Thank you for standing by, welcome to the Sandfire Resources One-Page FY 2023 Results Conference Call. All participants are in a listen-only mode. There'll be a presentation followed by a question-and-answer section. If you wish to ask a question, please press the star key followed by the one on your telephone keypad. I'd now like to hand the conference over to Mr. Jason Grace, acting CEO. Please go ahead.
Good morning, all, welcome to Sandfire Resources' December 2022 half-year financial results webcast. Firstly, I draw your attention to the important information and disclaimer before we move on to our strategy and values. Over the last year, Sandfire's execution of our strategy has delivered an excellent portfolio of high-quality operating mines, development, and exploration projects. We have transitioned from being a single-operation WA miner to being a genuine international copper producer. Our values of honesty, respect, collaboration, accountability, and performance are key to Sandfire's culture, and they guide our activities across every part of the business.
When we consider that Sandfire is one of the largest copper-focused miners listed on the ASX, that there is an inevitable increase in demand for copper in the future driven by the global energy transition, that we have a dominant presence in four mineral provinces that have excellent organic and inorganic growth opportunities, that Sandfire has proven capability as an explorer, developer, and operator of copper mines, and importantly, on the back of the MATSA acquisition and development of Motheo to a 5.2 million ton per annum capacity. Sandfire is one of the few copper miners that has a firm production growth pathway over the next three years, growing to around 110,000 tons of copper and over 80,000 tons of zinc production per annum.
If we look at group production for the first half, the company delivered strong operating performance during what was a transitional period for Sandfire, with a focus on continued optimization of the MATSA copper operations in Spain, the wind down of the DeGrussa copper mine in Western Australia, and the final stages of construction of the Motheo copper mine in Botswana, which is now on the cusp of commissioning. During the period, overall metal production was in line with the company's expectations, with copper production just over 48,000 tons and zinc production over 39,000 tons for the period. Lead, gold, and silver production also remain in line with mine plans and guidance.
Looking out to the full year, Sandfire is maintaining the previously stated group metal production guidance, noting that in line with the December quarterly update to the market, due to mine plan changes at Magdalena and the deferral of copper productions to the second half, we expect MATSA production for FY 2023 to be at the lower end of the 60,000-65,000 tons guidance range for copper, and also due to the transition to oxides stockpile processing at DeGrussa in mid-February, no further formal guidance is provided for DeGrussa.
The first half of FY 2023 has certainly been about operational and also balance sheet transition. A number of these headline numbers have been pre-released with the December quarterly results, I'll run through them here. Sales revenue of $431 million came from 46,000 tons of payable copper production and 33,000 tons of payable zinc production at a price of copper, $8,100 on average, and zinc of $3,000, with spot above those levels at the end of the period and also post that into January and also February. A pleasing operations EBITDA, as previously advised of around 40% margins. After depreciation, amortization, a number of other costs, and international costs, I'll also cover some of those later on in the presentation. We've recorded a $27 million loss for the period.
We are concentrating, of course, on not only the transition of the balance sheet, but also the transition of operations. As we are continuing to optimize the operations at MATSA, we are of course, building our new operation at Motheo in Botswana and looking at the wind down and closure of DeGrussa in Western Australia. In Motheo in particular, construction of activities are nearing completion. There is commissioning ore on the ROM pad, and in fact, the primary crusher has been commissioned during the month of February.
The stock, we'll see later on in the presentation where Jason will cover some of the update in terms of Motheo, and we expect Production is scheduled for the first part of the June quarter, which will be very pleasing for the company and the team to achieve. Our global opportunities remain, we of course, are very conscious of our holdings within two of the world's great copper belts. We've recently announced some very pleasing results in terms of the San Pedro discovery extension of Aguas Teñidas, a new zone of copper and zinc mineralization just 100 meters away from existing workings. We'll also shortly commence some drilling at Magdalena with some similar effect. The initial 400 meter strike length has been identified.
Thanks very much to the MATSA geology team on building their geological knowledge of the area. An untested prospective horizon around Aguas Teñidas mineralization has also been newly identified and is interpreted to be around 2 kilometers in extent. Looking at some comparisons, certainly within the operating results. Firstly, in terms of EBITDA contribution. You can see here on the left, DeGrussa around $80 million of operating EBITDA, and MATSA contributing just under $95 million of operating EBITDA prior to exploration and also a small impairment.
