MAC Copper - Earnings Call - Q4 2024

Transcript

Operator (participant)

Thank you for standing by. This is the conference operator. Welcome to the Mac Cooper Limited Q4 2024 Conference Call and Webcast. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

I would now like to turn the conference over to Mick McMullen, CEO of MAP Cooper Limited. Please go ahead.

Mick McMullen (Director & CEO)

Thank you, and thank you everyone for joining. Obviously, it's a busy couple of days for quarterlies in Australia. We'll try and get through this fairly quickly for people. So there's a presentation online there that people can see that's also been lodged on both the exchange platforms, and I'll talk to that. Joining me today is Morne Engelbrecht, our CFO.

And so as we go through the presentation, there's the usual disclaimer and forward looking statements that people can read. In terms of Q4, where did we land? We landed at 11,300 and 20 tonnes of copper at a grade of 4.1 percent milled. So that brings us in just above the midpoint of guidance that we had for last year. And pleasingly, the grade continues to be good as we continue to work on dilution control.

Morne will talk to the financials shortly, but you can also see on that slide that we had a C1 for the quarter of $1.66 a pound. And so that's quite a good result. We saw really only about a month of benefit from the lower exchange rate. And so that bodes well for 2025, obviously, as the Aussie dollar has fallen significantly. Again, liquidity, we had about $213,000,000 of liquidity at the end of the year, which in Aussie dollars is actually a very large amount of cash for us given our operating costs.

We continue to run at about a 47% EBITDA margin, and we convert about 74% of that to cash for the year. And we are well on our pathway to our greater than 50,000 tonnes of copper production by 2026. As per the quarterly report, we will typically announce our resource and reserve and any changes to guidance in about the 3rd week of February. And that work is well underway and going through the final external checks. So if we look back on 2024, I think we delivered on all of the things we said we would.

We operated the mine safely, all permits in place. We increased the reserve life to plus 10 years, so it's about 11 years based on last year's reserve. We had record copper production. We achieved and beat the midpoint of guidance. We delevered and simplified the balance sheet massively.

So at the end of the year, we had net gearing of around about 15%. And again, with the cash flows we're generating, we continue to pay down debt and reduce that. We got started on a bunch of growth projects, mainly the Vent project and the Peter South Upper. We raised a fair bit of equity on the AFX, I mean, 2 raises. We've built out our management team so that we're set for the future and stability.

We have a clear pathway to get to above 50,000 tonnes internally. Whenever we look at stuff, we're always lining up the best options for shareholders in terms of return of capital uncertainty. And right now, the best thing we can do, apart from delevering the balance sheet and reducing our interest bearing burden, which is well in hand, I might add, but is to actually grow organically. We have a lot of opportunities. If we take the midpoint of guidance for next year, it's about 50,000 tonnes.

The midpoint of guidance for this year is about 45,500 tonnes. And for those of you that are quick on the calculator, you'll see that we basically ended Q4 last year at the midpoint of guidance for this year. We continue to optimize the mine. And obviously, we've got the growth projects like the ventilation project, which really does unlock the bottom of the mine and allows us to try and fill that mill up. We know the mill will run at 80,000 tons of copper annualized.

We have run of that when we have the ore. And in Cutia South Upper, we are well and truly into the development of that now. There's a big focus on that in the last couple of months of last quarter. And I'm pleased to say that, that thing is moving ahead. So we're feeling very confident about this, about actually potentially getting a little bit more than that 50,000 tonnes because there's a few things like QTS South Upper, which last year was not in reserve.

We've now drilled it out and it will be in reserve, which then allows us to start including it into the into our production plan. Again, highlights for the quarter. So record production under the Mack ownership, record low C1. Total cash cost of about $2.31 a pound. We averaged just over $1,000,000 copper.

So again, in any language, that's a pretty solid margin for us. We continue to realize That's now reduced to 21% and 2.15%. So it's a significant impact. It's about a 70% reduction in our C1. So that really is about a $0.16 per pound reduction in our C1 that comes into effect from the start of January.

