New Century Resources Ltd

ASX:NCZ

Earnings Call Transcript 2022-Q3

[Patrick Walta, executive]

Thank you, ladies and gentlemen, for dialing in and listening to the New Century's March 2022 quarterly results conference call or Zoom call. I'm Patrick Walta, the Managing Director of New Century and certainly very excited today to be able to release our quarterly results. We've made a number of developments across the board, across our projects, and also had quite a successful quarter in terms of cash generation and operational profit. I'll run you through those details now.

Just note the usual disclaimers. This presentation has been released onto the ASX already, so it's freely available there as well. A quick overview for you about the business and how it's tracking. So as you can see there, we've built our cash bulk. We're at about $123 million in cash and concentrate as of the end of the quarter, and capitalized now at about $280 million. Importantly, we now have our Century mine as we've operated for the last 4 or 5 years as our engine room for the business. So generating good cash flow, focused on the tailings at the moment, but very quickly, we'll have the in-situ deposits developed there as well, allowing us to expand that production base and that cash flow profile from the Century asset as well.

And importantly, we've secured our growth project as well. Our next project, the Mt. Lyell copper mine. Really excited about what's happening down at Mt. Lyell, and we think there's some great opportunities to expedite that asset and restart it as a fantastic green copper produced for -- that will ultimately provide copper into the market for the long term.

Going back to the Century operations, I'll give you an overview, and then we'll discuss the quarterly performance of Century as well. So as you see from a number of these headlines -- the asset -- it's an amazing asset now that we have. It's a top 15 zinc producer, producing zinc initially from tailings-only operations. So we've now produced over 800,000 tonnes of zinc concentrate without starting a new mine. It's an amazing feat by the team, but Craig and the team on site have done an immense amount of effort to get the project up and running. And again, it's producing good, consistent production profile as well. And now we're obviously enjoying these great market conditions, which enable to generate very strong cash flow and profit. So March 2022 quarter was a record for us, operational cash flow of $40 million. And I should say that's despite significant operational challenges.

We obviously announced the issues that we had around needing to bypass the ball mill during the quarter. We were able to get the ball mill back on quicker than we thought as well. And at the same time, we had some fairly significant rain events. We had 100% of our annual rainfall in the month of January itself across 2 or 3 discrete events, so nearly 0.5 meter of rain. So the team was able to prepare for that and manage those wet season effects quite well. And ultimately, we were able to get our ball mill back online quite quickly as well and still produce a relatively good quarter of production for it. And obviously, we -- in doing that, we were able to enjoy the high price environment that we're in at the moment.

The business has now generated nearly $100 million in operational cash flow. So that's over the last 12 months, which is quite important. I mean that's not EBITDA or anything that has sort of accounting fluctuations in it. That's actual cash that the business is generating from these operations. And I should say that the 12-month zinc price is $1.47 a pound, which is a good price -- but we can see the tailwinds continue, and I'll talk a bit about the market in the next few slides.

So the current zinc price is just under $2 a pound. So we expect that operational cash flow to continue to build, and we're obviously looking at mechanisms that we can bring more zinc into the market. We bring our lead concentrate into the market as well and enjoy those higher prices coming from the Century line. Speaking of the lead, we have the in-situ deposit. We've made a number of great steps forward in that -- with these deposit in terms of getting it ready for development.

So we released a lot of information about the optimization work that's going on, and we will release that study imminently as well. But operational readiness, the team on site has been quite focused on making sure we maintain our critical path, given there have been, around the world, there have been extensions in time lines due to logistics and difficulties. We've been able to actually maintain our critical items quite well.

Ball mill, for example, underground mining equipment, for example, are all on order. And so we see that certainly as we tick off the final environmental approvals and senior lender approvals to be able to get that project up and running because the economic sector themselves and those -- the economics there on that third panel are done at highly conservative metal prices that were produced last September. And I think most metals are significantly up since last September.

