Thank you for standing by, and welcome to the 29Metals Limited June quarter webcast and 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 one on your telephone keypad. I would now like to hand the conference over to Mr. Mike Slifirski, Group Manager, Investor Relations. Please go ahead.
Thank you, Melanie. Good morning, ladies and gentlemen. My name is Mike Slifirski. We will be speaking to 29Metals' June quarterly report, which was released to the ASX this morning. The call and parallel webcast 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, our COO, Ed Cooney, and CFO, Peter Herbert, will each lead you through the June quarterly highlights before we open the call for your questions. Now I'd like to hand over to Peter Albert to commence discussion. Thanks, Peter.
Yeah, thanks, Mike, and welcome, everybody, and thank you for joining us this morning. The June quarter was predominantly focused on Capricorn Copper and getting ready for a restart in the third quarter, as well as advancing the de-bottlenecking activities at Golden Grove for the acceleration of production in the second half of the year. I'll come back to specific activities shortly. As always, safety and well-being at 29Metals is our primary focus. TRIFR remained largely stable during the quarter, although we did have one lost time injury. Of course, there's no production yet to report from Capricorn, as we're still in suspension. Golden Grove ramped up production in quarter two as compared to quarter one, largely in line with our plans.
Copper production at 4,200 tons was a 31% increase on Q1, and zinc at 13,400 tons was a 54% increase on Q1. Gold and silver production also increased against Q1. The two key drivers for the increase in production were, firstly, the release on the mill throughput constraint following approval of the TSF3 lift approval in late April, and secondly, the improved production from Xantho Extended. All production from Xantho Extended was 76,000 tons, a 73% increase on Q1. We also achieved a significant increase in development meters at Xantho Extended to 570 meters from 410 meters in Q1, i.e., a 39% increase. Importantly, this increase in Xantho Extended development is before the ventilation updates and upgrades with the new booster fans, which will come online this quarter.
Ed will talk to the booster fans in more detail shortly. We have provided an update to guidance today, guiding copper and zinc to be in the bottom half of guidance and adjusting our guidance for gold and silver to 15-17,000 ounces and 750-850,000 ounces, respectively. Gold and silver production remains weighted to the second half, as previously guided, the lower gold and silver production in the first half has resulted in guidance for the full year being revised. Cost guidance, including Capricorn Copper recovery costs, remains unchanged. Absolute site costs in Q2 were reduced as compared to Q1, despite the increase in activity levels. This is, again, despite continuing inflationary pressure and reflects early results of the cost out program we are implementing. Peter Herbert will talk to some examples shortly.
C1 and AISC costs are recorded as increases on Q1, driven by a number of factors, notably reduced by byproduct credits as a result of lower prevailing zinc prices and higher charges related to movements in stockpiles, with a significant increase in Golden Grove concentrate stocks sold during the June quarter. We would not expect Q2 outcomes to be reflective of full-year performance. Looking at longer-term operational de-risking projects, besides the Xantho Extended booster fans, we are focused on life of mine tailing storage facility submission to the regulator in this third quarter and the Gossan Valley submission, which is slightly deferred to the fourth quarter this year.
We continued conversion drilling activities at Cervantes during the quarter, with approximately four kilometers of our seven-kilometer program for 2023 completed so far. The focus of this program is to convert a significant proportion of current inferred resources into indicated in order to inform feasibility studies for the project. This would likely occur in the second half of 2024, after release of our next update of mineral resources and all reserves estimates early in the new year. At Capricorn Copper, our focus has, of course, been on recovery, with planned activities for the first phase of the restart of operations on schedule. In the first instance, this will be a restart at the Mammoth and Greenstone mines and process plant in this current quarter that we're in today, with planned commencement of dewatering of Esperanza South in the fourth quarter of this year.
Towards the end of the this quarter, the last quarter, the regulator, the Department of Environment and Science, DES, requested additional technical information for the purposes of the approval of the ETSF lift. The further extended approval process obviously puts additional pressure on tailing storage capacity. Given reduced throughput, as well as a number of other short-term tailings options, we remain confident of an ability to secure tailings solutions prior to the implementation of our planned life of mine tailings storage facility outcome. We will be presenting the life of mine tailie storage facility proposal to DES shortly, and subject to any initial comments from DES, we will rapidly move to detail design and approval submission. In terms of financial outcomes, Peter Herbert will discuss these in greater detail, but a couple of highlights.