I touched on the exchange rate earlier. Somewhere in the quarterly, Morne has got a sensitivity there. But obviously, with the Aussie dollar at $0.62 to $0.63 we've got quite a tailwind as about 80% of our costs are actually in Aussie dollars. Morne, I'm going to hand over to you for the next few slides on the financials. Not sure Morne is able to dial in.

Are you Morne, have you been able to dial back in?

Operator (participant)

Morne, I think your line is muted on your end.

Mick McMullen (Director & CEO)

Okay. Well, I guess I'll do the financial stuff until we can get Morneau to dial back in. We've had some there's been some challenges with the lines. So in over the course of last year, we saw net gearing move from 41% down to about 15%. Cash and cash equivalents expressed in U.

S. Dollars has gone from about $32,000,000 to $172,000,000 And I would point out that in Aussie dollar terms, it's actually grown even more because, obviously, when we translate our Aussie dollar balance, which is about half our cash back to Aussie, When the Aussie dollar has fallen, we've lost a few $1,000,000 through the translation. Off the top of my head, I think it was about AUD277 million at the end of last quarter, which is a large amount of cash to have on the balance sheet. We have agreed, as announced to the market, the early repayment of Sprott. We're just going through the process with our senior lender senior bit right now to upsize our revolver and give but we're sitting at very large cash

Morné Engelbrecht (CFO)

Sorry, Mick. I'm back on. I dropped off for whatever reason. Can you hear me?

Operator (participant)

Yes, we can hear you, Marni.

Morné Engelbrecht (CFO)

Sorry, I'm not sure what you covered already, Mick. But obviously on that Slide 8, obviously, it's very significantly delevered MAX balance sheet. We produced net gearing by over 60% to company record of net gearing of 15% at 31 December. So comfortably below one times EBITDA. We also have a very healthy US172 million dollars in cash.

That's around US276 million dollars at our disposal at 31 December. So that's again over 400% better position since the end of 2023, which is further supported by an undrawn revolving facility of $25,000,000 outstanding QP receipts of 6.5 dollars unsold concentrate of about $5,500,000 and then we've got that investment in polymetals as well, which is around $6,500,000 at 31 December. So that brings our total available liquidity to around $213,000,000 or US340 million dollars at 31 December. The balance sheet was boosted also by the completion of the successful equity raise we did in October. So Aussie $1,000,000 or $133,000,000 before costs.

So we are therefore well equipped to further optimize our balance sheet as we announced in December through the retirement of the existing $145,000,000 mezzanine debt facility. As I said to the 10th, we announced in December that we reached an agreement with Scott to repay that facility at max discretion, obviously with no additional penalty cost on that. We're also going through a refinancing process to reset our senior debt. So we cannot really support the repayment of the Met facility, but obviously provide a cheaper, longer dated and material reductions on our repayment profile as well. So watch this space.

So in summary, MAX balance sheet is in a very strong and commanding position. So and frankly, the best position we've been in since the inception of the company. So and that provides us with great flexibility while we drive our organic growth as Mitra South finds. Moving to Slide 9. We've been squarely focused on, as I said, the simplification and delivering of the balance sheet and obviously utilizing that great cash flow generation from our operations to not only grow production materially, but reduce our interest bearing liabilities as well.

So if we look at the operational corporate side of the quarter on quarter movements, there's a few things just for highlights. So firstly, again, we had a very healthy free cash flow from operations there after sustaining CapEx of around US30 $1,000,000 for the quarter. That's sort of in line with Q3. It should be noted that we did sort of delayed shipment at the end of December. So we made a part sale of a shipment of concentrate, which was at port before year end.

So we aren't we recognize it as cash, but we aren't able to recognize it as revenue. So we will recognize that revenue in January when the ship is loaded. Obviously, if we had to recognize that in December, then our free cash flow from operations would have been around that sort of $37,000,000 mark. Secondly, we further reduced our senior debt. So we paid another $8,000,000 back on that facility.

So another 5% reduction. So that's now standing at about $158,000,000 as of the end of December. And we also had a pro form a net gearing ratio of 15% as I said. So that's a 60% decrease from where we were at the end of December last year. The third point I want to make here is that we paid interest of about $8,000,000 so that's both for the mezz and senior facilities, so about $4,500,000 of that is a mezz facility.