So we have made improvements to the production profile and simplification to the flow sheet as well. But even just new consensus pricing is going to be quite accretive in terms of the value proposition as well. And at Century, we've now managed to convert the asset into a long-life asset or targeting a long-life asset, really 2030 plus is the base now. So we have the tailings reserves up to 2027. We have defined in situ resources that can easily extend that to 23rd and beyond. And we actually have some work now going on, on a significant phosphate deposit or mineralization we have on the side as well, that we ultimately see as something in the future when -- if there's no further discoveries of zinc made and the exploration team has been doing some good work over 2021 and then weave into 2022 as well as the wet season finishes. But even if there's no base metals discovered, we have a fairly major phosphate deposit or mineralization that we'll look to define and start to bring into the market over the course of 2022 as well.

Looking in detail at the March quarterly performance there, you could see a fairly busy cash waterfall graph there. The takeaway there is that after all expenditures, including our growth expenditure, we generated cash. And we generally increased our cash and concentrate pile by nearly 20%, 18% in there. It's a significant portion of our value proposition in terms of our share price. And so you can see there's a great backstop for shareholders to know that there's excellent cash stockpile. We obviously have a number of growth projects underway at the moment. We're going to trying to use that cash in conjunction with financing activities -- debt financing activities, I should say. And so we can be as efficient as possible, make sure our balance sheet is as efficient as possible. And that opens up opportunities for what we can do with that cash in terms of potential distributions and that sort of thing in the future for shareholders.

So a number of one-off items in terms of costs inside our cash waterfall, but ultimately, those will be eliminated in quarters going forward. And with the stronger zinc price, as you can see -- the average zinc price for the quarter itself was only $1.69. And so we're currently probably averaging over $2 for the zinc price into the June quarter to date. We do expect some further improvements again in terms of cash flow and that sort of thing which is ultimately great for the business. Guidance has been reaffirmed. And so that's despite the quarterly interruptions that we had in terms of weather events, ball mill, general management of COVID as well, still able to maintain that guidance in both cost and price range.

This is an interesting new slide that we developed. We just wanted to give investors a bit more context around the zinc price rise, what is generating it and what it means for the market. Fundamentally, what we're seeing here is dual black swan events that occurred. So if we go back to late last year or even not so late last year, the European power crisis was real. So quite a strong transition to renewable energy sources in Europe, and the reality is there wasn't enough power at the start of the winter. So we did see some decent price movements or growth there.

So zinc smelting is an energy-intensive business. So we produce a concentrate. That concentrate -- let's say it's 50% zinc and 50% gang material, we sell that to a smelter. The smelter fundamentally heats it up. They put it through a big roaster and heat it up to 1,000 degrees. And then the sort of basically pulls the zinc out of it by doing that sort of roasting that material. To heat anything up to 1,000 degrees, you needed a lot of energy. And so energy is normally derived, particularly in Europe from gas or coal or anything like that.

So the zinc price is fundamentally linked to European gas prices at the moment. You have a huge set of oil, you have 2 Black Swan events that have caused a huge set of interruptions to that gas price and potential future gas prices. So first, it was renewable energy issues that were in Europe. And now that has been completely overrun by the invasion -- the Russian invasion of Ukraine. So Russia supplies the majority of gas to Europe to the countries within Europe. And so the threat of that gas being turned off has resulted in a number of smelters shutting down or being concerned and threatening to shut down, which causes the zinc price to go up. So -- and we've seen that play out over the last 2 or 3 months. So particularly with Nystar, smelters in Italy, smelters in France, shutting down in Netherlands and Belgium.

And even last night, we saw the news that Russia has cut off gas supplies to Poland and Belgium. Well, Poland has 2 zinc smelters. So I'm not quite sure how that's going to play out yet. But their energy prices are likely to significantly increase to the point where it basically becomes economic -- uneconomic to refine zinc, and as a result of that, you shut down the smelter. So we're seeing strong demand still in the market. A lot of countries obviously trying to grow zinc.

Zinc demand is fundamentally linked to global GDP. So as people are producing steel and they need to galvanize for buildings, for automobiles, and construction industry, there's a strong demand for zinc, but we're just not seeing the supply because of these Black Swan events and these constraints. And as a result, we've got some fantastic zinc prices at the moment. How long do they last for? I really don't know. It's amazing that the whole zinc supply demand fundamental basis is really linked to the actions of one country or even one person in terms of what Russia might do in terms of the gas supply there.

