New Century Resources Ltd

ASX:NCZ

Earnings Call Transcript 2021-Q2

[Patrick Walta, MD & Director]

Good afternoon, or good morning, everyone, depending on where you are in the country at the moment. Many thanks for dialing in to New Century's quarterly results conference call and presentation. I appreciate everyone's busy so we'll work through this -- the salient in details as quickly as we can and hope to give you a snapshot of where the company is at the moment and how we're going to progress things going forward. Today on the call with me, I've got Barry Harris, our COO, who's up on site at the moment. So he'll be able to provide some insights into what's happening on the ground at the moment as well. So we'll kick it off now and go straight through the presentation as well. Just note the usual disclaimers. All of this is available, released on the ASX platform and on our website now as well. So a quick snapshot of where the business is at right now. Some quarterly highlights there. As you can see, we've had a good increase in our adjusted EBITDA for the quarter, a lot of -- particularly in regards to price improvements, it's been great to see. A bit of a milestone with our 500,000 tonnes of zinc concentrate shipped, and also you would have seen some recent announcements around our reduction in our rehabilitation costs as well. So there's been some good things happening in the quarter and some good ones with progress to come. And I should just add, we'll go through this presentation or the majority of this presentation, and then there will be an opportunity for Q&A after this where you can type it in on the Q&A section of your screen then. And we'll look to answer those Q&A questions at the end of proceedings. Jumping into the quarterly results themselves. We did have quite a solid quarter in terms of just being slightly under what we achieved for the September quarter. And this -- we were able to achieve this despite some operational difficulties during the quarter, mainly in regards to wet weather and also in regards to some power supply interruptions. Despite these interruptions and having less operating days, we were still able to punch out a fairly material amount of production, and it's set quite a good base for us. So as a result of that, our adjusted EBITDA grew quite strongly, up 70% to $22 million. And that's really as a result of also getting the zinc price increase, so really taking advantage of the leverage we have around zinc price as well. We -- the zinc price average is $1.19 for the December quarter to achieve those results. And pleasingly now, we've actually put some hedging in place as well. So we have a floor price for 100% of sales in the March quarter and a 50% of sales in the June quarter at $1.20. So sets us up quite nicely, particularly with regards to some additional benefits, macroeconomic benefits we're expecting now into the March quarter around TCs, which I'll go through. It sets us up quite nicely for the March and June quarters and beyond as well. What am I doing quickly is I'll flick to Barry. And Barry, perhaps you can take the listeners through really that sort of metal production call-out box there and have a talk about the quarter that was and a bit of the plans going forward as well.

[Barry Harris, COO & Site Senior Executive]

No worries. Thanks, Pat. Good day, everyone. As is outlined there, one of the major reasons why we had a case -- stop production was through the wet weather events. Pleasingly though, through this whole period, we did manage to instigate through the projects and the hydro mining team, they've put in a lot of processes and procedures and mitigation measures that, in all reality, actually halved the amount of downtime we would have otherwise had. So whilst we did have a lot of wet weather interruptions, the impact of those were mitigated a lot in comparison to last wet season. They did this through the installation of additional on dam bonding and water diversion by the decants. We've over doubled our pumping capacity over the last wet season. And we've also built and are setting up a separate pumping -- satellite pumping system, so in wet weather rain events, we can still hydro-mine and get density to go through to the plant. And the other part of that is updating all of our tops and operating procedures, not only down at the hydro mine but also at the processing plant. So whilst we did have a lot of interruptions through wet weather events, those have been drastically reduced versus last wet season. And we're actually even set up better going forward now which was pleasing to see. The one that was really exacerbating was the effects that we had via the Queensland government-owned Mica Creek Power Station, which, after operating since 1960, was in the process of shutting down. And through that process, the last 3 months that they were in operation, we had a lot of impact to the operation. That also increased our cost because they're running open cycles. So we had quite a substantial increase in our gas costs for the quarter. But importantly as well that added a lot of variability into the operations. The first thing that gets shut off when we get a brownout after a load shed from Mica Creek up into that point was our bore mill. And when our bore mill is not operating, it affects our recoveries between 8% and 10%. And we had not only submitted brownouts, but also some quite prolonged one where we ran for long periods without the bore mill, which drastically hindered our production over the quarter, not only with the bore mill, but we also had our feed pumps and our blowers tripping out because of that change in the actual power supplier. As far as what we've done about that, the only thing we could do was transition to a new power supply, and we've done that. And that took effect from January 1. Our power supply is now coming from the Diamantina Power Station. And that transition happens on the start of January. And since then, we haven't had an interruption to our power supply at all, and we expect that to continue going forward. The other added benefit on that, not only consistent, reliable supply, but also less likelihood of getting that open cycle key rate and that additional gas costs going forward. So those were the major issues that we faced during the wet season and this last quarter. And what we've done is actually mitigate that going forward, so expecting much better performance going forward from the operations because when we didn't have those interruptions and we had solid production, we really did start to see the plant and the operation perform really well. It was pleasing to see in those periods, we were still averaging between 47% and 51% on recoveries. And we actually managed to have a peak production of 477 tonnes of zinc metal during the period, even though we had all that things to deal with, interruptions to the operations.

