Thank you for standing by and welcome to the 29Metals Ltd March Quarter Conference Call. All participants are in a 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 1 on your telephone keypad. I would now like to hand the conference over to Mr. Mike Slifirski. Please go ahead.
Thank you, Darcy. Good morning, ladies and gentlemen. We will be speaking to 29Metals' March Quarter 2024 quarterly report, which was released to the ASX this morning, and to the offtake finance and insurance claim update released to the ASX yesterday. This call and parallel webcast has been recorded and will be available for replay by the 29Metals website and the Open Briefing website. 29Metals' Managing Director and CEO, Peter Albert, will present an overview before handing over to COO, Ed Cooney, to lead you through operating performance and the Capricorn Copper rampdown and suspension.
Ed will then pass to CFO, Peter Herbert, to discuss financial performance and the additional liquidity disclosed yesterday. Special guest, Cliff Tuck, will join us to make some comments around the insurance update, and then we will open the call for your questions with the full team available to address them. I will now hand over to Peter, Peter Albert, to commence the presentation. Thank you, Peter.
Thanks, Mike, and welcome, everybody. And thank you for joining us this morning for our 2024 Q1 results. It has been an uneventful start to the year with a lot going on, including the difficult decision to suspend operations at Capricorn Copper and the announcement of the appointment of the company's new CEO, with James Palmer taking the reins as of May 1, one week from now. As always, we will start with safety.
Our total recordable injury frequency rate, TRIFR, was marginally higher for the quarter at 6.6 per million work hours compared to 6.5 at the end of December. Notably, there were zero significant incidents, zero regulatory reportable incidents or recordable injuries for March. This is the first time in 29Metals' near three-year history that this has been achieved, an outstanding result for the business. But as always, we can never become complacent about safety.
The decision to suspend operations at Capricorn Copper overshadowed the quarter for our Queensland-based operation. It was a difficult decision, especially given the commitment and hard work by the whole team, including the Queensland Government Office of the Coordinator-General, endeavoring over the past year to bring the mine back into full production. Despite achieving a partial restart and significant progress in reducing water retained on-site up until January this year, we were then, unfortunately, overwhelmed by consecutive tropical cyclones. Higher water levels impacted our ability to produce copper, with negative impact on cash for the quarter and deferring our pathway to dewatering Esperanza South and restoring to full production levels. These were key factors contributing to the decision to suspend operations.
Following the decision, our focus and commitment is now on the key enablers for a successful and sustainable restart of production, being the reduction of site water inventory, the reinstatement of a water treatment facility, and ensuring certainty of long-term tailings capacity. In the short term, there has been an immediate focus on providing support to our colleagues at Capricorn Copper who have been directly impacted by the decision.
There will also be an impact on some of our colleagues in corporate offices, which we'll be working through in coming weeks. Whilst difficult, ultimately, the decision will allow us time to establish the key enablers we need in place for a successful and sustainable restart of operations. Holding costs, ongoing costs, and capital recovery costs are included in the release, and Peter Herbert will talk to these later.
In terms of timing for a restart, this will depend on the implementation of the key enablers, and we will update the market as and when these become clear. Suffice to say, we're all focused on as early a restart as possible, especially given the annual resource at Cap Copper of 65 million tonnes at 1.8% copper, which we have, and the recent and anticipated, somewhat anticipated, significant rise in the copper price. At Golden Grove, copper production was better than recent quarters, while zinc production was lower. Development rates achieved at Xantho Extended were a highlight of the March quarter.
We had 853 meters of development at Xantho Extended in the quarter, with continuing good development rates post-quarter end, with record daily and weekly meters numbers achieved by the team, setting up the mine to deliver from Xantho Extended 29Metals' highest value ore source over the rest of the year. Also, paste filling has been continuously improving, enabling multiple stopes to be brought online post-quarter end at Xantho Extended, and we are highly confident of increased metal production in the subsequent 2024 quarters. Costs at Golden Grove were well controlled in the quarter, with a significant movement in stockpile charges impacting unit costs. Over the balance of the year, with higher metal production, unit costs are anticipated to significantly reduce.
The team at Golden Grove completed the Rotobox project during the March quarter, with the first of the site's containerized concentrates loaded onto a ship at the port of Geraldton via rotating container tippers with integrated lid lifters. This is an example of a project that will deliver productivity gains, logistical flexibility, and environmental advantages. Turning to corporate matters, yesterday we announced two significant outcomes.
First, we have now signed binding terms for a $50 million subordinated offtake finance facility with Glencore. And secondly, the commitment by insurers for a further interim progress payment of AUD 16 million for the surface interest line. Combined, these outcomes provide the company with additional liquidity at Cap Copper as Cap Copper moves into suspension and works are progressed towards a sustainable restart of operations. Unaudited cash at 31st of March was AUD 106 million.
