I'd now like to hand the conference over to Mr. Brendan Harris, Chief Executive Officer. Please go ahead.
Hello, and good morning. My name is Brendan Harris, and I'm the CEO of Sandfire. Welcome to our September quarterly call. The first quarter, in many ways, is like the first session of a test series. While you want to get off to a good start, it's how things end that matters. With that in mind, let's move quickly so we can get to your questions. First, I'd like to acknowledge the traditional custodians of the land on which we stand, the Whadjuk people of the Noongar Nation, as well as the First Nations peoples of the land on which we stand and Sandfire conducts its broader business. We pay our respects to their elders and leaders, to past, present, and emerging. I'd also like to welcome my colleagues to the call, Megan Jansen, Jason Grace, Richard Holmes, Cath Bozanich, Gemma Tually, and Scott Brown.
Starting with safety, we closed the quarter with a total recordable injury frequency of 1.8, a marginal increase from the 1.6 reported at 30 June. Nothing is more important than the health and well-being of our people and the communities we are proud to be part of, and we're working hard to enhance our system of risk management and internal control because we have to improve. Turning to our operating performance. In a solid start to the year, we delivered group copper equivalent production of 38,000 tons and remain on track to achieve group production costs and capital expenditure guidance in FY 2025. Page 6 of our quarterly report shows this most clearly.
As you can see that our run rate across the various metrics is tracking between 21% and 27% of full year guidance, with the exception of exploration, which will build momentum across the year. MATSA maintained its consistent run of form, as an annualized processing rate of 4.6 million tons supported a 4% increase in copper equivalent production to 23.7 thousand tons. Contained copper production itself was a clear highlight as recovery kicked in our Poly Line, noting byproduct production is expected to tick up across the remainder of the year as planned. At Motheo, our team continued to put the runs on the board as they achieved an annualized processing rate of 5.3 million tons, despite completing a five-day shut at the start of the quarter.
The copper head grade did, however, decline to 1% during the period, which contributed to the 6% contraction in copper equivalent production to 14.3 thousand tons. I can confirm that Motheo has started the December quarter well, and we are gaining confidence in the facility's ability to sustainably exceed its 5.2 million ton per annum rate of capacity. We were also pleased to receive pivotal regulatory approvals during the quarter for projects that will underpin our ability to deliver consistent and predictable performance in the longer term. At Motheo, approval of the Managed Aquifer Recharge, or MAR project, further de-risks the development of the A4 open pit and its delivery of first ore in the December quarter.
Similarly, environmental approval of our new tailings facility at MATSA was another important milestone in the permitting process that will enable the complex to remain a significant contributor to the Andalusian regional economy for decades to come. Construction is scheduled to commence in the June quarter of 2025, with the first phase of development to be completed in early FY 2027 at a capital cost of $35 million. More broadly, our MATSA team once again kept costs under control at $20 per ton of ore processed, which compares favorably with our annual guidance of $42 per ton. Similarly, at MATSA, our team did relatively well to mitigate cost inflation as the euro, the US dollar, and power prices rallied.
While this did result in an elevated C1 cost for the quarter of $1.88 per pound, I'd again remind you that byproduct production is expected to tick higher across the remainder of the year, while treatment and refining charges are also expected to fall to better reflect current market rates from the commencement of CY 2025. With growing consistency at all levels of our business, we were able to deliver group sales revenue of $282 million and underlying group EBITDA of $140 million at a very healthy margin of 43%, which was underpinned by an operating EBITDA margin of 44% at MATSA and 58% at Motheo. Together, this led to a further $51 million dollar reduction in net debt to $345 million at 30 September 2024.
If you are in any doubt, we intend to remain disciplined as our run rate for capital expenditure builds across the year and we move further, I should say, toward a net cash position. That brings me to our 5-year plan to increase the life of our MATSA and Motheo mining hubs by leveraging the solid foundation of geological and geophysical fieldwork and analysis completed in prior periods. We're now building solid momentum, having turned back to the drill bit, and our targeted yet aggressive plans will see us invest $19 million in infill and extension exploration and recognize a $24 million expense for regional exploration in FY 2025 at MATSA and Motheo. We look forward to sharing the early results of this work when we provide an exploration-focused presentation in early December.
Bringing this together, we've finished the quarter in good form, and the outlook for our products continues to improve. But we're not getting carried away as we look to capitalize on our increasingly strong position. With that, I'd like to go to questions. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. And 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. Your first question comes from Ben Lyons from Jarden Securities. Please go ahead.