So -- but we are looking at this as an opportunity. We're not resting on our laurels and just enjoying these prices. We see this as a great opportunity for New Century to grow. So we use these high prices. We generate good cash flow, and we bring our additional growth projects online. I'm talking about in-situ projects and down at Mt. Lyell, out copper project down in Mt. Lyell as well. So we can certainly then evolve the company that -- metal prices will ultimately have downturns in them. But if we can evolve to being a multi-asset producer of multiple sources of revenue, commodity diversification, it puts us in a much stronger position for any events into the future as well. So we fully intend to utilize these good times to be part of that -- to be evolved the business into being stronger.

You'll see this is just a quick snapshot of the in-situ deposit. You've seen the economics of it. As I said, we'll be releasing an optimization study infinitely, and we expect to provide some good news around environmental approvals in the near term as well. Now Silver King is located on the mining lease, you see here, and it's within sort of 2 kilometers of the plant. So when you think about Silver King, it's not a new mine in that regard. The mine is already running. So we are reprocessing these tailings. We use the evaporation dam water here to hydraulically mine these tailings. We bring it up through existing pipe work, and we reprocess it in the same facility. So we just give it more residence time. We extract the zinc out of it. The zinc goes up our concentrate pipeline. So we own 300 kilometer underground slow pipe, the one that goes to our own port facility in Karumba, and we use our own transshipment vessels for that. So a huge amount of infrastructure, strategic infrastructure that we still own.

And ultimately, all these tailings and all this water goes back in the pit. So we're also rehabilitating the site. That's the current turnings operations. Silver King and South Block are bolt-ons for that. So the tailings is kind of paying all the bills: the power, water, the services to people. Silver King really has to pay for its own mining costs and obviously produces a significant amount of metal. And we're seeing this adding potentially 25% to our overall metal production base, and you're obviously spreading that additional production over a fixed cost base as well. So significantly lowers our cost base as well and obviously drives more earnings from the operations there. So we're really excited about bringing on the in-situ deposits, and the team on site has done some great work to get them operationally ready. And there are a lot of people on site and also Danny Melbourne as well that are keen to see it all happen to be a great new mine to get developed.

Just quickly before we go on to Mt Lyell, wanted to give you a backdrop of some of the philosophy and the targets of the business. So very much the business is focused on providing this net environmental benefit, but also being an ESG-focused business, and fundamentally, that's what we do with what we produce. So zinc from tailings itself. And Zinc is also used in the clean energy metal sector, probably doesn't get as much focus as copper or nickel or those sort of things which are very much seen as metals for the EV future. But in terms of wind power, zinc is a huge amount of consumption of zinc. You're talking about coating of big wind turbines so they can last for generations. Well, that's all zinc in there. So zinc's very much part of the wind power thematic around in the market as well.

Silver as well. We produce a bit of silver within our zinc concentrates as also. And then ultimately, we're bringing on this really exciting copper plate, which I'll talk to you about just over the next few slides as well. And we all know the exciting thematics about copper and its use in clean energy metals going forward.

Mt Lyell, we're really excited about Mt Lyell. It's probably an understatement. The team has done some excellent work. We worked with our friends at Vedanta for quite a long time on constructing a transaction that was going to be suitable for all parties and the right development pathway for the asset. And we've now -- we're now enacting on that. So we've made that acquisition. We've got an option over the asset, and we're now busy doing the assessment and the development work as well.

Fundamentally, what Mt. Lyell is, is 1.1 million tons of copper, defined. So this is not exploration targets or anything like that. That is actual copper in mineral resources, which very quickly will be converted to mineral reserves or a big portion of it converted into reserves. And it's also 1 million ounces of gold there. It's located in Tazi. It's a Tier 1 location. It has a mining lease. It has a fully regulated tailings dam, has the approvals that it needs.

So the asset has been on care and maintenance since 2014, and now we're looking to reinvigorate it. And fundamentally, doing exactly the same thing what was done. We obviously bring a lot of environmental credentials. We'll make sure that safety credentials are very well in place, but we're looking to restart operations and enjoy higher copper prices as well. So that's a process we're going through in terms of the feasibility study. but we see it very, very, very quickly becoming a win as opposed to if, which is exciting. And we're looking to release these reestablished reserves in the near term. And from that, we'll be able to discuss our timing and our plans for the rest of 2022.

