I'll hand it over to Simon and Nathan, and we'll have time for some questions at the end.
Great. Thanks, Peter, and thanks everyone for spending the time to join us on the webinar. I hope you've had an opportunity to have a skim of the quarterly activities report, which we put out this morning on the ASX. As normal, I'll probably share the screen and if you haven't seen it, we can then go through it on the screen. Is that coming through, Peter?
It is just loading it now, and there it is. Yes.
Great. Okay. Well, look, I think the most important thing to address upfront is the production volumes and the production and shipments in Q3 were, I think, solid at best. But the expectation, of course, was for a much higher volume. I think, obviously the reaction to the September production numbers was quite extreme and frustrating, I think for investors who've been with us for a while. I can absolutely say that from a management perspective, we are as frustrated and I guess really focused on turning things around.
I think the frustration, particularly people like myself and Nathan who have been with Metro for five years and taking it from where it was just coming out of care and maintenance in 2021 and building the business and investing in it, is that on site, I know that not many of you would have been up there, but it is a fundamentally different business. The amount of investment that has gone in up there in equipment, in people, in setting up the right environment from a weather point of view and so on. There has been an enormous amount of investment, and the frustration is absolutely real about they are not seeing that flow through in a consistent way. We had very deliberately and cautiously set the initial guidance and it is a really, I guess sort of frustrating and difficult time to then have to adjust that.
What I would say is that, the issues that we faced this year have all been quite distinct and some not of our making, particularly around the quarter one cyclone and the impact that that had. But absolutely some that could have been anticipated or that where we could have reacted more. I guess that has been a very deep reflection from the management team around how those things have occurred and what we are going to do with it. I can absolutely say that from the board and myself and right the way through the organization, there is a razor sharp focus on what we have got to do in this last quarter to really demonstrate the potential of this business. There is nothing that has happened this year, from a technical or an operational sense, that changes my view as to what the potential of this business is.
We have certainly seen periods where that 7 million-8 million ton capacity is absolutely there, and available for us. We saw in the last quarter a period through, particularly in July, where we had to operate the floating terminal with one crane. Out of adversity comes some silver linings. I think the single crane operation out of Ikamba was superb, and we were able to get much higher rates than, for example, out of the floating crane, just from that single crane. That is because of her design and because of the equipment that we have got there. We were able to deal with this lingering cylinder issue. They are very four large, 4 ton cylinders that we have had to change out. Eventually that ended up requiring a one-week shut.
We, again, were able to demonstrate that the geared vessels that we were able to bring in were able to mitigate the output from having her down. So that was, again, a positive upside to that. Look, since she has come down, we have had a good demonstration of what she can do with all of the things that were done as part of the dry docking, plus the changes in the cylinders. We have achieved record rates out of her over the last sort of month or so. So we are getting up to that 2,400 tons per hour production, which really sort of shows what she can do. What that really means when we first get a barge coming in, she is operating close to 3,000 tons per hour, which really demonstrates the upside potential that we still got there.
Those of you been investors with us for a while, understand that we've got a sandbank at the mouth of the river. We maintain that on a regular basis every six months or so, and we've changed our strategy there and we now have a dedicated tug that we use to bring in with a dedicated bed-levelling crew with a much larger plow than we've used in the past to do that. Unfortunately, just prior to that occurring in October, we did have a grounding event for a barge. That's not a serious incident, but it is a reportable incident, and it does mean that the harbour master declares a lower draft in the channel until we can clear it and provide that survey.
Over the last two to three weeks, we've been enacting on that, and we have now achieved the required depth to be able to operate at the top end of the new guidance that we've put out there. Look, I'd say, again, emphasizing that from a production point of view, it has been frustrating. It's been a difficult year on several levels, but each of those issues has been addressed and mitigated. We are now absolutely focused on delivering, certainly, for the next three months, the best possible output that we can. The second half of October has already shown that we can operate once the channel's clear and we've dealt with some of those productivity issues that affected us in September, along with the channel issue that have been dealt with, that we're now operating in that sort of 30+ thousand ton per day.
October's certainly going to be a month of two halves. First half looking a bit more like September, and the second half looking, I believe, more like how we're going to be operating. That's certainly the target. I said at every level in the company, we're focused on getting that productivity and those outputs through. The market is strong or strengthening and getting to a point where we're starting to be able to drive those margins further. Let me just touch on the market a bit, and then I'll hand over to Nathan to talk a bit about the actual financials. I think the Gulf War continues to have quite a big influence on the aluminium value chain.