Revenue of AUD 99 million, as expected, down for the quarter compared to the first quarter. This is, of course, a result of Capricorn Copper being suspended and lower revenue at Golden Grove, primarily as a result of lower zinc prices. Cash balance at the end of the quarter of AUD 127 million, noting the unwinding of AUD 31 million favorable working capital, unfavorable working capital at end of the first quarter, and the drawdown of the $40 million revolving credit facility. Average copper price received during the quarter was $3.75 a pound US, and for zinc, $1.13 US a pound, down 9% and 17% respectively on the March quarter. During the quarter, 29Metals lenders provided covenant relief under the group's corporate debt facilities.
In respect to insurance, significant progress has been made with 29Metals insurers. Key factors in our submission include the magnitude of the claim, the extent of damaged facilities, and the complexity of the claim. Insurers have all the information they need to confirm their view on policy response, and we will be engaging with them closely regarding a progress payment to assist with the recovery costs at Capricorn Copper. I should say that, notwithstanding the liquidity available to the company at the 30th of June, we remain focused on enhancing our liquidity through delivering on higher production in the second half at Golden Grove, pursuing an interim payment from our insurers as a result of extreme weather event at Capricorn, reviewing all non-essential capital items, including those in connection with recovery efforts, and reducing costs across the group.
In addition, there are other moving pieces, such as the restart of Capricorn Copper coming soon, strong support and engagement from our lenders, as well as a positive engagement with insurers. We will, of course, update the market of key developments as they crystallize. I'll now hand over to Ed Cooney, the COO, on production activities of the two operating mines, and Ed will then hand over to Peter, to Peter Herbert, to talk about financial and commercial outcomes. Over to you, please, Ed.
Peter has spoken about our safety metrics and production outcomes for the quarter, so I'll begin with progress against our recovery plan at Capricorn Copper. The key focus of the team has been on progressing the various water reduction initiatives outlined in our May strategic update. During the quarter, we have recommissioned existing additional evaporative capacity on site and procurement of new high-efficiency evaporators as well advanced, with commissioning expected in early August. With the existing water treatment plant still inaccessible, reestablishment of water treatment to support mining and processing operations is well advanced via existing settlement ponds three and four, with commissioning of this new system expected in early August. This project is intended to rely reliance on additional freshwater drawn from the adjacent lake, contributing to improved salt water balance over the medium term.
Additionally, detailed engineering is underway on expanded treatment of water contained within on-site storage structures ahead of release opportunities during the upcoming wet season. Engagement with the regulator remains constructive and ongoing. Further technical matters related to our application for ETSF Lift Two have been raised, and we are working with our external subject matter experts to address these matters. The delay to this approval has necessitated a need to progress and accelerate alternative options, which are already previously being considered available to Capricorn Copper to address near-term tailings storage. Notably, the Esperanza Pit, in which tailings has been previously and historically deposited prior to the current lift on the ETSF. This option remains subject to the planned water reduction performance over the upcoming six-month period, in addition to approval of an existing application to increase water storage capacity within the pit.
In parallel, planning of a life-of-mine facility continues as a high priority. In terms of mining, both Mammoth and Greenstone ore bodies are ready to recommence production, with recent activities focused on additional paste fill reticulation in order to maximize conversion of tailings to backfill underground. Remobilization of Byrnecut resources, which are reallocated to alternative Byrnecut projects following the extreme rainfall event, and in parallel, progressing design and procurement of dewatering infrastructure for Esperanza South ore body. Additionally, a number of personnel, seconded to Golden Grove are returning to Capricorn Copper ahead of planned recommencement of the phase one restart in August.
