Aurelia Metals Limited Q2 FY26 Earnings Call - Strong Cash Flow and Positive Federation Ramp-Up with Expansion Projects On Track

Conference Operator: Thank you for standing by, and welcome to the Aurelia Metals Limited December Quarter Activities Report. All participants are in listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Bryan Quinn, Managing Director and Chief Executive Officer. Please go ahead.

Bryan Quinn, Managing Director and Chief Executive Officer, Aurelia Metals Limited: Thanks, Kaylee. Look, welcome, and thanks for joining us for the Aurelia Metals Quarter Two results for FY26. We appreciate your time to join us and allow us to sort of present some very positive results for this quarter and a bit of an outlook as well. I’m joined today by Martin Cummings, the Chief Financial Officer, and Andrew Graham, our Chief Technical and Business Development Officer. Angus Wyllie, the Regional General Manager for Cobar, is on much-deserved leave at the moment, so he won’t be joining us. So we’ll obviously take questions at the end of the call and presentation. Please just refer to the forward-looking statements on our pack. I would now like to talk through the highlights for the quarter before moving into some more details. So if you can just move on to the highlights slide.

We’re very proud to announce we had a very good quarter with cash flow, with AUD 42.9 million operating cash flow after our sustaining capital costs. This was supported by strong commodities prices and obviously strong gold production for the quarter. Our Federation Mine is performing well. Our Peak Mine is up 21% on previous quarters and continues to grow each quarter for the remainder of the year. And we’re also continuing to increase in ore grades and recovery from the ore in line with our reserve model. Great Cobar project’s performing well with our own operator teams delivering a 13% increase in meters from the previous quarter as we continue to sort of build momentum in the project. This continues to place us well in the copper market with increasing demand in the future for copper, obviously.

The three other expansion projects at the Peak Mine are also tracking and will deliver in line with our expectations for the expansions. Obviously, the first is our thickener project, which is being ready for commissioning in Quarter Four of FY26, a ball mill project in Quarter One, FY27, and a materials handling Quarter Two, FY27. So we’re very happy with the progress of those projects, and we’ll talk to a bit more of that soon. Lastly, and very importantly, our balance sheet remains very robust and continues to allow us to grow our business in line with the commitments we’ve made, achieving AUD 85.6 million at the end of the quarter, which Martin will talk more to.

So if I can just move on to the production and cost slide, I would like to reinforce the strong production cost outcomes which we’re delivering within guidance for the full year. But importantly, I want to highlight some of the details of that guidance. Obviously, we’ve been sequencing our mine to feed the ore to the mill this quarter, very much delivering our gold, lead, and zinc ore, which obviously is focusing on maximizing cash. The next quarter and the sequence of the next quarter is obviously focusing more on higher copper and higher copper and higher lead-zinc from Federation also. Importantly, we’re building a nice stock level in front of the mill, and we’re achieving very close to nameplate capacity for the mill, which I’ll talk more to soon. That’s the mill before the expansion. All our costs are in line with guidance.

Sustaining capital appears a bit higher year to date, obviously, and for the quarter. Obviously, we’ve done some purchase of equipment that Martin will talk more to, which sort of skews the numbers at this point in time. But those costs have been taken already, and we don’t have that in the future. So in all, and growth capital is slightly under as well, but within guidance also. So in terms of production and costs, I guess we’re really sort of looking to say that we’re well and truly within guidance for the full year.

In terms of sequencing, we do expect to obviously move into more copper and gold in these next couple of quarters, which will, as I said, which will bring up those copper numbers in the sequencing for the full year guidance, which obviously looks a little bit low for year to date, but the plans are the plans for the full year. If I can talk to the group sustainability slide. Unfortunately, we had four recordable injuries in this quarter, which involved hand injuries and slips and trips. Management’s really focused on preventing injuries before they occur and having people really look at hazards and risks on the job and making sure that the proper precautions and actions are taken before doing work.

