Thank you, Harmony. Listeners will know that we have been talking about the stage two expansion to 1.5 million tons / annum for some time now, but have not been clear on the timing or cost of that expansion. So it is great to finally land that. Until recently, we had been looking at a stage two expansion, t hat is up to 25,000 tons / annum of copper in concentrate, arriving in about FY 2031. That expansion is now targeted to be completed in the December 2028 quarter, approximately two years earlier than our previous thinking. This is the quickest we can ramp up a project to 1.5 million tons/ annum. We have been able to bring the stage two expansion forward because of the copper price. In the past, we ran our FY 2025 budget at AUD 14,000 / ton copper.
We ran our FY 2026 budget at AUD 14,500 / ton copper. These assumptions are now, obviously or clearly, too conservative, and they were hampering our understanding of the project. They were telling us to delay the expansion. At current spot prices around AUD 18,500/ ton, Eloise generates sufficient cash flow to pay for the accelerated underground development required to reach 25,000 tons/ annum copper in concentrate by FY 2029. Accelerating stage two obviously requires increased capital investment in FY 2027 and FY 2028 to achieve the 1.5 million ton/ annum combined mining rate. But it is the optimum rate and brings value forward. It is the best NPV and IRR option. The additional capital expenditure is predominantly underground development and surface infrastructure. That is tailings, water, and ventilation. We have broken that out clearly on page three of today's announcement.
You will also see that FY 2027 is a year of two halves. The first half is very strong from a free cash flow perspective as development drops off significantly at Eloise. We did a lot of development at Eloise in FY 2026, and we will reap that in FY 2027. The June quarter AISC and AIC results we announced last week will not be repeated in the September and December quarters. Eloise is set up for a very good first half. That concludes my comments, so I will ask the operator to open the line for questions.
Thank you. If you do 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. I f you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Daniel Morgan from Barrenjoey. Please go ahead.
Hi, Aaron and Tim. There's a lot of information here, but just picking through a little bit of it. You have a very strong half one production number for FY 2027. You say in your release you've set up Eloise well. I presume that means perhaps you've also got some strong grades coming through in half one, or does the mill, which is planned to be online in December, come in earlier in December, and therefore you get some extra milling? Just trying to understand why there's such a strong half one production result.
Not significant on the milling side. Sure, maybe December. Dan, no. Eloise at its best is what that is. Supplemented of course by the tons out of Jericho by that stage. Predominantly Eloise at its best.
Thank you. I guess the cadence of development rates that you need to do to set up Jericho to underpin this expansion, I know you've given us guidance for FY 2027, is this something you'll need to put into the business for the next couple of years to set up the mine to do one and a half? Thank you.
I think I'll hand the question over to Tim, who's here with me. Just if I correctly understand it, sorry, that's the only issue, Dan, Jericho development rates in FY 2027, are we looking at something similar for FY 2028 here? Is that the sort of the question?
Yeah, I guess I just want to get a sense for it. I know you're not providing dollar millions guidance for beyond 2027, but is the level of activity combined across the site in terms of development activity to sustain the 1.5 million ton/ annum? Is this what we should be expecting going forward, what you're expecting to do in 2027?
The simple answer is yes. It continues at a similar level.
There's a similar number of jumbos out there, Dan. The slightly complicated way for us of describing it to you in dollars is the buckets change a bit next year because of what you see this year in that Jericho project capital. Obviously, Jericho is not a project from the second half on. It's not a project next year. In terms of meters, Tim's answer is I think what you're looking for.
Thank you, and just last question is the funding piece. You've got an extension of your debt facility with Trafigura today. What was underpinning that? At face value, it looks like you've got a bit more free cash flow coming through in the production numbers here and the sequencing. Is that just an assurance if commodity markets and the copper price was not to track at current levels?
All those risks. There's 10, if not 20 of them, Dan. Some of them are real. We're doing everything we can to mitigate them. We're ahead. We've got good grade. The copper price is nice. All those things we've been telling you in the past is that we're in a good place. An additional $10 million of prudence, I think we'll name here for the reason to take on that $10 million. I think we've noted in there we don't expect to draw it. That's exactly what it is. Dan, it's for prudence. I was about to say it's for a rainy day. Dare I mention the weather? Yes, it could be for a rainy day. I wish I hadn't brought that up now. Thanks, Dan.
The current intention is try to keep that money in their account, but it's there in case we need it.
Makes sense. Hopefully you don't have any rain till November, which is when it should be expected next.
Exactly.
Thank you. Your next question comes from Paul Kaner from Ord Minnett. Please go ahead.
Hi. Thanks, Aaron and team. Just on that sort of FY 2027 guidance and on that second half skew, obviously a large portion of that is driven by mining rates there at Jericho. Can you maybe just talk a bit more on that sort of mining ramp-up, to help keep that mill full and I guess the stockpile build required, noting that there isn't much coming from Jericho in Q1?
Yes. I'll hand over to Tim to see, give you as much help as we can.