The exploration evaluation, as we're all aware, Sam , one of Sandfire's key parts of our strategy is across the two significant copper belts, and also looking in Botswana and Spain, and also across Australia and the U.S. $20 million of expenditure during the period, including some of those very pleasing near mine results. Impairment. A small impairment in terms of balance sheet, and then some corporate costs and of course across the different operations, brings us from an operations EBITDA of just under $175 million down to a group EBITDA of just under $136 million for the half. Looking now at a reconciliation or waterfall of NPAT. From that, relatively minor NPAT loss, adding back depreciation, as we can see.
Importantly, that is taking some of the tail end of DeGrussa, as of course we're aware in terms of the wind down of DeGrussa and eventual closure or sale. Is also importantly bringing on the depreciation amortization of MATSA, which is over an initial period of around 8 years. It's relatively accelerated in my view, depreciation amortization rate, particularly in the early years prior to us continuing to optimize the ore reserve and mine life at MATSA. Net financing costs possibly look a little high. $9 million of that is non-cash accounting expenditure in terms of the FX losses that are booked on things like at MATSA in terms of deferred tax liabilities, rehabilitation, and other liabilities that are euro-based and are converted through to the reporting currency.
There is a non-cash number in there of $9 million. Just out of interest, up to June last year, there was a profit at that line of around $20 million. Tax, $5.8 down to a group EBITDA of, as we said on the previous slide, just under $136 million. Adding back those other, those other areas that I talked about on the previous slide, impairment, exploration, and corporate, back to reconciled back to just under $175 million of operating EBITDA. Very importantly, also, cash flow to provide it as we did in the quarterly, a waterfall and reconciliation between opening cash at July and closing cash at December. As I say, these are pretty much the pre-release numbers.
We can see from left to right, we talk about generating operating cash flow and equity. Also, the proceeds of the equity raising the MATSA Motheo drawdown of $110 million during the period, and we'll draw another $30 in the next month or two. Debt repayments across both the corporate facility and also pleasingly, repayments at MATSA, which also continued after the end of the half into the end of January. Exploration expenditure, capital $114 million at Motheo and $44 million at MATSA. Also at the back end of this waterfall reconciliation, we can start to see the impacts that we've talked about for a number of months around the balance sheet transition for Sandfire.
Income tax elevated in terms of cash outflows due to $30 million being from the prior period relating to DeGrussa's high profitability in the prior period, and also into other, just under $20 million of DeGrussa impact in terms of credit to wind down at the back end of the sulfide mining operations in particular, and sulfide mining, which finished in October of 2022 for closing cash, as we note there. Importantly, looking at our facilities and hedging, as I said, we've repaid the MATSA facility in around 12 months. We've repaid the MATSA facility down from $650 down to $452 as at the end of January, making that $80 million repayment, as we mentioned, at around the time of the quarterly.
We've also repaid in full the corporate facility, which began at AUD 200 million, and then the final payment of that was made at the end of December for the final AUD 50 million or $33 million. The Motheo facility certainly touched on, and is repeated here, $140 million drawn in two parts, October and December, during the period of $55 million each. We are quite pleasingly well progressed in terms of our discussions with the banking group and what is likely to be an expanded banking syndicate.
We thank very much Société Générale and Nedbank for their support in that first part of the $140 million facility, and that's been very, very useful in terms of our ability to fund this operation and to get production on time and on budget. It's been a big part of the effort and the team effort that's gone into that. We are, as we've flagged before, looking to upscale that $140 million facility to something around a target of $180 million-$200 million. That's certainly the discussions that are ongoing at the moment within that range. We may also add a working capital facility in terms of month-to-month turnover of revenue and creditors.
In total, we may look at a facility in total of around AUD 200-220 based on a turning over working capital facility there as well. Still to be advised. We'll certainly update the market as we're aware of more progress towards that target. The hedge book is restated here in terms of the remainder of the financial year, and it's very much the numbers that we put out in the December quarterly, with some copper protection, the rest of the financial year and also some zinc protection. Our hedge book also goes into another approximately 18 months on top of that in terms of copper and zinc hedging. We are QP hedging at DeGrussa and also at MATSA.
As I said in the earlier comments, this has very much been a period of balance sheet transition, and something that we've certainly kept the market abreast of as we've gone. There's been a focus on a period of transformative growth and a balance sheet that needs to support that transformative growth, and transition from a business that has been almost entirely West Australian to be almost entirely international. Across an operation that is optimizing in terms of MATSA and also a brand new operation, of course, at Motheo. At MATSA, we have also kicked off in February the opportunity to resculpt the future debt schedule that is based off Sandfire's first mineral resource that was based mineral resource released last year, and also our first ore reserve.