It obviously affects not only fuel output and so on, but a number of the large smelters are based in that region, and so there is a significant direct impact on that. Also some of the supplies like petcoke and other things into the market come out of that region. So we've seen a quite a volatile LME price. Whilst the aluminium price has come down again to almost pre-war levels, the stock levels of metal around the world are almost at a historical low. That does suggest to me that there is probably upside in that LME price. That's certainly good for some of our customers in terms of their ability to make money.
In the alumina space, we have seen increased production out of China over the last year to combat the shortages that were in the market, and we have seen some increased capacity out of Indonesia at the same time. There is some more supply coming into the market to supply that demand. Alumina, we are seeing a kind of a split market. The overseas or traded market outside China has tightened significantly, and you can see there over the period there was greater than a 15% increase in the price on the dark line there. In China, even though demand for alumina did go up during the last quarter, there was enough supply coming on to meet that extra demand. Indeed, there has been an increase in exports out of China from a metals point of view.
There was enough supply of alumina, and you have seen a pretty static alumina price and still relatively low. That is important because a lot of our customers are long alumina. Whilst bauxite costs have gone up, Nathan will talk a bit about the impact of costs, where we have and where we have not seen impacts on cost. Certainly freight has been one area that has continued to stay high. We have seen, since really the Gulf War took off, that we have seen between $40 and $50 per ton freight rates out of Guinea, and it is still hovering in that sort of range at the moment. That is certainly 15%, 20% at least dollars higher than where it was before. That is just the freight.
The mining costs have also gone up there as they have for us in terms of diesel prices and so on. There is certainly a cost curve driver for pricing going up. We have only seen the Guinea price has gone up in that period about $10. It has not gone up enough to really drive I guess, profitability in that sector. We have seen the latest numbers coming out of Guinea that shipments are certainly down by 15%-20% from this quarter to the previous quarter, and about half of Guinea's 250 million ton capacity is currently suspended and not operating. It will flow through. There will be an impact.
Certainly, the government there has given the profitability and the utilization of the capacity there is so low, there needs to be higher prices to incentivize that to come back on, and I know the government there is focusing very hard on that. I know that we have been talking a bit about that for the last sort of six months to nine months, and it has not flowed through into legislated action yet. But there has to be a moment in this market where those costs are truly reflected in the delivered pricing into the Asia-Pacific region. In terms of our own pricing, we were able to get about a roughly 9% U.S. dollar rise between Q2 and Q3, off a low base, obviously, in Q2. But that was a bit more than how the market moved. Unfortunately, some of that was offset by exchange rate.
We got about a 6.5% increase in the AUD per wet ton, the wet ton measure of delivered pricing. We are going to see a continued strengthening in the market through to Q4. Depending on customers, we have seen a $2-$4 kind of increase through that, through Q3 to Q4. So slowly strengthening, but certainly not busting out of the range that we have seen. In terms of freight, obviously, the impact of freight is significant. If we were exposed to the spot market, we are not. Our strategy is not to be exposed to the spot market for freight. We have had a strategy of locking in contracts. You can see that we have had good contracts that we have signed up into in 2025, and that has stood us in good stead for most of the year.
We have locked in a few more contracts longer term. That will push up the freight slightly, but effectively, we are still operating well below where the market is and it is our intention to continue to take out long-term positions in freight. I might pause there and hand over to Nathan, who can talk a bit about more of the costs and margins, financials, et cetera.
Yeah, sure. Thanks, Simon. As I said from the outset, it has obviously been a frustrating quarter, particularly when we look at the controllables around unit costs, around site costs. From a market perspective, it is obviously pleasing to see that extra sort of $3 and more a ton that the marketing team has been able to achieve out of what, as Simon said, is still a difficult market. I think that has been a fantastic result, and our strong freight hedging position has then allowed us to maintain a healthy FOB margin and site EBITDA margin. Where we do have a little bit of the impact of some of these escalated freight costs will just be in the demurrage side, the demurrage exposure.
Obviously, there is going to be an inherent amount of demurrage that we incur as part of our business as we look to have some small amount of overlap between our laycans and our vessels. But those demurrage rates will still be pegged to sort of market conditions. So it will have a little bit of an impact on our FOB margin, as you can see there, where the CIF pricing of the extra $3 - $4 has not necessarily flowed straight down to that FOB margin. As I said, from a site cost perspective, that is probably the more frustrating result for us financially. There is naturally the impact of some increased variable costs, particularly around diesel. That is not dissimilar to what we had in the previous quarter.
