Thank you, Peter, and hello to everybody. Good morning, afternoon, wherever you are. Thank you for joining as ever, and your support of Metro Mining. I will, as usual, share on the screen the release that we put out this morning. Hope we can see that. Yeah. I'll walk through this. As Peter said, if there are any questions, put them through the chat function. We'll try and get to them at the end. A record quarter from a tonnage point of view. I'm pleased with that outcome, given that we had mobilized in March to try and get an early start. That effort was stymied by a large cyclone which came across the Cape.
We didn't get much damage or any damage on the site at all. Obviously the shipping channel was affected by what were quite significant waves. We were able though, I think, to come back online in April, quickly and address. I think we learned a lot from last year's. We had a similar, non-cyclone event, a similar kind of marine event at about Easter last year where we had some damage to the channel. Honestly, the damage this year was probably a bit worse. We were really on top of it quickly. We had dedicated tug crew, tug assets with a specialist plow ready to go. We were able to start barging literally in the first week of April again, steadily building up the draft in the channel.
Really not as much impact as it could have been or we would have had in the past. That's an example, I think, how we're trying to create increased resilience in our business to external weather events particularly. Ikamba was also away on its statutory five-year dry docking cycle in Indonesia. We also took that opportunity to do some maintenance on various parts of the vessel. She came back towards the end of April. We were able to get her running in May again. Probably slightly later than we had anticipated. That was partly to us to take up some diesel fuel so that we can sort of mitigate against any shortages. She had a few issues in recommissioning.
Turned out that some of the cylinders we'd replaced in Singapore, there was some faulty work on some of those. We had to repair those. That repair wasn't really satisfactory. We decided to bring her down for a shut, replace all the cylinders on one of the cranes. We have four large four-tonne hydraulic cylinders that operate each crane. Last week we took her down, replaced all four of those cylinders so that we're effectively then flushed out the whole hydraulic system, et cetera. We did actually plan a shut in July. It was just a bit longer than we would normally. We planned a three-day shut. We were shut for just over six days. That's gone well. She's now back in operation this week.
Look, if I then sort of rattle through, I think some of the things that really pleased me also about the last quarter. June we saw, certainly the first three weeks of June, we saw really proof of concept around our new operating system, and that was probably the three most highest capacity, less variability weeks with all of the system, all of the supply chain working extremely well. That was in challenging tidal conditions and some weather as well. We really saw, I think, proof of concept in those first three weeks of June. We are also notably, and this is important from a cost point of view, we are 70%, I guess, higher than we planned to be in terms of waste.
Those of you who have been following us for a while saw that last year. Our ore movement did get constrained in the second half of the year by a lack of waste, or a limitation in the waste clearing. We are now way ahead of that, and that has had some cost impact in this last quarter. It is something that I think strategically sets us up really nicely for the second half, which is always our strongest period.
I think of note as well that one of the things that our integrated planning has been focusing on, and this doesn't really come through the numbers in some senses, but it is part of our real focus on variability was grade control and the ability to take what is quite an expensive and detailed grade control program and really convert that into a consistent ore quality through to the barges and through to the shipments and customers. That has been a real focus over the last six months. That is significantly better in terms of where we mine from two or three pits at one time. Getting that blending right, getting those grades right on the ship is really important in a direct shipping ore operation like we are, to get that right. We don't have a processing plant where we can even out some of those grade issues.
That has gone extremely well, and we have added two new customers who have taken trial cargoes over the last quarter and into this coming quarter, which is really, really pleasing to see in terms of customer diversity as we grow and also as we grow our business. Notably, we have extended our port stockpile after working on approvals there. That is part of our Q1 resilience and cash neutrality drive, and that allows us to then put probably almost 400,000 tons onto stock there, if we can mine that in advance of the wet season. That disconnects our mine from our port. If the weather is sufficient, we can then continue to load ships even if our pits have got waterlogged with rain, et cetera. That allows us, particularly in March, to start and have some confidence around it.
