OZ Minerals Limited (OTCPK:OZMLF) Third Quarter 2022 Results Conference Call October 23, 2022 7:00 p. m. Eastern Time
Participating companies
Andrew Cole – President and Chief Executive Officer
Warrick Ranson – Chief Financial Officer
Matt Reed – Chief Operating Officer
Conference Call Participants
Paul Young-Goldman Sachs
Levi Spry – UBS
Kaan Peker – Royal Bank of Canada
Peter O’Connor – Shaw and partners
Daniel Morgan – Barrenjoey
Mitch Ryan – Jeffries
David Coates – Bell Potter Values
Lyndon Fagan – JPMorgan
Kate McCutcheon – Citi
Operator
Have a nice day and thank you for being here. Welcome to OZ Minerals’ September 2022 quarterly earnings conference call. [Operator Instructions]
Now I would like to pass the communication to your first speaker to Andrew Cole, CEO. Continue.
Andres Cole
Thank you so much, good morning, and thank you all for joining us for our September quarterly report call this morning. I am in the land of Gaurna today, and I would like to pay tribute to its greater pasts, toast and emerge. I would also like to thank and pay tribute to the classic owners of all the land on which OZ Minerals works.
With me are Warrick Ranson, our chief financial officer; and our operations manager, Matt Reed. They will communicate about our third-quarter operational and monetary functionality at a time here. Then we will move on to the questions and answers.
The following 2 slides are the same disclaimers and compliance statements found on our online page for you to review whenever you want. In the third quarter, we saw a continuous improvement in the operational functionality of our 3 operating assets, with unit prices improving as production volumes increased. At Rom Hill, improved functionality made September the highest month of underground ore movement on record and at Carajas Este, September the highest steel produced on record. There have also been monthly innovations in production functionality at Carrapateena At Musgrave, the structure will begin next month following this quarter’s final positive investment decision. We have now begun to explore the prospect of a strategic alliance in this asset as well, following significant incoming expressions of interest over the past 6 months or so from parties with a strategic interest in trendy minerals.
Our work on Kalkaroo’s allocation also began at the end of the quarter, after Havilah shareholders approved their option to obtain the assignment. We also continue to make progress on brownfield expansion allocations in Prom Hill and Carrapateena and Carajas.
Our $700 million corporate credit facility continues to provide truly ample current capital liquidity, including our investments in the Prom Hil and Carrapateena expansion projects. In addition, our new $1. 2 billion syndicated term credit facility was finalized for the progression of the West Musgrave project. I’ll communicate a little later on our guidance for 2022, but I wanted to briefly emphasize that we remain on track to meet the group’s 2022 copper production guidance. However, we have slightly reduced Prom Hill’s gold production and higher unit price forecasts.
Mining is critical to building a renewable future, which I think we all understand, which wants to be conducted responsibly and ethically, and seeing that we are entering the era of electrification, we have evolved our strategy from a fast concentrate on copper to a broader set that we call trendy minerals. As a first step, this will lead us to include copper and nickel in our target portfolio. Over time, we will be able to include other metals from the electrification era.
Our strategy is in line with the OZ pathway, with pricing for all our stakeholders in the center, which we consider of utmost importance. We believe that only when we create prices for all our stakeholders will we be a successful and sustainable business. of our stakeholder teams is our workforce, and a critical measure of how we create price for our workforce is to ensure we have a physically and psychologically safe workplace, which is why during the quarter we implemented a company-wide one-day safety shutdown. to address an unacceptable trend in security incidents. The company-wide closure has allowed for a wide variety of activities to help others refocus on their physical and intellectual well-being and prioritize projects to help others work safely. Thankfully, the protection functionality has since stabilized, but we still have a long way to go.
Now let’s move on to the next slide, which shows our portfolio and the key provinces we are creating, as well as their production, costs, resource reserves, and expansion potential. Every province is an opportunity for us to create anything that is multigenerational with low operating costs.
There is consensus among commodity analysts about the really broad market share opportunity ahead, a world of decarbonization that is on the cusp of a decades-long transition to the electrification era. OZ Minerals is uniquely positioned to capture this growth. We have a unique diversity of durable and low-cost operating assets in low-risk jurisdictions, focused only on commodities that will help in this transition. production assets for our stakeholders.
Our mines and expansion opportunities are located in safe and robust jurisdictions. This comes at a time when the source of minerals available for quality places like Australia is becoming increasingly scarce. Expansion assets help a very achievable expansion trajectory. This has been made imaginable through a cutting-edge culture of other people who are very proud of what they do, and is the basis for a transparent path to more than doubling our production in the coming years. , all from our existing pipeline.
I’ll now move on to a summary of our production prices for the third quarter, before passing it on to Warrick and then Matt. As mentioned, production consistency and momentum strengthened in the last quarter, with power and reliability improving month over month. This stood out with Prom Hill generating a record month of underground ore movement, with an equivalent run rate of five million tonnes consistent with the year for the month.
On the charge side, unit prices quarter by quarter as production volumes increase. We find that inflation contributes to higher unit prices, which Warrick will discuss. Given the year-to-date performance, we expect a strong end to the year, which will also put us in a smart position for next year.
