We have the CEO and CFO of Metro Mining, Simon Wensley and Nathan Quinlin, here to discuss the highlights from the June quarterly activities report. I'll hand it over to Simon to run through, and we'll have a few questions at the end. Thank you, Simon. Thank you, Nathan.
Thanks, Peter. Good afternoon, everyone in Australia or wherever you are. Thank you for joining this call. We wanted to get the chance to present some of the key elements of our Q2 release that we released this morning onto the ASX. I might just share that on the screen. Just bear with me. This release is available on the website today, and you can obviously pick it up off the ASX as well. I look at a very positive, very positive quarter for us. We'd already released the operational results at the start of the month, but record shipments for a Q2, that's obviously our expansion has ramped up during the back half of last year, and now we're into our first full year of production at that 7 million ton rate. That's up 19% year- on- year.
The comment I made on the front page, we're obviously primed that into a pretty robust market. The price of bauxite reached record highs at the end of 2024 and has come down a little, but we were still able to, during the quarter, stack ourselves onto that high pricing environment. We've had significant price uplift over Q4 last year, which was our last full operating quarter. We had some tonnage in Q1 this year, a low tonnage. The net FOB unit revenue up about 41% to $72 per ton. That's generated along with our delivery of some very positive costs between sort of the CIF and FOB level about just under $32 per ton. That's obviously a huge amount from a margin. The leverage over margin is much greater. About a 500% increase from the same quarter last year and about an 83% increase over Q4 2024.
A very pleasing result. As I mentioned in the paper, it's really indicative, I think, of the type of cash generation potential that we've got here at the Bauxite Hills asset. Not everything went to plan in the last quarter. We did have a tropical storm around Easter time, and that did, unfortunately, damage quite significantly our channel. It's a late storm in the season after we had already done the bed leveling where we sort of clear out a channel for operations. We'd already spent quite a lot of time and effort doing that in early March. That was an unfortunate incident. That restricted our barging through the back half of May and into June. That was probably around 1,400 tons per barge that we weren't able to put on. That also affected our ability to bring empty barges back. The tidal windows were also reduced.
It's a combination of both capacity per barge and the number of barges that we were able to get in and out in any specific day. We did take the opportunity to bring forward some maintenance, and we shut down the site and the transshipping for three days to get that done. That should also enable us a bit more of a clear run during this coming quarter. Operationally, it's still a reasonable result up on last year, but we were certainly targeting probably 15% more volume this year, sort of round about that 1.8 million tons, 1.9 million tons. Let me just touch, I'll pass over to Nathan in a minute to go a bit more into the operational results and some of the financials as well, but I'll just touch a bit on the market before I do that.
There's quite a good and lengthy explanation, as we always try and do in the quarterlies. Bauxite isn't the most transparent of markets, but it's structurally moving in a good direction. Generally, there would clearly be some volatility. We have seen that over the last six to nine months with alumina pricing, as you can see on that graph. Our customers are making alumina, and this is an important factor that occurs in our market and with our negotiations. That did go up significantly at the end of 2024. There was a correction, but it has stabilized through the last quarter. At these sorts of levels, at 3,000 Chinese RMB per ton, most customers are making reasonable money. That puts the market in a relatively stable position again, albeit a bit below where you saw the levels in 2024 before the run-up.
We did see some alumina producers exiting the market in Q1, and that was really mostly inland refineries who were using high-cost domestic bauxite. A few of those have come back online, but this swing has also cemented somewhat this transition between inland domestic refineries and coastal refineries in terms of the trend that's occurring in China. Those coastal refineries have been either built or expanded, and they're all exposed to imported bauxite. Let's, and you can see that, you know, you can see that sort of occurring there in the total bauxite consumption of domestic and imported bauxite in China up until the end of May. You can see there that imported number is still, you know, that slice is still growing. What we've seen in the first half of the year, again, is a record, another record.
The fourth year in a row, we've had first-half record tons over the previous half. Indeed, just over 100 million tons has been imported. Now, you know, some of that has gone into inventory, and that's also, you know, I guess, created a little bit of context for a reduction in the bauxite price that's also sort of been driven by that alumina price reduction. As you can see from that chart, if you compare it with the alumina chart, certainly the bauxite price has not dropped to the same level as the alumina price. That's because the bauxite market dynamics are different. We've seen again that although there's been very strong imports in the first half of the year, the second half of the year is much more difficult to predict. Indeed, there'll be, I think, certainly increasing volatility again in that price.