That drove our mining schedules and through to always the intention of a potential resculpt in terms of the remaining 452 million. I'm glad to say we've kicked it off in February, and we'll of course keep the market up to date in terms of what we can achieve in terms of that resculpt probably into the next quarter. I talked about the balance sheet transition in terms of particularly back end of last year, the DeGrussa wind down relating predominantly to the end of mining sulfide at DeGrussa and the AUD 30 million of additional tax payments relating to DeGrussa from the prior financial year. Those are now behind us, and that has been a pleasing part of certainly that first half term balance sheet transition.
Into the second half, our balance sheet transition is more around the debt side. The MATSA resculpting, the additional Motheo facilities, and also just making sure that our balance sheet is well-positioned to support all reserve growth, exploration, and development programs. We, of course, hope to return shortly back to dividend payments. At the moment, we have continued to pause in terms of a nil interim dividend, which I think is well understood given the position and the transformation of the business, but we do hope to return back to our dividend-paying position that we are so proud of over the last few years. Moving on now to an update on the Motheo copper mining in Botswana. Firstly, as an update on the development of the Motheo 3.2 million ton per annum project.
Construction is nearing completion and continues to proceed on schedule with first production expected early in the June quarter. With over 1,700 personnel, construction personnel on site and the operations team now fully recruited, commissioning is now in full swing, with over a quarter of a million tons of ore on the ROM pad and crushing of the first ore to the stockpile achieved on the 21st of February. In addition to this, Sandfire has also progressed the 5.2 million ton per annum Motheo expansion project with the environmental and social impact assessments submitted to the Botswana Department of Environmental Affairs. The ball mill was delivered to site in late December. Engineering design for the 5.2 million ton per annum expansion is now 90% complete, and the ball mill civil contract has been awarded, with work commencing in January 2023.
As Matt touched on earlier, during the period, the $140 million Motheo project finance facility was executed during the period, with the first two tranches received during the first half and the balance to be drawn in the March quarter. Stepping back to progress at Motheo. Subsequent to the end of the first half and following on from our pictorial update to the market on the third of February, we continue to be very pleased with progress, with first production now just a matter of weeks away. The construction and operations team at Motheo just continue to kick goals with a number of key milestones achieved. First and foremost, the site achieved an outstanding safety milestone with 4 million hours lost time injury-free achieved on the eighth of February.
I was fortunate enough to be on site when this milestone was achieved, and as a leadership team, we took the opportunity to shut down the construction workforce to celebrate this performance and also to reinforce the importance of maintaining a strong focus on safety through to the end of the project. Mining of the T3 open pit also continues to perform very well. We continue to maintain our position of being ahead of the feasibility mine plan and schedule. All power infrastructure is now 100% complete. The site was successfully connected to the Botswana electricity grid on the 7th of February. Most recently, the primary crusher was commissioned on the 21st of February with first oil crushed and placed on stockpile, as you can see from the images shown on this slide.
Looking forward, following the completion of construction of the comminution, flotation, and concentrate filtering circuits, we expect to commence plant production during April. Looking at construction and development capital. Not only is the project tracking well from a progress perspective, but Motheo development also remains on budget. The total estimated development capital for Motheo remains at AUD 397.4 million, and this includes AUD 47.9 million for future development costs for the A4 infrastructure and the 5.2 million ton per annum plant expansion. Please note that the AUD 71.9 million shown here includes AUD 24 million of pre-approved capital. Life of mine capital is estimated at AUD 499 million, or maintained at that.
As at the 31st of December 2022, the company had invested approximately $280 million of the total $397.4 million of development capital. In closing, firstly, I'm very proud of Sandfire's team or the Sandfire team's performance over the first half of FY 2023. As I touched on early in the presentation, this has been a time of great change for the company, with a focus on the continued optimization of the MATSA copper operations in Spain, the wind down of the DeGrussa copper mine in Western Australia, and the final stages of construction at the Motheo copper mine in Botswana. At the same time, the company has also made a significant board and leadership transition.