Despite how bad the wet season may have been, we can really have some confidence about being able to load vessels, at least from a mine supply point of view. I'll pass to Nathan in a minute to talk a bit about finances and maybe a bit more about that new integrated planning and operating system. We ended, pleasingly, the quarter with AUD 24 million of cash and, from a secured debt, our debt is in US dollars. It's down to just over AUD 30 million. From a balance sheet perspective, that really places us in good shape, and we expect to be close to cash neutral, to be net cash in this strategy. I will cover off on market in a minute and talk a bit about. Look, I think just I'll make a comment here and Nathan may add that.
Look, the EBITDA margin, which we knew the market was coming into this year, and irrespective, we were targeting roughly around a double-digit margin. We're still aiming to try and hit about a AUD 9- AUD 10 EBITDA margin. That was affected, obviously, some one-off non-recurring items like the recovery from Narelle, some of that maintenance work and a little bit of scale. We were looking to try honestly to do about AUD 1.9 million-AUD 2 million in this quarter. We were a little bit down on that target. Of course, oil price flowing through. That is not a non-recurring item. Excuse the double negative. That's likely to be with us for the remainder of the year and is roughly a AUD 2- AUD 3 impact on the bottom line. Look, I think, a slightly weaker free on board netback.
I guess the main issue there was costs and scale. Look, I think, as a business, where I'm really targeting, and this was a very weak pricing quarter, was that we're still delivering double-digit margins, and that certainly was the target. A couple of things there for us to work on as we go through. Let me cover off on the sales stuff, and as always, we have a bit of a more detailed deep dive into the market on coming through. I think with the aluminum sector being strong, and this is obviously just a 12-month view on the left here, but that trend would still have been positive. You can see even with the correction that's occurred over the last few weeks, that we're seeing a very strong aluminum sector. That's underpinned by long-term trends around electrification, around lightweighting of vehicles.
The construction sector generally is still pretty weak, but we're still seeing really strong 3%, even up to 4% demand from aluminum coming through. That's mostly still flowing through to production. Indeed, the market's recognizing that China is not going to be adding a lot of capacity in aluminum production. The incentive price to bring new smelters online has got to be higher, given the capital advantages that we know exist in China. That's still a very strong positive story. We've talked about alumina in the middle here between bauxite and aluminum. That has suffered from an oversupply over the last year or so. We did see the bottom around January, February, March this year, and then a recovery roughly around that RMB 200 per ton equivalent, maybe slightly more. That's about a AUD 30 to AUD 40 increase in alumina pricing.
Look, I think that partly that's about a bit of rationalization of capacity in China. There are a couple of refineries have curtailed and shut down. I think that's partly that, we're also seeing a pull-through from that aluminum demand on the top. We're seeing China currently averaging about 46 million ton annualized capacity, which is a bit above their 45 million ton kind of cap. That's flowing through, and we're seeing increased demand out of India and Indonesia. I guess, this is all in the context of the Middle East not taking as much alumina as they would normally take. This has happened in the context of extra alumina sort of flowing around the market, trying to find a home that wasn't flowing into the Middle East. Look, I think we've seen the bottom.
We're going to see prices rising, I think from alumina point of view, that's good news from a bauxite perspective because bauxite prices also have to rise from the bottom, there's a few reasons for that. Again, we saw around that February period, March period, we saw a low in bauxite pricing and that has also sort of recovered. I mean, whether that's driving alumina up or whether it's sort of forcing it up, obviously there's an equilibrium issue here. I would argue that the bauxite price not really is in equilibrium at the moment. At the moment, there's a bit of a standoff where we're seeing currently about 70% of the bauxite used in Asia Pacific comes from West Africa, particularly from Guinea.
The freight rates from Guinea have gone from just over $25 a ton in January, that was probably a decent average over the last 12 months. That rose to about $45 per ton on a dry basis. Averaging over the last quarter, probably around $40. Certainly, we saw at the bottom of the market in February, some signs that some Guinea producers couldn't make money at the sort of low 60s. I think the Guinea price got to about $62 for the standard grade 45, that would've been a lower price. A lot of the Guinea material now is not 45% alumina. It's more like 43%, even down to 42% and 41%. The delivered pricing for those lower grades would've been probably below $60. That was challenging.