In terms of guidance, 2024 guidance, as released at our last quarterly report, remains unchanged, although estimated costs for the new tailings facility at Golden Grove have increased, with capital costs now sitting at the upper end of guidance. In addition, there will be some corporate cost reductions, which will flow through in quarter two. I will now hand over to Ed Cooney to talk in more detail about our operations. We will then, in turn, hand over to Peter Herbert to talk in more detail about financials, and finally, to Clifford Tuck to talk in more detail about progress on our insurance claim. Over to you, please, Ed.
Thanks, Peter, and good morning, everyone. I must start at Golden Grove, where copper production at 5,800 tonnes was solid, driven by a majority of feed to the mill being copper ore. Following a strong December quarter of zinc production last year, the March quarter involved a planned paste filling campaign at our high-grade Xantho Extended ore body. As a result, 4,000 tonnes mined from Xantho Extended, approximately half a quarter-over-quarter, to 65,000 tonnes, and zinc production was lower at 4,700 tonnes. Having set new paste fill delivery records during the March quarter and achieving another record quarter of high development performance, the mine is well set up to deliver higher zinc production outcomes over the subsequent quarters, with all tonnes from Xantho Extended increasing significantly.
Mill tons for the quarter were lower than the December quarter, driven by a higher proportion of harder copper ore associated with a lower throughput rate relative to zinc, and two unplanned downtime events, both of which have been resolved. The June quarter has commenced with an initial zinc mill campaign well underway and multiple higher-grade zinc ore sources online at Xantho Extended.
In terms of project-related activities at Golden Grove, the first of the site's containerized concentrates were loaded onto ship at the port of Geraldton. This approach moves away from historical bulk containers, the more widely used Rotobox system, and avoids the need to both rehandle loose concentrate and maintain port warehouse facilities, and has environmental benefits in terms of concentrate loading being done by crane within the confines of the vessel.
Applications for regulatory approval for the future development of the Gossan Valley project were submitted post-quarter end, and activity progressed related to the Life of Mine TSF4 project, including additional long lead commitments, preparation of civil tender documentation, and ongoing engagement with the regulator. Approvals and the civil tender process are anticipated to occur during the June quarter. Moving on to Capricorn Copper, we experienced a very challenging quarter following the accumulation of significant additional surface water inventory due to rainfall associated with consecutive tropical cyclones passing through northwest Queensland.
Additionally, water treatment through the interim settlement ponds to support operations proved much more difficult than the December quarter, while balancing competing demands of treating water for controlled releases while Gunpowder Creek was flowing. These challenges led to lower mill runtime and lower metal production of approximately 1,300 tonnes of copper, down almost 45% on the prior quarter.
As a result of the surface water accumulation, progressive dewatering and rehabilitation underground at Esperanza South has now been paused, with dewatering efforts from underground currently directed at maintaining levels. Importantly, the dewatering and rehabilitation completed to date at ESS will be retained, along with upgraded dewatering infrastructure, the large-diameter raise bored dewatering holes into the southern cave, and the procured high-capacity submersible pumps.
These will be installed once surface capacity within Esperanza Pit again becomes available and will enable future dewatering from underground at double the rates that have been achieved to date. All mining operations at Capricorn Copper ceased at the end of the quarter, with the exception of some raise boring and diamond drilling, which are now also complete. Demobilization of the underground contract equipment and personnel has progressed, and it is anticipated this will be complete by the middle of May.
Processing of remaining surface ore stockpiles is currently underway and will be concluded by the end of April, while project-related activities on-site are continuing, with commissioning of the Mill Creek Dam neutralisation project expected in the June quarter. Turning to long-dated projects at Capricorn Copper, we commence detailed design for a new water treatment plant post-quarter end, with current timelines indicating commissioning likely around Q3- Q4 of 2025. Design work on TSF3 continues, and while at this time a firm schedule for the facility is not yet certain, we are very focused on progressing the design activities and continuing engagement with various government agencies. I will now hand over to Peter Herbert to discuss the financial outcomes of the quarter.
Thank you, Ed, and thanks to everyone for joining the call today. I will start with our revenue outcomes. 29Metals' unaudited revenue of AUD 154 million for the March quarter was an increase of 9% on the prior quarter result. Within that, Golden Grove's revenues increased 27% on the prior quarter, driven by increased volumes of zinc sales as a strong buildup of concentrates in the December quarter unwound. Golden Grove's improvement in revenue was offset by a significantly lower sales outcome at Capricorn Copper, with revenues down 54% relative to the prior quarter. Copper as a percentage of total revenue for the quarter was approximately 59%, a decrease on the prior quarter result of 71%, reflecting materially higher zinc sales at Golden Grove and materially lower production and sales at Capricorn Copper.