But much like we did with Century, we think we can very quickly instill the value proposition to the market in terms of feasibility studies and getting numbers out there because it's a well-established mine with historical production history and you have reserves. And then obviously, that's a trigger for us to look at financing and ultimately pulling the trigger to get it up and running as well.

The asset quickly, as many people would know, is about 130 years old. It's been operating for a very long time. I think up until 1950, it was one of the most significant copper producers in the British Empire itself, before Mount Isa came along and took it over, but it has a very rich history. Water producer is a very clean copper concentrate, and it also receives 100% renewable energy power from Tasmania's hydroelectric systems as well. So as of November 2020, Tasmania moved to 100% renewable energy supply across the state. That's actually going to move to 200% renewable energy supply and energy will actually export it to the mainland as well.

So inherently, everything that is done at Mt. Lyell is brining the copper that's produced is green. And we believe that, that is something that over the next -- whether it's 5, 10, 15 years, we'll start to trade at a premium. We, certainly, from an investor credentials perspective, will be seen as a premium product in the marketplace as opposed to copper that's produced from brown coal power or something like that as well. So it certainly fits very much into the New Century ethos, providing net environmental benefit, having an ESG focus to our business, producing green metal, green copper down at Mt Lyell, and obviously, green zinc up at Century.

Looking quickly at the opportunity here, we can see Mt. Lyell has been a really consistent producer. So Vedanta acquired it in 1999 and operated it all the way through to 2014, consistently produced that sort of 25,000 to 30,000 tonnes of copper, 10,000 to 15,000 ounces of gold from its operations. The last 3 years was a circa $2 a pound all-in sustaining cost producer, and they were producing in the vicinity of sort of, let's say, 30,000 tonnes of copper equivalent, which is nearly 70 million pound.

So if you think about it, if you've got a $2 a pound producer that's enjoying $4.50 copper prices and you're producing 70 million pounds a year, that's pretty attractive. You can make $2.50 a pound, 70 million pounds. So that's a very quick overview of the value proposition if we can get this right and restarted, and that's what the team is focused on; it is restarting those operations. Even those all-in sustaining costs, you could argue that there's been cost inflation. Well, the reality is that the gold credit that's inside that all-in sustaining cost is also doubled. So it should be that sort of producer going forward and the copper price is up over 80% there. So looking forward to restarting it.

The focus area is for the restart and the restart study are on the 2 well-developed deposits. So you have the Prince Lyell deposit here, and you also have Westin classes. There are extensive resources outside of these. So almost you've got to narrow your focus because there's just so much mineralization. It's 135 million tonnes of mineralization, already defined, and still open in many areas, and the historical planned was only 2.5 million tonnes per annum. So again, you're looking at a multi-decade life here. You've got to start somewhere though. So starting in the historical areas.

Why are we starting in there? Because there's 28 kilometers of underground workings with direct access onto the ore already in place. There's some capital on that. It may not necessarily be appreciated until you realize if you don't have it. If you have to put 28 kilometers of underground workings in place, it's going to cost you $200 million to $250 million, roughly. That's a huge investment, a huge amount of sum capital that we can benefit from. So we're able to not only get on to ore quickly but the capital for restart is significantly reduced to do it.

So our focus in terms of CapEx for restart is really about the processing plant, which we'll get into in a second. So we're looking at redefining the ore reserves. A big portion of these 2 deposits will be redefined as ore reserves quite quickly, given all the operational history and production and what we're doing is restarting it. And then we'll look to come out with those statements in the near term and provide the inputs for production going forward. But you can see here as an example, the success of the operation, sublevel caving that produced nearly 1 million tonnes of copper since 1965 doing sublevel caving. That's all we're going to do.

In fact, the only difference between our sublevel caving and what was being done back in 2013 is, we're starting right back up at the top of the deposit there. So this is known as de panel or it's an extra sleeve of the deposit as well. So we actually get cost benefits in the first, say, 5 years of operations because we'll be mining at a significantly shallower depth: So shorter truck movements, all those sort of benefits as well. So we actually see the first years of operations being ultimately cheaper and more cash generative than future ones as you get deeper into the ore body, and you might look to splice that with the Westin classes development there. Again, you back up at a shallower depth. But the mining at $2 a pound all-in sustaining cost is down this step, so naturally you should be able to get it cheaper if you go back up the top.