[Patrick Walta, MD & Director]

Yes. Thanks, Barry. Yes. So I think it's some good stuff to note there. If you think about wet weather, wet weather is a feature of operating up in North Queensland. The team has been able to mitigate that wet weather downtime as much as possible. For example, you typically get quite heavy deluge in that area as opposed to long periods of slow rain. And any of the rain that falls outside of the tailings dam is actually designed to flow away. So that's a measure that we've put in place. And now even rain that falls on the tailings dam itself, we've got a lot of avenues to push that away from the production areas. And then the meaningful insight there, we've now got additional pumping capacity. So there has been quite a marked improvement in that reduction of downtime. It is a feature of how we manage it. And as Barry said, it's pleasing to see the switch over on to the new power supply now and we're getting those effects as well. So I will -- you see some other drivers for value there going forward. We'll talk about those in the preceding slides going forward. Just some other items to note there, we are still obviously receiving appreciation of the Aussie dollar at the moment, which artificially increases your costs. And we obviously have -- if production is slightly lower, you have a lower production base to apply your fixed costs across from as well. So we can get some good clear days. We've removed the power supply interruption issues that we expect then production to be able to go up and, in tune, cost to be able to go down as well. Flicking on to the next slide here. Despite those operational challenges, it is still our best quarter ever since we started the operations there. So starting to generate some really good EBITDA. You'll see a difference between the operating cash margin and the EBITDA there purely as a result of the value of inventory. So we had quite a bit of inventory inside the pipeline, core facility, that sort of thing. So the adjusted EBITDA takes that into account, and it assumes it's all sold within that quarter, which really takes to account of lumpy shipments and lumpy invoicing and shipments that the nature of our business that sort of has. So we did generate some very good reception with customers, and you can see there from the waterfall chart as well, one of the focuses for us going forward is removing all those one-off costs. So For example, the Karumba accommodation purchase is very much a one-off cost. We have 1 more power bond cash backing to go. That just moves us into restricted cash as opposed to being a proper cash outflow. And similar with the contractor buyer, that's nearing completion as well. So it's pleasing we should start to see removal of those one-off costs and really just move into the pure operational side of things where your receipts from customers less your -- as production costs in SG&A will be that really good true measure of performance as well for us. Lots of opportunities for us to improve things. Obviously, we'll talk about treatment charges in a sec, but we know they're coming down, mining rate in the Jameson Cell project as well to assist us with getting production up. And there are opportunities, I'll talk a bit about the macro with post-COVID growth also going forward. Just quickly on to the Jameson Cells upgrade itself. A pretty picture of the Jameson Cell that's in place. It's a refurbishment of existing kit as opposed to a build of something new. Barry, perhaps, you want to just run the team through that work in progress and the time line going forward for the Jameson Cell up growth?