Australian dollar commodity prices were broadly flat during the quarter, with a slight improvement in copper prices and lower zinc prices, noting the material increase in spot prices occurred post the end of the quarter. Turning now to costs and capital. At Golden Grove, site costs for the March quarter of AUD 86 million were AUD 5 million lower than the prior quarter result, reflecting lower ore mined and/or milled and increased capitalized development.
Selling costs comprising TCRC and concentrate transport costs were AUD 5 million higher, reflecting material increase in zinc concentrate sales during the March quarter. Unit costs were impacted by stockpile movement charges driven by the unwinding of zinc concentrate stockpiles and lower production of byproduct credits during the quarter. Unit costs are expected to improve over 2024 in line with an increased contribution of ore from Xantho Extended.
Total capital for the March quarter of AUD 13 million included AUD 6 million of capitalized development, an increase on the December quarter, with improved development advance, sustaining accruing capital with both lower than the prior period. Turning to Capricorn Copper, site costs of AUD 32 million for the March quarter were in line with the prior quarter, with a decision to suspend operations coming at the end of the March quarter.
The safe wind-down in activity levels is now well underway. Operating costs for the second half of Capricorn Copper are expected to be in the order of AUD 18 million or roughly AUD 3 million a month, with opportunities to further right-size contracted costs being evaluated. Final sales of concentrate, one-off termination costs, and working capital unwound will occur in the June quarter as operations are progressively wound down.
Efforts to identify costs and productivity improvement opportunities continued in the March quarter across the group, with a focus on defining plans to target productivity and volume improvements to drive lower unit costs at Golden Grove and reviewing corporate costs in light of the suspension of operations at Cap Copper. These works remain ongoing and are an evolution of the program in 2023, which we estimate delivered AUD 20 million in improvements.
Turning to cash and debt, 29Metals finished the quarter with unaudited cash of AUD 106 million, a decrease on the September quarter position of AUD 162 million. The movement in cash reflects realization of concentrate inventories at Golden Grove produced during the December quarter, with operations cash flow positive after capital expenditure, materially lower production at Cap Copper, and a further $10 million principal repayment and interest costs during the quarter.
Yesterday, 29Metals announced it had agreed binding terms for a $50 million subordinated facility with Glencore. The facility has received credit approval from the company's senior lenders, subject to completion of full-form documentation, which is underway and expected to be completed in the June quarter. As part of the package of terms, the company will enter into a long-term fixed tonnage offtake agreement with Glencore for Golden Grove copper and zinc concentrates.
Terms are market-based, including benchmark TCRCs, with delivery into the offtake agreement to occur over and beyond the tenor of a line agreement. The company is extremely pleased to have reached agreement with Glencore on attractive and flexible terms following a competitive process. The additional liquidity support will assist the company as it progresses the safe wrap-down of operations at Cap Copper and its evaluation of a sustainable restart.
The group had unaudited net gross debt of AUD 103 million at the end of the quarter, an increase on the unaudited position at 31st December of AUD 52 million. After principal repayments, gross debt declined to $336 million at quarter end. As a reminder, a further amortization payment of $10 million will occur in the June quarter before stepping down to $2.5 million per quarter for the second half of 2024.
For clarity, the liquidity and debt outlined before does not include the post-quarter end announcement of an additional insurance payment of AUD 16 million. Clifford will provide additional color on insurance shortly. Finally, 29Metals continues to finalize stamp duty submission in connection with the acquisition of Golden Grove. As previously noted, we expect to finalize this submission during the first half of 2024. 29Metals maintains a AUD 26 million provision in relation to stamp duty. Thank you very much for listening. I will now hand over to Cliff.
Thanks, Peter. Good morning, everyone. We were very pleased to announce yesterday that 29Metals' insurers had agreed to a further interim progress payment in the amount of AUD 16 million. This further interim progress payment again relates to the surface component of the claim, and once received, will bring aggregate insurance proceeds received to date to AUD 40 million. We have worked very hard with insurers and their appointed loss adjuster to progress the surface component of the claim, including demonstrating the expected future costs to replace surface property damaged by the extreme weather event in March last year. We are grateful to the insurers for advancing this aspect of the claim. In parallel, we have continued to work to evaluate the matters raised by insurers in relation to the underground component of the claim.
With this further progress on the surface component and the further progress payment announced yesterday, we are looking forward to accelerating progress on the balance of the claim with our insurers. As a final comment on the insurance, I would note that we do not anticipate that the announcement of suspension of operations at Capricorn Copper will have a material effect on the progress of the claim. With that, I will hand back to you, Peter.
Thanks, Cliff and Peter and Ed. So Darcy, we have completed the presentation that we intended to do this morning, and I am happy to go to Q& A, please.