Moving on to Golden Grove, Progress on commissioning of the new booster fans for Xantho Extended has been marginally delayed by completion of the required civils infrastructure and subsequent interruption to Gossan Hill access following remediation of the portal, following the activities undertaken in the late March quarter. Access has now been reinstated with a focus on completion of the outstanding civils, followed by mechanical installation of the fans and then commissioning. No further procurement is required, and we anticipate commissioning of the fans to occur in August. As mentioned previously, these fans support increased volumetric flows into Xantho Extended, enabling higher mining activity levels at depth during the second half. Notwithstanding this delay to the booster fans, as Peter mentioned earlier, pleasingly, development performance at Xantho Extended increased by approximately 40% quarter-on-quarter.
Construction progress of TSF3, which was approved in early May, has been excellent, and construction is expected to be completed ahead of schedule in August. We have been focusing on preparation of our application for our new life of mine tailings facility, TSF4, and anticipate submission this quarter. Given our focus of regulatory processes being on life of mine tailings facilities at Golden Grove, recovery and tailings capacity at Capricorn Copper, our submission for the Gossan Valley project is now expected to be made later in 2023, which we anticipate to have no impact on the longer-term GG outlook presented to the market in May. In terms of production outcomes over at Golden Grove, June quarter performance saw a 23% increase in mill throughput relative to the March quarter. Higher recoveries and metal production across copper, zinc, gold, and silver.
Looking forward, production during the second half is anticipated to be higher than the first half, notably in Q4 for zinc, not dissimilar to 2022. I'll now hand over to Peter Herbert to discuss financial outcomes for the quarter. Peter?
Thanks very much, Ed, and thanks, everyone, for joining the call this morning. I'll start with revenue outcomes for the quarter. 29Metals unaudited revenue of AUD 100 million for the June quarter decreased 39% from March, impacting by the suspension of Capricorn Copper operations, with no sales reported to Capricorn during the current quarter. Golden Grove revenues were also lower than the prior quarter, primarily due to lower commodity prices, despite high sales volumes in the March quarter, which also included the sale of the lead parcel. High concentrate sales volumes at Golden Grove were possible as a result of lifting of throughput constraints, putting in place managed available cavern capacity. During the costs, Golden Grove costs were lower quarter on quarter, as Peter mentioned, at AUD 78 million. This is despite higher overall activity levels than the last quarter.
The reduction in site cost reflects continuing focus on managing costs in an inflationary environment, with efforts undertaken to rationalize contractors, including the insourcing of pipeline operations, reducing headcount on site, re-tendering contracts, including drilling, village, and aircraft services, and deferring of non-essential expenditures. The push for improved productivity and lower costs will continue over the remaining of 2023 and beyond. Golden Grove selling costs, however, were higher during the period, reflecting increased volume sold and the sales mix, specifically a material increase in zinc concentrate sales. Despite reduction in site costs, the June quarter unit costs at Golden Grove were elevated. Higher unit costs are primarily resulting in materially lower by-product credits, with lower zinc prices impacting zinc revenues, in addition to the impact of negative QP adjustments from prior period sales.
Stockpile movement charges of AUD 11 million also contributed to higher unit costs, reflecting a drawdown in raw material stockpiles as mill throughput rates increased prior to the last quarter. A drawdown of concentrate stock profits with higher sales volumes during the period and lower concentrate zinc prices during the quarter. Assuming foreign exchange and commodity prices remain the same, unit costs are expected to decrease in the second half as production increases and with continued progress on cost reduction efforts. As of 30 June, year-to-date, total capital costs at Golden Grove are tracking towards the bottom end of our guidance range. Capricorn Copper total costs for the quarter are AUD 28 million, were predominantly recovery costs as the site prepares for the first stage of the restart operations in August.
While early in the recovery process, expenditures remain in line with expectations, noting that our cash outflows for the quarter at Capricorn Copper of AUD 37 million were materially higher than costs, reflecting the unwind of working capital at Capricorn Copper, post cessation of operations in the last quarter. We will continue to evaluate opportunities to improve the profile of recovery expenditures as the recovery works advance. 29Metals finished the quarter with unaudited cash of AUD 127 million after the following key movements during the quarter. The unwind of positive working capital gains from the March quarter, approximately AUD 31 million, as we showed in the March quarter report. Weaker cash flows at Golden Grove on materially lower zinc prices during the quarter, including the impact of negative QP adjustments from prior uploaded sales.
