Thanks, Melanie. Good morning, ladies and gentlemen. My name is Mike Slifirski, and I'm Group Manager, Investor Relations for 29Metals. I have our full executive team with me this morning to present 29Metals' December quarterly and full year 2021 production report, and then to provide production and cost guidance for calendar 2022. Additional financial guidance points will be provided with our 2021 financial report on the 23rd of February. This morning you'll hear in order, first, Peter Albert, our CEO and Managing Director, then Ed Cooney, Chief Operating Officer, then Peter Herbert, Chief Financial Officer, and then Mark van Heerden, Group Manager, Exploration, after which we'll open up for Q&A. At the conclusion of the call, the recording will be available on both the 29Metals website and on Open Briefing.
This call is available via Open Briefing as a webcast and also over the phone. I'd like to now hand over to Peter to open the call. Thanks, Peter.
Thanks, Mike, and thanks for the introduction. Welcome everybody, and thank you for joining us this morning. Of course, it's a busy time right now with quarterly reports and results coming out from multiple companies, so very pleased that you can join us this morning. Mike's already done the introduction, so I don't need to do that again. I'll go straight into an overview of the quarterly results, and then, as Mike said, I'll hand over to Ed, Peter Herbert, and Mark van Heerden for a bit more cover in each of their specific areas. First of all, of course, safety. While we have held our safety performance steady, we've not yet been able to reduce the number of minor accidents, mostly hand injuries. This is disappointing and there is a strong focus across both sites to improve our performance in this area.
I can say, from a cultural point of view, the focus on safety and the reporting of any incident or potential incident is very, very good. COVID, of course, has been a significant business matter for us and for all other mining operations. The difference in the regulatory environment between states presents challenges, although at the same time, it also provides learning opportunities that we are able to share between the sites. With the Queensland borders opening up in mid-December, we have seen the inevitable spread of COVID in the community and, early this year, the first appearance of cases in our workforce at Capricorn Copper. However, as described in the quarterly, through our COVID management plans, we have to date successfully managed to limit transmission and keep case numbers low.
While there's been some impact on less urgent project activities, the operations have been sustained. I'm also pleased to be able to report that to date we've had no person seriously ill or hospitalized as a result of COVID infection. At Golden Grove, our workforce is all double vaccinated and all will soon need to have had their third dose. While this will not stop the spread of COVID, it will almost certainly assist in the reduction of serious illnesses, and we are cautiously optimistic given the effectiveness of our COVID management plans at Capricorn, to be able to manage cases at Golden Grove. The recent change to the highly anticipated Western Australia border opening is disappointing. However, the last two years have demonstrated that we can tightly manage sites remotely, and we will continue to do so until borders normalize.
Actually, I couldn't be more proud and pleased of our teams at all three sites and across the business. Under 29Metals, the communication, the sharing of information, and the support across the business has just been great to see. On the ESG front, plenty of activity in these areas across the group, as we have set out in the report. We are progressing work on our first formal sustainability report, which will be included in our annual report later this year. We also commenced work with an expert external group during the December quarter to assist us, a company called Point Advisory. They've been working with us over the last few months to develop our roadmap for reporting against the TCFD, an important step as we refine our contribution to actions against climate change, including setting specific targets.
As noted in the report, we are working to increase our capability at the group level in this ESG space, in addition to engaging expert external parties to assist as required. Moving to operating performance, we had a really strong finish to the year at both operations. Capricorn achieved a record in December of over 3,000 tons of copper. At Golden Grove, zinc production was lower than the prior quarter, as we had expected and indicated, but very strong copper production reflected significant improvement and a strong quarterly result overall. The improved and improving production performance resulted in significantly improved unit costs and solid operating costs for the year, notwithstanding the challenges of the first quarter, March quarter last year.
Production at 68,200 tons in copper equivalent terms exceeded the forecast that we had put into the market at 67,400 tons, so we're very pleased about that result. Based upon our full-year production revenue and costs released today, we expect full-year EBITDA to meet or exceed the prospectus forecast of AUD 221 million, subject of course to the finalization of full-year final results and the audit process. There is of course lots of discussion in the general mining space about cost pressures and 29Metals is no different. As mentioned earlier, to date, COVID impacts have been well contained, albeit of course, this has come at some cost. Labor costs are largely well managed, recognizing that the labor skill shortage has an impact on wage rises, especially in some areas of the business.
Overall labor cost increases in 2022 are not expected to be extraordinary and in line with the rest of the industry. Where we have seen cost pressures has been in the supply of goods and materials, both in terms of inflationary costs for those materials, as well as the freight and logistics costs for delivery to the sites. Nonetheless, the 2021 costs have come in at the bottom of the range of the guidance we provided in the September quarterly report. Now, let me move to guidance. In today's quarterly, we have provided guidance on production, operating costs, corporate costs, and capital. I should note that going forward, 29Metals will no longer provide guidance for copper equivalent outcomes. We will provide guidance on metal production, and we will report actual copper equivalent outcomes on a quarterly basis for reference purposes.