Some producers already in February when that low was there, we've only seen about an AUD 8 to AUD 9 rise so far. It certainly hasn't covered the freight cost rise, it also, if Metro is seeing around an AUD 2 to AUD 3 rise, we've got pretty short haul distances and pretty short transshipping distances compared to Guinea, they would be seeing probably $3-$ 4 type impact on their mining costs over there. It certainly hasn't risen enough to cover those costs. At the moment, we're seeing a bit of a standoff between alumina producers who've seen a bit of a rise in price, but not much. There's a bit of stock on the ground from an oversupply of bauxite over the last six months, after the Guinea government had said that they were going to restrict exports.
Unfortunately, they announced that quota or restriction and then didn't go through with it from a legislation point of view, or haven't yet gone through with it. Anybody who had excess stock on the ground, put it on a ship and got it out before the quota could be put in place. I think something's got to give here. We've seen shipments to Guinea drop from Guinea, ships to Guinea and shipments out of Guinea drop by about half over the last three months. That probably isn't enough to sort of sustain the demand. Something's going to give here. We've either got to see the price go up or supply from Guinea probably drop a little bit further. This is an interesting period, and we just got to see some of that excess stock in China start to get absorbed.
There are signs that that's getting fairly close when we sort of talk to some of our customers and the people that run the ports, and we are seeing some of that stock being taken up. Look, from a Metro point of view, unfortunately, we price our bauxite in advance. The quarter two pricing was done round about Chinese New Year in the end of February, before some of these price rises had come through. It was a pretty weak pricing quarter for us having to compete with a oversupply out of Guinea and so on. Look, we were able to agree those prices with our customers and ship them and, as I said, we were still aiming for [audio distortion] absent some of those one-off issues, we would've hit that or close to it.
We've already seen As I said, an increase, a bit of a bump there. We've negotiated prices for this quarter roughly about $4 on average higher on a CIF basis. That's about a 9% increase from where we were. Subject to obviously demurrage and freight and other issues, hopefully that will flow through towards the bottom line. We're now pretty much all the contracts for this year are scheduled, and we'll be pricing again in China probably towards the end of this month and next month. In that period, we'll see what happens to market pricing with that tension that I just talked about playing through into the market. Nathan, I'll hand over to you and maybe if you want to maybe talk through some of the other numbers.
Yeah, great. Thanks, Simon. Like I mentioned a little bit earlier, the key focus for us this quarter or one of the key focuses has really been the implementation of this revised management operating system. Which as we've spoken about previously, and especially in the last quarter of last year, was really a focus, not necessarily around capacity, but it was really about lifting the average performance and reducing variability. Naturally, you can see the sort of step change that we had in production and the consistency of that production, particularly in the month of June. Taking that variability out is not only the right thing to do in and of itself, but it really increases the operations capacity and bandwidth to be able to deal with the extra complexities, particularly that we dealt with in this quarter.
When I think about the operational context of the quarter just passed versus the year-on-year, there was quite a little bit of extra things to deal with operationally. Not only the tropical cyclone and the impact that had on the controlling depths of the river system, but the extra complexity of dealing with the geared vessels as well while the Ikamba was away. Those are all extra external things that can really impact the supply chain. With the backdrop of those extra complexities, it was really pleasing to see the Q2 record results versus year-on-year. That was really pleasing because for us, this management operating system is as much about setting what is a minimum level of acceptable performance, which is exactly where the resilience of the operation now comes from.
Naturally we're going to see ups and downs in price cycles, and the test of the business is to be able to continue to cash-generate within that context of weaker pricing and some operational complexities. From that perspective, it's been pleasing to still have strong operational cash flow in this quarter and to really set ourselves up to be able to deal with those complexities. These other non-recurring items like the geared vessels and the increased freight costs associated to that. Also, we've seen a pretty substantial impact for things like diesel pricing as well. To be able to withstand some of those more macro-driven influences has been quite pleasing. Like Simon mentioned a little bit earlier, that sort of hides in the numbers a little bit.
Where we stand at the moment in terms of our clearing and stripping performance, which we've highlighted in our monthly operational updates, has far exceeded our own expectations at the beginning of the year. When we look back to the September-October period last year where that had become a constraint and essentially crawled us towards the end of the year. To be sitting here now with that stripped horizon in front of us is a fantastic position to be in as we start to look towards what's going to be prime-time loading conditions. You can see that impact even just now within the April-June in terms of the mining versus shipping numbers. As you can see, that healthy run of mine as we prepare to go into these next-level loading rates versus the much smaller ROM we were sitting with at this time last year.
