Hello, thank you for standing by, and welcome to the 29Metals Limited full year 2022 financial results conference call. Today, all participants will be 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 one on your telephone keypad. I would now like to turn the conference over to Mr. Mike Slifirski with investor relations. Please go ahead, sir.
Thank you, Chris. Good morning, ladies and gentlemen. Welcome to 29Metals 2022 full year financial results conference call and webcast. We'll be speaking to a presentation that was released to the ASX this morning, along with our Appendix 4E and annual financial report, ASX summary release and our December 31, 2022 mineral resource and ore reserve estimates. The presentation can be found on our website and also on the Open Briefing website. This call is being recorded and will be available for replay via the 29Metals website and the open briefing website.
29Metals Managing Director and CEO, Peter Albert, will commence the presentation before passing to our Chief Financial Officer, Peter Herbert, to talk to the results, and then to Group Geology Manager, Mark van Heerden, to talk to the significant increase in mineral resources and ore reserves also announced today. Mark will then pass back to Peter to address 2023 priorities. I think Peter brought that forward actually. Sorry. We'll then invite your questions. Ed Cooney, our Chief Operating Officer, is also sitting in the room with us, so we'll be available during Q&A to address any operating questions. I'd now like to hand over to Peter Albert to commence the presentation, please. Thanks, Peter.
Yeah, thanks, Mike, and thanks for the introductions. Today, we're pleased to present our 2022 financial results and also at the same time, our mineral resource and ore reserve estimates. Before I start, I'd like to recognize the lives lost in that terrible mining tragedy in Queensland last week. A shocking result and a reminder to us all to be extra vigilant. To read the stories of the impact on their families and workmates is heartbreaking. As Mike has said, I will make a few introductory comments, and then Peter Herbert will talk about the financials. I will talk to the key focus areas for 2023, and then Mark will talk to the resources and ore reserve statements before we go to Q&A. Looking and starting at slide four.
I think we'd all appreciate the challenges that 2022 threw at us, and there is no need to repeat those in great detail here today. The upshot is that despite those challenges of border reopenings, COVID management, absenteeism, labor scarcity, supply chain challenges, and on top of it all, increasing inflationary pressures through the year, we came through the year really very, very well. With a stretched workforce, many new faces, and having to implement changes to our mine plans, the improvement in safety performance was very good. There is no substitute for safety. It is our number one priority and comes before everything else that we do. Our total recordable injury frequency rate, TRIFR, reduced quarter on quarter last year from 12 per million work hours at the beginning of the year to 9.8 at the end, by the end of the year.
A testament to our site management teams. Our production performance in terms of total metal produced on a copper equivalent basis was 8% improved on the previous year on a full year comparative basis, with copper pretty much in line with the prior year, but zinc improving by 21%. Noting that zinc production in the last quarter was very strong. A truly great outcome of last year, which Mark will talk in more detail later, is a continuing success of our exploration program, culminating in the updated mineral resource and ore reserve estimates also reported today. Conversion drilling across the business has yielded a 23% increase in estimated ore reserves after depletion, and on a copper metal basis, an 18% increase. Really strong, positive results.
We did have some outstanding results from Esperanza South at Capricorn, confirming the increasing width of the ore body and improving grades at depth. At Golden Grove, Cervantes results just continue to demonstrate the quality and potential of this ore body. In Q4 last year, we released the results of the Gossan Valley feasibility studies and PFS results for Cervantes. Gossan Valley study processes will be advanced this year with the intention to submit a request for approval in the September quarter. We will continue the conversion drilling at Cervantes to further enhance this project.
In the meantime, the mineral resources tons in the measured and indicated categories at Cervantes by 82% to 2.9 million tons as compared to the inventory stated in the pre-feasibility study when we released it in the fourth quarter last year. On the financial performance of the year, which Peter Herbert will talk to in detail shortly, we achieved AUD 183 million of cash flow, free of the buyout of all copper hedges, and in the context of a challenging operating environment across the sector, a solid EBITDA of AUD 152 million.