So now I’m going to ask Warrick and then Matt to communicate about the effects in a little more detail, please.
Warrick Ranson
Thank you Andrew and good morning everyone. Volatility has continued in the sector, in line with this year’s high, of course. For the Chinese economy, we have noticed mixed indicators, with some signs of optimism offset by headwinds in the real estate sector. However, electric vehicle sales in the U. S. are still declining. The U. S. and China rose significantly, proceeding to our trendy minerals strategy. We also saw an improvement in global auto forecasts, with positive revisions for China, offsetting a slightly diminishing outlook for Europe.
The downward strain of the Australian dollar in the quarter partially offset the decline in the value of copper in US dollars. And, in the short term, we expect this to persist in line with expected US economic policy. In the US, which provides higher relative returns. It is vital to note that the basics of the copper market remain very positive, as operations in our key South American supply chains continue to revel in production and cargo challenges, while also seeing a tighter market in Europe.
In terms of our express capital control activities for the quarter. As Andrew mentioned, we have noted the investment resolution made in West Musgrave, backed through a new $1. 2 billion 18-month syndicated credit facility, heavily backed through our partner banks. Once the documentation is complete, the monetary closure of the facility is still ongoing by the end of October. This installation allowed us to begin the progression of the project, while also optimizing the final financing mix, potentially adding a minority interest sale, as Andrew mentioned. We also achieved a provisional dividend of $0. 08 consistent with the quarter’s percentage, consistent with our sustainable dividend policy.
In terms of cash, we ended the quarter with a net position of $84 million after making an investment of $286 million in our gross projects. Work continued on the expansion of the Wira shaft mine at Prominent Hill, with the installation of the pre-sinking apparatus completed and shaft sinking operations began.
At Carrapateena, the concentrate remains at the crusher 2 facility, we have also commissioned a new high-intensity mill there, as the team continues to identify opportunities to maximize yield and product quality. in all our operations. Working capital movements sometimes reflected the shipping schedule, with the busy October [planned] shipping schedule.
Move to prices; and unit prices advanced quarter-on-quarter, in line with improved production functionality and the weaker Australian dollar. While we had a much longer quarter in COVID absenteeism, it took us a little longer in Prominent Hill to see an entire building increase in availability, experiencing cable bolter shortages, especially at the beginning of the quarter.
Domestic inflation accelerated in July and August and remains broadly below that of other developed economies. We have started to see the first signs of a slowdown in the current tightening of financial policy and expect further easing in the coming quarters. Application costs remain uncertain, and overall energy costs remain high.
That said, interestingly, we really saw a relief in electric power and [legal] prices in Brazil this quarter. Despite this, we have experienced an increase in mining prices, something that is not so much in the South Australian economy. , however, interstate markets put pressure on hourly rates for operators and maintenance teams. Store retail prices also increased quarter-over-quarter, as volatility was observed in the value of this consumable during the year. – and long-term demand, and job profile to achieve the principal [indistinguishable] and optimize contract periods and design for each when we can.
And with that, I’m going to pass the word to Matt, who will explain the operational functionality in more detail.
Matte Roseau
As Warrick said, I will now communicate the main points of our operational functionality in the third quarter, starting with Prominent Hill. We delivered 1. 13 million tonnes of ore during the quarter, up 26% from the second quarter and an average grade of 1. 1%. copper in the third trimester. Ore production years gradually increased in the quarter as the effects of COVID-related absences subsided, several critical vacancies were filled, and we also benefited from paints to improve the diversity of our ore sources, schedule optimization, and some early benefits from our improvement program.
In September, as Warrick and Andrew mentioned, we achieved the highest consistent underground ore production for the month at Prominent Hill at 412,000 tonnes, representing, as we said earlier, an annualized production rate of around five million tonnes consistent with the year. We also extracted ore that lies near the back of the Malalu open pit, using a complete source there that would otherwise have been sterilized by dumping waste into the pit.
Copper relief is on track to meet full-year targets, with continued innovations in underground operations, higher-grade copper works commissioned in the fourth quarter, improved mill performance, we expect a significant improvement in metallic copper production for the quarter. The strategy However, it will result in a decline in gold production, with a lower proportion of gold stocks being machined in the quarter. And as mentioned, we now expect 4-year gold production to be in the low direction strategy for gold.
Work on the expansion of Prominent Hill is progressing steadily. As Warrick said, the previous sinking apparatus was installed, the sinking of the well began. And at the end of the quarter, we were about 25 meters below the neck of the well. , the vertical drill. We expect the main frame to be delivered to the site in the fourth quarter, along with the permanent cooling plant appliance and the new ventilation fan.
Also as a component of the expansion, we have accelerated drilling systems progressing as planned, the first cuts were made to the caps of this program in September. This will be used for diamond carryover to prospectively expand the resource and also convert the alleged resource into a reserve. During the quarter, we also finished drilling at the tailings deposit facility as part of our program to explore the possibility of [more] recovery there as well.