A pleasing quarter in terms of the economies of scale being there, being able to show the resilience to some external macro events. Most importantly, really setting ourselves up at this point for prime-time loading. Thanks, Simon.
Yeah, all good. There's some good operational detail in here. I think for those of you who go through it and to describe what we've been doing. Also safety stats. Unfortunately, we had a serious accident during the quarter, which involved a low-speed truck rollover. The driver was okay. Again, operating in, we're constantly trying to improve those areas. We take obviously those accidents seriously. Any what we call high potential incidents where there's effectively what we call a near miss, and we go through now full investigations of all near misses which could have caused an injury. Then we're trying to maximize statistics there. I just would also just want to call out the results of our dry screening test work, which we've been running over the last six to nine months.
It's a really interesting and important part of Metro's future as we seek to extend our resource base and reserve base. We've had really good proof of concept around taking higher silica ores and putting them through a pretty rudimentary screen. This is our backup screen on site, which we use when we take one of the larger screening units down, and we use this, what we call a scalping screen, a mobile scalping screen to do the work. We've been fitting it with different aperture screens, and we've been running higher silica materials through there.
We're getting really good proof of concept now around taking even up to, I think, our highest 19% silica material and putting it through the screen and getting a sellable product at about a 60%-65% yield and lower silicas, even up to 80% yield, to get sellable product through. This allows us now to look at those resources and say, "Right, okay, where does that allow us to convert resource into reserve?" That's a big focus for us now in terms of maintaining and extending our operating life out further. I would That's some potential announcements on that subject to competent person, sign-off, et cetera, towards the end of the year. I also just wanted to, a little bit of really nice kind of work by our environment and community team in a couple of spaces.
One was hosting, setting up and us hosting the naming ceremony for our big tug, Mandang. She's been on site now for about a year, or more than that. We hadn't had the opportunity last year for a number of reasons to formally welcome her. Mandang is the Ankamuthi name for strength, we were able to get a lot of our traditional owner groups from the Seven Rivers Corporation and the Old Mapoon Corporation, plus members of council and local traditional owners onto site, onto the boat and have a blessing and a proper welcome. It was a really nice event. A couple of politicians and other guests as well. It was an excellent kind of showcase, I think, to what we're doing up there.
The other aspects there, as I mentioned in the past, we've won awards for, or an award for promoting and sponsoring and hosting educational programs up on the Cape. One of them through the Johnathan Thurston Academy. You can see some of the graduates there from the JT Believe program. A brilliant program, obviously, sort of architected by Johnathan himself, and really a good, a really big shout-out to the team, both the teams at the school and our own team. Then a nice bit of fun there with MPA College, painting some boots for the Gold Coast Suns fans out there. Really nice opportunity for them to get involved in sport and kind of giving a Queensland footy team a real sense of the length and breadth of our state and the support they've got, particularly in some of these communities.
A really excellent opportunity there and well done to the team for doing that. Look, that's where I might stop there and take any questions, 5 million ton. Second half of the year is where we really go hard. Economies of scale come through, costs come down, tons go up. I expect that also to be in at least a strengthening price environment for us. It's the most important part of our year, for where we make all the margin. Critical. Still targeting that 6.6 million-7.1 million sort of guidance. 7 million's been the big nameplate number that we've been looking for out of our expansion. I guess what we know about June, from that first part of June and now into July, is that we've got the consistency and reliability too, and the capability to get that done.
Ikamba's back operating after her shut, I guess we're all primed, ready for that. Peter, if we've got any questions, happy to take them.
We do have some good questions come through. Congratulations on an excellent quarter of production. Some great numbers in there given the environment that's impacting current prices and contracts as well. Our first question is interesting. It's regarding critical minerals associated with Metro's bauxite, such as gallium. Is there anything else within the ore that you regard as valuable that might be worth looking at?