For 2022, we are providing a guidance range for key parameters which you'll find in the quarterly report. I don't intend to go through each of those numbers here, although obviously happy to take questions later. Overall, we expect strengthening performance driven by continuing strong copper production and a material increase in zinc production year on year. Cost guidance reflects the continuing cost pressures we are seeing, particularly in Western Australia, and planned increased activity levels at the mine sites. Concentrate transport costs are expected to be materially higher than 2021, reflecting the significant increase in shipping rates and the market that continues to be volatile. Supply chains, high demand for people and materials, and border closures all have contributed to rising costs. As a business, we are very focused on managing through this environment in the best way possible.
Guidance for a number of the accounting measures will be released along with our full-year financial results due on the 23rd of February. There were a number of important operational and de-risking milestones in the December quarter, including first ore from the Xantho Extended ore body at Golden Grove, completion of the TSF 1 lift at Golden Grove, as well as the advancement of the TSF lift at Capricorn to the point where we will imminently commence depositing tailings into this, into that facility. Advancement of the Gossan Valley feasibility study and breakthrough of the Esperanza South cave to the surface at Capricorn Copper. On the Gossan Valley feasibility study, the key study inputs have been completed and validate the prior PFS outcomes.
We are now focused on optimizing Gossan Valley as part of an integrated and optimized Golden Grove mine plan, which will potentially include the role of Cervantes. The Cervantes drilling results reported in September were very encouraging, and the results from the continued drilling through to the end of 2021 will be reported shortly. We aim to include the majority of the Cervantes drilling results up to end of December into our updated mineral resource estimates in our annual resources and reserve statement to be released to the market in this current quarter. We will be considering the optimum and best value proposition for the company in the context of timing for potential development of both Gossan Valley and Cervantes. This year also, we will be focusing significantly on our organic growth opportunities at our sites.
For example, the regional work at Capricorn Copper, extensions to the Esperanza South orebody, Grey Ghost and Eagle Nest on our regional tenements that we have, as well as extensions to the Greenstone orebody. At Golden Grove, Conteville is an orebody which has a potential extension to Gossan Valley. Xantho Extended North, aligned with Xantho Extended and the Scuddles footwall, commonly known as GG4, as well as the work we are about to commence at Red Hill, and Mark will talk about that shortly. The team at Red Hill has mobilized, and we're about to commence activities there. Overall, a great quarter, a great finish to the year, setting us up for an even more successful 2022.
With those overarching remarks, I'll now hand over to Ed Cooney, our Chief Operating Officer, to give us a bit more color around the production activities at the two operating mines. Ed will then hand over to Peter Herbert on commercial and financial, and then we'll finish off with Mark van Heerden and more detail on the exploration and organic growth activities. With that, thank you, Ed. Over to you, Ed.
Thanks, Peter, and good morning, everyone. Really great to be here today presenting our December quarterly performance. In terms of production, as Peter mentioned, we delivered a strong performance for the December quarter. It was our best quarter for the calendar year for copper metal produced, and on a copper equivalent basis. A very pleasing quarter to finish the year with both operations achieving their best production quarters for the year and really reflecting the significant combined efforts and contributions of the site teams. At Golden Grove, mining volumes exceeded mill throughput as we navigated our way through completion of the TSF lift and commenced deposition. Opening stockpiles for 2022 ahead of the mill put us in a much better position relative to the start of the 2021 calendar year. Copper production for the quarter was significantly higher than prior quarters with lower byproduct metals.
Development and backfill maintained good rates during the quarter. As we stated last quarter, establishing access to and production from new high-grade ore sources remains a key priority. During the December quarter, we commenced first ore production from the upper levels of the Xantho Extended orebody, and this represents a significant milestone, and it's the culmination of a lot of hard work by the Golden Grove team over a number of years. Our focus for the March quarter will be to continue activities, upgrading ventilation in the area, and extending the decline, linking the Xantho Extended, Oizon, and Hougoumont orebodies. Completion of these will enable us to deliver chilled air directly from the surface to working fronts underground and further optimize our truck haulage and traffic management.
In terms of the mill, throughput of 365,000 tons was marginally lower than the September quarter, impacted by the restrictions associated with completion of the TSF lift. Post completion of the lift in late November, the mill has been operating unconstrained at higher throughput rates. From a recovery perspective, the processing team have achieved improved copper recovery from lower grades as a result of further optimization of the flotation circuit, enabling us to produce concentrate from grades we previously weren't able to. The paste plant project has now received final regulatory approvals. However, progress has been delayed due to ground conditions experienced when drilling the surface hole. A new hole was commenced in December, which is progressing well and pleasingly is now through the area of poor ground conditions we experienced in the first hole.