Thank you. Good morning, Brendan and team. Might start with MATSA, please, and acknowledging firstly, I guess, that operating costs were higher during the quarter, but CapEx was running well below the annualized guidance. So I get the bigger picture that the total cash out of the till over the period was a bit of a wash. Also, taking on board your comments in the intro about some of the granularity in terms of the operating costs. Just wanted to interrogate it a little bit further, I guess. You know, again, acknowledging this is less than 10 million bucks we're actually talking about, but is there anything in particular to call out in there? Like, can you put a number around the impact of increased power costs, for example?
Or I also note the accounting peculiarity, where some of the transport costs are deducted off revenue and some come through the operating cost line. So, yeah, maybe there was an impact of higher transport costs, for example, during the quarter. Thank you.
Yeah, thanks, Ben, and look, we've noticed people rightly picking up on just that elevation in cost of MATSA in the period relative to our guidance. And as you say, there are some moving parts, many of which are outside of our control, such as the euro, power prices, et cetera. And as I mentioned in my speech, TCRCs are expected and implied within our guidance to fall into the new calendar year. Noting of course, that Motheo broadly benefits from commercial rates for TCRCs because it's effectively uncontracted in nature, whereas MATSA is linked to annual benchmarks. So again, we need to wait till they reset, and that will lead to some degree of skew, if you like, in some of the drivers of costs.
But look, why don't I pass to Megan? Because I know she's spent a lot of time on this, and perhaps she can dig into a few more of the numbers in a little bit of detail.
Thanks, Brendan. Morning, Ben. Thanks for the question. Maybe just as an opening remark, we've seen the MATSA team continue to maintain strong cost controls throughout the quarter. As you touched on, there was an FX impact. The euro did strengthen during the quarter, so it averaged around $1.10, and that's in comparison to the previous quarter in FY 2024, when we saw around $1.08. So that's the main impact that's played out in the operating costs over the period. In terms of power, I would say that's a slight impact for the quarter, and that's, you know, a few hundred thousand dollars, less than a million, is how I'd describe it, as we saw a brief step-up in power prices.
One thing we would, you know, come back to is we have locked in more than 50% of our power requirement under long-term contracts with Endesa. Over and above that, we've recently executed some further contracts, which basically protect our price going into Q2 and Q3 over the European winter. And so with that, that really helps support us delivering on our budget and therefore guidance cost assumptions with regards to electricity. Those impacts did flow into C1, and I guess the C1 was then further exacerbated by slightly lower by-product credits in terms of volume, and we're expecting that to pick up in the remainder of the year, together with some slightly softer prices on the by-products.
The other item Brendan touched on was the TCRCs, and what we're expecting in the second half, we should see some benefit starting to come into the P&L if TCRCs move in line with market expectations. So for every sort of 10 cent movement there at MATSA, circa $4 million impact, and $3 million at Motheo. CapEx, MATSA's CapEx was probably a little bit slow in Q1, but the run rate there is a few million behind. The team's comfortable on the capital pipeline and the projects we have, and we're expecting we'll deliver on that in the year to go. Hopefully that answers your question.
Okay. Yeah, no, that's, that's great. Thanks, and thanks for the additional sensitivity to the TCRCs. That's very helpful as well. So, sorry, Brendan.
No, no, I know to say, Ben, I mean, as you, as you can see on that slide, page six of our report, these, as you pointed out, it's sort of at the margin. Maybe just while we're on that, though, Ben, it might help, Jason, a critical element of this, particularly people who focus on C1, which is pretty much an outcome of an aggregation of a lot of numbers, is you referred, you know, in our last conference call, last quarterly conference call, of the slight weighting of by-products, i.e., zinc and lead, particularly to the future periods beyond Q1. Can you just give people another sense of how that's tracking today?
Yeah. So where we stand today for FY 2025, we do expect slightly higher production on zinc and by-products in Q2 and also in Q4 for this year. So it's a bit of a, if you like, a bit of an oscillation as we move through the year. Overall, copper is pretty much... We expect it to be pretty flat throughout view.
Yeah. So half one and half two is not that big a skew.
No.
But ironically, in both quarters, the second quarter will be stronger for zinc and lead than the first, and then the fourth will be stronger than the third.
Correct.
Yeah. Does that help, Ben?