Cash outflows of AUD 37 million at Capricorn Copper, as working capital from the March quarter operations unwound, in addition to the recovery works undertaken. The drawdown of the group's $40 million US working capital facility and repayment of AUD 60 million for the group's term loan facility principal, as well as the net interest costs. On a net debt basis, the group had unaudited net debt of AUD 124 million at the end of the quarter, an increase on the March quarter position of AUD 34 million. As previously announced, 29Metals received a waiver on certain covenants at June 30 from its lenders, recognizing the impact of the extreme weather event on group performance.
29Metals continues discussions with its insurers on the impact of the extreme weather event in respect of property damage and business interruption, and is working towards a potential interim payment. The company continues to evaluate options to improve near-term cash flow profile, including, as mentioned, advancing discussions with our insurers, including the potential for an interim payment. Exploring opportunities to reduce or defer recovery expenditures and non-essential capital across the group, and in addition to reducing costs across the group, as discussed earlier. Finally, stamp duty in connection with the acquisition of Golden Grove remains outstanding. 29Metals maintains a AUD 26 million provision in relation to stamp duty. Thank you very much for your time. I'll now hand back to Peter Herbert.
Thanks, Peter. Melanie, we can go to Q&A now.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Rahul Anand with Morgan Stanley. Please go ahead.
Hi, Peter and team. Rahul Anand here from Morgan Stanley. Good morning to everyone. You know, if I can please start with perhaps the gold and copper being lower. You know, appreciate that the grades came through lower. Just was interested to understand some of the drivers here. Is this mainly a mine plan change? Are there dilution issues, what, or you didn't access specific areas of the mine? What drove the silver and gold miss in this period and the guidance downgrade?
Thanks. I think you corrected yourself there, Rahul. You said gold and copper first, but gold and silver is obviously what you're focused on.
Yeah. Sorry.
Morning, Rahul. Eddie, I'll take that one. I guess a number of contributing factors to gold and silver, and the decision for us to lower the guidance on those metals. If I start with the mill throughput, that constraint on the mill throughput earlier in the year was longer than we had anticipated in terms of being a function of delays to that approval. Also, lower zinc metal production year to date, and really the gold, the precious metals being associated with, predominantly, with some of the zinc mineralization. A third element will be, you know, some underperformance, I think we reported in the first quarter as well, a bit of dilution in one of the production sources that had gold associated with it.
A deferral of another sort of, heavy precious metal ore source, but a lower base metal content, deferral of one of those stopes, into 2024. Probably they're the key reasons.
Okay. Just touching upon that, throughput, obviously, there was a miss in the first quarter, I understand that, but milling throughput did pick up this quarter. It seems largely that the grades that came in were significantly lower for gold and silver. If we can maybe break that down into, like, if you talk about the dilution side, did that continue into this quarter? What are your expectations, and what's baked into guidance for the rest of the year, perhaps?
Yeah. The one, in the first quarter, there was a scuttle stope that did incur quite significant dilution. That was a remnant stope taken between a couple of backfill stopes. To mitigate that going forward in terms of future sources, we are leaving more substantial pillars around that for the next source. That, that was a, that was the key sort of source of dilution. You'll accept, though, Rahul, that, you know, we do turn over quite a lot of stopes. From time to time, you know, we do get some stopes that underperform via either recovery or dilution, but others that outperform. It sort of depends on the period and the nature of the precious metal content as to those which are affected.
Okay. All right, perfect. Perhaps then turning to two other things, which are firstly the insurance claim and then perhaps capital availability. Obviously, firstly, you know, the $61 million draw on the revolver. Can we perhaps get an update on sort of capital availability going into the second half, and when you're expecting that insurance claim to have an update or some kind of a resolution?
In terms of the insurance, Rahul, we're obviously pressing the insurers. We've indicated already to deal with our claim and to make an assessment. They, as I indicated, they have all the information that they were seeking in terms of moving to that position. We are not in a position to know exactly when that will transpire, but we are, of course, pressing for an interim payment in the meantime. Can't advise because we don't know at this point in time when that might be.