We expect to commission the plant towards the end of the June quarter. In the interim, the site team continue to maximize cemented hydraulic fill delivery rates and focus on optimizing the remaining construction schedule of the plant. Moving on to Capricorn Copper. We achieved 10% higher metal production than the September quarter. Mining performance was good, with volumes broadly consistent with the prior quarter. Higher grades were attributable to Mammoth, and in particular, the Greenstone orebody during the December month, resulting in the site monthly production record Peter mentioned of more than 3,000 tons of copper metal produced. At Esperanza South, the sub-level cave successfully broke through the surface, and this was a welcome outcome and eliminates the need for any additional measures to initiate further propagation.
We also commenced raise boring activities of a new ventilation shaft to surface at the Esperanza South orebody to increase underground air volumes and reduce working temperatures, with the pilot hole successfully breaking through and back reaming now underway. In terms of the mill, we processed similar volumes to the September quarter, though at higher feed grades. Recoveries and overall metal production was higher as a result. Preparation for the transition of the processing operations and maintenance activities in-house is progressing extremely well, and we look forward to the transition occurring in February and pursuing the benefits we believe this transition will afford. Completion of stage one of the Esperanza TSF lift is imminent, with commencement of deposition expected by month 10. In parallel with these construction activities, we've also progressed multiple surface site water projects.
I'll now hand over to Peter Herbert, our CFO, to address some of the financial outcomes across the business.
Thanks, Ed, and thanks, everyone, for dialing in this morning. Group revenues for the December quarter were by far the strongest for the year at approximately AUD 196 million. That's an increase of more than 30% on the prior quarter. This result included a material increase in Golden Grove revenues, particularly copper and zinc sales, somewhat offset by lower precious metal revenues. Capricorn Copper revenues, excluding QPs, decreased slightly on the prior period, in line with lower sales volumes recorded in the December quarter. The difference between the production results that Ed talked about and sales reflects timing differences as finished copper inventories increased during the quarter. For the December quarter, realized copper prices increased by approximately 4% in USD terms, also supporting the revenue outcome.
Overall, copper accounted for approximately 66% of total group revenues in the December quarter, which is in line with the full-year result. In terms of costs, group site costs were approximately AUD 7 million higher than the prior quarter, due mainly to higher mining and G&A costs. Higher mining costs are largely attributable to Golden Grove on account of higher activity levels as well as continuing cost pressures. Higher G&A reflects works undertaken at Capricorn Copper to install and ready pumping infrastructure in advance of the wet season. Group C1 absolute costs were approximately AUD 3 million higher than the September quarter, reflecting the higher site costs just mentioned, increased transport and treatment charges on higher sales volumes, lower stockpile credits as timing differences at Golden Grove largely unwound during the quarter, and higher by-product credits largely offsetting higher costs.
Golden Grove all-in sustaining costs on a unit basis improved approximately 8% on the prior quarter, reflecting the higher C1 costs more than offset by increased copper sales and lower capitalized development. Capricorn Copper all-in sustaining unit costs increased 6% on the prior quarter, given the higher absolute costs, primarily a result of higher sustained capital and lower copper sales volumes due to timing differences as just discussed. In terms of the balance sheet, during the quarter, 29Metals achieved financial close on a new corporate debt facility, refinancing existing asset level debt at Golden Grove. The new group facilities encompass term loan, working capital, and bonding facilities, and we believe will provide greater flexibility to 29Metals to manage the group's liquidity needs. Post completion of the corporate refinance, unaudited drawn debt remained unchanged quarter on quarter at $150 million.
Unaudited group cash of approximately AUD 199 million is an increase of approximately AUD 27 million on the prior quarter. The increase in cash reflected strong sales for the quarter and is after paying the redemption fees in connection with the refinancing completed. As a reminder, stamp duty in connection with the acquisition of Golden Grove remains outstanding and is now expected to settle during the March quarter 2022. In terms of our full year financial results, 29Metals expects to release its full year results on the 23rd of February. Based on the full year revenue and costs as disclosed in today's quarterly results, 29Metals expects to meet or exceed 2021 pro forma EBITDA forecast set out in the prospectus, and that includes adjustments for AASB 16 lease accounting.
This result is of course subject to finalization of our full year accounts and the audit process, and we look forward to updating the market in due course. Thank you everyone for your time, and I'll now hand over to Mark van Heerden, Group Manager, Geology.
Thanks, Peter. Exploration activities continue to focus on near mine, in mine organic growth opportunities this quarter, and preparations are well underway for the planned exploration activities across the group in 2022. At Golden Grove, we continued to extend and delineate Cervantes orebody in the December quarter, with an additional nine extensional holes and 11 infill holes completed following on from the six holes previously announced. The results of this drilling will be announced once all assays are received and validated. Additionally, we now expect the bulk of the results from the successful Cervantes campaign to be included as part of our updated mineral resource estimates to be reported in our annual resource and reserve statement, which will be delivered in the March quarter.
