I'll give that to you. You move the slides.
Thanks very much. Hey, this is a fantastic opportunity for me to grill the great man well-known to all of us here at Rising Stars. Of course, Bill came here when Northern Star was about AUD 0.10, and the rest is history, as they say, and moved on now with Develop. Probably pretty glad he's moved on, too, I suspect, given what I read. He's now got a whole new project portfolio on his hands. When he presented here a couple of years ago, the stock was just under AUD 2, and Bill took us through what that plan is to make money. Bill's very strategic, and it's all about the strategy, and it's about making money for investors. So Bill, maybe you could start by recapping on what the plan is and how you're tracking.
Yeah. Look, thanks, and it's always great to get to my favorite audience every year, is this audience here. My clicker's not working. Can we go one forward? No?
So, you have to—
Here we go. Beautiful. Look, Paul, we put out a five-year business plan on Develop, and we are only two and a bit years through it. We have effectively ticked all the boxes to this and probably the key one for anyone in this room is the fourth box, which is what our business is going to look like in the next two to three years. We are going to be doing north of it. This has been dialed down. Hopefully, no one is in the ASX in the room. We will be doing in excess of 50,000 tons of copper equivalent, and also 200,000 tons of equivalent spodumene per annum. That is the key box. A key one we wanted to tick, and we will talk about those assets. We are well advanced. It is now just purely execute the next two mine builds.
Right. Now, you always refer to it, Bill, as a business as opposed to a mining operation and key distinction. By definition, you are talking about cash flow and businesses. Let us look at what is driving that cash flow. Since you were last here, Woodlawn has ramped up and you have really hit some targets there. Can you take us through what is happening at Woodlawn, both from a production sense and an exploration sense?
Well, look, we promised the market we would be steady state in the March quarter, and it is not easy to build and operate mines. There are a lot of people in this room that have built and operated mines and appreciate how hard that is. We promised that, we delivered it in March quarter. June quarter was outstanding, and we are very happy with this quarter. It was all focus, just build it, get it up and running, do it properly. For a brand-new mine build, it absolutely went to plan. Really happy and proud of my team executing that. Woodlawn is around about, and I like doing things simple. To me, it is what is the revenue per ton and what is the cost per ton? No fancy stuff like all-in sustaining and bullcrap.
I just want cash out the door, cash in the door. It is pretty simple. Woodlawn annual revenue, and it is probably crept up a bit. Copper is up, zinc is up, and we will talk about that a bit later.
Yeah.
Annual revenue of AUD 375 million a year and the cost base is around AUD 200. It is not a bad little earner. We have a 10-year mine plan. The build has gone well, the execution has gone well. Anyone, please have a look at the drill results we put out two weeks ago. We actually put out more hits than Dolly Parton. They were amazing hits. She has I love her music. Luke is in the back of the room here. Go and have a look and have a chat. We are on a world-class geological system, guys. It is really hard to get your hands on these tenements and these projects and the right commodities, and the exploration there has gone really well. We have a goal there to grow the mine life from 10-1 5 years. Why is that important?
I sort of feel like global investors and the local investors in base metals want you to have a 15-year mine plan. In gold, I think they are happy to have a two-year mine plan. In base metals, you get rewarded with a 15-year mine plan. Any one of my peers that have done that, each of those assets have been worth between AUD 2 billion -AUD 4 billion Aussie valuation. We have a market cap of about AUD 1.5 at the moment.
I was about to say, put that in context of the market cap. Also, let us talk about why you think you can get to that 15-year life. You mentioned those hits you have had. In that latest exploration update, you said you were hitting mineralization in all sorts of places outside the resource. What should we expect on that front?