The Guinea government has continued to exercise its rights in terms of the mining leases that it has there, in terms of asking producers to consider doing studies on refinery capacity. Some are compliant, many, many are not. There are also other, you know, other gripes that are there from the government. At the present time, and I flagged at the AGM that there might be just over 40 million tons of bauxite capacity, annualized capacity in Guinea exposed to these restrictions. That's now risen probably to around 70 million tons of annualized capacity. At some level, either some of those licenses have been canceled and others are under restrictions or constraints being placed on them by the Guinea government.
The Guinea government has also decided to exercise some rights in gaining access to some bauxite to be able to sell itself, which is obviously going to create some dissonance in the market. They've also flagged to those producers that they want bauxite placed on Guinea-registered bulk ships, which again is going to create, I think, a bit of dissonance in that market. I think we're going to continue to see, obviously, the largest traded bauxite producer in the world out of Guinea is going to continue to be quite volatile over the next, certainly over the next 6 to 12, probably 18 months at least. In terms of our own offtake contracts, as we talked about before, they're predominantly with larger, high-quality customers. Some are integrated. Some trade alumina on the market. Our bauxite goes into a combination of high and low-temperature refineries.
I do get asked this question quite a lot. The line has blurred between those technologies. The Chinese, as they have done in many industries, have sort of innovated quite considerably in the use of raw materials and in the technology development as they build out their industries. What we're finding with our customers, those that are innovative and willing to trial and blend and work with our technical teams, is that they like the high level of gibbsite alumina that we have in our bauxite. Because we have a relatively high level of quartz, our silica levels exist in both the kaolin element and also the quartz element, but our relatively high level of quartz, which dissolves at between 230 degrees and 240 degrees, if they can control their operating conditions, they can minimize what's called that quartz attack, the dissolution of the quartz.
Our reactive silica is somewhat better than the chemical silica that exists on our specification. In any case, this is an ongoing piece of work that we're doing with all of our customers. We believe we do provide a very strong value proposition to those customers. In terms of guiding price, the spot bauxite market versus where we were negotiating before Q2 and now in Q3, those contracts that we have been agreeing are about 10% below the price that we agreed through those contracts. There are also some legacy price contracts, fixed price contracts that we agreed some time ago in 2022 and 2023 that we're still having to deliver on. There's about a million tons of those contracts left to deliver through the back half of this year.
In terms of tonnage, we'll be looking at roundabout trying to catch up some of the loss that we had in tonnage in the last quarter. It's not a huge amount. We're still confident that we're tracking towards the top end of guidance. We'll be looking to produce probably around 5 million tons in the second half. That million tons will only be approximately 20% of that sales volume. Okay. Nathan, I'm going to hand over to you. Do you want to share a few comments?
Yeah. Thanks, Simon. From a quarter perspective, as you can all see from the table, a fantastic result on a margin basis, which we were all expecting given the pricing environment. Site costs have naturally been impacted by the channel restrictions, which saw reduced volume than what we had set out for initially at the start, but still some pleasing structural savings that we've seen come through that give us greater confidence over the flow sheet, particularly at this activity level. Definitely expecting to see, with the channel restriction now lifted, full realization of those scaling benefits into Q3. Pleasing to see that site margin. From a cash perspective, as you would have seen, cash balance has built up quite nicely. From a June 30 perspective, the cash balance will have been impacted a little bit by just timing of shipments.
I think we had roughly around 200,000 tons of bauxite shipped over the rails over that period. I had a fairly large trade receivables balance with our customers of around $25 million, most of which has been subsequently received. In combination of cash and the working capital, in a very good position. In addition to that, some of the highlights of the quarter, we're in a position where we've now essentially paid all of the deferred royalties that we've had. We paid $9 million in deferred royalties this period that you would have seen come through the cash flow. That will be the first time in many periods where we have fully paid out all royalty obligations. That's a big moment for Metro a nd one that we're really pleased with. In terms of other highlights, we've been pleased to be able to restructure the hedge book on the FX.