[Barry Harris, COO & Site Senior Executive]

Yes. Thanks, Pat. The team has been making some great headway in getting that all sorted out and ready to reintroduce into the flow sheet. And whilst we have had some delays related to getting some of the product and some of the bits and pieces we need up to site as a result of COVID, we're on track to do the major tie-ins in our last and final shut for this financial year, which will happen in March. And then after that, progressively, the teams will finish the install and start the commissioning from that through into the final quarter of the financial year. So it's on track and on schedule. We've had a few challenges. As I said, we're getting stuff to site from those COVID-related transportation issues, especially stuff coming from overseas. But all in all, it's on track and heading where we wanted to. So we envisage bringing that on in a stage fashion and then start to see the benefits before the end of the financial year.

[Patrick Walta, MD & Director]

Patrick Walta. Thanks, Barry. So just flipping over to costs and treatment charges. Now TC, there's a huge story for New Century. It's 35% of our C1 costs. So it is our major cost overall. And so that macro drive has a really big effect on our bottom line earnings ultimately. And we've suffered over the course of 2020 with this high -- initially high spot TCs. And then obviously, the benchmark was set right at the time when those TCs were high. So we've seen -- been dealing with a $300 benchmark TC. It's been fantastic to see the spot fall off a cliff. So that's a supply-demand fundamental on global concentrate, which we'll go through and talk about those changes that have occurred. But you can see throughout history, the trend of spot really dictates the annual benchmark setting. So while we averaged $2.69 on the -- on our average TC basket for the December quarter, we see that coming down in the March quarter. So the annual benchmark treatment charge is set typically at the end of February each year. So it's a negotiation between tech and career zinc. So tech being the miner. One of the biggest miners in the world, Korea Zinc being one of the biggest smelting groups in the world. They'll typically set the annual benchmark. And then most contracts will follow suit. So it's typical to have a benchmark contract where you set that price annually. And so we're anticipating that will come out in late Feb, hopefully, when those negotiations are concluded. But more importantly, it be -- coming down significantly as a result of the swing, the very large swing in supply/demand fundamentals there. And it's an important feature for New Century. You can see there's a little calculation there. If you achieve a $100 drop in that TC basket, you're dropping your C1s by $0.10 a pound and adding $35 million worth of earnings. So we have a very large production base to apply that TC to. So it's a really important fact for us into 2021. And I should say that it's retrospectively applied to the 1st of January. So we are in the new TC benchmark price zone. We just don't know what it is just yet, but we should be finding out late February. And so that will be important for us going forward. In 2021, our shipments are scheduled to be around 80% benchmark or a decent discount to the benchmark. And then about 20% will be spot as well. We did intend to try and take advantage of some spot shipments or more spot shipments in the December quarter, but we weren't able to get that production up beyond our -- well beyond our benchmark -- sorry, our benchmark scheduled shipments. So we did have -- last spot deal we did was at $111. So we're going to take advantage of some of those low prices, but it would have been great to take advantage of more of them going forward. But we are in the new TC environment now, which should be still really good things for our cost base and ultimately straight on to bottom line earnings as well. So that, in combination with putting a decent put or a hedge in place at $1.20, sets us up for some good quarters going forward as well as our production increases with the Jameson Cells coming on. An important consideration with TC is why. Why is the spot coming down? And why do we see the benchmark following suit? And really, it is purely supply/demand fundamentals, particularly based on this -- on the post-COVID recovery and the demand growth. So I thought I'd just present a couple of slides here to sort of show where that's heading and where we see that