Look, we have some STIs coming out and LTIs and people will work out pretty quickly what is going to drive management. We have two drill rigs in there now. The second one only got mobilized. We were doing drilling from the end of last year, but it was more grade control, just infilling what we knew, given the mining shapes, and so we can go and mine it. Now we are turning our attention along strike in and out of the plunge and down at depth. Our goal is in the next, I would say 18 months of time, you do the drilling, get the assays and put it in a JORC compliant. It will be 18 months. I think two weeks ago, you are starting to see that we are going to demonstrate physically a mine life of 15 years in my goal in the next 12 months.
Right. Now let's jump across to lithium to Pioneer Dome. You bought it quite some time ago. The lithium market sold off heavily. You parked it. You said you'd wait till the right time. You've now got the wheels turning there again. How do you see production and cash flow? What's the timetable? What sort of numbers can we expect there?
Yeah, look, and just to close out last one, I did put these in green, just so Armstrong could actually work it out as well. We're already positive cash flow now at Woodlawn, and I think this is what the market's missing, and we've only got three analysts that cover us, and lucky Bell Potter's one of them, so thank you. We would like a few more. It shouldn't be missed that our pathway to cash flow is rapidly happening. On to Pioneer Dome. Yeah, look, lithium's really, really interesting. We just delivered a paper to the board yesterday, an internal paper on the lithium market and our views as a management team, because you've got to cut through the BS on this stuff. There's really diverging views.
When you actually get in the industry, actually get and talk to the end users like BYD and CATL and things like that. My advice, if you want to understand lithium, just look at their results, look at their guidance, look at their forecast, because they are about 70%-80% of the lithium market. They're very bullish on what they're growing too. We're very bullish on lithium with that, very confident and I could sit here for the next hour and tell you every project, how they're going to go and what stuff's not coming to market as quick as what people think it is. Every analyst in lithium supply has been wrong for 10, 12 years now. They forecast that, mines deliver that. I don't think it's coming to market.
When do you expect to hear the cash register ticking over?
Next quarter. I will just put it there.
Right.
Positive free cash flow next quarter.
A good run into Christmas?
Yeah. Look, we will put first ore on ship in December quarter. We started digging the open pit waste about two weekends ago and this ore body outcrop, so we are in ore very quickly. Big ramp up happens Monday, another, well, actually just happened on Monday. A heap more people on site. It is a great little starter pit, but we are, as we said in our announcements, the whole game here is an underground mine. We have basically got a year's worth of feed from the open pit in DSO. The whole goal here is we are finalizing our studies and our final investment decision for the board in the next three or four weeks. But we are very excited about potential underground opportunity and we have got an eight-year life there and it will easy do 1 million ton per annum.
At this price, the DSO market is open. It's pretty extraordinary see-through pricing. You're probably getting in the order of AUD 450-AUD 500 a ton for underground DSO ore. We're only 270 km from port, so if you're doing a million tons a year, again, the free cash flow of this asset is way more than Woodlawn.
Right. You've got two, Woodlawn and Pioneer Dome, both ramping up cash flow. Over the next three to six months, we're going to see substantial growth
Yep.
in what's coming into your bank account.
Yep.
Right. Let's step back from the two production opportunities. Yitirrti, probably known to many people here as Sulphur Springs, recently renamed, and you are achieving a lot behind the scenes there. It's been the quiet achiever in many respects over the last few months.
Yeah, Yitirrti means water soak in Nyamal language, so it is a good change. We wanted to change it from Sulphur Springs. Yitirrti is an amazing asset. That is what I recapped this business on four or five years ago. This is a base metal discovery, greenfields, up in the Pilbara of Western Australia. I just spent the day up there on Monday. I was on site, taking some shareholders to go and have a look. This is an amazing asset. It is going to do 120,000 tons of zinc a year and about 12,000-15,000 tons of copper with a heap of silver, probably close to 1 million ounces of silver per year. We started building this literally September last year, we started the undergrounds. We are now 3 km down in the tunnels, which is a long way.
