I would now like to hand the conference over to Mr. Bryan Quinn, Managing Director and Chief Executive Officer. Please go ahead.
Thanks, Darcy, and good morning, and thanks for joining the Aurelia Metals Quarter Two Update for FY 2025. I'm joined today on the call with Martin Cummings as Chief Financial Officer, Andrew Graham, our Chief Technical and Business Development Officer, and Angus Wyllie, our Cobar Regional General Manager. Today I'll run through the slides. I'll call out the slides as we're going through them as per what's provided in the pack. Firstly, I'd like to call out that we've continued to report results of strong underlying performance across the business this quarter through all of our metrics. Our cash position is looking good and delivering what we have committed to the market in terms of our various milestones. I'll just hop to slide three.
Some of the key highlights that we've taken through today that I really want to call out will include that Peak has continued to perform strongly to deliver cash, and we'll discuss some of these metrics in later slides. Two is we've delivered and processed a batch of Federation ore through the Peak processing facility and have been very happy with the results as it has been reported this quarter before. Three, we've maintained a strong and healthy balance sheet while building our Federation project with the cash from Peak funding this growth and other activities. It really shows we're managing the balance sheet very tightly and diligently.
And four, with the benefit of the production lift of Peak over the last six consecutive quarters producing cash, Federation delivering stopes and production in line with the plan, and managing growth capital within our budget, and with the resulting strong balance sheet, we've really been able to continue to pursue our growth projects and exploration options that will fill our mills with quality, high-margin ore into the future. Moving on to slide four, we've continued to be on track with our performance against guidance for the key metrics. A couple of the callouts I want to make is really during the first two quarters we've been producing at Peak. Dargues obviously shut down in quarter one. Federation ore has been processed in quarter two at around 16,000, just over 16,000 tons of batch tons.
In the next two quarters, our production is set up to continue momentum and be stronger, as well as Federation ramping up with zinc, lead, gold and copper, and Peak will be running at full capacity also. Number two, sustaining capital is slightly higher due to the purchase of two new trucks for Peak, but definitely still within guidance on a full-year basis from our perspective. Our exploration capital is slightly behind, but we'll pick up in H2. A fair amount of detailed planning around Nymagee and Federation were undertaken at the start of this year to get the program launched, and we've also done new competitive contracts for both the underground and surface drilling also. On the fourth point I'd like to raise really is the group operating costs is obviously looking good in terms of the full year.
This does not include the Federation operating costs. And lastly, the Federation growth project capital is definitely on track to be within budget and for FY 2025 within guidance. So overall, when I look at the guidance metrics we have and we set out at the start of the year, we're looking very healthy and in the right direction for the full year. On sustainability, slide five, as I continue to reiterate every quarter, safety is our most important value, that we ensure our people work safely and return home with a sense of purpose and also return home safely. Currently, the trends are in the right direction, but still there's a lot of work required to really get these levels to be operating in a sustainable way.
Key initiatives currently underway in the first couple of quarters that we're continuing to work through is revising our failure risk control protocols, which is important to have the involvement of the workforce and management to really define what can fatally injure our people and what are the controls to prevent this so that we can systemize those and make sure that we prevent those going forward. This work is ongoing through FY 2025 and into FY 2026. We're also progressing our deep dives on risk management for high risks in our business to ensure that the right controls are in place, the right control owners understand their accountabilities, and we're managing the risks to our business that allow us to keep looking around the corner to stop those sort of unknowns popping up on the business.
And thirdly, and most importantly, making sure our leaders are spending time in the field with our people to ensure our people have the right tools, using the right processes and practices to do their work, and using the things like Take 5s and JHAs to really ensure they're planning their work well and executing their work well. Key initiatives for the quarter for environment and community have really included the exciting new opening of our Cobar Community Hub for Aurelia. This is a new shop front in the center of Cobar where our teams can sit with community members and discuss our business, talk about employment, learn about our growth projects, and just to hear in general any of the concerns the community may have that we can address.
We've also continued to work pretty intensively on our energy efficiency and water reduction projects from an environmental point of view to really look at how we can close some of the gaps on reducing energy and reducing water consumption in our business, which will have ongoing effects and benefits to our business, both in cost and in being more sustainable for the future. So in summary, from a sustainability point of view, definitely trends are in the right direction, but lots of work still to do to make sure we can sustain that direction and be the business where people can go home safely every day. In terms of slide six for Peak production, there's been good performance uplift, but we're obviously wanting to take it further and set up the business to make some step changes.