playing out over the course of 2021. It's very hard to predict. But really, for zinc, it's a tale of 2 worlds. You've got China. And you've got ex China rest of the world. China is 50% of global zinc consumption. So it's a huge player in zinc. China is growing, zinc is having a good time. If it's not, it's the other way around. So what we've seen with China is kind of a case where they came out of COVID much earlier than the rest of the world as the rest of the world was getting into it. So we saw a very strong rebound in China's manufacturing PMI for example. And that really drove quite a quick post-COVID recovery for zinc demand itself. And you saw a big supply constraints because of social distancing requirements or countries being shut down throughout 2020, which meant supply fell off a cliff. Recovery demand -- half of the world's recovery -- sorry, demand recovered quite quickly, which is pleasing to see, which is why we saw that big spot TC drop in itself. And you can see some of the graphs here they kind of show the same thing. You see Chinese domestic mine supply continuing to decrease; concentrate imports into China increasing; converting that concentrate into refined metal increased strongly, particularly with COVID interruptions. It's been quite impressive. But also that refined metal being drawn. Stocks being drawn down. It's been physically consumed over the course of 2020. So really positive signs in the China bubble and so half the world zinc there as well. And this is some interesting data that's actually just come out from Macquarie themselves. So we've seen a great support from China. What about the rest of the world? You see, in 2020, China represented up to 60 -- at one point where it represents 60% of base metal demand globally. So as the rest of the world was in a hole, China was getting on with business. And we can see now those graphs starting to turn up for the rest of the world. And that should -- it's a key determinant in providing that next leg of demand increase, next leg of ultimately price increase and, hopefully, continued low treatment charges in that spot world as well. So some good signs in the market for base metals in general. It really will depend on vaccine rollouts, implementation of stimulus as ultimately countries -- as they roll out infrastructure-led stimulus are going to grow. Just similar to what we're trying to do here in Australia, what China is trying to do. So a lot of new infrastructure, building buildings and roads and all that sort of thing. If you're using steel, metal still needs to be coated with zinc. It needs to be galvanized to make it rust proof. So we're very much went to iron ore demand, and that's quite strong at the moment as well. So we do see some good -- I guess -- we have an optimistic view on zinc going through into 2021. Important to see how that rest of the world demand recovers, pushes going forward. So that's sort of why -- how we -- how the TC environment has unfolded for us, and we'll obviously update the market when that new TC comes out as well. Just flipping back quickly onto the Century assets themselves. One of the announcements we had subsequent to quarter's end was certainly a victory for us and a great milestone for the business around our environmental rehabilitation cost. It's effectively the environmental bonding. So every mine site in Queensland and in Australia requires some degree of environmental bonding. In Queensland, it's based on the surface area of disturbance of your mine site. So as you put down a mine -- an open pit, the tails dam and evaporation down, waste dumps, your surface area grows. Conversely, as you shrink it, as you rehabilitate, that will reduce. Typical process is to run a mine to the end of its mine life and then rehabilitate. The New Century model is slightly different. We're actually looking at a progressive economic rehabilitation here. So reducing that surface area of disturbance while the operations are continuing. Some of that we do naturally, just by the fact that we're picking the tailings dam up, which obviously is our first mining operation, and we're putting it back in the pit. So we're reducing the disturbed areas. By doing that, we're obviously producing zinc along the way. But it's great to see the team achieve this goal. But Barry, I don't know if you want to give maybe a little bit more insight into the work that's being done around our rehabilitation activities and what has been used to generate this first reduction?