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 are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Alex Papaioanou from Citi. Please go ahead.
Hi, Peter, and Ed, a few questions from me. So compared to your current term-loan facility, is there anything that you can say around the rate of the Glencore facility or the margin, and to confirm the tenure of the offtake is matched with the life of the facility?
I will take those. What we can give some guidance is that it is not priced materially wider than the senior facility, but those terms are commercial in confidence. In terms of the offtake tenor, we expect that it will extend beyond the tenor of that facility and subject to the rate of production over that period, of course. So again, commercial in confidence, but that is a good guide that it will extend to at least that period.
Thanks, Alex. And then on corporate costs, just to confirm, the group level reported AUD 8.5 is inclusive of the AUD 1.8 and AUD 1.1 reported site levels. And could you give any more color on the expected reductions over CY2024?
Look, in terms of the reductions, that process is ongoing, so I think we will be able to provide more detail in subsequent periods. And look, those corporate costs for the group do aggregate up, so that is right.
Great. Thanks. Okay, I will pass it on.
Thank you. Your next question comes from Daniel Roden from Jefferies. Please go ahead.
Hey, good morning, Ed, Peter, and Mark. I just wanted to clarify. If you had existing permitted tailings capacity at Capricorn Copper, would you see yourselves turning the asset off into care and maintenance at the moment? Or I guess tailings capacity seems to be the constraint there.
Yes, so just to clarify, there is some remaining tailings capacity, albeit not very much, in Esperanza TSF. We have made the decision to suspend operations, though. So as of the end of this month, April, we will no longer be treating mining and milling ore. So that decision has already been taken. If you missed that.
Sorry, Daniel, maybe we did not get the question, grasp the question. Did Ed answer the question there, Daniel?
I guess it is probably semantics, but if there was sufficient tailings capacity post the remaining capacity for the stockpiles, if it was just uncapped, would you be still turning the asset into care and maintenance this year?
So the question is, with the tailings capacity, is driving the suspension? Is it, if I understand that? No, I think we have been clear, Daniel, that it is the additional water, the rainfall that occurred between January and March, the three cyclones that came through that impacted the site and led to the decision to, well, one, we were unable to keep dewatering Esperanza South, and also the additional water on site became difficult for us to continue operation. So not tailings capacity per se.
Okay. So if the wet weather events did not occur, then you would still be producing today even though there is no tailings capacity?
There are applications in process, Daniel, for additional tailings capacity, which are ongoing. So the decision to go into suspension was driven by water, not tailings.
Okay. Okay. And can you, I guess, clarify with the facility as well? The offtake is on a group level, or is that for Golden Grove? And I think I guess where I am trying to go with that is, is there any further ability for offtake contracts after the Trafigura contract rolls off Capricorn Copper in 2026?
Yes, you are right that the offtake relates to Golden Grove. Naturally, it is a little hard to make commitments around Cap Copper at the moment given the uncertainties there at present. Look, we will consider options around that as we move forward with our plans and thinking, but at this stage, nothing can be committed at this point for obvious reasons.
Yep. Yep, no trouble. Maybe just I will ask as a last one. In the Capricorn Copper capital timing, are you able to provide a bit more guidance on, I guess, just the timing of that into the end of the year and into 2025? Just how should we be sculpting that CapEx profile?
The question was for calendar year 2024 capital guidance, was it?
Yep. Yep. Yes, so the Capricorn Copper restart capital, is it fair just to straight-line that? I assume not. So just are you able to provide any guidance around when those capital items are likely to be expended by the company?
Sorry, I understand the question. I mean, the focus at the moment for us is really design activities, which is a more modest spend as we continue and complete the design for water treatment plant and TSF3. The physical activity associated with those will attract a significantly higher proportion of capital spend, which I would think likely in calendar year 2025. There may be some early capital commitments later this year, but we are yet to land on those at this juncture.
Okay. Perfect. Thanks, Ed. I will hand it over.
Thank you. Your next question comes from David Radclyffe from Global Mining Research. Please go ahead.
Hi, good morning, Peter and team. I might start with the Glencore facility as well if I can because it is really not that clear. So is this the offtake based on tonnage, is that what you are saying? And then where should we think the cost of that offtake actually sits? Is it within the interest of the loan, or is there other costs such as within the payables and the such like?
So yes, so it is a fixed and the terms of that offtake are very much market-based, so we will continue to report those in line with our current practice as being the TCRC costs for that material. So there won't be any there will be very clear reporting of our finance costs and very clear reporting of the TCRC costs in line with our current practices. That won't change going forward.
Okay. All right. Then maybe a follow-up because again, it is not clear. But has there been any progress on the outstanding permitting at Capricorn Copper? So has anything changed past your announcement to obviously suspend the operation? I guess I am still trying to reconcile here what being a special project actually means here in Queensland.