We retained a strong balance sheet with cash of AUD 172 million, total liquidity of AUD 231 million, and drawn debt of AUD 198 million after repayment to the banks of $ 12 million. This putting us in a strong position for execution of our plans in 2023. It's worth emphasizing the final settlement of copper hedges in 2022 leaves the company in a very positive position of being fully exposed to the copper price in an environment where we can only see medium and long-term upside in the copper price. Turning to slide five. This shows and demonstrates the company's focus on copper with almost 60% of our payable metals mix attributable to copper production.
Zinc production at Golden Grove was very strong, as mentioned earlier, especially in the last quarter, yielding a 21% increase in zinc production compared to the prior year, and overall, a 30% contribution to the sales mix in 2022. Looking forward to 2023, we see sustained copper and zinc production across the group, as shown by the guidance ranges on the right-hand side of this slide. Notwithstanding that, as we advised in the December quarterly release, the second half of the year will be a stronger outcome than the first half of the year. Turning to slide six, and I don't plan to talk in any detail about sustainability and ESG this morning, but just to highlight some of our intended focus in 2023. We will focus on water management, tailings management, and emissions target setting.
You will see more of this in our sustainability and ESG report, which will be released with our annual report coming out soon. On that note, I'll hand over to Peter Herbert to talk us through the financials in a little bit more detail.
Thank you, Peter. Good morning to everyone, and thanks for your time. I'll start by covering the key financial results on page seven, and then we'll step through some of the items in more detail. 2022 was a solid year, notwithstanding a challenging operating environment. Higher zinc production and eight-dollar metal prices supported an increase in revenue to AUD 721 million, partly offset by higher treatment charges for the period. EBITDA was solid at AUD 152 million, lower than the prior year, taking into account the impacts of higher site operating costs including the impacts of labor absenteeism and inflation, which emerged in 2022, particularly in the second half.
The net result for the year was disappointing, a AUD 47 million loss, heavily impacted by a material increase in depreciation and amortization accounting charges for the period, as well as higher costs and the continuing impacts of hedges as well as FX movements. Operating cash flow was strong at AUD 183 million before AUD 28 million in outflows for the settlement of copper hedges during the year. As Peter mentioned, these are now fully closed out. Following settlement of these hedges, 29Metals gained full exposure to the copper price. Turning now to page eight on costs. Overall, costs were higher in 2022, reflecting the impacts of higher activity relative to the prior period, the direct and indirect impacts of COVID-19, particularly labor absenteeism, exacerbated by a tight labor market, especially in Western Australia.
Inflationary pressures resulting in higher input costs for consumables and contractor rates. Combined, these factors resulted in an increase in site operating costs of 14% against the 2021 pro forma result. Realization costs for concentrate sales were 26% higher on a pro forma basis. These were impacted by a material increase in shipping rates during 2022, although these rates started to fall again towards the end of the period and into 2023. Our cost of sales includes Depreciation and Amortization accounting charges, which was materially higher in 2022. We'll step through those movements in D&A on the next slide. Looking forward, our expectation is that the pressures of labor absenteeism will abate in 2023. Accordingly, our focus is on cost and capital management to improve our operating margins. Turning now to page nine, where we cover capital and depreciation and amortization charges.
Capital expenditure was in line with the prior period pro forma result, with an increase in sustaining capital due to increased investment in TSF expansions and other environmental projects. Growth capital, comprising the completion of the Paste Fill plant at Golden Grove, in line with the prior period expenditure, and a decline of $12 million in capitalized development, reflecting below-plan development rates compared to the prior period and a lower capitalization of mining costs. Although capital expenditure was flat, D&A of $189 million was materially higher than the prior period pro forma result of $124 million. As shown on the chart on page nine, the main driver of the increase in D&A was higher accounting charges on Golden Grove's TSF assets.
This was due to increased investment in TSF capacity expansions, fast utilization of those facilities due to lower backs of underground, and accelerated depreciation of historical TSF assets identified at year end. Labor absenteeism with a shift to mining remnant areas. These areas are typically shorter life and therefore amortized more quickly. Mine property D&A includes the outcome of IPO accounting as well. Turning to the movement in NPAT for the year on slide 10. Revenues, materially high D&A for the period, and continued mark-to-market losses on derivatives, albeit significantly lower than the prior period. The loss was offset partially by an income tax benefit for the period, reflecting the group's expectation of recovering tax losses in future years. Turning now to group cash flows, which are laid out on slide 11.