... Yep, yep, that's extremely helpful. Thank you very much, and thanks, Jason and Megan, for your input as well. Maybe just quickly switching across to MATSA. No need to call out the most important election undertaken in October of this year, obviously over the next couple of days, but just wanted to talk about the material movements and the ore sources, please. Obviously, you've had an outperforming mill. I assume you've probably run down a lot of your high-grade and medium-grade stocks on the ROM.
So as we're sort of looking through the September quarter and maybe into the December quarter, I assume that you're on ore in A4 now, which probably should give you a bit of a grade boost, if you have, you know, sufficient ore availability coming out of A4. So I guess just holistically, you know, what the ore sources look like over the next few months, and whether we can see a little bit of a grade sweetener as A4 starts coming into the mix. Thanks.
Yeah. Look, thanks, Ben. I'll throw to Jason for the details. I hope the, you know, the guidance we've provided, I think here is, you know, page 15 of our report, which you're right. So we start seeing, you know, very first signs of ore out of A4 being delivered to the pile in the coming quarter. Incrementalism, if you like, through the second half, where you really start to see the benefit of A4 on grade is most likely coming in the next financial year. But look, long story short, we're really well placed at the moment with the way the sequencing of our mine plan is working to deliver, you know, the overall average head grade to the mill this year.
I'm sure it's not lost on you, Ben, you've followed this very closely, but the mining or the processing rate, I should say, we achieved in the period of 5.3 million tons, once you adjust for, you know, the 5-day outage at the start of the quarter, again, highlights that the processing facility just continues to go from strength to strength, and we're really starting to see that consistency in performance as well. Jason?
Yeah, just to really build on Brendan's comments there. Ben, if you look at appendix A, and particularly with respect to the guidance there for A4 for the year, Brendan's 100% correct. I think about A4 as really being a significant contributor in FY 2026, and so that guidance for the full year, we're really only mining 235,000 tons at 1% copper. So FY 2025, in terms of ore feed, is all about T3. So, and particularly if I look at how I manage or how we are monitoring risk in terms of that, it's all about the material movement rates there out of A4 for this year. And you would've seen there that we've moved 1.6 million BCMs of a forecast or guidance for the full year of 6.8.
So pretty much right on 25% and exactly where we expect to be. Now, further to that as well, we have completed and you would know that we do RC grade control in advance of mining. So we have completed our first program of RC grade control at A4, and we've intercepted the top end of the ore body, and we're starting to build that into our detailed schedule. And it's pretty much as Brendan said, we expect our first, you know, trickle of ore this quarter, and really not really making any real contributions then through Q3, and then kicking in towards the end of Q4 this year for FY 2025.
Maybe, Jason, just one element. We've talked before about A4 being wetter than T3, and the MAR is an important risk mitigator, and so there's no regret in moving forward with that. But probably between, you know, now and when we last spoke with the analysts and investors, if anything, A4 is proving to be, you know, marginally drier than we might have thought at that stage, which again is a good news story and, you know, for productivity and the rate at which we can get into the ore body.
Yeah. So firstly, I mean, the dewatering infrastructure there for A4 is fully operational and has been for the bulk of this prior quarter. Looking forward, we are getting less water, there's no doubt in our minds, less water than we expected to see so far. And you know, we are starting to update our groundwater models in respect of that at the moment to really understand where we expect to be over the life of mine. But at this stage, it's better than expected and drier than expected.
Great. Thank you very much, Jason. Thanks, Brendan. Thank you. Awesome.
Good on you. Thanks again.
Thank you. Your next question comes from Kaan Peker from RBC. Please go ahead.
Hi, Brendan, Megan, and Jason. Maybe, continuing on with Motheo, I suppose, when we look at A4, that should provide a grade sweetener, but, when should we expect to see those mining volumes get above that 5.2 million tons run rate? Is that still a FY 2026?
So we expect this year that we will largely mine all of the ore that we require at 5.2, and we will continue to stockpile ore throughout FY 2025 and into FY 2026. I kind of touched on it there with Ben's question. A4, in terms of ore supply, is more of a story for FY 2026 than it is for FY 2025. Just reiterating my comments there before, with respect to appendix A and the guidance that we've submitted for A4 ore mining, it's 235,000 tons for the full year, so less than 5% of our total planned or milled for the full financial year, and that's at a grade of 1%, so pretty much on par with what we expect from T3 as well.