We now have the opportunity to consider a number of strategic long-term scenarios, taking into account both Cervantes and Gossan Valley, in order to determine the best approach to integrating these mining fronts and optimizing the Golden Grove life of mine. Both areas will also be subject to further exploration activity in the March quarter. At Gossan Valley, Conteville, which is located 1.1 km north of Gossan Valley and 800 m below the surface, has been flagged as part of an upside case assessment. Surface extensional drilling is planned to commence in the March quarter, targeting the untested area between Conteville and Gossan Valley to assess further continuity. At Cervantes, we plan to undertake further resource extension and infill drilling in the March quarter and beyond. Near mine underground exploration drilling is also planned to occur down plunge of the Amity lens at Gossan Hill.
Beyond the March quarter, resource extension and infill drilling is planned at Oizon and Xantho Extended, and exploration drilling is planned for near-mine targets at Xantho Extended North and Scuddles GG4. Moving now to Capricorn Copper. In-mine, near-mine growth drilling continued in the quarter, with 3.6 km of drilling occurring versus the 1.5 km in the prior quarter. Drilling took place at Mammoth Deeps, G-Lens, and Esperanza South. The drilling of the regional lead-zinc-silver prospect, Grey Ghost, had to be deferred due to drill site access issues as a result of the wet season. However, the rig was redeployed to the Magazine prospect to follow up on a historic near-surface copper intercept. Three holes were drilled, with one intersecting minor copper mineralization visually as the results for that work are pending.
Looking forward, surface and underground drilling planned for the March quarter will focus on near mine organic growth opportunities, with surface rigs conducting infill and resource extension drilling at Esperanza South and underground drilling occurring at Greenstone and Mammoth North. The drilling of Grey Ghost, as well as GPO-3 and Eagle Nest regional targets, is now planned to commence in the September quarter once the surface rigs have concluded with near mine programs. Underground drilling beyond the March quarter is planned to include extension and infill of Mammoth G-Lens and further infill drilling at Esperanza South. At Red Hill, the team is mobilizing to site in the coming days in order to undertake the first field work on the project since 2017.
The work will comprise small field crews operating portable short drills that will take rock samples underneath the peak cover, along strike with the known mineralization across all the known veins that make up the current Cutters mineral resource. Additionally, our team will be mapping and sampling the surrounding areas to assess potential for further veins, and we will undertake a high-resolution drone-based magnetic survey over the Cutters area. The work is planned to occur over the March and June quarters, with the objective of determining the overall potential endowment for the system outside of what has currently been modeled. All going well, this would lead into target drilling activities in 2023 to increase the resource. Overall, I'm extremely excited by our planned exploration activity to Capricorn Copper, surrounding exploration leases in the Isa Inlier, Golden Grove, and in Southern Chile this coming year.
I'll now hand back to our CEO, Peter Albert. Peter?
Well, thanks, Mark. Thanks, Ed Cooney, and Peter Herbert. I think we go now to Q&A, Melanie. Over to you, please, to handle the Q&A.
Your first question comes from Mitch Ryan with Jefferies. Please go ahead.
Good morning, team. Thank you very much for taking the question. Just, you're clearly getting very strong results to date. I was wondering what the team looks at to mineralizing like-
Melanie?
Hi. Yes, if you could just re-register for a question, we will move on to the next one. Your next question comes from Hayden Bairstow with Macquarie. Please go ahead.
Good morning, guys. Just a couple of questions from me, Peter. Just firstly on Golden Grove, interested around the commentary around Cervantes versus Gossan Valley. Is Cervantes just turning out to be that good that this is gonna be prioritized over everything else? Or has there been some areas of disappointment at Gossan Valley just on the early work we've done so far and previous drilling, et cetera? Just on the border closure, I mean, the commentary around guidance that you sort of haven't assumed any sort of, you know, material weakening or anything on COVID. But what are you assuming in WA? 'Cause the border closure at the moment is effectively permanent until we get a confirmed date.
Yeah. Thanks, Hayden. In terms of your first question, there is the Gossan Valley and Cervantes. The way you framed it, quite the opposite. I think what we have is a you know not a plethora but a multitude of opportunities here if you in terms of how we move forward. Gossan Valley, we're pleased with the outcomes that we've reached there so far. There's some optimization work that we can do, which we'll be working at looking at in coming months this year. Cervantes, as you've indicated, also some of the results there coming through that we've reported to date in September last year, extremely good.