Thanks, David. Permitting process at Capricorn Copper is ongoing, as I think I was referring to with Daniel just now. The engagement with the regulator and especially with the Office of the Coordinator-General remains very positive. The state, as they articulate it, is very committed to supporting Capricorn Copper and bringing it back into operations in the right way, sustainable, long-term future, and get it right. Good support from the government in all of those aspects. Those processes remain live and ongoing.
Okay. All right. And then maybe just the last one then. You mentioned, I guess, a working capital impact for an unwind there for Capricorn Copper. Is there any way you can put a number around what that might be and also the one-off expenses?
Yes, look, we will be managing it down very carefully as you would expect. We point to the operating costs for the March quarter as being sort of an indication of what that would be. We are still processing stockpiles at the moment, so naturally, there will also be sales primarily during April and maybe into May depending on the timing of all of that. So that is the guidance that I can give you around the working capital unwind.
Okay. All right. Thanks, guys.
Thanks, David.
Thank you. Your next question comes from Ben Lyons from Jarden. Please go ahead.
Thanks. Good morning, Peter and everyone on the call. Probably a few more for you, Peter Herbert, on the Glencore facility, please. Firstly, you talked about a fixed volume. Can you please clarify if that is like a total volume over a number of years or if there is a fixed annual component to that? Thanks.
It is a total volume commitment, and we will work with Glencore on the yearly allocation of those volumes. Thanks, Ben.
Thank you. Next one is on the security. Can you comment over what asset I realize it is subordinated to the existing facility, but what assets is it actually secured over?
All the assets of the group within Australia, which is, as you would expect, the vast majority of them. It is on the same terms as the existing senior facility, just subordinated to those.
Excellent. Thanks for the clarification. I am also interested in some of the other terms that might sit behind it. For example, do you have to maintain the equivalent of a debt service reserve, so maintain a certain cash balance on the balance sheet in order to service the facility?
There is no debt service reserve account. Ben, it is subject to minimum liquidity, is consistent with the senior facilities.
Awesome. Thank you. Are there any covenants attached or similar styles of conditions attached to the facility?
The minimum liquidity I just mentioned, but other than that, it is pretty much covenant-free. There are standard ones like information covenants and the like, but that is the material one that you would be interested in.
Okay. And in the conceptual event that you are unable to deliver a certain tonnage of CON into the agreement for a certain period of time, what would happen to the facility? Would it possibly become callable under that scenario of events?
Yes, thanks, Ben. Look, clearly, the reason that this facility is being provided to in exchange for offtake, so if we were unable to satisfy that, that would be an event of default. However, what I would say is in terms of the way that operates is any rights under that facility are subject to intercreditor agreements and the rights of the senior lenders. So it is a subordinated facility in its sense, but let's be clear, the reason why it is being provided is in exchange for offtake.
Yep, understood. I guess the nature of the questions is around our inherent caution regarding the motivations of this particular counterparty and their track record of loan-to-own style facilities. So hence why I am going pretty deep on this, and apologies, Peter, for grilling you on it. But just to be 100% clear, given it is Glencore, given they have done this previously, are there any convertible or equity-style hooks that are built into this facility?
No, there is not.
Awesome. That is very reassuring. Thank you. And now maybe more broadly, sort of again, I accept it is a conceptual-style question at this point in time, but as the business transitions to a single mine operation, albeit hopefully only for a temporary period of time, given the financials are so heavily dependent upon that particular Xantho Extended ore body, how do you feel about the optimal capital structure for the business? Thanks.
Sure. So I think it is a really good question, and it is something that clearly depended on the work that is ongoing around defining what a sustainable restart of Capricorn Copper looks like in terms of its capital requirements and also the profile, the ramp-up at Golden Grove. That is a key piece of work for us that we are working through at the moment, and I think they are the key building blocks that define what that looks like, Ben. So absolutely, that is a really key question for us, and we are working through that. And naturally, we will keep working through that with James as he comes on board very shortly.
Okay. Okay. Thanks very much for the responses, Peter. Much appreciated.
Thanks for the questions, Ben.
Thank you. Your next question comes from Paul Wiggers de Vries from RBC. Please go ahead.
Good day, Peter, Peter and Ed. Just a quick one from me. Just around Xantho Extended tonnages, I mean, the end of last year, you sort of flagged that production profile would be broadly flat across H1 and H2 this year. Is that still the case, or should we think now with the lower tonnage out of Xantho Extended over Q1 that it will be a little bit more sequentially increasing over the remainder of the year?