I think that's probably the key point for me, Karl, is that, you know, we certainly don't sit here and just do anything other than try and understand our risks, and I sort of think of us critically as important risk managers in our role. But as we sit here today, the overarching Motheo operation is not providing us with a great deal of surprises. Yes, there are things we've had to deal with, particularly the mobile filter press requirement, given that the OEM supplied piece of kit really didn't perform. The initial piece of kit didn't perform, but we've got past that.
You know, pretty well things are going as planned, and I think as we now start to get that stability, the big driver for us above just consistency and predictability is actually starting to drive recoveries in the processing plant, and that's where that incremental, you know, extra dollar is going to be won.
Sure. Thank you. And just on MATSA, still seem to be mine constrained. There used to be no real ROM stock build over the quarter. What needs to change for this to occur? And maybe if you can also provide some details on why there's increased longitudinal stoping. Thanks.
Yeah, good question. Look, I think we've said before that there's a limit to how much stock we want to build. We pretty much did that last year. And because, again, remember, there is the limits in terms of residence time, of which you can leave these ores on surface. They're, in many cases, polymetallic, which creates a different issue if they're left exposed to oxygen for too long. I think the other point I'd make is, I don't know too many underground mines that aren't mine-constrained, because that's ultimately, you know, one of the things that you're always working through, is building your mine development to keep in front and open up degrees of freedom. Because you're right, you ultimately would like your, your mills to be where the constraint sits, but, but that's a balance.
It's always moving between the two. I think we've shown very consistently over the last eighteen months that we've managed to get much more predictability. We're hitting and maintaining those record processing rates. Mining rates are ebbing and flowing around those sorts of similar record levels. And I think, you know, we're feeling very confident in terms of the ability to execute as we go forward. Of course, I'd also note that these polymetallic operations, as much as we'd like it to be like an auto's manufacturing plant, they're always going to have variability. And so we see that usual volatility in copper versus by-products production, depending on where we are in the mine plan.
And obviously as part of that as well, you know, you will have from time to time different configuration in terms of the ratio, and in this period, more longitudinal stopes. But as you can see, we've maintained the guidance, and we're feeling, you know, very well placed to deliver on all of our commitments across the year. Maybe, Jason, just on the longitudinal stope, specifically part of the mine plan, but-
Look, Kaan, I just will make the point that mine production has exceeded overall ore process tonnes in the last half of FY 2024, and we're very close there year to date as well. So, from that point in time, we did build up our ROM stocks during last year for this exact reason, right? To give us a little bit more flexibility and to be able to cover for these type of situations where we can continue production. Overall, and if we look at it, Aguas Teñidas did exactly what we expected it to, and Magdalena was really the only impact.
Now, these longitudinal stopes, they typically sit on the periphery of our ore body, so where we have narrower ore zones, and we are moving through, that area in terms of the mine sequence on a regular basis throughout FY twenty-five. Now, where we will get variation is that we will bring in and out of the schedule there, our transverse stopes, which are the larger scale and wider parts of the ore body. So we'll see a little bit of fluctuation, throughout the year, but overall, we're tracking where we want to be.
Thanks, Kaan.
Thank you.
Thank you. Your next question comes from Adam Baker from Macquarie. Please go ahead.
Brendan, Jason, and Megan, just on silver recoveries at MATSA, just noted FY 2025 guidance at 90%. I think the previous feasibility study outlined silver recoveries of 86%, but the recent quarters have been around 82%-84%. Just wondering if you could talk through the potential room for improvements here. Thanks.
Yeah, look, thanks for that, Adam. Look, overall recoveries are probably the area that we see more improvement for right across the board at Motheo. If you look at it, they're delivering on the nameplate tonnes, and we do think there's potential upside there as well. But we have got further improvement works going in to really focus on those recoveries. You know, as per our guidance, I expect that they will improve incrementally over as we go throughout the year.
Thanks for that. And maybe one on Sandfire America, given your interest in the project sits at 87% equity interest. Brendan, would you like to optimize its structure before you reach a potential investment decision in this, in 18-24 months' time?
Look, I'm actually very comfortable with the structure as we sit here today. That doesn't mean we won't look at alternatives in the future, but I can see advantages, distinct advantages for Sandfire America retaining its current structure, and ultimately, you know, that will be something for its shareholders, of which, as you've said rightly, we're an 87% holder. More broadly, our focus there is continuing to build out that lower copper zone, and I think we're showing real success of that program, and we look forward to talking more about that in December.