You might recall, at the end of last year, we had fairly significant unrealized losses. It's been pleasing to make sure that we haven't had to crystallize those losses and we've been able to convert some of those foreign exchange contracts that were at $0.68, we've now been able to hedge out our book for the remainder of the year at $0.63, which is, I think, sitting in a pretty good position relative to where the spot rate currently is.
Yeah. It's all good. I think, you know, a couple of other points to make, which we flagged, we have flagged, we are commencing exploration activity this year again in earnest. We did do a bit of that around some of our pits, you know, the back half of last year. We will be doing greenfield as well as continuing with that pit extension work. We are going to go and look at some greenfield stuff. North of the Skardon River, we have a fairly large bauxite tenement just on the northern side. We currently operate on the southern side of the river. It's near enough, but we'll be going in there. Just of note, we've reached some commercial terms with Profit Resources to farm into a tenement. We've got a tenement on the western side of Aurukun, right on the coast, about 180 km south of our current operation.
We've farmed into a tenement there next to our current one, and that's just effectively double the size of that tenement. That's yet to kind of be fully stamped and approved by the government, but we expect that to happen in the next week or two. We would be looking to also get some exploration done on that property subject to commercial compensation agreements with the local traditional owners, which discussions are underway. We're certainly going to start executing on that exploration task as we had flagged. I might just pause there. Peter, we usually get a few questions. Are there any questions out there that people want to get a bit more color on?
We have a few and a good audience at the top as well. Thanks, Simon. We have a question here. Would you mind talking through the drop in shipping costs that have been dropped by roughly $10 per ton versus June quarter last year? Is the June quarter shipping cost indicative for the rest of the year?
I'll take the first one, and Nathan can maybe talk about the indicative outlook. That drop is a function of a couple of things. Obviously, the FOB revenue, we ship FOB and CIF. The FOB revenue is the fully allocated revenue and unit revenue for all of our tons for the quarter. That's the number you should look at. The CIF pricing is based upon a realized pricing for the CIF sales. We did have a very slightly higher FOB price on some of those sales. The main difference, as I guess indicated in the question, has been really from two areas. One is freight, for sure. There's definitely several dollars a ton U.S. reduction in our freight costs. That's as a result of long-term contracts that we signed last year, which has taken effect in 2025 and will see us moving forward.
Also, one of the differential issues is a reduction in some penalties, which we've seen across several of our contracts over the last couple of years. What we've done there is move our contract specifications much closer to our reserve and resource grade. We're not seeing anywhere near the level of penalties that we saw in previous years. It's a function. Those are the two main movers.
Yeah, that's right. I suppose in terms of year-on-year differences, we include within that freight number demurrage as well. We did have some demurrage in Q2 of this year as a result of that April weather event. In relative terms, a better demurrage result than what we had year-on-year. I think what you're also seeing is the benefit of much higher utilization of Newcastle max vessels as well. We've really tested our transshippers and made sure that we're loading the absolute biggest ships we can. Not only is there a productivity advantage for us in loading those larger vessels, there's also a slight freight differential, which we're benefiting from as well.
Thanks, Nathan. I've got one here for you, too. One of the audience wants to confirm the trade redeemable balance of circa $25 million as of 30th of June. Would that be correct?
Yeah, that's correct. That's correct.
Now, the royalty for question is the state royalty based on FOB or CIF revenue, and how long do those royalty payments continue?
In terms of the state royalties, those payments will continue, life of mine. It's based on FOB, so freight is a deduction from those royalties.
Thank you. A comment on the silt buildup in the river. Usually, a solution, obviously, it's pretty difficult. It's something you have a lot of control over. What sort of solutions do you have for the silt buildup in the river, and how much does it impact your barging?
Yeah, it's a great question. Look, we're in a tidal estuary where you get, obviously, over the wet season with monsoonal weather patterns and, you know, cyclones and tropical storms, we can see quite a lot of water activity. Most of the seabed is sand. There's very little rock or even seagrass or anything else. It's a pretty benign environment, but it does mean that it's sort of exposed to that weather. Normally, we conduct what we call bed leveling. We actually use a plow to just sort of, it's like sweeping, effectively, like sweeping out a hallway, if you like, between the river and the transshipment area offshore. We normally conduct that twice a year with the equipment that we have on site. We use our existing tugs and a plow to do that. Normally, we do that just before the season recommences, so end of February, early March.