With the repayment of that mezz facility, we'll save around sort of that $12,000,000 to $13,000,000 per annum in interest cost. The other key elements from the cash flow is the sustaining CapEx of $12,000,000 so that's largely in line with the previous quarter. So that gives us about $50,000,000 just over $50,000,000 sustaining CapEx for 2024. So overall, very strong and healthy balance sheet position. And we're looking to further strengthen that position with the repayment of the spot deck facility and obviously the refinancing process we're going through.

The repayment spot, as I said, will drive significant cash savings from an interest point of view, which will allow the simplified savings sheet and also the P and L as well. With that, I'll hand back to Mick.

Mick McMullen (Director & CEO)

Thank you. All right. Hopefully, people can hear me. The lines aren't very good today. So the other thing that we want to touch on is our safety.

So safety, we've always said on the quarter is we think we can do better. Q4, we did do significantly better. TRIF has come down from about 14 to just under 11. We do see potential, and we think we should be lower than that. So we'll continue to drive that down.

We are our main capital project outside of the bend in Cutia South Upper is the Stage 10 lift. We're well advanced on that. Those works will continue during all the way through to Q3. But that will give us once that's done, that gives us tailings capacity up to about 2,030. So and that's spent and done, right?

So we're in good shape. As Morne touched on, we sort of indicated around about US50 million dollars dollars of capital for the year last year, and we've come in just under that. So no negative surprises there. Again, from a copper production point of view, you can see the trend is up quarter on quarter, again driven by actually more ore tonne and better grade in Q4. You can see C1 and total cash costs, again, a great trend over the course of the year as we've managed to strip out costs, improve production, renegotiate contracts.

And so look at C1 of $1.66 given the average exchange rate versus where it is now and the fact that we're seeing around about $0.15 $0.16 saving on our TCR fee from January on. We're feeling pretty confident in the directionality of where the C1 is going. And again, I think if we look at this best production quarter we've had, best C1 and total cash cost we've had, best balance sheet, net gearing, best safety. And so I think as a company, we've delivered on what we told people we would do. And as we get more and more into what we actually have at the mine, we're finding quite a few growth opportunities that are just organic that we already own for relatively little money actually.

Mill grade, again, the last 3 quarters, let's call it 4% on average. That seems to be about where we are. Again, that's a combination of where we're mining but also better dilution control. We are, again, directionally, when we did the reserve last year, we added a fair bit of dilution in the reserve number, and we have been mining above that grade. So it's likely, as we do the reserves this year, we might sort of modify that a little bit to be a bit more reflective of where we're actually what we're actually mining.

Development meters, down on the relative previous quarter but sort of flat for the year. We pushed on the decline has been pushed on a long way. It's now currently 25 meters vertically above the bottom of the 2023 reserve. We're finding more ore tons per vertical meter there. So actually, that's allowed us to not have to do quite so many meters of development.

But ore tons at 286,000 tons was good. The month of December, off the top of my head, was 103,000 tons for the month. So and that's before our ventilation comes in and or QDS, our buffer is online. So yes, we're feeling increasingly confident about delivering the operation, and we can't do the ventilation fast enough to be able to really unlock that mine. Costs, Morne, I might hand back over to you and you can talk to the dollars.

Morné Engelbrecht (CFO)

Yes. No, it's good, Nick. So Slide 13, so processing mining costs per molds and mine time there. First, the processing cost per tonne in Q4 was around 26, so slightly down from by around 2% from the previous quarter, mainly impacted by the increased molt tonnes and higher grade material being processed for the quarter, but otherwise pretty stable there. On the mining cost per tonne, the comparison, you look at very positive trends in terms of metric continues, with mining cost reducing by around 21% from Q1, around 12% in the last quarter low.

Obviously, that's just mainly driven by that 20% increase in ore mined for the quarter compared to Q3, which is also 12% increase on the previous 3 quarters average mine tons. And it's mixed here just over 100,000 times mine in December alone. So that's driving that cost per ton much lower. So obviously this not only demonstrates what's possible from a mining perspective, but also demonstrate the spreading of a large portion of our fixed cost over increased volumes. So as we previously mentioned on previous calls, our fixed cost is around that sort of 65% to 70% with labor making up about 60% of our mining cost as well.