Okay. Now that the claim is submitted, are you able to perhaps talk a bit about how we should be thinking about the claim itself in terms of, I mean, is it gonna include the production loss? Is it also gonna include damage and, you know, recovery, ramp-up, related losses? How should we think about that claim?
Well, essentially two key components is the loss of.
E quipment, which is infrastructure, of course, and then there's a business interruption component. Those, those are separate components. So we, they have the information that has been requested. The ball is in their court. We anticipate that the eventual outcome will take some time, and which is normal in these processes. Of course, we are, as I said, pushing for an interim payment in the meantime.
Okay. Final one was just on that capital availability and flexibility. Just a quick reminder or recap, perhaps, on available debt facilities as we stand today and, you know, capital budgets, and if everything's still looking comfortable for yourselves? Thanks.
Thanks, Raul. Just sort of outline, sorry, Peter Herbert here. We're really focused on three things in terms of our cash flow profile for the rest of the year. It's delivering on the latter goals. It's looking at the profile in terms of the rest of recovery expenditures and seeing how we can improve on that and reducing, you know, costs across the group. Sorry, actually, and that's in addition to the, you know, pursuing an interim claim from insurers. As Peter said, you know, some of that is outside of our control to an extent. So they're the, they're the things we're focused on in terms of, you know, improving our profile.
Debt facilities, in terms of your specific question, are fully drawn at this point in time.
Perfect. That's very clear. Thank you very much. I'll pass it on.
Thanks, Raul.
Thank you. Your next question comes from Daniel Morgan with Barrenjoey. Please go ahead.
Hi, Peter and Tim. Just for the Capricorn Copper, for the tailings approval, do you feel you need the approval to turn on the mill again in August, or are you willing to go forward with placing tailings in the Esperanza pit, if required? Thank you.
I'll start with the first comment. Dan, thanks for the question, and Ed might add to that. Certainly, very comfortable with continuing and commencing the startup of Mammoth and Greenstone. Obviously, no production over the last five months. As we've had indicated in the past, we're not intending that we'll have a 100% mill through, but from here until we get Esperanza South recommenced, restarted in the middle of the first half of next year. You know, not an insignificant reduction in the amount of material that we need to place in the tailing storage facility.
Moving forward, plenty of options that we have, that we're working through with DES. As Ed indicated earlier, one of those, in terms of the short term, is the re-replacement of re-reengaging or replacing tailings into the Esperanza pit, which has already always been always historically been a disposal area. Very focused on our life of mine, tailings storage facility, and as we indicated, advancing and presenting that to DES in the very near term and looking to move that as rapidly fast forward as we can over the coming months.
We're, from a confidence perspective, we're very confident of our tailings position and being able to manage our current production profile and certainly for the, and certainly anticipate resolving tailing storage facilities as we go through the next few months. Anything to add to that, Ed?
And perhaps another a couple of additional points. By operating Mammoth and Greenstone, you know, you retain core skills, resources on site to be able to manage the various water reduction projects that, you know, to be honest, we are non-discretionary. We need to return the site, reduce the site water inventory, return the site to compliance from that perspective. Additionally, by processing ore and depositing tailings up on the Esperanza TSF, you know, that does entrain quite a lot of water up onto what is quite a large evaporative pan, the Esperanza TSF, in addition to entrainment of additional excess water in paste that goes underground as backfill. There's a few additional water reduction opportunities that we can leverage by operating Mammoth and Greenstone, notwithstanding the revenue that it also generates.
Just to follow up on the water reduction initiatives, I mean, what's what seems to be key to my mind is the wet season that's coming up and the ability to, you know, put water into, I guess, swollen creeks or what have you. What do you need to do to do that? Do you need the water treatment facility back up and running? What's the latest on that?
Yeah, no, that's absolutely. That's, that's a very important initiative we are focused on. We have dedicated team and resources. We have detailed engineering underway to treat water and contained in the site storage facilities in anticipation of release. The engagement with the regulated DES is constructive and ongoing as well.
Just one clarification point there, Daniel. If you were thinking or suggesting that we need the water treatment facility in full operation to be able to do that's not the intention through this period. The intention through this period is to treat water, bulk treat water to get it into a condition for release. We're not reliant on a new water treatment facility, if that was the point of your question.