As we prepare to welcome Brendan Harris into the team in early April, I would like to sincerely thank the Sandfire team for their support and hard work, all of which has positioned the company for great success in the future. I would also like to reinforce my points from the start of this presentation, which is again to remind everyone that on the back of the MATSA acquisition and the development of Motheo to a 5.2 million ton per annum capacity, Sandfire is one of the few copper miners that has a firm production and growth pathway over the next three years, growing to over 110,000 tons of copper and over 80,000 tons of zinc production per annum. I will now hand back to the moderator for Q&A.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. The first question comes from Lyndon Fagan from JP Morgan. Please go ahead.
Thanks very much. just wanted to check in on the, operating cash flow and the tax specifically within it. The $57 million, if we take out the 30 of catch-up tax, can I just confirm that that all relates to DeGrussa, and that the depreciation that you're reporting at MATSA is acting as a tax shield?
Partly Brendan is Lyndon, sorry, is the answer. In addition to the 30, there are normal tax payments, provisional tax payments made both at MATSA and also at Degrusa. There is some shielding in terms of depreciation, allowable depreciation, but at MATSA you don't get the tax break on the uplift on the acquisition, and that's where the DTL comes from.
Right.
Partly is the answer.
How should we calculate cash tax at MATSA, given that you don't get that M&A benefit for the uplift?
I'll take that on board. I'll come back to you maybe in terms of when we do our guidance numbers, I think might help.
Okay. No, thanks for that. The other one, just is there anything you can say about Black Butte in terms of where it's at? Thanks.
Thanks, Lyndon. Jason here. Where we're at with Black Butte. That project is doing two main activities at the moment or the team over there. Firstly, we are continuing to defend the legal challenges that relate to our mining license and also our water rights. Importantly to note that we've now received the granting of all the water rights that we require to develop the mine. That's another important milestone that was achieved late last year in the project. We continue to go through the process there around the mining license. We're doing that in a two-prong approach. We're working with the regulators to close out any gaps that we've had in terms of the process that was taken around granting the mining license.
Secondly, we're going through an appeals process there as well on the legal challenge to the granting. Anticipated timeline of those things, it's always very hard to, if you like, estimate that. We estimate at this point in time that we should be close to having a much better position on that towards the end of this calendar year. At the same time, we're also doing work on adding value to that overall project. We're currently undertaking a pre-feasibility study on the Lowry Satellite Deposit, which is roughly about two kilometers away from the Johnny Lee deposit, which is a subject of the previous feasibility study there at Black Butte.
We've completed a resource drill out on that, and we've started mining and also, overall project studies on that, and we expect to complete that work probably in Q1 of next financial year.
Thanks for that.
Thank you. Your next question comes from Kaan Peker from Royal Bank of Canada. Please go ahead.
Hi, Jason, Matt and team. Just wondering if you could provide an update on ground conditions at MATSA. You know, the poor ground conditions have they continued over the quarter, and have you been able to access all from lower areas? Thanks.
Thanks, Kaan. Look, overall what we've seen currently in this current quarter, we have seen an improvement, particularly at Magdalena, and that's where the only real issues that we've had, say, in the first half of last year. We are opening up and extending development into new areas, and we are seeing that there's an improvement in those ground conditions in the new areas there as well. We're working through it, and we do expect, if you like, copper production to lift on the back of higher grades. We are working towards improving or increasing production rate, particularly at Magdalena. I would note that Aguas Teñidas and Sotiel, there are no material or even real issues there with ground. That's what's taking some time.
Particularly around, we are making provision there in terms of making sure that there's joint investment and in renewable energy sources going forward for the long term for MATSA as part of our ESG commitment. That's probably taking a little bit longer than expected. Certainly any benefits that we expect to get from this new power agreement will actually be backdated to one January.
maybe, just to follow up, the quantum of benefit on costs of power?
Yeah. Yeah. We're still working through those at the moment. We're limited in terms of what we can disclose just from a basically a confidentiality perspective. We will provide the market on regular updates as we go through and as we start to realize those benefits.
We did put some of that consideration into our guidance in terms of cost guidance as we put out in December.
Okay, thank you. I'll pass it on. Appreciate it.
Thank you. Your next question comes from Daniel Morgan from Barrenjoey. Please go ahead.
Hi, Jason and Tim. First question is just to follow up to the question by Lyndon on the tax shield at MATSA, just wondering if you would have to hand what the book value of the assets that you acquired is as maybe a clue. Obviously, we know the acquisition costs. Thank you.