On Slide 14, we cover G and A and development costs per meter. Again, pleasing me to see the G and A side of things, mainly impacted by 1,000,000 tonnes, which has increased by 9% with our underlying G and A cost, gross G and A cost largely in line with the previous quarter. Development costs per meter was largely in line as well with previous quarter. So as well with the overall capital development meters across all capital projects, largely in line with previous quarters as well. Slide 15, moving to tonnes north per employee.

So again, very pleasing to see much higher by 10% compared to the previous quarter. As noted, the additional tons mined in December quarter, some 9% compared to the previous quarter drove the increase in tons multi employee. Employee base relatively stable over the quarters as well. Sustaining CapEx decreased slightly over the quarter, but as we said, that will sort of end up at the $50,000,000 mark for the year when we report our results. So overall consistency and increased efficiency in operations increased and increased grade as well, driving our production, free cash flow and decreasing our unit cost and that obviously supports a leaner, more simplified balance sheet and obviously as we deliver more capital development for this year as well and continue to grow the company. Mick, I'll hand back to you for the rest.

Mick McMullen (Director & CEO)

Thank you. Many of you have seen this slide before. Look, I think hopefully the message has gotten across now that we aren't actually ore body limited. There's been a great track record of replacement of R and R. We clearly grew it a large amount last year.

We're starting to see a lot of additional potential in and around the current mine. And as I said, we've expanded the main ore body, Cutias North, by 20%, 25% along strike. We have a fair bit of material that hasn't made it into reserve historically, measured and indicated, plus a lot of inferred. A lot of the drilling, if you look through the historical drill resource releases the last year, Much of that's aimed at upgrading inferred mineralized material to measured indicated for conversion to reserve. And again, really, we're just limited by drilling.

When all the ore bodies are open, not just at depth, but up and down. And so there's a lot of potential here to continue to mine for a very long period of time, right? So that we don't really see that as a limiting factor anymore. It's actually getting it out of the whole task is the key. This long section is useful for us to talk about.

So currently we mined 75%, 80% of our ore out of QTS North, a little bit out of QTS Central and then a couple of other ore bodies not shown there. Kitia South Upper, the very top left hand thing, we're on our way to develop that. Q4, we'll have some production out of that. And that will turn up in reserve now that we've drilled it out. Kitia South, the sort of one on the extreme left there, that is very high grade.

The bottom of that's running about 7% to 8% copper. The very bottom hole sort of at the bottom was 9.5% at about 20 odd percent copper. In the current mine plan, that's still a fair way up. We'd like to mine that a bit quicker. And that's one of the things that if we get a bit more bent in the mine earlier, we can start looking to get out there and drag some of that material forward.

In the very top of the mine, mine, there's a red bar and a sort of a yellow looking thing, which is the east and west lenses. We've been doing a fair bit of work in that area up there, looking at historical zinc for a start, but also the copper mineralization. There is significant copper mineralization up there. And the zinc we've talked about historically of the ability to track that to polymetals. So there's a fair bit of focus on that right now.

We've put a separate team on that to look at developing what we call the upper mine. We think there's again, when we talk about organic growth opportunities, we see 400 or 500 meters vertical ore body there in separate zinc and separate copper deposits. And that actually has the potential to for very low capital cost, add a reasonable amount of production. And so that's a high focus for us right now, particularly as we're developing our security South Upper. If we can open up a mine in front of the top of the mine that is not connected to the bottom of the mine, not pulling vent from the bottom of the mine and not coming up the shaft.

It's just it's all incremental production at a very low capital cost. It's all within 50 to 100 meters of existing development and very shallow, right? Starts 150 meters below surface. So we're quite excited about this. We're working away.

Probably the first thing we'll come out with will be the sort of plan around the zinc. Our investment in polymetals has done very well, and we have the right to put another $2,500,000 in at $0.35 in the polymetals. And they're working away and sort of they'll be in production here in the not too distant future. And so we're quite keen to push our plans forward to be able to track some zinc ore up there. But actually, we have a pretty substantial copper ore body that looks to be sitting up in that proportion that we can go and mine as well.