Maybe I misunderstood the question there, but the H2 will have the Jericho mill running, or sorry, the upgraded mill running. Stronger cash flow from more throughput in H2 2027.
Paul, is it around the tons out of Jericho? Be cause we ramp up Jericho tons through October, November, December. From January, Jericho's fully committed. It's producing its sort of annualized 400,000- 450,000 tons from the 1st of January onwards. Nice and consistently. D oes that help?
Yeah. T hat was it, just around the mining tons, sort of stoping the rates and development rates as you sort of head through FY 2027.
We're commissioning in the December quarter. Full rate from January 2027.
35,000- 40,000 tons a month.
Great. That's it on that one. Secondly, Aaron, thoughts on hedging to maybe protect you through this expansion phase. You've noted that current pricing has enabled you to accelerate this expansion. W hat sort of protection do you have if copper prices went the other way? Was it just that added capacity?
We've put a lot of thought into it. John is also here. John Callagher, our CFO, is also here with me. I'll let him answer that question. Any one of us in the room can answer it because we're pretty aligned on it. I don't want John to miss out. Over to you, John.
Thanks, Aaron. We do have some put options out to September for 500 tons of copper/ month, at a strike of AUD 17,500. I guess that's the level at which we see value in sort of protecting the price at that level and below. Obviously, it's a constant balancing act for us. We're constantly monitoring where we sit. At AUD 19,500 today, we feel we can continue to adopt that stance, to be honest. We're absolutely minded. We're focused on that. We're monitoring it. When prices were between AUD 17,500 and AUD 18,500, that's when we sort of took out those puts. At the moment, where spot price is today, we feel relatively comfortable, but we'll continue to monitor.
We're sitting on the sidelines, Paul, but really no intention at the moment to buy any more of those AUD 17,500 puts, although they're pretty cheap at the moment. They're AUD 200/ ton in October. I don't think there's anyone on the call or this room that thinks we're going to be below AUD 17,500 in October. Now, I've said it. We're comfortable with what we have and sitting on the sidelines.
Too easy. That's very clear. Thanks. Thanks for your perspectives, too.
Thanks, Paul.
Thank you. Your next question comes from Daniel Roden from Jefferies. Please go ahead.
Hey, guys. Thanks for taking my question. Just one from me. I just wanted to chat on the 1.5 million ton/ annum expansion really briefly. You've got a 2029 production target of 25,000-27,000 tons in copper. I just wanted to, I guess, understand how much of that year is expecting to be at the 1.5 million ton/ annum rate. Is that the whole year for that rate? I think, if I recall correctly, you've had like a prior outlook that kind of articulated a growth in production to around those numbers as well. I guess, what's changing in your greater than 25,000 tons/annum announces in the 1.5 million ton/ annum that doesn't see any increase? I guess, is that a grade thing with the higher Jericho contribution?
Yeah, it's grade, Dan. As we noted, the expansion should be completed in the December 2028 quarter. W e don't kick off at the full 1.5 million ton/ annum rate until the second half of FY 2029. The current long plan has actually got quite strong production during that period. Basically, Dan, well spotted, but that's what we're showing, and it is grade driven, of course.
No trouble. T he development rates in Jericho, obviously need a few more or a fair bit more gear on sites. You have the availability looking in Queensland at the moment to go and get more jumbos and, I guess, associate the development infrastructure.
We don't need more jumbos, actually. We've shifted one of the jumbos over from Eloise. Hence why we're seeing Eloise costs drop off a bit. We've already got one there. We'll have two machines in there for the time being, and then a third one comes on later on.
No trouble, guys. Thanks for the detailed information as always. I appreciate it.
Great, Dan. I hope you're at your desk. It sounds like you're out and about, quickly get back. You have got to update your model to 1.5 million ton/ annum now. You've been holding out on us for 12 months. You've been dangling it there for us. We've now given you the numbers. Over to you, mate.
Will do, guys. Cheers.
Thanks.
Thank you. Your next question comes from David Coates from Bell Potter Securities. Please go ahead.
Thank you. Morning, Aaron, Tim, John. Congratulations on the announcement this morning. Very exciting news. Most of them might have been covered, but just a quick one on the expansion. Very capital efficient, AUD 15 million. Can you just sort of run us through, I guess, or remind us, I suppose, we've all sort of been up there, but just remind us, I guess, some of the key items of the plant that remain to be installed for that run rate. I suppose at what point in time we might see contracts awarded and, I guess, those prices kind of de-risked, I suppose.
That's right up the back of the announcement. Tim's here. He'll run you through it. Cheers.
Morning, Dave. W e're at the moment doing the study work to lock in the long lead items for the upgrade. We'll be ordering those towards the end of this financial year. There's one flotation cell. There's some minor pumps in the process plant. There's some additional plates to put in the filter press. The filter press is already sized appropriately. There's a tailings dam lift, which we'd have to do anyway to accommodate the additional or we have to do it sooner to accommodate the higher throughput. That's about it on surface infrastructure. Oh, no, I actually forgot. There's a tailings pipeline to add into there as well. That's all costed and budgeted for this year and for the following year.