Yeah, I can provide. I don't have them right in front of me, Daniel, and best that I'd provide them properly because there isn't a breakup, of course, between different types of assets and liabilities and then deferred tax liabilities. I'll grab those and make sure you've got 'em.
Okay, thank you. Yep. Just following up on Motheo, how does Motheo look as it ramps up both physically and financially? When is first concentrate expected to be shipped, and when might commercial production be declared? Thank you.
Look, Daniel, we are rapidly approaching production there at Motheo, and the team's doing a very good job. We expect that we'll commission the full plant in April, and we will expect once that plant is commissioned and operating continuously, we estimate that we'll have first concentrate production basically within 14 days of that. In terms of first shipment, that will depend on the ramp-up to operations. At this stage, we are planning on potentially one shipment there very late in this current financial year.
Right. Okay. Thank you very much.
Thank you. Your next question comes from Levi Spry from UBS. Please go ahead.
Good day. Thanks for the call. Just an operational one for Jason, please. The uplift in copper production at MATSA in the second half, can you just run me through the drivers there? A bit of a recap, I know, but grade throughput and recoveries to get you to, I think you're saying now the low end of guidance. Just remind us of that, please.
Yeah. Look, if you look at it, we originally for the year forecast that there was rising grades, particularly with zinc and to a degree, copper towards the back end of the year. That was exacerbated by some of the ground conditions that we saw in Magdalena affecting access to higher copper ore, particularly in half one, and in particular, the second half of Q2 or the December quarter last year. What we haven't seen at this point in time, we've started to see that overall production at Magdalena has been impacted by that. Access to those higher grade areas is now deferred to the second half. We will see particularly rising copper production on the back of access to that ore.
We do see an underlying improvement on the back of higher grades there, particularly in the mill on recoveries. There are some improvements, and the team is working on a very important project at the moment on recovery improvements. We have factored in some of those improvements that we're already seeing in the plant and in the very detailed test work that we've done.
Okay, great. Thank you. Then just on MATSA, talk about cash tax, all that sort of stuff. In terms of resculpting the, the debt, how far away is that? What needs to happen?
It's just a little bit of a process to go through in terms of updating the models, which are all done, and working through that process. I would imagine it will take a couple of months to work through a process to the point of being, you know, agreed and announced. We certainly expect that during the course of the June quarter.
Okay, great. Thank you. Last one, yeah, the question on the Black Butte being a bit of a sleeper in the portfolio. Like, is there any angle with IRA and things like that? Has it crept up the priority list? Are you in talks with anyone on those angles?
No, not at all. Look, the next stage on that project for us is we need to complete the studies work on Lowry. Right? We need to progress with basically, you know, defending our, basically defending the mining license.
We'll actually strategically look at that in more detail as we get a better line of sight on what that project looks like for long term.
Roger. Thank you. Thanks for your time.
Thank you. Your next question comes from Sam Berridge from Perennial. Please go ahead.
Good day, guys. Just trying to reconcile the gap between your operating cash flow and your EBITDA. If I include your interest charges in operating cash flow, which I see that's in the investing cash flow line, but assuming you stick it back where it usually is in operating cash flow, you get to -$35 million versus EBITDA of $135 or whatever it was. Just within that cash flow waterfall on page 10, are there any chunks of that which aren't included in the P&L?
Yes, Sam. I'll do my best to answer it. In addition to the cash flow on 10, you probably say there are some elevated receivables. There are some other balance sheet style movements that do impact cash. We do have an elevated level of receivables that will have some impact there. I'll also draw your attention to the cover note announcement in terms of the ASX release this morning. Does talk through also the impacts on operating cash flow of some of those elements that I went through, including tax, receivables, timing, other. There are a few other measurements in there in terms of getting back from operating cash flow back to an EBITDA measure.
As we reverse out a couple of those elements, including exploration, the operating cash flow sits at about $60 million. It's a comparison of that back to EBITDA, which is effectively gonna be more balance sheet movements around receivables.
Yeah. Okay. I was just sort of curious because there's not a working capital movement sort of chunk within that cash flow waterfall. I suppose as you say, it can be reconstructed from that earlier stuff you're saying.
Effectively, if it sits, yeah, it can sit back in that. Correct. If you've got not only elevated receivables, but potentially if you've got elevated concentrate stocks, the elevated concentrate stocks impacts EBITDA because you haven't sold it, therefore you haven't unlocked the profitability from the stockpile.
Yeah. Gotcha. Just finally, just confirming that the QPE adjustments that does go through the P&L, so that is captured in that EBITDA figure.