Definitely, all metrics are heading in the right direction, as you can see from the graphs, and we have a clear focus on driving productivity agenda hard over the next six months to improve our unit costs and meters advance above the current improvements. We've continued to roll out our Mine Operating System or MOS, and continue to focus on the North and South Mine as two separate production areas with all the equipment and people and resources needed to make sure we can run those businesses properly on both sides of the north and south side of Peak. Our key focus is really on jumbo utilization and advance rates, maintenance costs, and delivering quality ore in line with the plan for the mill for processing. On the processing side, the focus remains on squeezing more from the recoveries.
So far, year to date, there's been some really good improvements, as you can see from the graphs on the slide. There's still a way to go to get the recoveries where we'd like to achieve this consistently, and importantly released some information on the Federation processing in this quarterly release. Very happy with the recoveries of these ores that have provided, and also very happy with how the materials have flowed through the plant. Definitely, this has exceeded our expectations, and we'll continue to focus on these recoveries and throughput rates coming from Federation as we continue to ramp up the operation. Again, all these metrics are trending in the right direction, and the team's focus is to make sure we continue in that direction. I'll just turn to slide seven. Slide seven is for Federation. It's another highlight for this quarter. Obviously, development's been performing very well.
It's exceeded targets. Our stope drilling has been on plan. Main ventilation fans have been installed without significant delays. Our power systems have been installed for this current phase we're working through, and we're ramping up production to the capacity we've planned. It's very rewarding also to see some revenue in quarter two from Federation as a start of offsetting some of the capital costs we're outlaying in terms of building the mine. The project continues to remain on budget as was approved, which is something I don't hear from many other mining projects, and that's something we're going to continue to make sure we keep on track to the very end. Federation now continues to focus on development in the decline to set up platforms for our infill drilling to help design our future stopes and understand the ore deposit better as we progress.
As noted in our release, our stoping orientation has changed and so has some of our development sequences based on the detail of geological knowledge we've gained underground to date, and we'll continue to modify our plans with the new infill drilling information and mapping information that we have available as we progress. But for now, we're on track to ramp up the business for the next couple of years with the information we have from the infill drilling. So once again, Federation definitely on track to deliver what we said we're going to deliver, and with obviously more work to be done as we progress the mine. I'll hand over to Andrew to provide some updates on the works in quarter two for exploration, which is key for our options for our growth beyond what we have in our plans now. Over to you, Andrew.
Thanks, Bryan. As it has been for the entire business, it's certainly been a busy quarter in exploration. You may recall that we retendered surface drilling in Q1. That's led to a slightly slower start-up to the year, but that was planned. But certainly through Q2, all of the surface leads were very active. We released a roundup of exploration results from Peak on the 22nd of January. I'd encourage people who haven't looked at that to go on there and have a bit of a look. It provides more detail than is included in this quarterly. Just to touch on some of that, look at various feedback that some people expect that every time we drill an exploration hole, we're going to get a spectacular discovery hole. The drilling that we released on the 22nd of January at Peak is pleasing, but for a slightly different reason.
So firstly, for New Cobar and Kairos, the drilling showed substantial depth extension of those two key copper mining areas. And when I talk depth extension, I'm talking 300 m+ extension from current workings. Now, you might recall that Cobar-style ore bodies tend to be strike-limited, but depth extensive. So it's really great that these deep holes have shown that those ore bodies continue to depth. Secondly, in Jubilee North, you'll recall that we came out in July with extension to the north of Jubilee. Really good that that follow-up drilling has shown that that extends both up and down dip and certainly not closed off. So plenty more potential there around Jubilee. As I mentioned, look, all of that drilling was close to existing workings, so it can make its way into the mine plan very easily once we prove it up.
Also, just to touch on Jubilee North and New Cobar, that's where we intend to access Great Cobar. So the decline will extend from there. So anything we get in that region is certainly complementary to what we extract out of Great Cobar. Turning then further south to the Nymagee district, we did the first stage of surface drilling at Nymagee, and that allowed us to then do downhole electromagnetics in December, which will help us target our subsequent drilling. Those results are still pending. Once we get those, we'll use those to help design further programs at Nymagee. Late in the quarter, so in December, we relocated one of the surface rigs to Federation North offset. You may recall an exciting announcement we actually put out in June, which showed the discovery of that offset to the west.