Yes, thanks. So just to recap, so last year, we achieved about 350, if I am not mistaken, 1,000 tons out of Xantho Extended, and I think last quarter I mentioned the plan for this year is about 600,000 or thereabouts. So obviously, Q1 was less on the back of a lot of paste filling. We do anticipate a lot stronger result in terms of overall tonnage movements in the second quarter. Probably fair to say maybe the second half is slightly more than the first half given Q1, but not necessarily materially. So we certainly don't envisage a very late run home at year-end as we saw in calendar year 2023.
Yes, thanks. So I suppose, then, if we think about it with the zinc grades particularly higher at Xantho, that zinc production should sequentially increase over the remainder of the year?
Yes, correct. Yep.
Yes. Thank you very much.
Thank you. Your next question comes from Belinda Humphries from iQ Industry Queensland. Please go ahead.
Hi, everyone. I am interested in the workforce at Capricorn Copper where you say you are retaining about 40 people. How does that compare with the previous workforce levels, contractors, and your own employees? And also, what steps have you been taking to help these Capricorn Copper people through the transition, those who are no longer required there?
Yes, thanks, Belinda. Thanks for the question. Obviously, a key focus for us in early April, not an outcome we had intended or desired, but in the best interests of the business. The workforce who had really made tremendous commitments to endeavor to bring the operation back to full production disappointed as we all are, but also quite understanding of the outcome, many of them indicating a desire to remain in touch and come back at the right time. We have provided the support to the workforce in terms of external sort of support to the individuals as well as to their families if they require that. We have provided that support.
In terms of numbers, we have got, as you quite rightly say, ±40 people there, Belinda, and many of those associated with project activities, which Ed, I think, referred to earlier on in terms of getting projects in place to bring the project back, bring the asset back as quickly as possible. In terms of 29Metals people, at full production, when we were operating normally, rough numbers, 180-ish sort of numbers. I am not too sure we have talked about that before.
We probably doubled that in terms of contractors as well, but for now, that is 40 is probably a quarter of what we had originally on site for the full production, ± approximately. And I might add a couple more to that, Peter. We were in communication with a number of other regional operations. We did pass on a number of vacancies from other operations to the individuals impacted, some of whom I know have already secured employment, and we did offer career transition support as well to impacted employees.
With the current state of the labor market in mining, do you anticipate having any difficulty bringing people back on when it is time to ramp up again?
Time will tell, Belinda. It is a dynamic marketplace, as you are obviously aware as we are, so difficult for us to make that prejudge. What I can say is, as I think I said just now, was the response from the workforce was a desire to remain in touch and potentially to be available in the future. So time will tell, Belinda. But yes, it is a hot market right now. It may be different in months to come. Who knows?
Thank you for that. That is all my questions.
Thanks, Belinda.
Thank you. Your next question comes from Adam Baker from Macquarie. Please go ahead.
Good morning, Peter and team. Maybe just on Capricorn Copper, just wondering if there is going to be any assessment of carrying value of this asset. I think there was over AUD 170 million in net assets there at the end of last year. So will there be an assessment of the carrying value? And if so, when will that occur? Thanks.
Yes, thanks, Adam. I will take that one. We naturally will continue to assess carrying values as we come up to the June 30 half-year accounts. When we went through the process at 31 December last year, we considered a number of scenarios in testing our carrying values, and that included potential suspension scenarios. So we have some level of comfort that the work done through that process supports the carrying values where it is at the moment. But naturally, as our work progresses on the restart and we better define what that looks like, we will be retesting that work and making sure it remains appropriate. So nothing to say at this stage, but hopefully, that gives you some color about the process that we have and will undertake on this side.
That is good. Thanks. Maybe on the insurance payments, forecasting these is a bit of a black box if it does occur. So good to see you got another AUD 16 million there. Just wondering if you could run us through what the remaining claims are and what remains outstanding. Is this all the surface infrastructure covered off now, and is it just the underground component remaining, or just walk me through that process? Thank you.
Sure, Adam. This is Cliff. Dealing with the first part, the components of the claim, roughly, you have really got four parts. You have got property damage on surface. You have got business interruption loss associated with the surface property damage. Then you have got property damage underground at ESS, and you have got the business interruption associated with the property damage at ESS. So in terms of the progress payments we have received to date, they have only related to category one and two, so the surface property and associated BI. And the lion's share of what we have seen in the aggregate AUD 40 when we received the AUD 16, it would be related to the property damage component and the increased cost of working, which is part of BI.
So the loss production and the broader underground claim, as we flagged in the announcement and past disclosures, the underground component of the claim is not resolved. So that is a key part of our ongoing engagement with insurers. But the further progress payment announced yesterday is not the end of the surface claim. There is still more work to do on the surface claim. It is just a significant step forward. Hopefully, that answers your question.
Yes, that is good. Potentially another surface insurance payment to come down the line after further engagement with insurers.