We can't obviously at this stage talk about the results that we've received up until December, but that'll be coming out shortly. What we're indicating is that, Cervantes and Gossan Valley provide great opportunity for the future growth of Golden Grove. We need to look at both of those in the context of everything else that we have, you know, Xantho Extended and all the other the current mine plans we have and decide and determine what is the best sequence of events in terms of development of those potential development of those two opportunities. It's really looking for the optimum outcome rather than any concerns around or around any results. Quite the opposite, Hayden.
In terms of border closures, well, we've been living with border closures for the last two years, so it's really business as usual for us, quite frankly. It is disappointing. It is frustrating. We've managed the business extremely well. Great team on site, tremendous team on site. As you can imagine, you know, we're on the line all the time with the team there and working through the operational day-to-day business. It really is business as usual. We can't forecast when the borders will come up. We have to assume that they're gonna stay down for an extended period of time, and we'll just continue as we have done successfully for the last two years.
Terrific. Just one final one on costs and particularly on freight rates. I mean, are you seeing any indication that that might settle down at any point or we just have to live with these elevated rates for now?
Yeah, look, good question, Hayden. I think it's quite a difficult one to forecast given the volatility that we saw towards the end of last year. We're not assuming that there's a you know, a major sort of normalization in that you know, in terms of how we're looking at the market. Yeah, it's a hard one to forecast, Hayden, really. Yeah, we've assumed that the sort of current levels are where the market will play out for 2022.
Great. I'll leave it there. Thanks, guys.
Thanks, Hayden. Mitch, when you came on just now, it just came across. We couldn't hear a word really. I don't know whether that's been resolved. Would you come back in with your question?
Thank you. Your next question comes from Mitch Ryan with Jefferies. Please go ahead, Mitch.
Good morning, all. Can you hear me?
Yeah, we got you there, Mitch. Thanks.
Sorry, Mitch, your line is just cutting out again. I will just ask you to re-register your question, and we will move on to the next one. Your next question comes from Rahul Anand with Morgan Stanley Australia. Please go ahead.
Oh, hi, Peter and team. Happy New Year and great result today. Congratulations on that. Look, my first question was perhaps to get a bit of a quick update. I mean, Xantho Extended, you're gonna be mining there next year. Are you able to provide a bit of a timing schedule as when you think some of that ore starts hitting the mill? And then perhaps a follow-on from there was the zinc recovery rates, quarter-on-quarter, a bit lower despite higher zinc grade. Is this perhaps because of disturbed sequencing and part of that triple sequencing that we've done in the past? And how should we think about the recoveries going into next year or this year rather?
Yeah. Thanks, Rahul. I'll just ask Ed to respond to those. You okay, Ed?
Morning, Rahul. In terms of Xantho Extended, we have actually mined the first ore from the upper levels. That's now void. I guess in terms of outlook for 2022, probably weighted more to the second half of the year. As you're aware, we are aiming to commission a paste plant.
On surface so that we can effectively fill Xantho Extended at high rates. That's really will be a critical path for maximizing ore tons from Xantho Extended. In terms of the zinc recoveries, yeah, look, perhaps quarter-on-quarter was a reduction, but I wouldn't note that the zinc feed grade is also lower. Compared to probably in the June quarter with comparable grades, the recoveries are actually slightly higher, so no concerns from my perspective on the zinc recoveries for the December quarter.
Okay, perfect. Perhaps, Ed, a quick follow-up there. In terms of Cervantes, what's the new flow timeline like in 2022? When do we get updates, as this progresses?
I think I might just jump in there, Ed. As we've indicated in this call and on the quarterly, the results from the drilling, if they're not all through, they're imminent, and we'll be looking to get those results out into the market as soon as we have the full set of results. And we've also indicated that the results up until the end of December, which is most of them, will be included. There'll be a resource estimate undertaken on those results, the full Cervantes numbers up until the end of December. Looking to get resources and reserve statement out into the market in this quarter.
In terms of moving forward from there's a fair bit of work to do, as we indicated in the previous question from Hayden between Gossan Valley, Cervantes and other optimization opportunities that we have at Golden Grove towards, you know, through the year as we reach material decisions or milestones. But I can't really give you a timeline on that. But as information, as we reach conclusions then, of course, we'll keep the market informed.
Okay, perfect. Then, perhaps one on the cost pressures that you're facing. You've talked about labor cost pressures in WA. Can we get a bit of an update on two fronts, perhaps? First one being, are we comfortable in terms of the contractor rates? Have they been locked in for calendar year 2022 now? Then also, you've done quite well at Capricorn besides the cases that you flagged in the quarterly. If you do have a similar type of an impact at Golden Grove, what type of an impact do you envisage there from a cost perspective?
Okay, I'll take the second question first and then ask Ed to address the contractor rates as a second question or response. As you quite rightly point out, Rahul, we've managed very well at Capricorn Copper to date, you know, and touch wood and all that. Our processes and procedures for isolation on-site if we've got a case are procedures in terms of keeping people off-site if they're a close contact or indeed if they have COVID and testing before they get to site and testing on-site if we've got potential close contacts.