And then, beyond that, Ian Kerr has pretty much rolled off the Motheo project, you know, and the success that he delivered there to focus, you know, very much on the Black Butte project, and then supporting the MATSA team as well with some of their various opportunities. And a big part of that is we build out our understanding of that resource, and again, that high grade, lower copper zone, at the same time upgrading and updating our capital cost assumptions for the development. Remembering, it's a relatively, you know, small footprint, very, very focused operation, relatively small underground, but very high sustainability standards, particularly around water. We're updating all of those numbers, and we look forward to bringing that together, you know, somewhere in the next circa 18 months.
That will really help us chart the course forward. I think from my perspective, you know, plus or minus thirty thousand tons of contained copper at peak, it doesn't sound like a large mine, but if it has a high IRR, that just really opens up a whole lot of alternatives in terms of options we have to release value from that investment. You know, while thirty thousand tons, again, isn't large in the scheme of the global copper supply dynamics, it's, you know, circa 20% of our current production which, again, is not to be sneezed at. You know, we're still excited about the project, and the team's very focused.
Just, a lot of work to do over the next twelve to eighteen months to ready ourselves for the next key decision.
Thanks, Brendan.
Thank you.
Thank you. Your next question comes from Levi Spry from UBS. Please go ahead.
Good day, team. Thanks for your time. Could I just take you back to the TCRC sensitivity? So, you gave me a $0.10 movement. Can you just give me those numbers again and tell me what your current cost guidance is based on?
Can I take that one?
Yeah, go for it, Megan.
Thanks for the question, Levi.
Thanks, Megan. Yeah.
So we are talking through a sort of $10 impact broadly at MATSA with about a, you know, $3.94 million impact on net revenue, let's say. And similarly, a $10 impact on TCRCs was about a $2.5 million impact at Motheo. Our guidance build for the year is sort of there are some differences between MATSA and Motheo, as Brendan touched on earlier. So at Motheo, we are selling our concentrate under spot and a combination of term contracts. And so that sort of plays out, and you see the market price playing out there throughout the year. And then at MATSA, we are under the 2024 calendar benchmark terms.
And then there'll be a reset in calendar year 2025.
Yeah, and I think so. What I think about it, Levi, circa eighty and eight is what MATSA is exposed to today, at least on the copper side. And that will, as an example, feed through to the end of this year. Then you actually have to do the negotiations, and then, depending on where it cuts, is how it, if you like, rolls into the financials. It hasn't been uncommon for us not to realize the full benefit until the fourth quarter, but ultimately, you know, it is rolled back. And obviously at Motheo, if you think about commercial rates, remembering we're still building a brand and we're still, you know, we're beyond commissioning, Con, but it's still in that early phase.
You know, we're achieving substantially lower average TCRCs than 88, but not all of them at the levels that you might have seen, which have verged on going negative. So, but nonetheless, I think a very, very good outcome for us.
Yep. Great, thanks. So I think I can triangulate some numbers there. And just zinc, I mean, what's the update on, I guess the zinc market and also, you know, potential, you know, halving of TCRCs here?
Yeah, look, I probably don't want to go too far on zinc, you know, and the reason I say that is, and clearly we're not gonna set the price. I reflected a lot on LME week, and the main takeaway from LME week was the very distinct dialogue around the risk that current rates, commercial rates represent for European, Japanese, Korean smelters. And obviously, you know, we've seen periodically over recent months that the TC rate for zinc has actually gone negative, I think, first time in history. So, you know, I think it's gonna be a very interesting negotiation, because I think there's going to need to be some balance in terms of thinking about the short-term benefit versus the long-term structure of the industry.
But nonetheless, relative to the rates we're currently exposed to at MATSA, I think of around $165 a ton, you know, settled, I think it was in January, March 2025. You know, we are, I guess fair to say, optimistic that we're gonna see a benefit. I just don't wanna put too many projections out there.
Okay, great. Thanks. And maybe one for-- more for Megan. Just on the debt repayment schedule, can you just sort of remind us on what that looks like now? I think you paid a bit more back than I was expecting.
Yeah, no problem. So we have been making payments fairly steadily on the corporate revolver, so there's good progress that you can see coming through the cashflow waterfall in that regard. Motheo, we have our quarterly repayments throughout the year, that profile will sort of continue throughout the remainder of FY 2025, Levi. At MATSA, following the takeout of MATSA facility A earlier this year, we don't resume repayment from MATSA facility B until December 2025. So you'll see that profile change at that time in the subsequent financial year. And probably just to remind everyone, we do have those cash sweep mechanisms that are at play across the facilities at MATSA and Motheo.