That is the objective. The claim is certainly not finished.
Okay. Thank you. I will pass on.
Thank you. Your next question comes from Kate McCutcheon from Citi. Please go ahead.
Hi. Good morning, Peter and Peter. If I look at my cash flow expectations, they are not really helped by the amortization schedule and the debt facilities. You have essentially had those facilities from day one. Is refinancing something that you are looking at or refinancing altogether?
Yes. Thanks, Kate. I mean, yes, we are. And clearly, for our senior lenders, critical for us is to be able to outline what our restart plans and capital requirements look like and appreciate that is not just our senior lenders, that is also the broader market. So that is the key priority for us to be in a position to progress that more rapidly. And it is very much as I talked to a bit earlier, in upfront thinking as James comes on board and defining all of that, so that we have a clear plan forward.
Yep. Okay. And then sort of following on from Adam's question, you mentioned that you are looking at a new water treatment plan in the back end of 2025, if I heard that correctly. Is that predicated in terms of going forward on spending that? I think you said about AUD 40 million of CapEx is what it will cost. Is that predicated on further insurance payout? I guess I am sort of looking at the interplay between cash inflows and outflows and wondering how you fund those commitments.
Thanks, Kate. Obviously, going to work through all of that in relation to your earlier question. As we indicated earlier, the current commitment is to get on with the detailed design, and that is already commenced. That does not answer your question, of course. But that is, and in terms of the overall capital structure, which we have had a couple of questions on that, as Peter said, we have got to work through all of that, look at all of those numbers, and understand the best way to execute for those projects that will bring the asset back into operation. So a bit early for us to respond on that at this point in time, Kate.
All right. Yes. To ask the question another way, would you greenlight a restart at Capricorn Copper without additional financing measures that we have in place today?
Well, I think it depends on where we get to on the capital requirements and the timing of those, Kate. And it is a bit hard to answer that question definitively until we understand that, and including what we want to see in terms of the shape of the balance sheet. So I understand the reason for the question, but we just can't be definitive today until we finalize that work.
So I have to say, I mean, we are absolutely committed to bringing the asset back. We got 65 million tonnes at 1.8% in resource. We got almost 20 million at 1.7% in reserve. Well, in excess of a 10-year mine life. There is not too many resource bases like that. So whatever the answer is, we are absolutely committed to bringing that back and bringing it back, as I said earlier, in the right way with the long-term future locked in with the three enablers that we talked to: clear pathway on tailings, water reduction, and water treatment facility. So we are focused on all of that, and how we put all that together is what we have to work through. But absolutely 100% committed.
Okay. Thank you.
Thank you. Your next question comes from Ashley Chan, Private Investor. Please go ahead.
Hi, Peter. Peter, thanks for your presentation. I just got a question just from, as a recent shareholder viewpoint. With the offtake agreement, when you talk about market-based terms, is that on a spot last 30 trading days or something like the last six months' price average or the last year price average? Given the suspension, the second question just relates, can you run through the trade payables and provisions given the suspension?
For example, is it jus`t a wish for that stamp duty and perhaps government royalty is staged payments, or is it a likelihood? What has happened with the trial outcome for the AUD 12.5 million? And operational accruals, any due immediately? I saw their balances increase from AUD 43 million- AUD 59 million in the last set of accounts. And any of the provisions for rehabilitation and restoration, which is Capricorn Copper has got AUD 60 million, any of them go from long-term to current?
Sure. A few things in all of this. I will try and cover it off as best I can. I think in terms of the offtake, that is, as per market standard offtake contracts, it is priced on a particular month. So it is not a sort of a long-dated trailing payment arrangement there, a 30-day payment. Environmental liabilities, nothing changes in terms of what we have previously disclosed. Working capital, we will work through that with our counterparties and, as you said, manage the wind down there very carefully. Just trying to think what is left outstanding in your list of questions from all of that.
Are the stamp duty, trial outcome, and operational accruals increased?
Yes. Sure. Sure. So look, in terms of, there's nothing unusual in terms of the changes around accruals. As I said, we will manage those accruals down as part of our working capital cycle and as we have talked to on a couple of points today. The stamp duty submission, we are finalizing at the moment. We expect to submit that shortly, certainly within the current half. We will be working with the Office of State Revenue at WA over the terms of payment for that. So there is an ongoing discussion there and a submission that is live. So not a lot more I can update on that at this stage.
Cool. I just had one final question, probably for Peter to answer. I guess this is just an in-hindsight question. In hindsight, what would the investment have been to protect the Capricorn Copper from a one-and-a-thousand-year flood? So that none of this would occur. Are we talking AUD 5 million-AUD 10 million? It is like random stuff that you could not have protected against.