We have already broken the back of the principal or the primary ventilation, pumping power, all that set up. That is a huge milestone of any underground mine connecting it with the surface properly. We gave out an AUD 275 million contract to GR Engineering . They are actually on site next week with their batch plant and start mobilizing and pouring concrete. That is well advanced and I do not think people appreciate, we are literally in less than two years, we are pouring concentrate and we are positive free cash flow in less than two years on Yitirrti, which is a better ore body than Woodlawn. It is bigger, it is 30,000 tons copper equivalent. At this price, it is probably closer to AUD 600 million annual revenue with a cost base of about AUD 250 million - AUD 260 million, so that is about it.
They are big numbers, aren't they? I suppose some people would say, "Okay, that is great, Bill. How are you going to pay for that?" It is probably worth recapping, isn't it, on the Trafigura deal because there was a lot of round at the time, but that was a game-changing agreement you got there on several fronts.
Yeah. Well, they gave us AUD 575 million in June. That was a big debt piece. Part of that was refinancing the 100 at Woodlawn. But that gave us the runway to fund now Pioneer Dome, which is not much CapEx, it is only AUD 30 million, and Yitirrti is the big one at AUD 450 million CapEx, plus we are making cash flow along the way. So Trafigura, amazing partner. You have got to sell your product to someone, whether it is lithium, whether it is copper, zinc, whatever. They are really strategic. They are one of the world's biggest commodity traders. They have got a really big balance sheet and we have nurtured that relationship, and we got a stunning deal on the debt piece with very little covenants and the offtakes were, we got better offtakes than Woodlawn. Again, everyone is screaming.
These are really good indicators when the world's biggest commodity trader like Trafigura and Glencore, which normally rip the face off a miner, when they are actually giving you way better commercial terms than what industry is seeing. It tells you that they are screaming out for the metal, which means the smelters want the metal and the world wants the metal. It is an amazing relationship. I cannot vouch for them enough.
When you started this company, you said it was a hybrid. It was a company based on conventional mining operations, the ones you have just been discussing, for example, and the mining services division. You have had so much going on the project front. Perhaps the mining services division has not got the attention it warrants. But you are a big believer in the hybrid model still, are not you?
Oh look, absolutely. Our mining services is core. I call it the three Cs. You heard before culture, capability, and if you do it right, you get good cash flow, and you give a good product back to the client, so everyone wins. But yeah, it is super important. We do not want to be big in it, but that skill set and that DNA is super important. I have got one underground mine. I am building another two underground mines, so I need that skill set and that capability for our own mines as well. We have got some amazing clients now with Core Lithium and I will reverse break that story. I really like what Paul Brown and team are doing. I am a shareholder and I will buy more of them. But they are doing it right and OceanaGold in New Zealand are a fantastic client.
So we will pick up more work. We do not want much more, maybe one more contract, but it is super important for the overall business unit and what we are doing and the skill set. Anywhere in resources, guys, is so tight. I have been in the game 32 years now, and it is the tightest labor market I have ever seen in my career. Wages are going up, have gone up, continue to go up, if you can find someone to fill the seat. So it is really important that we have got that skill set. I have been saying this a lot in the last month, underground productivity in Australia has fallen 25% in the last 12 months.
It is going to catch out every single producer. It already is. If you saw their guidances that all got released in August, every single gold company was 15% higher in cost structure, total spend. That is just consumables and inputs. Wait until you see the productivity factor. It is what it is, unfortunately. Gold's doubled in price in three years. People are mining twice as much material to do the same ounces. No one's grown their production. I haven't seen production grow.
It's a common theme now, isn't it, that these projects take longer to bring online than the so-called experts say. We heard Charlie Aitken said it this morning, particularly about uranium, about copper. The schedule for these projects is always longer than anticipated. Is the labor shortage a factor in that, do you think?
Yeah, definitely. It's like if you built a house five years ago, and you go and build a house now, I guarantee it'll cost you 100%. It'll be double. It's no different in mining. We're out in the bush, it's even worse. So it'll cost you double, and you've got to try and find people to go and build it and manage it and operate it and all that sort of stuff. It's really, really difficult. So you've got to have networks, discipline, use the right partners. That's why GR Engineering was so important for us at Woodlawn to refurb and recommission and obviously Pioneer Dome. Because, look, I wouldn't build a gold or a base metal plant without using GRs, and sorry if there's opposition in the room.