We also plan to do one sort of a maintenance, if you like, a maintenance leveling just at the beginning of Q4 to ensure that we get what we want there. It's a really critical part of our business. It's a shallow, it's a very shallow channel. At lowest annual tide, it's 1.8 meters deep. That obviously means that we have to load our barges so they can, on the predicted tide, actually get in and out, or they can simply get out. On the way in, the tugs are the constraint coming back in. On the way out, we try and load as much as we possibly can according to the tide.
When we get movement in that, we've got a 60 m wide channel that we have to keep, and the Harbour Master obviously takes a strong, like a keen interest in the pilotage of the tugs and barges through that channel. When we do have these incidents, we survey and then have to kind of do some maintenance on that. A late storm like this, if you remember, for those of you who know the area, sort of tropical storm didn't quite become a cyclone, came in and sort of kissed the coast and then went south. That created a sort of fairly unique set of wave patterns that moved some of that channel, quite a bit of the channel, a bit of the walls on the channel into the middle of the channel itself. We had a fair bit of activity to be able to move that out.
Now, longer run, we obviously sort of taken that, and it hasn't happened to us before in the middle of the season. We've taken that as a bit of a, I guess, a lesson and obviously we're going to take some action on that. We're looking at, I guess, how we improve that. We're looking at two things. Our tug, Mandung, which is a new tug which we got at the end of last year, is a more powerful tug than any of the other tugs that we have. We're designing a new plow for that, a bigger, more powerful plow. We're also looking into contractor bed leveling, which does occur around the Gulf of Carpentaria already in some of the other ports. There are contractors who do that work with specialist vessels.
In the longer run, we are talking with the relevant stakeholders, including the Harbour Master and Ports North, around potentially a dredging program. That would obviously, we would try and take that opportunity to probably widen the channel and maybe even make it a bit deeper if we were going to go to that level, but it does require a rather different level of approvals, and that takes some time. I'm not expecting that to be in place for this season or this coming wet season or the restart for next year. That does take a lot of study and a lot of approval time and effort, but that is something that we will almost certainly put in place at some point in the near future.
Thanks, Simon. I've got quite a few questions there with that. Another question about operations. How do you see PIT 5 shaping up grade-wise?
PIT 5, PIT 5 BH2, as it was called, does have some areas of low silica material. It does give us more flexibility in our operations. One of the reasons we had that amount of bauxite on ships at the end of the quarter was that we actually held a vessel partially loaded and then switched to a second vessel to start loading because we wanted to, we did a bit of a trade-off on a grade penalty versus demurrage, and we decided to hold that vessel there to be able to top it up with better grade that we were going to be accessing from the new mining area. That was what we did. PIT 5 is also a little bit closer than our PIT 3 and 4. What was BH1? That's a closer, it's near the airport for those people who know of the area.
That's all now, the road's been built and the mine has started in the first week of this month. That will give us some extra flexibility in managing grade control.
Okay. We'll see if something comes in. One question for you. One is just somebody wanting confirmation that $63, if this is for 100% of the sales for the dollars of calendar 2025.
Yeah, that's right. With forecast sales, we expect to be fully imaged.
Thanks, Nathan. Is there an expectation for where the cost for the site costs will reduce in this quarter as a higher production rate is achieved?
Yeah, we're certainly expecting to see a couple of dollars drop off that site cost that you're seeing in Q2. We'd like to see mid-$25 once we're fully up in Q3 expectations.
Great. Thank you, Nathan. Thank you. That brings to a close all our questions. Anything to leave our listeners with, Simon?
Yeah, look, I think this is the year where we're going to execute on the expansion. As I said, I think the market is generally going to be in our favor as it was in Q2. I think it will be at periods again, although I sense it will be volatile moving forward. I think with our cost structure, as we head towards, as Nathan s aid, sort of mid-20s and then lower again next year, that will set us in a really good position to weather pretty much any pricing environment. Strategically, that is where we're going. We've started now, obviously, the cash that's come in, we'll certainly get to a point, I think, through this third quarter where we'll be net cash in terms of the balance sheet. That's a pretty exciting place to be as a junior.
I think that's certainly where we're headed and everything seems to be on track for that.
Wonderful. Thank you for a good update on a successful quarter. Thanks, Simon. Thanks, Nathan. Thanks to our audience for joining us. They'll be hearing a major part of this webinar, which will be available, and we'll send it out to those who have registered. Thank you very much.