At Carrapateena, underground equipment extracted just over 900,000 tonnes of ore during the quarter, with 1. 64% copper. Our copper production was 14,500 tonnes and gold production was just under 20,000 ounces. We continue there to mix the mineral extracted from the subsoil as an earlier progression. , in order to maximize the overall movement of the fabrics through the formula and therefore the steel production after reporting the production, you will see that we have now separated this tea from the ore and the grade of the mine figures for ease of understanding.
Around the cave, we have finished a new series of surface hydrofracturing crusades, while painting to facilitate the expansion of the cave to the surface. We saw significant seismic responses in the fourth, 43 meters of vertical expansion and until the end of September in the cave. It was about 90 meters from the toilet. And it gave us confidence to finish our underground [drilling] program. We have another hydrofracking crusade planned for this quarter, and we will continue to wait for the cave to surface until the end. of the year. The progression of the slope towards the block cave now exceeds 1,000 meters vertically below the surface, all major parts of crusher 2 are now on site and are now expected to be completed by the end of 2023.
Finally, in Carrapateena, we have reached new levels in the structure of the ISR moment level, with the finishing touch of the earthworks of the lifting of the main embankment and the elevation of the settlement road.
At Carajas Este, strong operational functionality continued at Pedro Branco, with higher grades and recoveries contributing to an approximately 20% improvement in copper and gold production in the quarter, and record steel production in September. Also expected in this last quarter of the year in Brazil, an update of the mineral resources of Santa Lucia, with an ongoing acceleration plan for the prefeasibility examination, received planned follow-up drilling in the exploration objectives of Tapuia, Grota Rica and Valdomiro west of Carajas, the final touch of the new resource estimate and the study in Pantera, which is Pantera’s option to place a time center on Carajás’ problems.
Finally, in the province of Gurupi, INCRA Brasilia is recently advancing its land use concession contract and CentroGold relocation plan, following state approval.
With that, I’ll give it to Andrew.
Andres Cole
Thank you very much, Matt, and thank you, Warrick. I will now take this opportunity to summarize the main points of the announcement we made in September about the IDF and the West Musgrave feasibility study. West Musgrave is a key component of OZ Mineral’s next phase expansion and signals our access as a manufacturer of multiple trendy mineral products, whether copper and nickel. West Musgrave is expected to come online at the right time, to allow us to source from global markets, already building for decades to come.
The final positive investment resolution of our Board of Directors is in a rigorous feasibility study that confirms the strength of the allocation. It includes an improved processing capacity of 13. 5 million tons consistent with the year, achieved through mine manufacturing plans and mill optimization. An attractive production profile of approximately 35,000 tonnes per year of nickel and approximately 41,000 tonnes per year of nickel for the first five years and for a constant period of time. 50% accrues to the net offering price of the allocation of approximately $1. 5 billion to $2. 2 billion, from a capital of approximately $1. 7 billion.
The highlights of the West Musgrave assignment come with a 24-year operating life, starting with the first production, which is expected to begin in the current part of 2025. First quartile position on the load curve, supported by favorable ore frame characteristics and an over-sustainability as a fashionable mining task, which comes with over 80% renewable force penetration in power generation systems, and a path to achieving net zero Scope I emissions by 2038. We expect the structure to begin in November, with key contractual partners having already been decided and long-term acquisitions have already begun.
In the longer term, the province of West Musgrave has a super expansion prospect and we are exploring several opportunities to unlock more prices on the site. 51% of the resource remains outside the reserve, so there is a prospect of accumulation over the life of the mine through conversion. from resources to reserves over time. Examination of the downstream nickel processing plant to produce a combined hydroxide precipitate continued into the third quarter, with a pilot plant program now effectively completed in the U. S. The U. S. Department of Homeland Design demonstrated the flowchart on a continuous basis and produced an MHP product that compares well based on nickel content. An MHP PFS update is on track to be released later this year.
West Musgrave’s key attributes, production scale and long mine life, lend themselves to potential downstream integration, which is why we have begun exploring the possibility of a strategic alliance, following the significant expressions of interest received over the past 6 years. Around months of matches, with a strategic interest in trendy minerals.
Let us now turn to the province of Curnamona, where the Kalkaroo assignment is located. The shareholders of Havilah Resources Limited voted to grant OZ Minerals the option to acquire the copper allocation from Kalkaroo. -Gold allocations to our biological expansion pipeline. Since the announcement of the proposed transaction in May, we have been developing paint program plans, engaging with suppliers, and collaborating intensively with the Havilah team to enable the study, which will focus on opportunities to identify further pricing and risk elimination development. Through this study, we will demonstrate our understanding and confidence in the allocation, which will come with a box drilling program to verify the existing mineral resource estimate.
Our agile technique has enabled immediate progression of allocation supported by our culture, allowing us to maximize value. We’ve created the set of assets and allocations you see on the screen over the past few years, and now we’re in a position for our next bankruptcy. of growth
I will provide some updates on our exploration plans for the quarter, which are showing encouraging symptoms at an early stage. In Pekeak and Denison, approximately 150 kilometers northeast of the Prom Hill mine, Demetallica Minerals performed drilling controls on 3 primary IOCG targets. And a second, to further verify the planned magnetic anomaly in Wills. 5 projects are also underway in Sweden, with encouraging initial results. For optionality and growth, we will continue to target until 2022 to add various features like Kalkaroo to our portfolio.