So again, when we look at all of the things we can do, obviously, paying off the spot there is a guaranteed return at a sort of 12% and change interest rate. So that's a no brainer. But we have some great opportunities here in terms of advancing the business. So that's really our focus right now. Again, GDS up upper, it's small, it's super high grade.

We are mining out towards now. It was a hive of activity there last week when I went down there. We're pretty excited about this. We have another deposit about 200 meters, 250 past this cork in Tampa. We're actually going to continue to drive out and we'll use those accesses as drill drives because these ore bodies are subvertical, drilling them from the surface.

You can miss them easily, but drilling them from underground is much easier. And so we're quite excited about this. Q4 is when we expect to see the first production coming out of this thing. The ventilation project, so we get asked a lot about this a lot. Total budget is about AUD42 1,000,000.

We will spend because I think in U. S, we'll spend around about AUD22 1,000,000 I think on it this year. Target completion date is Q3 of 'twenty six. And so we're well advanced on that. The Geotage drilling has been done.

We're pushing the drives out. Interestingly, one of the drives I was standing in it last week, that phase that you can see on that slide there was running about 15% copper. So we're actually pushing out on a stringer, which will provide us a bit of extra incremental ore and pay for that thing. And then it will run out and we'll push out past that. But it does highlight when I went there with some people and we went to have a look at the ventilation drive and we turned up to a place that's running 15% copper, that's CSO for you.

You can get those things all over the place. And it's all about being on your toes, identifying them and mining them and getting them in the mill as quick as you can. So in terms of our plans going forward, so we sort of see plus 50,000 tonnes starting to become a bit more confident about maybe we can do a bit better than that. We sort of see the target for C1 down around the $150,000,000 Take Q4, dollars 1.66 We told you that we'll get about $0.15 or $0.16 off the TCR improvement this year. So you don't have to be a rocket science to work out that we're feeling quite confident around getting down that level.

And net gearing, again, ended the year at 15%. Morne would like 10% to 20%. I'm pretty happy with 0%. But once we've paid out the Sprott facility and we've got a bit more flexibility, we can start looking at things like shareholder returns, right, which in the current structure we aren't able to do. So again, as we generate cash, self funding all of the stuff that we're doing, we see a good pathway for organic growth.

And we think the balance sheet is in a great shape now. So the business, quite frankly, has never been in a better position. I was down the bottom of the line last week with some investors who've been with us for the journey all along. And I think they were quite surprised at just how much activity we have going on there relative to over the last 18 months. So we're starting to get into a good rhythm and cadence now.

And so we feel pretty comfortable about the growth profile of the business. So look, that's our strategy. Deliver operationally, execute organic growth. I think quite frankly, right where we are, it's delever the balance sheet, shareholder returns and grow the business, I think, is quite frankly where we are. And we're feeling pretty good about the operation.

I'm feeling less good about where my share price sits. But look, CFA has been an amazing operation. The team at SITE have turned it around. We've stabilized the workforce. I think they've delivered really well.

We can see a great runway now in terms of what else is to come. And when you head grades 4% copper, it's a pretty good mine. So with that, I'm going to turn it over for any questions if anybody's got any. I'm happy to take as many as you want.

Operator (participant)

First question comes from Daniel Morgan with Berenjorie. Please go ahead.

Daniel Morgan (Founding Principal - Mining Equity Analyst)

Hi, Mick and Monet. First question, just on achieving your production outcomes you'd like in 2025, what is the key driver versus 2024? Is it more tonnes mined or grade or both? Thank you.

Mick McMullen (Director & CEO)

Yes. I think grade will be hovering around about 4,000,000 maybe just under 4,000,000. So it's more tonnes is the short answer and more consistency, Dan, in terms of how you get those more tonnes. So quite frankly, it's we know this mine can produce a lot more than 45,000 tonnes of copper a year on a week by week basis. It's eliminating the weeks when you're producing at half that rate.

That's actually the if I we talked about consistency before. It's that consistency piece. So and that's why I say we've never had more working places open. We've never had more places to go. We've got the hallway system sorted and the people are all in place. So that's really the key, Dan. It's consistency.