[Barry Harris, COO & Site Senior Executive]

Yes. Thanks, Pat. The environmental team on site have been doing an excellent job, in combination with the hydro mining team in the northern part of the dam where it's a shallow section, only 10 meters depth, where we can actually expose the bottom surface of the tailings dam. And we're running through trials on how we're first exposing the bottom layer of the dam and then going on to further rehabilitate it from there. And we'll progressively work away from the north of the dam towards the south as time goes on. And as we refine our process and get better at it, it will progress faster and faster. Keeping in mind that on the major bottom section of the dam, there's 2 benches that we've got to mine. So over 20, 23 meters worth of material that we've got to get through. So in the early years of our mining, we're only really going to be able to do this for the northern part of the dam. The other part of the area that we've started our trials on and you can see there in the picture in the center one, center right is we've actually started to do some file work on the evaporation dam itself. Our old process is to draw down that evaporation dam as low as possible so we can get the flush and get it to come down naturally. But what we've also started doing is ripping and seeding some areas to see how they will generate, and that's giving us good information that's feeding into our further programs that we're doing. Notwithstanding that, what we're also doing is still dismantling and selling unused infrastructure on site, again, further reducing the footprints and the surface area of the service around the operations. And we have key areas outside of our current mining operations that we're going through and systematically rehabilitating. So the teams are doing the work on the ground. That's all getting correlated by our environmental manager, which we then go back to the Department of Environment and Science and applied for a reduction in overall ERC. It's key to note that this is the first reduction in Queensland that's happened. And this is a validation, as Pat said, of our whole model. This is the first time we've done it, but we intend to keep going back and getting further reductions as we complete work. As we mine more of the tails and rehabilitate other sections of the operations, we'll keep reducing that down.