Cool. Thanks a lot, Tim. Cheers.
Thanks, Dave.
Thank you. Once again, if you wish to ask a question, please press star one. Your next question comes from Peter Kormendy from Shaw and Partners. Please go ahead.
Good morning, everyone. Thanks for taking my question. The tailings lift. I believe you submitted the regulatory approval request in December last year, and you're expecting an outcome by December this year. Could you just run through your level of confidence that that will actually be achieved in that timeframe?
Peter, we have the permit already for tailings dam five lift. We'll do that lift. In fact, we're just starting that this day. That lasts us two years. The tailings dam seven permit is with the regulator at the moment. It's been through their whole process. We've done public notifications. They're just writing the EA conditions, the updated EA conditions at the moment. We expect to have that back shortly. We need that tailings dam lift for the next one for TD7, as it's not until 2028. We're really confident that we've got the permitting we require. Once we have that back or that we will have permitting we require, once we have that back, that TD7 permit, then we'll have 10 years worth of tailings storage permitted.
Thank you. 10 years of tailings from-
Peter, sorry.
... about when?
Shortly. That's this quarter. Sorry, go ahead.
Sorry. Go on, Aaron. This quarter? You expect approval September quarter?
Yep.
Cool. All right. Good. Then, of course, FY 2029 is when, I suppose, you get past the inflection point where Jericho ore becomes the majority of the ore that gets processed through the new plant. Jericho ore is quite a bit harder than Eloise ore. What are the implications for, I don't know, sustaining CapEx from that point on?
Fair question, Peter. FY 2029, we're basically 50/50. That's more or less the blend that the plant. The 1.5 million ton/ annum , that's sized on 100% Jericho ore. There's no issue to throughput. Sustaining, all about abrasivity and so on, not just hardness. I don't know. Well, sorry, I'll ask Tim. I don't think that we're guiding anything particularly higher than Eloise ore.
No, we've built the abrasiveness or the, sorry, the additional hardness into our design and our costing. Our cost per ton processing will come down due to that size. The new plant is actually much more efficient than the old plant, in that it's somewhat automated. We're expecting to actually see a reduction in the wear that we see in it. That's yet to be proved, but that's what we're expecting.
Thanks. G ood question, Peter.
That's good to know. Thank you. Particularly the increased efficiency, I suppose. Thank you.
Thanks, Peter.
Thank you. Your next question comes from Paul Hissey from MA Financial. Please go ahead.
Good day, guys. Just a couple of quick ones. Just reading sort of the footnotes in between the lines here. We're expecting Jericho to be declared commercial from an accounting perspective by the end of this calendar year, hence the expenses flip over from capital to operating from that point in time. Would that be a fair assumption?
Effective first January. Yep.
Great. I think we've all had a crack at sort of trying to inquire about longer term capital numbers. Just to cover off on exploration and corporate, are they sort of the right kind of steady state run rate for the business, Aaron, beyond 2027?
No. That exploration one's nowhere near enough. We're gonna have to jack that up as quickly as we can. It's somewhat gated. Even next year's TD7, I suspect we'll get through some gates on that TD 7. On corporate costs, we drive ourselves pretty hard, Paul. You know that compared to anyone else at this rate, increasingly hard to keep a cap on that. For the time being, we're running this as tight as we possibly can.
All right. Thank you.
Thank you. Once again, to ask a question, please press star one. Your next question comes from [David Collier] from [Ashington Group]. Please go ahead.
Hi, Aaron. Ex- Demetallica shareholder and very happy with what you guys are up to. A few words, if you don't mind, on resource definition drilling. You're doing a bit on each at different halves of the year. Can you spell it out a bit more for me?
Look, the resource definition, I guess it falls into where we are in defining this in terms of the project. You see it's predominantly, it's resource definition, it's grade control at Jericho. That's as low as it can be in this year. It follows up all the areas or infills all the areas where we're about to stope, we're about to mine, and you've seen that in the quarter just gone, those holes, effectively resource definition. We need to put a bit more into it next year. That number's light to set us up for the longer term, but it's sufficient for what we're doing next year. We'd like to put more into resource definition probably going forward. There's also the constraints of a drill position.
Once we've got some more development in place, we'll have more positions to do that drilling from and ramp it up to get ahead of ourselves, would be a much more comfortable position for us all. I hope that answers your question, David.
Yes, it does. Yes, thank you.
Thanks, David. Thanks for your support.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Colleran for closing remarks.
Wow, that was quick. Thank you. I've got bits of paper everywhere in front of me. Thanks, Harmony. We have a great long- life mine at Jericho. We're going about setting that mine up for the long term. It will be the backbone of this company for the next 20 years, if not 30 years. We can't deliver that upside overnight. We are going about delivering it as quickly as possible and adding value as prudently as possible. Thank you for dialing in. That concludes the call.
That does conclude our conference for today. Thank you for participating. You may now disconnect.