Daniel Morgan (Founding Principal - Mining Equity Analyst)

So to that end, I mean, it was pleasing to see the lift in mined ore tons in the quarter. Is that something we should expect for the March quarter, for example, another lift or stability? Or what's

Mick McMullen (Director & CEO)

Well, we're not really we've got to come out with our guidance in about 3 weeks. But I think overall for the year, we're not really in the business giving quarterly by quarterly guidance. But overall for the year, we expect to see a bit more tonnes, ore tonnes, similar ish grade, and that's where your production lift comes from. But again, we exited last year in the quarter at midpoint of this year's guidance already. So it's really about doing what we did in Q4.

Daniel Morgan (Founding Principal - Mining Equity Analyst)

And just on the resource reserve update coming in Feb, what is in scope, Your various ore bodies, what's in scope to be considered for that? And what is too early with regard to the drilling on cutoffs or anything to be considered? Could you maybe talk through the various areas?

Mick McMullen (Director & CEO)

Yes. So Kiria is North, Kiria is Central, East, West, Kiria South, Kiria South Upper will all be in that. And so really, the only new one there is Kiria South Upper. But obviously, there's been drilling to expand all of them. And so both total resource expansion plus conversion to M and I for reserves.

We're working towards seeing if we can get a zinc resource out and then the copper like in the upper portion of the mine. The copper in the upper portion of the mine is unlikely to be in there. We have an internal number, but it's probably not quite ready yet. It needs probably a few more test holes into it, just confirmatory holes before we can roll that out. That may be a midyear update.

So yes, in an ideal world, we'll but we're literally going through the finalization right now. The external checks, we've sent it out to external checks. So we're in that phase right now, right? So the Board will sign off in that in 2 or 3 weeks.

Daniel Morgan (Founding Principal - Mining Equity Analyst)

Thank you. And

Mick McMullen (Director & CEO)

Sorry, we wouldn't look like to get the zinc resource out, so at least then we can talk about what that production plan looks like.

Daniel Morgan (Founding Principal - Mining Equity Analyst)

Yes, right. So the I know Poly's plans, I think it's midyear, to be back up and running. It would sound like it's going to be a it's still going to be a little bit of time for you to do the work on your end to provide ore into that zinc ore into that JV?

Mick McMullen (Director & CEO)

Yes. I think realistically towards the end of the year, sort of Q4 top sort of stuff. Right now, the upper part of the market is going to get that running. And then we can come back and do the development for the zinc. The development work for the zinc is actually quite small because it's so close to development.

It's just we've got to focus on doing stuff in the order that it needs to be done. But yes, it's sort of Q4.

Operator (participant)

The next question comes from Sam Catalano with Wilsons Advisory. Please go ahead.

Sam Catalano (Equity Partner & Head of Natural Resources Research)

Hi. Good day, Mick. I'd rarely give the congratulatory thing from analysts, but excellent quarter. So well done to everyone. Two questions.

Just to probably ask the questions that Dan was asking perhaps in a slightly different way. So let's assume you get that consistency on grade and output levels through 2025, then that annualizes roughly around that midpoint of your existing guidance. I know that's due an update. But if we think about what might get you to the top end of the current guidance range, what's it likely to be in 'twenty five? Would it be surprise grade bump?

Or is there sort of or is it likely that you can see an avenue where the output will materially move up and you can get towards that 48 type figure? I'll ask one more question.

Mick McMullen (Director & CEO)

Yes. The key I think the key is actually Cutia South Upper, which is not in the current guidance range at all because it was inferred last year. And so that's about 1500 tonnes of copper a quarter, maybe a little more when we get into the meat of it. So if we can try and drag forward, we will be like I say, it's not currently in like if we look at the midpoint of guidance, there's nothing from QTS South Upper in that.

So if you get it on the quarter, then there's 1500 tonne of right? So there's a reason that we've put it into everyone's bonus for this year is first ore out of Cutia South Upper, the earlier the better. And so I was there last week up on the 2 level, and it is a high of activity. So for us, that's pretty crucial, right? And so I think Q4 is where we can assume that we'll get some more out.