Largely, we’ve had injuries involving short-term contractors on site, and we’re going to continue to have supervision really focusing on making sure that there’s adequate supervision and making sure that as a management and leadership that we’re really looking at behavioral-based safety going forward to really sort of improve the performance of safety. In terms of our environmental reporting, we’ve had a good run in terms of compliance and over quite a couple of quarters now, so very much in good shape and good results coming out of that reporting process. I’ll just move on to the Peak slide. Really, our focus is maximizing throughput and recoveries to really take advantage of the revenues and the cash flows of our commodity mix. And as you can sort of see, I’ll just talk on each one of the graphs.

So our mine development meters is definitely heading in the right direction as we’ve committed. And part of that is from our productivity project focus to get our meters well and truly ahead so we have optionality for where we’re going to produce and stope. And also, in addition to that, is actually our Great Cobar meters as well, which are on track, as I’ll talk about soon. So very much our development at Peak is moving in the right direction. We still remain focused on our fleet availability and utilization of the fleet, and that’s about really having the right planning systems in place, which they are now evolving and maturing, and also making sure we have the people on the job day in and day out to ensure that we can drive the equipment that is available.

So that’s obviously a key focus for the team to continue to focus on the safe productivity of our development and our mining area. In terms of the throughput, I’ve added a slide this quarter, and we’ll do this ongoing now, obviously as a focus on the throughput through the plant. We continue to report that we are ramping up the throughput through the mill at Peak. The key message I’d like you to take away is that we’re very close to nameplate capacity, and we have stocks in front of the mill from all the mines. At the end of the quarter, we’re actually at 36,000 tons of stock in front of the mill, which is a great place to be and something we haven’t experienced for a while.

So importantly, on an average monthly volume year to date, we’re actually at record numbers since FY20, and we see obviously upside on these monthly averages going forward as we will now have stocks in front of the mill of high-quality ore as we continue to build that level ready for the expansion. And then no doubt, as the projects we’ll talk about continue to commission over the next quarter four, this financial year and quarter one, FY27, we only expect those averages to continue to go up to the next nameplate capacity that we’ve sort of reported from the project point of view. With regards to recoveries, really good news still continues on. Very pleased that our gold recoveries are sort of at all-time highs for this quarter. And in terms of that’s exceptional considering the high throughputs as well.

Lead and zinc recoveries are also very good and definitely worth noting. So we’re very happy overall how the business is working in terms of the processing of this ore. Higher throughputs and higher recoveries is a really good place to be for Aurelia Metals to deliver maximum value to our shareholders. If I turn to the Federation slide, just in terms of our mining and our ramp-up process we’re going through that we’ve talked to the shareholders and investors about for a while, we continue to ramp up. As you can sort of see, on average, the meters are continuing to head in the right direction. We’re slightly down in December due to some utilization of equipment with resourcing challenges of our main contractors. That’s obviously been rectified in January, and we’re back on track.

But still, overall, the average is in the right direction, which we’re happy to report, and we have plenty of production opportunities to grow from the development ahead. In terms of ore mining, you can sort of see from the graph we’ve continued at a 21% increase higher this quarter. Obviously, we continue to expect that to increase quarter on quarter for the rest of this financial year, which is also a great story for Federation. In line with that story, we’re also seeing continuation of grades increasing from the previous quarter to this quarter, which we expect to sort of basically be in line with the reserves that we’ve sort of reported to the market. Costs remain on track for the full year also.

Halfway through the year, we’re halfway through our costs, so very much in line with the previous slide for the full year guidance numbers. I’ll just turn to just a couple of bits of information around the Federation Mine. Obviously, we’ve just put in an update on the mine plan where it looks like where we’re tracking year to date and where we’re going. You can sort of see that the Federation Mine is going very, very well. We’re pushing the decline down. As we push a decline down, we’re setting up infill drilling and also resource drilling from the various locations, and that’s what we’ve talked about at previous quarterly and annual results. If you look at the actual results, we’re sort of targeting about 1,500 meters a quarter, and that’s being achieved.