It's a northern offset of Federation, and we're back in there drilling again currently. So we've got a busy schedule coming up in exploration for the back half. Nymagee will obviously continue that Federation North offset drilling, and then we'll intend to go back to Nymagee once we get those results of the down hole EM, which will help guide that sort of ongoing drill program there at Nymagee. In the Cobar district, from surface, we'll complete drilling at Young Australian, and then it's back to Queen Bee, which you recall we were at last year, and then on to Tharsis. So Tharsis is interesting. It's an exciting maiden drill program for the company. Fresh target, so we'll see how that goes later this year. Underground, we'll be back in South Mine drilling at Kairos, and then also Perseverance S400 in Zone A. So plenty going in the exploration team.
Turning then to the growth slide. Bryan's obviously touched on Federation. I won't go into any more detail, but he may want to add to that. But just to reiterate what Bryan mentioned in relation to recoveries, albeit it's a small sample that we put through the Peak plant, but recovery is higher than those assumed in the feasibility study across the board, which is definitely a great outcome at this stage of its development. Great Cobar. The study's progressing well. The team's focus has been on a lot of ancillary items, actually, so things like power and pumps and water and the like. So often overlooked in studies, the team has been considering owner-operator versus contract development of the mine as well as pricing up some of the capital items for the project.
All going well, definitely on track to bring this to a final investment decision during the half. Similarly, work on the Peak plant optimization has been progressing well. Two elements of that, you recall, one on water management, and we've been pricing key items, the thickener, the flocculant mixing system, pumps, and pleasingly, they've all come in line with the previous study work on that project. And the second part of that Peak optimization, the throughput expansion, there's significant engineering ongoing focused on the installation of the Dargues ball mill at Peak and also the switchroom from Dargues at Peak as well. And probably worth noting, we're also actively engaged with our permitting authority, which is the Cobar Shire Council, on that change. So we're considering how we bring it forward on that plant expansion.
It's likely, as I mentioned, I think earlier, that we'll bring that in two parts, particularly given there's a justification for the water management improvements irrespective of an expansion, and then we'll look to bring the expansion items as well. So we're certainly on track for this half. Passing over to you, I think, Martin.
Thanks, Andrew. So just turning to slide 10 just to take you through the balance sheet. I'll keep my update fairly brief this quarter. So we finished the quarter with AUD 96.7 million in the bank, pleasingly operating cash flow from Peak of AUD 20.6 million, more than offset our investment in Federation. I will point out that this quarter's result at Peak takes cash flow to AUD 37 million for the half, and that was the same cash flow that Peak generated for all of FY 2024, demonstrating that the operational stability we're achieving is now enabling us to take advantage of these high commodity prices, particularly for gold. With Dargues, we are reporting a small operating cash flow reflecting the finalization of shipments. At the end of the quarter, we did have three shipments remaining that we'll finalize likely during this quarter.
So going forward, costs from Dargues this quarter and going forward are now reported within the care and maintenance column in this chart. For Federation, as we've said, we've spent AUD 18.8 million this quarter, and it takes spend to AUD 36.7 for the year, which is on track as part of our guidance of AUD 70 million-AUD 80 million for the year. Not in this pack, but in the release, I made some comments just around how we're going to report Federation, given we have actually started producing and selling concentrate from that operation. So in summary, when we come to our statutory accounts, we will report revenue for those sales, and we will take up and offsetting cost of goods sold amount in the P&L. So that will result in zero earnings from those sales reported.
Given the operation isn't commercial, there is a balance of cost that we will be taking up within our capital, and there was an allowance in our growth capital guidance for this year for those costs. So essentially, from a guidance perspective, there is no change. But important to note that when we reference group operating costs in the context of guidance, we're not including these Federation costs in that assessment. We're also not including outcomes from Federation in our group All-In Sustaining Cost Metric, and we'll keep excluding that until the mine reaches commercial production. Just a few other comments on the balance sheet. So we did make a tax payment this quarter relating to our provisional tax payable for FY 2024, and that was AUD 2.2 million.
Tax losses relating to the closure of Dargues were not actually taken up in our accounts until the operation closed in the September quarter, and so we'll be flowing this through our first half FY 2025 accounts. As Bryan mentioned, we purchased two new trucks for Peak, and we did finance those on leases. So we have reported that capital expenditure within Peak's operating cash flow for the quarter, and we'll unwind those leases through financing cash flows over the term of the lease. And finally, not on this slide, but in the report, you will have seen we did add a very small amount of gold hedging to our book. It was actually within the December quarter FY 2026, and 1,800 oz were added at a very attractive price of AUD 4,435 an oz So our strategy hasn't really changed in terms of hedging.