Operating cash flows prior to the payment of copper and gold hedge settlements were strong at AUD 183 million. This reflects the increase in $8 metal prices and production for the year, as well as higher operating costs, as discussed earlier. Settlement of hedges, payment of dividends, FX movements and finance payments account for the balance of movements for the year. Turning to the balance sheet, as set out on slide 12. At December 31, the balance sheet remained strong with ample liquidity. During the year, the group repaid $12 million of its term loan facility and will continue to amortize this facility on a quarterly basis. The group's cash reserves and undrawn working capital facility provide a total liquidity of AUD 231 million as at December 31, 2022.
29Metals maintains a provision for stamp duty of AUD 26 million at the end of last year. To conclude on our financial result, 2023 guidance for financial metrics is set out on page 13. Compared to the D&A result for 2022 of AUD 189 million, group guidance for 2023 D&A is between AUD 155 million and AUD 190 million. This guidance reflects planned operating capital metrics for 2023 and incremental capacity expansions at both sites prior to transitioning to live facilities. The reduction in 2023 PPE depreciation guidance relative to 2022 reflects lower expected D&A for the Golden Grove TSF assets. Reflecting the group's accumulated tax losses and based on expected performance, the group is not expected to be in a tax payable position in 2023. Finally, the group's remaining hedges are gold hedges.
Approximately 10,000 hedge ounces will settle again in 2023, a reduction on the prior period. These ounces are hedged at an $8 price of $2,509 per ounce. Thank you very much for your time. I'll now hand back to Peter Albert.
Thanks, thanks, Peter. Turning to slide 14, and our key priorities for 2023, which we set out in the December quarterly report, and we summarize them here on this slide. I don't propose to go through each and every one of these bullet points in detail, but just to summarize. Development rates, which have significantly improved in recent months, looking to sustain those. We've had good progress there. Ventilation concerns at both sites. Some really good progress with the vendor over the last couple of months. Challenges that we experienced with the equipment failures and commissioning some good progress there, and we expect that these will all be behind us at Capricorn this quarter and at Golden Grove, behind us in the next quarter.
Regulatory approvals for tailings capacity increases at both operating sites are progressing, and we've had some very good engagement with the regulators in both states and are continuing to work through the processes. A reminder, of course, that the impact of delays in these approval processes is included in our guidance for the year, and we expect to resume normal milling rates early in the June quarter. Naturally, the impact will be most strongly felt in this March quarter. At the same time, we're advancing life of mine tailing solutions at both sites and with designs at both sites underway. Golden Grove, a little bit more ahead of Capricorn, both sites are focused on life of mine tailing solutions and designs with consultants are being progressed. In terms of costs, 2022 was a challenging year for the whole industry.
Our focus in 2023 will be on identifying opportunities for operating and capital cost savings right across the group. Those are the key items I want to point, pull out in terms of our focus for this year. On that note, I'll hand over to Mark van Heerden, to talk about resources and reserves. Please, Mark.
Thanks, Peter. Turning now to slide 15, I'm excited to highlight the strong year for mineral resources and, in particular, ore reserves growth at both Capricorn Copper and Golden Grove. I also encourage people to have a full read of our Mineral Resources and Ore Reserve Statement, which was released today for more detailed information. At a group level, our resources have increased by 4.5 million tons after depletion, with the majority of this increase finding its way directly to our reserves. At Capricorn Copper, both the estimated ore reserve tons and the contained copper metal have increased by 27% after depletion, while at Golden Grove, estimated ore reserve tons increased 19% to 15.1 million tons after depletion, and that includes 1.8 million tons of reserves from Gossan Valley.
Slide 16 illustrates the head grade and tons processed over 2022 in the context of the December 2022 mineral resources and ore reserves estimates. Focusing on the top right chart, the width of the skinny column on the extreme left of the chart depicts Capricorn Copper ore tons milled, with the height depicting the head grade. The second bar illustrates the December 2022 ore reserves with a higher average grade of 1.7% copper and a very comfortable reserve tonnage of 16 million tons compared to the 2022 milling rate of 1.7 million tons. The materially wider gray column represents the mineral resources estimates of 62 million tons at 1.8% copper, which is inclusive of reserves. We will continue to target this broad pool of material to replenish our reserve base and feed mine life extension.