There's none of it in to get to midpoint of guidance right now. That's not in the plan. And so if you think about what's the swing factor to get to the top end, it will be that. And then the other opportunity we have is that there's as we drive out there, there's definitely smaller lenses on the way. If we happen to be lucky and we happen to find something that we could mine, then there's some chance that we could do that as well.

Sam Catalano (Equity Partner & Head of Natural Resources Research)

Got it. And just to clarify what specifically my second question was on Kiria South Upper. You've talked about 1st ore this year. Is that just development ore or you're actually talking about 1st stoping ore?

Mick McMullen (Director & CEO)

The metric we've stuck in everyone's bonus is 1st stoping ore. Ore. So again, it's narrow, but it's very high grade. And so you don't need a lot of ore tonnes out of that thing to get 1,000 tonne of copper or 2,000 tonne of copper. We could again, we get asked about this.

We've probably been a bit delayed. We went out to contractors to see if we could get a contractor to do it. And actually, whether scale or they're all busy on other stuff, we just couldn't get a contractor to focus on it. So we probably lost about 3 months there while we did that. And then we just made the decision, well, we can't wait for other people.

So we're doing it ourselves, and now we're executing it on. And that same crew, what we're trying to do is that same crew we actually want to use I'll just go back to the slide. If you can see the slide, Jigya South Upper about the same level and about 600 meters away from that Upper West and Upper East ore bodies, the zinc and the copper there. In an Islander world, I have that same crew and fleet moving between those two areas, right, to maximize my fleet. So that's why we've defined Cutia South Africa.

We have a plan. We're executing on that plan. Now we're rolling into defining the plan for those other areas, and then we'll try and utilize the same fleet, right?

Sam Catalano (Equity Partner & Head of Natural Resources Research)

Okay. So if sorry, just last a little bit. If everyone hits the 1st stoping or in Q4 and gets a bonus and so forth, then potentially in the quarter or 2 before that, you might get a tiny bit of incremental development material out of there?

Mick McMullen (Director & CEO)

Yes, we may. And again, as I said, there's various drill hits and sort of small lenses on the way out to it as well. And so if we're lucky, maybe we need a bit out of that as well. As I showed you the photo on that vent level that we're driving out there, we've hit a face that's running 15% copper, right? Like that CSA is you can have those small lenses and you just got the opportunity to take them.

Operator (participant)

The next question comes from Paul Hissey with Moelis Australia.

Paul Hissey (Executive Director)

Just a couple of quick questions from me. Firstly, sorry if I missed it. Just the potential on your balance sheet restructure, not so much the sprot pay down, but just the remaining, I guess, discussions around alternative facilities. I might have missed it at the very start. Did you have a potential timeline if we could put Morne's feet to the fire on that one, Mick?

Morné Engelbrecht (CFO)

Yes, April.

Just on the refinancing, we're going through that process now, probably take another sort of 6 to 8 weeks to finalize that. Sort of looking to obviously extend that debt and obviously convert if we re buy the mix facility then all the remaining debt to sort of that low 7s interest rate and looking to sort of have a bigger sort of rolling facility as well. So gives us a bit more flexibility in terms of managing our balance sheets from that point of view and we don't pay a lot of money for that. So, that's sort of the main things we're sort of aiming for, but that's probably sort of 6 to 8 weeks away in terms of getting there. But we actively engage with all the banks and also looking to add Australian banks to the facility as well.

Paul Hissey (Executive Director)

Yes, sure. And just with the Sprott facility, we expect to see a closed out, again, the cash out the door prior to the end of this quarter?

Morné Engelbrecht (CFO)

Look, again, it sort of depends on how we sort of move through that refinancing process, but that's sort of the same sort of time, 6 to 8 weeks to sort of close that out.

Paul Hissey (Executive Director)

Okay.

Yes, sure. Okay. And then just one other question about I guess this is more bigger picture strategy wise, but just running the asset in general, so the vendor will come online sort of midway towards the second half of next year. This gets you to 1,700,000 tonne, obviously, but excludes QTS upper. Just remind me, Mick, what's the throughput of the mill and sort of where do you if you can get 1,700,000 from I guess, from the legacy operation, clearly QTS higher QTS upper high grade material can displace anything that's lower grade.