I won’t dwell too much on this slide that repeats the same old data about our assets, projects, progression spaces, and data about resources and reserves. This gave us a simple reference to track the estimated delivery of other assets or projects in our provinces. .
Finally, in terms of key milestones, we have a busy few months ahead. These come with an update to the group’s MROR, which is expected for the quarter. Work on the Wira well site at Prom Hill is expected to be completed this quarter. The TSF Stage 2 is expected to complete Carrapateena this quarter. Our West Musgrave MHP exam will be published and updated this quarter. And finally, exam updates for East and West Carajas also want to be updated this room.
To summarize our effects for the quarter, we are focused on our strategy, capitalizing on pricing opportunities and maximizing price for our shareholders. With the consistency and momentum of our operations, we are on track to meet copper production guidance for 22 groups, despite a slight relief in Prominent Hill’s third gold class. Construction of the West Musgrave assignment begins later this month. We have added an option to get the Kalkaroo Copper assignment.
We ended the quarter with net cash, minus $84 million after reinvesting $286 million in expansion projects. And our corporate line of credit and syndicated term loan facility put us in a smart position as we invest in our major brownfield expansion projects in Carra and Prom Hill, and expand the West Musgrave project. What we completed this quarter and pushed it more broadly through our culture. It’s our innovation, agility and collaboration through partnerships that has led us to our smart fortune and, more importantly, allows us to reflect that smart fortune into the future.
Finally, in a non-public note before moving on to questions, I would like to pay tribute to Peter Bradford and express my condolences to his circle of family, friends and the entire IGO team. Peter, a wonderful user and a visionary, and I think we will miss him very much. I would also like to pay tribute and express my condolences to the circle of family and friends painters and co-painters of those who recently lost their lives while working in our sector. It is transparent that, as an industry, we still have a long way to go.
It is ok. Operator, could you ask you to remind other people how to ask questions?And as a reminder, we have Warrick Ranson, CFO; Matt Reed, operations executive and I are here to respond.
Q&A session
Operator
[Operator Instructions] And I show that our first comes from the Paul Young lineage of Goldman Sachs.
Paul Jeune
Andrew, some questions about Carrapateena. Obviously, it is still a relatively difficult environment to deliver, and a fairly combined quarter in the tons and grade of the Carra mine. Just a few questions; One is: the first is incrimination indications, and I know that there is no comment on the backlog of chargebacks on the first page of the report. is $1 to $1. 15. Can you really in achieving your goals for the year?
Andres Cole
We have Matt Reed here, who can talk a little bit about operational functionality. So I’ll ask Matt to talk a little bit about the trajectory of operational functionality since the beginning of the year, and why we’re confident in the next functionality of the quarter first.
Matte Roseau
Throughout the last quarter, we saw and, indeed, until the end of the last quarter, we delivered through underground oil production as well as progression performance. And we still have a number of pretty significant operational improvement initiatives, which have been online this quarter. So comfortable that this trajectory will continue to improve, and we are comfortably routed around our guided position [cost].
Andres Cole
Forgive me. Oh friend
Paul Jeune
It is ok. Sorry, that was the consultation, of course, in the next quarter and in the short term. I know it’s a 20-year asset and [we’re] through the charge calculations a little bit more. But a consultation is more in the medium and long term. And Andrew, a query about it, especially around the cave of blocks. I know you did a pre-feasibility examination in the block cave and the estimated capital is $1. 25 billion. You went straight to development. We haven’t seen a feasibility study or, I assume, a capital upgrade in the block cavern. Maybe you can provide an update, will you provide one, or have you re-estimated CapEx here online?And has there been any adjustment in the scope of those projects?Do you like the way you level this project?
Andres Cole
Since we are here today, the scope of allocation in our base case has not been replaced. And as you know, we’ve given a 5-year recommendation instead of our 4-year recommendation, and we’re still on track to provide this 4-year recommendation. Annual guide, which includes the component of the first phase of progression for the expansion of the cave of blocks. So if we were to replace that, of course, we would want to replace our instructions, which we’re not doing right now because this baseline situation hasn’t replaced.
Two things that would go up to that. The first is, which I already mentioned, that we are pushing the existing operator’s processing plant very hard. So the role of the team on site is to continue to deepen [indistinguishable] this plant, to push the functionality of the plant as superior as possible, because the higher the yield we get in the existing plant, the less exercise we have to build at the moment. Therefore, despite an inflationary environment and input prices accumulate over time. Most likely, the length of the plant we would have to build, to cope with the expansion of the block hold through 12 million tons, it will also decrease. Therefore, there are indirect jumps, so to speak, in the capital estimate.
That said, we are constantly reviewing our asset life strategies. Lately we’re in the middle of another plan making cycle and we’re looking at other features for Carrapateena, as we will. But unless we actually locate a base case of choice, the cave block and its base case will continue as expected. If we see significant capital adjustments after the recommendation we gave them, we will have to update the market, because we put it in the PFS that we published a few years ago. So, for now, Paul, you deserve to assume the same numbers that we put in the documents, in the edition for you.
Operator
And I show that our next one comes from UBS’s Levi Spry line.