That has worked very well for us, as well as the plethora of other management plans we have in terms of social distancing and all the besides the government regulated requirements, our own processes. Yes, you're right, it worked very well at Capricorn. At Golden Grove, not dissimilar in terms of how we will manage that. As an added advantage, if you like, at Golden Grove, in that everybody on site is at least double vaccinated today. The current mandate from the West Australian government is that people in the FIFO operations need to be triple vaccinated, i.e. the booster. Timing is a little bit up and down, but sort of by April time, or just about everybody has to be triple dosed.
That means we'll probably have less infections, and two, less seriousness of infections, when and if they occur. The processes that we have had at Capricorn, we'll apply the same at Golden Grove. Do not anticipate that will have an impact on the business in any material way. At Capricorn, as Ed noted, we had to redeploy some personnel to ensure we sustain the business, but those are short term and minor impacts to the business. I would expect that Golden Grove wouldn't be any different and may even be a lesser sort of outcome there. I might go to Ed on the first question there.
In terms of mining contractor rates, at Capricorn Copper, that's limited to a fixed scheduler rate. Yes, that's locked in for the full calendar year. Golden Grove is a little different. I guess we're subject to some of the market labor prices more there, just given the nature of the structure of the agreement, Rahul.
Okay, perfect. And I presume that's already been taken into account in terms of your forecast of what you're expecting will come through, there, obviously, yeah?
Yes.
Perfect. That's all from me. Thank you very much.
Thanks, Rahul. I don't know, Mike, did we get a question from Mitch on the email or anything else?
No, he's gonna try again.
He's gonna try again.
That's how we do that.
Okay. Next question, please.
Thank you. Your next question comes from Matt Greene with Credit Suisse. Please go ahead.
Hey, good morning, Peter and team . Just checking, can you hear me okay?
Yeah, good. Fine. Thanks, Matt.
Great. Okay. Just one on Golden Grove, your mining costs there. Just on the unit cost of mining, I calculate around, like, AUD 130 a ton in 2021, but you did experience some operating challenges this year. If I look at moving into 2022, just at the mid-range, your guidance implies mining costs of around AUD 140 a ton. I'm just, if I look at your technical report, I appreciate that these estimates have changed to some degree, but it actually outlined costs decreasing into 2022, down to AUD 100 a ton. Obviously that cost base has changed somewhat.
Look, I appreciate things are very challenged and uncertain at the moment, but you know, you have said that labor costs have been relatively contained. Can you just help me bridge the gap here on what's driving what, you know, what's quite a significant increase in your cost base there since the technical reports? Do you see any of this cost pressure unwinding, or should we be thinking this is the new cost base moving forward?
I guess a couple things. One would be what we've just discussed, being the labor cost pressures in Western Australia. Probably when those reports were done earlier, that sort of escalation that we're seeing was never expected. Probably a similar one would be steel input costs in terms of ground support requirements. You know, there's a whole multitude of variables. Another may be ground support requirements as we progress further at depth and managing some of the geotechnical aspects. Probably another point I would add in 2022, in particular, is that there is actually a marked reduction in capitalized development and an increase in operating development flowing through into the costs as we sort of increase our orebody development at Xantho Extended.
They're probably some examples of what's driving the costs. In terms of new normal versus you know prior 2021 spend, I guess you know a lot of that will be dependent on probably some of the input costs such as steel et cetera and what if any reduction in labor pressure we see once the borders reopen.
Okay. No, thanks. Are you able to give me some indication as to how much of that cost base is labor driven? What proportion of it is labor?
Probably not off the top of my head. No.
No. Well, I'll just make a couple quick comments. One is in terms of specific labor costs for the 29Metals teams, as I indicated earlier on, pretty much in line with, you know, the rest of the industry. Nothing extraordinary in that framework. You know, without talking about specific numbers, sort of less than 5% in terms of a labor cost increase across the board. As Ed indicated, you know, we may well see some reduction in the likes of steel input costs. It's always difficult for suppliers to reduce costs, but that could be an outcome, and we have some sort of suggestion that might be the case going forward.
Back to the labor cost question there, where we probably did have some impact last year, which was on short-term contractors that were really under a lot of pressure in terms of their personnel and sustaining those labor forces on a short-term basis that for some of our project work. Now, whether you know that flows through to this year and beyond is a moot point, but possibly not. Certainly that impacted some of the labor costs that we incurred in the last period of last year, certainly in the last quarter of last year, in terms of labor increased costs, not in our workforce, but in some of the short-term contractor workers.