To the extent we have cash over and above certain levels at the end of a period, a portion of that is swept to the facilities, and so that'll see the repayment levels move around a little bit, as the available cash builds throughout the period. Does that help, Levi?
That's good. Yep. Thank you. Thanks for your time. Thank you.
Thank you.
Thank you. Your next question comes from Rahul Anand from Morgan Stanley. Please go ahead.
Hi, Rahul.
Hi. Hi, Brendan and team. Thanks for the call. Look, just had a couple on MATSA. Brendan, I guess, this one's perhaps for you, and then a second one to Megan. In terms of sort of, you know, you've talked about your stockpiles, and you've that that you're nearly there in terms of what you need, in terms of stockpiles, and obviously oxidation, et cetera, is a key concern, but if I look into perhaps FY 2026 and perhaps the intention to, you know, to run the mill a bit harder, do you think this level of stockpiles is enough? And I assume you're sitting at just under 200,000 tons at the moment. Or would you seek to build them a bit further from here to be able to get to that higher throughput rate?
That's the first one. Thanks.
Yeah. So we, as was mentioned, those stocks are going to ebb and flow, but we're not looking for major shifts, right? So they'll ebb and flow around this level, consistent with what we've said in the past. And just to be really clear, I've never put out there a message that says we're gonna look to run the mill harder or the mine harder than it is today, because we're gonna look to run it to maximize value. And in fact, if we determine that we should lower throughput rates because it's gonna give us a better NSR and a better outcome for shareholders, I'll have no hesitation with Jason in doing that. So, you know, I think the industry's had a great propensity to chase tons, but not always for the right reasons.
Again, we think our plans are robust. When we look into next year, we see similar levels of copper equivalent production, which shouldn't, I don't think, surprise people on this call, and it's really about with MATSA, it's about being consistent and predictable. It's about opening up those new mining areas that we've talked of, San Pedro and Olivo, and with that, that'll help again with that consistency and predictability, and for me, that's the critical thing here. It's being in the game because, you know, like a lot of you on the call, I share the view that the outlook for our markets is good. So if we can manage our costs and deliver the tons, we should, you know, ultimately have a very strong period of cash generation. So that's really our focus.
And at the moment, we're not seeing a major shift in, if you like, the operating mode at MATSA compared to what we've been talking to you about over the last 12-18 months. But again, as we are always scrubbing our plans, if indeed we were to conclude that we should run incrementally higher or incrementally slower rates of performance, I can guarantee you that'll be driven by a value equation and nothing else. Jason, anything that you'd like to add to that?
No, I think you've covered it really well. I, I'd just highlight the difference between MATSA and Motheo. MATSA being an underground mine, so we don't incrementally mine low-grade material like you do in an open pit. And that's why we'll see at Motheo, in particular, those low-grade stockpiles will grow or lower, depending on where we are in our mine plan. Whereas MATSA, we maintain the goal is to maintain a mine production rate that will meet the requirements of the mill, and we keep a small, smaller amount of tons on the ROM to make sure that we've got enough room to be able to predict and see what's going to present to the mill and be able to blend ore as it comes out of the mine as well.
And that's really the critical thing, isn't it? It's having enough stock that our teams in the processing plant, working with our mine geologists, can walk that stockpile and have a very strong view of the mineralization that's gonna be presented to the mill and then to the float circuits, and then they can adjust their reagents. It's much more about that. The volumes we're going to have there are never going to be sufficient enough if we have a major operational outage.
Yeah.
Which actually ties back to the real point I wanted to make, and that is, again, opening up the different additional faces such that we have degrees of freedom. If we have challenges with the stope, we can move our equipment and stay productive. That's actually the critical aspect for us there, and hopefully that helps, Rahul.
Maybe I'll just add to that-
Sorry, go ahead.
Can I just add to close that out, Rahul? And in terms of that sort of fit-for-purpose stockpile that Brendan and Jason talked about at MATSA, you'd recall last year we talked about our plan to maintain a few hundred thousand tons on the ROM. And we have done that, so there is a few hundred thousand tons remaining at the end of the quarter, and that's broadly unchanged from June. So we haven't seen any material change in that stockpile. We've in fact, you know, broadly maintained it over the quarter.