Looking at the processing plant itself. This is kind of the question mark is that the plant is old, and we're looking at a multi-decade operational life potential here. We're not going to put it back together with sticky tape and Sikaflex. This is going to be properly built and designed for multi-decade operations. What's pleasing is all the ancillary gear or much of the ancillary gear is sort of what we've been thinking about admin, labs, workshops, declines, tailings areas, all that sort of thing, the power, the water, the services. It's in even place, and it's functional. We have 20 people on site at the moment. They undertake care maintenance every day. So running the water treatment, running the underground ventilation, making sure everything is ticking over and being looked after. So the site is being really well cared for by Vedanta.

Stay tuned, Vedanta, who are ultimately still caring for the site, they're doing a fantastic job in presenting in a fashion where it can be restarted quickly -- and that's our focus is to get that restart going to benefit all stakeholders in the local community. There will be a portion of the plant that is going to be rebuilt and modernized. It's fundamentally the crushing circuit and the milling circuit and the float circuit. These are not particularly complex items. So we're not -- the flow sheet, as we said, is crush, dry and float, still a concentrate. So there's no SX-EW. There's no autoclave. There's nothing particularly onerous about that flow sheet. And it's a flow sheet that successfully run since 1965, for example. Vedanta successfully ran it for nearly 20 years themselves. So we're doing exactly the same thing. And then we rail that concentrate up to [indiscernible] and it's exported all around the world as well.

A couple of things about the metallurgy for those interested -- it's actually quite a coarse grained float. So it only needs to be about 100 microns to achieve the flotation, which means less grinding, let's say, cheaper costs as well. And we still -- and you get excellent recoveries. The recoveries -- a couple of recoveries have been 92% to 94% for the forceable memory from the operations, a good consistent performance there.

This is a quick sort of summary slide showing, I guess, the comparative value proposition when you look at New Century on a copper-equivalent basis. So we'll release some more information about this as we've got reserves in place, and we can start to do more comparative data. But the mineral endowment that New Century has control over now is nothing short of massive, particularly when you compare it to peers of 29 Metals and Sandfire and that sort of thing. There's some great valuation gaps for us to catch up on as we bring these projects into production.

We have Century tailings underway. We'll bring Silver King on that will add more value there. We have Mt Lyell under option. We can bring that on quicker than what we thought, and we want to do that and realize that value potential there as well. And really what Mt Lyell is going to take is brownfield asset management skills. And that's what New Century has. We were able to restart Century. It is a very, very large mine, and we were able to get it up and running quite quickly. And we do taking all those learnings; there was positive and negative learnings, the things that we've learned along the way, and we're able to apply that to do the Mt Lyell restart as efficiently as possible, ultimately for the strongest returns for shareholders going forward.

I won't go through this slide. This is sort of a copper market overview slide. Needless to say, I think most people are excited about where copper is going to go. And certainly, we're looking at a timing for restart of Mt Lyell in sort of '23, '24, '25 region, as being opportunistic in terms of supply-demand fundamentals in favor of producers, copper producers there. So it'll be good timing if that plays out.

In summary, thank you very much for listening to this March quarterly conference call. We feel we've had an excellent quarter. It's great to be growing cash, the cash stockpile. The March quarter is typically our worst quarter from a production perspective, if I think about previous quarters because you inherently have wet season issues that you're dealing with there. On top of that, Q&A and -- sorry, on top of that, you have also the issues around the ball mill. And then also just difficulties around expanding your operations in these tough environment.

But financially, we've done very well, and we think we can grow that with more production into the June quarter itself. And obviously, our focus continues to be on still looking for development, and ultimately, Mt Lyell development there. So a very defined pathway for growth for our business. And all the while, as we released late last year around our transaction, we are also working on a development of a new division for the business around tailings asset management as well. So there's a number of items going on in the background there. And we look forward to educating the market about that and ultimately launching this division at the right time, and that will be a very exciting additional development and additional value add for shareholders to consider.