The green column in this case represents Esperanza South, which saw significant growth in this mineral resources update, with total resources now standing at 18.8 million tons at an average copper grade of 2%. These changes may offer an opportunity to support higher mining rates and/or increase our head grade in the future. The two Golden Grove charts below similarly depict the same opportunity for a long mine life and an increase in the head grade, particularly as we get into the high grade Xantho Extended ore body, and that becomes a larger contributor to mill feed. At both mines, the grade of our overall pool of estimated reserves is higher than where we are today, and this reflects better grades at depth at both mines. Moving on now to slide 17.
One of the key areas of opportunity at Golden Grove is the Cervantes ore body below the Scuddles mine. Cervantes was subject to a PFS in 2022, the results of which were published in November. That study confirmed the viability of Cervantes at a PFS level and demonstrated the potential for it to extend the life of the Scuddles underground mine. Relative to that study, the estimates published today show an increase in overall tons of 13%, with total resources now estimated at 5.2 million tons. Along with that, estimates of contained copper metal increased by 34% to 85 kilotons. Gold and silver also saw increases to 114,000 ounces and 6.2 million ounces, respectively, while contained zinc metal was steady at 305,000 tons.
There was also a substantial uplift within the indicated category, with total tons increasing 82%. The drilling also had the added benefit of identifying mineralization closer to existing development, with significant mineralization now beginning around 210 meters below the scale of decline. Drilling in this area will continue in 2023, with a further 7 km of drilling currently underway. The aim of this will be to boost the overall resource confidence for consideration in future reserves. Cervantes also remains a key area for resource growth, with the ore body still open along strike and down plunge. Turning now to slide 18. The other area that saw studies released in 2022 was Gossan Valley. It confirmed Gossan Valley as a viable third mining front with a projected mineral inventory of 2 million tons.
1.8 million tons of that material has now been reported as probable reserves. The long section on the right of the slide shows this 2 million tons of mineral inventory in red as it relates to the broader mineral resources estimates in the area. The Gossan Valley project area as a whole hosts about 6.3 million tons of material at grades of 1.1% copper, 6% and a bit percent zinc, half a gram of gold, and 18 grams of silver. There's a number of opportunities for us to grow the 1.8 million ton reserve further, both from the existing resource base as well as from doing more drilling at depth.
We see this initial reserve as allowing us to get a foothold into an exciting new area that we can test from underground platforms as they come available and ideally extend the life beyond the scope of our initial study. Shifting now to Capricorn Copper on slide 19. The major drilling program for the year focused on converting and extending the Esperanza South orebody at depth. The results of this drilling was announced on the first of August. Not only have we seen that add to our resources base, but also contribute to a substantial increase in our ore reserves.
Not only do we add about 3.5 million tons after depletion to the ore body, but the effective grade of that material would have to be about 2.6% copper, about 28 grams of silver, and about 500 PPM cobalt in order to achieve the metal uplift that we saw across the whole ore body. Due to the spacing of the drilling, our conversion outstripped our growth, with 4.3 million tons of new material added to measured and indicated after this year's depletion, representing an additional 55% and 64% increases in estimated copper and silver metal respectively within those higher confidence resource categories. This, in turn, was a primary cause of the 27% uplift in reserve tons and copper metal for Cap Copper.
These results warranted an immediate follow-up drill program to the tune of about AUD 2.2 million, targeting down plunge into the north. The final hole of this program concluded at the start of this year. Asset results for that program are pending. Moving on to the final slide and still at Cap Copper. Two of our orebodies, Esperanza South and Esperanza, contain significant cobalt grades within the estimated copper resources. About 17,000 tons of cobalt, or around 77% of the estimated contained cobalt for Capricorn, is located within only 37% of our copper ore tons. We have several projects underway to better understand the potential value this material can offer us.
We're working in tandem with PhD students, other members of University of Queensland, supported by the Queensland Department of Resources, to understand not only what we may have within our existing tailings, but also the mineralogy and deportment of our institute cobalt mineralization that's associated with our traditional copper ore. The colorful image that you can see comes from the work of PhD student Lauren Nichols, and it's an image of our drill core along with spectral and X-ray fluorescence data. This data helps us understand what minerals cobalt is associated with, which will in turn assist us in some of the flotation test work that we are currently undertaking. There's plenty more to do in this space. Stay tuned for more info. With that, I'll hand back to Peter.