... Oh, no, I absolutely understand, and I completely buy that view, Brendan. It was just more around the lines of potentially, you know, you also get economies of scale from maximizing throughput rates and mills, and also get benefits of fixed costs, et cetera. So, you know, that kind of does play into the total cash flow equation, but I'm sure you've done those numbers better than I have, and
Yeah, no, certainly don't want you to think of... It's a good question. I'm just trying to give you a sense how we think about it in the context of MATSA, and what we're presented with there. And I do think for us, it is that real challenge of working through that equation that you're describing in effect, which is: what benefit do you get through driving throughput, i.e., vis-à-vis economies of scale, versus focusing on NSR? And my suspicion, when you look at MATSA and the polymetallic ore body that it is, that over time, a focus on NSR is probably gonna give us a better value equation. But we're doing a lot of work around that as we speak.
Sure. Okay, and look, the second one's perhaps way simpler, the one for Megan. Megan, you talked about the costs a bit, and you've talked about them in detail already. I just wanted to check if you can help us understand perhaps the split of US dollar denominated and euro costs. Obviously, there are linkages and majority is probably euros, but just to help with a bit of modeling going forward.
Yeah, sure, well, can do. So MATSA's in the range of 90%-95% euro cost base, and so we see that therefore play out in both their operating expenditure and their capital expenditure. And I think as I touched on earlier in the call, we saw a $1.10 average over the quarter. We used an assumption of a $1.08 for our guidance purposes, and that was broadly the rate that we saw play out on average throughout financial year 2024. So hopefully that helps with giving you a bit of a sense of the impact of FX at MATSA. And on that note, you know, spot has retracted, so we have come back to around a $1.08.
and our team's closely monitoring whether that's something we maintain at spot or whether we sort of look beyond managing in future.
Got it. Oh, that's perfect. Thank you, guys. Very helpful.
Very good. Thank you.
Thank you. Your next question comes from Anthony Barich, from S&P Global Commodity Insights. Please go ahead.
Yeah, hi. Just talking about that five-year plan from MATSA and Motheo. I mean, you talked about in June quarterly when you announced that kind of five-year strategy, that, you know, that meaningful reserve growth at Motheo is really dependent on belt-scale exploration success. I mean, just wondering, you know, how, how confident... I know it's only early stage, but I mean, how important is that, that five-year strategy in your overall company growth, given the other projects you've got going on and, and, and whatever else? And how, and, and where's your confidence level at at, at the moment in terms of, that ability to really get that exploration success?
Yeah, look, I don't want to sound facetious, but as an old geologist, until you drill things, you're always incredibly confident. Look, in truth, you're absolutely right to focus on this, because I still believe the most value accretive thing you can do as a mining company when you have installed infrastructure, you know, which in a way it is simply a significant investment of shareholder funds, the most capital efficient growth in value comes from extending life. And that is why it is a core pillar of our strategy. You know, we have that sort of eight to 10-year life typically in our mining hubs. I've said before that MATSA's a much more quantifiable pathway.
You know, we've put that diagram out there previously, which shows every drill hole that we're planning to complete in both infill and extension drilling across the next five years, and that's really just chasing known mineralization. Which, you know, again, while there's no certainty in life, you know, I have a high degree of confidence in that plan. Motheo is more about, as you've described, doing that initial work around the T3 footwall, the A4 extensions, and the A1 resource-to-reserve conversion, which we're really hopeful is going to add important years of life. But then it's around the belt-scale exploration and discovery requirements. Noting that our focus will very much in the early periods be focused around the Motheo hub itself, you know, within the trucking distance of the processing facility.
And we are drilling and ramping up our drilling activity there as we speak. I'll pass to Richard quickly to give you a sense for how he thinks about the step change in our understanding of the controls of mineralization in the Kalahari Copper Belt, and how important that is in our targeting approach, and obviously why we are confident enough to significantly accelerate and increase our rate of expenditure, in that Motheo hub, and then over time, across the belt more broadly. Noting that prior to any sort of relinquishments, I think we often say that we have close to two-thirds of the tenure in the Kalahari Copper Belt, which ensures that we're very well positioned in what we think is going to be an increasingly important emerging copper-producing region. Richard?