That's the end of the presentation for me. We do have Q&A.

Obviously, I encourage all shareholders to use the Q&A function at the bottom or the top of your screen depending on what you have. Now you can either do that or you can send me an e-mail or give us a call if you don't want to convey them over this system. But thank you very much for listening, and please stay for the Q&A., and we'll progress and look forward to giving you some more updates in the short term, particularly about Silver King and also Mt Lyell.

[Patrick Walta, executive]

So on to the questions, I got first question from Martin. Martin, it's good to hear from you again. Talking about recovery rates for the quarter, and they seem low.

Absolutely. Martin, when the ball mill being offline is really the function of why recovery rates are low. So we're very fortunate at the Century Mine to not be a traditional miner. So if you think about it, we don't have the things in our flow sheet that can cause 0 production. So a traditional mine would have issues or risks around, for example, underground mine collapses or pit wall failures, but also around milling as well. So crush grind and milling. If something breaks down in that chain, you go to 0 production in there.

Now New Century obviously doesn't have underground -- currently underground operations and kind of pit wall failures being tailing through processing operation. And we are also able to bypass our ball mill as well. Now what that means, if you do that, you don't get optimal performance, and that's really around recovery. So they're non-steady-state recoveries that were achieved during the call and yet we're still able to achieve some pretty good production, 27,000 tonnes of metal versus 30,000 tonnes in the December quarter as well. But if you bypass your board mill, you inherently get lower recoveries from the period that you're bypassing the ball mill there.

So thanks for that question. I appreciate that.

From Paul Onli. Very good economics in geology, but when should shareholders expect dividends, please.

It's a great question, Paul, and I can assure you that being a shareholder myself, I'm also -- care for these sorts of things. Now the business has a strategy of being able to pay dividends. If you look at even our growth in our acquisition strategies, we don't acquire assets for hundreds of millions of dollars upfront. So we don't build war chest for -- to do these sorts of things. We're not really at sort of that traditional miner that needs a huge amount of cash to be able to grow and buy the next project.

We use our competitive advantage around economic rehabilitation and looking at assets differently to acquire them cheaply or acquire them under a back-ended scenario. And for that reason, we see ourselves able to grow, but also be a dividend payer in the near term. Now I agree with you, we've got a good cash pile, and we've got a growing cash flow at the moment. We do have 2 growth projects in place in terms of our Silver King development and also Mt Lyell.

We also have a bit of a lazy balance sheet as well. We have no debt on the balance sheet right now. And we are looking to maybe get some debt financing in place for Silver King and/or Mt Lyell in the future, really, so then we can free up our cash to do what we want to. And we do have restrictions within our existing senior lenders position, so we have Macquarie with their hedging and Argo with the environmental bonding in place. So we can't just freely go out and pay dividends whenever we want to. This could be approval mechanisms.

But the -- so it's a long-winded way, Paul, and I apologize for the long-winded answer of saying that it's certainly on the agenda. The Board does not have a formal policy in place. It's not releasing a policy, but the target is to be a dividend player in that medium term. Once we've got that established financing through of those -- of our growth projects, and obviously, I'm very confident that we're not going back to the market. You want to pay a big dividend and then suddenly go back to the market for whatever need as well. So certainly, the last 6 months has been an amazing period of strengthening the balance sheet, and we're going to use that to grow the business that's the focus right now.

Another question from Martin. Where do you expect TC/RC to settle this year. They appear to be trading much higher than last year?

Okay. So zinc doesn't have an RC. Zinc is just TCs as well as copper has RCs that sort of thing, but zinc is just about a treatment charge and has a payability factor. Now the -- there's 2 different types of treatment charges. There's a benchmark treatment charge, which is effectively a treatment charge which is agreed and it's for the whole year, for an annual period. And then there's spot TCs, which move every day depending on the contracts itself. When you start a mine, you typically just spot TCs and you -- as you get consistent production and you become a stable part of smelters supply chain, so smelters will source concentrate from a number of mines, you become a stable producer and a part of their supply chain.