But what's the, I guess, the medium term philosophy there around overall throughput with your plant capacity?

Mick McMullen (Director & CEO)

Sure. Yes, look, that plant it depends what you put into it, but 1,800,000 to 2,000,000 tonnes a year is about what you could put into at the front end. The back end will build about 80,000 tons of copper, and then we run under that when we have the ore at high grade. We run under that. We're capped at about 1,700,000 tons per annum on the water.

So our own water, 1,450,000 tons. The deal we did with Polymetals to secure that extra 150 Megaliters of water, that gets us to 1.7. And so we sort of think about 1.7 ish, 1.8 is our target to get there from all sources. And you've got to think it's not necessarily high grade, low grade. So thinking about margins, so if you are possibly

Paul Hissey (Executive Director)

I'm not sure if it's mine or your end, Mick, but you're breaking up quite a bit here. Yes. Yes. Look, maybe a little good that I guess you've confirmed that sort of 1.8 is the magic number for the plant. So I guess it boils down to where you get the material from to fill that 1.8.

The line is really bad. I'll check the transcript after the call, Mick. And if I have any other questions on that, I'll just give yourself or Morne a call directly. Apologies.

Operator (participant)

The next question comes from Eric Windmill. Please go ahead.

Eric Winmill (Equity Research Analyst)

Great. Thanks for taking my question. Congrats, Mick and team. Hopefully, you can hear me okay. There's definitely the lines breaking up a bit here.

But just a quick question on the reserve and resource update. Perhaps you mentioned it, but how much new drilling do you think is going to go into that or where's the cutoff on the drilling for that?

Mick McMullen (Director & CEO)

I'm managing to get it back online. There'd be 35,000 meters of drilling in the new resource update. The data was cut off, I think it was at the end of September, October.

Eric Winmill (Equity Research Analyst)

Okay. Fantastic. Thank you. And maybe just a question on the tailings, you're doing this stage tenant embankment now. How long is that going to set you up for?

And what's do you see what the CapEx is around that?

Mick McMullen (Director & CEO)

Yes. So the CapEx on that is about $12,000,000 ish on total, like $18,000,000 It might come out to be a little bit less because obviously the Aussie dollars dropped. I'm just trying to find the slide. And once that's built at the end of sort of Q3, early Q4 this year, that takes us out to about 2,030. So the tailwind is down until 2,030.

Here we go. So we're spending that money now and then we're set up for the next 5 years.

Eric Winmill (Equity Research Analyst)

Fantastic. Thank you. And maybe just one more question on the upper portion there. I know you said that we'll make in the resource, but I know some of the initiatives there in terms of digitizing and obviously a little more zinc. Anything you're seeing there you want to follow-up on and maybe kind of catch your interest here that you might want to look out for?

Mick McMullen (Director & CEO)

Yes. So that work, we've got all the historical drilling in. We've had a huge project digitizing all the old level plans and everything and georeferencing them. As I said, there's a pretty high grade, decent sized zinc ore body sitting at the top there, but also lower grade, but still pretty good grade relative to every other copper mine, just lower grade for us. Sizable copper deposits sitting out there that we believe we can add a reasonable amount of production.

It may well give us the pathway to fill in the mill up, but that work is underway right now. So but again, as we look at what does everyone else have that's undeveloped, I think actually we have a better project sitting out there than all the other undeveloped copper assets in Australia.

Operator (participant)

This concludes the question and answer session. I would like to turn the conference back over to Mick MacMullen for any closing remarks. Please go ahead, Mick.

Mick McMullen (Director & CEO)

Okay. Thank you, everyone. I think we feel very proud like the team at SITE have done a great job for the quarter and for the year. It's been a very strong result. I think the company has never been in a better position.

And we look forward to continuing to deliver. And I guess, we like to think that we're as advertised on the team. We've delivered on what we said we would deliver and then done. And we're feeling pretty confident about that mine out there now, about our pathway to organic growth. And that's it. Thanks, everyone, for your time.