Levi Spry
Hello Andres and the team. Maybe just another one for Matt. Can you describe to me some vital milestones in Carrapateena and Prominent Hill, and exactly what you’re doing for the production?So, start with the cave advance, what we can expect to see there in terms of cave design, and then when the cross chamber beats, what are we going to expect to see in the transport?And then remind me at Prominent Hill with the handle, when can you [take stones]?
Matte Roseau
If no problem. So, from the point of view of breaking into the cave, probably a couple of things. I think I noticed a lot of movement in the last quarter, as I mentioned, which now gives us a lot of confidence for a breakthrough. Those overdraft activities, which I think they probably referred to a few times in the last 12, 18 months or so. an improvement in the trajectory in Carrapateena.
I think the question of the moment was about shredder 2. Crusher 2 allows some improvement in the underground movement of the ore, relieves our overall curtain catalog system. And, of course, this also has an effect on costs, as we are cutting some of our trucks from the long circuit. So, some benefits or opportunities were not covered by the conclusion of crusher 2.
Levi Spry
And time [indistinguishable]. . .
Matte Roseau
So, the grinder 2, towards the end of 2023. This is what we expect there. And then I think about your next consultation about the tree. And we still say 2025 for the Wira well.
Levi Spry
It is ok. And Andrés, to upload one more. Just about West Musgrave’s strategic partner, can you tell us precisely what level that procedure is at, and I guess the context is the optimization exam next year, there are other people in the other room, there is a procedure going on, what is the context around that?
Matte Roseau
Levi, there are two parallel paintings in progress, which we referred to above. One is a stream of technical paints to demonstrate that it is technically feasible to move West Musgrave nickel concentrate to a West Musgrave nickel MHP. The paints that have been made to date have shown that not only is it technically feasible thanks to a pilot plant, but that the product is of very good quality compared to other MHPs in the world. From a technical standpoint, we are moving more and more in the test pipeline. We want to complete a PFS exam update, if you wish, later this year.
At the same time, we introduced a procedure for perceiving which downstream parties might be interested in a minority position in West Musgrave. So that procedure has begun. It is through invitation. It’s going exceptionally well, and once we have more information, we’ll let you know what it looks like. So we can give you an update later this year, I guess.
Operator
And I show, we have our next of the Kaan Peker lineage of the Royal Bank of Canada.
Kaan Beijing
Hello, Andrew, Warwick and Matt. Es wonderful to see Prominent Hill’s underground progression rates increase, but it turns out that in fact the indications of underground movement have been reduced for Prominent Hill and Carra. And again, this was not discussed on the first page of the note. But just with the subsurface, I wonder if it is: do we see more selective exploitation of higher-grade specifications there, and what has it replaced and how long will those higher copper grades last?Is the reasoning for extracting ore from the open-pit mine more likely to be of inferior quality?And I’m back with a question about Carra.
Andres Cole
Maybe I’ll respond to the first article at a higher level. I mean, the explanation for why we downgraded overall volumes is that we started the year slowly and just couldn’t make up for the tons we lost in the first part of the year. And we don’t aim at the highest level, we aim for volume. So, we’ll stick to the timeline we’ve built, which is a strategy to maximize NPV [pie] in the long run. It is not a consultation of short-term or first-level projects. Our goal is long-term value, which maximizes volume and throughput without assembling the schedule.
Matt, do you want to tell us a little bit about the paintings we do in the open pit mine, why we did it, and so on?
Matte Roseau
Yes, I certainly can. So I think we probably have more wonderful wisdom about pit stability and the opportunity to access clumped materials, before they’re necessarily lost under waste, as well as the opportunity to improve our flood mitigation. Smart bite of additional [mines] to the mix. I am not bound by the top of my head for the grade, but it is not a significant dilation, in fact it is intelligent material. So I wouldn’t be involved with this Kaan.
Andres Cole
Maybe just a point to add, because, remember, historically we’ve had stability issues in the pit with our open pit. So we adopted a fairly conservative technique in the way we left the pit open, but the slashes behaved exceptionally well, I think Matt, in the last few years we’ve noticed very little wall movement, which has given confidence to the team.
Kaan Beijing
Of course. And the consultation of the moment is a kind of continuation of what Levi asked for, especially around shredder 2. It turns out that it has been: the commission was postponed to the first half. So, what is being talked about now is towards the end of 2023. What are some of the implications for volumes to see why 23, in terms of pricing and also bottleneck removal project, and if there are CapEx implications there as well?
Matte Roseau
Ouais. Il has evolved with some underperformance or, indeed, the similar underperformance we talked about last year and more recently. Some of the redesign paintings we had to do, given the conditions of the replaced terrain. All of this is behind us and we are happy with the progress now. We are comfortable with the guided position in the past on the [progression] times during this 4-year period. As I mentioned in the previous answer, there is an effect on prices because we are going to be operating longer truck fleets than originally planned.
Andres Cole
And we’re building on that right now in our plan-making process. So as long as we’re here today, we don’t want to replace our advice. So, for Carra, we have a 4-year orientation there, I think. If we have to replace that, it will be in January of next year, once we have finished our plan-making process. But because we’re here today, we don’t think we want it.