Infill drilling is progressing very well and giving us results that allow us to sort of firm up our stope design so we can maximize our throughput, and obviously, if we can maximize grades and throughput, we can actually reduce our logistics costs while putting on the road to the Peak Mill to be processed, which is obviously a key driver for us, and obviously, the ore body is reconciling very well at the moment, and we’re seeing that coming through the Peak processing plant as we sort of process the ore for Federation, so overall, I just want to leave the message that definitely Federation ramping up as we’ve committed and doing a good job of getting the ore in front of the Peak Mill at a very good quality for the processing to occur, and hence we get the grades and the recoveries out of the processing.

I’ll just talk briefly about the expansion projects before handing it over to Andrew to talk about the exploration and our future growth options there. So if I can just talk to the Great Cobar Copper project. If you look at where we are, and this is a bit of a visual on the slide of where we’re going to be in the next couple of years, very much mine development is tracking well. As I said, there’s been a 13% increase in development from the previous quarter. We sort of have three kilometers of development remaining to get to our platform before we start drilling to unpack potential future information on infill and also resource. And then we have about four Ks to get to production. But like I said, we see very much conditions in the Great Cobar area being very, very favorable.

As we continue to sort of sequence our teams, hopefully we can see some improvements and go beyond our sort of targets. Overall, I guess one of the key messages is with this copper project not far away and with the current pricing of copper and the demand for copper going forward, we do see a material upside on the value of this project as well to what we’ve presented in the past. Great news for Aurelia on the basis of copper and gold prices going forward. I’ll just talk to the next slide, which is on the plan upgrades. Obviously, not too far away, we’re on track to deliver our plan upgrades. Just firstly on the tailings and processed water management, that project is on track to deliver in quarter four.

We will see improvements in copper recoveries, obviously some cost improvements through cyanide consumption reductions, and obviously, that project will be ready in this financial year to start those improvements for us, which is excellent in and above what we’ve been presenting now. The tertiary ball mill will be commissioned in quarter one, FY27. Once again, it’s on track. We’ve been pulling apart the ball mill down at Dargues, and it’s ready for trucking, as is the power substations, etc., ready to move their way to Peak in the coming period. Definitely, you can track that as we go every quarter by quarter. Just on the photo, that’s actually the footings for the tailings and processed water management. We actually poured that largely before Christmas when it was nice and sunny and hot.

The team’s done an amazing job to continue progressing that sort of concrete foundation steel work in anticipation of this tailings and water management being ready for quarter four. All of the major parts from overseas have arrived, and the containers on site. They arrived before Christmas. Obviously, we’re getting all those parts ready to install. Very, very exciting for the first part of the project to be moving into the next couple of quarters to be ready to commission. Lastly, our crushing materials handling project, which is focused on quarter two, FY27, is very much in the process of detailed work to have that ready to start the process as we speak. All three projects are streaming very well on track, and we’ll only enhance what we’re currently delivering.

With the stock building in front of the mill, once we have these projects in execution and commissioning, we’ll be basically really ready to sort of choose through those stocks and deliver significant value to shareholders in not too far future. So that’s kind of the upgrades we’re up to. I’ll now just pass it on to Andrew to talk about exploration. Thanks, Andrew. Thanks, Bryan. It certainly is exciting to see construction progressing there on site at Peak on these projects that we’ve been really keen to see progress. Just on exploration, those who follow us closely will have seen we put out a release in December on Nymagee. It was our only release for the quarter in the exploration front. Certainly interesting items there from our drilling Nymagee North, extended up dip by about 100 meters and also along strike.

Interestingly, some gold, which we haven’t seen at Nymagee before, and so hopefully that progresses as we drill further in Nymagee North. The recently discovered Metropolitan Lens was also extended 40 meters up dip, seeing good continuity on thickness and grade, and back on Nymagee Mains, the main part of the old workings and the ore body, this largely forms the basis for the resource, and we’ve got a good extension along strike to the north and also an extension 250 meters down dip, which was also extremely pleasing and supported some of the results we’d seen from Downhole EM previously. Just mentioning Downhole EM, we did through the quarter do an additional survey at Nymagee North, and we’re still awaiting the results of that. We’ll use that to really focus our efforts around drilling Nymagee North going forward, a key target for us in the exploration space.