Yeah. Thanks, Mark. Great. Some tremendous results, Mark, with undoubtedly much more to come as we put that drill bit to work. That's the end of our presentation this morning. Thank you for listening and we can now go to Q&A.
Thank you, sir. If you wish to ask a question during today's call, 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 your handset to ask your question. As a reminder, please limit your questions to two per person. If you wish to ask further questions, please rejoin the queue. We will now pause momentarily to assemble our roster. Today's first question comes from Daniel Morgan with Barrenjoey. Please go ahead, sir.
Hi. My first question is related to Xantho Extended and the very high grades.
That are projected to come from that. What tonnages are you expecting to mine in the next few years? Or perhaps what proportion of the feed do you expect to come from Xantho Extended? I guess what I'm trying to get a feel for is, yes, you've been mining below your reserve grades at assets, but how quickly or in what magnitude does that step up over time?
Thanks, Daniel. I might ask Ed Cooney to address that question.
Yeah, thanks. Thanks, Daniel. Probably, and, similar to what we advised in the December quarter, I mean, the whole thesis around our growth objective is to grow the contribution of Xantho Extended obviously over time. Has been impacted by development performance historically, but we are very focused in terms of increasing or sustaining the more recent increased development rates and completing some of the investment in supporting infrastructure such as development, phase reticulation, et cetera. We haven't disclosed specific sort of targets in terms of annual production from here, but we will seek to update the market on that point in due course.
Is it safe to say that there will be an increase in your grades in 2024? I know you haven't given guidance explicitly on 2024, grades should be going up and therefore production with it, I imagine.
Yeah. We haven't given guidance on 2024. O ur intention, as I said, is to continue to grow the overall contribution of Xantho Extended ore body each year going forward.
At Capricorn, I understand in the early part of this year, if I have it correct, you are gonna be constrained by tailings capacity, and you need approvals. If I have that correct, then at what time do you need your tailings approvals to be received by in order to meet your plan? You know, what have you factored into your guidance? Thank you.
Well, as mentioned earlier on, Daniel, we've factored that into our guidance that we put out a few weeks back. Of course, that is reflected in our comments that the production outcomes weighted to the second half. And we have indicated that we should be back into full operation early in the June quarter, was I think what we've said, and it remains the same as we said in our quarterly report out before the December quarter, which we released late January.
Thank you. What tonnage do you think you'll process in the first quarter, roughly at Capricorn Copper? Thank you.
Yeah. Again, Daniel, we haven't provided guidance on quarterly numbers and we're not in a position to do so today. We haven't provided that guidance.
Okay. Thank you very much.
The next question comes from Tim Huff with Canaccord. Please go ahead.
Hi, guys. Thanks for taking the question. I just wanted to question around the tax shield that's that's available to the company at the moment. I think it's AUD 41 million in the account. How is that calculated, and is there scope that changes over time? Just trying to work out when you might get into a tax paying position.
Thanks, Tim. Good question. That is the tax effect of the tax losses that are recognized on the balance sheet. T hat's 30% of the gross amount. W e give guidance on an annual basis for taxes. You'd appreciate there's a lot of moving factors which makes it tricky to go, you know, beyond that period, of course. Those benefits are expected to be realized over, over a number of years based on, you know, based on our view of the world today. The guidance is that we don't expect to pay tax this year, and that there will be continuing losses going forward thereafter.
Yep. Excellent. Thank you. Then in terms of the payables, it's been about a, you know, AUD 40 million-AUD 45 million gain year-on-year. I think versus the previous accounts sort of also gained on that. Is that a number that you're gonna be trying to push down throughout the year?
Are you talking about the derivatives or sorry, what? I missed that one.
Sorry. Trade and other payables in your current liabilities. That number sort of crept up to AUD 150 million.
Yeah.
Which is up. Yep.
Yeah. Sorry. Yeah. I mean, that there is sort of a, bit of a natural swing in some of those things. We do expect it to go up and down from, you know, from period to period. W e're comfortable where they are at the moment.