Look, gallium's a hard one. It's definitely there, but it really isn't something that's economically able to be extracted at the bauxite level. It's really one for our customers. Our customers who buy the material, they're obviously processing and extracting the alumina from our bauxite, and pretty much everything else ends up in a residue called red mud. That's got iron and it's got a bit of bauxite in it still. Iron and any other sort of minor minerals end up in that residue. It's really not economic for us to do that. There's not an economic case for buying our bauxite just to extract the gallium. Look, we've looked at that.
What I would say, though, is we've got on our lease, and it's part of our thinking as we move forward. We've talked a bit about kaolin in the past. Kaolin sits underneath the bauxite that we've got. We're also now looking, we've also got some quite nice silica deposits. In terms of the glass market, particularly solar panel glass, which is something that's in high demand obviously. It's a pretty low-price commodity, certainly below AUD 100. We've got now, I guess, the operational supply chain to be able to look at that. We're investigating our leases for the presence of silica and the ability to be able to extract that and get it out. There are some things. These are more slow burn, longer term issues. We're not asleep at the wheel. We're certainly looking at those things in a methodical way.
Thank you. Our next question says, "Great progress with the integrated planning and grade control. Are you planning on further customer diversification, and what value upside are you expecting from this approach?"
Well, look, the answer is yes, and it's something that we naturally should be doing anyway as we grow, we're growing the business. We talked about growing from seven million tons. We've gone from a 2 million ton run rate, from 2021 up to now, what we hope to be around seven for this year. That's already meant that we've probably added a customer or two in that space. What we need here is probably four or five core customers. The market is also evolving. I think we've now probably served 15 or 20 refineries directly over the last six or seven years. Our product is more well-known. I think in a market, a more normal market, bulk market, these things tend to run, become a bit more short-term in nature, where people have base loads, but also they maybe put a bit more onto the spot market.
I can see that happening a little bit with bauxite. I think there's some pros and cons to that. You got to be aware and use different methods to sell the product, last year we saw the use of auctions and things like that. We don't yet have a trading platform that people can trade on, I think that may not be too far away. Look, the market's definitely evolving. We're working hard directly with customers, existing customers, new customers. There are probably four or five new refineries that are either have commissioned or will commission this year on the coast of China. All of them are set up to take our product effectively, we're working with all of those groups.
I said I was really happy that we've brought on two new customers at least, taking trial cargoes over the last couple of months and this month to bring on board. Look, the push is always on. The team working very hard in China, even in a difficult market where there's a bit of oversupply. We're certainly still getting a lot of interest in working with Metro and having, I guess, the security of supply of an Australian-based bauxite producer.
Thanks, Simon. The next question is regarding the share buyback. Can you give us an overview or comment on your timing plans for that?
Yeah. Nathan, do you want to touch on that?
Yeah, sure thing. In terms of the buyback, we had anticipated Q2 for all the reasons around, particularly around weather, and obviously, the recommissioning of the Ikamba that was scheduled for May. It was always anticipated that we would have a slower start to the buyback, and look to start ramping up around this time. Obviously, in that intervening period, we've had the conflict in the Gulf and some increased diesel prices. That's just made us be a little bit prudent until we're in a position, like we are now in terms of, one, our physical security, over fuel and otherwise seeing the Ikamba being back up and running at the right nameplate capacity. Expectation at this point is you'll start to see activity from us on that in the very near future.
Thank you. Drag probably one for you too, Nathan. Item number 1.2, line three of the cash flow statement. Production costs at AUD 47.7 million are very low versus the corresponding period last year at AUD 73 million, despite increased production this latest quarter. Can you explain the large difference there?
Yeah, sure thing. Certainly as you're filling these out, it was a number that jumped out that we did some sense checking over what it is for us is there are some timing differences in there between, this is cash, in terms of how much accounts payable you bring into the quarter versus what you end with. A lot of it is price-driven in there. In terms of if you looked at the receipts, there'll be a proportional commensurate decrease in those receipts from customers as well, just due to that softer pricing and something that we've spoken about and speak to our local members about is, there is a high royalty burden here in Metro of up to 15%. You've got a bit of price-linked movement in that production number as well.
Thank you, Simon. Moving right along. Let's see. Got a few here to go. Could you please provide commentary on Metro's expectation for site costs and freight costs for quarter three?