Yes. I am afraid [inaudible] will talk to you.
I know it is a tricky one in hindsight, but I guess it is your last conference call.
hindsight, very well, even in hindsight, very difficult to understand what that is. What we can say, Ashley, is that that weather event that occurred last March 8th and two or three days around that was the biggest rainfall event ever experienced with a historical record. So very difficult for us to have contemplated such an outcome.
And I think it was in excess of a one-in-500-year event or thereabouts. What it would take to protect against that, difficult. However, having said that, we have put in place additional protections, additional diversions, additional protection for Esperanza South, water treatment plant we are planning on, and other environmental protection measures that seek to protect the site against future events. But difficult to look back in time and say what might it have cost. Difficult one for us to respond to there, Ashley.
Well, thanks. Thanks for your comments.
Thank you. Your next question comes from Ben Lyons from Jarden. Please go ahead.
Thanks for allowing a follow-up. I did miss one on the interest on the Glencore facility. Apologies, Peter, but one more. Just on the ability to capitalize the interest on the facility, is that quite straightforward? Is there any penalty apart from that? It looks like a 2% interest rate kicker if you capitalize the interest.
That is pretty much exactly right, Ben. There is not much more to say on that point. It is pretty straightforward.
Okay. So you can presumably, over the entire tenure of the facility, you can capitalize the interest and just make those repayments between April and October 2028?
It is not at the company's election. It is if we are not in compliance with senior covenants, including where waivers have been given, that that will apply. That is the arrangement. It is not an option that the company has. It is dependent on whether or not we are in compliance.
Okay. So the default setting is you are required to pay the interest as you go through the facility. But if you don't have enough in that liquidity reserve, then it gets capitalized. Is that how I should think about it?
Yes. All the operations are generating positive cash flow as per the cash flow test. So again, it is driven by the covenants on the senior facility, Ben.
Okay. Got it. Thanks again.
Thank you. Your next question comes from Tim Hoff from Canaccord. Please go ahead.
Hi, guys. Just a follow-up on the insurance claim. In terms of the underground claim, given that you can't actually access the underground and it is not going to be able to be inspected, is that essentially a stalemate? Or are they able to progress this and essentially show you can show them what you had under there, therefore it has a monetary loss, etc., etc.? Or is it just going to end in a, "Well, prove that it was lost"?
Yes. Hi. Thanks for the question. Cliff again here. I will take that one. So neither the suspension of operations and the consequence that ESS still has water in it is an impediment to progressing that component of the claim. So as we have reported previously, the insurers haven't accepted the underground claim to this point, and they have raised a number of issues with the underground component.
And what we are doing is working through those issues, which are more coverage issues as opposed to sort of verifying the damage that has been suffered, bearing in mind that ESS is sort of broadly 50%-55% of the total tons mined in normal operations at Cap Copper. So a big part of the underground component will always be the BI. The fact of the water inundation in and of itself is a pretty easy factual matter to demonstrate, if you get my meaning.
Yes. Right. So it can still progress.
Absolutely.
Excellent. Thank you.
Thank you. There are no further questions at this time. I will now head back to Mr. Albert for closing remarks.
Yes. Thanks, Tim. Thanks, everybody, for all the questions today, probably more than we have experienced in the past. Very good. Appreciate all of that. I would like to finish by outlining a number of reasons why we are positive on our outlook for the balance of 2024. Firstly, at Cap Copper, we have well progressed on the safe wind-down of activities.
We made that difficult decision to suspend operations. As indicated earlier and stated earlier, not what we wanted, but it is in the best interest of the business and will allow our teams to absolutely focus on those enablers that we talked to for a successful and sustainable restart. Secondly, at Golden Grove, the improvements in development and pace performance that Ed talked to, especially, of course, at Xantho Extended, setting it up for a successful 2024 outcome.
And as we indicated earlier on, the March numbers, well, the quarter numbers in terms of development and the follow-on in March in terms of some of the records that we are achieving there really give us a lot of confidence for Xantho Extended and Golden Grove for the balance of the year. And thirdly, the progress that Peter Herbert and Clifford talked to today in terms of additional liquidity from their offtake finance and insurance processes, again, putting the company on a solid footing to support the activities for the rest of the year.
And fourthly, and no man is least, I did make some reference earlier to the mineral resource and ore reserves specifically at Cap Copper, but also at Golden Grove, 60 million tonnes at 1.7% copper and 3.9% zinc. And a reminder at Cap Copper, resources at 65 million tonnes at 1.8%. Against that backdrop of the improving base metal markets, copper price, zinc price is significantly up over in recent weeks. Long may that remain and get better. Looking forward to the balance of the year. Thank you, everybody, for attending today. Appreciate your time. Thanks, Darcy.
Thank you. That does conclude our conference for today.