Do you get much cross-pollination, Bill, the ability to move your people around between projects, between the mining services division and your other projects generally?
100%. The hardest probably positions to fill in industry right now is a general manager of a mine site and an underground manager. They're both statutory ticket holders. Good luck trying to find them. It is crazy, and my wife does that for a living and can't fill roles. So having multiple mines is a real secret success. If you're a single-asset mine owner, you can't attract high-performing talent because there's only one underground manager, there's only one general manager, so you can't get promotion. Every kid wants to get promoted. Every person wants to get promoted. If you've got multiple mines, well, I've got three GMs. I've got three underground managers. I've got three processing managers. It was one of the secrets of Northern Star is we have multiple mines, and we could house talent and keep talent. But if you're single asset, geez, it's difficult.
You see it. I know plenty of those companies, and they can't hold staff.
Right. Let's wrap up, Bill, by saying, let's try and anticipate the question that's going through everyone's mind here. Where is Develop going to be in 12 months' time? What's going to drive your share price over the next 12 months?
Look, for us, and we just finished an in-house strategy we do every year, we review our strategy or develop a new one, and finished that two weeks ago. What was really evident is just execute what we've got. Our biggest value creation is what we've already got. I'm sort of laying some breadcrumbs there with this slide, annual revenue, annual revenue, annual revenue. Cash flow now, cash flow now, cash flow soon. It's pretty simple maths. You add up our whole cash flow in three years' time, when everything is built and running steady state, we'll be doing probably close to AUD 1 billion EBITDA, maybe even a touch more if the copper price keeps going, the zinc price keeps going. AUD 1 billion EBITDA. Go and look on the ASX of any business doing AUD 1 billion EBITDA.
The ASX will either give them a multiple of four if they're a bad operator, eight if they're good, and maybe 10 to 12 if they're really, really good. Oz Minerals got taken out at 12 times EBITDA by BHP. It's pretty simple maths, four or eight times Bill. That's your market cap, and there's no more shares on issue. I'll let everyone do the maths.
That's the opportunity, that gap—
Yep.
—between now and then.
Yep.
Right. Doesn't get much simpler.
No, no, and that probably leads me on to I had to put this slide back up. One of my shareholders asked me this morning. I said, "Just don't steal my thunder." I put this chart up last year, same thing. It was quite eerie when I was flying over and went, "Four years into the business, where was I at last year?" I just thought, because every day it's not like Groundhog to me, but it's like I just keep, crap, I did this four years ago or five years ago. At this junction point, we did this. We upgraded management team four years, yada, yada. I thought I'd track it against share price of how we did in the stages of Northern Star. So the first four years of Northern Star and the first four years of Develop.
Last year, it's eerily that our share prices have got even in year three, we went backwards, year four. So I thought I'd plug year five in there. Guess what? Year five's tracking very similar to Northern Star path. If we look at this on a cumulative basis, this is the important piece, is don't think you missed the journey. The first four years, that was great. That was 1,100% total sharehold return. Year five, we're tracking same as what we were doing in Northern Star. So that was quite eerie when I did that yesterday on the plane. But look at the next two or three years, guys. It was a big jump in Northern Star. It was a big growth phase. I think I've just outlined, yeah, we're growing a hell of a lot in the next two or three years.
Don't miss that next big, big leg up, and that was like a 300% leg up.
That's the cash flow-driven chapter of growth.
Correct.
Yeah. That pretty well summarizes it.
Absolutely.
Great to have you back, mate. Thanks for joining us.
Thank you.
What a way to end a lunch. Please, out the door to your right, and we will be down there with the bell. Enjoy your lunch, and let's get back here promptly for another great session. Thank you.