You typically convert from a spot TC, which is highly variable onto a benchmark TC, which is annualized. I'm pleased to say for some time now, New Century has been almost exclusively on benchmark TC. So we're sort of -- the foreseeable future, we're 90% plus on that on our benchmark, and we have some flexibility to increase or decrease that depending on production rates. Now the benchmark TCs have increased.

So last year, the benchmark TC was agreed between tech and Korea zinc as it's done every year. And it's about $160. We've seen over the last sort of 4 or 5 months as they renegotiated the price for this year, very strong increase in the spot TC. So spot TCs have been sub-$100 for the most of 2021, but literally they've exploded because of the supply/demand fundamentals around zinc refinery. So less refineries in Europe producing -- converting zinc concentrate to zinc metal -- more concentrated around, spot TCs go up. And we're seeing spot TCs north of $200 now as well. As a result of that, tech and Korea in have negotiated that -- the new TC and it's $230, I believe. It has an escalator involved in it as well. So if the zinc price is higher, it also escalates. So it's probably effective rate of about $250 at the moment there as well.

Now I should say that, that TC, while it's an impost going from $160 to $230 or $250, well, the reality is that the zinc price rise has by a factor outweighed that as well. So yes, it's increasing cost base or cost base of all producers as well. But we're all enjoying these higher zinc prices as well. We obviously can sustain those, or they can be sustained for a long time going forward.

Martin has also asked, has the TC increase has been taken into account, March quarterly numbers and cash flow?

Short answer is, in terms of absolute cash, no, the TC increase wasn't actually agreed until after the quarter end, and so you get a backdating effect on your cost. So we'll have a cash payment to make for those previous shipments there. It's not going to be significant because you've already paid $106 or $160 plus. But the -- yes, so the reality is yes, we'll backpay that, but we'll also enjoy higher prices. As I said, the average zinc price last quarter was $1.69. We're now currently averaging $2. So there's benefits there as well, obviously, over and above our hedging pace, but we are producing some good tonnes well in excess of our hedging, hence, why we're enjoying good cash flow growth as well.

So thanks for that question, Martin. And obviously, happy to do follow-up discussions on TCs. It's a pretty decent piece, a lot of discussion around that as well.

A question from Robert. Rob, great to hear from you. We were talking about production. So -- sorry, production guidance, 110,000 to 130,000 tonnes. It's quite wide for one quarter left.

Yes, I agree it was a reaffirmation of guidance that was in place set late last year. We're looking probably smack bang down in the middle of it, as well, right now. Now that depends on a lot of factors during the quarter. We're seeing operations ramp up. Hopefully, we don't have any late wet season, certainly not expecting any bore mill effects going forward as well. Strategically, the company is completely focused on metal production. So previously, when zinc prices were low, we were more focused on efficiency. When I say efficiency, I'm talking about recoveries. So we generate good recoveries from you operations and you utilize your resources as efficiently as possible.

Reality is, right now, these are great in prices. And we don't expect them to last forever. The zinc price is well above the industry cost curve right now. So incentivization for new mine supply is strong. New mine supply doesn't come on very quickly. So it does take time. But ultimately, these are the prices which incentivize people to develop mines and ultimately have to supply into the future. So we know that strategically, you're much better off making hay well the sun shines right now.

So focusing on generating as much metal as you can this quarter, next quarter and the quarters beyond as the zinc price is strong. And you do that, we're able to operate on a throughput recovery curve. So trying to increase the throughput as much as we can, and there are always constraints around that. We have a number of test work initiatives going on right now that the site team is doing in order to try and help us maximize that throughput. And in doing that, we're able to bridge small metal and really taking advantage of those higher prices there. So that's the strategy for the business. Now that could change, probably not tomorrow, but we look at that strategy in reflection of the zinc price and how it goes. But at $2 a pound, you make as much zinc as humanly possible. And we're very fortunate to be one of the top zinc miners in the world. So we can enjoy these higher prices as well.

Thanks, Rob. Thank you, everyone. I really appreciate your time and listening into our quarterly report. As I said, I think it's going to be quite a busy June quarter. There's a lot of activities that are coming to a head quite quickly for us. And so we look forward to providing that information to the market and putting some meat on the bones particularly on some of our growth projects. There's going to be some great announcements coming up. Thanks, everybody, and I look forward to chatting with you soon.