Yeah. Okay, thank you for the clarification. That's my last question.
Thanks, Dash.
Thank you. Your next question comes from Mitch Ryan with Jefferies. Please go ahead.
Morning, Peter and team. Just focusing on Cap Copper, wondering if you can sort of provide some more color on the recovery and specifically the underground water, in Greenstone and Mammoth. How high are the water levels? Have you gained access back into those areas, and what are the ground conditions like as you're re-entering those areas?
Yeah, Mitch, Eddie, I'll take that one. Just to clarify, so Mammoth and GST, which is where we'll recommence the operation in, or production in August. That's, that's fully dewatered. We have full access to that, those two ore bodies. Esperanza South is the one that still has, you know, quite significant amounts of water in it. We've maintained the water level, so no additional ingress of water. Just, you know, through some small pumps, while we procure the larger dewatering pumps ahead of the proper dewatering efforts commencing later in the year. We don't have an ability to, you know, inspect, obviously, beyond the current water level. Everything we've seen so far, in terms of inspecting up to where the water level is, it, you know, conditions are fine.
We do anticipate that we will need to rehabilitate the ground support once we commence dewatering, so in parallel, dewatering rehabilitation, and that's the recovery costs allow for that.
Yeah. Thank you. Moving across to Golden Grove, when would you expect mine production to be restricted within upper Xantho if you don't get out or, yeah, without leveraging off Xantho Extended, when does Xantho become constrained?
The Gossan Hill complex, I don't know the number, perhaps there's eight different ore bodies there, and then there's also the Scuddles mine. In the quarter just gone, we produced about 80,000 tons from Xantho Extended of the circa 350,000 tons, to give you an idea of proportion.
Okay.
Over the medium term, if you recall the outlook statement we made in May, the proportion of production from Xantho Extended increases each year. Next year, off the top of my head, was sort of circa 600,000 or 700,000 tons, the year after increasing further, again, ultimately ramping up to, you know, 850,000 to one million tons or thereabout. The other Gossan Hill ore bodies and Scuddles will contribute to the remaining material. I hope that clarifies your question?
Yeah, it does.
I might just add a different comment there, Ed. We are really quite pleased with the performance of Xantho Extended in this last quarter. As we've got down there, opened up development headings, et cetera, et cetera. You know, the increase in development rate as well as production tons, without those new booster fans, which are coming in very soon, we're starting to see that additional throughput, sorry, additional production coming out of Xantho Extended, and it can only get better from here as we bring on that additional ventilation and able to put more equipment down there.
Thank you.
Thank you. Your next question comes from David Radclyffe with Global Mining Research. Please go ahead.
Hi, good morning, Peter and team. First question's on the insurance payment and how you're now seeking, if you could, an interim payment. Just trying to understand, is there a subset of the claim this refers to, and why it's actually in the insurer's interest to accommodate this?
Yeah, David, didn't get the first part. It's not an unusual practice for insurers to accommodate these interim payments in the, certainly in the case of larger claims that we, such as we have. I don't believe that's an unusual situation and quite typical. What was the first part of the question?
The question was whether it would be allocated to obviously. I think that's a point of detail that we'll be working with our insurers on. Thanks, Peter.
Okay. Thank you for that, for clarifying that. In terms of the debt restructure, you'd sort of talked to looking for maybe a debt restructure in 2024, given the fact here that, you know, there's some uncertainty here in the potential timing of an insurance payout. Just wondering if you've brought that process forward?
No, not really. I mean, I think, you know, ultimately, you know, we can have a proper process of insurance payments. I mean, it would be an input, of course, but I think it's fair to say that, you know, in terms of a, yeah, a refinancing, our lenders, you know, quite rightly, want to see where we get to in terms of progress of the recovery and the ramp on Golden Grove. I think, you know, given... You know, I think we come at the process in 2024 with a lot more certainty about where we are on those two key things. That'll be a key, a key consideration, you know, for that process.