[Patrick Walta, MD & Director]

Yes. Thanks, Barry. I'll just flick -- we'll just change tack now and turn on to some of the other exciting stuff we're doing around exploration at the moment. So you would have seen some recent announcements that have been released as we've kicked off 2021 drilling program on site. It's the first time we've actually done exploration and drilling since 2018, which is too exciting to be part of. And the initial focus is really around Silver King. So you'll see the Silver King being a couple of kilometers away from the operating plant. All on the mining lease, everything there. So it's an ore body that's been known about for 100 years. There's been historical mining there in place. And really, the only reason it hasn't been developed by predecessors of -- pre-owners of the original Century tenements is because of its size. The original big zinc ore body, which has been mined to date was 120 million tonnes. So Silver King is the best part of 3 million tonnes. It's much smaller, slightly different mineralization, higher grade, vein style mineralization. And so just it hasn't been -- had the love and the attention to be developed. But a lot of studies done on it show, particularly at current price, it's a very economic proposition. And we look forward to releasing some more of that information, but also a result of the drilling. It's a largely infill drilling that's occurring here at the moment, using just to upgrade the confidence in that resource, but all leading into us being able to make a 2021 financial -- final investment decision on the deposit itself. Pleasingly, the strategy that we have around Silver King will not interrupt tailings operations. So we've changed tack there slightly. We don't see -- we don't envisage the need to drop down throughput, for example, into the tails operation. The plan for Silver King is more around implementation of the historical lead circuit on site. So there's a small part of the plant that's not being used right now, which is associated with the old lead circuit. And it's quite suitable for a small-scale high-grade operations in Silver King. So we're obviously not going to do 1 million tonnes per annum or something like that of Silver King underground feed into the client. It's going to be more in that sort of 100,000 to 300,000 tonne range. And it's quite suitable for that separate circuit there, so we can effectively run 2 operations through the plant. And we start building -- generating obviously additional zinc, but a high silver lead con will also be brought onto the market as well. So quite excited to see the results of the drilling. And obviously, we'll release those in due course as part of upgrading the resource as well. Beyond Silver King itself, we also have obviously South Block and East Fault Block. We're putting a couple of holes into those as part of the upgrading of the metallurgical assessments as well and those studies in terms of banking those into the life of mine. We also have more of a greenfield exploration targets -- or brownfield exploration targets, I should say. So particular, the Millennium target, which is a lot of work that's been done by the team, while we haven't been able to access the site for drilling on assessing the potential of another piece of the original ore body. So the north base of the original ore body is cut off by faulting. So literally sort of a 25-meter face of 12% or 13% zinc and lead, and then you have [ nickel fault ] on the northern side of that pit, and then you have nothing at all. So clear sharing events occurred. It's about understanding and finding this third piece and how big is it and all that sort of wonderful stuff. But we've sort of zeroed in on the potential areas. And that will be the plan in 2021 as well as to -- and drill that. So there'll be some -- there's a fair bit of excitement about getting the drill rigs over to those. It's less wet weather access in those areas, so it will be done post the wet season itself. But certainly slated to be investigated as well. And even beyond that, we have Watsons Lode, which is about 8k to the south of us on our tenements as well. Very much a similar vein-style deposit like Silver King. However, based on the geological interpretation of the team, to date, we feel that these -- because it's been reclassified as a SEDEX deposit, these veins actually potentially form the feed up to these larger big zinc-style deposits. So there's sort of sediment hosted deposits as well. So we've got veins going through the right host rocks, the Century host rocks. You get that chance for geochemical precipitation to occur.There are a number of undrilled Century host rocks identified around the Watsons Lode high-grade, vein-style deposit. And so we feel there's really good potential for a similar sort of scenario to evolve. So again, we plan to be testing these over 2021 or into 2022, depending on results of other drilling as well. So there's a lot of opportunity for continued exploration discovery, continued bolt-on of -- to our life of mine. And I think a pleasing thing for the team is to be able to demonstrate that to investors, to the market as well. It's not a tailings reprocessing operation. What we have is we have a base metal hub. We have a very big land package. We have a fantastic plant. We have the only economic group for the transport of bulk concentrates in the region. We own that 100% as well. So it's about feeding that plant, developing these ore bodies, putting them through and continuing to push out that life of mine as well. So we're excited to do that against this unfolding macro backdrop as well. As I said, yes, there's -- beyond that, there's a number of targets which we'll continue to build up and identify going forward. I don't propose to go through anymore, there's some other discussions within there. We obviously talk also about some guidance ranges as well, in the back we can quickly discuss that. We do see our guidance being at the lower end of production given the interruptions we had to this quarter as well. Quite difficult in predicting C1 costs given we don't know where the TCs are going to be, and we've had a good rise in the Aussie dollar. However, we do maintain our production going forward. And happy to take questions on some of the other macro part of the environment. We see there's some potentially some opportunities for -- based on trending for improvement in Aussie dollar, zinc, in particular, going forward. So that's the conclusion of the presentation itself. What I might do is open it up for any Q&A that anyone has myself, or Barry. Happy to take any questions. Let us know. And obviously, happy to take a call or an e-mail if you have follow-up questions later on or want to discuss things in some further detail. But certainly, the plan from the team on site, hopefully, now is to build -- through 2021 is to build off the bit of the momentum that we've generated in the December quarter, grow that production base, bring on some of these in-situ deposits. We've got some good hedging in place to get us some good -- generating some further good EBITDA into the future quarters as well, and ultimately sort of then continue to build on the Century's story of improving value for shareholders as well. So thank you very much for listening in. And I'm happy to take any questions that maybe anyone might have.