Look, we've gone on record. The target for this year was always this $30 delivered into the market. That combines obviously our site marine costs and also our freight. We've said that that was meant to be an average across the whole year. We're not going to achieve that as an average for this year with the, I guess, impost of fuel and also some of the kind of maintenance and other things that we've had to deal with. We think that that's a realistic target, including all of those elements for the second half. $30 delivered into the market at that 5 million ton run rate is a realistic outcome. What underpins that is the economies of scale.
Effectively, going from more like 700 tons, 800 tons a month up to that sort of 900 tons per month type run rate. That's where we're looking to run at for certainly the next August, September, October, November. Those are the kind of numbers that we're going to need to run at. From a freight perspective, as we've talked about, the freight last year, we took the decision to continue to take out longer term contracts in freight. I guess, from our point of view, we do have a good sense of the market, and we felt the numbers at that time were good without being at the bottom of the cycle, but we could contract competitive rates. Look, that's stood us in a good position. These numbers, for last quarter, had we not contracted freight, we would have been in loss-making territory.
That's what put Metro into trouble back in COVID, 2020, 2021 period. It's been a strategic decision. It stood us in a good stead. We've still got a large amount of cover for this year, roughly 80%-90% for the rest of this year, and a decent amount next year and the year after. We're going to steadily layer in when we see the right opportunities, those freight contracts. What I'm hoping is that, that differential between CIF and FOB is going to become a bit more predictable. Our FOB proportion as we grow is dropping. A larger component of CIF pricing, which will show then a pretty predictable differential, and that is based upon our sort of sub $10 freight rates that we've locked in under. Look, overall, as I said, $30.
We do still have a lot of currency hedging in place. Even if the exchange rate was to bubble even further, we can largely predict that for the rest of the year as well. Look, that's our target.
Thanks, Simon. One for Nathan. Could you please provide some additional detail on the AUD 9.6 million year-to-date release of amounts held for financial assurance and performance guarantees? In particular, what drove the release and is it pertinent or could Metro be required to provide replacement cash collateral or otherwise replenish these arrangements in future periods?
Yeah, sure thing. There's a mix of a couple of things there. One just being sort of contractual structure or expiration around some guarantee timing and the majority of it being essentially release of surety out of the financial provisioning scheme. It's something that we've spoken about a little bit in the past around first prize, around the financial provisioning scheme being really reviewing our own internal processes around what can we do to reduce that surety required by beginning at the sort of liability, what can we do around that liability? The environmental team have been able to leverage a lot of hard work that's been done on implementing their progressive rehabilitation plans.
That essentially gives you more resolution or definition on the actual rehabilitation requirements there and allows you to apply some nuance into some of those liability calculators that you otherwise wouldn't be able to do. The net effect of that has been that we've been able to reduce that surety, which is a really pleasing result. Look, outside of that, I don't foresee any significant increase in that surety being required. A lot of that just depends on the mine plan that we forecast out. I think the focus for us now is essentially to find a solution for that surety, and I'm confident that we'll get that cash back into our balance sheet before the end of the year.
Thank you, Nathan. Finally, a question regarding dividends. Can you update or report on the company's plans on future dividend payments?
I think, yeah, look, I better take that. Look, I think we've got a dividend policy out there on record, and it's about distributing I guess at least 20% of cash flow after the debt servicing, et cetera. That's what we intend to stick to, absent any other kind of call on the cash. The next time we'll review that is obviously at year-end when we do the year-end tally, and we have a very good sense of also what the wet season spend is going to look like going into next year. Yeah, look, I think without making, I don't want to make any commitments. The aim, of course, is that we do paid dividends. The share buyback, I think, was a certain instrument for a certain time, and a certain market situation, and a certain sort of company situation.
If we can, the dividend will be our preferred mechanism. At this point, obviously, it depends on how we go in the second half of the year.
Well, if you can maintain the efficiencies and the numbers that you're producing now, that future's looking good. Thank you, everybody who's joined us today. It's pleasing to see that everybody stayed from beginning to end. This is being recorded, so we'll be able to send it out to you all as well. Thank you for your report this morning, Simon and Nathan, and we look forward to hearing from you all again soon.
Great. Thanks, Peter. Thanks, everybody. Thanks for joining.
Thanks, everyone.