It is correct. It is in the P&L. Yes, that's how we map it. It's in the cash flow there. It's also in the EBITDA numbers.
Yeah. Okay. Gotcha. Righty-o. Thanks very much.
Gotcha.
Thank you. Your next question comes from Ben Lyons from Jarden. Please go ahead.
Good day, Jason, Matt Crowe, et cetera. The first one's on Motheo. Fantastic performance, guys, with the delivery of the development ahead of schedule and ostensibly on budget. I think I heard you say in the preamble you've now got a quarter of a million tons of ore sitting on the ROM. I guess all of that gives you great confidence for your expected production profile as we look into fiscal 24. As the market sort of turns their mind to the potential production from this asset over that period, just wondering if there's any kind of major tie-ins, shutdowns, et cetera, to be aware of over the initial, call it, 12 months as the concentrator ramps up.
Hi, Ben. Thanks. It was good to see you on the trip to Motheo there recently as well. Looking out to FY 2024, there are no major tie-ins other than the tie-in for the ball mill, which is the 5.2 million ton per annum expansion. We expect that that will happen very late, from memory, in the calendar year. As we've almost designed the plant for this to happen almost from the word go, you know, it's not gonna be a couple of weeks. It's more like days in duration.
Excellent. Thanks, Jason. Maybe just one that hasn't been talked about yet. Is there anything you can say about the process you're running for the potential divestment of DeGrussa?
Look, the only thing is there that we're advancing, there is interest in the DeGrussa assets. We are working through that process. We would envisage at this point in time that we'll probably look at concluding that process around about the middle of the year, the calendar year.
Okay. Thank you. I know there was a bit more wind down style expenditure that was captured in the result. Are we expecting a little bit more of that cash outflow to come through in future results, or is that pretty much dealt at this stage?
That's pretty much done DeGrussa wide. DeGrussa's moved onto those oxide stockpiles. It doesn't have the element, of course, of mining costs like the sulfide does. It doesn't really have that closure element in terms of creditors. It's more a month-to-month processing costs, energy costs and salaries. You don't really have that working capital movement like you do in the normal operations. I'll just add, Ben, as well, in terms of Motheo, the numbers we currently have out are the feasibility study, combined feasibility T3, A4 numbers. When we get to releasing guidance in July this year, we'll release guidance, of course, for the next financial year, and that'll be more specific into next financial year in terms of obviously more detail around production parameters and guides.
At the moment, we've got the feasibility numbers out there in terms of annual future copper production from Motheo.
Yeah. Awesome. Thanks for the detail, Matt. Since I've got you hammered through those waterfall charts, and I might have missed it, but there was a bit of a blowout in trade receivables on the balance sheet. That had a bit of an impact on your working capital, and obviously that flows through to the cash flow, as a few people have mentioned on the call already.
Presumably that's just a end of period timing issue on concentrate sales or the like. You know, given that we're at the end of February, I assume that that's basically already been unwound and sits in your cash bank account at the moment.
Yeah, correct. It does wash through quite well. We don't tend to have major receivables movements outside of commodity price at MATSA. MATSA sells almost continuously. But we have had some of those. You're right, it washes through in the first part of the following quarter. Subject to where it sits, of course, at March, we would expect a net benefit in terms of receivables washing through. There's also an increased element in terms of copper pricing, of course, at the end of the period. Some of that uplift we'll also see into the second half of the year.
Yep, got it. Thanks very much. Well done, guys.
Okay.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We will now pause for a brief moment for more questions to be registered. The next question comes from Matt Greene from Credit Suisse. Please go ahead.
Hi. Good morning, gents. Hope you're well. Matt, if I could just ask on the hedge book, you touched on there just the elevated pricing at the end of the period. Just looking at slide 11, about 33,000 tons at about $3.95 a pound. Some of that has QP hedging in there. I guess I'm just trying to look at kind of the hedging you have in place at MATSA and DeGrussa, and then trying to figure out what's the remaining components that could be QP. You've got 10,500 tons. Looking at page seven of your release, at $3.80 for DeGrussa over the next eight months.
Do I look at the remainder of that 33,000 tons as, I guess, hedged, well, sales out of MATSA for the next six months? Essentially looking at on a group level, you have a pricing floor of $3.95. Is that sort of how we should be looking at it?