Okay. Excellent. Perhaps one last one, if I may. around the cobalt grade and Esperanza. Is that something that you could look to campaign mill and separate as a flotation product? Is that the path you're going down, or is this something that you might look to either, I don't know, negotiate payment terms or is it a tailings processing option?
Well, we don't know the answer to that yet, Tim. Thanks for the question. Obviously, as you see in the presentation there, plenty of work happening and with some very high quality caliber groups in at U.K., and also the flotation work in the West. Ideal scenario is to be able to produce a separate product at Capricorn, but all options are on the table at this point in time. Plenty work happening, and we're pretty excited about the opportunity. We don't know the final process route there, but obviously looking to maximize value as we can.
Excellent. Thanks very much for that. I'll hand it over.
Cheers.
The next question comes from Adam Baker with Macquarie. Please go ahead.
Good day, Peter and team. Just another one on Capricorn. Just in light of the recent unfortunate fatalities that we've had up there in Queensland, just wondering on your engagement with the Queensland regulator, like obviously they've got a fair bit on their plate at the moment with those two unfortunate deaths. Just wondering if you're still having pretty good engagement there or is that something that might have been put lower on their priority list with regards to getting this Tailings Storage Facility permitting approval pushed through?
No, Adam. A different, certainly different group, that would be the Mines Department dealing with, as you say, those terrible tragedy there. The environmental group are totally different entity. No specific impact for us on that from that perspective.
Good to hear it. Maybe one on just some of the costs for calendar 2023. I think Peter Herbert alluded to on the call that cost pressures alleviating or expected to alleviate this year. Mining costs are increasing quite significantly year-on-year and the same goes with milling costs. Just wondering what the context is there. Just is there potential upside to those cost rates or are you comfortable with where you guided to?
Yeah. We're certainly not revising, you know, guidance at this stage. I mean, I think it's early in the year to make a call on that. I mean, there are a number of inputs to the business, you know, which are going up and down obviously, which is diesel of course and other, you know, processing consumables like that. I mean, I think our observation is that the inflationary pressures, as we said, you know, really sort of impacted the second half more than the first. Some of those are flowing through into the year and have been, you know, baked into our guidance.
Clearly, our efforts are to make sure that, we're identifying opportunities to, you know, to offset any of that and, you know, hopefully, you know, improve, on that position. At, at this stage, we're not revising our guidance based on any change to those expectations.
Sure. Great. How about dividends? How should we think about that moving forward? Should we think of last year's one as a kind of one-off payment or, you know, while we kind of focus on the balance sheet here or, how should we think of that from a modeling perspective moving forward? Thanks.
Over to you, Ed.
I think certainly the, not looking at this as a, as a one-off, but I think when we, when we looked at our position at the, at the end of the year and considered the, you know, the sorts of achievements that we're looking to make early in the year, that it wasn't appropriate at this point to pay that. I mean, I think the board has been very clear, that they see, you know, dividends as a part of the sustainable returns to the business. At this juncture, it wasn't appropriate to make one.
T he confidence in the full year outlook, is sort of reflected in the in our statements with the full year release that the matter will be revisited at the half year based on where we see the external market and our operating performance at that time. Not a, you know, not a one-off, but equally, you know, we will assess or I should say the board will assess, the appropriateness of that at each juncture.
Great. Thanks guys.
Our next question comes from Trent Allen with CLSA. Please go ahead.
Thank you. Hi, guys. My question's about resources and reserves. I see you've got some pretty substantial increases in tons and contained metals, well done. I could dig around in the statement. Perhaps you can just tell me how much of that is due to drilling and how much is due to changes in commodity price and FX assumptions? Thanks.
This one for you, Mark or Ed? Mark, if you, if you take that one or do you want Ed to take it?
No problem at all. Trent, it depends on the asset, but we have actually waterfalled out every metal and the tonnages by each factor. You can see how much related to commodity price versus how much we associate with drilling and modeling. In the context of Golden Grove, it was about a 9 million, just north of 9 million ton increase due to the change in the copper price assumption to the resources base. It had less of an impact on the reserves, primarily because they don't go and redo all of the stopes in the remnant areas each time we change the commodity prices. That didn't exactly flow through to the reserve side in terms of the commodity price impact.