A couple of other bits just to touch on. They’re not on the slide, but they’re in the quarterly report. Importantly, we drilled out New Occidental tailings through the quarter. Here this morning, we finally got all of our assays back on that. So we’ll progress now to developing up the resource on those two tailings stockpiles. Their stockpiles are not a tailings dam, so we’ll just develop up a resource on that and at the same time use the assay results from the drilling to do some further met testing, which will then feed into a pre-feasibility study that we’ll bring to you once it’s together. And we are initiating permitting on those as we speak as well. So from an exploration point of view, currently we’re drilling out Federation West from underground, doing some additional exploration drilling there.

It’ll be a little bit drilling and then back on resource infill and then back on Federation West, but we’ll bring you those results as we get them through. Peak for underground drilling at Chesney Deeps and also Kairos Eastern Copper at the moment. Again, once we get results, we’ll bring those to you through the quarter. So going forward, you can expect to see information, obviously, on New Occidental. We’ll give you an update around Peak and the various drill programs we’ve had going on there, which are detailed in the quarterly report. And also, as we get results from Federation West exploration drilling, we’ll bring you some of those. Pass over to Martin. I think it is now to talk about the balance sheet. Yeah, thanks, Andrew. So I’m up to slide 15 in the pack, and we’re just showing the cash flow waterfall here for the quarter.

As you can see, pleasingly, we finished with cash of AUD 85.6 million. Along with our undrawn loan note, which did step down to $20.4 million this quarter, takes our overall liquidity to around AUD 116 million. Still very strong on the liquidity front. We did have to add some cash to our restricted cash this quarter, so $7.9 million was added, and the balance of that restricted cash now is up to $27.8 million. We don’t report restricted cash within this number. This is in addition. How to unlock that restricted cash is through a refinance of our performance bond facility primarily, which is well underway, and we’re in the due diligence process at the moment. We’ll look to close that refinance process during the second half, at which time we’ll get that restricted cash back.

In the meantime, there will be a few more amounts that we will have to add to restricted cash over January and February of around AUD 10 million. Look, Bryan mentioned for operating cash flow was an excellent quarter for the Cobar Regional Operations with AUD 42.9 million generated, and that’s after sustaining capital driven by the very strong production and sales and obviously commodity prices. You will recall last quarter I talked about some concentrate that we did have on hand in September quarter, so we did sell that during the quarter and realize some of that in the operating cash flow. Bryan touched on sustaining capital before at AUD 15.6 million. So our year-to-date number of around 31 is a little bit above the midpoint year-to-date.

But as you also mentioned, we have invested in our fleet at Peak, so in the first half, and we’ve been talking through that investment and some of the improvements around availability and operating costs that we’ll get from that. So we’re quite comfortable with where we’re at with sustaining capital in terms of the full year range. On the other hand, our growth capital is below the midpoint year-to-date, but really the spend profile of those planned expansions that Bryan just took everyone through, the spend profile on that is weighted to the second half. So again, we do expect to see growth capital tracking to the guidance range. A couple of other things this quarter. So as you will know, in the 30 June accounts, we did report a tax payable number of over AUD 12 million, and we did make that payment in this quarter.

So within that is AUD 12.2 million related to the FY25 tax year. The balance of that is monthly PAYG payments that we’re making in relation to FY26. And as I said, we also put through the AUD 7.9 million of restricted cash, which we report within the financing cash flows. Working capital was pretty flat, but within that, we did make our annual insurance payment in this quarter. But that was a net outflow, but overall working capital was largely flat. So I’ll leave it there, but I just want to leave you with the balance sheet being really strong, driven by another really strong quarter of production and operating performance in Cobar. So that has really set us up well, and we’re on track to meet all of our guidance metrics. So with that, I’ll hand it back to you, Bryan. Yeah, thanks, Martin.