But really what we want to be seeing there at that level of production, which is not dissimilar to the previous quarter year-on-year, is another sort of $3 - $4 a ton come out of that, if not more. Aside from the diesel, really what we've got in there is fixed structural costs where we've made an investment in the business on the flow sheet. Really what we've got there is equipment where we know that we can get better utilization and productivity out of. When we look to that Q4, we're not necessarily looking at a cost structure that's maxed out. What we're looking at is a cost structure that still has lots of opportunity to be extracting these economies.
Not a bad site EBITDA result, but at this time of the year, really what I wanted to see was something in the double figures, and us at least sort of around that AUD 25 a ton, if not lower mark around site cost. Naturally, that's going to be a razor-sharp focus from us in Q4. We've made these investments into the flow sheet. We've made sure that we've got the gear. Now we've got to make sure that we're extracting all of the value out of it. From a, I guess, balance sheet perspective, you'll be able to see that we've taken a really good chunk out of our debt this quarter, which is great. That leverage ratio continues to improve. From a cash perspective, I would have hoped to have seen a little bit more cash generation at this point of the year.
But certainly with what we're predicting in terms of Q4 with the forecast that we've got set up, the gear that we've got ready to go, and the people ready to operate that gear, I'm expecting a really strong cash generation quarter out of Q4. Outside of that, outside of the actual cash generation from the business, we continue to work on our bonding options around the FPS, and I look forward to making an announcement or providing the market with an update on that in the near term. As far as it goes when we look out towards the rest of the year, lots of cash generation opportunity for us.
I would expect at this point all of our wet season plans are still very ambitious wet season plans, particularly around some of the new screening elements that Simon will be touching on is, we're really looking forward to continuing to make investment in the screening that we've been commissioning in the last quarter. A there or thereabout sort of quarter for us financially, with some frustration about the upside that's there. But with obviously a huge focus in Q4 about time to deliver. Thanks, Simon.
Thanks, Nathan. Look, as always, we are pretty detailed and transparent about what is going on in the operation, and you can have a look there. I think we have obviously the bed-levelling piece, we have had a lot of questions about in the past, and you can see a picture of the assets that we deploy there. An interesting thing is now the use of drone technology to do the bathymetric surveys as we do that to get more accurate information that we can then pass on to the authorities to re-declare the channel. That is a cost saving. Certainly a cost saving and is a more accurate outcome. Look, again, safety, a decent safety year. I guess I would, if I, in the time remaining, talk about a couple of things just back to marketing a little bit.
Obviously, we spent a fair bit of time. It is a difficult market. There has been oversupply, certainly, into the first half of the year. But in that environment, we have managed to get two significant customers over the line to put in three-year contracts. Moving forward, it is a significant part of our sales volumes over the next three years. So I think that is a real reflection of our focus on output, product quality, reliability, et cetera, consistency, and these are all direct B2B sales. We do not tend to use trading companies in the business, and that is, I think, resulting in these outcomes. I did want to talk about the screening side of things. We have touched on it in the past, but we have been in a trial mode.
I think we have had a double deck or two-deck screen scalp, what we call a scalping screen, Metso scalper that we have had on site for a couple of years. It has really been the backup sort of temporary, when we have had sort of maintenance on our screens at the port. So that has really been its function. However, what we have been able to do over the last six months is actually trial a very wide range of materials that comes out of our resource at Bauxite Hills through that. Adjusting, looking at different screen sizes, looking at different throughputs, looking at different kind of results, and we have seen some really excellent outcomes from dry screening.
When I came into this business, I came out of the Rio Tinto, I guess, mold of everything has to be washed, and you need a big plant to be able to do it, and you need big tailings dams and all that sort of stuff, which was the sort of the kind of, I guess, perceived wisdom at the time, and that suits them, I suppose. But I always felt there was a different way of doing this, and so really looking at more at the kind of the quarrying, more flexible, more low capital, low operating cost sort of way. And dry screening obviously is what it is what it says on the tin. It is a screening without using water. And we have had, frankly, excellent results from those trials.