[Patrick Walta, MD & Director]

I've got a question here from someone. Is there potential for consequence of loss claims against the power provider?I'll say, sadly, no. There is very much a duopoly there in Mount Isa, the 22 gas-fired power stations. One being the Mica Creek Power Station, which is a state-owned power station. Or it was, it's obviously not operating more. And then the Diamantina Power Station. And unfortunately, contractual arrangement, there's not a lot of negotiating power there. So we didn't have guaranteed fee breaks, which we do now with Diamantina, which is great. And ultimately, there isn't a recourse available for brownouts production issues, that sort of thing as well. I'll probably cover it, but Barry, I don't know if you have any further detail or comments that you wanted to add to that. But yes, sadly, that's not really available to us. We're more just, I guess, while it's disappointing that we had to deal with these interruptions and sort of unnotified brownouts, it's pleasing that we now are with a modern power station that we -- contractually, we've seen this coming. We knew that Mica Creek was shutting down. So we've had this contract and is planned in place for the best part of the whole of last year. However, yes, it was disappointing that particularly in this last quarter in November, in the month of November and December, in particular, there was quite a prevalence of supply interruptions that occurred from that shutdown. Thanks very much for that. Just another question here. Is there a time line/plan to implement the use of a lead circuit? Could we expect using it in FY '21? Now FY '21 is through to 30 June. So short answer is no for FY '21, but absolutely in FY '22. So the plan is we'll complete this drilling, complete these studies that enable all the input we need ultimately to make a final investment decision in calendar Q3 this year. Now we've been able to optimize and reject the mine plans to a much shorter time to get on to ore for us as well. So certainly, within FY '22, we see -- assuming the final investment decision is made, Silver King development occurs in that time. So thanks for that. I hope that's answer to your question. Another question here. Can you comment on the recent fall in the zinc price, currently $1.16? Yes, it's frustrating. We obviously want zinc to be as high as possible. And more importantly, I'd much rather our hedging be worthless because zinc price is at $1.30. The drivers of that zinc price fall, this is subjective commentary for you from what we see. We've obviously seen quite a breather in base metals across the board there. There's some continuing concern about vaccine rollouts ex China. And we've also seen China had a what probably is clarified as a relatively small COVID outbreak again, over the last week or 2. So it's really only happened over the last couple of weeks, and it does certainly feel that zinc has taken one of the bigger hits from all of the sort of base metal group from that. So there is -- I can't give you a definitive answer as to why the price has dropped. But seeing those things, some additional LME metal fall on, so while we're seeing the [ shift in ] stocks, the Shanghai stocks drop, seeing some additional metal come onto the market over the last couple of days. Yes, that I think would have that short term hit. It is quite a significant hit over the last couple of weeks. We do get a natural hedge with zinc on the Aussie dollar. So typically, as zinc drops off, it's because of various macroeconomic drivers. And we see that Aussie dollar come off debt. There will be a lead and a lag to that. So we're seeing the Aussie dollar stay up. I think it's about $0.76 at the moment. But last time zinc was $1.16, I believe the Aussie dollar would have been sub $0.70 or thereabout. So we should see the Aussie dollar tail off assuming zinc is going to stay down there. And our Aussie dollar zinc then obviously improves as well. So yes, to be seen where it goes, but despite a couple of weeks, a short-term macro move here against zinc, the baseline of seeing rest of the world demand increase is ultimately a good thing for zinc because we're still having -- relatively still having supply constraints. You've got a scenario where -- and I'll just flip to a slide on it to give you some point of view on it. This is 2020 data. I remind you that you have a scenario where the big zinc-producing nations or the big zinc concentrate-producing nations really got hit hard by COVID and continue to get hit hard by COVID: so sort of China themselves, Peru, Bolivia, South Africa, the U.S.A. So a lot of those top 10 COVID nations have also been -- suffered quite greatly from COVID itself. That resulted in a lot of industry shutdown for a period of time. Now the industries have turned back on invariably. But you're still practicing social distancing. That's the feature of all countries, even in Australia, obviously, where we have relatively little COVID, yes, we're still really practicing social distancing. And when you have 75% to 80% of your mine concentrate in zinc and lead coming from underground sources, it's very difficult to both practice social distancing and expand your output, expand that supply as well. So we see that the general theme of miners just struggling to maintain their output as opposed to doubling it or tripling it or anything like that, getting that real growth. So we can see that backdrop of demand surge from rest of the world against continued, sort of, supply struggles. It sets up quite well for that good evolving -- that macro to continue and to evolve going forward. So I hope that answers that question as well. Another attendee, Pat. So expectation going forward, it will -- we transferred the Diamantina, return to ops stability and recoveries at steady-state ops. The short answer is yes, absolutely. Barry, do you want to give a little bit of insight into sort of stability and ops performance over January?

[Barry Harris, COO & Site Senior Executive]

Yes. Thanks, Pat. We did have some wet weather interruptions at the start of January with regards to those couple of cyclones that happened up in the Gulf and the subsequent weather events that came with those. But since those have dissipated, we really have started to get operational stability and starting to see the zinc production and recoveries follow from that. So as soon as we don't have interruptions, the plant actually rebounds. It takes a little while to get back. And then when it does, it really starts to perform well. And we're seeing that now. So see -- the latter half of January, we're starting to see some really good results over the plant.