Okay. What was behind the decision to increase the prices? Are you just using a consensus view or is it like a mark-to-market? How often do you change them?
That price is reviewed annually, and we use a consensus view combined with analysis of peers as well to form a view on where we should be at in the following year. That usually happens around just after the middle of each year and the middle for the commencement of the following year.
Okay. Thank you. I'll have a look at that table. Thanks.
The next question comes from David Radclyffe with Global Mining Research. Please go ahead.
Hi. Good morning, Peter and team. My first question is actually a follow-up on the resources there. Obviously, it looks like a key driver was those higher commodity price assumptions, which look actually pretty much at spot to date. I would have thought that's a bit more aggressive than maybe some of your peers. The question is the key offset there looks to be changes to the metallurgical model. I'm just wondering if you could maybe explain there what changes you have made I'm assuming low recoveries?
Yeah, I can elaborate on that. I mean, these are all fairly minor adjustments in the scheme of the broader pool. A lot of the stuff doesn't really flow through to the reserve. In terms of the metallurgical model, what they were anticipating when they updated the year-on-year model was poorer recoveries within a high iron material. When the pyrite content is high, they went fairly conservative, and they modeled that we would see a drop-off in recoveries. Performance of the actual mill subsequent to that is better. We'll obviously review that when the time comes to update the resource statements again.
Okay. Was that to one operation specifically or to both?
That the changes in the metallurgical model is specific to Golden Grove.
Okay. Thank you. Maybe just a follow-up to Adam on the dividend. It's very hard, I guess, for us to, or the market to have an idea about when you might actually choose to pay a dividend. Just the question is why no formal policy like a number of peers, some sort of formula that we, the market can use to have a better understanding of when you may or may not pay a dividend?
Yeah. Thanks, thanks, David. I mean, it's, that's a, that's a comment which we'll take on board, David, and we're very much aware of that. As Peter has indicated and advised just now to the board, we'll review that at the half year. In time, we will consider a policy which is in the market. That's a work in process at this point in time.
All right. Brilliant. Thank you. I'll pass it on.
Our next question comes from Matt Greene with Credit Suisse. Please proceed.
Hi. Good morning, gents. My first question is just to follow up on Dan's question earlier, just on guidance. I seem to recall. Well, I guess, Peter, you said that Capricorn Copper is, I think it was early June quarter, you expect to be unconstrained. I recall from the December quarter that your guidance assumed that Q1 was constrained and Q2 was unconstrained. Perhaps can you just talk me through, walk me through the guidance assumptions here on the tailings restrictions at Golden Grove and Capricorn Copper as to what's gone into your guidance? 'Cause it sounds like maybe things have slipped a bit here.
Yeah. Well, that's, maybe it's the guidance that we provided, some three or four weeks ago, hasn't changed. W e're anticipating the approvals for both operations in this quarter, and then in the June quarter, early in the June quarter, getting back into normal production activities at both operations. Exact dates is, you know, a bit difficult to pin down exact dates, Matt, but, that guidance that we've put in the market is not changed.
Okay. Understood. This quarter, you are going to get the approvals. That's helpful. Thanks. Okay. Just on Cervantes, you couldn't do the PFS because the amount of inferred material and just eyeballing it now, it looks like about half your resource is in the M&I category. What's your sort of thinking here in terms of, I appreciate you doing a bit more drilling, but in terms of potential timing as to when we could see a PFS on Cervantes?
No, no. Good, good question, Matt. You're quite right. I mean, we've obviously improved, increased the confidence level at Cervantes, and the drilling continues there. Mark, I can't remember how many kilometers we've got planned for this upcoming period. With those results, then we will look at whether it's appropriate time to be able to consider moving that from a pre-feasibility to a feasibility. We need to do that work, but we're certainly very encouraged by the recent round of drilling and the results that we're in the market today.
That's great. Look, lastly, I guess an accounting question on the D&A, a bit higher than what you guided to, and it sounds like this is somewhat unexpected. As we look into guidance this year, I guess 22 is at the upper end of your guidance this year. Are you quite confident in that number, or do you expect any other accelerated D&A charges to come through? Is there any potential there, or you're pretty comfortable with the range you've provided?