That came to a head at the end of the last quarter, and we were able to get to a proof of feasibility and then into an execution stage on phase I, and we have procured two larger capacity screens. One is a dedicated dry screen, so that will in a similar These are triple-deck screens, so they have additional ability to screen at effectively four different screen sizes, and we have used the work we have done on site to be able to optimize what those screen sizes should be to get the best possible grade at the best possible recovery at the best possible throughput. We are now implementing that over the next of this month. We are now, I think we have one of those screens running full time, and the second is running at half time. They will sit in the pits.
We will not incur mining, sorry, large transportation costs to transport raw ore to a central location, and then transport the reject fines back. These will sit literally right next to the mining face so we minimize mining costs, and then we can also dispose of the finer material. We are currently looking at, we are currently using a - 2 mil at the bottom end, and that is about 30%-40% of the volume that goes in. But we are getting a massive increase in quality, so we are putting up to 20% silica into these screens and getting a grade coming out at the bottom end at 11%-12.5% silica. Really the stuff at the top end of that is not saleable material. I mean, our reserve grade is around 13%.
What this is demonstrating is the ability to take material that is on the edge, on the shoulder of our DSO bauxite horizon and being able to turn, and indeed waste product and turn that into a saleable product. But this has also a number of other advantages. The ability for us to obviously de-risk those reserves, increase the quality of our product is good to start with. But that has, if we think about it, quite a massive strategic impact on the ability to now look at our resources in a different way and be able to look at a different cutoff grade for those resources, bring them into reserves on the basis of this operating proof of concept here. It enables us also to go for higher productivity. In the past, we have to obviously mine according to each specification on each ship, right?
We do not really have the ability to change or to modify the grade as we are in flight on a particular vessel. Now we have the ability to effectively higher grade our DSO and have the confidence that with the material that sits on the edge, we can then screen, and then we can actually feed that in depending on how the grade on each ship is moving. It gives us an ability to worry less about fine-tuning the grade per ship and actually move through the pits at a rate that suits us and our equipment and our productivity, rather than being constrained by grade. The other thing is, I mean, what we are doing here is removing, I guess, the very fine clay that comes with the bauxite. That is what causes the bauxite to become sticky during the wet season.
Removing that fine material does enable us to handle this product much more easily during the wet season. One of these screens is capable of operating both in dry mode and wet mode. It does have an ability to spray quite aggressively the product as it comes through the screens. That is something that we are going to trial. We have done obviously bench tests and so on, and we did a campaign test at a North Queensland quarrying operation, which has a very similar screen to the one we have bought, which was very positive. We have done some bulk trials at that quarry, and that enabled us to purchase this other screen. This screen can operate in dry mode during the dry season and wet mode in the wet season, and we are going to trial that over the next once we get into the wet season.
Procuring, storing, and transporting water is more expensive. Indeed, handling the wet fines product, wet fines reject is also going to be a more difficult proposition than handling a dry reject. Again, that is exactly why we are going to look at all of that over the wet season. I think all in all, this is a really fantastic sort of, I guess, increase in the resilience of our business. It enables us to do more things. It enables us to look at different resources, not just around Bauxite Hills, but in other places, and look at them in a different way. It is a very cost-effective way of doing this. I mean, these units cost under AUD 1 million per unit. They are very cheap to run. They are sort of sized perfectly for the type of equipment that we have there.
There you can see the four products coming out of the four screen products coming out of the dry screen there on the left-hand side. The one on the right there is the hybrid screen, which is an inclined screen, and that really comes into play when you have got the washing, the sprays coming over the top of the washer there. I think I might pause there. Peter, we are at the half hour, but as always, plenty of opportunity for questions. Please let me know if there is anything that people would like to ask.
Thanks, Simon. Thanks, Nathan. Yes. We have got quite a list of questions there, and I have some other ones that were submitted earlier by shareholders or investors, and perhaps we can summarize some. I will lead off with these first ones, and then we will go into some of the more detailed ones. Firstly, regarding production and sales outlook for 2027, would you like to comment on your view there?
Like I said, we have had a frustrating year this year. There's nothing that I've seen or done, or seen or experienced that gives me any real concern over the inherent capacity that sits within the system here. As I mentioned earlier, 7 million - 8 million tonnes is still what we believe this flow sheet can do. We're consistently increasing the resilience and de-bottlenecking through the approach we're taking. While this hasn't been the year where we've hit that 7 million target, I still have that. Without preempting guidance too much, the flow sheet is still capable of that output and we're certainly seeing the demand for our product in that range or even higher. I think that's probably where I'll leave it at the moment.
