impacts of higher grade that come through from Xantho?
Rahul, I'll take that one. Ed here. So the zinc regrind mill, so that went down in March as we disclosed, so order of magnitude impacts from that, about 4% zinc, 1% copper. Now we do anticipate that, that will be reinstated during the June quarter so only a short-term impact. In terms of -- yes...
Sorry, go ahead.
I was going to say, other than that, in terms of remainder of the year, nothing else really comes to mind. Everything else is performing consistently. Obviously, a multitude of variables go into recoveries in terms of some of the other elements, sulfur, iron content ratios. But otherwise, we're very happy with recovery performance, notwithstanding the regrind mill downtime.
And then perhaps if you can provide, and this is my final question, perhaps a bit more visibility into what type of a grade uplift you expect from Xantho Extended in the second half. And obviously, that will be a positive impact beyond what you've seen in the last quarter. On the recovery side as well, if you can provide a bit of visibility on that, that would be good.
And we probably haven't sort of guided on those specifics, Rahul, but if you consider volumes and guidance range of metal, you should be able to back calculate what a grade uplift might look like, if that helps.
Yes, yes. I have done the same.
[Operator Instructions] Your next question comes from Mitch Ryan with Jefferies.
I just wondered if you could please provide a bit more color around the zinc offtake agreements and with regards to the TC escalator of 12.5%. I just wanted to understand if that is agreement for the 320,000 tonnes or the time period -- like if you overdelivered, would it extinguish earlier? Or how do we think about that from a timing and volume perspective?
It sticks to the 320,000 tonnes, Mitch, so we do have sales outside of those contracts.
And that TC escalator is -- of 12.5% is for the full term out to 2026?
Yes, that's right. Over the -- fixed over those tonnes at the ranges of escalators as we've indicated in the quarterly, that's right.
There are no further questions at this time. I'll now hand back to Mr. Albert for some closing remarks.
We'll just hold on for a minute or so, Melanie, see if there's any further questions coming through. If not, I can get to closing remarks, but let's give the audience 1 or 2 more extra minutes.
[Operator Instructions] Your next question comes from Matt Greene with Credit Suisse.
Just a question on Golden Grove with the failure at the zinc regrind mill there. I guess just more broadly, how have you found just getting maintenance crews to site? Have you seen material impacts to that, just given the broader challenges on labor?
Yes, Matt. Ed here. Certainly have. It requires us to be a bit more proactive in terms of lead times for planning major shutdowns and a lot more collaboration consultation with contract providers to make sure that we're sort of working in and around other mine sites that have had shutdowns on -- in and around similar times. So certainly is, but we're still able to get the work done. Just requires more planning and communication.
That's great. And when do you expect your next major maintenance shutdown at Golden Grove?
Yes. So we have one planned in the June quarter in May, and that's the period at which we'll undertake the work to reinstate the zinc regrind mill.
Your next question is a follow-up from Mitch Ryan with Jefferies.
Just wondering if, I guess, in the environment of heightened geopolitical risk that we're in, if you've done a study across your supply chain and have any concerns about -- do you supply anything from either Russia and/or with China going into extended shutdowns, do you have a view as to any key consumables in your supply chain that come out of either Russia or China?
Yes, Mitch, we did have some specific reagents, copper sulfate coming out of Russia. We've since taken the initiative to switch that to a China supply. On the China front, we actually acquired a number of reagents provided from both Mainland China and Taiwan. What we have done subsequent to the rise of COVID is we've taken a conscious decision to increase our stock inventory on site. Nevertheless, we are in communication with our supply chain providers with regards to the current China sort of threat. So we're evaluating that as we speak. But in terms of -- in the immediate term, no concerns, and we have plenty of additional stocks both on site and on order.
There are no further questions at this time. I'll now hand back to Mr. Albert for some closing remarks.
Thanks, Melanie, and thank you, everybody, for attending today and the good questions, and also thanks to Cliff, Ed and Peter for their presentations. So just a few closing remarks. Whilst the March quarter has undoubtedly been a challenging time for the whole industry, and 29Metals is no different, although perhaps we haven't been as badly impacted by absenteeism as some of our peers are reporting. Nonetheless, even though we have been proactive in deploying available resources to prioritize production where possible, there has been an impact on production, which we've relayed in the quarterly.
Nothing is certain in this COVID world but we are optimistic of a flattening and gradual decrease in absenteeism curve in the current quarter. And this should see a return to normal and stable operations and an ability to recover some of the lost ground from the first quarter.
One significant outcome as a result of the recent borders opening up again is that we're able to travel. Ed and I have been fortunate to visit both operating sites during the quarter. And Mark van Heerden, as we've said, is now at our Redhill site in Chile. There's no substitute for face-to-face meetings, and it's been great to reconnect in person with most of our teams at both the operating sites.
Likewise, we have also had 1 investor visit to Cap Copper and 1 to Golden Grove led by Mike Slifirski, and Mike will be looking to organize another site visit to each operation later in the year. Earlier, I made a reference to the expansion of Cliff's role to include sustainability and ESG and also recruiting for a group manager of sustainability. We do intend to remain a lean and razor-sharp corporate office, and we have 2 other internal promotions during the quarter: Peter Danks as Group Manager, Human Resources; and Brett Milner as Group Manager of Projects, Innovation and Technology.
These both reported in the December quarterly report but have taken up their roles in the March quarter. These internal appointments recognize the depth and strength of our teams and enable other internal appointments and promotions to take place. Development of our people is always a key aspect of our leadership and in these challenging times, even more so.
Please don't forget our AGM coming up on the 24th of May, and we look forward to meeting many of our investors, either in person or again, remotely on that day. Thank you, everybody, again, for listening to our presentation, and we'll close off here. Thank you, Melanie.
That does conclude our conference for today. Thank you for participating. You may now disconnect.