I think doing it in the absence of some greater certainty there obviously makes that process much more challenging, if I can put it, you know, around in the way. You know, it's not irrelevant, of course, but insurance is not the driver of that timing.
Okay, thanks. Maybe if I could, just one last one. A couple of your peers have obviously come through with some pretty, on the base metal side, some impairments. Just wondering for you, if this is a process that you do look at on the half of it's an annual process, and it may not be obviously a fair question because obviously, without knowing the insurance payment quantum, it might be not something you could even do. Just trying to understand when you do look at carrying those.
Yeah, we've, you know, under the accounting standards, we have to consider that at each balance date, so that includes half year and full year balances. As you say, lots of moving pieces in all of that, and we're working through that. You know, sort of pulling together a half year financials is a live process at the moment.
Okay. Thank you. I'll pass it off.
Thank you. Once again, if you wish to ask a question, please press star one. Your next question comes from Adam Baker with Macquarie. Please go ahead.
Good morning, guys. Just on Golden Grove, pretty, good increase in development rates there. I think you mentioned 40% increase. Just wondering what the drivers are of this. Is it a reconfiguration of the mining fleet? Did you get more jumbos or, yeah, just wondering if you could add some more color there, please.
Yeah, thanks. Good question. I mean, look, it's an area that we have been, you know, focusing on a lot lately. We've enacted a bit of restructure in terms of various factors organizationally, some additional resources to focus on execution in that particular area, ramping up our compliance to plan, metrics, and disciplines, as well as sort of alignment in terms of objectives, between 29Metals and burn cuts. A whole multitude of factors there, and it's pleasing that the site team, are achieving some benefits as a result.
Yeah, it's certainly positive. On your guidance, you trimmed the byproduct based guidance. Just on the copper, you know, where we're at this point in the year, you know, if you look at the first half, that's around 44% of your target there. On zinc, it's about 41% on the half year, annualizing that. Just wondering, you know, you mentioned you get some of that Xantho Extended ore in the fourth quarter. Are we expecting to see a similar uptick in copper as well?
Yeah. Second half, and in particular, the fourth quarter will have a higher proportion of the higher grade Xantho Extended ore body contributing to production, which, you know, drive grade, which drives the metal. We saw quite a similar sort of profile and uplift in the fourth quarter of 2022. Particularly for zinc, we would expect that fourth quarter will be the highest zinc production, and copper production, you know, probably relatively consistent over the second half.
Adam, we've always, you know, right from the get-go, guided to a greater weighting to the second half. We're, you know, we're feeling pretty comfortable or confident that will play out as we had expected.
Thanks, Peter. One other comment, so a further mention was the throughput, obviously, so we won't have that restriction that we had in, well, effectively, the first four months of the year. We're unconstrained for the remainder of the year.
Sure. Maybe, if I may, just on the recoveries, but pretty strong uptick, you know, about 87.5% copper and 88% zinc. Are we expecting similar to that in the second half of the year? Is that something can be maintained further into the future?
Yeah, no, it was a very strong quarter in terms of recovery. A couple things contributing there. We had quite low iron content in the quarter relative to the grades, and those grades treated, that does have a very significant effect. If we compare the Q2 recoveries to sort of full year 2022, that they are higher. I wouldn't necessarily anticipate the Q2 performance being achieved for the remainder of the year. Certainly pleasing and something we'll always aspire to achieve, but can't guarantee it. It's probably a bit of a one-off.
Great. I'll hand it on. Thanks, guys.
Thank you. Your next question comes from Kate McCutcheon with Citi. Please go ahead.
Hi, good morning. Maybe a couple of questions for Peter H. The covenant relief, what's the key one that's been waived or perhaps was of concern? You slightly touched on it before, is there any scope to delay debt repayments?
I think on the second part of your question first, Kate, I think as I mentioned, I think that'll be something more likely to be considered next year in terms of refiners. I should elaborate there. I think the point here is, as you think about routes, you know, plans and integrated, particularly with things like cost and value, it's making sure that our debt facility speaks about our property in line with that profile, which is the key point of looking at a refinance that we talk about. I think in terms of that, you know, looking at the right price for this business, that's more likely to be the 2024 exercise as we as I planned.