Okay. Probably segueing into this, the next question about bauxite pricing, freight, and diesel costs. How is that being affected at the margins in this current market?
Well, I think I touched on pricing. Did you want to say anything more, Nathan, than you've already said on cost and margin?
No, I don't think so. Just with respect to diesel, you'll all be seeing it yourselves at the pump, and there's still that sustained price increase. Probably not quite as dramatic as what we'd seen earlier in the period, but otherwise, outside of that, from a supply perspective, yeah, we're well set up, well supplied. Don't anticipate any supply shocks for our business for the rest of the year.
Thanks, Nathan. We have had quite a few questions regarding the share buyback. Can you comment on the timing and rationale? Where is that sitting right now?
Well, look, we had expected to be able to launch that in the last quarter. Obviously, the production numbers didn't generate the cash flow that we had anticipated. As I have mentioned a couple of times in the past, we announced that share buyback, and I think the following day, Trump launched the attack of Iran. The context in which we announced it was quite different to where both the market and, I guess, our cost position is today. I think then having not achieved our expectations on output has just held us back in terms of committing the cash to that. Obviously, the share price, we believe is significantly undervalued given the value of the business. From my point of view, it is a good time if we are buying back 5% of our share capital. The board is constantly looking at that.
If we see some strong output, I think in the next month or so, I think that does give us then the confidence. We get to a point where we are confident that we can do everything we want to do in the wet season, and that gives us that confidence. As Nathan alluded to, he is working on a couple of other things as well from environmental bonding, the amount of money we have got tied up in that bond, about how we release some of that in the business. That work has been ongoing for over a year. It has been a long-term objective of ours to get to not have our cash tied up in someone else's bank account. That would certainly increase the, I guess, the approach or the confidence of the board to launch that.
I won't give an exact timeframe, but I certainly would hope we can do some of it this year before the wet season.
Simon, you mentioned the bond liberation. Is that something that you have some control over with the Queensland Government? Is there a timeline for bringing some of that bond facility back?
Nathan, do you want to answer that?
Yeah, sure thing. For us, what we've seen in the last probably year or so, that we've been working very closely with a number of parties, particularly around insurance bonding options, which probably up to 12-24 months ago, was a very shallow market here in Australia. Providers with some assistance from us as well in dealing with the Queensland Treasury, who have spent a fair bit of time developing that as a credible option. So we're in discussion at the moment with a couple of providers on that. As you would know, I think we've got at the moment probably about AUD 25 million that sits cash-backed surety for us. That's obviously a massive focus for us. That's a significant amount of captive cash that's sitting there.
We believe that between the de-risking of the business that's happened over the last couple of years, and also what's been a really positive rehabilitation performance from an environmental perspective, that a combination of the actual liability that's outstanding and the work that we're doing right now with some of these insurance bond providers. The expectation would be that a good chunk of that will be liberated within the next month.
It's probably worth just emphasizing something that Nathan just touched on there, which is I guess as we run this business that we're making good decisions for the long term of the business. The rehabilitation, for example, that we do, we do that very close to the mining face. We're spending money on doing something that other companies leave till the end of the mine life, and we do that rehab as soon as we possibly can, to getting the waste back in, getting the topsoil and seeding. We know it's a focus for government. We know it's a focus for our traditional owners, and the way we do that and so on. It's a critical part of our business.
We put a lot of resources into that, and it's a decision that we take over and above what's the lowest possible cost of cash we can get, of cost we can get away with, versus what's the right thing to do with the business. You'll also see a mention again of the quite significant legacy assets that were left by the bankrupt Palan operation that was here 10 years before Metro started. We've been steadily dealing with that as a legacy issue to clean up that mess and to, whether that's tailings, whether that's equipment, whether that's overburden and so on, that was part of that mining operation. Dealing with that is something that, again, we've taken pretty seriously, and it gets integrated to our mine planning and our equipment allocation and all those things that we do on-site.
Thanks. Nathan, sticking with the theme of cash at the moment. One question asks, cash declined approximately AUD 7 million during the quarter to close at AUD 16.8 million. Were there any outstanding shipping receivables or other expected working capital inflows at the quarter end that might contextualize this balance?