Look, if I can just go to the key focus area slide, the last slide. Obviously, we are very focused on safely executing the plan towards our 40,000 copper equivalent tons that we’ve talked about, which eventuates in FY28. To get there, very much we were focused on disciplined capital allocation, and the cash balance is obviously coinciding with the results today. That makes sense that we continue to deliver those cash back to the business to fund our growth, but to build our balance as well to have that robustness. We are continuing to fill the Peak plant to maximum capacity. As I talked about, we’re obviously close to nameplate.

We expect to sort of hopefully exceed nameplate over the coming quarters and deliver really high quality ore, which we have in stock now, continue to build our stock in front of the plant and really have that sort of available for the planters to choose through and maximize our revenue and our cash flow. It’s a real key message I want to get across to all the shareholders that we do have that stock in front, and we continue to focus on building that so the plant can really be maximized now and hopefully increase as we’ve just committed to get the full year results and get the expansions ready as well to go. In terms of ramping up Federation, it’s definitely a key focus. We’re very focused on delivering more at our Federation this year.

And obviously, in line with that is also the infill drilling and exploration work to extend the mine life as well. So pushing the decline down to the bottom of the current ore body as we know it now, infill drilling to unlock more potential from the current stopes. And obviously, getting great performance in terms of grades and volume out of Federation is very much a focus. In terms of the focus on Great Cobar, obviously, achieving that project milestones were well and truly on track, and we do see some upside there in performance as we’re only two quarters into developing. And as we build up our routines and our process around that, there’s obviously some improvement areas always to build on. So we are on track and definitely ahead of plan to where we want to be to deliver our performance there.

In terms of our growth options, we’re going to obviously continue to look at both, as Andrew’s talked about, some of our organic growth options, but also keep a look over the fence of inorganic options that may be sort of progressing around us. That’s going to be a continual focus for us, but obviously not a priority, but a focus in terms of looking at what we can do both with our current resource and what potentially can be done around us. And lastly, and really importantly, making sure we attract and retain quality staff in the region and in Brisbane. We’ve got a really good team, and obviously, as we continue to build the organization, we’ll continue to look for talent to enable us to perform even better than we are today.

So really, it’s a good news story for Aurelia Metals, and really proud of how the team’s performing to get us where we are today. So with that in mind, I’m going to hand it back to you, Kaylee, to pass us over to questions and answers before I wrap up. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you’re on a speakerphone, please pick up the handset to ask your question. Your first question comes from Paul Kaner with Ord Minnett. Yeah, thanks, Bryan, Martin, and Andrew. Just a couple from me, if I may. Just firstly on that refinancing piece there, Martin, you said you sort of expect that to complete this first half.

Do you think that’s more likely to be this quarter or maybe the June quarter? I’m targeting end of this quarter, but yeah, it may be early in the following quarter. I guess the message, Paul, is I’m not targeting June. It’ll be earlier than that. Yeah. So we’re well underway with DD at the moment. And yeah, it’ll just, I mean, yeah, around the middle of this half is what I’m aiming for. Yeah. Yeah. No, that’s fine. So it might slip into the beginning of the June quarter. That’s all good. And then maybe just a couple there for you, Andrew, just on exploration. Yeah, obviously some exciting results there from Nymagee. I guess, how should we think about this deposit for, I guess, the longer-term opportunity?

Is that a Hera restart opportunity, or can that material go back on the truck down to sort of the Peak processing plant? I guess how are you guys thinking about it at this early stage? Yeah, probably important, Paul, your comment. It is an early stage. So at the moment, we’re really trying to understand what we’ve got. There’s certainly ore there. Certainly can be economically treated. We just need to see whether we get enough for an economic project. Assuming we do, and it’s growing quite nicely, the easiest thing to do is put another truck straight back to Peak. If there’s enough inventory, then we can consider the possibility of restarts of Hera. Yeah, it has to do a little bit too with Federation and how that evolves and Peak and how that evolves. There’s a lot of moving parts there.