Coming back to the first money question, Kate, the covenants there relate to, you know, profitability and cash flow for this period. As you can see, obviously, we consume cash, and also the costs and lack of production impact our earnings. Those metrics relative to the net outstand covenants that were made.
Okay, understand. Is there another catalyst that you're looking for or balance sheet timing gates, I guess? Is there a point where you're dependent, where you need that money from insurance to come in, and then you have to come to the market or perhaps revisit the Cap Copper restart spend any further? Just on my numbers, there's not much headroom, so trying to understand how you think internally about the timing and the hurdles you're looking for.
Yeah, no, I would, I wouldn't say there's a, you know, there's a key staging point. It's obviously something that we keep a very close eye on, as you would expect, and for all those things as quickly as possible. As I set up, you know, our focus is on things we can control. You know, the, you know, optimizing that profile that you talked about, that's something that's not a staging gate item there. It's something that we just continue to monitor. We're obviously focused on delivering, you know, better production in the second half to support our cash flow profile. Cost reduction efforts, which is an ongoing process. There's I wouldn't put any of those things around a stage gate.
It's all just stuff that we keep on top of, we keep a close eye on, we continue to push the things that we can control. In addition, the work with the insurers is going on at pace. Again, to be clear, that's, you know, that's not something that we ultimately control, but we're doing everything we can to advance it as quickly as possible.
Okay, got it. Just my last question, following on from Dan's question on the water treatment. How do you future-proof cap copper here? You're spending mid AUD 100 million on the recovery, but my understanding is that doesn't include a new water treatment plant, and without that, and you've got limited water storage, how do you ensure in another extreme weather event situation, you future-proof this asset, I guess?
Yeah, Kate, I'll take that one. There's a multitude of key water reduction or water actions. One we've spoken about is the reuse and recycling of site water in the existing settlement ponds three and four. That's an interim solution obviously, while we don't have access to the existing water treatment plant. We'll aim to commission that imminently. That's a key enabler of getting the site water balance on a better footing. Longer term, obviously, we are keen to be subject to inspection of the existing water treatment plant infrastructure. We are keen to replace a water treatment plant, be a size fit for purpose, in a slightly different location. That's one. A second is our investment in additional high efficiency, mechanical evaporators.
They also contribute to reduction of water over time. Ongoing treatment of water for release during the wet season as opportunities arise, and the work we're doing in terms of investing in permanent infrastructure to enable. They're probably a few of the key items. You know, once we do reduce the site water inventory, the water balance modeling that we've done indicates that the water we do get to a very sustainable position with that additional investment.
Okay, got it. Then just remind me, was the water treatment plant in the scope for the insurance payout?
Yes, correct.
Yeah.
Just one point of clarification. Ed talked about some of the elements there of the water management strategy. As an overall comment, our intent here is to move to a negative water balance outcome. Historically, the site has drawn water from a local lake, which obviously adds water to the system. Our intention through our revised water management strategies is to reduce that to a bare minimum, only just for potable water requirements, and recycle and reuse water on site through the strategies that Ed's talked about, Kate. That's really where we need to move to.
Okay. The strategy is perhaps to maximize the amount of storage you can have in another extreme event?
Correct. Correct.
Cool. Thank you.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Albert for closing remarks.
Well, thanks, Melanie, and thank you, everybody, for lots of good questions there through this webcast or call. Thanks for joining us this morning, everybody who's online. We are, we've covered a lot of ground here. We are excited on a number of fronts, not the least of which, of course, is restarting Mammoth and Greenstone, the continued improvement at Xantho Extended, which can, as we said, can only get better when the new fans are operational in the very near future. We didn't really touch on the conversion drilling at Cervantes. That's ongoing and looking forward to that and turning that into a feasibility study in due course.
Focus on the longer term project for the long-term sustainability of the business, Gossan Valley and life of mine tailings at both sites. Also, of course, the opportunity to recommence the tremendous exploration prospects we have at Capricorn Copper. Thank you once again, everybody. As always, any follow-up, please come back to Mike or indeed any of us with any questions you may have to follow up, and have a good day.
That does conclude our conference for today. Thank you for participating. You may now disconnect.