Yeah, sure thing. It's always a difficult exercise, I'm sure, to be able to balance cash movements with an accrual basis, particularly for a business that we have 35 - 40 shipping cash flow events a year. Timing does play a large part in what that balance looks like at any given day or any given balance sheet date. As you can imagine, there's a very healthy working capital balance in terms of customer receipts. That also sits there on the balance sheet. In terms of relative movement between this quarter end and the previous quarter end, it's as much impacted by the actual production result for the current preceding month. If we compare June with September. June was, I think, an extra 120,000 tons versus what we hit in September.
So that naturally has an impact on sort of cash in bank versus net working capital.
Thanks, Nathan. Another question on cash flow statement. Production operating costs increased by about AUD 48 million quarter-on-quarter. Can you comment on that as being normalized in Q4, or is that to be expected?
Yeah. I think a similar comment in terms of how that cash flow between comparing the cash flow and the actual accruals basis. The best guide is always to look at the unit cost per ton on the year-on-year, which I think what we had up on the screen a little bit earlier around sort of AUD 30 versus AUD 25. That probably gives you the best indication through the period of those increased costs. Like we said, about 1.20 of that is diesel. And the rest of that is really what I consider to be investments in people and equipment that we need to now get the productivity from. Right. So as part of that cost increase, I think it also gives you a sense of the scale of opportunity that's still there for those economies of scale and the tons that we expect to recover in Q4.
Thank you, Nathan.
Pete, just one other thing. I think one thing that is moving significantly is also our blend of FOB and CIF sales. In the past, we have had very significant FOB proportion of our sales, and that is now moving. I think it was, I do not know, Nathan, probably over 60% or something last year
Yeah
of FOB. That through this year has moved and I think we are going to be much, much lower FOB. The shipping, when you see costs of actual costs, there are going to be significantly more shipping costs involved in there, but obviously we are then getting a CIF price versus an FOB price. The pricing will increase to reflect that. Revenue will increase to reflect that. But we are going to see quite a change in the sales mix from a delivered and an FOB perspective. That is, when you are looking at costs, just make sure that the shipping part of that will probably change quite significantly through this year, and then ongoing for the next few years, that I would anticipate almost all of our sales were going to be on a CIF basis.
Thank you, Simon. Summarizing some of the questions that have come in about staffing, which was raised in one of the announcements. Can you cover how you are seeing staffing at Skardon River, currently and into the future? And particularly perhaps in the context of Rio Tinto's commitment to develop Kangwinan as well.
Yeah. Okay. A lot there. Look, obviously we mentioned that the issue we faced in September. Just to go back a couple more months. We are a FIFO site and that has a couple of percent turnover roughly per month from an attrition perspective, a structural sort of turnover. Obviously we do what we can on that from a contractual and staff conditions and all of those sorts of things. And we are constantly working on that and seek feedback from our teams on that. We put through a pay rise in July. And that was obviously well-received. But the context around the East Coast mining with coal prices having rebounded a bit is there is a strong competition for people. And so we started to see a little bit more attrition.
But the main factor that affected us in September, which was sort of I guess a month where we had both the bed-levelling and the productivity issue, was to do with absenteeism. We had a bout of virulent flu and COVID sort of come through the site. In context, we normally plan for about a 10%, I guess, absenteeism rate through our normal crews. That bumped up to almost sort of 30%-35% over a period there. That's normally, and has proven to be relatively short-lived, so that's good. We are working a lot more on, I guess, the strategy to retain our people and get more people in.
That's always an issue for, one, a FIFO site, two, a very remote site like ours as well. We're obviously, there are no other mines around us, other than the Rio Tinto mine, which has a different employment basis. I guess that's the bit of the context. But the ability for us to deal with that, it's hard to react to a kind of an instantaneous set of events like that. We are working on the longer term stuff, and we're changing some strategies there, certainly, to be able to retain and attract new workers. One thing I would note is we did implement this year a staff share saving sort of scheme, and we're doing a lot of work on the camp and the facilities there as well during the year and the forecast for the wet season.
As opposed to the Rio Tinto mine, I might address that more broadly too, which is, look, I think Rio Tinto have been operating in Weipa for over 60 years, and there's been a base at Weipa there for that long. That mine site at Weipa will close in the next couple of years, and as will the Gove bauxite mining site as well. Rio Tinto's operations are starting to consolidate, and the approval that they've given is to, over the next sort of six years, expand what was called Amrun, the Amrun mine south of Weipa. The extension is called the Kangwinan project. They're going to move from a total 2025, they shipped and sold 52 million tons of bauxite, either to their own refineries or to the market.