Yeah, it's pretty close, I think. Yeah, it's predominantly MATSA is under that original hedge book. At the time of the MATSA acquisition, we took out a three-year hedge book at around, call it 35%-40% of production. That was that is obviously remains, and we're rolling through that into the second half. This clearly covers the second half of the financial year. Really February, January through to June. Yes, predominantly that is MATSA, but we're also QP hedging, particularly at DeGrussa. We've also got production hedged at DeGrussa in January and February. Some of that would be in addition to this.
When we do the March quarter, I'll break it out a little bit more or give me a call and I'll run you through a couple of the splits.
Yeah. That'd be handy, 'cause if I look at, when you provided that hedge profile at MATSA, I think it was on an annual basis, but it was, I recall it was around $4.20-$4.30. Looking at your hedge book, it's implying $4 for MATSA and, yeah, just seems a little bit low. So I just wanna make sure we're not perhaps understanding your hedge terms at MATSA.
Yeah, sure. Yeah.
That'd be helpful. Thanks. Then just on the Motheo facility, the project finance, any hedging associated with that?
No mandatory hedging on that facility. We may do it, of course, from time to time. We may do QP hedging. We may decide as a company, but we're also, of course, conscious about our investors and our, and their, and their desire to be exposed to the long-term copper price and decarbonization. On balance, that of course, the executive and board will consider that. At the moment, no, there's no requirement for hedging.
Okay. That's great. Thanks. I guess just as you're nearing first sales of your copper coin from Motheo, who's your offtake? I mean, are you just looking to sell some spots or is Trafigura gonna be taking this through?
No. Well, sort of no one individually at this stage. We're running a similar process to what we did at DeGrussa in terms of Motheo offtake. Particularly spot during that commissioning stage is important to make sure that we sell that commissioning concentrate on the right terms, and we don't have any restrictions under longer term concentrate offtake.
We certainly intend to form and enter into longer term, more run-of-mine concentrate offtake agreements in the second half of the calendar year as we hit, you know, run-of-mine normal concentrate terms. And certainly the concentrate at Motheo is very attractive. Around 30% copper contained in concentrate and also very low deleterious elements. Our recent marketing activities have been very, very pleasing in terms of the desire to, for longer term offtakers to get hold of concentrate from Motheo.
Yeah. Understood. Thanks. If I could just ask one last one. Jason, you touched on some of the recovery improvements you're looking at MATSA. Now, if I recall from the site visit, there was also potentially looking at work in terms of some of the met studies at Sotiel. You know, perhaps looking to upgrade a product or, you know, produce a separate product on site, and then explain that. Any sort of updates on both of those sort of studies and when we could expect some news on that?
Firstly on the basically recovery and also concentrate grade optimization from the existing mill and also the existing feed blend. We are at the stage where we've completed all of our lab test work, got the results on that, and we're moving to full plant scale trials. In the early stages of that, there's certainly some very promising signs from what we've seen so far. In terms of Sotiel, we are basically initiating formal studies on that. In the interim, we actually have done early test work, particularly around focusing on what we can do in the existing Aguas Teñidas mill to optimize recovery and also concentrate specs to maximize the value of that ore. Once again, there's some really good opportunities that are starting to emerge.
Okay. Thanks. Just on that lab test work, what was that sort of indicating? I appreciate it is only sort of early stages, but what's the sort of potential uplift you can see here for recoveries?
Yeah. Look, we are, you know, probably early, too early stages in terms of we do wanna look at the performance in the plant before we hand out any real numbers and improvements. We are looking at a material uplift, potential uplift in zinc recovery. A little bit less so on copper, some real benefits there in concentrate specifications as well.
I appreciate it. Thought I'd try asking anyway. Thanks, Jason. Thanks for that.
No worries.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Grace for closing remarks.
All right. Thank you, and thanks to everybody for dialing in on the call today. I think the, the key takeaway from my point of view once again is around the first half of FY 2023 has been a period of transition, right? We're transitioning our operations. We're transitioning our footprint in terms of, you know, international from WA. We transitioned our leadership.
What we've done at the same time is really set up a platform for growth, and that includes a solid pathway for growth over the next three years, but also our platform for longer-term growth and prosperity of the company, and particularly when you take into account the optimistic long-term outlook for copper and copper demand. Now we are really placed in a very good position and, you know, we're looking forward to continue taking forward the company to the future. Thank you, everyone, and, we'll talk soon.
That does conclude our conference for today. Thank you for participating. You may now disconnect.