Operator
And I show that our next one comes from Peter O’Connor’s lineage of Shaw and Partners.
Peter O’Connor
I stick to the MHP factor in the procedure. Thank you for giving us the main points of the invitation only. So, does the procedure now give invitations at a point where it is heading towards a non-binding indicative offer stage?And I missed the comment before you had shown the timeline of the procedure, but just wanted to ask for that clarification?
Andres Cole
Yes, Peter, we are committed to providing an update on MHP, technical and business processes until the end of the year, and we are looking forward to indicative five-part input.
Peter O’Connor
It is ok. And on the way to work, you commented on COVID and I guess the partial recovery from that COVID absenteeism that was noticed in recent years. problem?
Andres Cole
Want to comment on what we see in assets?
Warrick Ranson
Yes, we. . . I am clearly referring to anything we have in mind. We had pretty smart effects in the last quarter and addressed a number of critical shortcomings. So not here and now, however, of course, we are in our planning process, thinking about our 2-year, 5-year plans that come with the skills we’re going to want and the preventive or proactive jobs we’re going to want to undertake, to make sure we’re going to keep having them. But here [now], knowing that we are in intelligent form.
Andres Cole
I’m just thinking about getting on that, you know we’ve noticed a bit of a cycle, so we’ve passed, you know where we shed some skills and then we went to recruit them. So earlier in the year that we had, I think [operations], for example, this quarter we had a little bit of a shortage, as I said, of bolters, but we were going to fill them. So it’s just a little cycle that we go through with other types of capacity. Bases
Operator
And I show that we have our next lineage of Daniel Morgan de Barrenjoey.
Daniel Morgan
Hi, Andrew and Tim. Could you provide us with an update on your power acquisition arrangements in South Australia?When do they expire and what is your strategy for negotiating the next ones?
Andres Cole
Yes, I can. So, the electric power contract that we have been putting in place for a few years, the constant value contract, ends at the end of this year. Lately we are running a procedure and have been executing for some time what our strategy will work for the future. Of course, there are several options, it is a volatile and dynamic environment at the moment. So once we close a policy, we can tell you what it is. that. We’re looking for constant value in the short term, a [indistinguishable] value in the long term, and everything in between right now.
Operator
And I show that we have our next of the lineage of Mitch Ryan from Jeffries.
Mitch Ryan
Hello, Andrew and the team. My first query has to do with mining costs. You asked for higher turnover rates. So, I was wondering if you can provide a color on how they track them. Have they become general again after a fairly short period of time, given the closure of borders, or are they higher than the old standards?
Andres Cole
So, the rotation of hard work in the basement, we see, is it another one of the story?
Matte Roseau
Yes, I mean, it’s been a little higher this year than in the past. I think he’s right, there was a little shake-up when the borders were reopened. And then also, when we brought in several new people. As Warrick said, we’ve noticed some turnover over the course of, probably by the middle of the year, some must-have skills similar to those of diesel installers and maintenance team members in general, are starting to stabilize now. Going back to your original proposal, I think what we saw was that, overall, it was a bump, as borders opened up and people, I guess, were making options possible after a few years of COVID restrictions.
Andres Cole
[indistinguishable] Adjusted rem rates?
Matte Roseau
We’ve adjusted reimbursement rates in a couple of critical areas and are doing a lot of work to improve, let’s say engagement overall, as part of our retention work activities. . .
Mitch Ryan
Only with respect to this component of the rem tariff. Remind me that he has now begun to integrate the bonus, as a component of the base salary. He argued with the underground operators that receive this component, so I guess they were already high, so it works: this strategy or do you want to review it too?
Andres Cole
Basically, we’re talking there, or my comments are more commonly similar to our underground workforce, which is in the total [indistinguishable] mining contractor, so it’s a little different.
Mitch Ryan
It is ok. And the last one is from Hill Tailings, the drilling program there. You said you were exploring other products and possibilities. What other unfired fabrics are you drilling or what possible opportunities to recreate that waste?
Andres Cole
It is ok. My apologies. This is the opportunity to recover copper and gold from those tailings, and that is our main objective.
Operator
[Operator Instructions] And I show that our next one comes from the David Coates line of Bell Potter Securities.
David Coates
Thank you very much, Andrew, Warrick and Matt, and especially for spotting the costs of competitors compared to the other [indistinguishable] ones they’ve had recently in the industry. Just a few questions, a macro, a type of micro, let’s start with the micro, to succeed in forecasting for this year, you have to [lose] copper production from about 30,000 tons this quarter to 40,000 tons next quarter. Can you give us more main points about: where it comes from, Prom Hill, Carra or Brazil or the tons and the law, what will drive this big increase?
Andres Cole
Yes, it essentially comes from Prominent Hill. We expect some kind of uprising in Carra and Carajas. But the vast majority of that construction came from Prominent Hill, and thanks to those underground mineral movements. that we delivered, that is, in September of the last quarter, and also an expectation of progress in the copper grade.