The beauty is we have processing plants. We have Peak. It’s recovering well. It will expand well. And we have Hera as an option. So the beauty is as we delineate or improve up mines, we can actually process that material. Okay, great. And then just on Federation West, adding to that optionality, I guess, assuming this sort of shows up a bit further, when’s the earliest you could potentially access this material from, I guess, the current mine plan, given where it sits? Yeah, we’re in our life of mine process at the moment. So that’s something that the team at Federation will think a bit about. It really just depends how it competes with the materials right there on the decline. So we’ll think about that and think about when it makes sense.

Obviously, at the moment, we’ve got a rig there doing exploration, which is really stepping below those hits we had previously. As we get results on that and have a bit more of a story around how it all fits together, we’ll bring that to you, obviously. It’ll be a little bit on and again, off again at the moment because obviously we’re trying to do infill drilling as well. So we’ve got the rig at the moment doing exploration. It’ll go back to infill. And then later in this financial year, it’ll be back on exploration, targeting the eastern side of Federation. So as we get some assay results and some information, we’ll bring that to you. But we are thinking about when and how that makes sense. Yeah, too easy. No, thanks for that. And I’ll squeeze in one more if I can.

Just for you, Bryan, ramp up of Federation’s going well. I guess the infill drilling you’ve done more recently, has that changed your thinking about, I guess, FY28, or is it still sort of too early to say given, I guess, FY26 and 27 is predicated on a slightly different mining method? Look, the infill drilling for FY26 and 27, we’ve got a fair bit of confidence in terms of what’s in front of us. We’ve still got a lot to come from the drilling being done. We’ve still got a lot of results to come back in. But as we’ve said before, we’re going to continue infill drilling all the way as we push the decline down. As we get towards the June period, we’ll be updating against our guidance numbers for what that looks like.

But like I said, the Federation ore deposit is a very good deposit, and we continue to see some really good results coming out of it. So it’s exciting. And it’s a shame we haven’t got the infill drilling results to share right now. So we’ll get it as it comes up, and we’ll report it accordingly. Yeah, no dramas. Thanks for that, Bryan. That’s it for me. Cheers. Thanks, Paul. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Paul Hissey with Moelis. Good day, guys. Just to follow up on Federation, Bryan, you said in the presentation there that’s reconciling well. I just want to unpack that a little bit more because obviously that’s sort of not how it played out initially.

Can you just, for our benefit, it’s reconciling well against, I assume, your sort of revised plans? Can you just unpack that a bit? Thanks. Yeah, look, I think that’s the key message. It’s reconciling well against our revised plans. We’re seeing very much as obviously we’re doing infill drilling, we’re getting the assays back, we’re building our models, and then we’re reconciling what we’re seeing coming through the plant. And basically, as we sort of said in the report, from this last quarter to this quarter, we’re obviously seeing the grades increase, which is obviously coming through our models as well. And we’re seeing that at the plant. And in terms of reconciliation, well, we definitely aren’t seeing any downside against what we’ve sort of looked at in our plans. Andrew, did you want to add anything to that at all?

Yeah, as you know, Paul, there’s kind of two parts of reconciliation. One’s the geological model and the other one’s through the plant. And certainly on the plant side, we’re absolutely seeing what was expected. The recoveries are great. It’s going through the plant really well. We’ve blended zinc ore from Federation with zinc ore from Peak, and we’re getting a synergy on that. So we’re really seeing a positive reconciliation there through Peak. On the geo side, if anything, it’s reconciling positively, particularly on gold. And that’s a piece of work we’re doing at the moment. It’s just really trying to understand what that means for us long term. Obviously, it’s good news. It’s good to have good news. But then thinking about how we model that going forward. As you know, gold is a fairly difficult thing to model given the variability.

And it’s really a lead zinc ore body as far as driving the economics of it. But we do want to get that as right as we can so we can predict what we expect to see. Okay, thanks. And then just last one, just remind me the next resource reserve update, which will capture, I guess, the next iteration of Federation life and more. And when is that due? So we’ll be releasing that after the full year results. So basically, we’ll be closing off the drilling and the assaying and have that out in the September quarter. September quarter. Great. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Roy Gillespie, individual. Good morning, team. Thanks for a good result. I’ve got two questions, basically.