Okay, thanks. That's helpful. I guess just on the zinc production, staying on Golden Grove, being second half weighted, is this driven by sort of grade in the mine plan? Are you expecting some of those high-grade zinc strips to come in? Or is it more a case of just an increased contribution with Gossan once the paste plant is up and running? I guess now that all your regulatory approvals are in place on the plant there, what's the critical deliverables from here to get you comfortable with that June quarter timeline?
Critical path for the construction is really completion of the surface drill hole. The plant is a modular plant. It's ready to go. As soon as that hole is complete, we'll mobilize to site and installation will commence. In terms of the zinc, largely it's just a function of the mine plan, ore sources, and really the relative timing of higher Xantho Extended tons in the latter part of the year.
Okay, thanks. Just on the next tailings lift in the December quarter, are all permits in place for that?
Yeah. The tailings at Golden Grove is complete. Approval for that was, I can't remember, but it'd be months ago. Approval for the first lift on the ETSF at Capricorn goes back to an approval back in August last year, with that nearing completion and the first part of that to allow deposition before the end of January, we anticipate.
No, sorry, I'm talking about the Lift 5B in the December quarter 2022. Is that all approvals for that in place?
No, I think that is a Q1 activity, if I'm not mistaken.
Sorry, Matt.
Of 2022. Sorry, Matt, I misunderstood you there, so. Yep.
No, no worries. That's all for me, gents. Thanks very much.
Thank you. Once again, if you wish to ask a question, please press star one. Your next question comes from Kate McCutcheon with Citi. Please go ahead.
Hi, Peter and Ed. Guidance for 2022 at Golden Grove. If I take your expected tonnes mined, it implies a softer zinc grade compared to where we might have expected it to sit. What's driving this? Is that just the paste plant delays? Are you still expecting this to kind of trend back up in 2023?
I mean, there's a couple of factors. I guess, you know, just to put it in context now, whenever you do a life of mine plan, it's always a single point in time. You know, probably a few changes. In terms of Xantho Extended, we have made the decision to increase the sublevel interval to 45 m from 30 m. That will mean that there is some stopes planned for later in the year that previously will move into the 2023 calendar year. So there's slightly less material relative to prior plans in the 2022 year. That's probably one of the key changes. There are some differences in some of the other ore bodies, specific ore bodies, but probably that's a key one to call out.
Yeah. What's driving that bigger stope size or the change in the design?
Sublevel interval.
Yeah.
There's a lot of benefits with increasing the sublevel interval in terms of, you know, economics. It does mean a bit more development to get to the next level, but once we're there, you know, there are significantly lower or higher, I should say, higher orebody tons per development meter. Over time, that should result in much more attractive AISC.
Yeah. Okay. Is that something that's been done before? Are you comfortable with the geotech around that and everything else that you need?
Yeah. We've done a lot of work on the geotechnical side of it, to, you know, satisfy ourselves if that's the right decision. In terms of operationally, there are some differences in terms of how you drill it and execute it, but you know, we're confident that we have that in hand.
Yeah. Okay. In terms of zinc, we're obviously seeing a lot of smelter curtailments in Europe. I'm interested to hear what you're seeing in terms of TCs. It looks like quarter-on-quarter, those TCs, particularly at Golden Grove, have come up. You called out freight, but is there any more color on what you're seeing, please?
No color, particularly. I mean, we obviously watch the market very closely for how it's gonna develop. The TCs for the quarter. It's not necessarily an increase in the rates, but more volume driven.
Mm-hmm.
Which is driving up the absolute cost for the period and fixed sales this period driving that. We watch the market. We'll watch the negotiation process around the TCs quite closely and see where that plays out. I mean, I think we probably read all the same things that you're referring to, and it's a metric that we're keeping a very close eye on.
Okay. A final question for Ed, just for the AASB lease adjustments of the EBITDA line. I think you've said AUD 33 million for this year in adjustments, in the prospectus. Is that still what you're expecting? Do you have any expectations as to how we should think about this number going forward?
Oh, look, I think that was the forecast that we put out at the time we did the prospectus. I don't think any, you know, updates to that number. We'll obviously have to wait till the finalization of our accounts, including the audit process. A bit premature to sort of give any firm or final guidance on that. Yeah, the prospectus forecast at this point is the best reference point for that at this stage.
Yeah. Thank you.
Thank you. Your next question comes from David Radclyffe with Global Mining Research. Please go ahead.
Hi. Good morning, Peter and team. I've just got a follow-up question on Golden Grove. Really just trying to understand here. You know, would you consider spending on both accelerating Cervantes and Golden Valley, sorry, Gossan Valley, concurrently, if that's what your study said was the best result for growth and de-risking the business? Just trying to understand whether you think funding is one of the key considerations here we should be thinking about, or are there other drivers against sort of pushing both projects together?