David Coates
Good, good. And sort of a more macro question, and it’s a little hypothetical, but you know you’ve been: The company has executed a strategy of creating and contributing a multigenerational collection of assets. Now you have Prominent Hill, Carra, West Musgrave and Brazil or you know it’s not in operation, on your way to operation. Has it been, has it been, has it been, has it been part of a great investment cycle, and you know it’s kind of a start?It will be reflected in a large accumulation in the debt position on the balance sheet and potentially incorporate the strategic component. At what point in a way, do you think this cycle will stabilize, when you consider that there is an optimal amount of assets in the portfolio, can you give us a little thought about, you know, where you see perhaps the future in the medium term, with that balance?
Andres Cole
So, it’s an attractive consultation and it’s a debate we’ve had: we have this debate every year with our board, when we review our strategy, because we have annual strategic perspectives where we spend a few days with the off-board site to debate in general, and there are all sorts of clues. Here’s one: there are a few clues here. They are evidently additional to our existing journey. Five years if you will, making an investment in biological characteristics in the business, and will be done in other stages over the next five years. But it is a factor that we will be debating continuously.
We don’t aspire to be a big corporation, however, there will be a sweet spot for corporate length like this. I suspect we’re getting to the point where we have a pipeline. We have a selection of how we invest in assets, what assets we invest in and now we’re at a point where we can also take a look at divestments, given that we have a pipeline and it’s an enviable position, and I think that’s the sweet spot where you want to be, as a very healthy corporate. where asset allocation decisions can be made, in addition to contemplating divestments.
We still have some paintings to do in the coming years, but this is one we will debate every year. I can’t answer that because that will be replaced over time. But it’s a wonderful question, one we’re going to keep considering.
Operator
And I show that our next one comes from Peter O’Connor’s lineage of Shaw and Partners.
Peter O’Connor
Following Dave’s question, the fourth quarter production profile, and thanks for the main points about Prominent Hill. So, this presentation of the content and the presentation of the site, it turns out that you have confidence. But is Carrapateana’s advance a threat to the quarterback, if you don’t perceive it?I think you discussed that this quarter would take place. Is it mandatory to get Carra’s advice, or is it just a merit along the way?
Matte Roseau
I’ll tell you what, I’m hopeful [technical difficulty].
Peter O’Connor
And Andrew, the comments he made in his opening remarks about security. He has had a fantastic track record of assembly and operations advice etc. And safety is a big issue, and I wonder why they want to spend the day, which is a wonderful, well-done initiative. Are you doing too much, are there too many? You talked about having a pipe, which is good. Are you too tense or too distracted by outdoor suitors?Why has security derailed now?
Andres Cole
You know, I don’t think it went off the rails. I think what’s more, we’ve noticed an accumulation of mostly low-severity injuries, and similar injuries to other people on operating assets. Therefore, front-facing maintainers-line operators who are injured. And without injury, and as we’ve noticed, this trend started to pile up, and it’s been a very dynamic year, with a COVID upper rule change, a higher burden of living, distracted other people, [indistinguishable] conversion of operating assets themselves, changes in control, etc. It’s just making other people perceive that their private protection and private intellectual well-being is the most important thing they want to think about when they’re in the workplace. So we use occasions like this, just to make other people perceive that we are demonstrating it symbolically.
Obviously, we don’t need to harm anyone, it’s a symbolic initiative we can take. So I wouldn’t think about that anymore. As a front-line concern, as it is a commercial portfolio concern. We’re not seeing the same kind of higher injury trends in other parts of the business, frontline operations right now.
Peter O’Connor
It shouldn’t have used derailed, so it doesn’t matter. So thank you for the correction.
Operator
[Operator Instructions] Our next one comes from the Paul Young lineage of Goldman Sachs.
Paul Jeune
Hi Andrew. Can I ask a direct question?Have you had conversations with BHP recently?
Andres Cole
No, i did not.
Paul Jeune
It is ok. And then, secondly, only in the West Musgrave sale, looking to find out what you’re looking for to sell here. I mean, of course, one is flexibility around the balance sheet, but the minority: the sale of the minority stake is wide, it’s between 1% and 49%. So what are you looking for? Is it a dollar, a million dollars?Is it a higher percentage than the MPV?Is it the alignment of the spouses?Am I just trying to understand what you’re trying to solve here with minority interest?
Andres Cole
Yes, of course. So, let me start with the strategy. Our strategic aspirations that we recently published in the market position, deserve to give you an indication of the direction here. We established this company to produce clean, eco-friendly and eco-friendly products, with the support of classic homeowners. as partners, in the same jurisdiction. Therefore, raw fabrics will be sought, in a world that is becoming very temporarily and requires it very temporarily. So, those are products that we put in position to be able to put them in a market position like this. With copper concentrates, nickel concentrates, by promoting them to a smelter, complicates traceability in the system, because they are mixed regularly.
So, we’re looking for opportunities to be able to peek into those metals in the ground, through a chain of costs to an end customer, because that’s only when you can potentially capture the cost attributable to producing the white green metal, you know. , very safe jurisdiction without modern slavery, and so on. So, the spouse we’re looking for is a strategic spouse, who can help identify the hint of those products throughout the price chain and then can leverage those products as a whole. of customers, such as white green products. Because I and we as a company, in the long run there will be a difference in structural value between white and non-white green products.