One is I had a quick look through the quarterly report and could not see silver production listed. Can you tell me what the silver production is and maybe where to find it in the quarterly report? The other one is the hedging of gold. You’ve got gold listed as valued at 4,500 something. That seems well below what is the spot price at the moment. And that’s for over 10,000 ounces for the rest of the year. Can you comment on these, please? Yeah, hi, it’s Martin here. I’ll take that. So firstly on silver, if you go to page from page 14 onwards in the report, we’ve got full data tables that show all of the various productions. So production for the quarter was 33,500 ounces. In terms of hedging, yeah, the hedge book we put in place quite a while ago.

As I noted in the report, we haven’t added any hedging for some time. The average price you’re seeing there is a result of the forward prices that were executed at the time the hedging was done. Obviously, the gold price has run significantly since then. That’s just a function of when the hedging was done. Yeah, it just seems it’s well below. It’s listed as AUD 4,500. With gold price at the moment, AUD 7,000. It’s well below that, isn’t it? Yeah. It seems quite a penalty to the company. We’ve made that hedging decision based on protecting, I guess, the revenue source for expansion projects.

Obviously, while we’re building our company and putting a lot of capital into the business to get us to the 28,000 copper equivalent tons, which will give us significant cash flows as a company, we’ve obviously taken that option to, in line with our policy, to be prudent around protecting that capital and revenue source. So that decision was made at that time. And so we’ll continue to anything we overdeliver against gold will obviously be at spot as well. And that’s really the sort of position we’re taking. Obviously, if we’d not taken it and price had gone down, I’m sure everyone would be having a different opinion to us as well about that. So we are very heavily capital intensive, so. Yeah. I understand. Yeah. The reason why. Yeah. But the biggest question going forward in the next year, what will the strategy be with hedging?

Will the need for it reduce or will it stay the same or what? Yeah, look, as Bryan mentioned, we’re using hedging as a way to protect our balance sheet. So I look at hedging all the time. Right now, the spot price itself is giving us some protection, just given the price today versus where our cost base sits. So we continue to monitor it. We’re not actively in the market right now, but it’s something we’ll continue to consider. As Andrew mentioned, we’re going through our life of mine process now, and we’ll assess our cash flow outlook and our capital requirements. And as I say, but it’s a constant conversation internally. It’s fair to say we’ve been through a very heavy capital spend period with Federation, obviously going to commercial production in July.

Obviously, we’re in great Cobar and obviously getting it up and running and moving. These expansion projects are sort of coming up in the next six months. Really, the life of mine will sort of look at what is our exposure, what is our capital sort of outlay beyond these projects, if there is some, and we’ll assess it accordingly with the board. Thank you. Your next question comes from Daniel Roden with Jefferies. Hey, guys. Thanks for taking the call. Just a couple of quick ones for me. Just looking at some things like the TC/RCs cost line, seems to have increased in the quarter. I just wondered if you had any commentary around how you’re seeing TC/RCs doing at the moment. Globally, some of the majors, electric vehicles, it looks quite positive. So just are you expecting any, I guess, benefits from that over 2026?

Hi, Dan Martin. Your line’s pretty average, but I think you’re asking about CCRCs and the variance quarter on quarter. Yeah, so there is a bit of a higher TCRC this quarter, primarily driven just by the amount of sales that we’ve put through and the amount of shipments that we’ve made. So there is sometimes a little bit of a timing mismatch between when revenue is recognized and when the TCRC is recognized. But in terms of our outlook, the outlook for FY or for calendar year 2026 indicates that there’s still a bit of opportunity for us in TCRCs, but we’ll wait to see what the benchmark setting process looks like. But the market intel is positive, yes. Yep. Awesome. And hopefully, that’s the question. Yeah. Yeah. And sorry, hopefully that line’s better. That is. Yep. Sorry. Thanks.