These additional hedges were put in as part of our rolling management of our hedge book, and you will know that we still retain significant exposure to both precious and base metal commodity prices. So in summary, a really strong cash flow outcome from Peak, which was on its own able to fund the investments in Federation this quarter, which meant we maintained our very strong balance sheet in terms of cash. Our loan note remains undrawn, resulting in a total liquidity of AUD 135 million to support our growth plans. Thanks for the time. I'll hand it back to Bryan now.
Thanks, Martin. And just to recap, when we talk about the great and exciting opportunities we have in exploration, the two FIDs coming forward for the project this half, and also the ramp-up of Federation, I guess it's really key to understand these things are all going to add value to our business. And with the balance sheet to support it, that's obviously a very strong position we're in relative to some of our peers. Look, in terms of the final slide 11, our key focus areas for the remainder of the year is really to deliver an outcome which gets us to be improving our margins, delivering strong cash flow in the medium term, and also delivering our growth options into copper, which is really supported by our resource base. Therefore, there's really nothing new in the focus areas. They're sort of the same focus areas we've had.
It's really about ramping up Federation in line with our targets, which will bring cash to the business. If we can bring it forward, cash forward to the business through better commodity prices or more volume, obviously we will. We're improving productivity through operational excellence, focusing on the jumbos and on the maintenance at the Peak operation. We'll continue to maximize cash through all activities to really keep the balance sheet strong, which will enable our growth options we've just discussed, and obviously completing the two studies that Andrew talked about is going to be fundamental this half, and obviously involving a lot of the team, reviewing those and being involved with having input into those as well to make sure that we own it and take it forward.
While exploration programs are opening up opportunities to grow our business organically, which will add further shareholder value in addition to what we're doing with these various projects. We have a very, I guess, a solid outlook where we're going. I guess in terms of the strategy and in terms of the purpose of the organization, we're very much aligned with that. On that note, I will hand it over to the questions.
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 Adam Baker from Macquarie. Please go ahead.
Hi. Good morning, Bryan and team. The Great Cobar study and Peak plant expansion, I see FIDs expected before the end of FY 2025 for both of these. Just wondering if we should expect to see these in conjunction or separately.
Basically, we'll have those studies completed, and then it'll be depending on timing. Obviously, we want to have both those projects sort of put through FID in H2. And obviously, the sooner we can do those, the better in terms of knowing our direction, what we're going to do. And we'll release the information once we have that information for both of those projects once FIDs are gone through.
Thank you. And speaking on both of those studies, I know you've disclosed the AUD 20 million-AUD 25 million outline for the plant expansion at Peak to get to 1.1 million-1.2 million tons running capacity. Just wondering about the CapEx required at Great Cobar. I know there is an older PFS, which outlines growth CapEx of about AUD 50 million, but I think it's a little bit stale as you're running through the numbers now. But is that number current at all, or have you got to completely reevaluate it, do you think?
So the project's currently going through that review. So once we have those numbers finalized, we'll come back and provide that information to the market. Obviously, the project was done at a very good level. There's obviously been price fluctuations in various areas, and we're working through each one of those to bring back the best competitive project we can. Andrew, any additional information?
No, I think that pretty much sums it up. Bryan, it's been a while since that Great Cobar PFS that you referenced, Adam. So obviously, there's been quite a bit of cost inflation in the industry. We're also thinking about how we go about it. For example, the work on ventilation shows that we can actually change fan blades on an existing fan as opposed to installing a new one. So there's certainly scope change as well that we're working through. And as Bryan says, once we have that in a more complete form, we'll bring it back to the market.
And then that's still the Federation project. We've obviously found things have been over cost compared to what they were, but we've found ways of bringing things under cost. So we'll do the same for Great Cobar. We'll publish those numbers once we're happy with what they look like.
Thanks for that. And maybe thirdly, if I could, just on potential funding for the Peak plant expansion and Great Cobar development, if it does go ahead, you're in a pretty enviable position with cash of AUD 97 million, and I know you've still got an undrawn loan note at your disposal as well. So I guess from a funding perspective, you're sitting pretty pretty pretty right now. But is there anything else we should be thinking about if you do pull the trigger on FID for those projects? Thanks.