[Patrick Walta, MD & Director]

Thanks, Barry. Next question. What do you anticipate the EBITDA to be at the end of the March quarter? Okay, that's -- we haven't forecasted EBITDA. Obviously, EBITDA is very much dependent on the zinc price, TCs and production as well. So we've demonstrated that we have a good base of production now. Even with the sort of few niggling issues, we've been able to operate in this sort of 32,000 to 34,000 tonnes of metal range. Now that's not the range we want to be in, and it's not the range we expect to be. But it is still a very large supply of zinc. Those sort of levels on -- if you look at the 2020 data, the top 10 zinc producer in itself. So we've got good opportunities, and we've invested the capital to grow that production base and improve it. But where it stands right now is a good base to take advantage of good prices, which we've been able to lock in to a degree with our hedging. But true to answer is we haven't given a projection on EBITDA, but obviously, you can see by the -- both the corporate actions and even the operational actions there, we're looking to try and lock in and replicate out our previous growth. We had around $13 million adjusted EBITDA in the September quarter. We're growing that to $22 million. We can get the benefit of some TCs while maintaining that sort of good hedging price. It sets you up well to maintain and grow your EBITDA if you're getting decent production as well. What does the drilling budget look like is the next question. Current approval is around, I think, it's around $2.5 million. It's a rolling approval. The short answer is the approvals are in place. So depending on the results of the Silver King work, we may look to do additional step-out drilling or things like that there before bringing on these additional resources. I hope that I'm able to forecast next year that we're spending $20 million on drilling because that absolutely means that we'd hit something. So wait and see. But it's not a huge amount that we're spending on drilling, but it's very targeted and obviously, initially focused on specific for development of our second mining operation at Silver King and East Fault Block. But as we get through that because we'll be looking more at that exploration style or brownfield exploration-style activities as well. Next question is -- I've got a couple of questions, is there a forecast TC rebate amount back-dated from 1st of January for NCZ? So the answer is yes, if we do a shipment on the 1st of January, it is done at a -- so we set out a contract on 1st of January. It would be done at last year's benchmark of $300 less whatever the applicable discount was for that. However, as the new TC is finalized, you do get that money back. So you officially -- you are -- every contract that is signed from wherever shipment that occurs from the 1st of January is on the new TC. We just don't know exactly what that TC is. So we normally have -- we issue a provisional invoice, but we get paid about 90% of the contract value, less the TCs. And then as you go to settle your final invoice, you get that additional 10% depending on where the zinc prices move and then also an adjustment of your TC as well. So I hope that answers the question. Next question. When do you expect to hit 12 million tonne per annum? A very good question. Really getting the Jameson Cell project online and up and running will be a key component to that. It won't be a light switch. It's not going to -- if the Jameson Cell is fully operational mid-May, for example, it's not all of a sudden going to be 12 million tonnes per annum. We'll be doing -- stepping that up in a measured, managed way. But we do expect -- much like we did going from sort of 6 million tonnes per annum to 9 million tonnes per annum, we expect that sequential staged increase. So the idea is to get operational stability to have those recoveries up, so efficiently using your resource, and then to make those steps, those mini steps up to that mining rate. So certainly not looking to deflect the question, but it will be a similar replica to how we did. Once we have the Jameson Cell online and embedded into the circuit, it will be a similar process where we make that staged increase. Now based on stability of the operations, we'll do it as fast as we can. But we don't want to unnecessarily waste the resource by having lower recoveries. We could technically go to 12 million tonnes tomorrow, but you don't want to do that and have your recoveries drop right off. So you're balancing it while still trying to increase your ultimate goal, which is metal. The more metal you make, the more money you make and the lower your C1 costs are. So it's balancing throughput and recoveries to maximize metal and, obviously, try to increase both as quickly as you can without creating instability in the plant. So that concludes the questions that we have from everyone. I really appreciate those. That was great. As I said, myself and to a degree, Barry, when he's not busy, will be -- is available for more questions. Please feel free to e-mail me or give me a call. And I certainly look forward to providing some updates throughout the quarter as well with anything material that develops and also provide some updates, obviously, within the next quarterly as well. So many thanks, everyone. Appreciate your time, and we'll reach out soon.

[Operator]

Goodbye.