New Occidental, just wondering if you could. Sorry, I might have missed it, but if you could provide some, I guess, expectations on maybe scale or grade range around that. I guess what’s the strategy there? It just goes into the expanded Peak mill once it’s finalized and assuming it’s all economic, of course. Andrew, you’re running that project. Would you like to explain, please? Yeah, absolutely. Hey, Dan. Look, I don’t really want to presume tons and grade because that’s the process we’re going through at the moment with the assays. I think we’ve previously suggested something in the order of kind of two and a half million tons and a half a gram is sort of roughly where we thought it might end out. We’ll know more about that in the coming couple of months, and we’ll put that out.

So the earlier question about resources, we’ll probably put that out ahead of the usual resource update for the business just because it will form the basis of a pre-feasibility study that we’ve got active at the moment. The intention is to feed it effectively while we’re feeding Federation material. And the reason is that we don’t need the third ball mill, the tertiary ball mill on Federation ores and lead zinc ores. The intention for that is to use that on copper. So that mill will be available. At this stage, the study would suggest we pop it through a scrubber, take out any pieces we don’t want to get into the slurry, and put it through that mill from there straight into the CIL. And we would have a CIL capacity to deal with that material.

So yeah, the intention is we’d be feeding it sort of in the order of 250,000 tons a year for a prolonged period and getting additional gold through the existing plant and not interrupting what we’re intending on doing around fresh ores. Awesome. That makes a lot of sense. Thank you very much. And just final one for me, I think because you mentioned it, the inorganic options and opportunities that you’re keeping an eye on. That’s been, I guess, something in the market for a couple of years now around some of those opportunities. But are you seeing any more, I guess, progression on some of those? Do you have a bit more confidence on progressing some of those opportunities through and what might they look like? Look, I won’t talk about what they look like because they’re obviously not fully defined.

But effectively, we’ve always been in a position as we’ve got a great resource within our current lease holdings. And if we can drill that, establish that as a resource reserve, and mine it, and keep it in our control, we can deliver a lot of value without paying a premium. However, we will continue looking over the fence at opportunities that maybe add better value for the shareholders in the future. So I don’t think we’re going to define what that looks like at this point in time. But it’s one of those things that, as a business, we’ll get to the next sort of 18 months, we’ll be getting great Cobar moving. We’ll have the Federation at full capacity. The plant will be at full capacity. We’ll be generating excellent cash. And we’ll be considering where do we go next and what do we do next.

And so that’s sort of what the next six to 12 months is all about for the management team as well to put some ideas to the board at some stage. Yep. That sounds good. Awesome. Thank you, guys. And congrats on a good quarter. Cheers. Thanks. Thanks, Dan. There are no further questions at this time. I’ll now hand back to Mr. Quinn for closing remarks. Yeah. Thanks, Kaylee. And thanks for everyone joining us today. Just want to reinforce good cash flow from the business this quarter, really funding our future. And based on good, strong production, especially leveraging gold, we still very much have a good gold stream coming through our business in the production area. Federation ramping up in line with our commitments. And hopefully, we can do better than that for this full year.

And grades and sort of the overall outcomes for the business looking very good from Federation. Peak processing plant, like I said, near capacity. It’s got a ROM stockpile in front of it, which it hasn’t had for a long time. And that’s going to continue to build. So really putting the pressure now on the bottleneck of the plant, which is where it should be, which I’m excited to tell people about, filling our mills. And the excellent throughputs and excellent recoveries. So really, really great result for the team and what they’re delivering there. And just to reinforce, our growth projects are well and truly on track and advancing in the right direction. And so we’re only seeing upside in terms of throughput and potential recoveries and potential value coming out of the business going forward in the next 12 months. So really set up well.

We’ll come back and report next quarter on how we’re going in those particular projects and performance, but I think the business is in good shape, and the balance sheet supports that. Look, just want to thank, obviously, the shareholders for ongoing support as we continue to build our business, but also importantly, the management and the workforce. Yeah, everyone’s working very hard to deliver this value, and without them, we wouldn’t be where we are now, so I really want to thank everyone for the big efforts and support they’re putting in, so without further ado, thanks everyone for joining, and thanks, Kaylee, very much for the call. That does conclude our conference for today. Thank you for participating. You may now disconnect.