Interesting question there, David. You're well ahead of us in terms of our thinking. Of course, we are starting to turn our minds to that because given that we've got these opportunities, if you like, we're not currently thinking in terms of what the capital constraints might be. That will be a step in the process we have to go through. Right now, we're more focused on the technical outcomes and benefits of one project against the other or both projects together and the timing of that. It's you know, you're probably a few months ahead of us there. We've really got to do this work to understand what is the best outcome for the business. We can't.
I mean, sort of, I'm sure you would appreciate, you know, you can't just mine unconstrained or you'll hit a bottleneck at some point in time in terms of the mill. We've got to work out what delivers the best value for the project in the longer term. You know, this is as of last year, we had a 10-year mine life, and we obviously sustain that, grow it, and keep it going over time.
I can't really definitively answer that question, David, but it is a good question and something that we're obviously aware of and we'll work through as we get through this process.
No, no, thanks. I understand that. Just then, in terms of sort of making any FID at the moment on any projects, do you think that is actually possible until you have clarity on the borders? I mean, just for example, obviously, what you've been talking about in terms of labor constraints and such like.
No. I mean, that's short-term perspective. I would suggest, David, you know, this border closure challenge won't and can't go on forever. We have to think beyond that. We've got to deal with the here and the now, for sure, but we can't be making long-term strategic decisions on the basis that Western Australia is gonna be closed off for long periods of time. You know, in the short and medium term, business as usual. You know, we've managed the business very well, I would like to suggest, over the last two years, certainly over the last six months, as 29Metals. We'll continue to do that and deal with the situation as it exists right now.
Longer term, you know, well, that won't impact our thinking.
Brilliant. Thank you. I'll pass it on.
Thanks, David.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Albert for closing remarks.
Thanks, Marilyn. I just wanna check, did we get any question from Mitch? Mitch is online.
No, Mitch's question was answered by
Oh.
It was asked by Kate.
Oh, was it? Okay. Oh, great. Thanks very much. All right. Well, great. Thank you very much, everybody. Really great. Thanks for the good questions. Thank you for joining the webcast today, and thanks to the team here that contributed. Mark as well. We're sitting here in Melbourne, most of us, and Mark is over there in Western Australia. To answer some of the other questions earlier on about Western Australia, we have a very strong presence in WA, not only the operating team, Mark van Heerden is there, some of our other critical strategic resources in the financial and technical area are in WA, so we're able to be on the ground there. We have one of our directors in WA as well.
You know, we are well-positioned in WA regardless of the current border situation. 2021 has been a tremendously exciting year for us, bringing the company to market. The timing couldn't have been better. Although, you know, the truth is that it's been a process that started some two to three years previously, then interrupted by COVID and the commodity prices that transpired immediately post the COVID coming into the world. The rapid turnaround in the commodity prices in our key markets has certainly been a positive for 29Metals and our investors, but we always remain focused in terms of getting our business to operate as efficiently as possible and being efficient and competitive players regardless of the commodity price.
The performance of the team since listing has been outstanding. Remembering, of course, that we brought 29Metals to market on the back of a very poor first quarter. You all remember that at both operating assets and a promise to the investors that the problems experienced in quarter one were but a hiccup in the long-term future of the two assets. Certainly the performance over the past six months against the backdrop of COVID, the challenges of running the business remotely, the melding of a new leadership and management team, and increasing inflationary pressures, labor shortages across the industry, which are somewhat unprecedented, has, in my personal view, been outstanding. I couldn't have asked more of the teams at the sites in the different corporate offices. Couldn't have asked more of the team.
We've really worked well together and efficiently and produced what I think are outstanding results for 2021. Of course, there are always challenges in this mining business and such as the nature of the Golden Grove's VMS systems and the variability from multiple ore types and Ed's fielded a few questions around that this morning. We need to manage that and we need to manage the environmental priorities at Capricorn Copper, against which we are making very good progress. We've kicked many goals in what I think is a short period of time. Hard to sort of recollect them all.
Some of the key ones are commissioning of the triple sequential flotation circuit, the refinancing of our debt facilities, first ore from Xantho Extended, recommissioning of the winder at Scuddles and extension lifts at both TSFs at both operations. As we just talked about, the advancement of Gossan Valley and Cervantes drilling results and much more. Overall, very pleased with what we have delivered, but never of course satisfied. We're always striving to be better. It provides a foundation from which we move into 2022, and we expect 2022 to be a strong year.
I'm looking forward to our teams continuing the strong operating performance that we delivered in the second half of 2021, as well as more progress to crystallize some of the great growth opportunities that Mark talked about, as well as Cervantes and Gossan Valley, which we talked about just now. The regional exploration work at Capricorn Copper is really exciting and also the work we're about to commence at Red Hill. 2022 looks like it's going to be a great year. I'm really looking forward to delivering on the guidance and improving on what we have achieved in 2021. Thank you once again, everybody. Happy to catch up with further follow-up questions as and if you have them.
Appreciate you phoning in this morning. Thanks a lot.