Martin, any comments at all?
Yeah, Adam, look, as you say, our balance sheet's strong at the moment, and if where commodity prices are and we've got some hedging locking in those prices, I'm feeling comfortable, but we've got to go through the study and actually firm up what the capital requirements are, and then as part of that study, we'll wrap a funding plan around that, but I'm pretty happy with where the balance sheet is right now, but we'll assess it as those studies are firmed up.
Great. Thanks, guys. I'll pack lunches.
Thanks, Adam.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Paul Kaner from Ord Minnett. Please go ahead.
Yeah, hi, Bryan, Martin, and Andrew. Thanks for taking my questions. A few, if I may. Firstly, on Federation, that performed above expectations in that campaign program there at Peak. I guess moving forward, what's your blending strategy there with the Peak zinc material, or will you sort of continue to sort of keep it separate?
Angus, do you want to answer that question, the strategy for delivering the plan?
Yeah, so certainly, we're looking at batches just to continue to firm up exactly the recoveries. We're very happy with the performance through the plant at this point, but yes, as we move down the track, we'll certainly be looking to blend that as we go forward, but certainly, at the next lot, we are looking to batch through again.
Once we understand the batching and once we understand the recoveries, it'll allow us to optimize the blending, which is going to add more value. That's the ultimate answer for us.
Yep, too easy. And assuming the sort of recoveries come up, given that recovery performance there with that Federation material.
Exactly.
Yeah. And then just moving on to, I guess, costs and looking at those development meters and unit costs, both of those significantly improved this quarter, I guess. Is there anything specific to call out there, and how should we be thinking about this moving forward? I mean, what's your goal development meters per quarter and, I guess, unit costs?
Angus, want to talk to that one?
Yeah. As outlined in the presentation, again, our next target is to ramp up over 1,000 m per quarter with development. We're just working across optimizing that along with recruitment and getting the right people and the right resources. In terms of costs, yeah, we continue to focus aiming down to AUD 100 a tonne from the mining side. And that is across the board between our maintenance fleet and our people and just making sure that the right getting the tons out as well at the right cost. So there's a lot of work around the efficiency piece that we are focusing on this half.
Too easy, and I guess how you transition from the South Mine to the North Mine, I guess better ground conditions in the North Mine should aid that cost improvement?
Yeah, certainly. Yeah, we're working on transitioning there at the moment and setting up for success in the North Mine. So that's part of where we're looking in this quarter to set ourselves up for when we get approval to get on with Great Cobar.
But generally, Paul, the conditions will provide a lower unit cost, which will help us get down towards that AUD 100 a tonne that we're internally targeting. It's not what our budget number is, but it's what our internal target is to try and strive towards that, which is what Angus is talking to.
Yep, great. And then last one, if I can squeeze it in, just on guidance, that's unchanged. You seem to be tracking ahead on copper and maybe zinc as Federation ramps up, but slightly below on gold. I guess how should we be thinking about mine sequencing and, I guess, commodity contributions in the second half?
Angus, want to talk to that one?
Yeah, certainly. Again, yeah, to be honest, we're having a very good gold month right now, so yeah, we're certainly tracking around sequences, and it does very much depend on what we're feeding the plant in the particular timeframe, so we expect to track back on the gold this quarter and make up any deficit we've got there, but we're tracking well for the guidance.
But generally speaking, Paul, I think the sequencing, when you look at our mine, it is all about sequencing. So we're still on track. It's just the timing of when they come through.
Yep, too easy. No, that's it. Thanks. I'll pass it on.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. We'll now pause a moment to allow for any final questions to register. There are no further questions at this time. I'll now hand back to Mr. Quinn for closing remarks.
Thanks, Darcy. Look, just to reiterate, obviously, going forward for us, we've obviously got the right trends in place for our safety performance, our operating performance metrics. Starting Federation up and getting up, ramping up is all in the right direction right now, which we're happy about. And as a highlight for this quarter, so is some of the background work on the projects that Andrew talked about in exploration. Key to this is going to be obviously continuing to build our people capability up to support our organization going forward so we have the right people with the right mindset, really making sure we can deliver this business at the highest performance possible. So I guess thank you very much for your support today.
Thank you for the questions, and we look forward to providing further feedback over the course of time on how we're delivering against the FY 2025 budget. Thank you very much, everyone, for joining us, and we look forward to speaking to you soon. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.