Thanks, Brendan. So if you look at the work we've done in the past couple of years, we've spent a lot of time building that basic geological foundation, and I think the one big differentiator for the Kalahari Copper Belt is we're all undercover. So we're building three-dimensional models from geophysics, and we're making inferences. With the opening of the T3 open pit, we've now got, you know, we've now got fabulous outcrop, which enables us to really refine that mine scale geological model, then we can take those ideas and then build them into the regional model. So we're really confident, and as you know, as Brendan said, you know, it's an exciting time. We've got a high degree of confidence that we'll find more satellite deposits.
But I think the thing about exploration is, you know, using Brendan's cricket analogy, this is Test cricket, not twenty twenty. It's gonna take time, but, you know, we're confident we'll hit a six and we'll get there.
Yeah, I think, you know, Richard, it's a really important point. You know, so particularly when you look at MATSA, as I said earlier, we've got this quantifiable program, but it's underground. You need to get development headings to get drill platforms, particularly as you go down plunge with these ore bodies. And so, as much as it frustrates me to say, 'cause I'd like to see early results and a big, you know, sequential increase in reserves quickly, the reality is that's always going to be back-end load, and I've talked about that before, because it's just going to take time to build up that body of information.
At Motheo, we're hopeful, you know, we've got some important early news that we should have as we complete the work around, T3 footwall, overextension and A1, and then it really is around that, that critical discovery. And, you know, what we do look forward to talking about in December is that when we have a presentation in Sydney, is actually going through the detailed understanding we now have of these structural controls of mineralization. And I can tell you, it has changed completely, for the Kalahari Copper Belt in the last twelve months. And that's, that is exciting for us. It clearly builds confidence, but I go back to my earlier point, as an old exploration geologist, you know, you've got to be mindful that the worst thing you can do is sometimes to drill a target.
So we're, you know, it's going to take time, and it's going to require a lot of very hard work and diligence.
Yeah, thanks. I just, I guess I just meant, just in the context as well as your, your overall growth in terms of, obviously, you've got some stuff in Australia, but, you know, that's obviously the future of your company you're talking about, right? With that, that five-year strategy.
Yeah, absolutely. It's, it's pivotal. It's why it's one of the critical pillars in our strategy. You know, we've intentionally got a very simple strategy, and it's one of the key pillars. So 100%, you know, we're very focused on it, and as Richard said, we're very excited about what it can bring.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Kaan Peker, from RBC. Please go ahead.
Hi again, team. Thanks for the follow-up. Just wanted to ask you, seems like from the wording of the quarterly, you're continuing or you're planning to continue with spot TC from the tier. Are you paying higher freight rates as a trade-off?
No, no, we're receiving commercial rates. It's just... Remember that MATSA, because it's a new brand, we don't yet have long-term contracts in place, intentionally. We do look to increase our contracted position on the book, and ideally longer term of at least 50%, but at the moment, no, we're in, you know, a very good position given that the market is tight, and everyone wants concentrate to have that, call it open book, is working in our favor, and truthfully, we're not just pushing TC rates, TCRC rates. We're also thinking about the longevity of what we're trying to achieve in terms of how we structure those contracts, so you know, there's a lot to it, as you'd imagine, but I can assure you, we're not trading off freight rates.
Oh, thanks. And, I think my prior question, Jason mentioned, or talked about, Aguas Teñidas and Magdalena, but, just noticing that Sotiel volumes were a little bit lower than expected. Could I just ask why?
It's really around the mine schedule at the moment, and where we currently sit. We are trying to make sure that we are providing the best quality ore to the, to the processing plant. Sotiel, overall, we tend to use that as a bit of a gap fill to top up and make sure that we've got adequate, ore processing feed there as well, but, there's no concerns at Sotiel.
Thank you.
So Sotiel, let's be brutally honest, gets back to the heart of the discussion we were having, and that is, you know, what throughput rate do you wanna run versus what's delivering the most, you know, attractive value outcome? That's gonna be an ongoing question for us, unless and until we discover a different way to unlock that large Sotiel ore body, so, you know, again, as I mentioned earlier, we're looking and we'll continue to look at that very hard.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Harris for closing remarks.
Thank you, and thanks, everyone, for dialing in. I know it's sort of the back end of a busy reporting season. We do appreciate your interest. As I mentioned, we think we've started the year well. It is just the first quarter, but we're well placed to deliver on all of our commitments, and for us, that's what matters. Take care, and look forward to speaking again soon, and hopefully we can see a number of people in Sydney in December and I guess talk a lot more about our exploration plans. Thanks again. Have a good day.
That does conclude our conference for today. Thank you for participating. You may now disconnect.