As I said, Gove and Weipa will close and this new mine, they've said will operate at about 44 million tons. There's a net decrease in production out of Rio Tinto, but it will be all consolidated into one mining operation at Amrun. There will be then activity there, to construct, I guess, the new facilities to go to that 44 million. There will be, I guess, considerable construction activity. But when I look at the net-net operating workforce, it's probably going to be lower than what was at Gove, at Weipa, and at Amrun over the last few years. There'll be a net reduction in I think workers and that's obviously economies of scale and what they're trying to get that through that one mine site. Look, I think over time, there will obviously be a construction workforce that'll be a draw there.
But as they leave Weipa, I think that is a bit of an opportunity for us. There are lots of engineering and other types of services out of Weipa. So we would certainly look to try and take advantage of the fact that that Weipa, the base that has been set up at Weipa for all of these things would be more available to us to conduct engineering and transhipping-type operations. People will know we regularly take over the wet season our assets to Weipa to sit in a protected anchorage there and do maintenance in Weipa when we can. So, we think that is going to be an interesting opportunity for us. The workforces are quite different, so different contract bases, different shift rosters, different types of FIFO versus residential, et cetera. So, there obviously is an overlap, but it is not as direct as people may think.
Thanks, Simon. Perhaps a comment on the potential Glencore Rio Tinto tenement transaction. How are you seeing that impacting, or whether or not it will, for Metro Mining?
Look, I think, yeah, this deposit at Aurukun is, I think 440 million tons of beneficiated bauxite. So in Metro terms, I mean DSO, the in-situ resource there is over 700 million tons. It is probably the last deposit of any size in Cape York, a bauxite deposit in Cape York capable of sustaining an independent mine. I think that that is an important fact. The transfer from Glencore, I mean, that deposit has been, I guess, hand-balled from one multinational to the next over the last sort of 50 years and still has not been developed as an independent mine, which was what was foreseen by both the government and by the traditional owners and residents of Aurukun and the southern part of this Weipa bauxite plateau that has not occurred. I think that Glencore were awarded this lease in 2014 and still have not developed it.
I see, given the announcement from Rio, they are focusing on the resources in the northern part of that deposit. They have already got 1.7 billion tons of beneficiated resource there. So, I fail to see how adding the Aurukun lease, I mean, that is already at 44 million tons a year. That is almost 50 years of production that they have already got without the Aurukun lease. So, I mean, I really do not see how this benefits the state of Queensland or tying this resource up with a monopoly supplier there, does not really, I think, do the best thing for the bauxite deposit for the people of Aurukun or the people of Queensland. So I would expect the Queensland Government to be having a very, very hard look at this, the approval of this transfer. They have two ways in which they can affect that.
One is through the state agreement that underpins the development of Aurukun, and the Minister of Resources also has his normal ability to veto a transfer of a mining lease. I think there is a number of factors here that do not really pass the pub test, and I think the Queensland Government ought to, and I believe that they are certainly thinking about having a very, very good look at that transfer.
All right. We have probably covered most of the questions. It was pretty in-depth discussion here today. Simon, just a quick overview and a quick summary of the coming months.
Look, I think as I said earlier, it is a disappointing run this year. Frustrating, not just for investors, but for us here as management. What I can guarantee is that there is an absolute laser focus here on getting the best out of this last quarter. We are absolutely ready to take advantage of any shipping opportunities that occur in January. We understand that this sort of super El Niño might provide drier and later wet conditions than in the past. So, the weather gods may give us more opportunity again. So look, it is about that, getting as much out of that this year.
I hope that we can really demonstrate the second half of October and November and December, really what this operation can really do and that really sort of should show what we are capable of, not just from a production point of view, but also from a cash generation point of view as well. I mean, that is our focus. I think the market is generally heading in a positive direction. I think the screening work that we have done just provides another dimension to our ability to convert unsaleable or resource into a saleable product and that bodes well for expansion of our reserves and resources over time. So, I think a number of positives there, along with the challenges that we have discussed.
All right. We will wrap it up there. Thank you, Simon. Thank you, Nathan, for the webinar to the audience today. There are a few questions that might still remain. But for those that want them answered, please send those through to peter@nwrcommunications.com.au. I will see that Nathan and Simon get them, and they will make sure to reply. This will be recorded, or is being recorded, and we will have this available for distribution sometime later, either this afternoon or first thing in the morning. Thank you very much for your attendance.
Great. Thank you.
Thanks very much.