Yeah, no. Great question. No, we're very comfortable with range, and with the work that's gone into, to doing that, you know, reflecting, you know, our evolution as a, you know, as a listed company. It's a, the result this year does reflect, as you noted, some acceleration of assets. When, you know, when we looked at it on the balance sheet, we didn't think it was appropriate to carry them forward. They relate to historical costs, primarily around the Golden Grove TSF assets. Our, our profile this year, you know, has been pretty granular in terms of looking at our expenditure on those expansions this year and how they, how we expect them to depreciate over time.
That's great. That's all from me. Thanks very much.
Again, if you do wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. The next question comes from Ben Lyons with Jarden. Please proceed.
Thanks. Thanks guys, for the great disclosure. I'm not gonna ask for daily or weekly guidance on throughput grade, et cetera. I am interested in the cost base of the assets. Now the unfortunate reality, I guess, is we had $4 copper last year and 29Metals didn't generate cash. I accept that there's this anticipation that grades will improve over time at most of the operations. You also call out that one of the main focuses of 2023 will actually be on identifying potential cost-saving opportunities across the group. Is it time to get a bit more hardcore on the cost base of these operations, or is it your impression that you were dealt, you know, some pretty lean operations in the first place? Thank you.
Thanks. Thanks, Ben. Thanks for asking us again the detailed sort of grade and tonnage numbers. Well, I mean, in terms of the cost base, obviously a very appropriate and good question. Recognizing, of course, that last year and to some extent this year, there's been a lot of attention and focus on sustaining CapEx and building for the future. You know, that's a big part of the picture and that's, as you say, it's that on a cost base, on a unit cost basis, that has an impact from an overall perspective. Yes, you know, as we're bedding down the operations, we need to continue some of that work.
We're also very focused on cost savings this year or cost opportunities that we can see. Remembering, of course, last year was a challenging year, not just for us, Ben, but for the whole industry. You know, the inflationary pressures were one thing, which impacted everybody. You know, we've seen some of those numbers coming out from some of the bigger companies in the last few days. You know, we're not Robinson Crusoe here.
At the same time, you know, as well as inflationary pressures, you know, the COVID, the absenteeism, the need to redeploy resources, all of those challenges which were, you know, unusual last year, and we wouldn't anticipate seeing those again this year, at least not to the same degree. Those, notwithstanding Peter's earlier comments, you know, we're not changing our guidance. We, you know, we are focused on identifying where there are costs that we potentially can optimize through the business through the year.
Thanks, Peter. I don't want the second one to sound naive. I know that underground mining is essentially uninsurable. You've been dealt a number of faulty vent fans, it sounds like, at both operations by the vendor. Is there any prospect of, you know, I think the word you used is, like, warranty. They're dealt with under warranty. Is there any prospect of a business interruption insurance claim for those faulty vent fans? Thanks, mate.
No. Ben. There isn't. I mean, obviously, I can't go into the details of the contracts there, but the vendor is, you know, fixing those at their cost, as you, as we would expect. No, there's no concept of business interruption at this point in time. We have made other adjustments to our ventilation systems to maintain ventilation and obviously having to change some of our plans along the way.
It's all a little late, but I can, as I said earlier on, advise that the communication, the support, the response from the vendor has been very good and some of the original timelines, you know, that were put in front of us have been improved quite significantly. When we, as I said earlier on in my notes, I expect Capricorn to be behind us this quarter. Golden Grove, sort of half behind us this quarter and the balance next quarter. We're making good progress, but not anticipating an insurance claim there.
Okay. Thanks, Peter. That's it from me. Thank you.
There are no further questions in the queue at this time. I would now like to hand the call back over to Mr. Albert for any closing remarks.
Yeah. Thanks, Chris. I appreciate that, and thank you everybody. Some great questions there and good and well, really good questions. Appreciate the interaction and appreciate your attendance today. I know it's a very busy day as Mike Slifirski has advised me. Lots of results coming out today. Really appreciate your time with us today. As always, feel free to follow up with Mike or indeed any of us in coming days as you'd like to. Thanks again. Have a good day.
That does conclude our conference for today. Thank you for participating in today's event. You may now disconnect.