Whether it’s a value surcharge or a tax for those who aren’t, it doesn’t make a difference. It will be structurally different again. So that’s what we’re putting in position here. And the first one we installed, the vehicle in West Musgrave, given the interest and demand. Whatever form it takes, we stay very open. So when we communicate with middle partners in a very open way, looking to perceive what they like, what they want, before we start lowering our expectations.
Paul Jeune
It is ok. Just a follow-up, does that mean that in this case, a cathode producer, a cathode precursor/producer, you know, this organization is, potential buyers and consumers are the organization you’re targeting?
Andres Cole
We’re still pretty open ici. Il so there are a number of teams we communicate to. So anyone who can meet the criteria I’ve defined, would have guestlist compatibility, if you wish. As long as they can demonstrate that they can produce or do some traceability throughout the price chain, we are open and probably already have interaction with them.
Operator
And I show that our next one comes from the lineage of Lyndon Fagan of JPMorgan.
Lyndon Fagan
Andrew, I wonder when you hope to avoid this sale to minorities, is there a timeline for that?
Andres Cole
The only commitment we’ve made so far is to provide you with an update towards the end of this year. There is no tight deadline in this regard. Of course, until the end of this year, we will be able to give you an update on how this procedure is going and what the timeline will likely look like.
Lyndon Fagan
It is ok. And I guess moment one is just a high-level question. So it’s fair to say that you’ve done a wonderful job of creating shareholder value. I guess I’m just thinking about a situation where BHP’s supply doesn’t exist or the market loses confidence in that offer, and the percentage value potentially drops from 25% to 20% or even less. Paints to be done in the absence of a significant recovery in the value of copper in the short term. So, I guess I wonder how comfortable it would be if this situation happened, given some of the observations in the news this weekend.
Andres Cole
Of course. Look, I think we showed that confidence by rejecting the offer in the first place. We don’t compare the cost we create for our stakeholders in a day of inventory worth negotiating. We compare the cost we create to the long-term cost, and that cost is created through a series of channels. But we can generate a cost above $25 consistent with a consistent percentage in the medium and long term. And I think we’ve shown that we have the ability to do that. And I think we definitely have a channel to do that. That’s right, I’m regularly very comfortable if that happens.
Operator
[Operator Instructions] And I show that the next one comes from Citi’s Kate McCutcheon lineage.
Kate McCutcheon
Hello Andres and the team. ÀCarrapateena, gave us adjusted mine figures, thank you, it’s smart to see the score increase. Do you still feed progression residues with that half, or what pushes that cleanup into the mine to the tonne-grade plant?
Andres Cole
Yes, of course, Kate. I will ask Matt to do it for you.
Matte Roseau
Yes, Kate is. Therefore, we continue to load progressions in the plant and waste progressions in the ore flow. The logic is the same as we talked about earlier. In this way, it uncovers our overall curtain handling system and, because our processing plant has capacity, allows us to build [indistinguishable]. I hope we’ll keep doing that probably to the point where we order crusher 2, and we’re creating price from that, at this point.
Kate McCutcheon
It is ok. And to be clear, since it’s by definition waste, are you saying that by starting and preventing the handling formula that you’d have to run separate errands, it’s positive to see this on the conveyor?Am I thinking about it?
Matte Roseau
Yes, it is on the site. So disruptions in the transportation system, as well as learning the total cycle, means we’re better off with continuous mixing in the system. So yes, on the site.
Kate McCutcheon
It is ok! Can I take a look to see what’s going on at Prom Hill?So, has it replaced the mine plan there?Is it because they’re in ore motion, or are those higher-grade yards in the fourth quarter the same ones you still plan to use?And then, component of this question at the moment, what do you expect from copper recoveries in the fourth quarter, if you extract this material from the garage?
Matte Roseau
Oui. Il there’s a lot going on there. There’s a little sequence change as you mentioned, between, most commonly between the third and fourth trimesters and a little bit of the first quarter of next year. We aggressively increased the amount of gold stocks, which was a planned activity. But we had some problems with the functionality of the plant, while processing gigantic quantities. So we’ve pushed it back a bit for this quarter, while proceeding to work in parallel to improve the functionality of the plant, and we also looked at some minor capital investments and the merits of that. .
So I think it’s something that’s going to continue, but all said, as we said in the fourth quarter.
Kate McCutcheon
It is ok. So, for example, last quarter it had a recovery of 84% and 72% for copper and gold. What do you expect for the December quarter without making those stocks?
Matte Roseau
Sorry, I don’t have the numbers in mind, but we can go back. But I consider it more as a general functionality of the plant than as an undeniable matter of recovery. So, it’s also about performance and stability.
Kate McCutcheon
Ley. De agreement. So, would you be through plants consistent with se or out there?If you feed the stock?
Matte Roseau
Yes, that’s right. Yes.
Operator
Merci. Je no longer shows questions in the queue at this time. I would like to call Andrew Cole, CEO, again for final remarks.
Andres Cole
AllArray Thank you very much, operator and thank you all for calling. As usual, if you have any questions, please call Travis and we will work to get the [Technical Difficulty].
Operator
Thank you. This concludes today’s convention call. Thank you for participating. You can now log out. Have a nice day.